Supreme Court New South Wales Medium Neutral Citation: Bull v The Australian Quarter Horse Association [2014] NSWSC 1665 Hearing dates: 3, 4, 5, 6 March 2014; 14 and 15 July 2014;Last submissions filed on 3 September 2014 Decision date: 26 November 2014 Jurisdiction: Equity Division Before: Hallen J Decision: Direct the parties to bring in Short Minutes of Order reflecting these reasons for judgment within 7 days. The orders should include an order for the return of the exhibits and the Court Books. Stand over the proceedings to a date to be agreed to deal with any outstanding argument on the form of the Short Minutes of Order and costs. Catchwords: CORPORATIONS - Construction of Company's Constitution and Regulations - Company limited by guarantee - Aims and Objects - Application for registration of a cloned horse - Management and administration of corporation - Power of court to rectify corporate acts which are taken in contravention of corporate constitution - Resolutions passed by Board without proper notice - Validity of purported resolutions - Whether procedural irregularity under s 1322 - Validating orders - Whether substantial injustice - Oppression of single member - s 232 of Corporations Act 2001 (Cth) Legislation Cited: Civil Procedure Act 2005 (NSW) Corporations Act 2001 (Cth) Sherman Antitrust Act 1890 (15 USC § 1-2) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Abraham & Veneklasen Joint Venture, Abraham Equine Inc. and Jason Abraham v American Quarter Horse Association, No. 2:12-CV-103-J (N.D. Tex. July 12, 2012) Ananda Marga Pracaraka Samgha Ltd v Tomar (No 6) [2013] FCA 284; (2013) 300 ALR 492 ASC v Multiple Sclerosis Society (Tas) (1993) 10 ACSR 489 Australian Hydrocarbons NL v Green (1985) 10 ACLR 72 Australian Innovation Ltd v Petrovsky (1996) 14 ACLC 1357 Beck v LW Furniture Consolidated (Aust) Pty Ltd [2012] NSWCA 76; (2012) 265 FLR 60 Broadway Motors Holdings Pty Ltd (In Liq), Re (1986) 6 NSWLR 45 Cameron v Hogan [1934] HCA 24; (1934) 51 CLR 358 Catalano v Managing Australia Destinations Pty Ltd [2014] FCAFC 55 Caysand No 64 Pty Ltd, Re [1994] 2 Qd R 467 Charter Hall Ltd, Re [2007] FCA 1316 Cordiant Communications (Australia) Pty Ltd v Communications Group Holdings Pty Ltd [2005] NSWSC 1005; (2005) 194 FLR 322 Dixon v Australian Society of Accountants (1989) 95 FLR 231; 87 ACTR 1 Dome Resources NL v Silver [2008] NSWCA 322 Elderslie Finance Corporation Ltd v Australian Securities Commission (1993) 11 ACSR 157 Elemental Minerals Ltd, In the matter of Elemental Minerals Ltd [2010] FCA 687 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; (1998) 28 ACSR 688 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672 Giga Investments Pty Ltd (In Administration), Re (1995) 17 ACSR 472 Hollen Australia Pty Ltd, Re [2009] VSC 95 Holmes v Keyes [1959] Ch 199 Howard v Mechtler [1999] NSWSC 232 Howard-Smith v Ampol Limited [1974] AC 821; (1974) 3 ALR 448 H&P Newcastle Pty Ltd (in liquidation), Re [2013] NSWSC 778 In the matter of Richardson & Wrench Holdings Pty Limited [2013] NSWSC 1990 Jordan v Avram (1997) 25 ACSR 153; (1997) 141 FLR 275 Lu v Hua Cheng International Holdings Pty Ltd [2010] NSWSC 228. McLaughlin v Dungowan Manly Pty Ltd [2010] NSWSC 187 Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 343 National Roads and Motorists' Association Ltd v Parkin [2004] NSWCA 153; (2004) 60 NSWLR 224 Oil Basins Limited v Bass Strait Oil Company [2012] FCA 1122 Pettit v South Australian Harness Racing Club Inc [2006] SASC 306 Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 Sheahan v Londish [2010] NSWCA 270 Shew v Police and Citizens Youth Club [2013] NTSC 15 Simon v HPM Industries Pty Ltd (1989) 15 ACLR 427 St George Soccer Football Association Inc v Soccer NSW Ltd [2005] NSWSC 1288 Stanham v The National Trust of Australia (New South Wales) (1989) 15 ACLR 87 Super John Pty Ltd v Futuris Rural Pty Ltd [1999] NSWSC 627 Sutherland Shire Council v Leyendekkers [1970] 1 NSWR 356 Thomas v HW Thomas Ltd [1984] 1 NZLR 686 Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 Turnbull v NRMA [2004] NSWSC 577; (2004) 50 ACSR 44 Union Club v Lord Andrew Charles Robert Battenberg [2006] NSWCA 72 Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459 Weinstock v Beck [2013] HCA 14; (2013) 297 ALR 1 William Buck (WA) Pty Ltd v Faulkner (No 6) [2013] WASC 342 Zusman v Royal Western Australian Bowling Association (Inc) [1999] WASC 86 Texts Cited: Shorter Oxford Dictionary Category: Principal judgment Parties: Richard David Bull (Plaintiff) The Australian Quarter Horse Association ACN 000 964 643 (first Defendant) Peter John Bellden (second Defendant) Patricia Sharon Wettenhall (third Defendant) Terrence John McSweeney (fourth Defendant) Simon Julian Myers (fifth Defendant) Wendy Kim Johnson (sixth Defendant) Elizabeth Keating (seventh Defendant) Peter Stuart-Fox (eighth Defendant) Pauline Stuart-Fox (ninth Defendant) Carol Ann Ahern (tenth Defendant) Paul Lorimor (eleventh Defendant) Carol Ricketts (twelfth Defendant) Glenn Ricky Noble (thirteenth Defendant) Harry Van Dyk (fourteenth Defendant) Representation: Counsel: Mr A J McInerney SC; Ms S Clemmett (Plaintiff) Mr G Craddock SC (Defendants) Solicitors: Zucker Legal (Plaintiff) Gilchrist Connell (Defendants) File Number(s): 2012/380371 JUDGMENT Introduction and a Summary of the Claims 1HIS HONOUR: This is a case about quarter horses and, in particular, a cloned quarter horse. The cloned quarter horse is named "Smart Little Lena-D", also known as "Salute". (I shall refer to the horse as "Smart Little Lena-D" in these reasons as that is the name the parties used most often before, and during, the hearing.) 2A quarter horse is a breed of horse with its origins in the United States of America. Quarter horses have been bred in Australia since about 1954. They are known for their speed over relatively short distances and are used in Australia in many spheres of horsemanship, including in sporting, and rural commercial, activities. The breed is distinguished from other horses by performance, conformation (which means the form or outline of the horse; the symmetrical arrangement of its parts) and colouring. 3The Plaintiff, Richard David Bull ("Mr Bull"), the owner of "Smart Little Lena-D", sues The Australian Quarter Horse Association ("The AQHA"), and the members of its Board, by amended Summons dated 31 January 2014. At the hearing (which commenced on 3 March 2014), without objection, leave was granted to file a further amended Summons. In brief, Mr Bull seeks the following relief: (a) A declaration that the Plaintiff is, and continues to be, a member of The AQHA. (b) A declaration that a number of resolutions, purportedly passed at Board Meetings of The AQHA, was each invalid, null and void, and of no effect. The resolutions include: (i) the Resolution to remove Regulation 22 (regarding cloned horses) on 18 December 2010 ("the First Resolution"); (ii) the Resolution to remove Regulation 22 on 3 April 2011 ("the Second Resolution"); (iii) the Resolution to introduce an amended form of Regulation 22 (that is, "No cloned horse will be eligible for registration") on 3 April 2011 ("the Third Resolution"); (iv) the Resolution to amend Regulation 18 (regarding imported horses) on 18 December 2010 ("the Fourth Resolution"); (v) the Resolution to amend Regulation 18 on 3 April 2011 ("the Fifth Resolution"); and (vi) the Resolution to amend Regulation 10 (regarding the Stud Book) on 18 December 2010 ( "the Sixth Resolution"). (c) Orders, under the general law, or under s 233 of the Corporations Act 2001 (Cth), setting aside each of the First Resolution, the Second Resolution and the Third Resolution. (d) A declaration that "Smart Little Lena-D" was, at all material times, eligible for registration in the Stud Book of The AQHA and that the refusal to register "Smart Little Lena-D" was invalid, null and void and of no effect. (e) An order, under the general law, or under s 233 of the Corporations Act, that The AQHA register "Smart Little Lena-D" in the Stud Book. (f) A declaration that The AQHA denied natural justice to Mr Bull or acted with apprehended or actual bias against him in relation to the First Resolution, the Second Resolution and the Third Resolution and in relation to the application to register "Smart Little Lena-D" in the Stud Book. (g) In the alternative, a declaration that the Board Members of The AQHA, during the period commencing 18 December 2010 and ending on 15 September 2011, in respect of the First Resolution, the Second Resolution and the Third Resolution and in relation to the application to register "Smart Little Lena-D" in the Stud Book, acted in a manner prohibited by Part 2F.1 of the Corporations Act, namely in a manner: (i) Contrary to the interests of the members as a whole; (ii) Oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members, whether in that capacity, or in any other capacity. (h) Damages, interest under s 100 of the Civil Procedure Act 2005 (NSW), and costs. (i) Compensation (equitable and statutory). 4The Defendants oppose the granting of almost all of the relief sought by Mr Bull. However, they agreed that Mr Bull is, and continues to be, a member of The AQHA. In the circumstances, the parties came to the view that it was unnecessary to make the first declaration sought. I respectfully agree: Sutherland Shire Council v Leyendekkers [1970] 1 NSWR 356, at 361-362. 5In relation to Mr Bull's claim asserting a denial of natural justice, or actual or apprehended bias, by The AQHA, towards him, the Defendants submitted, and I accept, that Mr Bull "put no case of denial of natural justice... [and] did not seek to establish that natural justice was owed [to him] in any exercise undertaken by [The AQHA]". I also accept the Defendants' submission, first, that "there was no attempt to establish that actual or apprehended bias would affect any relevant conduct of [The AQHA]" and second, that "no evidence of apprehended or actual bias was tendered" by Mr Bull. (A re-consideration of the affidavits and the documents tendered in the proceedings confirms that there was simply no evidence advanced, or submissions made, to permit me to do more than to record the relief claimed and the submission of the Defendants.) 6In these circumstances, it is unnecessary to further consider these claims made by Mr Bull. I am of the view that a declaration, in the terms sought in the further amended Summons (and identified in sub-paragraph (f) above), ought not be made. 7It was part of Mr Bull's case that The AQHA's Regulations, to which reference will be made, at the time of his purchase of "Smart Little Lena-D" (and at the time of the importation of "Smart Little Lena-D" to Australia) must be applied. His case was that The AQHA's Regulations were not validly changed, in any relevant respect, between 3 December 2010 (the date of purchase) and 15 September 2011 (the date on which the registration application was refused) by the resolutions to which reference has been made. It was his primary contention that "Smart Little Lena-D" was eligible for registration in The AQHA Stud Book under the Regulations prior to any amendment and that "Smart Little Lena-D" should, therefore, have been registered. 8Mr Bull conceded that he would fail in the event that the court found, "on the Rules as they were, without any amendments, that the horse could not be registered". He accepted, also, that, if the Regulations had been validly amended, and, as amended, had the effect that "Smart Little Lena-D" could not be registered, he would fail: T41.33 - T41.39. 9Even though the allegation made by Mr Bull of oppressive conduct in the eighth prayer for relief in the further amended Summons extended beyond the First Resolution, the Second Resolution and the Third Resolution, and included the conduct of the affairs of The AQHA in relation to the application to register "Smart Little Lena-D" more generally, it was not part of his case that, if properly applied, and if resulting in "Smart Little Lena-D" not being eligible for registration, the application of the unamended Regulations would be oppressive. It is, therefore, unnecessary for me to address whether, in the events that have happened, that is, or is not, the case. 10On the second day of the hearing (4 March 2013), The AQHA sought, and, without objection, was granted, leave to file a Cross-Summons claiming the following relief: "(a) A declaration that, at its meeting on 2-3 April 2011, the resolution of the Board of Directors of The AQHA, that Regulation 22 be amended such that clones are not eligible for registration in the Stud Book, is not invalid by reason of any breach of Clause 14.5.2 of the Constitution of the First Defendant. (b) Costs." 11It can be seen that this relief is limited to one resolution to amend one Regulation only (presumably because, if made, it is unnecessary to declare not invalid the earlier resolution, or resolutions, dealing with Regulation 22.) 12The hearing of the matter was listed for four days but it did not finish within that time. It was necessary to adjourn the matter part heard for submissions to be completed. During the period of adjournment, I received further detailed written submissions from each of the parties, the original of which will remain with the court papers. (Subsequently, after the conclusion of the hearing, additional submissions were delivered, the last of which were sent to my Chambers under cover of letter dated 3 September 2014.) I shall return to the submissions of the parties, in more detail, later in these reasons. 13I should mention one other matter by way of introduction. Shortly prior to the matter being adjourned on 6 March 2014, the following exchange took place: "HIS HONOUR: I have to ask this very, very obvious question and it may say more about my lack of knowledge of the intricacies of all of this but has anyone ever thought that perhaps the Quarter Horse Association could create a register for cloned horses? ... I hate to ask that question because it seems so obvious and there must be an answer to it, but has anyone ever considered that? CRADDOCK [senior counsel for the Defendants]: I don't know whether that has been done. All I can tell your Honour is what is actually happening in America [regarding court-mandated rules for the registration of cloned horses and litigation on appeal regarding those rules] because that is what I have been told." 14At the conclusion of the evidence of Ms Stuart Fox, to whom I shall refer later in these reasons, I raised the matter with her in the following exchange: "Q. Is there any reason why The AQHA could not set up a register which simply identified cloned horses? A. It's never been thought about. Q. Is there any practical reason, and perhaps this may be a matter better for Ms Ross [the Registrar of The AQHA], I'm not sure, is there any reason from a practical point of view why that couldn't be done? A. I can't answer that question. I mean, I have not ever given thought to that. But it's an interesting point, yes." 15Finally, the following exchange occurred: "CRADDOCK: I think the position is that it probably would be possible but some processes would have to be undertaken in order to bring it about. Everyone is nodding on my side, so that much is accurate. HIS HONOUR: Mr McInerney [senior counsel for Mr Bull], let's assume for the purpose of the discussion that there could be a cloned horse register within the Australian Quarter Horse Association registry. If 'Salute' was included in that register, and any other cloned horses that Mr Bull decides to buy, would that be something that would be a satisfactory result from Mr Bull's point of view so far as this case is concerned? McINERNEY: Mr Zucker [Mr Bull's solicitor] tells me he needs to speak to me, your Honour. HIS HONOUR: We are not going to achieve the answer to that question today, so we will just put it on hold for a moment. McINERNEY: An issue with the process would relate to the registration of the progeny from the cloned horse... that may mean there is a subset within the register. HIS HONOUR: The good sense of the people involved might be able to work out that the register would contain the cloned horse[s]. How they [deal with] the progeny in relation to noncloned horses could be included in that register as well." 16Following the adjournment, but before the recommencement of the proceedings, the parties advised that the matter would be proceeding and that the proposal, the subject of the discussion above, had not been implemented. It was then that the additional two days was spent dealing with the submissions of the parties. 17When the hearing resumed, I was informed that Mr Bull embraced the possibility of a separate register for cloned quarter horses to be created by The AQHA. The Defendants, by senior counsel, stated that I should not make such an order as a matter of discretion. 18Furthermore, senior counsel for the Defendants, after the conclusion of the hearing, in answer to another question raised, submitted, in writing, that the court should not make an order requiring The AQHA to hold an extraordinary general meeting of the membership directed towards a plebiscite upon the question whether The AQHA ought to establish a register for cloned quarter horses and any offspring of a cloned quarter horse. 19Neither senior counsel, however, seemed to dispute that the court had power to make orders that might give effect to either matter. For reasons to which I shall come, and since I am not satisfied that Mr Bull should succeed on the relief that he seeks, it is unnecessary to consider the relief that could be given. Background Facts 20The following facts are uncontroversial. I have taken a number of these from a document headed "Facts which are Admitted" (Ex. RDB 1), from the submissions (where appropriate to do so), and from evidence that I am satisfied is not seriously in dispute, or which has been clearly established. 21Mr Bull is a breeder of quarter horses. He owns and operates the "Tamarang Stud" with his wife. Some of the horses that Mr Bull breeds are what he described as "dual registered stock horses, but they are all quarter horse based". He is also an importer of horses and shows horses. He has bred close to one hundred, and imported no more than 10, quarter horses. He also competes in the sports of "cutting" and of "camp drafting". 22He has been a member of The AQHA for about 40 years. As a member, Mr Bull has registered quarter horses with The AQHA. He has had registered more than 12 quarter horses bred in Australia or imported to Australia. 23The AQHA is a company limited by guarantee. It was formed in 1964 but was registered as a company on 17 March 1972. It is an affiliate of The American Quarter Horse Association ("The AmQHA"). It has a Board of Directors and a number of Committees, and it employs various management staff. It is what might be described as a "breed association". 24The AQHA website describes its aims as "to further the quarter horse breed in Australia, while maintaining the quality of quarter horse progeny". Its Constitution states its objects in more detail. These include the promotion and encouragement of the breeding of quarter horses, the maintenance and publication of a Stud Book, and the promotion and conduct of races, matches, competitions, shows and exhibitions. 25It is the Constitution of The AQHA that confers power on the directors to make Rules and Regulations. Such Rules and Regulations must not be inconsistent with the Constitution and are binding on the members of The AQHA. It will be necessary to return to the Constitution and the Regulations of The AQHA, in more detail, later in these reasons. 26The AQHA has a general membership, including youth members. There are in excess of 6,000 registered members. Certain members have voting rights. Each member pays a subscription fee and has his, or her, name entered in the Register of Members. 27The AQHA maintains a Stud Book in which it enters, by registration, identified quarter horses. It is only by entry into the Stud Book, or into the Appendix of the Stud Book, that a horse is registered as a quarter horse. Over 179,000 quarter horses are registered in the Stud Book of The AQHA. 28There are a number of Sub-Committees of The AQHA. One standing Sub-Committee is the "Stud Book Sub-Committee", which recommends amendments to the Regulations to The AQHA Board of Directors, which recommendations The AQHA Board either adopts or rejects. 29"Smart Little Lena" is the quarter horse of which "Smart Little Lena-D" is the clone. "Smart Little Lena" was a famous and successful quarter horse in the United States of America. It was a stallion by "Doc O'Lena" out of "Smart Peppy" that was foaled in June 1979. It died in August 2010. 30The AmQHA registered "Smart Little Lena" in its Stud Book. 31A number of foals of which "Smart Little Lena" was the sire, which were born in the United States and have been imported to Australia, are registered in Australia by The AQHA. The AQHA Registration Certificates issued for the progeny of "Smart Little Lena" record The AmQHA registration number of "Smart Little Lena" as the sire. 32Also, the DNA of "Smart Little Lena" is listed by The AQHA because of the offspring that have been imported and registered. 33However, "Smart Little Lena" is not registered in the Stud Book, or the Appendix Register, of The AQHA. Similarly, neither "Doc O'Lena" nor "Smart Peppy" is registered with The AQHA. Importantly, since each horse is now deceased, each may now not be registered. 34In the sport of cutting, "Smart Little Lena" won the United States Triple Crown, it being one of only three horses to ever win all of the Futurity, Super Stakes and Derby in the United States. 35"Smart Little Lena" sired 17 World Champions, 11 Reserve World Champions and 110 Register of Merit member horses. 36In an email dated 14 July 2014 (Ex. RDB11), The AmQHA provided Mr Bull with a copy of the Ownership Record of "Smart Little Lena" from the Records Research Area of The AmQHA "along with additional information listing that ["Smart Little Lena"] was Genetic Typed and Parent Verified". 37There were five clones of "Smart Little Lena" foaled in the United States. One of them was "Smart Little Lena-D". It was foaled on 26 February 2006. It is said to have the same DNA as "Smart Little Lena". 38In December 2010, Mr Bull bought "Smart Little Lena-D" at the Western Bloodstock Sales Limited, Fort Worth, Texas, in the United States of America, at auction, for USD$27,000 (A$28,067.38). Mr Bull knew, at the time of purchase, that "Smart Little Lena-D" was a clone of "Smart Little Lena". 39On or about 3 April 2011, "Smart Little Lena-D" arrived in Australia. It was released to Mr Bull, from quarantine, on or about 24 April 2011. 40The AQHA recognises the Stud Book of The AmQHA. As will be later discussed, it is significant that the country in which "Smart Little Lena-D" was foaled, and from which "Smart Little Lena-D" was imported, namely the United States of America, is a recognised international affiliate of The AQHA. (The other recognised affiliate of The AQHA, which is listed on The AQHA website, is the New Zealand Quarter Horse Association. There was also, in evidence, reference made the Brazilian Quarter Horse Association, which is one of the 35 recognised affiliates of The AmQHA, which, it seems, The AQHA has given some consideration to including as a recognised affiliate.) 41There is no evidence of "Smart Little Lena-D" having been registered by The AmQHA, in its Stud Book. Thus, a Registration Certificate from a recognised international affiliate of The AQHA has not been, and currently cannot be, obtained for "Smart Little Lena-D". 42(The significance of this relates to The AQHA registration requirements for imported horses. Detailed reference will be made, later in these reasons, to the nature of those registration requirements.) 43Mr Bull did, however, submit an application to The AmQHA to have "Smart Little Lena-D" registered in the United States under court-mandated rules, to which I shall refer, the result of which, subject to a present appeal, is that cloned horses may be eligible for registration by The AmQHA. 44The AmQHA advised Mr Bull that the dam of "Smart Little Lena", "Smart Peppy", was not DNA typed with The AmQHA. Also, "Smart Peppy" was reported as deceased, with the result that a sample of DNA from her could not be obtained. The AmQHA stated, however, that it may be possible "to attempt to 'build' a DNA type" for "Smart Peppy" by "typing" no less than 5, but preferably 10, registered offspring and their other registered parent. 45If The AmQHA were unable to "build" a DNA type for "Smart Peppy", it would advise Mr Bull that "Smart Little Lena-D" was not eligible for registration (even under certain court-mandated rules) in the Register of The AmQHA. 46"Smart Little Lena-D" carries the HERDA (Hereditary Equine Regional Dermal Asthenia), also known as Hyperelastosis Cutis, gene. It is said to be a genetic disorder which is a skin condition characterised in afflicted horses by skin lesions. It is described, in the Black Book (to which reference will be made), as "a devastating disease that causes the skin to lift and peel away". 47However, "Smart Little Lena-D" does not show the symptoms of HERDA. "Smart Little Lena-D" is what is described as "a carrier horse" and in genetic terms is depicted as "N/Hr". Some other Introductory Matters 48"Cutting" is an equestrian sporting event where a horse and rider are judged on the ability of each to separate a single animal away from a herd of cattle and keep it away for a short period of time. When the animal tries to return to its herd, the rider loosens the reins and leaves it entirely to the horse to keep the animal separated. A contestant has 2.5 minutes to show the horse and, each time the rider assists the horse, there is a penalty. 49"Camp drafting" is a unique Australian equestrian sporting event that also involves a horse and rider working cattle in a similar way to cutting. In a camp drafting competition, a rider on horseback must cut out one animal from the herd of cattle in the yard and block and turn the animal, then take it out of the yard and through a course around pegs involving right and left hand turns in a figure eight, before guiding it through two pegs known as "the gate". The rider maintains control of the camp draft horse. 50Some cutting and camp drafting competitions are restricted to quarter horses that are registered by The AQHA and some are not. Some are restricted to quarter horses that are registered with The AQHA and require, also, that the sire of a competing horse must be registered by The AQHA. (I should mention that a sire (a stallion) is the male parent, and a dam (a mare) is the female parent, of a horse. A foal is a young horse, typically under one year of age.) 51The practice of cloning by somatic cell nuclear transfer is, relevantly, a method by which the genetic material of an unfertilised egg, or embryo, is removed and replaced by genetic material taken from another organism to produce a live foal. A nucleus is taken out of a cell from the horse to be cloned. That nucleus is matched with an unfertilised egg of a mare, which is removed from the mare, and stimulated in a test tube to cause the nucleus to divide and multiply. The test tube embryo, at about the age of 8 days, is inserted into a recipient mare and grows in that mare to be a foal. The ensuing foal has none of the genetic qualities of the mare in which it grew, or the mare whose egg was matched to the nucleus prior to stimulation in the test tube. The foal has all of the genetic qualities, or DNA, of the original horse from which it was cloned. In other words, the genetics of the donor horse are not changed but, rather, a genetic duplicate is created. The cloned horse is said to be a genetic twin of the original horse. 52The cloning process is, self-evidently, different from the traditional breeding process. As was stated in Mr Bull's opening address (T2.07 - T2.13): "The differences between fertilisation and standard nuclear transfer lies in where the chromosomes originate... [In] fertilisation, the sperm and egg each contain half the chromosomes needed in the functioning cell. When the egg is fertilised, the resulting embryo ends up with a complete set of chromosomes, half from the mother and half from the father. However, in cloning, chromosomes come only from one source, the donor." 53(What was stated appears to have originated from Ex. RDB7, which is an article appearing in The Australian Quarter Horse News of June/July 2008.) 54Cloning is also different from artificial insemination, which is the reproductive method, or process, by which semen, previously collected from a sire, is inseminated into the uterus or vagina of the mare using instruments or equipment rather than by live cover. I shall return to this process, briefly, later in these reasons. 55Other evidence read in the proceedings reveals that mitochondrial DNA (being the very small percentage of DNA which originates in the mitochondria of a cell, rather than in the nucleus of a cell) may be passed onto the cloned foal. The mitochondrial DNA is referable to the mare whose unfertilised egg is used in the cloning process. It is the mitochondrial DNA that is used to differentiate clones from each other and from their donor. This topic was not explored, in any substantial detail, as there is complex science involved in this aspect of the cloning process. It seems clear, however, that DNA profiling, currently, would not be able to distinguish between the cloned, and the original, horses - both will have the same DNA profile: Ex. CB1/170. 56There was other evidence that suggests that there may be potential health issues relating to cloned horses. Some of these problems were identified in Ex. RDB7. However, this issue, too, was not explored in any detail. Email correspondence between a number of different experts and The AQHA formed part of the tender bundle of documents. I shall refer to some of these emails later in these reasons. The AmQHA Litigation 57In 2004, the AmQHA stipulated in its Rules and Regulations that cloned horses were ineligible for registration with the AmQHA. 58There has been litigation in the United States of America involving certain plaintiffs who, and which, sought to force The AmQHA to repeal its regulation relating to the non-registration of cloned horses and to allow cloned horses, and their offspring, to be eligible for registration with The AmQHA. Those plaintiffs, in that case, also sought monetary damages from The AmQHA: Abraham & Veneklasen Joint Venture, Abraham Equine Inc. and Jason Abraham v American Quarter Horse Association No. 2:12-CV-103-J (N.D. Tex. July 12, 2012). 59In broad substance, the claims in that litigation were that an agreement was made amongst the Committee members of The AmQHA to exclude the plaintiffs' horses, and other members with horses similarly situated, from registration with The AmQHA; that The AmQHA maintained a monopoly over the relevant market; that The AmQHA's conduct had an adverse effect on competition; that this conduct was without reasonable business justification; and that the plaintiffs had, thereby, been damaged. The case raised the question whether The AmQHA violated antitrust law by refusing to register clones of registered horses. 60The AmQHA filed a Motion for Judgment as a Matter of Law (which I assume is in the nature of a summary judgment application), which the Northern District Court of Texas District Judge, Mary Lou Robinson, rejected in May 2013. 61The substantive trial commenced in July 2013, before a jury. On 30 July 2013, the jury reached a verdict, finding that The AmQHA did violate s 1 (conspiracy to unreasonably restrain trade) and s 2 (monopolization, or attempted monopolization, of the market) of the Sherman Antitrust Act 1890 (15 USC § 1-2), and that it did cause damage to the plaintiffs. However, the jury awarded no monetary damages to any plaintiff. 62In its final judgment, given in August 2013, the District Court enjoined The AmQHA's enforcement of the regulation regarding non-registration of cloned horses and mandated that it adopt and incorporate specific language into its Rules and Regulations to accomplish registration of cloned horses and their offspring. 63Shortly thereafter, The AmQHA filed a motion for a stay, which motion was granted in part, staying, pending the resolution of an appeal, the requirement that The AmQHA register cloned horses and their progeny. 64The appeal lodged by The AmQHA, as I understand it, is against the lower court's adoption of the jury verdict and the issuing of a final judgment requiring The AmQHA to include a number of specifically worded amendments to its Rules and Regulations. The hearing of the appeal by the Fifth Circuit Court of Appeals, Texas, took place on or about 4 September 2014. At the time of writing these reasons, the result of the appeal is not known. 65The parties did not suggest that the determination of this case should be stayed until the litigation in the United States had been concluded and the decision of the Fifth Circuit Court of Appeals, Texas, is delivered. Significance of The AmQHA Litigation 66The AmQHA litigation is important because of its relevance to Mr Bull and the registration of "Smart Little Lena-D" by The AQHA. 67In October 2013, following the determination of the first instance litigation, The AmQHA informed Mr Bull that it was possible to register "Smart Little Lena-D", pending the appeal of the final judgment which had mandated that The AmQHA register clones and their progeny. 68If "Smart Little Lena-D" became eligible for registration under the court-mandated rules, it would be assigned a temporary Registration Certificate that "confirms registration of your clone with [The AmQHA] and may be used for all [The AmQHA] purposes, including registration and competition purposes." (The temporary Certificate was to be granted pending completion of certain computer programming requirements for The AmQHA.) 69However, "Smart Little Lena-D", at least until the appeal is finally determined, will not, in fact, be registered by The AmQHA. Thus, pending the determination of the appeal, it remains unregistered in the Stud Book of The AmQHA. 70If the appeal by The AmQHA is unsuccessful, then "Smart Little Lena-D" may be able to be registered in the Stud Book of The AmQHA. (This is, it seems, also subject to The AmQHA being able to "build" a DNA type for "Smart Peppy", to which reference was earlier made.) 71If "Smart Little Lena-D" is registered with The AmQHA, the result is that Mr Bull may be able to obtain a Registration Certificate from a recognised international affiliate as mandated by The AQHA's registration requirements for imported horses. 72The following exchange took place on the first day of the hearing (3 March 2014): "HIS HONOUR: And could I just ask: In the event that the horse is registered in the United States, that will mean, will it not, that it can be registered in Australia? CRADDOCK: Subject to the noclones rule. However, there's a practical question: If the Americans go that way, then do the Australians put their own members at a disadvantage in relation to international competition by continuing to decline to register clones? So there are legal and political [considerations involved]". 73It will be for The AQHA to determine what should be done in the event that "Smart Little Lena-D" can be registered by The AmQHA. It is not necessary for me to consider that question in these reasons. Dramatis Personae 74I have identified, above, the principal parties to the proceedings, the horses involved, and the principal overseas Quarter Horse Association to which further reference will be made throughout these reasons. I shall now introduce a number of the other parties, witnesses, and persons to whom specific reference will also be made. 75Peter John Bellden is the second Defendant and the current President of The AQHA. He joined The AQHA in 1990 and has been a director since 1996 (excluding the years 2000 and 2001), including, for a period, acting as Treasurer. He had previously acted as The AQHA President for the periods 1998 to 1999 and 2004 to 2007. He was also a member of The AmQHA for a short period of time in about 2002 and was, previously, a member of the National Cutting Horse Association in the United States. 76Mr Bellden, as the President of The AQHA, attends, and has voting rights exercisable at, Committee and Board of Directors' meetings. Where, by referendum, the Board of Directors votes in favour of changes to The AQHA regulations, Mr Bellden, at the relevant times, was responsible for putting proposed changes into written form and preparing a brief summary of the regulations reflecting the changes that were to be distributed to all members of The AQHA. 77In his capacity as President of The AQHA, Mr Bellden says that he is responsible for ensuring that it convenes meetings and makes any changes to regulations "in complete compliance with The AQHA Constitution and corporate law". From time to time, this involves him seeking advice from lawyers. 78Pauline Stuart-Fox is the ninth Defendant in the proceedings. She has been a member of The AQHA since about 1978 or 1979 and has been a director of The AQHA Board, at different times, over the last 11 or 12 years. She managed one of the largest quarter horse studs in Australia between 1991 and January 2010. Since 2008, she has been a member of the Stud Book Sub-Committee of The AQHA. 79Ms Stuart-Fox had been an international director of The AmQHA for more than four years. Her role as an international director of both Associations was to foster the relationship, and to liaise, between them. Part of her role was to facilitate the annual meeting for members of The AmQHA who were also members of The AQHA, the function of which annual meeting was to facilitate discussion between members of The AQHA so far as concerned their interest in The AmQHA. 80Carol Faye Ricketts is the twelfth Defendant and the company secretary of The AQHA. The AQHA has employed Ms Ricketts since 2008, initially as the Manager, and then as the General Manager, of The AQHA. Her role involved finalising and signing the payment of accounts and dealing with legal matters on behalf of The AQHA. In addition, she was the main person responsible for preparing the agenda for Board meetings and keeping the Minutes of the Board meetings. She has "the ultimate responsibility for any issues arising from the registration of horses". 81(The remaining Defendants, who have not played any part in the proceedings, are the third to eighth, the tenth, eleventh, thirteenth and fourteenth Defendants. Some of those Defendants are identified in the evidence because they attended one, or other, of The AQHA Board meetings or one, or other, of the Stud Book Sub-Committee meetings. Some voted on the amendments to The AQHA Rules and Regulations which are the subject of dispute in these proceedings. Otherwise, it is not necessary to refer to each. In fact, I note that there was really no case put specifically against any of the directors or officers of The AQHA.) 82Robyn Lewis (who is not a Defendant in the proceedings) has been the executive assistant to Ms Ricketts since January 2006. Whilst she was appointed to the role of The AQHA Magazine and Website Coordinator in August 2011, she says that she continues to assist Ms Ricketts "with AQHA legal and Board issues that arise from time to time". 83In her role as executive assistant, Ms Lewis was responsible for compiling Board Minutes (although, sometimes, Ms Ricketts compiled them personally). When Ms Lewis compiled Board Minutes, her "usual practice" was to forward them to Mr Bellden for approval and, upon receipt of his authorisation, to send an email of the Minutes to all Board members. She says that the Minutes "are customarily submitted for approval at the next Board meeting". 84In her capacity as Magazine and Website Coordinator, another role that she performs, she has the responsibility to amend The AQHA website to reflect any changes made to the Regulations. 85Toni Ross (who is not a Defendant in the proceedings) is the Registrar of The AQHA, which position she has held since 2009. She deals with the steps involved in achieving registration of a quarter horse with The AQHA. She processes the information into the database maintained by The AQHA when a quarter horse is registered. 86Margaret Hausfeld (who is not a Defendant) is the receptionist for The AQHA. She is responsible for responding to telephone calls and, where required, taking notes of the telephone conversations that she has conducted. 87Peter Banki, of Banki Haddock Fiora, is a solicitor who acted for The AQHA prior to the commencement of the proceedings. 88Ellie Smith, also of Banki Haddock Fiora, is a solicitor who was involved in providing advice to The AQHA in Mr Banki's absence. 89Christopher Zucker is the solicitor for the Plaintiff. He first obtained the file in relation to this matter in January 2013. (Mr Duncan MacLean, solicitor, then with MacLean & Curtis Solicitors, Tamworth, had previously acted for Mr Bull.) 90Adele Pamela Jarrett is a Legal Administrator who works at Mr Zucker's firm, Zucker Legal, in Tamworth. She deals with incoming and outgoing correspondence in relation to the matters for which the firm is responsible, including in relation to these proceedings. 91Professor Katrin Hinrichs is a veterinarian researcher and expert in the field of cloning. In November 2010, Ms Stuart-Fox, as a member of The AQHA Stud Book Sub-Committee, sought the advice of Professor Hinrichs. Reference will later be made to the advice that was provided. 92Professor Ann Trezise of the University of Queensland is a director of The Australian Equine Genetics Research Centre, formerly the Australian Equine Blood Typing Laboratory. She, too, provided advice, to which I shall later refer, to the Stud Book Sub-Committee of The AQHA regarding cloning. The Constitution of The AQHA 93I shall next deal with the relevant parts of the Constitution of The AQHA (Ex. CB1/21-53) to which the parties made specific reference, or to which I consider specific reference ought to be made. 94I shall also refer to the Rules and Regulations of The AQHA, in what is described as "The Black Book" (Ex. RDB 4), which are incorporated by reference in, and constitute Rules and Regulations made pursuant to, the Constitution. 95Article 2 of Part A of the Constitution sets out the objects for which The AQHA was established and include, relevantly: "(a) To promote and encourage the breeding and exhibition of Quarter Horses. (b) To compile, print and publish at intervals a Stud Book of Quarter Horses. (c) To collect, verify and publish information regarding Quarter Horses and to compile and maintain [a] register of such of information. (d) To compile and maintain a list of persons competent to act as judges of Quarter Horses. (e) To promote, foster, encourage, support and conduct races, matches, competitions, shows and exhibitions in relation to Quarter Horses and to give or contribute to such prizes, awards, distinctions and trophies and to guarantee prize money and expenses in collection [sic] with any such races, matches, competitions, shows and exhibitions. ... (f) To subscribe to become a member of and co-operate with any other incorporated association, club, or organisation, whose objects are altogether or in part similar to those of the Association, provided that the Association may not subscribe to or support with its funds any club, association, or organisation which does not prohibit the distribution of its income and property among its members to an extent at least as great as that imposed on the Association under or by virtue of clause 3 of this memorandum. ... (v) To print and publish any newspapers, periodicals, books or leaflets that the Association mat think desirable for the promotion of the Objects. ... (bb) To do all such other things as are incidental or conducive to the attainment of these Objects and the exercise of the powers of the Association. ... (dd) To promote, foster and encourage the development of and public interest in horse racing over distances of less than 800 metres and to promote, foster and encourage the development, breeding and exhibition of horses of all breeds capable of racing over such distances." 96The registered office of The AQHA is to be situated at Tamworth or any such other place in New South Wales as the directors may, from time to time, determine: Article 12 of Part A. 97In Part B of the Constitution, there are some definitions set out, which include, in Article 1.1.1: "Breeder" means a breeder of any Quarter Horse who is the owner or registered lessee of the dam at the time of service. "Constitution" means part A and part B of the Constitution of the Association. "Member" means a person whose name is entered in the register as a Member of the Association. "Stud Book" means the register of Q numbered Quarter Horses, the register of R2 numbered Quarter Horses and the register of R1 numbered Quarter Horses. 98There is no definition of "Quarter Horse" in the Constitution. Nor is there any definition of "breeding". 99Article 1.6 provides that headings and the table of contents must be ignored in the interpretation of the Constitution. 100Article 2 deals with membership. The maximum number of members is unlimited and identified as the subscribers to the Constitution and such other persons as the directors may admit to membership in accordance with the Constitution. Article 2.3 defines several categories of membership, including full membership, Constituent Membership, Affiliate Membership, Youth Membership, Associate Membership and Life Membership. Article 2.6 requires an application in a form approved by the directors for one, or other, appropriate class of membership to be made. Article 2.11 provides that The AQHA must keep a Register of members in accordance with the provisions of the Corporations Act. 101Article 3 provides that each Life Member, Full Member, Constituent Member, Affiliate Member and Honorary Member has one vote at meetings of Members. 102Article 4 deals with the entrance fee payable on election to membership. 103Article 5 provides for Members to pay an annual subscription. 104Article 12.2.1 provides for the Board of Directors to consist of 12 directors, all of whom must be members and resident in Australia. The directors are not to be paid any directors' fees for their services as directors of The AQHA: Article 13.1. Article 14.1 provides that the business of The AQHA is to be managed by the directors. 105Article 14.5 provides the power to make regulations and states: "14.5.1 The directors may make regulations, not being inconsistent with this constitution or the memorandum and at any time in like manner, but subject to this clause 14.5, to annul or vary any such regulations so made. All regulations so made and for the time being in force are binding on the members and have fall [sic] effect. Without limiting the generality of the foregoing, the directors have power to make regulations with respect to: (a) brands; (b) grading up programs; (c) the keeping of the official Stud Book and the contents thereof and the compiling, printing and publication thereof; (d) the registration of horses eligible for a 'Q' number being imported or born in Australia and the conditions of registration and the qualifications thereof; (e) the recording and acceptance of appendix horses and the conditions of recording and acceptance and the qualifications thereof; (f) classification of horses; (g) identification of horses; (h) progeny registration; (i) transfer or lease of horses in the Association's records; (j) registration, recording and transfer fees; (k) deregistration of horses; (l) show and performance recording; (m) certificates of service, stallion breeding reports and brood mare returns; (n) all facets of sprint racing (being racing over distances of less than 800 metres) including the conducting of race meetings and the licensing and control of trainers, jockeys, stewards, other racing officials and the like. 14.5.2 Alteration of any regulations for the time being in force by addition, deletion or amendment may be effected by resolution of the directors carried by at least three-fifths of the votes cast at a duly convened meeting of the directors pursuant to a notice of intention to move the resolution or one substantially similar lodged with the Secretary at least 21 days before the day on which the meeting was convened. Any such notice must be included by the Secretary in the notice convening the meeting." 106Article 15.2 provides the mode of meeting for directors. It states: "The directors are to be regarded as present together when in communication by telephone or other means of audio or audio visual communication if each of the directors participating in the communication is able to hear each of the other participating director." 107Article 15.3 provides for notice of meeting for directors. It states: "Notice of each meeting of the directors must be given to each director at least 24 hours before the meeting or at another time determined by resolution of the directors. The notice must include full particulars of the business to be discussed by the directors and any business which may come to hand subsequently to the notice but prior to the meeting must, so far as possible, be notified to each director provided that: (a) all directors may waive in writing the required period of notice for a particular meeting; and (b) it is not necessary to give a notice of a meeting of directors to a director who is out of Australia or who has been given leave of absence." 108Article 15.4 provides for the quorum at the meeting for directors. It states: "15.4.1 At a meeting of directors, a quorum is present if there are present at the meeting at least 4 directors or such greater number as may be fixed from time to time by the directors. 15.4.2 The continuing directors may act notwithstanding any vacancy in their number, but if and so long as their number is reduced below the number fixed by or pursuant to this constitution as the necessary quorum of directors, the continuing, directors may act for the purpose of increasing the number of directors to that number or of summoning a general meeting, of the association but for no other purpose." 109Article 15.5.1 deals with voting at directors' meetings. It states: "Questions arising at a meeting of directors must be decided by a majority of votes of directors present and voting. A decision of the majority is for all purposes a decision of the directors." 110Article 15.9 provides for the delegation of powers to a Committee. It states: "15.9.1 The directors may delegate any of their powers to Committees consisting of directors or Members as they think fit, to act in Australia or elsewhere. 15.9.2 The exercise of a power by a Committee in accordance with this constitution is to be regarded as the exercise of that power by the directors. 15.9.3 In the exercise of any powers delegated to it, a Committee formed by the directors must conform to the directions of the directors." 111Article 15.10 relevantly provides: "15.10.1 Except as provided in a direction of the directors, the meetings and proceedings of a Committee formed by the directors must be governed by the provisions of this constitution, in so far as they are applicable, as if meetings and proceedings of the Committee are meetings and proceedings of the directors. ... 15.10.3 A Committee may meet and adjourn as it thinks proper. Questions arising at any meeting must be determined by a majority of votes of the Committee members present and, in the case of an equality of votes, the chairman has a second or casting vote." 112Article 15.12 provides: "15.12.1 The directors must cause minutes of all proceedings of general meetings and meetings of the directors and Committees formed by the directors to be entered, within 1 month after the relevant meeting is held, in books kept for the purpose. 15.12.2 The directors must cause all minutes, except those deemed to constitute minutes by virtue of section 255 of the Corporations Law, to be signed by the chairman of the meeting at which the proceedings took place or by the chairman of the next succeeding meeting. 15.12.3 A resolution in writing signed by at least those directors sufficient to constitute a quorum at meetings of directors is to be regarded as a determination of the directors passed at a meeting of the directors duly convened and held." 113Article 15.13.1 deals with circulating directors' resolutions. It states: "15.13.1 The directors may pass a resolution without a directors' meeting being held if 5 or more directors entitled to vote on the resolution sign a document containing a statement that they are in favour of the resolution set out in the document. 15.13.2 For the purposes of this clause, separate copies of a document may be used for signing by directors if the wording of the resolution and statement is identical in each copy. 15.13.3 The resolution is passed on the day and at the time at which the last director signs a document. 15.13.4 In relation to a resolution in writing: (a) a document generated by electronic means which purports to be a facsimile of a resolution of directors is to be regarded as a resolution in writing; and (b) a document bearing a facsimile of a signature is to be regarded as signed." 114Article 17 deals with urgent business. It states: "If, in the opinion of the chairman of the directors, any matter of urgent importance has arisen which requires immediate discussion of the directors, any director may, with the consent of three-quarters of the directors present, submit any urgent motion without having given the special notice required in clause 15.1.3." 115Article 19 provides that volumes of the Stud Book must be supplied to Members and non-members of the Association at such price (if any) as the directors may from time to time determine. 116Article 20.4 provides that the Secretary must keep, at the Office, the Register, setting forth the names in full and addresses and stud prefixes (if any) and brands (if any) of all Members and the date of the latest payment by each member of his/her subscription. 117Article 25 provides for the method by which a notice to The AQHA may be given. The Regulations - The Black Book 118The parties referred to the book containing the Rules and Regulations of The AQHA as "the Black Book". However, this appears to be only because the book in existence in August 2010 had a black cover. I have referred, and shall continue in these reasons to refer to, the Rules and Regulations of The AQHA in this way. 119The Black Book contains the General Regulations (section 1), the Stud Book Regulations (section 2), the Show Rules, Amateur and Youth Regulations (section 3) and Contest Rules and Regulations (section 4). 120The Black Book identifies, on page 1, the following "Mission Statement": "* To record and preserve the pedigrees of the Australian Quarter Horse while maintaining the integrity of the breed, * To provide beneficial services for its Members which enhance and encourage Quarter Horse ownership and participation. * To develop diverse educational programs, material and curriculum that will position the AQHA as one of the leading organisations in the Australian Equine Industry. * To generate growth of AQHA membership via the marketing, promotion, advertising and publicity of the Australian Quarter Horse." 121Also on the same page is the following passage which appears under the heading "PLEASE NOTE": "By resolution of the Board, the Regulations and Rules shall become effective on and from 1st August 2010, and therefore all Regulations and Rules heretofore in force are hereby repealed. All State and Federal Laws can override our Rule Book." 122Regulation 2 includes: "Membership of the Association is a privilege not a right, application for which shall be made on forms and by payment of fees and according to the procedures as prescribed from time to time by the Association." 123Regulation 3 provides: "3 ALTERATIONS TO REGULATIONS Alterations of these Regulations by addition, deletion or amendment may be affected by resolution of the Board in accordance with the Constitution." 124Regulation 5 of the Black Book contains definitions, which include, relevantly: "The interpretations contained in the Constitution of the AQHA shall be deemed to be embodied in these Regulations. 5.1 'Association' means The Australian Quarter Horse Association, ABN 41 000 964 643. ... 5.3 'Imported Horses' shall be deemed to be horses foaled outside the territorial limits of Australia. 5.4 'Q Numbered' in relation to a Quarter Horse, means a horse which is registered as such by the Association. ... 5.6 'Breeding Year' shall be the period commencing on 1st August in any year and ending on 31st July of the next succeeding year. ... 5.9 'Appendix Register' means the register of appendix numbered Quarter Horses. 5.10 'Progeny Recorded' shall be deemed to refer to horses, which because of their breeding are eligible for registration. 5.11 'Registered' shall be deemed to refer to Q, R2 and R1 numbered horses which have been included in the Stud Book or AX, A, A1, A2 and A3 numbered horses which have been included in the Appendix Register ... 5.12 'Recorded' shall be deemed to refer to horses which are included in the Association's Records for breeding purposes only being Foundation Mares and Foundation Stallions that are accepted by the Association in the Breeding Program. ... 5.14 'Owner' shall be deemed to be the registered owner of the horse as recorded in the Association's Stud Book, Appendix Register or Foundation Recorded and shall include a lessee...". 125(Regulation 5 also includes the definition of "Breeder", "Member" and "Stud Book" in identical terms to the Constitution, which definitions have been extracted above.) 126As with the Constitution, there is no definition of "Quarter Horse" in the Black Book, although the Stud Book Regulations refer to a particular "Standard of Excellence" and include a reference to the conformation of a quarter horse. 127Regulation 8.6 deals with horses not eligible for registration or recording that show specifically identified characteristics. 128Regulation 10 relates to the Stud Book and provides: "10.1 Application for registration into the Stud Book must be in the name of a financial member of the Association who is entitled to vote at a general meeting of the Association. Any application for registration into the Stud Book may be refused by the Board without assigning a reason therefore. Youth members may only have two (2) horses registered in their membership (no colts or stallions). The Official Stud Book of the Australian Quarter Horse Association shall consist of the following: 10.2 Horses Born in Australia Any horse include in the Registrar of Q, R1 and R2 numbered horses and such other horses eligible for inclusion and which the Association may, at its discretion, include at a later date subject to the rules of the Association which include Genetic testings as described in Rule 15.10 and 16. 10.3 Imported Horses Any imported horse registered with an international Stud Book recognised by the Association provided that such horse meets all registration requirements outlined in the Association's rules which include Genetic testings as described in Rule 15.10 and 16. 10.4 Imported in Utero Horses (IIU) Any horses imported in utero with parents registered with an international Stud Book, recognised by the Association, provided that such horses meet all IIU registration requirements as outlined in the Association Rules & Regulations which include Genetic testings as described in Rule 15.10 and 16. 10.5 Horses not Born in Australia and residing outside Australia Any horse not born in Australia and residing outside Australia will be recognised by the Association provided that such horse meets all registration requirements outlined in the Association's rules which include Genetic testings as described in Rule 15.10 and 16. If the horse is registered with one of the international Stud Books recognised by the Association, then the rules for Imported Horses Rule 18 must be adhered to." 129Regulation 11 deals with the Appendix Register of The AQHA and horses eligible for registration in the Appendix Register. 130Regulation 13 consists of a breeding chart for horses registered both prior to, as well as on, or after, 1 August 1995. The chart outlines, based on the parentage of a horse, the classification by which that horse is to be registered and where it is to be registered (whether in the Stud Book or the Appendix Register). 131Regulation 15 deals with conditions of entry of horses into the Stud Book or the Appendix Register. Regulation 15.2 provides that "Any application for registration may be refused by the Board without assigning a reason therefore [sic]". Regulation 15.10 (referred to in a number of other Regulations) provides that "All horses eligible for registration in the Stud Book or Appendix Register must ... be parentage verified". 132Regulation 16.3 relates to one of the "Genetic Disorders" referred to in the Black Book, namely the HERDA gene. Regulation 16.3(c) provides that horses eligible for registration that test HERDA positive Hr/Hr will not be eligible for registration in the Stud Book, Appendix register or Foundation recording system. Regulation 16.6(g) provides that imported horses or horses registered for imported semen, testing positive Hr/Hr or N/Hr will not be accepted into the Stud Book or the Appendix registry. 133Regulation 18 of the Black Book deals with imported horses and provides: "18.1 Any imported horse registered in an international Stud Book recognised by the Association or any foal imported in utero, or born en route to Australia, is eligible for registration providing the application for registration is received within one hundred and twenty (120) days of the horse arriving or being born in Australia subject to: a) The application for registration is accompanied by documentation showing the date of arrival in Australia, the original Registration Certificate issued by the international Stud Book, or verifiable evidence is supplied, which shows the horse is registered in the name of, or leased to, the financial member making the application. b) Compliance with the Association's Rules & Regulations in relation to genetic testing. c) Horses who are registered with an international Stud Book and who have been upgraded by performance shall NOT be accepted for registration into the Association's Stud Book. Registration into the Appendix Register will be accepted. d) Any imported horse not complying with Rule 18 in regard to registration with the Association will have a penalty fee imposed which is to be paid prior to the registration being affected. (see Annex A) 18.2 Before a permanent registration number is issued to a horse imported (born en route or imported in utero) to Australia it will be subject to: a) Its pedigree being verified by scientific testing including stallion, dam and foal. b) All Genetic testing as required by the Association (see Rule 16.) c) The relevant appropriate fees having been paid (see Annex A) d) DNA markers for the horse must accompany any application for registration." 134"Annex A", to which reference is made in Regulations 18.1(d) and 18(2)(c), contains a schedule of fees payable to The AQHA in various circumstances, including in relation to membership, shows, testing and registration. Fees referable to "imported horses" are payable depending on when the registration application for an imported horse is received by The AQHA (if received within 120 days of the horse arriving, or being born (in the case of a foal imported in utero), in Australia, the applicable fee is $230; if received outside of 120 days of arriving, or being born, in Australia, a maximum penalty of $330 applies.) 135Regulation 19 deals with breeding requirements and the documents and other information of each of the stallion and mare that The AQHA deems necessary. In the case of a stallion, the requisite documents include its original Registration Certificate and evidence that its DNA type is on file with The AQHA. In the case of a mare, it is obligatory that its DNA type is on file with The AQHA and that any genetic disorder test results are provided. 136Regulation 20 provides for progeny eligible for registration in the Stud Book or Appendix Register. The progeny must be "parentage verified" ("foal and both parents must be DNA typed"). 137Regulation 21 deals with artificial breeding, that is to say, breeding by artificial insemination. Regulation 21.1 specifically deals with imported semen and, relevantly, provides: "A person wishing to import semen must at all times adhere to the current rules in the AusQHA and AmQHA Official Rulebooks pertaining to their breeding regulations (transported semen). Prior to the first collection occurring the owner must: a) Register the donor stallion with the Association b) Forward a copy of the stallion's AmQHA Registration Certificate c) File with the Association, from a registered Veterinarian i) a Certificate of Examination for Initial Breeding Fee (IBF) and pay the applicable IBF fee. ii) a written report of the stallion's DNA testing/genetic markers from a laboratory recognised by the Association. iii) Has complied with any further genetic testing the stallion requires as per Rule 15.10 and 16. Note: All other regulations pertaining to registering a horse must also be complied with." 138(The other sub-sections of Regulation 21, which sub-sections deal with imported embryos/eggs, domestic semen, stored semen and embryo transfer, are not relevant to these proceedings.) 139Regulation 22, as at August 2010, dealt with cloning and provided: "Horses produced by any cloning process are eligible for registration in the Stud Book or Appendix Register of the Association providing such is declared to the Association and that it meets all registration requirements. Cloning is defined as any method by which the genetic material of an unfertilised egg or an embryo is removed, replaced by genetic material taken from another organism, added to with genetic material from another organism, or otherwise modified by any means in order to produce a live foal. When a foal is produced by cloning, that fact will be noted on its registration certificate." 140(There were other versions of this Clause, which appeared in earlier editions of the Black Book. For example, Regulation 15.6 of the Black Book of August 2004 commenced with the statement that: "Horses produced by any cloning process are not eligible for registration in the Stud Book or Appendix Register of The AQHA". A similar rule appeared in Clause 16.6 of the Black Book of August 2005. In the Black Book of August 2006 and the Black Book of August 2008, the relevant Clause mirrored the terms of the August 2010 Regulations, namely: "Horses produced by any cloning process are eligible for registration in the Stud Book or Appendix Register of the Association providing such is declared to the Association and that it meets all registration requirements".) 141Regulation 24 deals with Registration Requirements. In an application to The AQHA for registration, a quarter horse must be "fully and accurately described in words and by drawing". Regulation 24.1(c) provides "The Association may refuse to accept, at its absolute discretion, for registration or recording, horses which have disqualifying characteristics as set out in the Standard of Excellence". Regulation 24.1(f) provides "Progeny of stallions and/or mares who have not complied with the Regulations pertaining to them are not eligible for registration". Regulation 24.1(g) provides that registration papers do not represent legal ownership and are issued for The AQHA's recording purposes only. 142Regulation 26 relates to horses not eligible for registration. Those not eligible included "imported horses in Australia after 31 December 2007 testing positive (N/hr or Hr/Hr) to HERDA". 143Importantly, no specific reference is made in Regulation 26, or in any of the Regulations, to an imported quarter horse not registered with an international Stud Book recognised by The AQHA or to an imported cloned quarter horse not registered with an international Stud Book recognised by The AQHA. However, reference has earlier been made to Regulation 10.3, which identifies what the Official Stud Book of The AQHA is to contain. 144Regulation 35, described as a "Hardship Clause", provides: "Notwithstanding anything herein contained, the Association reserves the right to accept any Quarter Horse and to record the transfer of a Quarter Horse into the Stud Book of Appendix Register of the Association when the breeding of the horse is proven to the satisfaction of the Association and on payment of a Hardship Fee which shall be determined by the Association." (The precise method by which The AQHA determines whether to accept a quarter horse under Regulation 35 is not disclosed in the Black Book. However, the Regulation 35 necessitates, not only that the horse to be registered is, in fact, a quarter horse and that the applicable fee is paid, but, also, that The AQHA be satisfied that "the breeding of the horse is proven to the satisfaction" of The AQHA.) 145Regulation 36 provides: "Registration of horses with the American Quarter Horse Association is possible on application to the Australian Quarter Horse Association provided horses meet The AmQHA registration criteria at the time of application." The Regulations as Amended 146In September 2011, after Mr Bull's application for registration of "Smart Little Lena-D" had been refused, Mr Bull's solicitor, Mr Zucker, downloaded a version of The AQHA Rules and Regulations from The AQHA website. 147The following amendments had been made to the Black Book, as published in August 2010: (a) Regulation 10.5 had been varied in part. The second paragraph thereof was, as amended, in the following form: "If the country in which the applicant animal resides has its own Quarter Horse Association Stud Book, then the horse must first be registered in its country of birth prior to consideration for registration in Australia (as per rules for Imported Horse Rule 18)". (b) Regulation 18, to which the amended Regulation 10.5 refers, was in a different form, and commenced by stating: "18.1 Imported Horses - Any imported horse must be registered in its country of origin in an International Stud Book that is recognised by the Association being the New Zealand Quarter Horse Association and the American Quarter Horse Association". (c) Regulation 22, as amended, was directly inconsistent with the previous form of Rule 22, and was in the following form: "No cloned horse will be eligible for registration". 148There was also an amendment to the Black Book, not the subject of dispute between the parties, to the effect that a quarter horse would not be prohibited from being registered by The AQHA because it was a carrier of the HERDA gene. 149Specifically, Regulation 16, as it appeared in the 2010 Black Book, was deleted and replaced. Part of the new Regulation was in the following terms: "16.3 ... (d) All horses that return a positive (heterozygous/carrier) result to HERDA/OLWS will be considered for Registration with the Association as long as the horse meets all registration requirements." 150In a press release about the amendment, The AQHA provided that "[t]he Board has made the decision to accept the registration of HERDA and OLWS carriers, both nationally and internationally ... as long as all other registration requirements are met ...". 151At the hearing, the parties confirmed the effect of the amendment in the following exchange: "HIS HONOUR: ... even if Smart Little Lena D is a HERDA carrier he is still eligible for registration in the Stud Book register as long as he fulfils all other registration requirements as laid out in the Black Book? Is that a fair and neutral way of putting it? CRADDOCK: We accept that. McINERNEY: Yes, your Honour." 152On the final day of the hearing, senior counsel for Mr Bull made the following concession: "Yesterday there was some discussion about the outcome of the HERDA forum. It was indicated that the Association had issued a press release and that it had been vetted by the board the effect of which was to indicate that HERDA carriers who are inflicted wouldn't be prohibited from registration. That much was accurate. I might have left a wrong impression. I think I probably did by saying that that qualification wouldn't be an impediment to the registration of Smart Little Lena[-D] by reason of his being a HERDA carrier. At the time of the application that may not have been correct so far as the Black Book was concerned." 153However, later on that day, senior counsel for the Defendants, referring to the Board Minutes of that meeting, provided: "The minutes themselves don't say when the change took effect. I sought the Association's instructions as to when that occurred. If I am permitted to tell your Honour that from here, the answer is that there was a statement to the membership made over the website on 3 April 2011. So we can take it that the rule was given immediate effect. Mr Bull didn't make his application until 29 August, I think HIS HONOUR: July. CRADDOCK: July, received by the Association, 3 August. The upshot of that is that the fact that Smart Little Lena-D was a HERDA carrier would not have stood in the way of his application, but by reason of the change to the rules contained in the Black Book." 154The following exchange also took place: "CRADDOCK: ...Mr Bull as of 3 August 2011, that is when it was received, had an application before the board. He was entitled to have an application [considered] according to law including [applying] the correct construction of the Regulations at that time. That was why it was important to determine whether... the pre April form of Regulation 16 or the post April form of Regulation 16 was to be applied to him. That's not a problem. HIS HONOUR: Can you remind me[?] CRADDOCK: -- that's the HERDA [Rule]. We discussed that because your Honour doesn't have to-- HIS HONOUR: -- by August the HERDA Rules had been changed already? CRADDOCK: That's what I mean. HIS HONOUR: HERDA doesn't become relevant. CRADDOCK: No. That's what I'm saying. We had to find that out because otherwise there might have been a further error about what particular form of a Rule applied to him. I'm putting this against [the] interest [of The AQHA]. What I'm saying is we've clarified that [Mr Bull] has the benefit of the latter version of Regulation 16." 155Somewhat in tension with Mr Bull's principal submissions regarding notice requirements, and not without significance, is the fact that the amendment to the HERDA rule was made at the April 2011 Meeting of the Board, being the same meeting at which the Second, Third and Fifth Resolutions, the subject of dispute in these proceedings, were said to have been passed. The Evidence of the Witnesses 156It may be helpful, next, to set out aspects of the evidence of individual witnesses that was not the subject of real dispute, or which I accept as having been established on the balance of probabilities. Where necessary, I shall later refer to other evidence the subject of dispute by individual witnesses and express my conclusions on that evidence. 157Mr Bull gave the following evidence (omitting matters to which I have earlier referred): (a) As a member of The AQHA, he had a copy of the Black Book which contained the Rules and Regulations of The AQHA. He had read the Black Book and was familiar with the Regulations that applied to particular horses being put forward for registration. (b) When importing horses prior to when he imported "Smart Little Lena-D", Mr Bull had read Regulation 18, which was to the effect that the application for registration with The AQHA was to be accompanied by documentation showing the date of arrival in Australia, the original Registration Certificate issued by a recognised International Stud Book, or verifiable evidence which showed that the horse was registered in the name of, or leased to, the financial member making the application. (c) Mr Bull had been careful, prior to importing "Smart Little Lena-D", to see what Regulations of The AQHA applied in relation to a cloned horse. He did not, however, pay specific attention to the Regulation about imported horses at the time he purchased "Smart Little Lena-D" or at the time he sought to import it into Australia. (d) At the time he purchased "Smart Little Lena-D", Mr Bull was aware that there was a Regulation in the Black Book that permitted the registration of cloned horses. (e) At that time, he had not heard of any controversy surrounding the registration of cloned horses in Australia, but had heard that certain people, in the United States, were considering making a challenge against The AmQHA's anti-cloning regulation. (Mr Bull said he did not know that such a challenge had, in fact, been commenced.) He acknowledged that there was "a lot of debate" about the registration of cloned horses. (f) At the time he purchased "Smart Little Lena-D", Mr Bull knew that the horse could not, then, be registered in The AmQHA's Stud Book, as The AmQHA did not, at that time, permit the registration of cloned horses. He also knew that "Smart Little Lena-D" was not already registered with The AmQHA. (g) Mr Bull purchased "Smart Little Lena-D" as a breeding horse only. (h) He believed that the registration of a cloned quarter horse with The AQHA was possible and that registration would increase the value of such a horse. However, he gave no evidence that, had he thought "Smart Little Lena-D" could not be registered, he would not have purchased it. (i) By September 2011, Mr Bull was aware that the Regulations of The AQHA, as then published on the website of The AQHA, included a rule that no cloned horse would be eligible for registration. (j) So far as Mr Bull knows, no cloned horse, other than "Smart Little Lena-D" is in Australia, and no other application for the registration of a cloned horse has ever been made to The AQHA. (Ms Ross confirmed that she had never received any other application concerning a cloned horse.) (k) In October 2013, Mr Bull sent an email to Professor Hinrichs stating that his understanding of cloning was that the cloned horse was a copy of the horse from which it was cloned and that the cloned horse had the same parentage as the horse from which it had been cloned. Professor Hinrichs responded by email to the effect that she agreed, stating "...the dam and sire of the donor horse are the dam and sire of the clone": Ex. RDB2/2-3. 158Ms Ricketts gave the following evidence: (a) There are 11 Sub-Committees of The AQHA, one of which is the Stud Book Sub-Committee. The role of each Sub-Committee is to address the daily issues that arise in respect of those matters falling within the Sub-Committee's purview, to investigate such issues, where necessary, and to make recommendations to the Board. The Board then votes and considers how the issues should be determined. (b) A Board member chairs every Sub-Committee. Some directors serve on multiple Committees. (c) At the meetings of December 2010 and April 2011, Ms Stuart-Fox was the director sitting on the Stud Book Sub-Committee. Other members of that Sub-Committee were Greg Watson, Ricky Glen and Sue Williams. (d) As the company secretary, either she, or her personal assistant, Ms Lewis, would put together the Agenda for Board Meetings. She would review the Agenda before it was circulated to Board members. (e) She attended the Stud Book Sub-Committee meeting of 17 December 2010. (f) When the Stud Book Sub-Committee made a recommendation, Ms Ricketts would ensure that each issue determined by it was inserted into an Agenda for the next Board meeting. The Board would consider the recommendation and vote on it. (g) The AQHA's Black Book is produced on 1 August every second year. The closest revision of the Regulations to the events that occurred in 2011 and 2012 was, as stated, the one prepared bearing the date August 2010. It was due to be reviewed again in August 2012. (h) If there was a change to a Regulation, prior to the publication of the following Black Book, it was noted in The AQHA magazine and also on The AQHA website. The changed Regulation was then incorporated, as amended, into the next version of the Black Book when it was prepared and published. (i) Following receipt of Mr Bull's application to register "Smart Little Lena-D", Ms Ricketts spoke with Mr Bellden, who suggested that the matter be referred to Mr Banki for advice. (j) On 30 August 2011, Ms Ricketts wrote a letter in the following terms to Mr Banki: "We have received an application for registration of a horse that we feel does not meet the criteria for registration with the AQHA. The application has been received from one of our members Mr Richard Bull, Tamarang Stud, Tamworth. The Board feels that when this registration application is refused that Mr Bull could possibly decide to take legal action against the AQHA. Therefore, the Board wants to make sure that the wording on our letter to Mr Bull is worded correctly, and also that you look at our rules re his registration. I have attached a document for you outlining all the details re the horse in question and also that pertain to this registration application." (k) The document attached was in the following terms: "BACKGROUND In America they are cloning horses. A stallion, registered with the American QH Assoc, Called SMART LITTLE LENA was cloned. Mr Bull from Australia, purchased one of the clones called SALUTE (stallion). The American QHA Association does not register Clones. Mr Bull imported his stallion SALUTE into Australia, he was transported from USA on the 3rd April 2011 and was released from Quarantine in NSW on the 24th April 2011. Mr Bull has applied for registration of the stallion SMART LITTLE LENA-D (known as SALUTE). Copies of all paperwork received from Mr Bull is attached. We feel that the horse is not eligible for registration with us as the horse has been imported to Australia and does not meet the criteria as set down for imported horses which is as follows: 2010 Rule book Rule 18.1 a) IMPORTED HORSES 'The application for registration is accompanied by documentation showing the date of arrival in Australia, the original Registration Certificate issued by the international Stud Book, or verifiable evidence is supplied, which shows the horse is registered in the name of, or leased to, the financial member making the application.' Mr Bull's paperwork does not contain a Registration Certificate from an International Stud Book as his horse SMART LITTLE LENA-D (known as SALUTE) is not registered in America. We also have another rule that states: '15.2 Any application for registration may be refused by the Board without assigning a reason therefore.' I feel that Mr Bull will challenge our decision not to register his horse under the Import Rule but will state that we have another rule relating to the Clones in our Rule Book. He is also stating, not in writing, that we changed the Clone rule midstream. I have outlined these rules below: Implemented in 2006 Rule 18 CLONING 'Horses produced by any cloning process are eligible for registration in the Stud Book or Appendix Register of the Association providing such is declared and that it meets all registration requirements.' This rule went to the Board for revision and in June 2011 the Board decided that they would not be registering clones. I am available for any further information that you require. If you require a copy of our rule book (the registration section) then I can have this sent to you by email. The Boards [sic] opinion is that the horse cannot be registered with us as it is an import and is not registered in a[n] International registry." (l) Mr Banki responded on 1 September 2011, by email, in which he stated that he was away from his office and that Ms Smith of his firm would look after the matter in his absence. (m) In answer to some questions posed by Ms Smith, Ms Ricketts responded that changes "regarding the Cloning rule were placed on our web site". She added, "We understand your requests for information regarding Cloning but I feel we must not lose sight on the fact that this horse is IMPORTED and therefore would be regulated under our IMPORT rules". (n) Subsequently, Ms Smith prepared a draft letter, which was forwarded to The AQHA. (o) The AQHA sent a letter, under the letterhead of The AQHA, dated 13 September 2011, to Mr Bull. I shall later refer to the terms of this letter. (The letter that Ms Smith prepared was altered, and was different from, the letter sent to Mr Bull under the letterhead of The AHQA.) (p) Any potential eligibility of a horse for registration pursuant to Regulation 10.3 and Regulation 22 (as set out in the August 2010 Black Book) was subject to it being established that the horse met "all registration requirements" prescribed by, and referable to, the other Regulations for registration in the Black Book. 159Ms Lewis gave the following evidence: (a) Whilst it was part of her usual practice to email the Board Minutes, first to Mr Bellden for his authorisation and then, following that authorisation, forward those Minutes to other Board members, she did not recall sending the Minutes of the April 2011 Board meeting to Mr Bellden or to other Board members and had not been able to locate any copy email or other records confirming that she had, in fact, done so. (b) It was Ms Lewis who changed the Rule regarding cloning on The AQHA's website following an instruction from Ms Ricketts that she should do so. 160Ms Ross gave evidence of the steps involved in achieving the registration of different categories of quarter horses in the Register of The AQHA. Some of her evidence was not read. However, what was read (paragraphs 15 and 16) was as follows: "I next deal with the example of an imported horse. An application for the registration of an imported horse will, in my experience without exception, include a copy of the Certificate of Registration provided to the owner by the Association of the country of origin with which our Association is affiliated. If The AQHA is an affiliate of the other Association, in my experience, that means that The AQHA will accept that the affiliate Association has carried out such steps as the Australian Association regards as acceptable proof of the pedigree of the horse. That is a necessary step because The AQHA, if it is to protect the integrity of the quarter horse breed in Australia, has to satisfy itself that imported horses are actually quarter horses of the breed and quality that the Australian industry will accept as contributing to the genetic base of our quarter horses. Without a Certificate of Registration from an international Association affiliated with AQHA I, as the Registrar of The AQHA, would not know, by reference to any established rule of the Association, how I would deal with assigning a pedigree to the horse. That is, where there is a Certificate, The AQHA accepts that the affiliate Association, whose processes we are prepared to accept, has done the necessary tasks. Without the Certificate, there is no established process whereby we could take the necessary steps to assign pedigree and thus to place in the Stud Book the information that is invariably there in relation to all registered horses." 161Ms Ross gave oral evidence that a Registration Certificate from an international association contained information relating to the horse's registered name, its registration number, its sex, its colour, its date of birth and the pedigree pertaining to that horse, meaning its sire and dam and four previous generations of parentage before that. She stated that, to meet The AQHA's imported horse rules, the horse arriving in Australia (and to reside in Australia) needed such an international Registration Certificate. 162She stated, as outlined above, that "Smart Little Lena" had not been registered with The AQHA, although many of its offspring, imported to Australia from overseas, had been. In relation to such imported horses, there was a description of a forbearer of the imported progeny, including the registration number of the sire and the dam with The AmQHA. Only in this way, did The AmQHA registration number of "Smart Little Lena" appear in the Register of The AQHA. However, as earlier indicated, the DNA of "Smart Little Lena" is listed with The AQHA because a number of foals, registered in Australia, of which "Smart Little Lena" was the sire, and which were born in the United States, have been imported to Australia. 163Ms Ross, in answer to a question from the Bench, also stated that, as "Smart Little Lena" was now deceased, even though he had been registered in The AmQHA Register, he could not, now, be registered in The AQHA Register. However, as a sire, he remains registered in The AmQHA Stud Book Register because of pedigree, and would remain so registered "until that drops off after five generations". 164Ms Ross maintained that "Smart Little Lena-D" could not be registered by The AQHA because it did not have an international Registration Certificate. 165I shall refer to the evidence of Mr Bellden later in these reasons. However, since it is relevant to Mr Bull's case, I should mention that Mr Bellden appeared to accept that obtaining registration of a quarter horse does play "a big part" in the commercial value of the quarter horse. However, he stated that registration did not have to be with The AQHA but could be with another association such as the Australian Stock Horse Association or the Palomino Association (neither of which are specialist quarter horse associations). The Application to Register "Smart Little Lena-D" with The AQHA 166On 29 July 2011, Mr Bull applied for registration of "Smart Little Lena-D" with The AQHA. The application identified "Smart Little Lena-D" as "a cloned horse" that had been imported from the United States; it identified the Breeder's name; identified what were said to be the sire and dam of "Smart Little Lena"; and provided The AmQHA Certificate of Registration for each of the sire and the dam, and of "Smart Little Lena". It described the application as one for an "imported horse". 167It was accepted, in submissions (T210.23), that "[Mr Bull's] application was framed as [one for] an imported horse that was also a cloned horse". 168In the letter, under cover of which Mr Bull sent the application for registration to The AQHA, he stated: "We expect to pay for any necessary verification as we are aware this will be the first horse registered under rule #22 page 39 AQHA Rule Book which applied at the time of purchase and arrival in Australia." (As stated, an issue raised by the Defendants concerns the relevance of Regulation 22 to Mr Bull's application in the light of the requirement, thereunder, that a cloned horse "meets all registration requirements" including, so it seems, the requirement, applicable to imported horses, in Regulation 18, for registration "in an international Stud Book recognised by the Association". I will return to this issue later in these reasons.) 169The AQHA received Mr Bull's application on 3 August 2011. It responded, initially, by letter dated 9 August 2011, stating "there are quite a number of issues raised by you and The AQHA will be working through these issues". 170In relation to the application, the Minutes of the Meeting of the Board of The AQHA held on 27 August 2011 contain the following statements: "10. Stud Book 10.1 Clone registration application received from R Bull for Smart Little Lena-D (attachment K) Pauline Stuart-Fox - under imported horse rule 18.1A - this horse does not fulfil the registration... requirements. Motion: That we do not register Smart Little Lena-D at this stage Moved: Simon Myers Seconded: Terry McSweeney P Lorimer against T Wettenhall and K Johnson abstained Carried Kim Johnson queried do we know what position The AmQHA is at with clones. Ricky Glen stated that he was told that the Americans are still 'investigating'. Pauline Stuart-Fox stated that it has not been brought up lately at The AmQHA Harry Van Dyk - we have grounds to not register this horse under the imported rules. Contact Banki and have him draft the letter. A legal argument could be used on 'common law'. Paul Lorimer stated that he feels that Rule 15.2 is the only rule required and that Banki needs to be aware of this rule Peter Bellden stated that he would work out with Carol Ricketts who would be talking to Banki". 171On, or shortly after, 15 September 2011 Mr Bull received a letter from The AQHA, which letter stated that the application for registration "must be refused". Reference was made to The AQHA's Rules and Regulations, the current version of which was identified as "available on our website". 172The letter referred to Regulation 18 and specifically to Regulation 18.1 and stated: "Your Application was not accompanied by an original 'Registration Certificate' or 'verifiable evidence' as required by Regulation 18". Such evidence, if available, was requested and, upon receipt thereof, Mr Bull was informed "the Application will be reconsidered". The Amendment of the Regulations 173I have earlier referred to Article 14.5.2. That Article gives the directors power to alter any of the Regulations, for the time being in force, by resolution of the directors carried by at least three-fifths of the votes cast at a duly convened meeting of them pursuant to a notice of intention to move the resolution, or one substantially similar, lodged with the Secretary at least 21 days before the day on which the meeting was convened. There is a further requirement that any such notice must be included by the Secretary in the notice convening the meeting. 174By the conclusion of the proceedings, it seemed not to be in issue, I consider appropriately, that Article 14.5.2 had not been complied with, which, in turn, gives rise to the need for the court to consider the legislative provisions regarding procedural irregularities under s 1322 of the Corporations Act. 175Later, I shall consider whether "Smart Little Lena-D" could be registered under the Regulations as they stood in the 2010 Black Book, before any amendment, as asserted by Mr Bull, and, then, I shall address the validity of the amendments that were purportedly made. The Minutes of Stud Book Sub-Committee Meetings of the AQHA 176Before proceeding to the Minutes of the Stud Book Sub-Committee meetings, it is useful to note that a copy of those Minutes was, as a matter of practice, incorporated into the Agenda and also into the subsequent Board of Directors Minutes. (Accordingly, the Minutes of the Stud Book Sub-Committee meetings often appear more than once in the evidence.) This practice is important because it identifies the information that was available to Board members who received the Agenda and also what information may have been considered at the Board Meeting. 177Furthermore, although it appears that The AQHA, in refusing to register "Smart Little Lena-D", placed reliance on the Imported Horse Regulation, rather than the Cloned Horse Regulation, since so much time was devoted to the latter Regulation and the events relating to its amendment, it is necessary to deal with each of the Regulations and the amendments purportedly made to each as a result of the Resolutions identified in the pleadings. 178In the Minutes of the Stud Book Sub-Committee Meeting of 5 August 2010 (Ex.D2/41), there is a question, under Item 2, whether the Stud Book Sub-Committee "need[ed] to revisit the Import rules on HERDA carriers". The recommendation noted was that the current rules regarding HERDA carriers stands. Further discussion was suggested at the December Board Meeting (Ex. D2/41). 179In the Minutes of the Stud Book Sub-Committee Meeting of 23 September 2010 (Ex. D2/61), under Item 5 (Ex. D2/66), the following appears: "Cloning Situation: We currently have Rule 22 that states: 'Horses produced by any cloning process are eligible for registration into the Stud Book or Appendix Register of the Association providing such is declared to the Association and that it meets all registration requirements. Cloning is defined as any method by which the genetic material of an unfertilized [egg] or embryo is removed, replaced by genetic material taken from another organism, added to added to [sic] with genetic material from another organism, or otherwise modified by any means in order to produce a live foal. When a foal is produced by cloning, the fact will be noted on its registration certificate.' ... Suggested addition to Rule 22 CLONING Where a registered Quarter Horse is going to be cloned, notification of intent to use this procedure must be notified to the office of the AQHA, 30 days prior to the procedure being instigated and the following information must be supplied: Name and AQHA Registration number of animal being cloned DNA Type of animal being cloned Any other genetic tests that are required according to the AQHA Rules at the time and must be completed prior to procedure taking place Parent validation of the animal being cloned Name of facility that will be conducting the cloning (please note that it must be a facility that is approved by the AQHA) Name of Recip mare and DNA type will be required for Recip mare The resultant clone must apply for registration within 60 days of birth and must be inspected by 2 AQHA Inspectors The resultant clone must be Parent validated The resultant clone must have any other genetic tests that are required according to the AQHA Rules at the time and must be completed prior to the finalisation of the animal's registration. Parentage validation of the animal being cloned must be on record at the AQHA office prior to the procedure being instigated. Results of any genetic tests required of the donor clone must be on record with the AQHA prior to the procedure being instigated. (This would include any tests required by AQHA, at the time of the procedure, for any of the genetic diseases that are tested for that the donor clones' pedigree indicates are necessary). The resultant clone must apply for registration within 60 days of the birth. The clone must be parentage validated to the parents of donor of the clone. (As it is a genetic replica of the donor parent)." 180The recommendation made was "[t]hat the above addition to the Rules come into effect 1st August 2011" (Ex. D2/70). 181In the Minutes of the Stud Book Sub-Committee of 17 December 2010 (Ex. D2/90), on the issue of cloning, Item 3 (Ex. D2/92-96) recorded: "ITEM 3 Rule 22 CLONING This discussion is returned to the Agenda as the Stud Book Committee thought this topic required further investigation and discussion...". 182There was then stated the results of enquiries made to Professor Ann Trezise relating to the cloning process and the risks associated with cloning (Ex.D2/92-93), including a "PDF from the University of Utah", which stated "the risks of cloning", and an email from Professor Hinrichs to Ms Stuart-Fox (Ex. D2/108-110), dated 20 November 2010, which responded to the following questions: (a) Is there any reason why we should not register clones? (b) Is there any solid research that they are defective in any way? (c) Is there any way that, because of the process and interference in the genetic process, that there could be more genetic diseases/ mutations produced with this process? (d) Is there any way that cloning is detrimental to the breed? 183The email to Professor Hinrichs also identified "[t]he protocol that [The AQHA] have come up with" and requested her "input and guidance on this matter". 184(Aspects of the information provided by Professor Hinrichs, which are considered relevant, are extracted later in these reasons.) 185The following then appears (Ex. D2/110-111): "Moved Pauline Stuart-Fox Seconded Sue Williams That the rule re cloning be removed and that the AQHA will not accept clones in the registry 2 in favour; 2 against Motion failed. GW rang and changed his vote 3 in favour 1 against Motion passed". 186(This purported resolution is also recorded in the Minutes of the Meeting of The AQHA Board held on 18-19 December 2010. The Board Meeting and the Stud Book Sub-Committee Meeting each took place at the same conference held by The AQHA, over four days, in December 2010. I shall deal with the resolution said to have been passed at the Board Meeting later in these reasons.) 187The Minutes of the Stud Book Sub-Committee of 17 December 2010 also recorded the following in relation to International Stud Books (Ex. CB2/163): "ITEM 4 International Stud Books recognised by AQHA This item has been returned to the Committee for further discussion and an accurate list for the office of recognised international Stud Books. Clarification as follows: Any horse registered with The AmQHA that meets our registration requirements. The AmQHA recognise Brazil and NZ - NOTED". 188Later, under Item 7 (Ex. CB2/164), the Minutes extract an email sent to The AQHA Board, from a Quarter Horse breeder, about HERDA. The Minutes then record: "The Stud Book Committee are continuing to deliberate on the input from members ... A decision on The AQHA position on the genetic disease HERDA will continue to be discussed". 189In the Minutes of the Stud Book Sub-Committee of 19 March 2011 (Ex. D2/181-183), the following is recorded: "Stud Book Sub-Committee Meeting 19th March 2011 In Attendance: Pauline Stuart-Fox, Greg Watson, Ricky Glen, Sue Williams, Carol Ricketts, Toni Ross and Stuart Kelleher for Item 1 HERDA Discussion. Item 1 HERDA Meeting The Committee will discuss the feedback from the meeting. The HERDA meeting was discussed at length. There was further discussion about the Autosomal Dominant and Recessive genetic disorders. The Committee felt that the like genetic orders should be treated the same and that the rule book should be changed to address the dominant and recessive genes. Recommendation: The Committee recommends the AQHA register all HERDA Carriers. Voted for Pauline Stuart-Fox, Ricky Glen and Sue Williams Voted against Greg Watson Item 2 Cloning Pauline would like this email discussed by the Committee. >>>Pauline Stuart-Fox ... 1/05/11 15:29 PM>>> Good morning Katrin, I have another question about cloning to ask you: If you have an offspring of a clone that is one of a number of identical clones (say a Smart Little Lena clone sire), how to [sic] you differentiate the sire of the offspring of these identical clones? Is this necessary (although I'm sure knowing people that breed, they like 'this one' over 'that one' for whatever reason, even if they are genetically identical). I know that the genetics is identical but I can see this being a problem, or am I barking up the wrong tree? Pauline From: Katrin Hinrichs ... Date: Fri, Jan 7, 2011 at 4:13 AM Subject: Re: one last cloning question To: [Pauline Stuart-Fox] Hi Pauline: Not barking up the wrong tree at all; you have identified the MAIN area for fraud in the area of cloned horses! Let's say you have a champion horse, STAR. You clone Star, and get 3 clones: C1, C2 and C3. C1 is a strapping colt, just the image of STAR C2 had crooked legs at birth, and some pneumonia, so is a little smaller and his legs aren't great. C3 was really sick at birth and had to have 2 weeks of intensive care, which left him kind of puny, and he grows up to be a runty kind of horse. NOW, since the clones were cloned from oocytes from the slaughterhouse, they will have the mitochondrial DNA of the oocyte used to clone them. STAR has the mitochondrial DNA of his dam. C1 has the mitochondrial DNA of the oocyte used to clone him (slaughterhouse oocyte, SH1) C2 has the mitochondrial DNA of SH2. C3 has the mitochondrial DNA of SH3. The sperm have mitochondria. So if you looked at a sperm sample from any of these stallions you could tell them apart, for example, if the sperm had SH2 mitochondrial DNA, you would know that the sperm was from C2. HOWEVER, after the sperm have been used to breed a mare, the sperm enters the mare's oocyte at fertilization and the oocyte destroys any sperm mitochondria that come along with it. The resulting foal has only the mitochondria of the oocyte (the dam's mitochondria). So, while you can tell which stallion the sperm was from before breeding, it is impossible to tell which stallion sired the foal after the foal has been conceived. Now theoretically, C1, C2, and C3 would all sire foals identical in quality to Star's foals. But if you truly want a foal sired by Star, you will not be able to tell. Given the above, which is true at this time, there are some possible ways if technology advances that in the future it might be possible to identify which alone sired a foal; 1. Cells in culture (and in the horse) get mutations in their DNA all the time * usually of DNA that is not important for making proteins, etc. If you scanned the entire genome of Star, C1, C2 and C3, you might find that each has a specific mutation in some area of the genome that identifies that horse (and would be passed to the offspring). 2. It is possible that some minute amount of the mitochondrial DNA from the stallion persists after fertilization (this is true after ISCI but less possible after natural fertilization). ... Noted as this was already removed from the rule book at the last Board Meeting." 190(The notation that Regulation 22 had "already [been] removed from the rule book" was clearly an error and was acknowledged to have been an error on the part of the Stud Book Sub-Committee.) 191The Minutes from 19 March 2011 also include the following in relation to registration requirements for domestic and imported quarter horses (Ex. CB2/183): "Item 3 from December Board Meeting The clarification of Registration requirements that is mentioned numerous times through the rule book. Registration Requirements for the registration to be successful. a) A service certificate (for stallion return) which then generates an b) Application for Registration with the stallion owner's signature section (service certificate) attached with the dates of service that marries to the original stallion return c) Parentage Verification PV/DNA d) Any Genetic testing that is required that successfully fulfils the guidelines. Registration Requirements for Imported Horses e) Must be registered with the Stud Book in its country of origin being NZ or USA papers. f) Must supply proof of this registration by supplying a copy of the registration certificate - this automatically confirms that a service certificate and other requirements for registration in that country were fulfilled and that the Association can track the applicant's pedigree successfully. g) If Imported in Utero, the eligibility for registration in its country of origin must be supplied, which would be a service certificate or an application for registration in its country of origin. h) DNA i) Any other genetic testing that is required, that successfully fulfils the guidelines. j) 3 consecutive generations of numbered parents on both sides. Recommendation: This was already passed at the last Board Meeting however the Committee would like to recommend a change to g) If Imported in Utero, the eligibility for registration in its country of origin must be supplied, which would be a service certificate or an application for registration in its country of origin or the registration certificate from the country of origin." 192Then, under Item 6 (Ex. CB2/190), the following appears: "Item 6 Clarification of Import registration rules and when they will be implemented. a) If an Import applies for registration with The AQHA that is registered with The AmQHA but the horse cannot be parentage verified what registration will it receive from The AQHA? If this was an Australian registration the horse would receive an AX registration? ... Recommendation: a) The committee believe that the Imported horses must be parentage verified the same as the Australian horse and if the horse cannot be parentage verified because the sire or dam is deceased with no DNA on file with The AmQHA, then they will be considered for an AX registration number...". The Minutes of Board Meetings of the AQHA 193There are two relevant Board meetings referred to in the further amended Summons. The first is the meeting on 18 - 19 December 2010 ("the December 2010 meeting"). The Minutes of this Board Meeting are in evidence, at Ex. D2/119-170. The second is the Board Meeting held on 2 - 3 April 2011 ("the April 2011 meeting"). The Minutes of this Board Meeting are in evidence, at Ex. D2/192-228. (A complete, paginated version of the Minutes of the April 2011 Board Meeting, signed by Mr Bellden, was annexed to the affidavit of Ms Catherine Louise Hing, the solicitor with the day-to-day conduct of the proceedings on behalf of the Defendants, sworn 14 July 2014.) 194Each of the First Resolution, the Fourth Resolution and the Sixth Resolution was said to have been passed at the December 2010 meeting. Those Resolutions relate, respectively, to "Cloned Horses", "Imported Horses" and the "Stud Book". 195Each of the Second Resolution, the Third Resolution and the Fifth Resolution was said to have been passed at the April 2011 meeting. The Second Resolution and the Third Resolution relate to "Cloned Horses", and the Fifth Resolution relates to "Imported Horses". 196Although these are the specific Meetings of The AQHA to which the parties made reference, it is clear that the issue of cloning, especially, had been a matter on the agenda of The AQHA as early as August 2010. Minutes of earlier Board Meetings to which I shall refer provide a useful background. 197The Minutes of the Meeting of the Board, dated 21 August 2010 (Ex. D2/44-60), include (at Ex. D2/50): "10.2 Cloning (AusQHA & AmQHA Rules) While in the USA, I was questioned a couple of times regarding our registration of cloning and the requirements to do so. I answered the questions that were put to me, some after enquiring from Carol [Ricketts] the requirements. I have placed cloning as a topic of discussion on the agenda for [the Stud Book Sub-Committee] for this meeting. The Rules in our rule book are a vague [sic] with regard to how this process would be implemented for registration ie service certificates and stallion returns (which is not possible so what is the laid down criteria[?]) - Pauline Stuart-Fox Pauline Stuart-Fox reiterated above Discussion regarding cloning and possible ramifications Support in principal - to be referred back to [the Stud Book] Sub-Committee for next meeting". 198There is a note that the Stud Book Sub-Committee report regarding registration requirements of The AmQHA and HERDA was accepted and unanimously carried. 199The Minutes of the Meeting of the Board, dated 8 October 2010 (Ex. D2/72-88), include at Ex. D2/80: "ITEM 5 CLONING We currently have Rule 22 that states: Horses produced by any cloning process are eligible for registration into the Stud Book or Appendix Register of the Association providing such is declared to the Association and that it meets all registration requirements. Cloning defined as any method by which the genetic material of an unfertilized [egg] or embryo is removed, replaced by genetic material taken from another organism, added to added to [sic] with genetic material from another organism, or otherwise modified by any means in order to produce a live foal. When a foal is produced by cloning, the fact will be noted on its registration certificate. Addition to rules: Where a registered Quarter Horse is going to be cloned, notification of intent to use this procedure must be notified to the office of The AQHA, 30 days prior to the procedure being instigated and the following information must be supplied: Name and AQHA Registration number of animal being cloned DNA Type of animal being cloned Any other genetic tests that are required according to the AQHA rules at the time and must be completed prior to procedure taking place Parent validation of the animal being cloned (cell donor) Name of facility that will be conducting the cloning (please note that it must be a facility that is approved by the AQHA) Name of Receipt mare and DNA type will be required for Recip mare The resultant clone must be Parent validated The resultant clone must be parentage validated to the parents of donor of the clone. (As it is a genetic replica of the Donor parent). Recommendation: That the above addition to the Rules come into effect 1st August 2011. Motion: The above recommendation be accepted. ... Vote: Unanimous Carried" 200(As will be seen, the wording here is identical to that included in the Stud Book Sub-Committee Meeting of 23 September 2010, extracted above). 201The Agenda to the December 2010 Meeting includes, under Item 7.2 "Cloning & HERDA" (Ex. D2/121): "[T]his subject will be discussed in the Board Meeting and Pauline [Stuart-Fox] wished all directors to have this information prior to the Board Meeting." 202What follows is the email from Professor Hinrichs, dated 20 November 2010, in response to the questions posed by Ms Stuart-Fox (Ex. D2/121-124). 203Importantly, the following passage appears in the email from Professor Hinrichs, in answer to the question "Is there any reason why we should not register clones?": "Yes, there is a (very small) possibility that cloned animals can bring unwanted genetics into the breed...". 204In answer to the question "Is there any way that cloning is detrimental to the breed?", Professor Hinrichs responded: "Genetically, see above, it could theoretically introduce mutations, non-breed mitochondria and epigenetic changes...". 205In relation to Ms Stuart-Fox's request for guidance on the protocol to be implemented by The AQHA in relation to the registration of cloned Quarter Horses, Professor Hinrichs offered the following comment "as a horseman instead of as a scientist": "I strongly feel that the clones should not compete. If you use cloning as a shortcut to make sure you have a foal with 'competable' genetics, so that you have a better chance at winning prize money, the breed is going to go sideways, not forward. BUT, sometimes a horse is cloned because it had a lot of promise but died young - in this case not allowing it to compete would be a hardship. My idea is that a specific genetics can only compete ONCE. If the original horse already competed in a certain event, then no clone of it can compete in that event. However, if the original horse did not compete, then ONE clone can." 206In the Minutes of the December 2010 Meeting (Ex. D2/136-170), under Item 7 "STUD BOOK... HERDA", the following appears: "HERDA discussed - how are we going to continue managing HERDA[?] Greg Watson - Continue to not allow any more HERDA carriers to come into Australia. Discussion on allowing imported HERDA carriers into our registry. Discussion held on other Genetic diseases that could arise in the future. Recommendation: Moved G Watson Seconded P Stuart Fox That the rules on HERDA be left as per the current Rule Book and to be reviewed for the next Board Meeting Carried Unanimously." 207The Minutes of the December 2010 Board Meeting (at Ex. D2/156), record two proposed motions to amend Rule 10.5, which concerns "Horses not Born in Australia and residing outside Australia". The first motion, moved by Pauline Stuart-Fox and seconded by Sue Williams, "failed", having two votes for and two votes against. The second motion was carried and accepted after a "unanimous" vote. 208The amendment carried by the motion at the December 2010 meeting, if valid, amended Rule 10.5 as follows: "Any horse not born in Australia and residing outside Australia will be recognised by the Association provided that such horse meets all registration requirements outlined in the Association's rules which includes genetic testing as described in Rule 15.10 and 16. If the country in which the applicant animal resides has its own Quarter Horse Association Stud Book, then the horse must first be registered in its country of birth prior to consideration for registration in Australia (as per rules for imported horses Rule 18)." 209(Notwithstanding the Plaintiff's pleadings and submissions in relation to this amendment (it appears that this amendment is what is referred to as the Sixth Resolution in the further amended Summons), there is a question as to the relevance of this resolution bearing in mind that "Smart Little Lena-D" is not a horse "not born in Australia and residing outside of Australia".) 210The only other reference to Imported Horses in the Minutes of December 2010 Meeting (at Ex. D2/163) appears to relate to "the phrase '3 consecutive numbered parents on each side'". The Minutes record a discussion on the applicability of that criterion for Imported Horses and how it impacts upon the determination the horse's registration by The AQHA. The following appears: "Rule interpreted by the Stud Book Committee is that '3 consecutive generations of numbered parents on both sides' must be evident for the imported horse to receive a Q number - NOTED". 211(Again, there is a question as to whether this is relevant in relation to the application to register "Smart Little Lena-D".) 212In the Board Minutes (at Ex. D2/158-163), the correspondence from Professor Trezise and Professor Hinrichs is extracted. 213Professor Trezise's comments, relevantly, include the following: "...DNA profiling will not be able to distinguish between the clone and the original individual - both will have the same DNA profile, and both will PV [Parent Verify] to the same Sire and Dam. Even though the clone and the original horse will have very similar DNA, there is no guarantee that the clone will have the same performance ability, body shape and size, temperament or other characteristics. In fact, it is more likely that the clone will have different characteristics compared to the original individual because environmental factors play a significant role in determining complex characteristics like performance and temperament". 214I have earlier referred to those aspects of Professor Hinrichs' comments that I consider relevant. 215After this information, the Minutes of the December 2010 Board Meeting (at Ex. D2/163) record the following: "Moved Pauline Stuart-Fox Seconded Sue Williams That the rule re cloning be removed and that The AQHA will not accept clones in the registry. 2 in favour, 2 against Motion failed. GW rang and changed his vote 3 in favour 1 against Motion passed". 216There was evidence from Mr Bellden that the person referred to as "GW" was Mr Greg Watson, who had attended the Stud Book Sub-Committee meeting, and who subsequently telephoned Mr Bellden and stated that he wished to change his vote. 217Mr Bellden deals with the circumstances in which this occurred in his affidavit sworn in the proceedings. He stated: "28. I attended a Board meeting on 18 and 19 December 2010. ...Item 3 deals with cloning at pages [111] to [116]. 29. At the 18 December 2010 Board meeting, I said words to the following effect to Pauline Stuart-Fox. Me: Can you report it as a 3-1 vote? Greg Watson rang me last night and told me that he wanted to change his vote. Pauline: I've spoken to him as well. That's fine. Following my conversation with Pauline Stuart-Fox, I examined the AQHA Constitution. I noted that rule 14.5.1 of the AQHA Constitution states: Alteration of any regulations for the time being in force by addition, deletion, or amendment may be effected by resolution of the directors carried by at least three-fifths of the votes cast at a duly convened meeting of the directors pursuant to a notice of intention to move the resolution or one substantially similar lodged with the Secretary at least 21 days before the day on which the meeting was convened. Any such notice must be included by the Secretary in the notice convening the meeting. 31. Accordingly, when the rule change was presented to the Board, I sent it back to the Stud Book Sub-Committee because they had not given the amount of notice required for a rule change pursuant to rule 14.5.2 of the AQHA Constitution. 32. In my capacity as president, I required a formal notice to be brought, with the notice period to be met. 33. In making the decision I did, I attempted to ensure that the AQHA convened meetings and made rule changes that were in complete compliance with the AQHA Constitution and corporate law. The AQHA makes a point of attempting to comply completely with its regulatory requirements. 34. I note that the minutes of the 18 December 2010 Board meeting ... do not reflect my recollection of the events. I am unable to account for this." 218Mr Bellden accepted that there was no notice, in terms required by Article 14.5.2, before the December Board Meeting, with respect to any proposed change to the Regulations. (He was unable to recall whether there was any such notice before the Board in the meeting of April 2011.) However, he thought, that since he had sent the recommendation back to the Stud Book Sub-Committee, it would come back before the Board at another meeting, which, in the events that happened, was the Board meeting in April 2011. In this regard, he considered that the Board, in April 2011, had sufficient notice of the intention to put a motion to change the Cloned Horse Regulation even though there was no written notice of that proposal. 219Ms Ricketts confirmed that she had checked the relevant records of The AQHA and that they had not included any reference to having received written notice to move the motion to amend the Cloned Horse Regulation. 220In the signed and paginated version of the Minutes of the April 2011 Meeting, on page 2, the following appears: "That the Minutes of the Board Meeting 18 & 19 December 2010 are accepted Moved R Glen Seconded P Wettenhall Carried." 221I have earlier dealt with the amendment to the HERDA Rule that was made at the April 2011 Meeting. The amendment is recorded on Pages 12-15 of the Board Minutes. Specifically, the Board determined to register HERDA carriers "as long as all other registration requirements are met". The AQHA also issued a press release to that effect, a copy of which is included in the Minutes. 222(A copy of the Annual Report of The AQHA of 2011 (Ex. RDB 6), under the heading "STUD BOOK REPORT" noted that the Board of Directors had accepted the Stud Book Sub-Committee recommendation that "overseas horses, as well as semen from overseas stallions, that are HERDA carriers are eligible for registration with The AQHA, as long as they fulfil all other registration requirements as laid out in The AQHA rule book". That section of the Annual Report concludes with the following comment: "The Stud Book is an important section of The AQHA and The AQHA Board continues to look at all aspects of the Rules and Regulations with a view to fulfilling the mission statement of The AQHA: 'To record and preserve the pedigrees of the Australian Quarter Horse whilst maintaining the integrity of the breed'".) 223On pages 15-16 of the April 2011 Meeting Minutes, under "Item 2. Cloning", the following appears: "Pauline [Stuart-Fox] would like this email discussed by the Committee". 224The email referred to was the one from Ms Stuart-Fox to Professor Hinrichs and the reply thereto. Each has been extracted above from the Stud Book Sub-Committee Meeting of 19 March 2011. Each was, again, set out in full in the April 2011 Meeting Minutes. Then, the following notation appears: "Noted as this was already removed from the rule book at the last Board Meeting. Motion: Rule 22 That no clones are eligible for registration Moved Pauline Stuart-Fox Seconded R Glen Carried" 225There appears a notation (at Ex. D2/228) dated 3 April 2011: "From the April 2011 Meeting of the Board: Cloning: The AQHA will not register Clones PJ Bellden AQHA President Uploaded to AQHA website 5th April 2011". 226In relation to the Regulation regarding Imported Horses, the Minutes of the April 2011 Meeting again extracted the registration requirements for Imported Horses. (Those requirements have been set out above from the Stud Book Sub-Committee Meeting Minutes of 19 March 2011, under the heading "Item 3 from December Board Meeting".) The same recommendation was then recorded, namely: "Recommendation: This was already passed at the last Board Meeting however the Committee would like to recommend a change to g) If Imported in Utero, the eligibility for registration in its country of origin must be supplied, which would be a service certificate or an application for registration with service certificate attached in its country of origin or the registration certificate from the country of origin." 227Then, the following appears: "Moved Pauline Stuart-Fox Seconded R Glen Carried unanimous". 228The Defendants produced no written notice of any intention to move a motion, that had been sent out to the Board members by Ms Ricketts, setting out any proposed amendment to any of the Regulations, either within 21 days of the December 2010 Board Meeting or of the April 2011 Board Meeting being convened, or at all. 229(The concession on this topic, made by senior counsel for the Defendants, was that there had been no "stand alone document" in the form of a motion. In the light of the evidence overall, I am satisfied that there was no formal notice of any proposed motion given.) 230The Constitution did require notice of the meeting to provide particulars of the meeting and notice of the business to be transacted at the meeting but not necessarily the specific form of the resolutions to be passed. The Lawyers' Correspondence before the Litigation Commenced 231At least some of what follows is taken from Ex. RDB 3, being the exhibit to the affidavit of Adele Pamela Jarrett sworn 30 January 2014. 232In a letter dated 22 September 2011, Mr Zucker stated: "In the application for registration Mr Bull declared Smart Little Lena-D to be a clone and the application is made on that basis pursuant to Rule 22. It is a fact which can be established by further DNA testing that Smart Little Lena-D is a clone of Smart Little Lena. That testing has in fact already taken place and a certificate from the United States will be provided shortly. The application was made pursuant to Rule 22 of the Rules & Regulations published on 1 August 2010. Mr Bull relied and relies on that provision as worded in the printed book. So that we can further advise Mr Bull, particularly in relation to the version of Rule 22 that has recently appeared on The AQHA website, we would appreciate copies of: 1. The AQHA Constitution; and 2. The Minutes of any meeting at which the wording of Rule 22 was purportedly changed since publication of the Rule book dated 1 August 2010. If there are any copying expenses please do not hesitate to let us know. In case it is not obvious we make it clear that we do not concede that any purported change to the wording of Rule 22 is valid or, if valid, adversely affects the application by Mr Bull." 233Mr Banki responded by letter dated 30 September 2011, which included: "Our client's Rules are amended periodically. At a meeting on 2 April 2011, the Board unanimously resolved 'that no clones were eligible for registration'. The Rules were amended accordingly, and the amendment was notified on The AQHA website on 5 April 2011. We note that when your client renewed his membership on 4 August 2010, he signed a declaration agreeing to be bound by the Constitution and Rules of The AQHA 'as amended from time to time'. The Constitution of The AQHA is on our client's website." 234Mr Zucker responded in a letter dated 22 December 2011, which relevantly stated: "Assertions by Mr Bull On our instructions the introduction of the purported amendment to Regulation 22, noted in your letter of 30 September 2011 as a resolution on 2 April 2011, was not introduced in the manner required in Rule 14.5.2 of the Constitution. Further the refusal to register Smart Little Lena-D, either pursuant to Regulation 22 in its form prior to 2 or 3 April or in its present purported form, may amount to conduct by AQHA Ltd which is oppressive to Mr Bull and thus contrary to his rights as a member pursuant to the Corporations Act. ... Renewal of application for registration Mr Bull renews his application for registration and we enclose copies of documents that were submitted by him to AQHA on 29 July 2011. We hold the originals and can provide them to the office of AQHA at Tamworth if necessary. The same applies to the cheque. So there is no doubt about it Mr Bull applies for registration pursuant to Regulation 22 as published in the Rules of AQHA effective 1 August 2010. We assert that the provision for registration pursuant to Regulation 22 is separate from the provision for registration pursuant to Regulation 18. Mr Bull offers to either arrange at his cost, or pay the cost of arrangements made by AQHA, for DNA testing of Smart Little Lena-D and for such certification or evidence from the United States as AQHA reasonably requires. Having said that it would seem to be a matter of public knowledge that Smart Little Lena-D is a clone of Smart Little Lena." 235By letter dated 12 January 2012, Mr Banki responded, relevantly: "... In the meantime, however, our client's position in relation to your client's application to register SMART LITTLE LENA-D remains unchanged." 236On 4 April 2012, Mr Bull filed an application purportedly "under sections 1, 9, 8F, 2, 4, 7A and 1324 of the Corporations Law" seeking orders for the inspection of books and financial records. Subsequently, on about 23 April 2012, an amended Originating Process was filed, relying only on s 247A of the Corporations Act. 237Under cover of a letter dated 2 May 2012, certain documents were provided by AQHA. Other documents were provided under cover of a letter dated 10 May 2012. However, on 14 May 2012, Mr Bull's application proceeded and the court made orders, by consent, requiring identified documents to be produced. Under cover of a letter dated 31 May 2012, further documents were provided, which documents were accepted as having been provided in "full compliance... with the Orders made by consent on 14 May 2012". 238In a letter dated 7 June 2012, Mr Zucker stated: "The issue which we now address concerns Rule 22 of The AQHA Rules and Regulations. The starting point is the booklet published on 1 August 2010 which, broadly speaking, provides that horses produced by a cloning process are eligible for registration. That Rule had been in force since 1 August 2006 when Rule 18, in the same terms as the August 2010 Rule 22, was included in the Rule Book. Its introduction appears to have come about at the meeting of the Board on 9 - 10 June 2006. Your letter of 30 September 2011 advised that the decision to change Rule 22 such that 'no clones are eligible for registration' was made at the meeting of the Board on 2 April 2011. That is consistent with an announcement made by AQHA at that time. It inevitably follows that prior to 2 or 3 April 2011 Rule 22 in its previous wording, which allowed registration of clones, was in force. The purported resolution at the meeting of the Board on 18 and 19 December 2010 does not need to be considered which is fortunate in view of the manner in which 'GW' was allowed to vote and the lack of notice. Rule 14.5.2 of The AQHA Constitution provides for the manner in which Rules can be altered. A careful analysis of the documents which AQHA has provided suggests that the procedure contemplated in the Constitution was not followed. If that be the case then the wording of Rule 22 that was in force when Mr Bull applied for registration of Smart Little Lena-D is the same as the wording in force prior to 2 - 3 April 2011. The Agenda of the 2 - 3 April meeting relevantly included the following: Item 2 Cloning Pauline would like this email discussed by the Committee. The email was a query about generics and indeed made specific reference to Smart Little Lena. The conclusion to the Agenda item reads: Noted as this was already removed from the rule book at the last Board Meeting. But it seems to be common ground that the Rule was not in fact removed from the Rule Book at the December meeting. The Minutes of the 2 - 3 April meeting include the critical motion: Motion: Rule 22 That no Clones are eligible for registration Moved Seconded Carried Neither the Agenda nor any other document prior to the meeting gave notice of that motion. It was simply not indicated to directors prior to the meeting that a motion which would have the effect that Smart Little Lena-D (and any other cloned horse) would not be eligible for registration would be put at the meeting. Indeed the notation to which I referred above suggests there would be no such motion. Further, there is no statement or evidence of the required majority. That being the case Rule 14.5.2 of the Constitution has not been complied with. I invite AQHA to concede that, on the date on which Mr Bull applied for registration of Smart Little Lena-D namely 29 July 2011, Rule 22 then in force was in the form published in the Rules and Regulations commencing 1 August 2010 which allowed for registration of horses produced by a cloning process. Acknowledgment of that position by AQHA is open from the wording of the motion on 27 August 2011 that Smart Little Lena-D not be registered at this stage. The purpose of this letter is to invite AQHA, no doubt with the benefit of legal advice, to make a concession and, it inevitably follows, to again consider the application for registration of Smart Little Lena-D. If the concession is not made then the next step for Mr Bull is to apply for a declaration that Rule 22 on or about 29 July 2011 allowed for registration of horses produced by a cloning process and for an order that AQHA consider his application accordingly. In light of the invitation in this letter for a concession the proceedings will, if successful, be the subject of a claim for costs and this letter will be relied upon to that end." 239In a letter dated 28 June 2012, Mr Banki responded, relevantly, as follows: "We refer to your letter dated 6 June 2012. 1. Summary of The AQHA's position In summary, The AQHA's position is as follows: (a) The AQHA considers that Rule 22 of The AQHA Rules and Regulations (Rules) as published on 1 August 2010 (Previous Cloning Rule) was correctly amended under clause 14.5.2 of The AQHA constitution with effect from 2 April 2011 (Current Cloning Rule); (b) The AQHA considers that the Current Cloning Rule is valid; (c) even if there had been any irregularity in the procedure to amend the Previous Cloning Rule, which we do not admit, any irregularity would have been a procedural irregularity that, in accordance with section 1322(2) of the Corporations Act 2001 (Act), would not invalidate the amendment; (d) even if the Previous Cloning Rule was improperly amended, with the result that the Previous Cloning Rule prevails, the Previous Cloning Rule requires that a horse produced by a cloning process must meet 'all registration requirements', which, for the reasons outlined below, Mr Bull's application does not; and (e) in any event, neither the Previous Cloning Rule nor the Current Cloning Rule is relevant to Mr Bull's application to register Smart Little Lena-D as The AQHA's decision not to register Smart Little Lena-D was made on the basis of Rule 18.1 of the Rules. ... 3. The Amendment of the Previous Cloning Rule 3.5 ...The April 2011 Agenda contained the following Minutes of the Stud Book Meeting held on 19 March 2011: Item 2 Cloning ... Noted as this was already removed from the rule book at the last Board Meeting. 3.6 We are instructed that the words 'Noted as this was already removed from the rule book at the last Board Meeting' were included in error... 3.7 The April 2011 Agenda was sent to all directors and the secretary on or about 19 March 2011. 3.8 The resolution... was dealt with at the meeting of directors on 2 and 3 April 2011 and was recorded in the minutes of that meeting... as follows: Motion: Rule 22 That no clones are eligible for registration Moved Pauline Stuart-Fox Seconded R Glen Carried. ... 4. The Act Even if there had been any irregularity in amending the Previous Cloning Rule: (a) it would merely have been a procedural irregularity that: (i) did not alter the substance of the amendment; but (ii) simply departed from the prescribed manner of notification specified by clause 14.5.2; (b) there has been no substantial injustice caused by the manner in which notification was given to directors; and (c) the amendment is validated by section 1322(2) of the Act. 5. Imported Horse 5.1 Smart Little Lena-D was imported from the United States of America on 3 April 2011. 5.2 Under the Rules, Smart Little Lena-D is an imported horse. ... 5.4 On 15 September 2011, the AQHA wrote to Mr Bull and informed him that his application to register Smart Little Lena-D had been denied. This decision was made on the basis that his application was not accompanied by an original 'Registration Certificate' as required by Rule 18.1(c)." 240It can be seen that The AQHA, whilst maintaining the amendment to Regulation 22 was a valid one, also maintained it was not the only relevant Regulation that applied to the registration of "Smart Little Lena-D". Some Issues of Credit 241There were a few aspects of the evidence by one, or other, of the witnesses that should be commented upon because they were referred to in submissions. 242One aspect of Mr Bull's evidence upon which he was cross-examined related to his affidavit sworn 24 October 2013, in which he wrote: "8. In my affidavit sworn on 3 May 2013 I made reference... to the value of Smart Little Lena-D if it is registered as a quarter horse by AQHA in comparison to its value if it is not so registered. 9. I made those statements to the media off the cuff and to strengthen the position and reputation of Smart Little Lena-D in the market. Notwithstanding those statements if the horse is registered the service fee would be among the highest service fee[s] commanded of any quarter horse in Australia ... The present service fee is $1,500 for about 40 mares. By not being registered the reputation of the horse is reduced. It is presently in perfect health and fertile." 243In cross-examination (T71 - 72), Mr Bull gave the following evidence: "Q. So did you say those things that are in quotations in that paragraph of your affidavit? A. Yes, my affidavit is correct but taking short pieces out of context probably. Q. It was correct, wasn't it, to say that horses do not need to be registered for cutting? A. It depends which cutting events you mean. Not every cutting event needs [the participating horse] to be registered. Some do. Q. So the only qualification you would make would be to say that it is true to say that horses do not need to be registered for all cutting events, would that then be a correct statement? A. No, I don't think it is. ... Q. So it's the case, isn't it, that when you told the journalist at this point in time that registration was not necessary for the value and performance of the horse, you were telling the truth? A. I was trying to protect the value of my horse. Q. Were you telling the truth or not? A. Depends how you put value. If you value the ability of the horse or a dollar value. Q. These are your words, aren't they? A. Yes. Q. Were you telling the truth or not? A. I am telling the truth. Q. I'm sorry? A. I am telling the truth. Q. When you made that statement to the journalist that you have quoted in your affidavit, were you telling the truth or not? A. My affidavit is correct." 244The cross-examination continued and, at T74-75, Mr Bull gave the following evidence: "Q. When ... you said to the journalist, 'Horses do not need to be registered for cutting, so it's not a huge issue for us', were you telling the truth? A. Hedging around the truth I think would be a correct answer. Q. To be plain about it, are you saying now that you weren't telling the truth? A. It was a tongue in cheek answer and, yes, I guess it's not quite true. Q. You believed that your commercial position was at risk, did you? A. Absolutely. Q. So in circumstances in which you saw your commercial position as being at risk, you made some statements to a journalist which you say weren't quite the truth, is that right? A. On the matter of horses and I did not want to say anything that would detract from an already devalued horse I think." 245I am satisfied, naturally, since the statements attributed to him are taken from his own affidavit, that Mr Bull made those statements. I would be less convinced about the reasons for making the statements had I not accepted his evidence that he bought "Smart Little Lena-D" for breeding purposes only and not for competition purposes. (For example, in a notice placed on his website in December 2010, Mr Bull wrote "he has been purchased as a sperm bank only".) 246However, this leads to a different problem that goes to the issue of damages (although for reasons to which I shall come, that issue will be irrelevant). 247Mr Bull gave evidence that "Smart Little Lena-D", over the past three years, had serviced "between 40 and 85 horses per year". However, no documents to corroborate the estimate, and no accounting records for "Smart Little Lena-D", were provided. This is somewhat surprising considering that Mr Bull did provide what he described as "a print out from the accounting and record keeping system I maintain on my computer, into which the details of bookings, and amounts paid, for services are entered", and which were said to "accurately record the amounts paid, the number of bookings and services", for another stallion ("Acres Destiny") owned by him. 248Mr Bull did not provide any acceptable explanation for not producing similar documents in relation to "Smart Little Lena-D" although, in submissions, senior counsel put that it was not thought necessary, as there had been no issue raised by the Defendants challenging Mr Bull's evidence on this topic. 249I raised the matter at the hearing, in the following passage: "All I am putting to you is that 40 to 85 isn't very specific. Do I pick 85, or do I pick 40 in determining the loss? ...How do I pick that? Merely because [Mr Bull's evidence regarding the service history of Smart Little Lena-D] is not challenged, does not mean I have to accept it. I have to balance the unchallenged evidence with other evidence in the case, one of which is that [Mr Bull] has meticulous records in relation to Acres Destiny, but doesn't produce any records at all in relation to Smart Little Lena D." 250This is important, also, because Mr Bull gave evidence that he did not always take a fee for allowing his horses, which, it seems, included "Smart Little Lena-D", to be used for breeding. He saw that offering services for no fee assisted in the commercial value of his Quarter Horses and the reputation of his Stud. 251Mr Bull was unable to state how many times he had offered the services of "Smart Little Lena-D" for no fee, stating that he "would have to check my breeding books to answer that accurately" (T76.45). 252Whilst Mr Bull's evidence was not challenged on the number of horses that had been serviced, the issue of damages was an issue in the proceedings and it was for him to establish any loss that he had suffered by virtue of "Smart Little Lena-D" not being registered with The AQHA. To this end, senior counsel for the Defendants submitted: "There is not before the Court a single piece of evidence from the market showing that a market participant who would have hired the service of Salute was put off doing so by reason of the lack of registration. Further, we say that there is no point whatsoever in saying well, Acres Destiny achieved this number of services per year at this rate because there is no relevant comparison that can be made, for the simple reason that Acres Destiny isn't a clone. Many other possibilities arise. It may be that Acres Destiny is a particularly good horse, and that Acres Destiny has progeny that have proved themselves in the market place. There is just simply no comparison. So what we say about damages is that (1) no loss has been proved so they don't get through the gateway, and even if we were wrong about that, notwithstanding the absence of evidence, the Plaintiff nevertheless bears the onus of proving his loss, and even though that need not be done by reference to probabilities, because you are dealing then with hypothetical future events the Court simply can't make it up, absent evidence." 253Another aspect that of Mr Bull's evidence that I found difficult to understand related to what he wrote about one aspect of registration. He had given evidence, in Paragraph 26 of his affidavit sworn 2 March 2014, that "there are risks associated with breeding a quarter horse with an unregistered quarter horse". He stated that "if a horse carrying the HERDA gene is bred with another HERDA carrier, that can lead to the resulting offspring being affected by the disease. Accordingly, breeders see it as safer to breed their horses with other registered horses, so that the genetic makeup of the parents, and therefore, the foal will be registered with The AQHA...". 254In this case, as I have stated, Mr Bull accepts that "Smart Little Lena-D" carries the HERDA gene. Registration will not establish this. It is already established. This seemed to be confirmed because Mr Bull had discussed with his solicitor, probably in January 2011, that "Smart Little Lena-D" would not be able to be registered "until the HERDA rule had been overturned" (T80.05 - T80.13). Accordingly, on this aspect, it seems to me that it is not the registration of "Smart Little Lena-D" that is important; it is whether the horse with which "Smart Little Lena-D" is mated is carrying the HERDA gene, and whether that fact - through registration or otherwise - was known to its owner and to Mr Bull. This may, in turn, affect the registration, and registration classification, of any foal produced by the sire and mare. 255(As outlined above, during submissions, at T209.24, the parties confirmed that "even if Smart Little Lena D is a HERDA carrier he is still eligible for registration in the Stud Book register as long as he fulfils all other registration requirements as laid out in the Black Book".) 256There was some dispute regarding the knowledge of some of the Board members in relation to the purchase of "Smart Little Lena-D" by Mr Bull. 257I am satisfied that Ms Stuart-Fox, who was the international convenor for The AQHA and who was responsible for facilitating annual meetings of members of The AQHA who were also members of The AmQHA, had attended The AmQHA Convention in March 2009, because "cloning was on the agenda". She was clearly interested in the topic of cloning and read articles in The AQHA's magazine on cloning. She was aware that the cloning of "Smart Little Lena" had taken place. 258As previously stated, Ms Stuart-Fox was in touch, by email, with Professor Hinrichs, having spoken with her at the March 2009 Convention. 259Mr Bellden was aware of Ms Stuart-Fox's interest in the issue of cloning and had spoken to her about the sale, at auction, of the four clones of "Smart Little Lena" before the Meeting that was held in December 2010. 260Each had heard "from people in the industry that someone was attempting to buy a cloned horse in the United States which would be imported into Australia". Neither was able to say precisely when she, or he, had heard this, but Mr Bellden thought that it was in early 2011. 261Ms Ricketts gave evidence that, by 19 March 2011, she was aware that Mr Bull had purchased a clone of "Smart Little Lena". 262It was submitted that the court should draw an inference that at least Ms Stuart-Fox, before the Board Meeting held on 18-19 December 2010, knew that a clone of "Smart Little Lena" had been purchased and that an attempt was to be made to import the clone into Australia. Whilst this may be, I am not prepared to draw a specific inference that any of the Defendants had a precise knowledge of Mr Bull's involvement in purchasing "Smart Little Lena-D", or of his future intentions in that regard, before the December 2010 Meeting. 263Furthermore, I do not draw the inference that the passing of any resolution to amend the Imported Horse and/or the Cloning Regulation was directed at specifically preventing of the registration of "Smart Little Lena-D". In reaching this conclusion, I bear in mind that Mr Bull has not pointed to, and I have been unable to find, any reference, in the Minutes of the December 2010 Meeting, suggesting that the Stud-Book Sub-Committee members were giving, or had given, consideration specifically to the importation of "Smart Little Lena-D". In fact, the future importation of "Smart Little Lena-D" is not specifically mentioned in the Minutes of either the Stud Book Sub-Committee or The AQHA Board of December 2010. One would expect, if it were the subject of consideration, to have been mentioned in one or both sets of Minutes. 264Mr Bull did not suggest that he had informed any member of the Stud Book Sub-Committee, or any director, of his purchase, or of his intentions in regard to the registration of "Smart Little Lena-D" with The AQHA. 265Furthermore, clearly the issue of cloning was the subject of discussion by members of the Stud Book Committee some time before the purchase of "Smart Little Lena-D" by Mr Bull. I have referred to references in the Minutes of the Stud Book in August 2010. 266I have also earlier referred to the absence of any evidence or submissions going to the allegation of actual or apprehended bias, towards Mr Bull, by The AQHA or any of its Board members. 267Next, there is a question of a telephone discussion, probably in early January 2011 but it may have been a little earlier, between Mr Bull and Ms Ricketts, in which he says he was informed that The AQHA was not going to register "Smart Little Lena-D". 268If the telephone discussion had taken place, it would follow that Mr Bull was aware, prior to importing "Smart Little Lena-D" to Australia, that The AQHA would be unlikely to register it. 269Whilst I am of the view that a telephone discussion occurred, I cannot be satisfied, on the balance of probabilities, that it included the precise topic deposed to by Mr Bull. However, even if it did, nowhere in his evidence did Mr Bull suggest that The AQHA provided any reason for the comment supposedly made. I cannot, in those circumstances, draw an inference that, if the comment were made, it was on the basis that "Smart Little Lena-D" was a cloned horse. I bear in mind that, at the time of the conversation, the HERDA rule had not yet been amended. Similarly, I bear in mind The AQHA position on the interpretation of the Imported Horse Rule. 270There was some criticism of the evidence of Ms Stuart-Fox and events in January 2011 relating to a proposed meeting with some of the directors and Mr Bull. I do not think that anything turns on the determination of this issue as it is very clear that the question whether a cloned horse should be permitted to be registered in the Stud Book was one that had been on the agenda of The AQHA long before the purchase of "Smart Little Lena-D" by Mr Bull. The Submissions 271I shall not attempt to set out all of the submissions made, which are voluminous. However, I have carefully read these and they will remain in the court file. I shall, instead, endeavour to summarise the substance of, or what I regard as the key points made within, the submissions. 272Mr Bull's submissions may, in part, be summarised by reference to what are described as "the invalidity grounds" and "the oppression grounds". 273The invalidity grounds are: (a) As a cloned horse, "Smart Little Lena-D", prior to any amendments to the Regulations, was able to be registered under Regulation 22, which "constituted a separate and distinct category" for registrable horses. (b) As an imported horse, "Smart Little Lena-D" was, prior to any amendments to the Regulations, able to be registered under Regulation 18.1(d) because that Regulation "permits registration without the international registration certificate if a penalty fee is paid". (c) Prior to any purported amendments, "Smart Little Lena-D" could also be registered because: (i) Regulation 10 provided that "The Official Stud Book of the Australian Quarter Horse Association shall consist of the following" and that Regulation "should not be construed as setting out an exhaustive list of the kinds of horses that could be registered"; (ii) There is no evidence that "Smart Little Lena-D" possessed any disqualifying characteristics of the kind contemplated by Regulation 24; (iii) It was open to The AQHA to register "Smart Little Lena-D" under Regulation 35, the Hardship Rule. (d) The purported resolutions to vary Regulation 18 and Regulation 22 of the Black Book are invalid for the following reasons: (i) The December 2010 Board meeting and the April 2011 Board Meeting, each was not "a duly convened meeting of the directors pursuant to a notice of intention to move the resolution or one substantially similar lodged with the Secretary at least 21 days before the day on which the meeting was convened". (ii) The December 2010 Meeting Minutes were not signed by the Chairperson, as required by Clause 15.12.2 of the Constitution. (iii) The usual practice for amending The AQHA Regulations was not followed, including, relevantly: a. The AQHA did not adhere to the usual process by which amendments were published on The AQHA website. b. The purported resolutions affecting Regulation l8 and Regulation 22 of the Black Book, in each case, was not, as a matter of form, effective to alter Regulation 18 and Regulation 22 in the Black Book because the wording of the Regulations, as published on The AQHA website, does not match the text of any wording in the Minutes of the December 2010 Meeting or the April 2011 Meeting. c. There was, in fact, no Board resolution relating to Regulation 22 passed at the December 2010 meeting. At the April 2011 Board meeting, it was erroneously recorded that a relevant resolution relating to Regulation 22 "was already passed at the last Board Meeting..." but that, in fact, had not occurred. (iv) In relation to Regulation 18, there is a list of requirements for registration of imported horses that appears in the 17 December 2010 Stud Book Sub-Committee Agenda and Minutes, and in the 19 March 2011 Stud Book Sub-Committee Agenda and Minutes, as having been discussed. That list of requirements was included in the Minutes for the Board Meeting of 19 and 20 December 2010, where the Board "noted" the "clarifications" to the rules. The Board did not note a change to the rules, though, or pass a resolution to change them. Setting aside requirements relating to notice and the proper convening of a meeting, no resolution was ever passed by the Board that could be said to have effected a change to Regulation 18. 274Mr Bull further submitted that the invalidity of the resolutions cannot be cured by reliance upon s 1322 of the Corporations Act because the purported passing of the amendment to Rule 22 (prohibiting the registration of cloned horses) and the purported amendment of Regulation 18, to the extent that either took place, does not fall within the term "proceeding under [the] Act". Additionally, each is not a "procedural irregularity", but rather a substantive irregularity. 275It was also submitted that an order should not be made under s 1322(4) of the Corporations Act to validate the purported passing of the resolutions because there were, in fact, no "resolutions" passed at either Board meeting and no order could be made to create resolutions that would be effective to alter the Regulations. 276In this case, the purported amendments to the Regulations would directly affect the rights of members and, in this case, particularly the rights of Mr Bull. 277In any event, it was asserted that the Defendants bore the onus of establishing that there was no injustice caused, or likely to be caused, by the purported passing of the resolutions and by the alteration of the Regulations. The Defendants had not satisfied this onus. 278Mr Bull advanced seven reasons, in summary, for not making an order under s 1322(4). These were that the Defendants had not sought any such relief; there was no act, matter or thing, purporting to have been done upon which the court's power could fix, because there was no relevant resolution passed at either of the Board meetings in December 2010 or April 2011; even if there were resolutions passed, they were not merely of a procedural nature; there was no evidence advanced to satisfy the precondition that the persons who were involved in passing the resolutions acted honestly, as required by s 1322(6)(a)(ii); it would not be just and equitable to make an order; such an order would cause Mr Bull substantial injustice; and the court, after balancing the interests of the relevant parties, ought not exercise its discretion to make an order because "the overwhelming weight of justice is against making the order". 279(In closing oral submissions, I raised with senior counsel for Mr Bull whether it had been put to any of the directors who were cross-examined that he, or she, or that any of the other directors, had not acted honestly. Senior counsel for Mr Bull accepted that it had not and that, in those circumstances, I could find that the directors had acted honestly.) 280The oppression ground is based upon the submission that, by changing the Regulations, or by passing the resolutions (if it is found that that had occurred), The AQHA conducted its affairs, and/or passed resolutions, in a manner that was oppressive to, unfairly prejudicial to, or discriminatory against, Mr Bull, in the sense contemplated by s 232 of the Corporations Act. 281It was also submitted that the amendments, if permitted, would amount to unfairness to Mr Bull as a member of The AQHA, with the result that the court ought to grant relief under s 233(1)(c) of the Corporations Act "to reverse the purported amendments to Regulation 18 and Rule 22 and require The AQHA to consider the application of "Smart Little Lena-D" in accordance with th[e] requirements of those Rules as they stood at about 3 December 2010". 282Mr Bull submitted that there were also contractual grounds for relief, in that there had been a breach of contract by the Defendants. That The AQHA had failed to follow the requisite procedure to amend the Regulations, as set out in the Constitution, amounted to a breach of the contract between The AQHA and its members. In addition, he submitted that the Defendants failed to give proper consideration to his application to register "Smart Little Lena-D", which constituted a breach of contract also. 283It was submitted that it is an implied term of the contract between The AQHA and its members that the Association would properly apply its Regulations when determining applications for registration. In this regard, Mr Bull sought to draw an analogy with "insurer and trustee cases". 284As well, Mr Bull submitted that there was a breach of natural justice, which would result in the decision to refuse to register his horse void. 285On the issue of damages, Mr Bull submitted that, by virtue of the Defendants' breach of contract, he had lost the commercial opportunity to breed "Smart Little Lena-D" with other registered quarter horse mares. He relied upon Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 and the principles stated therein. He calculated the quantum of the damages at $464,000 to $615,000. 286The estimates were based upon the date, being 1 September 2011, as the date for registration. "Smart Little Lena-D" had serviced between 45 and 80 mares each year (Mr Bull used 60 as the mid-point), whereas, had the horse been registered, it would have serviced 150 mares each year. He said that the difference (90 mares per year), at the rate of $4,000 per mare, would yield $360,000 and that, then, there would be the foals actually sired from the servicing, as compared with those that could have been sired, which would increase the damages to substantially more than the estimate given. 287Yet, during the submissions, the following passage should be referred to: "HIS HONOUR: ...What do I draw from the fact that Mr Bull has not put forward any accounting records in relation to Smart Little Lena D? McINERNEY: Your Honour does not draw anything from it in circumstances where the evidence he gave about the servicing provided by Smart Little Lena D was not challenged. HIS HONOUR: But let's assume all of that is so, how do I determine the loss if I don't know-- I would draw an inference, would I not, that because he has kept such meticulous records in relation to the other horses that there should be such meticulous records, one would think, bearing in mind this claim is for damages and has been for damages for some years, that he would have been particularly careful to produce records relating to what he has done, how he has done it and what effect it has had. So for all I know-- at the moment I don't know what he has charged and what he has been able to charge as demonstrated by an accounting record. I know what he has told me about it but I don't have any records to demonstrate. McINERNEY: Your Honour does not have any accounting records but from my perspective that is invoking something of the best evidence rule, your Honour has his evidence which has not been challenged about that. I don't need to go further than that. If there had been a challenge to it but there has not been-- HIS HONOUR: How do I know-- he says between 40 and 85. That could be 45 or it could be 84. One would have thought he would bring forward the actual evidence of what Smart Little Lena D has done since his arrival in Australia. McINERNEY: I accept the criticism. HIS HONOUR: I am not making it as a criticism, Mr McInerney. I am just making-- McINERNEY: This is one of those issues when counsel hears, one says I should have asked for the accounting records but the fact is the evidence is where it is. He has given the oral evidence, as your Honour has characterised it, that is, not less than 40 and not more than 85 but there was no challenge. HIS HONOUR: But to determine damages he says... [h]e anticipated if it was registered, if the horse was registered he said 150 horses a year, did he not? McINERNEY: Yes, about 150. HIS HONOUR: I don't know whether that means 148 or 152 or what but let's leave that issue aside. Then he says I have made -- the horse has actually serviced between 40 and 85 mares. How do I work out the damages? Do I start with 150 and take off 85 which leaves 65 or do I start with 150 and take off 41 or what? McINERNEY: Well, your Honour, the evidence and the way it was put forward I think one can construe it as a form of averaging over the past three years of that range. HIS HONOUR: But what do I pick as the average? Tell me what I do. McINERNEY: Your Honour takes the midpoint between them, I would have thought, on the basis of the evidence where it has not been challenged. I don't think it would be fair to Mr Bull, having regard to the way the evidence is presented, to take the most conservative approach against him because it was not challenged. HIS HONOUR: But it is your case. You have to prove damages. McINERNEY: I understand that. McINERNEY: Dealing with that issue, that was in our written outline of submissions of 2 June and where we put forward some figures to your Honour about that in para 132 we there used in our assessment a midpoint between those figures, between 40 and 85 to be taken off the 150." 288(I have also, earlier, referred to other sections of the transcript where submissions were made on the issue of damages.) 289The Defendants, in their submissions, accepted, as a starting point, that The AQHA was obliged to properly apply the Regulations in response to an application for the registration of a quarter horse. 290However, the Defendants, initially, submitted that "... cloning, the registration of clones or not registering of clones, really doesn't come into the case at all. It is utterly irrelevant" (T239.48-239.49). 291Rather, the Defendants' principal submission was that Rule 18.1(a), properly construed, means that an imported horse, to be registered, requires a Registration Certificate from an international Stud Book of an affiliated association. Since "Smart Little Lena-D" does not have such a Certificate it, therefore, was, and is, ineligible for registration. The Board was correct to reject the application made by Mr Bull by reason of a failure to satisfy Regulation 18.1(a), and, moreover, there was nothing the Board could do about that. 292The Defendants did not accept that Rule 18.1(d) would enable "Smart Little Lena-D" to be registered: "There is no room for the Plaintiff's unregistered horse travelling without papers. Regulation 18.1(d) does not provide for a separate category registrable merely on payment of a penalty. Regulation 18.1(a) requires the application be made within 120 days of entry. The penalty provided for by regulation 18.1(d) is found in Annexe A Fees, at page 8 of the Black Book. The fee for an imported horse application within the prescribed 120 days is $230. The 'maximum penalty' for an application outside the 120 days is $330. It defies common sense that the Association, having regard to its objective of protecting the integrity of the breed, would allow registration of an international mystery horse merely for the sake of an extra $100." 293(From the above, it may be inferred, also, that the penalty fee provision is intended only to apply to, and remedy, non-compliance with that aspect of Rule 18 that imposes a time limit on applications for registration of imported horses with The AQHA.) 294The Defendants also, initially, submitted that the determination of the issues in this case had nothing to do with whether there was an amendment, or amendments, of the Regulations because of an irregularity or otherwise. 295Further, the Defendants submitted that "Smart Little Lena-D" was ineligible for registration even under the former Cloning Rule. This was because the inclusion of the catch-all phrase "meets all registration requirements", in the Rule as published in the 2010 Black Book, "appears to be facilitative. It cannot be said that the words have no work to do. At the least, they bring within the statement of the categories any additional requirements that the Association determines to impose". In other words, Rule 22 was subject to the requirements outlined in Rule 18 for imported horses. Specifically, a cloned, imported horse still required a Registration Certificate from an affiliated international association. Rule 22 cannot be construed "as a stand-alone special path to registration for clones". 296Senior counsel placed reliance upon the words "shall consist of the following" in Regulation 10, dealing with the contents of the Official Stud Book, together with, in respect of Imported Horses in Regulation 10.3, the reference to "Any imported horse registered with an international Stud Book recognised by the Association". It was submitted that the result was that, because The AQHA's Stud Book "shall consist of the following", it could not include ("consist of") an imported horse not registered with an international Stud Book of a recognised international affiliate. 297The word "consist" is defined in the Shorter Oxford Dictionary as follows: "1. a Exist or reside in; be located or inherent in ... b Be constituted or composed of...; having its essential features in. 2. Exist together as compatible facts; ... 4. Be made up or composed of." 298Subsequently, since I did not know whether the Defendants' principal submission would be accepted, at my request, senior Counsel for the Defendants did make submissions regarding the purported amendments. 299In relation to the amendments referred to in the amended pleadings, the Defendants submitted that the "only rule amendment that could possibly merit examination is Regulation 22". 300The Defendants submitted that the purported amendment to prohibit the registration of clones was valid. As outlined in the Defendants' Cross-Summons, to which reference was earlier made, the Defendants submitted that that amendment was not invalid by reason of any breach of The AQHA Constitution. 301In the alternative, the Defendants contended, if it were found that the amendment to Regulation 22 was invalid, that any irregularity could be cured by s 1322 of the Corporations Act because: (a) The irregularity was purely procedural; (b) The irregularity, insofar as it concerned notice in relation to a proposed amendment, did not deprive any person of an opportunity to debate the issues or vote; (c) There is nothing to suggest that The AQHA, or any of its Board Members, acted dishonestly or in a manner motivated by any desire to adversely affect the Plaintiff; (d) It is just and equitable to make an order under s 1322 because it is "a matter close to the heart of the Association's object to protect the integrity of the quarter horse breed to determine whether it will accept cloned horses for registration... if the Board of The AQHA, having regard to its objects, thought it in the best interests of the Association that clones horses not be eligible for registration it was perfectly entitled so to decide"; (e) There is no substantial injustice suffered by Mr Bull, who knew of the imported horse rule and the requirement for registration papers for all imported horses and knew, or ought to have known, the controversy surrounding cloned horses, to apply s 1322. That "Smart Little Lena-D" could not be registered was "a commercial risk that was well known to [Mr Bull]". 302The Defendants also submitted that "Smart Little Lena-D" could not be registered pursuant to Rule 35, the Hardship Rule, because there is no evidence that its breeding could be "proven to the satisfaction of the Association". 303In relation to loss and damage, I have earlier referred to some of the oral submissions made by senior counsel for the Defendants. Further, it was submitted: "For the purposes of this case, the Defendant[s] [are] prepared to accept that if Salute was entitled to registration, that would have occurred about four weeks from receipt of the application... [However, the Defendants say] as follows. First, there is no evidence that the rate of services is affected by registration or lack thereof. Second, there is no foundation for any opinion that the rate of services would rise to 150 per year if the horse were to be registered. Third, there is no basis for saying that Salute's service fee, if registered, would exceed that of Acres Destiny. Salute is a clone. There is no evidence as to the performance of the progeny of clones. That is an obvious factor that, for all the Court knows, the market may see as critical. The Plaintiff offers no evidence as to the market in Australia for servicing of mares by a cloned horse." Submissions - Remedies 304Mr Bull advanced three alternative remedies for consideration by the court in the event that he was successful in the proceedings: (a) The primary remedy favoured by Mr Bull was for the court to order that "Smart Little Lena-D" be registered by The AQHA. Registration could be in the Stud Book, in the Appendix Register or in a Clones Register to be established specifically for cloned quarter horses and their progeny. (b) The court, alternatively, could order The AQHA to convene an extraordinary general meeting directed to the question whether a separate Clones Register ought to be established. Mr Bull contended that this remedy, in isolation, would prove insufficient but that the court, nevertheless, had the power to make the order even though it was not specifically sought in the pleadings. This is because the matter was raised with the parties and an invitation to make submissions was extended to each and because there is jurisdiction to do so conferred by Uniform Civil Procedure Rules 2005 (NSW), Rule 36.1 and by s 90 of the Civil Procedure Act. Reference was made, in this regard, to Lu v Hua Cheng International Holdings Pty Ltd [2010] NSWSC 228, at [88], per Gzell J. (c) Thirdly, the court could order The AQHA to reconsider the application to register "Smart Little Lena-D" "in accordance with the rules as they then properly stood, and as properly construed". Mr Bull accepted that this was the least intrusive remedy to impose upon The AQHA. 305The Defendants submitted that, if the court were to find that the conduct of The AQHA was oppressive, it was bound to impose the remedy that is least intrusive to the company: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; (1998) 28 ACSR 688 at 742. 306They submitted that, to order The AQHA to hold an extraordinary general meeting, would be an unjust remedy insofar as it represents an unwarranted intrusion into company affairs; it would be out of proportion to the wrong suffered; it would involve excessive expense; and it would force The AQHA to come to a determination of their position on complex and evolving scientific issues. 307Whilst the Defendants accepted that the court has a discretion, pursuant to s 233(1)(j) of the Corporations Act, to establish a Clones Register, it should not do so as a matter of discretion because, to do so would compromise the integrity of the breed. The Defendants, to that end, submitted: "...it isn't the Court's role, in effect, to sit as the registrar or the Board of the AQHA. Should the Court conclude that Regulation 18 did not stand in the way of the registration of the Plaintiff's horse AND that the amendment of Regulation 22 was not validly effected, the Court should set aside the decision rejecting the application and order the Board to make a decision on the application in accordance with law. This is not to treat the Board as an inferior tribunal or this suit as one of judicial review. It is merely to recognise that the conduct of this matter has not equipped the Court to undertake the various considerations that would be undertaken by the Association when considering an application for registration." 308For reasons to which I shall come, it will be unnecessary to deal with remedies. Construction of the Constitution and the Regulations - The Legal Framework 309An issue the subject of debate between the parties related to the construction of the Constitution and the Black Book. 310I am of the view that the following principles guide the court in relation to this question: (a) The Constitution and the Regulations have effect as a contract (a) between the company and each member; and (b) between the company and each director and company secretary; and (c) between a member and each other member; under which each person agrees to observe and perform the Constitution and Rules so far as they apply to that person: s 140 of the Corporations Act. However, each is, self-evidently, a document having features distinguishing it from a commercial agreement between identified parties. (b) As Jenkins LJ wrote in Holmes v Keyes [1959] Ch 199, at 215, each "should be construed so as to give [it] reasonable business efficacy, where a construction tending to that result is admissible on [its] language... in preference to a result which would or might prove unworkable": see also National Roads and Motorists' Association Ltd v Parkin [2004] NSWCA 153; (2004) 60 NSWLR 224, per Ipp JA, at [68]-[75]; 235-236. (c) The Constitution and the Black Book should be read together and as a whole, and as a business document. (d) Words in the Constitution or in the Rules and Regulations should be given their ordinary and natural meaning. One approaches the task so as to give each document a "businesslike interpretation", paying attention to the language used, the commercial circumstances which the document addresses, that is, the objects which it is intended to secure and any indication or purpose requiring the language to be so construed: Dome Resources NL v Silver [2008] NSWCA 322; (2008) 72 NSWLR 693, per Basten and Bell JJA, at [11]. (e) The meaning to be given to a particular provision in each can, and should, be influenced by the context in which that provision appears. One should also consider the structure and purpose, as well as the text, of each of the documents. (f) The search for meaning starts with what the words in their context would convey to a reasonable person in the position of a member having all the background knowledge that would reasonably have been available to members and the Association as the notional parties to the contract: Union Club v Lord Andrew Charles Robert Battenberg [2006] NSWCA 72, per Santow JA, at [102]. (g) Like any other document, the Constitution and the Regulations must be read fairly and their import derived from a reasonable interpretation of the language that is employed. Each should not be construed narrowly or pedantically. Each should also be considered as an enduring and flexible document: Re Giga Investments Pty Ltd (In Administration) (1995) 17 ACSR 472 at 476. (h) As a corporate Constitution, it is to be interpreted literally because it is an instrument on which third parties might rely: Simon v HPM Industries Pty Ltd (1989) 15 ACLR 427, per Hodgson J, at 433-434; Stanham v The National Trust of Australia (New South Wales) (1989) 15 ACLR 87, per Young J (as his Honour then was) at 90-91. (i) Courts are reluctant to imply terms, or to permit extrinsic evidence to be led in construing the Constitution and Rules and Regulations of a corporation: Ananda Marga Pracaraka Samgha Ltd v Tomar (No 6) [2013] FCA 284; (2003) 300 ALR 492, per Dodds-Streeton J, at [153]. In Stanham v The National Trust of Australia (New South Wales), Young J (as his Honour then was), at 91, gave three reasons for being very careful before implying any matters, namely, it is more difficult to imply a term where parties have purportedly spelt out their rights and obligations in an extensive set of articles; it is customary, in corporations, to rely upon the actual wording of each of the articles; and there is always power to amend the constitution by special resolution, so that it is always possible for any missing elements necessary for efficacy to be supplied with relative ease. Furthermore, the statutory and general law context in which a company constitution operates and is to be construed in relation to decision-making entrusted to directors provides a comprehensive - indeed, exhaustive - set of rules dealing with the relevant subject matter: St George Soccer Football Association Inc v Soccer NSW Ltd [2005] NSWSC 1288, per Barrett J (as his Honour then was), at [49]. (j) A provision in the Constitution or the Regulations conferring power on directors should be given as broad an operation as is reasonably available on the language and without imposing procedural constraints on the board, absent some contextual indication or purpose requiring the language to be so construed: Dome Resources NL v Silver, at [12], [16]. Section 1322 of the Corporations Act 311I shall deal next with s 1322. 312Section 1322 of the Corporations Act, relevantly, provides: "(1) In this section, unless the contrary intention appears: (a) a reference to a proceeding under this Act is a reference to any proceeding whether a legal proceeding or not; and (b) a reference to a procedural irregularity includes a reference to: (i) the absence of a quorum at a meeting of a corporation, at a meeting of directors or creditors of a corporation, at a joint meeting of creditors and members of a corporation or at a meeting of members of a registered scheme; and (ii) a defect, irregularity or deficiency of notice or time. (2) A proceeding under this Act is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid. (3) A meeting held for the purposes of this Act, or a meeting notice of which is required to be given in accordance with the provisions of this Act, or any proceeding at such a meeting, is not invalidated only because of the accidental omission to give notice of the meeting or the non-receipt by any person of notice of the meeting, unless the Court, on the application of the person concerned, a person entitled to attend the meeting or ASIC, declares proceedings at the meeting to be void. (3AA) A meeting held for the purposes of this Act, or a meeting notice of which is required to be given in accordance with the provisions of this Act, or any proceeding at such a meeting, is not invalidated only because of the inability of a person to access the notice of meeting, unless the Court, on the application of the person concerned, a person entitled to attend the meeting or ASIC, declares proceedings at the meeting to be void. (4) Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes: (a) an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation; (b) an order directing the rectification of any register kept by ASIC under this Act; (c) an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure of a kind referred to in paragraph (a); (d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding; and may make such consequential or ancillary orders as the Court thinks fit. (5) An order may be made under paragraph (4)(a) or (c) notwithstanding that the contravention or failure referred to in the paragraph concerned resulted in the commission of an offence. (6) The Court must not make an order under this section unless it is satisfied: (a) in the case of an order referred to in paragraph (4)(a): (i) that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature; (ii) that the person or persons concerned in or party to the contravention or failure acted honestly; or (iii) that it is just and equitable that the order be made; and (b) in the case of an order referred to in paragraph (4)(c)-- that the person subject to the civil liability concerned acted honestly; and (c) in every case-- that no substantial injustice has been or is likely to be caused to any person." 313The scope and effect of s 1322 has been considered recently by the High Court in Weinstock v Beck [2013] HCA 14; (2013) 297 ALR 1. From that case, the following propositions may be taken (adapting them relevantly for the present case): (a) There are decisions made and actions taken by directors of corporations that depend, for their legal effect, upon powers conferred by the constitutions of those corporations. Sometimes, by reason of error or circumstance, a condition for the validity of such a decision or action is not met. Australian courts have long been empowered by companies' legislation to make orders to overcome some of the inconvenient invalidities which can arise in such cases: per French CJ, at [1]. (b) Section 1322(4) and related provisions "reflect a long-standing legislative recognition that mistakes will happen in corporate governance and that it is not in the public interest that the validity of decisions made in relation to corporations be unduly vulnerable to innocent errors which may be corrected without substantial injustice to third parties: per French CJ, at [39]. (c) In accordance with its evident purpose, s 1322(4)(a) is to be construed broadly and applied pragmatically, principally by reference to considerations of substance rather than those of form: per French CJ, at [39]. (d) Section 1322(4) is cast in very broad terms. The power given to the court is to declare the act, matter or thing, or the proceeding, not invalid by reason of a provision of the Corporations Act or a provision of the constitution of a corporation. The court may do that either unconditionally or subject to such conditions as the court imposes. The court is given power to "make such consequential or ancillary orders as the court thinks fit". Section 1322(6) prescribes pre-conditions to making an order under s 1322(4)(a): per French CJ, at [40]; per Hayne, Crennan and Kiefel JJ, at [53]. As Campbell JA said, in dissent in the Court of Appeal (Beck v LW Furniture Consolidated (Aust) Pty Ltd [2012] NSWCA 76; (2012) 265 FLR 60, at [139]), all that was required for there to be a contravention of the constitution was "that something ha[d] happened that is different to what the constitution of the corporation requires". (e) The sub-section confers a remedial power on a superior court the exercise of which is conditioned, always, on satisfaction by that court that no substantial injustice has been, or is likely to be, caused to any person. (f) An order under s 1322(4)(a) goes no further than to declare an act, matter, thing or proceeding, not invalid by reason of a relevant contravention. The order does no more than to remove the invalidating effect of contravention so as to make valid what would have been valid without contravention: per Gageler J, at [65]. (g) The sub-section cannot assist to achieve a result that could never be attained under the constitution of a corporation. However, s 1322(4)(a) can assist in achieving a result that could, in some circumstances, be attained under the constitution by removing the invalidating effect of any absence of compliance with a requirement necessary for validity in the circumstances that in fact occurred: per Gageler J, at [65]. 314In addition, from other authorities, I glean the following propositions: (a) The general approach of the court is to use s 1322 in a beneficial manner where it is clear that the procedural irregularity is technical in nature and no injustice has occurred. (b) There are different aspects to s 1322. The first is broadly under subs (1), (2) and (3), and the second is broadly under subs (4), (5) and (6). They are not entirely separate, but they envisage two different types of application. The first postulates the prima facie validity of any 'proceeding under this [Act]' despite procedural irregularity. Any such proceeding 'is not invalidated... unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court' (s 1322(2)). The second provides a wider base for remedial action, in that the subsections give the court power to cure 'any act, matter or thing purporting to have been done... under this [Act] or in relation to a corporation' (s 1322(4)(a)): Re Caysand No 64 Pty Ltd [1994] 2 Qd R 467 per Thomas J, at 472 (explaining the operation of s 1322 of the former Corporations Law (which, although now repealed, was, in terms, not materially different to s 1322 of the Corporations Act)); McLaughlin v Dungowan Manly Pty Ltd [2010] NSWSC 187, per Ward J (as her Honour then was), at [308]. (c) The affected corporation can be the "interested person": see, by way of example, Australian Innovation Ltd v Petrovsky (1996) 14 ACLC 1357, at 1362; Oil Basins Limited v Bass Strait Oil Company [2012] FCA 1122, at [66]. (d) What is a "procedural irregularity" will be ascertained by first determining what is "the thing to be done" which the procedure is to regulate; if there is an irregularity which changes the substance of "the thing to be done", the irregularity will be substantive; if the irregularity merely departs from the prescribed manner in which the thing is to be done without changing the substance of the thing, the irregularity is procedural: Cordiant Communications (Australia) Pty Ltd v Communications Group Holdings Pty Ltd [2005] NSWSC 1005; (2005) 194 FLR 322, per Palmer J, at [103]. (e) Section 1322(1)(b) contains a non-exhaustive definition of procedural irregularity, which gives some indication of what is contemplated. The reference to a procedural irregularity includes a reference to a defect, irregularity or deficiency of notice: Howard v Mechtler [1999] NSWSC 232, per Austin J, at [32]; Re Broadway Motors Holdings Pty Ltd (In Liq) (1986) 6 NSWLR 45; In the matter of Richardson & Wrench Holdings Pty Limited [2013] NSWSC 1990, per Brereton J, at [27]. (f) In order to satisfy the requirements of s 1322(4) of the Act, the party seeking an order must demonstrate that: (i) It is an interested person within the meaning of s 1322(4); (ii) There was an act, matter or thing purporting to have been done under the Act, or in relation to a corporation, that is, or may be, invalid by reason of a contravention of a provision of the Act or a provision of the constitution: s 1322(4)(a); (iii) (a) The act, matter or thing was essentially of a procedural nature; or that (b) The person or persons concerned in or party to the contravention or failure acted honestly; or (c) It is just and equitable that the order be made: s 1322(6)(a) of the Act; and (iv) No substantial injustice has been or is likely to be caused to any person: s 1322(6)(c) of the Act. (g) In Jordan v Avram (1997) 25 ACSR 153; (1997) 141 FLR 275, Gillard J, at 156-157, gave a careful analysis of the structure of s 1322 and concluded, at 157: "In my opinion s 1322(4)(a) is not confined to procedural irregularities. It covers irregularities, errors or mistakes of a general nature and is expressed in very wide language. It clearly gives power to declare an act which is not in accordance with the articles of association, not invalid." (h) The sub-paragraphs identified in s 1322(6) are disjunctive and not cumulative: Re Charter Hall Ltd [2007] FCA 1316, at [7]. It is, therefore, only necessary to satisfy one of the three sub-paragraphs as a pre-condition to making an order under s 1322(4): Elemental Minerals Ltd, In the matter of Elemental Minerals Ltd [2010] FCA 687, per Gilmour J, at [30]; Sheahan v Londish [2010] NSWCA 270, at [160]. However, in every case when an order is made, the requirements of s 1322(6)(c) must be satisfied. The onus of establishing one of the conditions in s 1322(6)(a), and of establishing the absence of substantial injustice, rests upon the applicant for an order: Australian Hydrocarbons NL v Green (1985) 10 ACLR 72, per Hodgson J, at 83; Jordan v Avram, per Gillard J, at 159. (i) The word "injustice" requires the court to consider real, and not merely insubstantial, or theoretical, prejudice. A degree of prejudice to a person or persons may be outweighed if the overwhelming weight of justice is in favour of making the order: Elderslie Finance Corporation Ltd v Australian Securities Commission (1993) 11 ACSR 157, per Owen J, at 160; Super John Pty Ltd v Futuris Rural Pty Ltd [1999] NSWSC 627, per Santow J, at [15]. In other words, it is necessary to consider the prejudice that will be suffered by, for example, a member by the making of an order, and to weigh this in the scales against the prejudice to the company and, relevantly, other members, if an order is not made. (j) A substantial injustice depends upon whether the remedial order which gave rise to the detriment was unjust in the sense that it would have caused such prejudice overall as to have been unfair or inequitable, taking into account the interests of all those who would have been directly affected by such dispensation. 315In Re H&P Newcastle Pty Ltd (in liquidation) [2013] NSWSC 778, Black J noted, at [15]: "In Holmes v Life Funds of Australia Ltd [1971] 1 NSWLR 860, a meeting was validated under the section, notwithstanding that notice of it was not properly given, where the failure did not cause substantial injustice to any person. That power has been used to validate an irregularity, for example, in respect of non-compliance with a company's constitution in NRMA Ltd v Gould (1995) 18 ACSR 290. The power under s 1322(4)(a) may be exercised where, relevantly, the contravention is essentially procedural, or the persons concerned had acted honestly, or it is just and equitable that an order be made, and provided that no substantial injustice has been or is likely to be caused to any person: s 1322(6). The conditions specified in s 1322(6) are alternative, so that only one of them need be satisfied in order to allow an order to be made under s 1322(4)." 316In Whitehouse v Capital Radio Network Pty Limited [2004] TASSC 12; (2004) 48 ACSR 569, Cox CJ in the Full Court of the Supreme Court of Tasmania, wrote, at [20]: "It may well be that in some situations the holding of such a meeting [being a reference to an inquorate meeting] and the passing of resolutions which would in any event have been passed notwithstanding the presence of those necessary to constitute a quorum may work no injustice." 317His Honour, however, also made clear that, in the circumstances of that case, involving other negotiations and arrangements which had been made between the parties, there would be injustice even if the resolutions would still have been passed had the absent party attended the inquorate meeting. Accordingly, the court must still consider whether the procedural irregularity results in substantial injustice. Oppression - The Legal Framework 318Section 232 of the Corporations Act provides: "The Court may make an order under section 233 if: (a) the conduct of a company's affairs; or (b) an actual or proposed act or omission by or on behalf of a company; or (c) a resolution, or a proposed resolution, of members or a class of members of a company; is either: (d) contrary to the interests of the members as a whole; or (e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity. For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company." 319Section 53 of the Corporations Act identifies the "affairs" of a company for the purposes of s 232 as relevantly including the "...membership, control, business, trading, transactions and dealings of the body" (s 53(a)) and "the internal management and proceedings of the body" (s 53(c)). 320In William Buck (WA) Pty Ltd v Faulkner (No 6) [2013] WASC 342, Kenneth Martin J, at [108], wrote: "In approaching s 232 and s 233 of the Corporations Act it is appropriate to recall as well some observations were recently made in Campbell v Backoffice Investments Pty Ltd by French CJ and the majority (Gummow, Hayne, Heydon & Kiefel JJ), as regards general principles. In particular, I would discern at least these bedrock oppression principles: (a) Section 232 of the Corporations Act should not be read narrowly and so, any 'judge made limitation' emerging from prior cases, which must invariably be fact dependent, should be 'approached with caution': see [72] (French CJ), and [176] (Gummow, Hayne, Heydon and Kiefel JJ). (b) The term 'unfairly prejudicial' then used towards the conduct of a company's affairs would appear to subsume oppressive conduct. But s 232 encapsulates three heads of conduct which may provide a basis for relief, namely, oppressive, unfairly prejudicial or unfairly discriminatory conduct: see [59] (French CJ). ... (d) Merely because conduct is otherwise lawful would not, for the purposes of s 232, mean that it will not meet the touchstone for showing the existence of statutory oppression: see [176] (Gummow, Hayne, Heydon & Kiefel JJ). (e) Merely because a person acting on behalf of a corporate defendant substantively believes they are acting properly or correctly will not thereby preclude a finding as to the existence of statutory oppression. An examination of the alleged oppressor's motives for acting as they did, are usually not to the point: see again [176] (Gummow, Hayne, Heydon & Kiefel JJ). (f) Powers afforded a court under s 233 should not be hedged about by 'implied limitations': again see [178] (Gummow, Hayne, Heydon & Kiefel JJ)." 321His Honour then added some additional principles: (a) Generally speaking, courts have taken a position that oppression "must result from some overbearing act or attitude on the part of the oppressor": [123]. (b) Courts are, generally speaking, reluctant to interfere with the responsibility for the management of a company, which is committed to its Board of Directors. Decisions made by a board adversely affecting an applicant will be insufficient to show oppression. Ordinarily, there needs to be a lack of good faith shown by the board, or that no reasonable board could have come to a decision reached: [124]. 322There was no dispute that the usual approach taken to the interpretation of the section is that each element is not an alternative. Whilst s 232(d) and (e) constitute separate grounds for relief, the elements of s 232(e) should be viewed as a compound concept, which overlap and assist in explaining each other: ASC v Multiple Sclerosis Society (Tas) (1993) 10 ACSR 489, per Zeeman J, at 515-516; Shew v Police and Citizens Youth Club [2013] NTSC 15, per Luppino M, at [40]. The three different elements are treated as different aspects of the essential criterion, namely "unfairness": Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, per Young J, at 693. 323Section 232(e) is directed to conduct which involves "commercial unfairness" or a departure from the standards of fair dealing, or where a decision has been made so as to impose a disadvantage, disability or burden on the plaintiff that, according to ordinary standards of reasonableness and fair dealing, is unfair: Morgan v 45 Flers Avenue Pty Ltd, at 704; Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459. 324In Re Hollen Australia Pty Ltd [2009] VSC 95, Robson J, at [62] - [68], summarised some of the principles in this way: "Turning to the case law, for there to be oppressive conduct for the purposes of s 232 of the Corporations Act 2001, there must be commercial unfairness to a member or members of the company. In Wayde v New South Wales Rugby League Ltd, the only decision of the High Court to date on s 232 or its predecessors, Mason ACJ, Wilson, Deane and Dawson JJ stated: In that kind of case it may well be appropriate for the court, on an application for relief under s 320, to examine the policy which has been pursued or the proposed course of action in order to determine the fairness or unfairness of the course which has been taken by those in control of the company. In Morgan v 45 Flers Avenue Young J of the Supreme Court of New South Wales stated that the court looks at the criteria of s 232 '... as a composite whole and the individual elements mentioned in the section should be considered merely as different aspects of the essential criterion, namely commercial unfairness.' In Re Spargos Mining NL Murray J of the Supreme Court of Western Australia said the concept of 'unfairness' takes many forms and may include 'the harm suffered as a result of the conduct of management, the prejudice caused, the lack of reasonable commercial justification for the course taken, or simply in the decision making processes within the company.' The test for unfairness has an objective standard. It requires an assessment of whether objectively in the eyes of a commercial bystander, there has been unfairness. If the conduct under scrutiny is the conduct of the directors, the bystander is taken to be a reasonable director with the special skill, common knowledge and acumen a director should possess. The grounds for relief may rely on past conduct and it is not necessary to establish the oppression or unfairness be continuing. In Wayde v New South Wales Rugby League Ltd Brennan J stated: The question of unfairness is one of fact and degree which s 320 requires the court to determine, but not without regard to the view which the directors themselves have formed and not without allowing for any special skill, common knowledge and acumen possessed by the directors. The operation of s 320 may be attracted to a decision made by the directors which is made in good faith for a purpose within the directors' power but which reasonable directors would think to be unfair. The test of unfairness is objective and it is necessary, though difficult, to postulate a standard of reasonable directors possessed of any special skill, knowledge or acumen possessed by the directors. The conduct must relate to the 'affairs of the company'... Section 53 of the Corporations Act 2001 provides some guidance as to what is meant by the affairs of the company. However, the concept of a company's affairs is 'very wide.' Conduct which is not oppressive on its own may be considered oppressive when considered collectively." (Omitting citations) 325In Pettit v South Australian Harness Racing Club Inc [2006] SASC 306, White J, at [26], set out a number of principles, some of which are apt to consider in the present case. Relevantly, to this case, his Honour wrote: "1. The constitution of an association binds the association and all of its members. This means that the Committee was bound to apply the relevant provisions of the Club's Constitution in its consideration of the membership applications. 2. The requirement that an exercise of an association's powers be for the benefit of the members as a whole is to exclude their exercise for 'ulterior special and particular advantages', ie, it negatives 'purposes foreign to the association's operations, affairs and organizations'. 3. Other than in the limited circumstances of the kind outlined in the majority judgment in Wayde, the courts are not concerned in applications of the present kind with reviewing the underlying merits of the management Committee's decision. The courts do not substitute their discretion for the discretion exercised in good faith by an association's Committee. There is no appeal on merits from management decisions to courts of law: nor will courts of law assume to act as a kind of supervisory board over decisions within the powers of management honestly arrived at. 4. Conduct by a Committee of an association will be contrary to the interests of the members as a whole if no Committee, acting reasonably, could have engaged in that conduct. 5. Conduct may be contrary to the interests of the members as a whole even though a Committee does not act in bad faith. In Wayde, Brennan J said: [I]f the directors exercise a power - albeit in good faith and for a purpose within the power - so as to impose a disadvantage, disability or burden on a member that, according to ordinary standards of reasonableness and fair dealing is unfair, the court may intervene ... 6. In order to succeed, it is not necessary for an applicant to show that any decision of the association was invalid. 7. However, proof of invalidity or non-compliance with an association's rules may indicate that a decision is contrary to the interests of the members as a whole. This is because of the importance which the law attaches to adherence to the provisions of an association's constitution. So much is apparent in the following passage in the judgment of Olsson J in Popovic & Ors v Tanasijevic & Ors (No 5): Conduct complained of must be unjustly detrimental to either individual members specifically or, alternatively, members as a whole. It is not necessary to prove lack of bona fides, but conduct beyond power or in breach of statutory, legal or financial duty may well amount to oppression. The very provisions of s 61(7) reveal the importance which the legislature attaches to the proper adherence to the provisions of the constitution and rules of an incorporated association. This is because a failure to observe such provisions has the effect of depriving members of their right, as members, to have the affairs of the entity conducted in accordance with its constitution and rules." (Omitting citations) 326In a non-commercial corporation, fairness and conversely, unfairness, are to be assessed from the vantage point of a hypothetical, reasonable observer associated with the relevant corporation. Unfairness may arise even where it involves a valid exercise of legal power within the constitution if it may fairly be considered as outside the parties' contemplation when they became members: Ananda Marga Pracaraka Samgha Ltd v Tomar (No 6), at [417] - [418]. 327Importantly also, there must be more than "prejudice". The word "unfair" in the collocation of words should not be forgotten. 328It is also necessary to consider the substantial purpose(s), the accomplishment of which forms the basis for the actions of the Board. As was written in Howard-Smith v Ampol Limited [1974] AC 821; (1974) 3 ALR 448, by Lord Wilberforce, who delivered the judgment on behalf of the Privy Council, on an appeal from the Supreme Court of New South Wales, at 835: "Having ascertained, on a fair view, the nature of this power, and having defined as can best be done in the light of modern conditions the, or some, limits within which it may be exercised, it is then necessary for the court, if a particular exercise of it is challenged, to examine the substantial purpose for which it was exercised, and to reach a conclusion whether the purpose was proper or not. In doing so it will necessarily give credit to the bona fide opinions of the directors, if such is found to exist, and will respect their judgment as to matters of management; having done this, the ultimate conclusion has to be as to the side of a fairly broad line on which the case falls." 329In Catalano v Managing Australia Destinations Pty Ltd [2014] FCAFC 55, the Full Federal Court (Siopis, Rares and Davies JJ), at [9], described unfairness in this way: "The test of unfairness requires an objective assessment of the conduct in question with regard to the particular context in which the conduct occurs. The question is whether objectively in the eyes of the commercial bystander there has been unfairness, namely conduct that is so unfair that reasonable directors who consider the matter would not have thought the conduct or decision fair. As the test is objective, whether or not the conduct is oppressive will not depend upon the motives for what was done. It is the effect of the acts that is material." 330Importantly, and relevantly to the present case, in Thomas v HW Thomas Ltd [1984] 1 NZLR 686, Richardson J, at 694-695, observed: "Fairness cannot be assessed in a vacuum or simply from one member's point of view. It will often depend on weighing conflicting interests of different groups in the company. It is a matter of balancing all the interests involved in terms of the policies underlying the companies legislation in general and sec. 209 [the NZ provision] in particular; thus to have regard to the principles governing the duties of a director in the conduct of the affairs of a company and the rights and duties of a majority shareholder in relation to the minority; but to recognise that sec. 209 is a remedial provision designed to allow the Court to intervene where there is a visible departure from the standards of fair dealing; and in the light of the history and structure of the particular company and the reasonable expectations of the members to determine whether the detriment occasioned to the complaining member's interests arising from the acts or conduct of the company in that way is justifiable." 331Also relevant and important is the point made by Austin J in Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152, at [39], that "while it is recognised that conduct may be oppressive if inconsistent with the 'legitimate expectations' of shareholders, expectations are not immutable. The non-fulfilment of expectations will not establish oppression, if there has been some good reason for the extinguishment of the expectation: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672, at [85], [86], [175]... Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 343, at [96]...". 332Finally, in determining whether there has been "oppression", each case has to be considered on its own facts and circumstances, and by reference to the conduct as a whole. 333Section 233 relevantly provides: "(1) The Court can make any order under this section that it considers appropriate in relation to the company, including an order: ... (b) that the company's existing constitution be modified or repealed; (c) regulating the conduct of the company's affairs in the future; ... (i) restraining a person from engaging in specified conduct or from doing a specified act; (j) requiring a person to do a specified act. ... (3) If an order made under this section repeals or modifies a company's constitution, or requires the company to adopt a constitution, the company does not have the power under section 136 to change or repeal the constitution if that change or repeal would be inconsistent with the provisions of the order, unless: (a) the order states that the company does have the power to make such a change or repeal; or (b) the company first obtains the leave of the Court." 334The power conferred by s 233 is to "make any order under this section that it considers appropriate in relation to the company". As was noted in Turnbull v NRMA [2004] NSWSC 577; (2004) 50 ACSR 44, by Campbell J (as his Honour then was), at [42]; 54: "That is a power conferred in extremely wide terms, which would be confined as a matter of construction only to the extent that the scope and purpose of the statutory enactment may enable the court to see that some exercises of the power would be definitely extraneous to any objects the legislature could have had in mind." 335In Re Hollen, dealing with remedies where oppression is established, Robson J wrote, at [77] - [78]: "Generally speaking, there are two objectives in granting remedies for oppression: first, to bring an end to the oppressive conduct and secondly, to compensate the injured party for the injury done to him or her by the oppressive conduct. In Re Dernacourt Investments Pty Ltd Powell J of the Supreme Court of New South Wales said the purpose of granting a remedy under s 233 of the Corporations Act 2001 is to bring an end to the oppression. He said the remedies should be used 'if it be possible, to bring the 'oppression' to an end without recourse to a cure [winding up] the effects of which would, in many cases, be worse than the disease.' In John J Starr (Real Estate) Pty Ltd v Robert R Andrew (A'asia) Pty Ltd Young J of the Supreme Court of New South Wales stated that when selecting a remedy: It is incumbent upon the court when making an order under s 320 to endeavour to find a scheme, short of winding up, if possible, which will 'put the company back on the rails' and avoid the causes of conflict and oppression, yet will as far as possible allow all members to participate in the business." (Omitting citations) 336At [89], Robson J added: "Accordingly, the following appear to be the relevant principles: (1) Generally, the purpose of granting a remedy under s 232 is to bring an end to the oppression and to fairly compensate the person oppressed. (2) Typically, the oppression can be ended and the oppressee properly compensated by the oppressor being ordered to acquire the oppressee's shares at a fair value. (3) Generally, the order should seek to put the company back on the rails and avoid the causes of conflict and oppression. (4) Winding up is a remedy of last resort. (5) Winding up a profitable and operating company is an extreme step and requires a strong case to be make. (6) In choosing a remedy under s 233 the Court is exercising a discretion. (7) In exercising that discretion, the Court should keep in mind the above principles. (8) Bearing in mind those principles, circumstances may dictate that the most appropriate remedy to bring an end to oppression and to fairly compensate the person oppressed is a winding up." Determination 337There was no dispute, in this case, that the claims made by Mr Bull were justiciable. Presumably, this was because the parties recognised that, in Dixon v Australian Society of Accountants (1989) 95 FLR 231; 87 ACTR 1, it was held that the principles espoused by the High Court in Cameron v Hogan [1934] HCA 24; (1934) 51 CLR 358, at 370-371, do not apply to persons who become members of a company limited by guarantee. A similar view was expressed in Zusman v Royal Western Australian Bowling Association (Inc) [1999] WASC 86 at [7] - [9]. 338The task involved in deciding this case, at least so far as it relates to the Constitution and the Regulations, is not just one of construction of each, in the sense of ascertaining the meaning of the relevant Article or Regulation, but also of deciding how each operates. It is the Constitution of The AQHA that confers power on the Board of Directors to make Rules and Regulations that are not inconsistent with the Constitution and which are binding on the members. It also permits the Board of Directors to make Rules and Regulations amending the existing Rules and Regulations. 339As stated, the objects of The AQHA stated in the Constitution include the promotion and encouragement of the breeding of quarter horses. Yet, nowhere expressly identified in the Constitution are what methods of "breeding" are to be promoted and encouraged. Furthermore, nowhere in the aims of The AQHA, or in the "Mission Statement" referred to in the Black Book, are the controls on the methods of breeding, instituted to preserve the pedigree, identified. 340I accept that, prima facie, it is arguable that cloning is replication of genes and not breeding. In this regard, reference has earlier been made to the definition in the Constitution and the Black Book of "Breeder". That definition refers to the owner or registered lessee of a dam at the time of "service", which suggests the foal that is bred is the product of conception. 341I have also read the suggestion that cloning does not improve the breed; it just makes a copy of the same horses and that, therefore, with clones, the breed does not move forward, it stays the same. 342However, the Black Book, before the disputed amendment to the cloning rule (such that "No cloned horse will be eligible for registration"), did identify what might be described as the methods of breeding. They are, it would appear, "live cover" (Regulation 19), "artificial breeding" (Regulation 21) and "Cloning" (Regulation 22). It follows that the court should construe the Constitution and the Black Book in a way that treats the methods of "breeding" that are to be promoted and encouraged to include the three methods to which the Black Book specifically referred. 343It is necessary, then, to consider what requirements there were for the registration, by The AQHA, of a quarter horse that was bred using one of the three methods. Relevantly, for this purpose, in this case, it is necessary to consider the requirements relating to the registration of a cloned horse. Because "Smart Little Lena-D" was imported from the United States, it is necessary, also, to consider the requirements relating to the registration of an imported quarter horse. 344The Black Book refers to quarter horses that may be imported to Australia without expressly identifying the method by which those imported horses had been bred. Again, a logical construction, prima facie, would include the methods of "breeding" to which reference was made in the Black Book. 345Even though there is a dispute as to when relevant amendments are said to have been made to the Regulations (whether before, or after, 3 April 2011), and a dispute about the validity of each of those purported amendments, it is appropriate, in my view, to determine, at the outset, whether "Smart Little Lena-D" could have been registered before any of the disputed amendments were made, that is, by reference to the Black Book as published in August 2010. Accordingly, I shall first consider the applicable registration requirements in relation to the Black Book before any amendment the subject of dispute in this case. 346Regulation 5.2 in the Black Book, as at August 2010, defined "Imported horses" as horses foaled outside the territorial limits of Australia. There is no dispute that "Smart Little Lena-D" falls within this definition. 347Regulation 5.2, however, did not specify different categories of imported horses, for example, being those registered elsewhere and those not so registered. 348As a result, one then considers Regulation 10. Regulation 10 provided that "The Official Stud Book of the Australian Quarter Horse Association shall consist of the following" and, thereafter, did identify certain categories of horses. Regulation 10.3 pertained to imported horses and comprised "[a]ny imported horse registered with an international Stud Book recognised by the Association". Even then, to be registered, the proviso required "all registration requirements outlined in the Association's rules" to be satisfied "which include Genetic testings as described in Rule 15.10 and 16." 349Thus, it seems to me that Regulation 10, prior to any amendment, made clear that the Official Stud Book was to include only imported horses that were "registered with an international Stud Book recognised by the Association". Under this Regulation, there was no separate category of imported horse, not registered with an international Stud Book recognised by the Association, that The AQHA Stud Book could "consist of". 350"Smart Little Lena-D" was an imported horse but, at the time of the application for registration, was not an imported horse that is "registered with an international Stud Book recognised by" The AQHA. Accordingly, it follows that it could not then be registered in the Stud Book. 351To register "Smart Little Lena-D" as an imported horse would have resulted in the Stud Book of The AQHA "consisting of" an imported horse that was not registered with an international Stud Book recognised by The AQHA. 352It is to be noted, in relation to registration with an international Stud Book recognised by The AQHA being a requirement for imported horses, that Ms Ross was not challenged on her evidence that providing, to The AQHA, the Certificate of Registration provided to the owner by the Association of the country of origin, was a necessary step "because, if The AQHA is to protect the integrity of the quarter horse breed in Australia, it has to satisfy itself that imported horses are actually quarter horses of the breed and quality that the Australian industry will accept as contributing to the genetic base of our quarter horses". 353Nor was Ms Ross challenged on her evidence that "Without the Certificate, there is no established process whereby we could take the necessary steps to assign the pedigree and thus to place in the Stud Book the information that is invariably there in relation to all registered horses". 354As stated previously, one of the objects identified in the "Mission Statement" of the Black Book is "to record and preserve the pedigrees of the Australian Quarter Horse while maintaining the integrity of the breed" and one of the objects identified in the Constitution is the maintenance and publication of the Stud Book. In my view, the evidence given by Ms Ross regarding the necessity of providing a Certificate of Registration with a recognised international affiliate speaks to these objects. 355Then, it is necessary to refer to Regulation 18 in the Black Book as at August 2010, which sets out the requirements for registration of an imported horse. That Regulation, too, required the application to be accompanied by the "original Registration Certificate issued by the international Stud Book". 356The prelude to Regulation 18.1, which preceded, and was applicable to, all of the subsequent subsections, expressly applied only to "[a]ny imported horse registered in an international Stud Book recognised by the Association". 357I do not accept the submission made on behalf of Mr Bull that registration of an imported horse that did not have a Registration Certificate from an international Stud Book recognised by The AQHA could be achieved, pursuant to Regulation 18.1(d), simply by the payment of a fee. The subsection relied on cannot be read in isolation but must be read with the prelude to the Regulation in which it is found and in the context of the Regulations as a whole. 358Further, the submission, if accepted, would have the result of defeating the purpose of The AQHA in ensuring that the owner of an imported horse was able to establish the pedigree of the horse in order for it to be registered. 359Finally, I am of the view that, properly construed, and in reference to the terms of Annex A, which is identified in Regulation 18.1(d), the penalty fee applies only in respect of remedying non-compliance with the time limits imposed on making an application to register an imported horse with a Registration Certificate. It did not operate to enable an imported horse, without a Registration Certificate issued by an international Stud Book, to be registered. 360Thus, for the same reasons, reliance upon Regulation 18 would not provide an alternative basis for the registration of "Smart Little Lena-D". 361Similarly, a reading of Regulation 11, which referred to the Appendix Register of The AQHA and identified those quarter horses "eligible for registration" in the Appendix Register, does not assist Mr Bull. Regulation 11.2, which related to imported horses eligible for registration in the Appendix Register, was cast in the same terms as Regulation 10.3 and applied only to an imported horse "registered with an international Stud Book recognised by the Association". Even then, to be registered, the proviso required "all registration requirements outlined in the Association's rules, which includes Genetic testings" to be satisfied. 362Thus, Regulation 11, also, did not permit the Appendix Register to include an imported horse that was not "registered with an international Stud Book recognised by the Association". 363Regulation 15, in which conditions of entry into the Stud Book or Appendix Register are stated, does not assist Mr Bull either. A quarter horse must, first, be eligible for registration in the Stud Book or the Appendix Register in accordance with Regulation 10 or Regulation 11, as applicable. 364In my view, upon a proper construction of the Regulations, without any amendment, any imported horse that was not registered with an international Stud Book recognised by the Association could not be included in the Stud Book, or in the Appendix Register, of The AQHA. It follows that "Smart Little Lena-D" was not a quarter horse entitled to be registered in either the Stud Book or the Appendix Register even before any amendments to the Regulations, the subject of dispute in the proceedings. 365But for Regulation 22 in the Black Book as at August 2010, one might have concluded that a "cloned" quarter horse, also, could not be registered in the Official Stud Book or the Appendix Register because it was not identified as a category of horse that each "shall consist of" pursuant to Regulations 10 and 11. 366However, by virtue of Regulation 22, as it was before any amendment, "horses produced by any cloning process are eligible for registration" in the Stud Book or the Appendix Register of The AQHA. The Regulation did not state that a cloned horse would, without more, be registered. Even then, that it was a cloned horse was to be stated in the application for registration and "all registration requirements" also were required to be met. 367What "registration requirements" had to be met, for the purposes of Regulation 22, were not identified in Regulation 22 itself. However, considering the Regulations without amendment, and noting that the Regulations are to be read together, as a whole, the relevant registration requirements to be met under Regulation 22 depended upon, and were referable to, the category into which the cloned horse fell under Regulation 10 or Regulation 11. 368I do not accept Mr Bull's submission that Regulation 22 "constituted a separate and distinct category" for cloned horses to be registered without reference to the other Rules and Regulations. That would require the Regulation to be read in isolation which, in my view, it should not be. It would also require the words "and that it meets all registration requirements" in the Regulation to be ignored. 369In my view, the applicant for registration of a cloned horse would have had to satisfy all (relevant) registration requirements. So, if a cloned horse were a horse born in Australia, it would be able to be registered only upon satisfying "Genetic testings as described in Rule 15.10 and 16": Regulation 10.2. 370Since "Smart Little Lena- D" is a cloned imported horse, to be registered in the Stud Book, or the Appendix Register, of The AQHA, before the disputed amendments, it would have to be "registered with an international Stud Book recognised by the Association": Regulation 10.3. There would also have to be "[c]ompliance with the Association's Rules and Regulations in relation to genetic testing": Regulation 18.1(b). Further, before a permanent registration number could be issued, the pedigree of the cloned imported horse would have to be verified by scientific testing (Regulation 18.2(a)), all relevant fees would have to be paid (Regulation 18.2(c)) and DNA markers for the horse would have to accompany the application (Regulation 18.2(d)). 371There was no dispute that "Smart Little Lena-D" was imported. In fact, the application made to The AQHA described "Smart Little Lena-D" as an imported cloned horse. One would not expect an imported cloned horse to be able to be registered more easily than any other imported horse. The statement, in Regulation 22, that "all registration requirements" were to be met demonstrates that this was not intended. 372Yet, the contrary result would follow if Mr Bull's submission that he was entitled to have "Smart Little Lena-D" registered under Regulation 22 alone and without all registration requirements being met was accepted. 373Regulation 22, in its unamended form, should not be construed in a manner that would permit the registration of a cloned imported horse to be achieved without meeting the requirements necessary to enable the registration of any other imported horse. 374Mr Bull's submissions require the acceptance of the proposition that, at the time of his application, because "Smart Little Lena-D" was a cloned horse, it did not have to meet the other requirements for imported horses prescribed by Regulation 10 and Regulation 18. Regulation 22 should not be construed as a stand-alone pathway to registration for a cloned imported horse without reference to any of the other Rules and Regulations of The AQHA. 375In addition, the aims of The AQHA in this regard must not be forgotten. I have earlier referred to the objects of The AQHA in Article 2 of the Constitution and to The AQHA "Mission Statement" in the Black Book. I also refer to Articles 14.5(d) and (e) of the Constitution which, relevantly, vested power in the Board to set the conditions for registration of quarter horses with The AQHA. 376One of the conditions that The AQHA considered necessary to include, in relation to imported horses, however bred, was a mandatory requirement that the horse be registered in the Stud Book of an international affiliate of The AQHA. This seems to be, from the evidence, premised on the value of consistency in the standards by which the pedigree of a quarter horse could be ascertained. 377That this objective was, and remains, important to The AQHA is also supported by reference to the Regulations concerning, for example, the importation of semen to Australia. Regulation 21.1 provided that a donor stallion from which semen was extracted, "prior to the first collection", and, self-evidently, prior to the semen being imported to Australia, "must be registered with the Association". A "copy of the stallion's International Registration Certificate" was to be provided to The AQHA. There must also be compliance with the Official Rule Books of The AQHA and of The AmQHA. 378The need to forward a "copy of the stallion's International Registration Certificate", in my view, confirms that the Regulations of The AQHA were framed in a way considered necessary to ensure that the objectives of the Association, including protecting and maintaining the integrity of the quarter horse breed, were met. 379I turn, now, to two alternative grounds upon which Mr Bull contends "Smart Little Lena-D" was eligible for registration with The AQHA prior to any amendment of the 2010 Regulations. 380Firstly, whilst I accept that there is no evidence that "Smart Little Lena-D" possessed any disqualifying characteristics of the kind contemplated by Regulation 24, that, in itself, does not automatically mean that a horse will be eligible for registration by The AQHA. Regulation 24 confers a discretionary power to refuse to register a horse on the basis of disqualifying attributes. That power does not, in any relevant respect, limit the application of the other Regulations of The AQHA in relation to registration requirements, including, in this case, the need for "Smart Little Lena-D" to comply with Regulation 10 and Regulation 18. 381Secondly, whilst it may have been open to The AQHA to register "Smart Little Lena-D" under Regulation 35 (the Hardship Rule), there does not appear to be any evidence that Mr Bull actually made an application to The AQHA to apply that Regulation. Nor is there any evidence that he paid any hardship fee as contemplated by Regulation 35. It follows that I need not deal with the submission in more detail. 382It follows from the above that, even without amendments to any of the Regulations, at the time Mr Bull lodged the application for registration of "Smart Little Lena-D", The AQHA was entitled to refuse registration under the Regulations because "Smart Little Lena-D" was not registered in the Stud Book of its country of origin, the United States or in any other international Stud Book recognized by the AQHA. Whilst, in the unamended form, the Black Book permitted the registration of a cloned horse, as an imported horse, "Smart Little Lena-D" was still required to be "registered with an international Stud Book recognised by the Association". 383In this case, any sympathy for Mr Bull cannot obscure the fact that The AQHA was required, by its Mission Statement, to promote the best interests of the quarter horse breed and that it was empowered to determine which horses should be entitled to be registered in the Stud Book and Appendix Register kept by it. It was upon this basis that The AQHA chose to incorporate and upon which Mr Bull chose to become a member. 384In the circumstances, Mr Bull has not established that The AQHA was required to register "Smart Little Lena-D" under the 2010 Regulations before the purported amendments that are said to be null, void and invalid. 385The submissions of Mr Bull, in my view, elide his disappointed expectation with the assertions he makes regarding the alleged breaches by The AQHA. 386As the court finds "on the rules as they were, without any amendments that the horse could not be registered", the relief sought by Mr Bull in the further amended Summons cannot be granted. 387It is not, then, strictly necessary to deal with the other matters in the further amended Summons. However, because so much time was spent on the topic of the amendments, I shall set out, in a summary way, the conclusions to which I have come. 388In this case, the first question relates to the validity of the amendments made to Regulation 22 (the cloned horse rule) whether by the meeting of 18 - 19 December 2009 (the First Resolution) or by the meeting of 3 April 2010 (the Second Resolution and the Third Resolution). 389I have set out the Minutes of the meetings of both the Stud Book Committee and the Board and expressed the view that the Defendants have not satisfied me that proper notice of the intention to amend Regulation 22 was given in accordance with Article 14.5.2 of The AQHA Constitution. In particular, I am not satisfied that a notice of intention to move the resolution, or one substantially similar, was lodged with the Secretary at least 21 days before the day on which the meeting was convened, and that such notice was included by the Secretary in the notice convening the meeting. 390I am similarly not satisfied that a notice of intention to move the resolution, or one substantially similar, was lodged with the Secretary at least 21 days before the day on which the meeting was convened, and that such notice was included by the Secretary in the notice convening the meeting in respect of the meeting held on 3 April 2011. However, I note Mr Bellden's evidence that he considered that the Board, in April 2011, had sufficient notice of the intention to put a motion to change Regulation 22 even though there was no written notice of that proposal. 391The lack of satisfaction about these matters does not, however, mean that the resolution, or resolutions, passed at each meeting is invalid if the court is satisfied that each resolution should be validated pursuant to s 1322(4)(a) of the Corporations Act. 392In this regard, I consider that the court is entitled to have regard to the fact that the subject matter of the resolution had been on the agenda of The AQHA since August 2009 and had been discussed on a number of different occasions at both Stud Book Sub-Committee meetings and at the meetings of the Board. Also, each of the resolutions could readily have been and, bearing in mind what occurred, would have been, passed, but for the lack of notice. None of the directors has asserted that he, or she, would have taken a different course had the requisite notice been given. 393Also, by defending the proceedings in the manner that the Board has, the court is entitled to assume that it has not been suggested, by any member of the Board, that the result would have been different had the requisite notice been given. Nor was it suggested to any director who was cross-examined, that the resolution would not have been passed had the requisite notice been given. 394It was not suggested by Mr Bull that any person involved in having failed to give the notice required by Article 14.5.2 had not acted honestly. There is simply no evidence that would support a finding had that been put. That would be sufficient, in itself, to warrant an order for validation provided that the requirement in s 1322(6)(c) was established, namely that no substantial injustice is caused to any person. 395The detriment, or injustice, to Mr Bull, if an order were made under s 1322(4)(a), does not rationally affect the registration of "Smart Little Lena-D" since registration was not possible in any event for the reasons previously given. It cannot, in those circumstances, be said to be a substantial injustice of the type contemplated by s 1322(6)(c) to have ordered the validation of the Regulations that were amended without notice. 396I am of the view, in relation to the validity of the amendments made to Regulation 22, the passing of the Second Resolution and the Third Resolution at the April 2011 meeting superseded the First Resolution made at the December 2010 meeting. This may explain why the relief claimed in the Cross-Summons was limited in the way that it was. In relation to each of the Second Resolution and the Third Resolution, I am satisfied that there was, in fact, a procedural irregularity regarding notice but that each resolution is not invalid by reason of the absence of proper notice, pursuant to s 1322 of the Corporations Act. 397Therefore, an order, pursuant to s 1322(4) of the Corporations Act, that each of the Second Resolution and the Third Resolution made by the first Defendant at the meeting on 3 April 2010 was not an invalid resolution of the first Defendant by reason of any contravention of the Constitution of The AQHA should be included in Short Minutes of Order to be prepared by the parties. 398In relation to the amendments to Regulation 18 (the imported horse rule), I am of the view that any resolution, said to have been passed at the December 2010 meeting (the Fourth Resolution), would have been superseded by a resolution, in identical terms, said to be passed at the April 2011 meeting (the Fifth Resolution). 399I am also of the view that the notice requirements in The AQHA Constitution were not complied with in relation to any resolution pertaining to Regulation 18 (whether in December 2010 or in April 2011). In addition, I accept Mr Bull's submission that the wording of the amended Regulation 18, as published on The AQHA website, does not match the text of any wording in the Minutes of the April 2011 Meeting (or the Minutes of the December 2010 Meeting). 400I am of the view that the absence of notice and the issue regarding wording is each a procedural irregularity pursuant to s 1322 of the Corporations Act. However, in circumstances where no relief is sought by the Defendants, in the Cross-Summons, in relation to either the Fourth Resolution of the Fifth Resolution (or any amendment to Regulation 18), I do not propose to make any order in relation to either the Fourth Resolution of the Fifth Resolution. 401In relation to the Sixth Resolution, I have earlier referred to the amendment carried by the motion at the December 2010 meeting which amended Rule 10.5. I am of the view that the Sixth Resolution is not relevant to the application to register "Smart Little Lena-D", "Smart Little Lena-D" not being a horse "not born in Australia and residing outside of Australia". In any event, in circumstances where no relief is sought by the Defendants in the Cross-Summons in relation to the Sixth Resolution, I do not propose to make any order in relation to the Sixth Resolution. 402I turn, now, to the claims based on oppression under s 232 and s 233 of the Corporations Act. Again, my conclusions will be brief. I note that Mr Bull's claims regarding oppressive conduct did not extend to an allegation of oppression on the part of The AQHA were the court to find that The AQHA properly applied the Regulations contained in the August 2010 Black Book and, in so doing, validly refused to register "Smart Little Lena-D". 403In reality, the Board of The AQHA is confronted with a conflict between the rights of Mr Bull, on the one hand, and the rights of The AQHA, as a whole, on the other. The exercise of the powers conferred by the Constitution, in the circumstances of this case, necessarily results in what appears to be prejudice to Mr Bull as the owner of a cloned imported horse. 404However, the bona fide, and proper, exercise of the powers conferred on the Board in pursuit of the objects for which they were conferred, and the caution which a court must exercise in determining an application under s 232 of the Corporations Act in order to avoid an unwarranted assumption of the responsibility for the management of a corporation, results in Mr Bull facing a difficult task in seeking to prove that the passing of the resolutions, the result of which was said to be the decision to not register "Smart Little Lena-D", was unfairly prejudicial to him and, therefore, not in the overall interests of the members of The AQHA as a whole. 405I am not satisfied that the decision made by the Board of The AQHA was such that no Board, acting reasonably, could have made it. The effect on Mr Bull of the passing of the resolutions may be considered by him to be harsh. It has not, however, been shown that it was oppressive, or unfairly prejudicial, or discriminatory, or that its effect is such as to warrant the conclusion that the affairs of The AQHA were, or are, being conducted in a manner that was, or is, oppressive or unfairly prejudicial in the manner prescribed by the legislation. 406I also bear in mind my conclusion that, prior to the resolutions being passed, "Smart Little Lena-D" would not have been able to be registered. That being so, Mr Bull has failed to make good his submissions. 407The court should not assume, particularly in a case where a lack of probity or want of good faith is not alleged or established, that substituting its own assessment for that of directors, who can be expected to have a much greater knowledge and more time and expertise at their disposal to evaluate the best interests of the members of The AQHA as a whole, and to determine how the objects of The AQHA would best be met, is the way to proceed. 408Even if I considered the decision to not register "Smart Little Lena-D" a harsh one, so far as Mr Bull is concerned (and I am not expressing the view that it was), that is not sufficient to cause the decision actually made to be an unreasonable or irrational decision of the kind which would require judicial interference. This is heightened because of the earlier conclusion that the application to register "Smart Little Lena-D" was validly refused even before the resolutions, the subject of the claim for oppression, were passed. 409It is not possible to conclude, in this case, that the directors did not weigh the furthering of The AQHA's objects against the disadvantage that the passing of the resolutions and the decision would impose upon Mr Bull, and address their minds to the question whether what was proposed was unfair. 410Finally, it is also important to note that The AQHA does not prevent the cloning of quarter horses, or the sale and purchase of a cloned quarter horse from occurring. Mr Bull, and any other breeder of quarter horses, may continue to buy, and import, a cloned quarter horse. Each is simply not entitled to have the cloned quarter horse that is bought and imported, registered in the Stud Book or Appendix Register of The AQHA. 411The claims based on s 232 and s 233 of the Corporations Act, therefore, fail. 412Finally, I bear in mind that Mr Bull accepted that, if the passing of the resolutions was found to be oppressive (which, in the events that have happened, is not the case), the least intrusive remedy would be to remit the application to register "Smart Little Lena-D" to the Board of The AQHA for reconsideration in accordance with the Regulations before any amendment. To do so, for the reasons given, would not alter the result of the application. 413Subject to any argument on costs, I am of the view that the Plaintiff should pay the costs of the Defendants of these proceedings. 414In the circumstances, I direct the parties to bring in Short Minutes of Order reflecting these reasons for judgment within 7 days. The orders should include an order for the return of the exhibits and the Court Books. 415I shall stand over the proceedings to deal with any outstanding argument on the form of the Short Minutes of Order and costs to a date to be agreed. ********** 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. Decision last updated: 27 November 2014