Supreme Court New South Wales Medium Neutral Citation: Wykrota v Polish Club Ltd [2020] NSWSC 239 Hearing dates: 13 March 2020 Date of orders: 13 March 2020 Decision date: 16 March 2020 Jurisdiction: Equity - Duty List Before: Stevenson J Decision: Proceedings to be dismissed Catchwords: ASSOCIATIONS AND CLUBS – registered club – extraordinary general meeting – resolution that property be "non-core property" – whether such resolution is one dealing with alienation of club's property – whether Associate Members of club entitled to vote – where any such entitlement made no difference to the outcome – whether validating order should be made under s 1322 of the Corporations Act 2001 (Cth) Legislation Cited: Registered Clubs Act 1976 (NSW) Corporations Act 2001 (Cth) Cases Cited: Di Carlo v Kashani-Malaki and Anor [2012] QCA 320; [2013] 2 Qd R 17 GPT RE Ltd v Lend Lease Real Estate Investments Ltd [2005] NSWSC 964 Moala v Free Wesleyan Church of Tonga in Australia (Victoria) Inc [2019] VSC 205 Steuart v Oliver (No 2) (1971) 18 FLR 83 Category: Principal judgment Parties: Mick Wykrota (Plaintiff) Polish Club Ltd (Defendant) Representation: Counsel: J M Ireland QC (Plaintiff) M T McCulloch SC with R W Notley (Defendant) Solicitors: Hall and Wilcox (Plaintiff) Wotton Kearney (Defendant) File Number(s): 2020/65305 Publication restriction: Nil Judgment 1. The plaintiff, Mr Mick Wykrota, is a member of the defendant, the Polish Club Ltd ("the Club"). 2. The Club is a company limited by guarantee and a registered club under the Registered Clubs Act 1976 (NSW) ("the Act"). 3. The Club is a licensed social club which caters primarily for the Polish community. 4. It is the registered proprietor of two adjoining properties at 73 and 75 Norton Street, Ashfield. The land at 73 Norton Street contains the Club's main facilities. The adjoining lot, 75 Norton Street, is the site of a car park and a burnt out building. 5. Section 41E(1) of the Act provides that a registered club must not dispose of any "core property" of the club unless, relevantly: Section 41E Disposal of real property by registered clubs (b) … the disposal has been approved at a general meeting of the ordinary members of the club at which a majority of the votes cast support the approval 1. "Core property" is defined in s 41E(6) of the Act as: …any real property owned or occupied by the club that comprises -- (a) the premises of the club, or (b) any facility provided by the club for the use of its members and their guests, or (c) any other property declared, by a resolution passed by a majority of the members present at a general meeting of the ordinary members of the club, to be core property of the club, but does not include any property referred to in paragraphs (a)-(c) that is declared, by a resolution passed by a majority of the members present at a general meeting of the ordinary members of the club, not to be core property of the club. 1. The Club has previously resolved that its land at 75 Norton Street (the car park) not be "core property". 2. The present controversy concerns a purported resolution made on 1 March 2020 that the land at 73 Norton Street (on which the club building itself is erected) not be "core property". 3. On 1 February 2020, the Club sent to its members notice of an extraordinary general meeting ("the Notice") to be held on 1 March 2020 at 3:00pm ("the EGM"). 4. The Notice identified that two resolutions would be considered at the EGM: 1. an "ordinary resolution" as follows: "That for the purposes of section 41J [sic 41E] of the Registered Clubs Act the members hereby declare the land and facilities at 73 Norton Street, Ashfield (existing Club) to be non-core property of the Club." ("the First Resolution") 1. a "special resolution" or "extraordinary resolution" as follows: "That in accordance with Rule 49 of the Polish Club Limited's constitution the members hereby declare approval for the Board of Directors to proceed with the proposed agreement with Deicorp to develop both 73 and 75 Norton Street Ashfield." ("the Second Resolution") 1. The "proposed agreement with Diecorp" is one pursuant to which that entity proposes to redevelop the Norton Street properties in a manner that will include provision to the Club of new premises. 2. At the 1 March 2020 meeting the result of the voting on the First Resolution and the Second Resolution was as follows: TYPE OF VOTING FOR AGAINST ABSTRAINED INVALID TOTAL % OF "FOR" First Resolution 376 87 3 5 471 79.83% Second Resolution 365 87 2 1 455 80.22% 1. Included in those who voted on both resolutions were 13 "Associate Members", as opposed to "Ordinary Members" of the Club. All other members who voted were Ordinary Members. 2. The plaintiff, Mr Mick Wykrota, is a member of the Club and seeks a declaration that the purported First and Second Resolutions were invalid and an injunction restraining the Club from taking any step to implement those resolutions. Decision 1. At the conclusion of argument on 13 March 2020, I informed the parties that I did not propose to make the declaration or grant the injunction sought and that the proceedings would be dismissed. 2. I said I would give my reasons later. These are those reasons. Was the First Resolution one "dealing with" an alienation of the Club's interest in land? 1. The first question is whether the First Resolution, that the 73 Norton Street property be declared not to be core property, was one which required a Special Resolution, rather than an Ordinary Resolution. 2. The question arises because Article 49 of the Club's Constitution provides that: "A Special Resolution shall be required for any resolution dealing with … (c) alienation of any interest in land which the Club may acquire…" 1. The question is whether a resolution that the 73 Norton Street property not be "core property" is a resolution "dealing with" the "alienation" of the Club's interest in that property. 2. Mr Ireland QC, who appeared for Mr Wykrota, accepted that a resolution that the 73 Norton Street property not be "core property" was not itself an "alienation" of an interest in that property. 3. However, Mr Ireland submitted that as the resolution that 73 Norton Street not be core property "frees this asset to be alienated", the resolution should be seen as "dealing with" such alienation. 4. I do not accept that submission. 5. An "alienation" of land is the actual disposal of the land: for example Di Carlo v Kashani-Malaki and Anor [2012] QCA 320; [2013] 2 Qd R 17 (Muir JA (with whom Fraser and Gotterson JJA agreed)) at [30]. 6. An "alienation" of land "refers to a parting with property and includes the parting with some interest in the property": GPT RE Ltd v Lend Lease Real Estate Investments Ltd [2005] NSWSC 964 (White J) at [46]. 7. In order for a resolution to be one which "deals with" such "alienation" the resolution would have in some way to concern the "alienation" itself. 8. The First Resolution was not in my opinion itself concerned with the "alienation" of the 73 Norton Street property. 9. The First Resolution was a necessary condition precedent to an alienation of the 73 Norton Street property; but it was not itself a resolution "dealing with" such "alienation". The entitlement of "Associate Members" to vote at the meeting 1. The second question concerns the entitlement of "Associate Members" to vote at the 1 March 2020 meeting. 2. The 1 February 2020 Notice of Meeting stated: "Ordinary Members (Full and Associate Members) that are currently financial are eligible to vote for the Ordinary [i.e. the First] Resolution. Only Full Members are eligible to vote for the Special [i.e. the Second] Resolution." 1. Article 8 of the Club's Constitution provides, relevantly, that: "Full members shall be entitled to exercise…the right to vote at any General Meeting of the Club… Associate…Members shall have no rights to vote at any General Meeting." 1. In my opinion, for the reasons that follow, the latter part of Article 8 was not effective to disentitle Associate Members from voting at the meeting. 2. Section 30(1)(f) of the Act provides, relevantly, that: The rules of a registered club shall be deemed to include the following rules – … (f) a person shall not be admitted to membership of the club except as an ordinary member (whether or not persons may be admitted as different classes of ordinary members)… 1. The Act makes no provision for an "Associate Member" nor for the admission of a person to a club as an "Associate Member". 2. In s 4 of the Act: 1. "member" is defined to mean, relevantly, a person who is a "full member" of a club; 2. "full member" is defined to mean, relevantly, a person who is an "ordinary member" of a club; 3. an "ordinary member" is defined to mean a person who is elected to membership of a club in accordance with the rule of the club referred to in s 30(1)(g). 1. Section 30(1)(g) provides, relevantly: The rules of a registered club shall be deemed to include the following rules-: … (g) A person shall not be admitted as a member of the club… unless a person is elected to membership at a meeting of… the gathering body… of the club, the names of whose members present and voting at that meeting are recorded by the secretary of the club… 1. That is how "Associate Members" are in fact admitted to the Club. 2. Thus, "Associate Members", as referred to in the Club's Constitution, are in fact "Ordinary Members" for the purposes of the Act. 3. Section 41E(6) of the Act contemplates the entitlement of "ordinary members" of a club to participate in a resolution at a general meeting of a club that club property not be "core property". 4. Insofar as Article 8 of the Club's Constitution purports to restrict the entitlement of "Associate Members" to vote at the General Meeting, it is inconsistent with that provision. 5. Section 30(8) of the Act provides, relevantly: Any rule of a registered club…that is inconsistent with any rule specified in subsection (1) or (2) is to the extent of the inconsistency of no force or effect. 1. It follows that insofar as Article 8 of the Club's Constitution purports to preclude an "Associate Member" from voting on a resolution of a kind referred to in s 41E(6) (the First Resolution) it is of no force or effect. In any event, relief should be denied 1. The 1 March 2020 meeting was attended by 471 Club members of whom only 13 were "Associate Members". 2. Assuming, contrary to my earlier conclusion, that the 13 "Associate Members" were not entitled to vote on the First Resolution, it would nonetheless have been easily passed. 3. I have set out the result of the voting on the First Resolution at [12] above. 4. If it be assumed that all 13 Associate Members voted for the First Resolution, and that those votes should be discounted entirely, the result would have been as follows: FOR AGAINST ABSTAINED INVALID TOTAL % OF "FOR" 363 87 3 5 458 79.26% 1. On the other hand, if it be assumed that all 13 Associate Members voted against the First Resolution, and that those votes should be discounted entirely, the resolution would have passed with a higher percentage: FOR AGAINST ABSTAINED INVALID TOTAL % OF "FOR" 376 74 3 5 458 82.10% 1. Thus, the votes of the 13 Associate Members, no matter how cast, could have made no difference to the outcome. 2. In any event, and assuming that the 13 Associate Members should not have voted at the meeting, it does not follow that the resolutions are not valid. 3. Thus, in Steuart v Oliver (No 2) (1971) 18 FLR 83, Joske J (with whom Spicer CJ and Smithers J agreed) said, at 84: "There is no general rule that where a person who is not a member of a body, whether this is due to disqualification or lack of qualification or otherwise, is present at a meeting of the body, participates in its proceedings or even votes, this necessarily invalidates either the vote or the whole of the proceedings at the meeting. The circumstances of each particular case have to be considered. Thus the presence of so many unqualified persons at, and their participation in, a meeting may be such that a court would hold that it could not be regarded as a meeting of the particular body. So also, where the presence of the unqualified person is relied upon to constitute a quorum and unless he is counted the meeting is short of a quorum, there is no quorum and no meeting or, in other words, the proceedings at the meeting, if it is held, are ineffectual. The presence of a quorum means a quorum competent to transact and vote upon the business before the meeting. If some of those present are disqualified from voting and there is not otherwise a quorum, no business can be validly done." 1. I should add that there is no suggestion that the 1 March 2020 meeting was inquorate. 2. More recently, in Moala v Free Wesleyan Church of Tonga in Australia (Victoria) Inc [2019] VSC 205, Ginnane J said at [400]: "I act on the basis that the voting of a person who is not entitled to vote will not necessarily invalidate a meeting, and that all the circumstances of each case have to be considered. The test appears to be whether the presence of unauthorised participants may have made a material difference to the outcome of the meeting." 1. Assuming that the 13 Associate Members were "unauthorised participants" at the March 2020 meeting, their involvement made "no material difference" to the outcome. 2. That is a further reason for me not to make the declaration sought. Section 1322 of the Corporations Act 2001 (Cth) 1. Mr McCulloch SC, who appeared with Mr Notley for the Club, accepted that if, contrary to his submissions and my findings, the participation of the 13 Associate Members did have the effect of rendering the First Resolution invalid, that would constitute a substantive irregularity rather than a procedural irregularity of the kind referred to in s 1322(1) and (2) of the Corporations Act 2001 (Cth). 2. However, Mr McCulloch submitted that by reason of subsections 1322(4)(a) and (6) of that Act, the Court can make a validating order under s 1322(4)(a) if the Court is satisfied that the relevant persons acted honestly or that it is just and equitable that a validating order be made; provided that no substantial injustice is likely to be caused to any person. 3. There is no suggestion here that any representative of the Club behaved other than honestly. Nor is there any suggestion that any substantial injustice has been caused by reason of the "Associate Members" involvement in the 1 March 2020 meeting. 4. And, as I have said, the participation of the 13 "Associate Members" has made no difference to the outcome. 5. In my opinion, were it relevant for me to do so, it would be just and equitable to make a validating order under s 1322(4)(a) of the Corporations Act. Conclusion 1. The proceedings must be dismissed. 2. I will hear the parties as to costs. 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: 16 March 2020