New South Wales Supreme Court CITATION : Islamic Assoc of Western Suburbs Sydney Inc v Dr H R K Survery [2008] NSWSC 77 HEARING DATE(S) : 29 and 31 January 2008 JUDGMENT DATE : 13 February 2008 JURISDICTION : Equity JUDGMENT OF : Hamilton J DECISION : Four paragraphs of subrule held invalid, one paragraph held valid. CATCHWORDS : ASSOCIATIONS AND CLUBS [51] – Incorporated associations – Other matters – Rules – Rule relating to functions of "foundation" members – Whether invalid as void for uncertainty or by reason of conflict with Associations Incorporation Act 1984. Associations Incorporations Act 1984 ss 3, 9, 11, Schedule 1 par 6 LEGISLATION CITED : Interpretation Act 1987 s 5(2) Uniform Civil Procedure Rules 2005 Part 20 r 14 G Scammell and Nephew Ltd v Ouston [1941] AC 251 Massey v Wales (2003) 57 NSWLR 718 CASES CITED : National Roads and Motorists' Association Ltd v Parkin (2004) 60 NSWLR 224 Re Vassallo [2001] 1 QdR 91 Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 TEXTS CITED : J W Carter, Elisabeth Peden and G J Tolhurst's Contract Law in Australia (5th ed, 2007) Islamic Association of Western Suburbs Sydney Incorporated (P1) Australian Islamic College of Sydney (P2) Ghulam Akbar Khan (P3) Shakil Syed (P4) Abdul Jabbar Khan (P5) Shabbir Khan (P6) Naeem-ul-Haq (P7) Nazir Ahamed (P8) Tariq Aziz (P9) Kamaran Khan (P10) Shahid Khan (P11) PARTIES : Imtiaz Khan (P12) Faisal Temuri (P13) Tariq Naveed Khan (P14) Shamsu Din Shah (P15 Muammer Ceviker (P16) Hafizur Rahman Khan Survery (D1) Abbas Chelat (D2) Aijaz Ahmed Khan (D3) Shujaullah Kirmani (D4) Qamer A Khan (D5) Zaheer Shah Khan (D6) Mohammad Akram (D7) Gulam Q Siddiqui (D8) FILE NUMBER(S) : SC 6109/05 COUNSEL : R R I Harper SC & M R Pesman (Ps) J C Kelly SC & N A Confos (Ds) SOLICITORS : Dominic Stamfords (Ps) Spanko Soulos & Co (Ds) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J WEDNESDAY, 13 FEBRUARY 2008 6109/05 ISLAMIC ASSOCIATION OF WESTERN SUBURBS SYDNEY INCORPORATED & ORS v DR H R K SURVERY & ORS JUDGMENT 1 HIS HONOUR: The proceedings are complex proceedings concerning the affairs of two bodies, which conduct Islamic institutions at Rooty Hill. The first of those bodies is the Islamic Association of Western Suburbs Sydney Incorporated ("the Association"), which is the first plaintiff. The second body is the Australian Islamic College of Sydney ("the College"), which is the second plaintiff. The Association is a body incorporated under the Associations Incorporations Act 1984 ("the Act"). The College is a company limited by guarantee incorporated under the corporations legislation. The objects of the Association are the promotion of various Islamic interests, but its principal activity is the conduct of a mosque. The College conducts an Islamic school that has been constructed at great expense upon land owned by the Association. These are both worthy community enterprises and, apart from their obvious religious and cultural significance, have aspects of commercial enterprises involving the expenditure of considerable sums of money. 2 The Association began as an unincorporated association in 1983 and was incorporated under the Act in 1991. The College was incorporated in 1998. The affairs of both the Association and the College have been the subject of considerable controversy over many years. In the proceedings, the validity of meetings going as far back as 1983 was disputed and the very form of the constitutions of both the Association and the College was in controversy. 3 Protracted negotiations have at least produced agreement as to the form of the constitutions of both bodies, and the Court on 29 January 2008 by consent made declarations as to the form of those constitutions. At the same time, the Court ordered that questions as to the determination of the membership of the Association; the appropriate manner of the calling and conduct of the next annual meeting and the election of office bearers of both the Association and the College; and any additional steps necessary to regularise the affairs of the Association and the College be referred under Part 20 r 14 of the Uniform Civil Procedure Rules 2005 to Anthony Whitlam QC for enquiry and report. 4 At the same time, the Court also ordered the determination of a preliminary question separately from and before any remaining questions in the proceedings. That question, as amended by a further order of 31 January 2008, is as follows: "Whether rule 3(6) of the Constitution and Rules of the Association, or any part thereof, is invalid and of no legal effect by reason of any inconsistency with any provision of the Associations Incorporation Act 1984 or void for uncertainty." 5 The purpose of this judgment is to determine that preliminary question. 6 The question can be answered only in the context of the relevant provisions of the Act and of the Constitution and Rules of the Association ("the Constitution"). 7 I turn to the relevant provisions of the Act. In s 3 of the Act, "committee" is defined as "the body which governs or has the management of the association." By s 9, an application for incorporation of an association shall be accompanied by a copy of the statement of objects and by a copy of the rules "being rules that comply with section 11", or by a statement that the model rules are to be adopted. By s 11, the rules must make provision for the matters specified in Schedule 1 of the Act. By par 6 of Schedule 1 those matters include the "name, constitution, membership and powers of the committee or other body having the management of the incorporated association", including the election or appointment of members of the committee and the filling of casual vacancies occurring on the committee. 8 The Association followed the course of lodging its own form of Constitution and Rules. It is the form so lodged that, with immaterial amendments, has been declared to be the Constitution and Rules of the Association. 9 As with the constitution of a company, the constitution and rules of an incorporated association operate as a contract binding upon the association and all its members: see s 11(2) of the Act. 10 The following are the provisions of the Constitution, as declared to be in force, that are relevant to the question before the Court. By rule 2, membership of the Association is to be of three categories: full member, associate member and honorary member. Rule 3 defines foundation members of the Association and sets out certain functions of the foundation members. It is necessary to quote this rule in full: "3(1) Foundation members are all the full members who participated in the first general meeting of the Association on 23rd January, 1983 held at 73 Brittania [sic] Avenue, Castle Hill. (2) Full members who remain financial for ten (10) years may apply to be elected as foundation members to the foundation members college. (3) The children of foundation members on attaining the age of eighteen (18) years may apply to be elected as foundation members to the foundation members college. (4) The election of foundation members must first be proposed by two (2) foundation members. (5) The election of new foundation members must be passed by a majority of the foundation members. (6) The foundation members will be responsible for the following functions of the association – (a) the development of central projects; (b) administrative and financial control; (c) real estate management; (d) to appoint by majority vote, a trustee to fill a position on the executive council which may have become vacant and the member so appointed shall hold office, subject to these rules, until the conclusion of the annual general meeting next following the date of the appointment; (e) the foundation members shall have the power to dissolve the executive council and appoint an interim caretaker or dismiss individual office-bearers of the executive council. Such action can only be justified based on belief of either – (i) major conflict or potential conflict within the community; or (ii) in contradiction to the objectives on which the association has been founded for or falling performance." 11 Rule 11 deals with the disciplining of members. Subrules (1) and (2) are as follows: "11(1) Where the executive council or foundation members are of the opinion that a member of the association – (a) has persistently refused or neglected to comply with a provision or provisions of these rules; or (b) has persistently and wilfully acted in a manner prejudicial to the interests of the association. The executive council may, by resolution - (c) expel the member from the association; or (d) suspend the member from membership of the association for a specified period. The foundation members may, by resolution - (e) expel the member from the association; or (f) suspend the member from membership of the association for a specified period. (2) A resolution under clause (1) is of no effect unless the foundation members, at a meeting held not earlier that [sic] fourteen (14) days and not later than twenty eight (28) days after service on the member of a notice under clause (3), confirms the resolution in accordance with this rule." Subrule (3) provides for the calling of the meeting referred to in subrule (2) and subrule (4) provides as follows: "11(4) At a meeting of the foundation members held as referred to in clause (3), the executive council shall – (a) give to the member an opportunity to make oral representations; (b) give due consideration to any written representations submitted to the executive council by the member at or prior to the meeting; and (c) by resolution determine whether to confirm or to revoke the resolution." It would seem that, wherever it appears in rule 11(4), "executive council" is a clerical error for "foundation members": see rule 11(2). 12 Rule 12 makes provision as to the powers, etc, of the committee: "12 The committee shall be called the executive council of the association and, subject to the Act, the Regulation and these rules and to any resolution passed by the association in general meeting – (a) shall control and manage the affairs of the association; (b) may exercise all such functions as may be exercised by the association other than those functions that are required by these rules to be exercised by a general meeting of members of the association; and (c) has power to perform all such acts and do all such things as appear to the executive council to be necessary or desirable for the proper management of the affairs of the association." 13 Rule 14 provides that the executive council shall be the sole authority for the interpretation of the rules. Rule 15 provides for the constitution of the executive council and rule 16 makes detailed provision concerning its proceedings. Rule 17 provides for the vacation of the office of a member of the executive council, including by a resolution of "a two-thirds majority of members present at a properly constituted general meeting". 14 Rule 23 provides for the appointment of trustees. Subrules (1) and (2) are in the following form: "23(1) Five (5) of the trustees shall be elected from amongst the foundation members for a period of five (5) years at a general meeting called for the purpose. (2) Any trustee can be removed by a resolution of the foundation members passed by a majority which comprises not less than two-thirds (2/3) of such members of the [a]ssociation as, being entitled so to do, vote in person at a meeting of which less than twenty one (21) days written notice was given." 15 There are, as would be expected, detailed provisions for the holding of and procedure at general meetings and meetings of the executive council. There are no rules making any provision for the calling of or procedure at meetings of the foundation members, nor any provisions other than those set out above as to how decisions by the foundation members are to be taken or any procedure to be followed in respect of any such decisions. 16 The plaintiffs argue that the whole and each of the paragraphs of subrule 3(6) are contrary to provisions of the Act. The basis of the submission is, in general terms, that the Act evinces an intention that the governance of the Association should be by the committee and that subrule (6) makes provisions contrary to that intention. Furthermore, the plaintiffs submit that each of the parts of subrule (6) is uncertain by reason of the quality of the language used or by the failure to provide machinery by which the various provisions are to be carried out. 17 The defendants on the other hand contend that no relevant intention can be derived from the Act and that in any event there is no reason why the Act should not be construed as allowing for more than one governing body of an association: see Interpretation Act 1987 s 5(2). They say that the various provisions have sufficient certainty to be effective. 18 As to the first of the plaintiffs' submissions, it is not in dispute that, if the provisions of rule 3(6) are in conflict with provisions of the Act, they are not valid: see Re Vassallo [2001] 1 QdR 91. 19 So far as the plaintiffs' second submission is concerned, one must turn to the law as to the circumstances in which contracts should be held void for uncertainty. 20 In the forefront of the law as to whether a contract ought be held void for uncertainty is the classic statement of Lord Wright in G Scammell and Nephew Ltd v Ouston [1941] AC 251 at 268 - 269: "There are in my opinion two grounds on which the court ought to hold that there was never a contract. The first is that the language used was so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention. The object of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation. Difficulty is not synonymous with ambiguity so long as any definite meaning can be extracted. But the test of intention is to be found in the words used. If these words, considered however broadly and untechnically and with due regard to all the just implications, fail to evince any definite meaning on which the court can safely act, the court has no choice but to say that there is no contract. Such a position is not often found. But I think that it is found in this case. My reason for so thinking is not only based on the actual vagueness and unintelligibility of the words used, but is confirmed by the startling diversity of explanations, tendered by those who think there was a bargain, of what the bargain was. I do not think it would be right to hold the appellants to any particular version. It was all left too vague. There are many cases in the books of what are called illusory contracts, that is, where the parties may have thought they were making a contract but failed to arrive at a definite bargain. It is a necessary requirement that an agreement in order to be binding must be sufficiently definite to enable the court to give it a practical meaning. Its terms must be so definite, or capable of being made definite without further agreement of the parties, that the promises and performances to be rendered by each party are reasonably certain. In my opinion that requirement was not satisfied in this case." See also Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 per Barwick CJ at 437; National Roads and Motorists' Association Ltd v Parkin (2004) 60 NSWLR 224 per Ipp JA at [77] – [79]. 21 Whilst the parties agree that there is only one principle, there are two ways in which voidness for uncertainty may arise. One is the lack of precision in the language used. The other is the incompleteness of a particular provision of a contract. This is recognised in the title of the new Chapter 4 of the latest edition of J W Carter, Elisabeth Peden and G J Tolhurst's Contract Law in Australia (5th ed, 2007), "Uncertain and Incomplete Promises". 22 As is contemplated by the words of the separate question as finally formulated, it is agreed between the parties that some parts of rule 3(6) may be held invalid but other parts upheld. 23 So far as paragraphs (a), (b) and (c) of rule 3(6) are concerned, I shall deal first with the submission that they are void for uncertainty. The difficulty arises from the wide and ill defined ambit of the expression "will be responsible for" in the opening words of subrule (6) and the definition of subject matter contained in each of the three paragraphs: respectively, "the development of central projects", "administrative and financial control" and "real estate management". The uncertainty of the ambit of each of these four expressions is only increased when they are considered in juxtaposition with the general power conferred on the executive committee of control and management of the affairs of the Association. Just what is meant by the foundation members being "responsible for" these aspects of the Association's affairs is in my view completely unclear. I have consulted the definitions of "responsible" in the Macquarie Dictionary (rev 3rd ed, 2001) and the Shorter Oxford English Dictionary (5th ed, 2002). Nothing in those definitions increases the certainty of the ambit of the expression. That uncertainty alone appears to me to deprive paragraphs (a), (b) and (c) of any sufficiency or clarity of meaning to permit any of them to have contractual force. 24 Equally, the expressions "the development of central projects" and "real estate management" appear to me to be devoid of any sufficient certainty of meaning. Perhaps "administrative and financial control" may be a little closer to having some ascertainable content, but it is difficult to define its ambit as against the conventional expression in rule 12(a) vesting the management and control of the Association in the committee. In this context and bearing in mind that the expression "administrative and financial control" too is governed by the words "will be responsible for", I am led to the conclusion that this provision also is too devoid of certain meaning to be given contractual effect. It seems unlikely that the intention could be to give exactly the same power to both the foundation members and to the committee without provision for the interrelationship between the two. If what is purported to be given to the foundation members is less than the control and management vested in the committee, then the uncertainty of its ambit is highlighted. 25 For the foregoing reasons, I am of the view that paragraphs (a), (b) and (c) are void for uncertainty. In those circumstances I do not need to consider whether they are inconsistent with the Act. 26 Although by the form of the subrule, the words "will be responsible for" also govern subrule 3(6)(d), they clearly do not do so in fact. The vice of that expression does not invalidate par (d). The argument put for the invalidity of par (d) is that the paragraph is incomplete by not providing how the "majority vote" referred to is to be taken and whether the majority referred to is a majority of the foundation members or a majority of those who vote. There is no machinery provision in this regard in rule 3 and, as I have already observed in [15], there are no provisions in the Rules for the calling of and procedure at meetings of foundation members. 27 It is clear from the provisions that I have set out above that the holding of meetings of the foundation members is contemplated by the rules: see rules 11 and 23. Mr Kelly, of Senior Counsel for the defendants, submitted that lacunae in machinery provisions relating to the foundation members may be filled by the common law of meetings. Whilst I do not necessarily agree with the widest ambit of Mr Kelly's proposition as it was put, it seems to me that, where the rules contemplate that a meeting of foundation members will be held but do not provide machinery, Mr Kelly's proposition does in fact apply and the meeting may be called and conducted in accordance with the common law rules as to meetings. 28 In my view, as the Rules contemplate that there certainly are circumstances in which meetings of the foundation members will be held, the proper construction of "appoint by majority vote" in rule 3(6)(d) refers to or contemplates an appointment made by majority vote at a meeting of the foundation members held for that purpose. In that context, the "majority" referred to ought be taken to be a majority of the members present at the meeting. Once the paragraph is interpreted in that way, it cannot in my view be said to be void or incomplete for lack of the provision of machinery. 29 Nor do I think that this provision can be said to be contrary to any intention to be derived from the Act as to the ambit of the Rules. There seems to me to be no difficulty in a rule for a casual vacancy in the committee to be filled up by a specified entity, whether that be the committee itself, or some officer or organ of the Association pending the next annual general meeting. 30 In my view, therefore, rule 3(6)(d) is valid. 31 Rule 3(6)(e) is submitted to be invalid both on the ground of uncertainty and of conflict with the Act. I shall deal first with the submission based on conflict with the Act. It has been said that these Rules differ from the situation generally found to prevail in companies, where the Constitution usually provides that the business of the company is to be managed by the directors. Such a rule in companies leads to the conclusion that the general meeting has no power to make management decisions or direct the board in the management of the company: see the decision of the Court of Appeal in Massey v Wales (2003) 57 NSWLR 718 at [45]. However, whilst these Rules do not contain a similar provision in terms, it seems to me that the Act and the Constitution have a similar effect. Thus, the committee is defined in s 3 of the Act as the body that governs the management of the Association and rule 12 provides that the executive council shall, subject to the Act, the Regulations and these Rules, control and manage the affairs of the Association. Importantly, it is provided or assumed in the statutory definition that the Association is governed or managed by a "body". Rule 15 provides for the constitution of the executive council and rule 16 makes detailed provisions as to its proceedings. 32 Whilst it appears to me (without deciding), that a provision for the removal of the entire committee by the foundation members may be valid if there were provision for replacing the committee, it seems to me that a power to remove the committee and replace it by an individual person conflicts with the intention of the Act that the Association should be governed by a "body" of a number of people. There is no provision for the replacement of the whole committee if dismissed by the foundation members. Under rule 3(6)(e) as promulgated, the day after the annual general meeting the foundation members could, if the rule is otherwise valid, remove the elected committee in favour of a single caretaker with no provision for there to be a replacement committee until the following annual general meeting. 33 There are other difficulties with the paragraph. It contains no reference, as does paragraph (d), to a "majority vote" or other indication that the foundation members are to exercise this power in a meeting, nor does it provide how the belief which is said to be the necessary foundation of such an action is to be reached, expressed or recorded. However, I do not need to rule finally on these matters, since I am of the view that I have expressed that this provision is inconsistent with the requirements of the Act and therefore invalid. 34 The answer to the question posed for my decision is therefore that paragraphs (a), (b), (c) and (e) of rule 3(6) of the Constitution and Rules of the Association are invalid and of no legal effect. ********** 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.