Supreme Court New South Wales Medium Neutral Citation: Cox v The Animal Welfare League of New South Wales [2017] NSWSC 374 Hearing dates: 22 March 2017 Date of orders: 22 March 2017 Decision date: 07 April 2017 Jurisdiction: Equity Before: Ward CJ in Eq Decision: 1. Application for interlocutory relief dismissed. 2. Costs of the interlocutory application be the defendant's costs in the cause. Catchwords: EQUITY – equitable remedies – injunctions – applicant for interlocutory injunction to restrain defendant company from taking any further step towards holding an election of directors – injunction refused Cases Cited: Byrne v Australian Airlines Limited (1995) 185 CLR 410; [1995] HCA 24 Countouris v Kallos [2008] NSWSC 840 Stratford Sun Ltd v OM Holdings Ltd (2011) ACSR 84; [2011] FCA 414 Category: Principal judgment Parties: Deborah Cox (Plaintiff) The Animal Welfare League of New South Wales ACN 000 533 086 (Defendant) Representation: Counsel: C Adamson (Solicitor) (Plaintiff) A R Zahra (Defendant) Solicitors: Chris Adamson (Plaintiff) HWL Ebsworth Lawyers (Defendant) File Number(s): 2017/00076968 Publication restriction: Nil EX TEMPORE Judgment 1. HER HONOUR: This is an application before the Court for interlocutory relief as framed in paragraph 8 of the prayers for relief set out in an amended summons filed by the plaintiff on 20 March 2017, namely, for an injunction restraining the defendant (the Animal Welfare League of New South Wales (the AWL)) from taking any further step towards holding an election of directors on behalf of the AWL until further order of the court. 2. The plaintiff, Ms Deborah Cox, is a director of the AWL, which is a company limited by guarantee. In connection with the application for an interlocutory injunction, the plaintiff and her husband (who is not a party to the proceedings) have proffered the usual undertaking as to damages. 3. The plaintiff was a party to a deed of settlement entered into in 2016 – dated 28 June 2016 – with other parties and the AWL. That deed of settlement was part of the disposal of proceedings between the plaintiff and others on the one hand, and the AWL on the other, that were before the Equity Division last year. 4. The deed of settlement recorded that the parties had agreed to terms to be placed in the form of a deed of settlement and filed in the court, one of which was that the board would appoint a returning officer selected and employed by the Commonwealth Electoral Commission to conduct the next election of directors of the AWL (cl 5). It is common ground between the parties in the proceedings today that the reference to the Commonwealth Electoral Commission should have been a reference to the Australian Electoral Commission (the AEC), and nothing turns on that. 5. There was a further deed of settlement, a copy of which has been annexed to the affidavit of the plaintiff's solicitor, Mr Chris Adamson, sworn 13 March 2017. No reliance is placed on any particular term of that deed. 6. The context in which the present application is brought is that the board of the AWL has called for nominations for the position of directors in advance of a proposed annual general meeting scheduled for Saturday 13 May 2017. The AEC has not been appointed to act or to provide a returning officer for that election as contemplated by cl 5 of the deed of settlement. 7. In her amended summons the plaintiff has sought, amongst other declaratory relief, a declaration that there is a term implied by law in cl 5 of the deed of settlement entered into between the plaintiff and three other members of the AWL, filed in the Supreme Court of New South Wales, proceedings 2016/00016865 on or about 28 June 2016, that: The defendant will take all necessary and reasonable steps to appoint a returning officer selected and employed by the Commonwealth Electoral Commission [sic; scil., the AEC] to conduct the next election of directors of the Animal Welfare League of New South Wales. 1. The plaintiff argues that the evidence establishes a serious question to be tried as to there being a breach of that alleged implied term of the agreement. She has relied, in support of that submission, on evidence contained in an affidavit sworn 17 March 2017 by her solicitor, which broadly comprises correspondence and communications between the solicitor, the plaintiff and the president of the AWL (Ms Christine Richardson) or others, in relation to the proposed involvement of the AEC in an election that was proposed to be conducted in November last year. Broadly, this includes material provided to the AWL board or its president, pressing for updates as to the engagement or involvement of or appointment of the AEC in relation to that election, including the provision to the AWL not only of the AEC model rules guide for the conduct of elections but also suggested amendments to the model rules that might be acceptable for the conduct of the proposed election. 2. That material, as I understand it, is relied upon in order to show that the plaintiff and her solicitor have done all that they say could be done, and have acted in good faith, to cooperate with the board of the AWL in order for the AEC to become involved in the holding of the then proposed election in November last year and subsequently in relation to the now proposed May election. 3. Mr Adamson has tendered a statement signed by him as an officer of the court, which has been marked as Exhibit B and which I have read as a submission, which includes reference to a discussion with an officer at the AEC who is said to have had carriage of the application for the appointment by the AEC of a returning officer and to have informed Mr Adamson that he needed the written authority of the board to speak further about the matter. 4. Reliance is also placed by the plaintiff on an affidavit sworn by her on 21 March 2017 in which she deposes to concerns or complaints in relation to the manner in which the previous election was held (which led to the Equity Division proceedings that were resolved, amongst other things, by entry into the deed of settlement). Objection was made by the defendant to that affidavit on the basis of relevance. I have read the affidavit subject to relevance. 5. The plaintiff's affidavit sets out the background to cl 5 of the deed and is relied upon, as I understand it, in order to establish the subjective intent of the parties (including the plaintiff) who entered into the deed with the AWL in 2016. In particular, the plaintiff has deposed that the need for fair elections without participation of the board, with or without an independent returning officer, was of such great importance that, had the board not agreed to cl 5, she would not have entered into the deed of settlement or the further deed of settlement. 6. In construing, so far as it be necessary for the purposes of this interlocutory application, cl 5 of the deed of settlement, I am not persuaded that the subjective intention of the parties who entered into that deed would be relevant or admissible, but in any event it is not necessary for the purposes of this application that I make any ruling to that effect. 7. As I say, the plaintiff contends that there is a prima facie case of breach of the term that she contends should be implied into the deed of settlement. The AEC's position (at least according to its website and according to the evidence before me) is that it will not agree to act or select an independent returning officer unless, amongst other things, it conducts the entirety of the election process from announcement of elections through to declaration and unless the election be held by secret ballot. In that context, the plaintiff submits that a necessary and reasonable step that the defendant would be required to undertake, in order to comply with the implied term for which she contends, is that there be the holding of an extraordinary general meeting in order to amend by special resolution the Constitution of the AWL. It is submitted that this is no difficult task and that amendments to the Constitution have occurred on other occasions. 8. The defendant disputes the proposition there is a serious question to be tried. It refers in its submissions to the test for implication of terms into contracts, as stated by the High Court in Byrne v Australian Airlines Limited (1995) 185 CLR 410; [1995] HCA 24 at 422 (Brennan CJ and Dawson and Toohey JJ), namely that: …the remarks of the majority in the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings are frequently called in aid: "(1) [the implication] must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract". [footnote omitted] 1. The defendant maintains that the evidence demonstrates that, even if cl 5 of the deed of settlement were to be read in the manner for which the plaintiff contends, there has been no breach of that term by the defendant because the AEC was and is unable or unwilling to assist the defendant. It refers to various parts of the evidence, including evidence of inquiries made of the AEC by the defendant in August 2016, (to which Ms Glynis Boobyer, a director of the AWL, refers in her affidavit of 23 March 2017); to further inquiries made of the AEC in 2017; and to the printout from the AEC's web site setting out the minimum standards required before the AEC will assist in relation to the holding of an election. 2. In particular, reference is made to a letter dated 21 March 2017 received by the AWL from the AEC, which is part of Exhibit 1 on this application. In that letter to the AWL's solicitors, the AEC set out the minimum standards required to be agreed to by any potential client of the AEC for the AEC to conduct an election. Those requirements include (1) that the ballot will be conducted as a secret ballot and (2) that the AEC will only conduct an election or ballot in its entirety from announcement to declaration. Mr Paul Davis, the Assistant Director, Industrial and Commercial Elections, of the AEC, in that letter confirms oral advice apparently given by him to the solicitor for the AWL to the effect that the AEC will not agree to conduct an election for the company, the two reasons for that being that the company's Constitution, as Mr Davis was advised, does not provide for an election of directors to take place by way of a ballot, secret or otherwise, and secondly, that the company had already called for nominations for the relevant positions and the nominations had closed. 3. The AWL submits that in circumstances where the AEC is unwilling or unable to assist, there has been no breach of cl 5 of the deed of settlement or of any implied term of the kind for which the plaintiff contends. The AWL has also adduced evidence as to a resolution by the board to engage, and the engagement of, Grant Thornton (an accounting and corporate services firm) to assist as returning officer for the forthcoming election. It submits that there is no basis for the court to conclude that Grant Thornton would act other than professionally and competently in providing services to the AWL. 4. The plaintiff maintains that the evidence does not establish that the AEC has absolutely refused to appoint a returning officer. However, the evidence, and particularly the letter dated 21 March 2017, is to the contrary insofar as one of the reasons proffered by the AEC for refusing to accept an engagement or appointment of that kind is that the election process has already commenced. As I understand the evidence, there is no question that that is the case, nominations having already been called and various of the existing directors, including the plaintiff, already having nominated for the position of director. 5. It seems to me there is real doubt as to whether there is a serious question as to there being a breach of cl 5 of the deed of settlement as it presently stands if, as is the case, the AEC has refused to appoint a returning officer for the election. It may be there is an arguable case to be tried as to whether there is an implied term that operates to the extent to which the plaintiff contends, and as to whether the conduct of AWL through its board in the period of time leading up to at least the announcement of the election proposed for May 2017 amounts to a breach of that implied term. But for the reasons I will now address, I am not persuaded that the balance of convenience lies in favour of the grant of an interlocutory injunction to restrain until further notice the taking of further steps by AWL in relation to the holding of the election. 6. On the balance of convenience, the plaintiff has stressed the importance of the matter to the plaintiff and has referred to the conduct of the parties to date, in particular making complaint as to delay on the part of the board in approaching the AEC. The prejudice or detriment the plaintiff submits she will suffer if an injunction is not granted is that the AEC will not be involved in the election process and, having regard to the allegations made by her as to the conduct of the elections held in 2016, she has concern that this will lead to a risk that the forthcoming election will be unfairly conducted. In particular, it is said that when the 2016 election was conducted by the board, some 117 or so proxies had been wrongly or incorrectly not counted by the AWL. 7. I should note at this stage that there is no suggestion Grant Thornton was involved in the supervision or scrutiny of the 2016 election. I am informed by the AWL that Grant Thornton has had no involvement with the AWL, and there is evidence that it has acted in the role of returning officer in relation to elections for other service organisations. 8. Nevertheless, the plaintiff contends that the detriment she will suffer is that there will not be an election conducted in its entirety under the auspices of the AEC. 9. The AWL raises a number of factors going to the balance of convenience, which it says do not favour a grant of the injunction sought by the plaintiff. It points out that if the Constitution is not amended to satisfy the AEC's requirements, the AEC will not be able to assist in any event and argues that in those circumstances an injunction would serve any useful purpose, but would be likely to cause it inconvenience and expense. 10. The particular matters that are relied upon in support of the argument on the balance of convenience by the AWL are as follows. First, that the AGM has already been scheduled. Second, that cl 6.1 of the Constitution of the AWL requires the AWL to have a minimum of six directors and, since four of the current seven directors will automatically retire at the annual general meeting, this will leave the board with only three directors absent further appointments. It is submitted that this would have the result of preventing the board from doing anything to progress the charitable operations of the AWL, because cl 6.8 of the Constitution limits the activities that can be taken if there are fewer than the minimum number of board members at the time. The plaintiff, in response, points to the provision under the Constitution for the application of directors on a casual vacancy basis; and submits this is not a real difficulty. 11. Third, the AWL says that the process for calling for nominations for directors and the lodgement of nominations is complete. That is a matter which, it seems to me, goes largely to whether or not the AEC would be likely to step in at this stage in any event to appoint a returning officer, having regard to its minimum standards for involvement. 12. Fourth, the AWL points to requirements that it has under the Charitable Fundraising Authority Conditions for annual statements to be presented at an AGM within six months of the close of the financial year. Ms Boobyer gives evidence of those requirements. The AWL says that the AGM should have been held by 31 December 2016, and submits it should not be further delayed. 13. Ms Boobyer, a director of the AWL, gives evidence that the AWL is a registered charity that has been operating for over 55 years and provides expert care to surrendered, neglected and abandoned companion animals across New South Wales. She has expressed various opinions in her affidavit as to, amongst other things, the prejudice to the AWL if it does not comply with the fundraising authority conditions and as to the risk of potential regulatory enforcement action by the ACNC, Commissioner for Noncompliance with Governance Standards. The plaintiff objected to that evidence and I have read that material simply as a statement of opinion on the part of Ms Boobyer. 14. The final matters upon which the AWL relies are that the relevant documents have already been prepared and are due to be considered and approved by the board of the AWL at a meeting scheduled for tomorrow, that the venue has been booked and a deposit paid, and (a matter on which it places emphasis) that the election will be able to take place with the assistance of Grant Thornton. It is submitted that any deferral of the AGM or requirement to hold a further AGM to deal with election of directors will unnecessarily incur further costs and distract the AWL and its board from its primary focus on charitable operations. Ms Boobyer also expresses a fear that the unnecessary continuation of litigation may result in reduced membership and donations. As before, objection was taken to that evidence and I simply note those matters as an opinion expressed by Ms Boobyer. I place no weight on her statement of opinion in the context of this application. 15. Nevertheless, it seems to me that, in circumstances where arrangements have been put in place for there to be an independent returning officer for the forthcoming election, and where it is difficult to see there is any irremediable damage that will be sustained if the election is conducted under the scrutiny of an impartial and independent entity, the balance of convenience does weigh strongly against the grant of an interlocutory injunction. 16. In that regard, I note that the concern as to the manner in which proxies were dealt with on the last occasion (if not met by the involvement of an independent returning officer such as Grant Thornton) would, if it were to be repeated or there were to be procedural or other issues arising out of the election process, be a matter that would be able to be remedied in due course by further litigation. I have in mind the authorities which emphasise the reluctance of courts to restrain the holding of meetings on the basis of perceptions as to irregularities that might occur at the meeting, the courts tending rather to prefer to allow the meeting to be held and then to deal with any consequences that may flow if the irregularities were to eventuate (see, for example, Countouris v Kallos [2008] NSWSC 840 at [14] (Young CJ in Eq); cf Stratford Sun Ltd v OM Holdings Ltd (2011) ACSR 84; [2011] FCA 414 at [24]-[25] (Foster J)). 17. In those circumstances, while I appreciate that damages may be an inadequate remedy and that would be one factor that would point in favour of the grant of an interlocutory injunction, I am of the view that the balance of convenience weighs against the grant of an interlocutory injunction and I dismiss the application for interlocutory relief. 18. In relation to the costs of the application, the AWL seeks its costs of the application on the basis that this was a discrete interlocutory application; and it seeks an order that the costs be assessed and payable forthwith. The plaintiff seeks that costs be reserved, on the basis that ultimately at the conclusion of the hearing it may transpire that the election was improperly or incorrectly conducted, and that this was not an unarguable case in relation to the breach of the implied term for which the plaintiff contends. 19. I am not persuaded there is a basis on which costs ought to be ordered as being assessed and payable forthwith. Nevertheless, I think it would be appropriate that costs follow the event and to make an order that the costs of this interlocutory application be the defendant's costs in the cause. 20. I make the following orders: 1. Dismiss the application for interlocutory relief. 2. Costs of this interlocutory application be the defendant's costs in the cause. ********** 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: 07 April 2017