Bell v Umina Beach Bowling Club Ltd [2003] NSWSC 809

New South Wales Supreme Court

CITATION : Bell v Umina Beach Bowling Club Ltd [2003] NSWSC 809 HEARING DATE(S) : 20/08/03 JUDGMENT DATE : 11 September 2003 JURISDICTION: Equity Division JUDGMENT OF : Young CJ in Eq DECISION : The suspension of the plaintiff from the defendant club is invalid.

CATCHWORDS : ASSOCIATIONS & CLUBS [25]- Expulsion or suspension- Natural justice- Prosecutors acting as judges- Suspension invalid. CORPORATIONS [101]- Meetings of directors- Requirement of notice- Proper notice of agenda required- Need for proper minutes. Calvin v Carr [1979] 1 NSWLR 1 Ethell v Whalan [1971] 1 NSWLR 416 CASES CITED : John J Starr (Real Estate) Pty Ltd v Robert R Andrew (A'asia) Pty Ltd (1991) 6 ACSR 63 Leeson v General Council of Medical Education and Registration (1889) 43 Ch D 366 McKinnon v Grogan [1974] 1 NSWLR 295 Thomson v Earlwood-Bardwell Park RSL [1999] NSWSC 243 PARTIES : John Bell (P) Umina Beach Bowling Club Limited (D) FILE NUMBER(S) : SC 3579/03 COUNSEL : G George (P) R A Pepper (D) SOLICITORS : O'Connor & Co (P) Walker Herceg (D)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

YOUNG CJ in EQ

Thursday 11 September 2003

3579/03 – BELL v UMINA BEACH BOWLING CLUB LTD JUDGMENT 1 HIS HONOUR: The plaintiff, by summons filed 2 July 2003 seeks a declaration that his purported suspension as a member of the defendant is void. 2 The decision allegedly made by the board of the defendant on 5 June 2003 was that the plaintiff was suspended from membership commencing 26 May 2003 up until 26 November 2003, though as the plaintiff was a director, his suspension was not to affect his attendance at the club for meetings of the board. 3 The defendant is a registered club incorporated under the Corporations Act 2001. Its constitution, subject to the Registered Clubs Act 1976 provides that (I will put the number of the articles in brackets) there shall be a board consisting of not less than four nor more than seven directors being a chairman, two deputy chairmen, a finance director and up to three other directors (27) who are elected at the annual general meeting for one year (28). The annual general meeting is held in September. The board has full and absolute authority in the administration of the affairs and business of the club (39). It shall meet at least once every month (41) with a quorum of four (41) and the chairman may at any time, and the secretary on the requisition of not less than three directors, convene a meeting of the board (42). Vacancies in the office of director are to be filled by the remaining directors (45). 4 Article 16, so far as is relevant, provides: "16(a) If a member shall wilfully infringe any of these Articles or the By-laws or be in the opinion of the Board guilty of any conduct prejudicial to the interests of the Club or be guilty of any conduct which in the opinion of the Board shall render him or her unfit for membership the Board shall have the power by resolution to reprimand, suspend from the exercise of all or any of the privileges of membership for such period as it considers fit, accept the resignation, or expel such member PROVIDED THAT; (i) At least seven (7) days before the meeting at which any resolution is passed the member concerned shall have been notified in writing by certified post sent to his registered address of the intention of the Board to consider the matter and requested to be present at the meeting and that he shall at such meeting and before any such resolution is moved have had an opportunity of giving in writing or orally any explanation or defence he may think fit. If the member fails to attend at the time and place specified without reasonable excuse the matter shall be heard and dealt with and the Board will decide on the evidence before it his absence notwithstanding. Any decision of the Board on such hearing or any adjournment thereof shall be final and the Board may at its discretion order the refund of any subscription or any part of it to any member during the current financial year. (ii) The meeting shall be held within one (1) month of the date that the alleged offence infringement or misconduct is raised at a meeting of the Board. (iii) Any resolution under this Article shall be by secret ballot and passed by not less than two-thirds of the members of the Board present at such meeting. … (c) Any resolution of the Board pursuant to paragraph (a) need not state the grounds, facts or opinions upon which it is based." 5 It would seem that the present problems can be traced back to an extraordinary general meeting (EGM) of the defendant held on 13 April 2003. The matter dealt with at the meeting is of no moment, but the chairman of the board, a Mr Menzies, became concerned that an alleged confidential document was distributed to persons who should not see it. 6 The alleged confidential document appears to be a letter from a former secretary/manager of the club complaining that chairman Menzies had no conception of the difference between the functions of a board in setting policy of a club and the functions of a secretary/manager in managing it. There was also a piece of paper circulating which showed a very large amount had been recorded against free drinks for members of the board. 7 In his affidavit, Mr Menzies says: "I was concerned about from where members had obtained confidential financial information regarding directors' expenses and how the confidential letter addressed to the Board had come to be distributed to members at the EGM. … I believed that it was probable that John Bell [that is, the plaintiff] had provided confidential information to some members. I formed that belief as a result of a conversation I had had with the Club's accountant, David Falconer, on 17 March 2003." 8 I should note that the affidavits prepared and filed on behalf of the defendant were probably the worse set of affidavits I have ever seen. Mr George of counsel, who appeared for the plaintiff, very properly objected to the majority of what was set out in the affidavits. However, it seemed to me that with an expedited matter I had really no alternative but to admit the whole of the defendant's affidavits and merely discount the weight for material that was not in proper form or hearsay etc. Accordingly, readers of these reasons should not be surprised if I quote material which is obviously in quite inadmissible form. 9 I should add that Bergin J had made consent directions on 4 July that all the defendant's evidence be filed and served no later than 25 July, the defendant did not comply with that order. On 25 July the matter was stood over in the expedition list for a further week. The defendant still had not filed any evidence by that date and an indemnity order for costs was made against it. The matter was fixed for hearing on 20 August. On 6 August the three badly prepared affidavits were filed. On 19 August at 8.08 pm the defendant's solicitors faxed my Associate a copy affidavit by a Mr Harry Lake who was said to be a vital witness for the defendant, and at the commencement of the hearing on 20 August, Ms Pepper who appeared for the defendant, sought leave to read that affidavit on the basis that it would not cause any prejudice. That proposition was contested by Mr George. No explanation at all was offered as to why this affidavit was not filed by 25 July or even when the other affidavits were filed. Furthermore, it seemed to go to the issue as to whether in fact the plaintiff was the source of the distribution of the alleged confidential document, rather than the question that concerned me, and that was whether the board had been able to reach the conclusion that he had done so at its meeting on 5 June. Accordingly I rejected the application to file and read the affidavit, though in case the matter went further, I had it marked for identification. 10 Returning to the narrative, a "special board meeting" was held on 24 April 2003. 11 I should say something about meetings of the board of the defendant. 12 Although the passages from the Articles of Association which I have already set out clearly show that there should be notices convening meetings of the board, the custom has been that the board meets regularly on a certain day each month at 9 o'clock or thereabouts, and that no notice of meeting is ever given, but when members of the board reach the meeting they are handed an agenda. The agenda usually concerns the same matters each month, such as receiving the secretary/manager's report and other routine matters. 13 However, on 24 April 2003, there was held what Mr Menzies described as a special board meeting to discuss the result of the EGM. There is no evidence at all that any notice convening the meeting was given to anybody, nor that there was any indication of what business was to be dealt with at the meeting. According to the so-called minutes, the meeting commenced at 5.10 pm and the chairman advised the purpose of the meeting, viz: (1) Confidentiality agreement; (2) Secretary/Manager's appointment; and (3) Concerns from General Meeting 13.04.03. The minutes start as follows: "Chairman – I wish to inform The Board that I have received written resignations from Directors T Hobbs 14-04-03 and Bill Sheehan 24-04-03 and that I have asked D Glackin to join the Board as Finance Director. Moved by AG (Mr Gabriel) and seconded by WR (Mr Raper) that D Glackin be appointed as Finance Director – carried. Chairman then invited DG into the Boardroom and advised him that the Board has sanctioned his position as Finance Director. D Glackin accepted the appointment." 14 Whilst the board had power to fill up vacancies in its number there must be grave doubts as to whether Mr Glackin was ever appointed a director as there was no notice of the meeting given, and not all the directors were present. It should be noted that the evidence showed that Mr Glackin had twice before been unsuccessful as a candidate for the board but was clearly aligned with the position taken by Messrs Menzies and Gabriel. 15 The minutes then continued: " CONFIDENTIALITY AGREEMENT: Chairman invited G Strong to take the Board through Agreement, at this stage 5.20 pm JB [the plaintiff] joined the meeting stating sorry I'm late I have been to Sydney, he also stated he did not know the meeting was on. All other Directors said it was agreed at the last meeting that this meeting would take place at 5 pm prior to welcoming G Rand to the Club. Chairman then advised JB what had taken place prior to his arrival. JB expressed his disapproval of not being involved in the Finance Director's appointment. The Board replied saying that the meeting took place as scheduled and the Board has endorsed the decision."