New South Wales Supreme Court CITATION : Burston v Oldfield [2003] NSWSC 88 HEARING DATE(S) : 20 & 21 February 2003 JUDGMENT DATE : 24 February 2003 JURISDICTION: Equity JUDGMENT OF : Hamilton J DECISION : There was a quorum present at the relevant time. CATCHWORDS : ASSOCIATIONS AND CLUBS [49] - Incorporated associations - Matters relating to incorporation - Certificate of incorporation - Not conclusive evidence body was successor to unincorporated association - MEETINGS [5] - Conduct of business - Quorum - Meaning of quorum - Whether persons having an interest who abstain but are not disqualified from voting may be counted. LEGISLATION CITED : Associations Incorporations Act 1984 Parliamentary Electorates and Elections Act 1912 A M Spicer and Son Proprietary Limited (In Liquidation) v Spicer and Howie (1931) 47 CLR 151 Anaray Pty Ltd v Sydney Futures Exchange Ltd (1982) 6 ACLC 271 Baldwin v Everingham [1993] 1 Qd R 10 Ball v Pearsall (1987) 10 NSWLR 700 Clarke v Australian Labor Party (South Australian Branch) (1999) 74 SASR 109 Jobnet Employment Services Inc v Copeman (1999) 32 ACSR 554 Kibby v Santiniketan Park Association Inc [1998] VSC 148 CASES CITED : Levenstrath Community Association Incorporated v Council of the Shire of Nymboida (1999) 105 LGERA 362 Mune v Centro Argentino of Victoria Inc [1996] 2 VR 82 Re Greymouth Point Elizabeth Railway and Coal Company Ltd [1904] 1 Ch 32 Scandrett v Dowling (1992) 27 NSWLR 483 Steuart v Oliver (No 2) (1971) 18 FLR 83 The Queen v The Judges of the Federal Court of Australia; Ex Parte The Western Australian National Football League (Incorporated) (1979) 143 CLR 190 Thornley v Heffernan 25 July 1995 NSWSC Brownie J unreported Joske's Law and Procedure at Meetings in Australia (9th Ed, 2001) 33 - 34 Brian Burston (P1) Graham Burston (P2) PARTIES : David Ernest Oldfield (D1) Colin Keith Easton (D2) One National NSW Political Party Incorporated (D3) David Ernest Oldfield as representative of all members of the One Nation NSW Political Party (D4) FILE NUMBER(S) : SC 1231/03 COUNSEL : W P Lowe (Ps) A C Hogg and D M Aquilina (Ds) SOLICITORS : Waller Fry & Faulkner (Ps) Chase Lawyers (Ds) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J MONDAY, 24 FEBRUARY 2003 1231/03 BRIAN BURSTON & ANOR v DAVID ERNEST OLDFIELD & ORS JUDGMENT 1 HIS HONOUR: These proceedings arise out of the preselection process of the One Nation NSW Political Party ("the Political Party") of candidates for election to the Legislative Council at the State election forthcoming on 22 March 2003. The Political Party is registered as a political party under the Parliamentary Electorates and Elections Act 1912 ("the Elections Act"). 2 I shall first give an account of the preselection process which is in contest. The method of preselection for candidates for the Legislative Council was regulated, in the first instance, by a resolution of the State Executive of the Political Party held on 12 October 2002. That was by way of adoption of a document prepared by the State Director, Mr Easton, who is the second defendant in these proceedings. That provided for prospective candidates to submit 20 copies of a personal promotion kit to be distributed among the preselectors. It provided that the selection panel would consist of those members of the State Executive not standing for selection, "who will have due regard given [sic] to the preferences expressed by the Branch Presidents". It was noted that David Oldfield, who is the first defendant and an existing member of the Legislative Council, would not be involved in the selection process. The timetable was that the promotion kits would be lodged by 15 November, comment from Branch Presidents submitted by 29 November and the meeting would be held on 8 December 2002. 3 Comments, generally in the form of the specification of three candidates in order of preference, were lodged by all or many Branches. It is true to say that the majority of those comments favoured Lisa Oldfield, David Oldfield's wife, as the number one candidate on the ticket. The preselection meeting was held on 8 December 2002. There was some disagreement at it, about which there was some evidence. There was some attempt in the evidence to suggest that the result of the meeting was inconclusive. However, I think it is clear on the bulk of the evidence, and it was certainly subsequently accepted by the State Executive, that the candidates selected by the preselection committee were in order 1: Brian Burston; 2: Graham Burston; 3: Lisa Oldfield. It should be said that the view generally held in the Political Party is that there is a good chance that their number one candidate will be elected to the Legislative Council, but virtually no chance that the person in number three position will be elected. Although the preselection committee, having considered the comments of the Branches, did not make its selection in accordance with the majority view of those branches, no case is put before me that the process of the preselection committee was flawed because no regard was had by the preselection committee to the views submitted by the Branch Presidents. 4 At a State Executive meeting on 21 December 2002, the State Executive recorded the preselection result as I have stated it and that it considered that the process was conducted in accordance with the written guidelines. It passed a resolution that it "ratifies the decision made by the Candidate Pre-selection Committee" and declared the candidates to be the three persons named in the order previously stated. 5 There is no doubt that the announcement of this result was followed by expressions of dissatisfaction by a number of people in the Political Party, to the extent that it was stated by Mr Easton in an email on 28 December 2002 "that a split has emerged in our once united party over the issue". Mr Easton at the same time stated that he had discussed the issue with the President, Mr Oldfield, who was in agreement with the course of action that Mr Easton proposed. What he proposed was "calling a meeting of all party members for Sunday, 19 January 2003 ... to decide the composition and order of the first three Candidates on our MLC voting ticket". Indeed, a notice calling such a meeting was prepared by Mr Easton dated 29 December 2002. The evidence shows that about 840 notices were sent out. The membership at the time was about 1040. The difference was in large part explained by the fact that one notice was put in one envelope addressed to two people where, as in the case of husband and wife, two members of the party were members of the one household. Notices, it would seem, were not sent to the candidates or to persons known to be closely associated with them. 6 Although the plaintiffs, the Messrs Burston, mounted a case on the basis that the meeting of 19 January 2003 was not valid as a special meeting of the Political Party within the meaning of the Constitution (to which I shall turn hereafter), in the end it was not really contended that it was a special meeting. Mr Easton gave evidence that he called the meeting as a continuation of the preselection process in the way that he deemed fit, rather than with the intention of constituting a special meeting of the Political Party. Certainly, if it were intended as a special meeting of the Political Party, it was not validly called. It is doubtful, bearing in mind what has been said about the sending of notices, that notices were sent to all members. But in any event, less than 28 days' notice was given as required by the Constitution (as to which see [12] below). The meeting did take place on 19 January 2003. In excess of 70 members of the Political Party attended. The result of the vote taken at that meeting was that the candidates should be, in the following order, 1: Lisa Oldfield; 2: Ian Hale; 3: John Cantwell. 7 The plaintiffs have commenced these proceedings to obtain a declaration that the resolution of 21 December 2002 of the State Executive as to the Legislative Council candidates is valid and binding and that the officers of the party should not put forward as candidates those selected at the meeting of 19 January 2003. The defendants originally named were David Oldfield, as first defendant; Mr Easton, as second defendant; and the One Nation NSW Political Party Inc, as third defendant. Mr Oldfield and the third defendant have filed submitting appearances. Mr Oldfield has now been joined as a fourth defendant as representing all members of the Political Party, other than the plaintiffs. It is agreed that his submitting appearance extends to his representative capacity as well as his personal capacity as a defendant. The second defendant by his amended cross claim seeks orders in effect invalidating the resolution of 12 December 2002 and validating the decision of the 19 January 2003 meeting. 8 Thus both the plaintiffs by their further amended summons and the second defendant by his amended cross claim claimed declaratory relief relating to the validity or effect of the State Executive resolution of 21 December 2002 and the outcome of the meeting of 19 January 2003. It is inherent in this that both regarded those matters as justiciable. A modern statement of the law in this area is contained in the judgment of Mahoney JA in Scandrett v Dowling (1992) 27 NSWLR 483 at 503 – 504. But there have been a number of decisions to the effect that the procedures of political parties are now justiciable because of their registration under electoral legislation: Baldwin v Everingham [1993] 1 Qd R 10; Thornley v Heffernan 25 July 1995 NSWSC Brownie J unreported; Clarke v Australian Labor Party (South Australian Branch) (1999) 74 SASR 109. In any event no submission was put on either side that the matters argued were not justiciable. 9 The proceedings being without pleadings it was unclear at the commencement of the hearing what the precise issues were. A number of issues were raised during the two days of evidence and submissions, but resolved by agreement by the end of the second day. 10 First, it will appear from the above that I have referred to two entities, the One Nation NSW Political Party and the One Nation NSW Political Party Inc ("the Incorporated Association"). The second of those is an association incorporated under the Associations Incorporations Act 1984 ("the Incorporations Act"). The incorporation took place on 14 May 2001. The Political Party existed as an unincorporated association before that time, having been formed at a meeting held on 23 December 2000 ("the formation meeting"). The question raised was whether it was the pre-existing unincorporated association which was incorporated as the Incorporated Association, or whether there was a new association, which was formed and then incorporated for a separate purpose. It became, in my view, quite clear during the course of evidence that the latter was the true situation. Indeed, it became so clear, by the end of the evidence, that the parties were agreed that that was the situation. 11 It is quite possible for there to be two bodies of the same name (except for the word "Inc") existent at the same time. The existence of a certificate of incorporation of an incorporated association is conclusive as to its existence, even if the body that was incorporated was not qualified for incorporation under the Incorporation Act: The Queen v The Judges of the Federal Court of Australia; Ex Parte The Western Australian National Football League (Incorporated) (1979) 143 CLR 190. But the certificate is not conclusive as to the identity of the association which was incorporated and it may well be that a separate association was created and incorporated with the same name leaving the original unincorporated association concurrently existing: see Mune v Centro Argentino of Victoria Inc [1996] 2 VR 82; cf Kibby v Santiniketan Park Association Inc [1998] VSC 148; Jobnet Employment Services Inc v Copeman (1999) 32 ACSR 554. It is clear to me on the evidence that that is what occurred in this case. The Incorporated Association was intended to be created for certain financial purposes. The persons who became the members of the new association were the members of the existing State Executive, or a large number of them, rather than all the people who were by then members of the Political Party. Despite its incorporation, it appears that the Incorporated Association has never been used for the intended purposes. After its incorporation it was the Political Party that was registered under the Elections Act. The sole bank account, which on the evidence represents the assets of the Political Party, has remained its property. In any event, all parties are now agreed that the factual situation is as set out in this and the preceding paragraph. 12 Another issue which was disputed but as to which there has now been agreement is whether the Constitution of the Political Party is binding on the members. The Political Party was formed and has proceeded in a very informal fashion. It had no Constitution at all until February 2002, when the Political Party was registered with the Electoral Commissioner under the Elections Act. It was for that purpose that a Constitution was adopted, it would seem, by the State Executive. It was certainly solemnly lodged with the Electoral Commissioner as being the duly adopted Constitution of the party registered with him. A general meeting of the Political Party has in fact never been held. It seems to me that there was sufficient power vested in the State Executive at the formation meeting to adopt a Constitution when necessary for registration with the State Electoral Commission. Again, most importantly, it is not now contested among the parties to the proceedings that the Constitution is binding. The provisions of the Constitution are exiguous and in some ways more remarkable for what they do not contain than for what they do contain. They confer enumerated powers on the State Executive, but I do not accept that those enumerated powers exhaust the powers of the State Executive, which in my view continues to have, in addition, the power conferred on it at the formation meeting "to steer the party from now through the enlistment of members and registration process and until a general conference of the party's members can be held", which has not yet occurred. Furthermore, the Treasurer, Secretary and Membership Coordinator and any others they might wish to coopt were authorised to take all necessary steps required by the Electoral Commissioner for registration of the party in New South Wales. The Constitution does contain provisions as to membership, constitutional change, state conferences, special meetings (including notice) and the recognition of the Political Party's registered officer in accordance with the Elections Act, that registered officer being David Oldfield. There are no procedural provisions about State Executive meetings or, indeed, about the conduct of business at state conferences or special meetings. The state conferences and special meetings are the only forms of general meeting of the Political Party specified. As I have already indicated, the period of notice specified or stipulated for special meetings is 28 days and it is also provided that a special meeting must be authorised by a two-thirds majority of the members of the State Executive. It is now agreed that the Constitution is valid and binding. 13 The last of the issues which was at one stage contested, about which there was agreement, was the provision as to a quorum at a State Executive meeting. As appears above, no quorum for the State Executive is stipulated in the Constitution. However, again, the formation meeting made a provision for a quorum as being "50 percent of the members plus 1, that number being equal to 7". There was a motion passed at a State Executive meeting on 20 October 2001 which purported to abolish the requirement of a quorum. However, that meeting was itself inquorate and the resolution cannot operate to alter the provision for a quorum of seven. The effect of abolishing the quorum, that is, whether it would reduce the quorum to two or would revert the political party to the common law situation, where all members were required to be present for there to be a valid meeting, does not need to be considered: Ball v Pearsall (1987) 10 NSWLR 700; and see Joske's Law and Procedure at Meetings in Australia (9th Ed, 2001) 33. However, again, the important thing is that the parties are now agreed that the quorum requirement of seven stands. 14 Now that I have traversed the documentation and indicated the matters that during the proceedings have been agreed between the parties, the issues that remain are two. The first is whether the resolutions of the State Executive of 21 December 2002 relating to candidates for the Legislative Council were invalid on the ground that there was not a quorum present at that meeting at the time when they were passed. The second is as to what is the effect (if any) of the decision of the "preselection meeting" of 19 January 2003. 15 The factual situation at the State Executive meeting of 21 December 2002 is that at the time the resolutions were passed there were nine members present, but three declared an interest and abstained from voting. The second defendant claims that this deprived the meeting of a quorum, so that the resolutions are ineffective. Certainly the provision for a quorum at meetings of the State Executive, in my view (and the contrary is not argued), imposes a requirement for a quorum throughout the meeting and not merely a quorum at its commencement, so that the meeting can validly continue with lower numbers after a valid commencement, as is the case with some quorum provisions: see Joske at 33 – 34. The law is that, if persons are disqualified from voting to the extent that there is not a sufficient number of persons able to vote to constitute a quorum when a vote is taken, a valid vote cannot be taken. The locus classicus in this regard is Re Greymouth Point Elizabeth Railway and Coal Company Ltd [1904] 1 Ch 32. The rule was stated as follows by Joske J in Steuart v Oliver (No 2) (1971) 18 FLR 83 at 84 - 85: "The presence of a quorum means a quorum competent to transact and vote upon the business before the meeting. If some of those present are disqualified from voting and there is not otherwise a quorum, no business can be validly done." See also my judgment in Levenstrath Community Association Incorporated v Council of the Shire of Nymboida (1999) 105 LGERA 362 at 366 and other cases there collected. However, there is no provision in this case in law or in the Constitution of the Political Party that disqualifies people from voting at State Executive meetings, even if they have some interest in the result. The three members involved, not unnaturally (particularly in light of the guidelines laid down for preselection), abstained from voting on this issue at that meeting, but since they were not disqualified and were present, it is appropriate to continue to count them among those constituting a quorum. There is authority for this proposition in strong dicta in the High Court in A M Spicer and Son Proprietary Limited (In Liquidation) v Spicer and Howie (1931) 47 CLR 151 at 187 per Dixon J (with whom Rich J concurred). The proposition was adopted by Foster J sitting as a Judge of this Court in Anaray Pty Ltd v Sydney Futures Exchange Ltd (1982) 6 ACLC 271 at 273 - 274. With respect, I consider his Honour's view correct and I propose to adopt it. There was therefore a quorum present at the meeting at the relevant time and the adoption or ratification of the ticket of candidates brought forward from the preselection meeting was valid. 16 So far as the status of the meeting of 19 January 2003 is concerned, Mr Easton, as Director of the Political Party, takes and has expressed in evidence the view that this was valid as part of the ongoing preselection process which he deemed appropriate and, as I understand it, he is of the view that the result of that meeting ought take precedence over the State Executive decision of 21 December 2002. With this view I do not agree. It is quite clear that the meeting could not be valid as a special meeting of the Political Party, the determinations of which would be binding on all members, and, as I have said, it is not put forward in that guise. It seems to me that it cannot be considered as part of a preselection process binding upon the Political Party by reference either to its Constitution or to valid determinations of the State Executive, which is the only other binding authority provided for within the Political Party. There is no provision for the preselection process or preselection meetings in the Constitution. What is now occurring is not within but quite specifically without the preselection process as laid down by the State Executive on 12 October 2002 as set out above. In those circumstances it seems to me that, unlike the State Executive resolution of 21 December 2002, it has no binding status within the Political Party. 17 I should add, as I have been at pains to say during the hearing, that this Court is not, of course, engaging in a political process. What the Political Party does by way of its political activities are entirely within its purview and are none of the affair of this Court. The same, of course, applies to all other political parties and, indeed, all other parts of the political process. However, the members of the Political Party have, as is necessary, clothed their existence and operation in legal forms. Some of them have formed the Incorporated Association, although that turns out to be irrelevant to the present proceedings. Otherwise they have clothed their activities in the form of an unincorporated association constituted by agreement among the members and registered under the Electoral Act. In those circumstances, whether it has adhered to its adopted procedure is a proper subject of adjudication by the courts. It has not been argued that this is not an appropriate case for adjudication. Rather both sides have urged the Court to adjudicate the matter. That is the process that this Court has been carrying out and has concluded by the giving of this judgment. …oOo… 18 I have now heard argument on costs. Mr Hogg, of counsel for the defendants, has argued that, despite the fact that the second defendant (who was the contesting party on the defendants' side) lost in the result, account should be taken in the making of a costs order of the fact that he was successful on one or more of the issues which were at first contested but later agreed, for example, as to whether there were one or two entities with the One Nation NSW Political Party name. The general rule is that costs follow the event. However, special costs orders may be made where there was a discrete issue which added to the length of the trial and on which the generally unsuccessful party was successful. When one looks at the form of the further amended summons and the amended cross claim, although other issues were debated such as that of the number of entities, the central issue from the start was as to which had primacy out of the results of 21 December 2002 and 19 January 2003. Whilst there was debate and some evidence concerning issues on which the second defendant's view prevailed, I do not think it is possible to characterise them as discrete issues, in the relevant sense, in this comparatively short hearing. Although there is some force in the submission which Mr Hogg has put, I do not accept it. The result will therefore be that I shall order the second defendant to pay the plaintiffs' costs of the proceedings. 19 I have indicated to counsel during the course of discussion the orders that I propose to make and they have agreed that the orders that I shall now make adequately embody the decision I have come to. The orders of the Court will be: (1) I declare that the resolutions of the State Executive of the One Nation NSW Political Party ("the Political Party") at its meeting on 21 December 2002 concerning the Political Party's candidates for the Legislative Council elections in 2003 is valid and binding on the Political Party. (2) There will be judgment for the plaintiffs on the second defendant's amended cross claim. (3) I order that the second defendant pay the plaintiffs' costs of these proceedings. (4) I direct that these orders be entered forthwith. ********** Last Modified: 03/03/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.