Countouris v Kallos [2008] NSWSC 840

New South Wales Supreme Court

CITATION : Countouris v Kallos [2008] NSWSC 840

HEARING DATE(S) : 08/08/08 JURISDICTION : Equity Division

JUDGMENT OF : Young CJ in Eq

EX TEMPORE JUDGMENT DATE : 8 August 2008

DECISION : Notice of motion dismissed with costs.

CATCHWORDS : CORPORATIONS [32]- Remedies where oppression- Plaintiffs seek injunction to prevent defendants from holding an annual general meeting- Plaintiffs claim that this may amount to oppression to them because their supporters' membership applications have not yet been processed- Quaere whether injunction lies- Delay in bringing the application- Court reluctant to restrain meetings- Application refused.

LEGISLATION CITED : Corporations Act 2001 (Cth), ss 203D, 232

PARTIES : Peter Countouris & Others (P1-12) Themis Kallos & Others (D1-18)

FILE NUMBER(S) : SC 2881/07

COUNSEL : T D Tzovaras (S) (P) D E Grieve QC (D)

SOLICITORS : Tzovaras Legal (P) Watson & Watson (D)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

YOUNG CJ in EQ

Friday 8 August 2008

2881/07 – COUNTOURIS v KALLOS JUDGMENT 1 HIS HONOUR: This is a motion in a dispute over the control of a Parish of the Greek Orthodox Church. The parties unfortunately have been in litigation for some time and there appears to have been an unsuccessful mediation and the general matter is back before the Court on the 18th of this month. However, the problem that confronts the Court today in the duty list is that on 14 July 2008, the people who claim to be the current directors and current secretary have convened an annual general meeting to be held next Sunday 10 August 2008. 2 The Parish has adopted as its operating vehicle a public company limited by guarantee entitled the Greek Orthodox Parish and Community of Burwood and District St Nectarios Ltd. I refer to that as "the company". 3 Article 71 of the company's Articles of Association provides that elections of members of the committee shall be held within one month of the second annual general meeting and each second successive annual general meeting thereafter. 4 It has been the custom and I am informed from the bar table that when the relevant annual general meeting is held, an election committee is chosen and forthwith there is an election for the members of the committee (which is virtually the board of directors) for the ensuing year. 5 On 14 July 2008 the secretary sent out a notice indicating that the annual general meeting would be held at 3pm next Sunday and warning people that they needed to be financial by 2 August 2008 in order to vote. The formal notice of meeting included: "(E) To elect the election committee to conduct the election of committee members so that the number of committee members will be 12; and (G) To conduct the election of 12 committee members." 6 Unless the Court makes some contrary order or unless the meeting itself next Sunday agrees to adjourn, the plaintiffs say that an election will take place which will be unfair and oppressive to the plaintiffs (who appear to be persons not in full communion with the existing committee members) because 95 of their supporters have put in applications for membership which will not have been processed by next Sunday so that those 95 votes will not be able to be considered when the committee is elected. 7 I should note that this is an interlocutory application brought on with some speed, though, it must be said, regrettably, brought at the last minute after some delay because of in one sense a laudable attempt to avoid litigation. The haste may mean that there may well be insufficient evidence to convince a tribunal of fact that the 95 would support the plaintiffs. However, for present purposes I will infer they would. It is also debateable as to whether all 95 are eligible to be admitted as members. 8 Article 20 of the Articles of Association describes the way in which a person can become a member of the company. A person is to submit an application in the form set out in article 20. The form is not identical with that which has been used by the 95. The secretary is then to consider the application and satisfy himself of the qualifications of the applicant and can call upon the applicant to furnish a certificate that the applicant is a member of the Greek Orthodox faith and of that person's Greek origin or Greek nationality, as the secretary may require. Only if satisfied will the secretary refer the application to the next meeting of the committee under article 21(b). The committee then considers the application. If three quarters of the members of the committee present and voting agree with it, the person becomes a member but in the event of an applicant not being admitted to membership, the committee shall not be bound to assign any reason therefor. 9 It would seem that most of the 95 applications were signed between October 2007 and April 2008, most of them in January and February this year, and were stockpiled. The reason they were stockpiled according to Mr T D Tzovaras, the solicitor for the plaintiffs, was that mediation and other negotiations were being carried on and it was only when they broke down that the applications were needed to be deployed. They were only deployed on 29 July 2008. There was an affidavit of the defendants' solicitor to the effect that at least a preliminary survey of the 95 would disclose that only about six appear to meet all the criteria and would be forwarded to the committee without further explanation. However, the secretary has been ill and had personal problems and has not even gotten that far. The plaintiffs say that there should have been an assistant or acting secretary appointed to speed up the process but there is insufficient material to show that delays by the secretary have been caused by malice rather than by circumstances. 10 Of course, if those six were admitted, it is hard to say that it can make any real difference in the result as opposed to 95. If more than the six are submitted to the committee and the committee refuses to admit them to membership, then there may be some extraordinary circumstances in which that decision can be challenged. I believe this is so if the evidence shows that the committee had acted in a completely capricious way in defiance of their duties, but ordinarily it is extremely difficult to challenge the decision of a board of directors which has a right to reject a membership application without giving any reason therefor. 11 I was concerned for a while about the date at which people had to be financial members. However, article 72(e) I think makes it abundantly clear that it is the people who are financial members as at the date of the annual general meeting and they alone who are able to stand for election and vote for the committee. 12 The thrust of the plaintiffs' case is that the annual general meeting could very easily be postponed. There is no urgency about holding it and in view of the fact that the case is back before this Court on 18 August 2008, the mere fact that the meeting has been fixed for 10 August 2008 shows that there is some devilment at work. I am asked then to infer that this was because the date was calculated to deprive the plaintiffs of the votes of the 95 who have submitted their applications. That argument is a little hard to uphold, particularly as the 95 applications were submitted on 29 July 2008, 15 days after the notice convening the meeting. 13 Mr Tzovaras says that under s 232 of the Corporations Act 2001 (Cth) the conduct of the committee in calling the election so quickly is oppressive to a section of the members including them. He says that an injunction should go to prevent that abuse. I do not know of any case where a court has granted an injunction to prevent oppression in the future using the power under s 232 and I would not intend to do so unless I was completely satisfied: (a) that that was possible; and (b) if possible, proper. 14 Generally speaking, courts are very loathe to prevent meetings of members or people casting votes at meetings of members. Experience shows especially with public companies, that members get tremendously upset if they go to a function all prepared to discuss matters and to vote to find that there is some court order preventing them from exercising their democratic rights. As a general rule, the court will not prevent meetings and discussions and voting, and a fortiori that is the situation where if subsequently it is shown that there was equitable fraud or breach of duty or operative maliciousness that the election would be set aside. In the present case not only would that be a possibility if the matter was proved in due course but the company being a public company if ever the plaintiffs' faction did get the majority there could be removal of the directors under s 203D of the Corporations Act by the proper procedure. 15 All these factors and the delay in bringing the application operate in my mind so that I should decline to grant any injunction. As I understand it, the matter is next before the court on 18 August 2008. 16 The notice of motion filed in court today, subject to the fees being paid, is dismissed with costs. The exhibits can be returned.