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Thompson v Cavalier King Charles Spaniel Rescue (Qld) Inc[2022] QSC 82

Thompson v Cavalier King Charles Spaniel Rescue (Qld) Inc[2022] QSC 82

SUPREME COURT OF QUEENSLAND

CITATION:

Thompson v Cavalier King Charles Spaniel Rescue (Qld) Inc [2022] QSC 82

PARTIES:

JAMES BOYD THOMPSON

(plaintiff)

v

CAVALIER KING CHARLES SPANIEL RESCUE (QLD) INC

(first defendant)

AND

LAURENCE JOHN PITTS

(second defendant)

AND

KATHERINE LEPELAAR

(third defendant)

AND

BEVERLEY ANN HUSH

(fourth defendant)

AND

CAROLYN SHEPHERD

(fifth defendant)

AND

ELIZABETH (LIZA) MCMILLAN

(sixth defendant)

AND

SHIRLEY SMITH

(seventh defendant)

FILE NO:

9148 of 2013

DIVISION:

Trial Division

PROCEEDING:

Application filed by the first defendant on 25 February 2022 and application filed by the third defendant on 25 February 2022.

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

9 May 2022

DELIVERED AT:

Brisbane

HEARING DATE:

25 March 2022

JUDGE:

Jackson J

ORDER:

The orders of the court are:

  1. On the application by the third defendant filed on 25 February 2022 the plaintiff’s claim against the third defendant is dismissed.
  2. On the application filed by the first defendant on 25 February 2022 the plaintiff’s claim against the first defendant is permanently stayed.
  3. The parties may make any submissions on costs in writing within 14 days.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – ENDING PROCEEDINGS EARLY – SUMMARY DISPOSAL – SUMMARY JUDGMENT FOR DEFENDANT OR RESPONDENT: STAY OR DISMISSAL OF PROCEEDINGS – where the plaintiff was a member of a small not-for-profit association – where the management committee of that association resolved to terminate the plaintiff’s membership – where the summary judgment application was brought more than eight years after the proceeding commenced – where the plaintiff relies on contracts created by s 71 of the Associations Incorporation Act 1981 (Qld) – whether a committee member of an association incorporated under the Associations Incorporation Act 1981 (Qld) contractually promises each member that he or she or the committee members as a body will observe the rules of the association in acting as the committee – whether the plaintiff has a real prospect of success in his claim

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – ENDING PROCEEDINGS EARLY – SUMMARY DISPOSAL – SUMMARY JUDGMENT FOR DEFENDANT OR RESPONDENT: STAY OR DISMISSAL OF PROCEEDINGS – where the plaintiff was a member of a small not-for-profit association – where the management committee of that association resolved to terminate the plaintiff’s membership – where an internal appeal mechanism was available to the plaintiff – where the plaintiff has been ordered to pay in excess of $130,000 in costs – where the claim for pecuniary damages for breach of contract is approximately $1,300 per annum – where the plaintiff’s unsuccessful appeals and failure to observe rule 5 of the Uniform Civil Procedure Rules 1999 (Qld) added to the costs of the proceeding – where an application  was brought pursuant to s 72 of the Associations Incorporation Act 1981 (Qld) – whether the issue raised in the application was trivial – whether it was unreasonable to make the application – whether the unreasonable or improper conduct of the plaintiff has added to the cost of the proceedings – whether the court should refuse to make an order on the application

Associations Incorporation Act 1981 (Qld) s 46, s 60, s 71, s 72, s 73

Corporations Act 2001 (Cth) s 140

Rules of the Supreme Court 1900 (Qld) O 18, O 18A, O 19, O 22

Uniform Civil Procedure Rules 1999 (Qld) r 5, r 171, r 293

Cameron v Hogan (1934) 51 CLR 358, cited

Cox v Caloundra Golf Club Inc [1995] QSC 246, applied

Dey v Victorian Commissioner for Railways (1949) 78 CLR 62, cited

Gardner v Dairy Industry Authority (NSW) (1977) 52 ALJR 180, applied

General Steel Industries In v Commissioner for Railways (NSW) (1964) 112 CLR 125, cited

McClelland v Burning Palms Surf Life Saving Club (2002) 191 ALR 759, cited

Perren v Nambour Bowls Club Inc [2018] QSC 148, cited

Pine Rivers, Caboolture and Redcliffe Group Training Scheme Inc & Ors v Group Training Association Queensland & Northern Territory Inc [2015] 1 Qd R 542, cited

Spencer v Commonwealth (2010) 241 CLR 118, applied

Harris, Jason, ‘The Corporate Constitution as a Statutory Contract: Artifice or Anachronism?”’ (2020) 36 Australian Journal of Corporate Law 25

Keay, Andrew, ‘Exploring the Rationale for Board Accountability in Corporate Governance’, (2014) 29 Australian Journal of Corporate Law 115

Weinart, Kim D, ‘Legal Duties as Part of the Governance Framework for Incorporated Associations: A Comparative Analysis’, (2014) 29(1) Australian Journal of Corporate Law 38

COUNSEL:

The plaintiff appeared on his own behalf

C Templeton for the first defendant

E McCutcheon (solicitor) for the third defendant

SOLICITORS:

The plaintiff appeared on his own behalf

ACLG Lawyers for the first defendant

IP Link for the third defendant

JACKSON J:

  1. [1]
    These are two applications for summary judgment or orders stopping the proceeding under s 73 of the Associations Incorporation Act 1981 (Qld) (“the Act”) or striking out the statement of claim.
  2. [2]
    The applications raise two out-of-the-ordinary questions: first, does a committee member of an association incorporated under the Act contractually promise each member that he or she or the committee members as a body will observe the rules of the association in acting as the committee?  Second, are there circumstances that are sufficient under s 73 of the Act to warrant an order that the court stop a proceeding because the issue raised is trivial or it was unreasonable to make the application, or the unreasonable conduct of a party has been responsible for making the application or has added to the cost of the proceeding?
  3. [3]
    It will become apparent that the applications should succeed, one on a summary judgment basis and the other because a proceeding of this kind under s 73 involving unreasonable conduct by the plaintiff should be stopped.  It is necessary to explain the bases for those conclusions and in doing so to decide the arguments presented for determination.

Plaintiff’s material on these applications

  1. [4]
    The plaintiff is self-represented.  He has what now seems to be a morbid legal fascination reflected in the volume of materials he filed in response to these applications.  Documents he describes as affidavits contain long passages of legal argument supported by detailed references to cases, on procedural points a-plenty. 
  2. [5]
    Regrettably, despite the apparent length and breadth of his self-education in the law for this case, the plaintiff has not yet absorbed the importance of the implied undertaking to the court and to the other parties to proceed expeditiously at a minimum of expense under r 5 of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”). 
  3. [6]
    He filed 17 affidavits approximately 250 pages in text just for his response to these applications.  Those affidavits sought to raise numerous complaints about the conduct of the affairs of the first defendant (“the Association”) that are not within the scope of the issues raised by the statement of claim.  He submitted that was because he did not know what the grounds of the applications against him were.  That made no sense as an explanation for introducing fresh subjects of complaint.  I infer, instead, that his aim or strategy was to continue to expand the subjects of dispute to the extent that the court might permit. 
  4. [7]
    As well, the material relied upon by the plaintiff included many affidavits and documents beyond those specifically filed by the plaintiff in response to these applications.  That threatened to make these applications inutile and required the court to wade through a mountain of irrelevant material, just to decide them.

Background

  1. [8]
    The Association is a small not-for-profit association, now with seven members.  It was and is funded solely by donations from members of the community and operated by a group of volunteers.  It is primarily concerned in the rescue and rehoming of dogs of the Cavalier King Charles Spaniel breed, predominantly in Queensland. Its operations are described on the Association’s Facebook page, its website and pet rescue websites.[1]
  2. [9]
    The Association is and was a charity.  From the 2012/2013 annual statement lodged by the Association with the Australian Charity and Not-for-Profit Commission, it appears that in 2013 there were approximately 40 volunteers.
  3. [10]
    In June and July 2011, the time of the events in question in this proceeding, the Association was regulated by the rules adopted in 2006, in the form of the “Model Rules Version 5” under the Act.  They included rules providing for the management committee to terminate a member’s membership if the member conducted himself or herself in a way considered to be injurious or prejudicial to the character or interests of the association,[2] and for a terminated member to appeal the management committee’s decision to a general meeting.[3]
  4. [11]
    In May 2018, following the acceptance of a new form of model rules under the Act by the Office of Fair Trading (Qld) in the prior year, the Association adopted new rules in the form of the “Model Rules Version 6”.  Rule 5(1) of the new rules limits membership to ordinary members.  Rule 5(2) limits the number of members to seven and provides that each member is to hold a position on the management committee.

Statement of claim

  1. [12]
    On 21 July 2011, the management committee at that time comprised the named second to seventh defendants (“the Committee”).  The Committee resolved to terminate the plaintiff’s membership of the Association (“21 July 2011 resolution”).  That was the event from which this proceeding arises.
  2. [13]
    On 27 September 2013, the plaintiff started this proceeding by claim.  To date, the claim has been set down for trial twice, only to be adjourned.[4]  Now in its ninth year, over events that occurred two years before it started, the proceeding is not set down for a final hearing or trial.  The delay is a disgrace to the parties, particularly having regard to the subject matter, as will appear from these reasons.  That context makes these applications all the more out-of-the ordinary.  A summary judgment application after so long is itself remarkable, almost unheard of.  One brought after eight years during which the proceeding was set down for trial on two prior occasions is of Dickensian “Bleak House” character.
  3. [14]
    When the claim was started, the defendants were the Association and all six members of its Committee.  Like the attrition rate of combatants in the Great War, only one of the former Committee members remains a defendant, being the third defendant, who now applies to stop the proceeding against her.  All of the other Committee members have been removed from the proceeding previously.  On 12 February 2016, Mullins J gave judgment for the fifth, sixth and seventh defendants.  The second and fourth defendants are no longer parties because they died with the controversy yet to be quelled by an exercise of judicial power.[5]
  4. [15]
    The fifth amended statement of claim (“statement of claim”) does not conform to the rules of pleading in many ways and contains a large amount of impermissible material.[6]  But that does not make it altogether incomprehensible.  Some length in these reasons will be saved by a brief summary of the case it alleges for the purpose of analysis of these applications and the parties’ submissions.
  5. [16]
    The plaintiff claims that the 21 July 2011 resolution was invalid on a myriad of grounds.  At the risk of some inexactness for brevity, and working backwards in time from the resolution itself, the plaintiff alleges all of the Committee members were disqualified for bias; second, that they took into account representations made by other persons that he was not shown or given an opportunity to respond to in breach of procedural fairness; third, that they did not genuinely consider his representations against expulsion; fourth, that they did not give him sufficient or proper details of the grounds for the resolution to terminate his membership; fifth, that they did not validly meet on 21 July 2011 because the meeting was not validly convened; sixth, that they did not validly meet on 10 July 2011 to decide to convene the meeting to be held on 21 July 2011; and seventh, they did not give him valid notice of the proposal to terminate his membership because the (now deceased) second defendant was not authorised to give that notice.
  6. [17]
    Simplified, there are two important categories of claims for relief upon the plaintiff’s third amended claim (“the claim”) and the causes of action alleged in the statement of claim.
  7. [18]
    First, paragraph 1 of the claim claims:

“the immediate continuance of the plaintiff’s lifetime membership in [sic] [the Association]…”

  1. [19]
    Second, paragraph 12 of the claim claims:

“[t]he court specify the amount of monetary compensation for the plaintiff’s loss of income derived from boarding dogs owned by individuals associated with [the Association] … calculated … on … [t]he period of the loss … from … early July 2011 through to his reconnection with that community following the conclusion of these proceedings…”

  1. [20]
    The statement of claim alleges in paragraph 117 that in the year before July 2011 the plaintiff was paid boarding fees in the sum of $1,355.
  2. [21]
    It is not necessary for the present purpose to set out other paragraphs of the claim verbatim.  They may be mentioned more briefly in the course of these reasons.

The Act

  1. [22]
    The long title of the Act provides that it is an Act to provide for the incorporation of certain associations, for the regulations of the affairs of incorporated associations, and for connected purposes.  It does so by providing for incorporation by approval by the chief executive and registration.  Upon registration:
    1. (a)
      the association is incorporated;[7]
    2. (b)
      the members of the previously unincorporated association become members of the incorporated association;[8]
    3. (c)
      the incorporated association is a body corporate with perpetual succession and a seal and may sue or be sued in its corporate name;[9]
    4. (d)
      the property held for the unincorporated association becomes the property of the incorporated association;[10]
    5. (e)
      the incorporated association has the powers of an individual and power to issue debentures and notes;[11]
    6. (f)
      the operation of the doctrine of ultra vires is limited by the Act;[12]
    7. (g)
      the liability of a member of a management committee or of the incorporated association to contribute to the debts and liabilities of the incorporated association is generally restricted to the property of the incorporated association in the member’s hands;[13] and
    8. (h)
      provision is made for the way in which the incorporated association may enter into or bind itself by contract;[14]
  2. [23]
    Part 5 of the Act provides for the rules of an incorporated association.  Relevantly to this proceeding, on registration the rules of the incorporated association consist of the association’s registered name, the objects for the association stated in the application for incorporation of the association and the adopted model rules.[15]
  3. [24]
    Part 7 of the Act provides for the powers and responsibilities of the management committee of an incorporated association, including:
    1. (a)
      the business and operations of an incorporated association shall be controlled by a management committee;[16]
    2. (b)
      every member of the management committee acting in the business or operations of the incorporated association shall be deemed to be the agent of the incorporated association for all purposes within its objects;[17] and
    3. (c)
      the management committee may hold meetings, or permit members to take part in its meetings, by using any technology that reasonably allows members to hear and take part in discussions as they happen.[18]
  4. [25]
    The plaintiff relies on s 71 of the Act as follows:

71  Rights of members

  1. (1)
    Upon incorporation the rules of the association shall constitute the terms of a contract between the members from time to time and the incorporated association.
  1. (2)
    Where a member of an incorporated association is deprived by a decision of that association of a right conferred on the member by the rules of that association as a member thereof, the Supreme Court shall have jurisdiction to adjudicate upon the validity of that decision under the rules.
  1. (3)
    An incorporated association shall be bound by the rules of natural justice in adjudicating upon the rights of its members conferred by the rules of such association on its members.”
  1. [26]
    Section 71 has two relevant substantive operative parts as to the rights and obligations of the incorporated association and its members: first, the rules operate as “the terms of a contract between the members from time to time and the incorporated association”; and second, that the incorporated association “shall be bound by the rules of natural justice in adjudicating upon the rights of its members conferred by the rules… on its members”.

Legal bases of the claim

  1. [27]
    The plaintiff alleges and submitted that his claims for relief are founded in the contract created by s 71(1).  He submitted that it created two relevant contracts on the terms of the rules of the Association: one between him and the Association “the Association/Member Contract”), the other between him and each member (“the Member/Member Contract”), including each of the members of the Committee.
  2. [28]
    The plaintiff’s claims for relief all stem from those contracts and the statutory requirement of natural justice in adjudicating rights.  His claim against the Association is founded in the Association/Member Contract.  His claim against the third defendant is founded in the Member/Member Contract.

Application by third defendant for summary judgment

  1. [29]
    The alleged Member/Member Contract is not expressly stated in s 71(1).  That subsection, on its ordinary meaning, including the ordinary rules of syntax, refers to a contract between two objects, namely “the members from time to time” and “the incorporated association”.[19]
  2. [30]
    However, it is not necessary to finally determine whether s 71 does or does not create any statutory contract on the terms of the rules between the members, inter se.  One contextual indication that it might be construed to do so is that s 72(1)(b) provides for the court to make an order declaring and enforcing the rights of members “between themselves”.
  3. [31]
    Other Acts make it clear for some corporations that there is a statutory contract between the members, inter se.  In particular, s 140 of the Corporations Act 2001 (Cth) which has a long history of preceding similar provisions in company law,[20] provides that a company’s constitution (if any) and any replaceable rules that apply to the company have effect as a contract between the company and each member and  between the company and each director and company secretary and 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.
  4. [32]
    The express provision that a company’s constitution and any replaceable rules operate as a contract between the company and each director or secretary (or officer) is of relatively recent origin,[21] but a contract between a member and each other member is not.[22]
  5. [33]
    The plaintiff submitted, in effect, that he had three relevant causes of action or equities and claims for relief against the third defendant.
  6. [34]
    Two of them depended on a breach of the alleged Member/Member Contract between the plaintiff and third defendant.  The plaintiff submitted that the third defendant’s participation in the 21 July 2011 resolution was a breach of that contract that entitled him to a declaration of invalidity against her, personally.  Second, the plaintiff submitted that his claim for damages for breach of contract for economic loss as a result of the termination of his membership was recoverable as damages for breach of contract as against the third defendant, personally.
  7. [35]
    In addition, the claim includes a claim for an injunction[23] to restrain the members of the Association (who do not now include the third defendant) from further acting to terminate his membership on the grounds that were the subject of the 21 June 2011 resolution.  Before her membership ceased, that claim against the third defendant was based on the Member/Member Contract.  Alternatively, it might have been argued that the third defendant was a proper party to the injunction claim against the Association as a member of the Committee (she is not now a member of the management committee).
  8. [36]
    The plaintiff submitted that he is entitled to a declaration against the third defendant as well as the Association, in effect to vindicate his claim that his membership of the Association was invalidly terminated.  For this submission, the plaintiff relied on s 72(2)(b) of the Act as empowering the court to make orders declaring and enforcing the rights and obligations of members. 
  9. [37]
    As to declaratory or injunctive relief, the third defendant is no longer a member of the Committee or even a member of the Association.  Accordingly, she is not a person who will be able to exercise any of the powers as a member of the management committee or as a member of the Association in general meeting as organs of the management of the Association.  No injunction would be granted against her now on either basis.  As to a declaration, unless some other basis exists, a declaration that produces no other foreseeable consequence for the parties will not be granted.[24]  Although there are some exceptions to that rule, for example where a government agency publicly released a defamatory report seriously damaging a person’s reputation,[25] there is nothing approaching those circumstances in this case.
  10. [38]
    Once that point is reached, relief on the plaintiff’s claim against the third defendant depends on the existence of the alleged cause of action for breach of the Member/Member Contract and the claim for damages for breach of that contract being sustainable in law.
  11. [39]
    The critical point on which that cause of action turns is whether a management committee member purporting to exercise a power of the management committee (in this case the rule empowering the Committee to terminate a member’s membership) along with the other members of that committee is acting in discharge of a contractual obligation as an individual member to each other member of the incorporated association.  Nothing in the rules of the Association or the Act expressly provides for that result.  So it must be arrived at, if at all, by the proper construction of the rules as the terms of the contract under s 71 of the Act, per se.
  12. [40]
    No authority that the plaintiff could point to and none that I have found supports that conclusion.
  13. [41]
    Cameron v Hogan[26] contains an analysis of the construction of similar rules of an unincorporated association.  As to a committee member sued for an invalid expulsion of a member, it was observed that at common law the court regarded the expulsion void and gave no damages against committee members for breach of contract.[27]  As to the position of a committee member sued for some other failure of the committee to observe the rules of the association, the court observed that “[i]t can seldom be the true meaning of the rules of any large association … that those undertaking office thereby enter into a contract with each and every member that they will execute the office in strict conformity with the rules”.[28]
  14. [42]
    Of course, the Association is not an unincorporated body, by virtue of its registration under the Act as an incorporated association.  But there is also an analogy with a company, as a body corporate, because the Act’s provisions are broadly similar to the structure of the provisions for the incorporation of a company, in this jurisdiction and others, following the original model of the English Companies Acts of the 1850s. They included the predecessors of s 140 of the Corporations Act 2001 (Cth) previously noted that are analogous to s 71 of the Act, on which the plaintiff relies.
  15. [43]
    To a company lawyer, the postulation of a direct contract between a director of a company and each individual member of the company that is breached by a failure by the director as part of the board of directors to validly exercise a power given by the company’s constitution to the board of directors is novel.  No case of that kind is readily found.  No liability of that kind will be found in some of the leading Australian texts on the subject of director’s liabilities, in either the general works on the subject[29] or the specialist texts referring to a director’s liabilities.[30]
  16. [44]
    In general terms, there are explanations for this state of the law.  First, the predecessors to s 140 were enacted against the background of the separate corporate personality of a company as a body corporate created on registration by the subscribers to the memorandum of association, as the original members of the company.  Usually, the context was that of a limited company with power to issue shares in accordance with articles of association in the form of or similar to Table A and where issued shares could be transferred to new members.  The rights of the members, inter se, depended on the provisions of the legislation, the memorandum of association and the articles of association.  It was important to establish that the provisions of the memorandum and articles of association bound the members from time to time.  That was established by the statutory deemed contract created by the predecessors to s 140.
  17. [45]
    Professor Jason Harris recently considered the origin of the statutory deemed contract under s 140 and its predecessors:[31]

 The deemed contractual effect of the constitution, first established in 1856, replaced the earlier requirement under the first general incorporation statute in 1844 to register a copy of the deed of settlement with the Registrar of Joint Stock Companies. The registered deed had to be kept up to date. The deed had to be signed by each shareholder. A person who had taken shares in the company but who had not signed the deed was called a subscriber.

The deed of settlement registered under the 1844 Act was a continuation of the concept that lay at the foundation of unincorporated joint stock companies formed during the 18th and early 19th century. These companies were established at a time when the benefits of incorporation were virtually impossible to obtain due to the Bubble Act 1720, 6 Geo I, c 18. Lawyers devised ways for large partnerships to be established with a form of contractual collective asset partitioning managed using a trust through the deed of settlement. Each of the investors would sign the deed of settlement that formed the constitution of the business enterprise (though not a separate legal entity as it was not incorporated by statute or by royal charter) and several of the shareholders would take on the role as trustees with both shareholders and trustees contractually bound to uphold the requirements of the deed. The deed of settlement could not prevent third party creditors from pursuing the investors, who remained liable as partners. The appointment of trustees allowed a smaller number of persons to sue on behalf of all investors.

The requirement to have members of an unincorporated joint stock company bound by a common set of internal rules through entering a deed of settlement was necessary for the collective operation of the group enterprise. The relationship between the members was primarily contractual, because it was illegal to form a company for the purposes of acting as a separate legal entity without a statutory charter or letters patent from the Crown. The continued foundation of the relationship between the members and the company when general incorporation became available in 1844 can also be understood on the basis that the new Act was set up to formalise the increasingly popular practice of using joint stock companies and to offer some measure of protection for investors. The 1844 Act was not creating a new form of business structure, but rather giving legal recognition and greater certainty to the existing business practices.

The move away from lodgement of a constitution as an actual signed contract to a deemed signed contract in 1856 was merely a continuation of the need to bind the members together. Both law and general society still regarded joint stock companies as being the legal embodiment of the members coming together. As noted above, the members were incorporated into the body corporate. It was common to refer to such bodies as co-partnerships and indeed the early texts on company law discussed the extension of partnership law to joint stock companies.

The deeming of the constitution as a contract signed and sealed by all members and binding on them as such was a practical response to avoid the need to secure the actual signatures of large groups of shareholders to facilitate incorporation.”  (footnotes omitted)

  1. [46]
    Professor Harris also considered the remedial operation of the statutory contract of a company as follows:

“While s 140 deems the constitution to have the effect of a contract, it is not clear that the full range of contractual remedies is available for enforcing that contract. Professor Gower expressed the view that damages were not available for a member seeking to enforce the constitution. Professor Ford stated that ‘the usual remedy for a member who complains of a breach of the [constitution] is a declaration or injunction. There is no recognized right to damages’.

Claims for damages face several doctrinal obstacles. First, the rule in Foss v Harbottle, noted above. Second, members are unable to claim damages if their damage merely reflects harm to the company (the reflective loss principles), in which case the company is the proper plaintiff. Third, some have suggested that the rule in Houldsworth v Glasgow Bank (‘Houldsworth’) demonstrates reluctance by the courts to award damages to members where the loss goes to the essence of their membership. However, it should be noted that the rule in Houldsworth has been heavily criticised by the High Court in Sons of Gwalia Ltd v Margaretic (‘Sons of Gwalia’) and was rejected as grounds to deny members the capacity to claim damages for breach of statutory misleading conduct provisions that related to their purchase of shares in the company. The rule has been described in subsequent cases as being of doubtful authority. Indeed, the Chief Justice of NSW has gone further and stated that the Houldsworth case was overruled by the High Court in Sons of Gwalia. With the greatest respect, while the High Court’s reasons clearly rejected the argument that the rule in Houldsworth barred the shareholder from claiming statutory damages, the collective ratio of the judgments did not overrule Houldsworth for other debts that a member may have in their capacity as a member.

One area where the courts have awarded damages, albeit in limited circumstances, is for company title properties. For example, in McLaughlin v Dungowan Manly Pty Ltd (‘Dungowan’), residents of a building that undertook extensive redevelopment and then charged residents an unauthorised levy to pay for the work were awarded damages, including damages for being deprived of the use and enjoyment of their property. It is submitted that it is likely to be difficult for a member to claim damages for breach of the constitution, unless the constitution confers some direct financial benefit on them (such as a breach in refusing to pay a dividend that has been declared) or imposes a direct financial loss on them (such as depriving them of a right to use the company’s property in their capacity as a member, which occurred in the company title cases such as Dungowan).”[32]

  1. [47]
    Professor Andrew Keay recently considered[33] the contractual structure of a company, observing:

Third, the directors have no express contract with the shareholders, and arguably no implied contract…. Furthermore, there are UK, US and Australian cases, for example, that hold that directors owe their duties to the corporation. Besides that fact, legislation in the United Kingdom now clearly states that directors owe their duties to the company and the Corporations Act 2001 (Cth) also provides for something similar.”[34]  (footnotes omitted)

  1. [48]
    These analyses are consistent with the historical development of a director’s liability not to a member as such, but to the company as an abstract legal personality, first by the imposition of fiduciary obligations on the analogy of a trustee and second by statutory duties.
  2. [49]
    The Member/Member Contract relied upon by the plaintiff against the third defendant, alleged to be created by s 71 of the Act, is necessarily implied or ascertained as a matter of statutory construction.  The question is what is there in the context of the Act or the rules that would impliedly or by statutory construction raise a contractual promise by the third defendant to the plaintiff as a member that the management committee would not breach the rules, when no such promise would be implied in the analogous situations of an unincorporated association or company?
  3. [50]
    The principles for the implication of a term of a contract at common law by law were comprehensively reconsidered in Barker v Commonwealth of Australia.[35]  Using that approach by analogy, there is no basis that emerges from the circumstances of the Association as an incorporated association under the rules and because of the operation of s 71 of the Act that requires the implication of the necessary term to support the contractual promise required for the plaintiff’s case against the third defendant to succeed upon the alleged Member/Member Contract.[36]
  4. [51]
    It follows that the plaintiff does not have a real prospect of success in his claim against the third defendant.
  5. [52]
    The plaintiff relied on some well-known cases that deal with the care that the court will exercise before making an order for summary judgment.[37]  The UCPR brought about two changes to the procedural rules affecting summary judgment relevant to the present case.  First, they introduced r 293 providing for summary judgment on the application of a defendant.  Up to that time, the Rules of the Supreme Court 1900 (Qld) had only provided for summary judgment on an application by a plaintiff and limited the claims on which a summary judgment application could be brought by a plaintiff to claims that could be made by a specially indorsed writ, or actions for specific performance or account.[38]
  6. [53]
    Second, they introduced the requirement that summary judgment was limited to cases where for a plaintiff the court is satisfied that the defendant has no real prospect of either successfully defending all or a part of the plaintiff’s claim[39] or where for a defendant the court is satisfied that the plaintiff has no real prospect of succeeding on all or part of the plaintiff’s claim[40] and, in either case, there is no need for a trial.[41]
  7. [54]
    The intention of introducing the “no real prospect” test was to replace the prior tests applied to summary judgment under rules of court where there was no expressly provided standard before summary judgment could be granted.
  8. [55]
    Prior to the introduction of r 293, a defendant was also able to apply to strike out a statement of claim under either the equivalent of r 171 of the UCPR[42] or to stay or dismiss the proceeding in the inherent jurisdiction of the court where the proceeding was frivolous, vexatious or otherwise an abuse of process.[43]  It was accepted that although those powers were only to be exercised with caution and care, extensive argument might be required before it was clear that the power to strike out or dismiss was engaged.[44]
  9. [56]
    It may also be noticed that when a rule providing for summary judgment in favour of a defendant was first considered by the High Court, the same approach as that for an application to stay or strike out in the inherent jurisdiction was applied.[45]  However, under r 293 the question to be answered is the statutory question whether the plaintiff has no real prospect of succeeding on all or part of the claim.[46]
  10. [57]
    The present case is one where the power to grant summary judgement under r 293 of the UCPR in favour of the third defendant should be exercised.  The plaintiff has no real prospect of succeeding on all of the claim against her.  There is no need for a trial.  No factual inquiry at the trial will alter that conclusion as against the third defendant.

Application to refuse to make an order by the first defendant

  1. [58]
    The Association applies for orders that the claim in paragraphs 10 to 15 of the claim be struck out under r 171 of the UCPR and the court refuse to entertain the claim for relief in paragraph 1 of the claim under s 73(2) of the Act.
  2. [59]
    Section 73 of the Act provides:

73  Powers of Supreme Court

  1. (1)
    The Supreme Court may, on an application brought pursuant to section 72, grant such relief as is appropriate in the circumstances.
  1. (2)
    The Supreme Court may refuse to entertain such an application, or to make an order on such application, or may refuse an order for costs, or may make an order for costs against a party, whether successful or not, if it is of the opinion that—
  1. (a)
    the issue raised in the application is trivial; or
  1. (b)
    having regard to the importance of the issue, the nature of the incorporated association, any other available method of resolving the issue, the costs involved, lapse of time, acquiescence or any other relevant circumstance, it was unreasonable to make the application; or
  1. (c)
    the unreasonable or improper conduct of a party has been responsible for the making of an application or has added to the cost of the proceedings.”
  1. [60]
    The plaintiff’s proceeding, although started by claim, is an application within the meaning of s 72.[47] That section provides:

72 Enforcement of rights and obligations

  1. (1)
    The Supreme Court may, on the application of an incorporated association, or of a member thereof, make orders, including interim orders—
  1. (a)
    giving directions for the performance and observance of the rules of such incorporated association by any person who is under an obligation to perform or observe those rules; or
  1. (b)
    declaring and enforcing the rights and obligations of members of such incorporated association between themselves, and the rights and obligations between such incorporated association and any member or members thereof.
  1. (2)
    An order may be made under this section notwithstanding that no right of a proprietary nature is involved, or that the applicant has no interest in the property of the incorporated association.”
  1. [61]
    Section 73 is unique and home-grown.  Its origins are explained by the 1980 Queensland Law Reform Commission (“QLRC”) report that preceded the Bill that became the Act.  Clause 39 of the draft Bill became s 43 in the Act as originally enacted and is now s 73. The report stated:

“39. Powers of court. Generally, on an application brought under clause 38 the Supreme Court may exercise all of its powers and grant such relief as it considers appropriate in the circumstances. In particular, the court will have power to grant equitable relief in the form of injunctions. Because the District Court has no power to grant injunctive relief it is thought that it would be rather futile providing for that court to have jurisdiction in relation to actions brought pursuant to this Part. It therefore becomes necessary to ensure that only matters of substance are brought before the Supreme Court. With a view to preventing a disgruntled member from commencing proceedings with a view to embarrassing the association, paragraph 2 has been designed to give the court a specific power to summarily dismiss the application. Further, the court is given wide powers to make orders for costs, even against the successful party, if in all the circumstances it is considered that the action was unnecessarily brought. Such provisions should have the desired effect of ensuring that only matters of substance are litigated.

Many actions under clause 38 could be brought before the court by way of notice of motion for an injunction. This would, in general, provide a fairly cheap and ready method of resolving most of ·such disputes. When the Rules of the Supreme Court are being amended consideration could be given to specifically providing for applications under s.38 to be disposed of summarily in many instances.”

  1. [62]
    There are not many cases that concern the operation or application of s 73.[48]  The most important was Pine Rivers, Caboolture and Redcliffe Group Training Scheme Inc & Ors v Group Training Association Queensland & Northern Territory Inc.[49]
  2. [63]
    In the present case, sub-paragraphs (a), (b) and (c) of s 73(2) are relied upon by the Association as warranting an exercise of the power not to make an order on the plaintiff’s claim by dismissing the proceeding.
  3. [64]
    The nature of the Association is a small charitable organisation now comprising seven members (apart from the plaintiff’s claim to be a continuing member) with the purpose of fostering and protecting animals of a particular dog breed.  It is wholly funded by charitable donations made by members of the public and carries out its activities through the unremunerated voluntary service of its members and other volunteers.
  4. [65]
    There was another available method for the plaintiff to resolve the issue of his membership, namely an appeal from the Committee’s decision to terminate his membership to the entire membership of the Association in general meeting under rule 10 of the rules.  When the plaintiff started this proceeding more than two years after the 21 July 2011 resolution, the Association offered to permit him to make such an appeal and to waive the time limit for an appeal to enable him to do so.  The plaintiff declined, preferring his chances of success in this proceeding.  The availability of such an appeal was said in one case to warrant the “view that in general the courts should be a last resort for the determination of club and association disputes.  A democratic decision of the members will be the preferred course in most instances”[50]  and that “courts have no wish to intrude into the general conduct and resolution of club disputes.”[51]  The Plaintiff submitted in oral argument that it would be unreasonable to use this internal review mechanism because the decision makers on appeal would have been the same people who decided to terminate his membership in the first instance.
  5. [66]
    Having regard to the expectation of the QLRC in propounding the drafts of s 72 and s 73 that a case such as this should be conducted in a relatively quick and inexpensive way by an application for an injunction, the costs involved in this proceeding have been inordinate.  There are no fewer than 341 filed court documents.  On the hearing of this application alone the Association read four of them,[52] being the application and three affidavits.  The plaintiff read 43 of them.[53] 
  6. [67]
    As well as the two aborted trials so far, there have been numerous interlocutory applications, and many directions hearings, no fewer than three appeals to the Court of Appeal so far[54] and one application to the High Court of Australia.[55]
  7. [68]
    To date, the plaintiff has been ordered to pay costs of various interlocutory disputes, including an unsuccessful appeal to the Court of Appeal and an unsuccessful application for leave to appeal to the High Court, together exceeding $130,000 on assessment.  There are other orders for the plaintiff to pay costs that are not yet assessed and the overall costs of the proceeding are not yet subject to any order or assessment.  The costs of any future trial would have to be added to the costs incurred so far. 
  8. [69]
    If these costs were not the product of unreasonable conduct of any of the parties under s 73(2)(c), they illustrate that when the proceeding was started the prospective costs were such that under s 73(2)(b) it was unreasonable to make the application made by the claim, in preference to the appeal procedure under the Rules.
  9. [70]
    But a significant proportion of the costs have been the product of unreasonable conduct.  The plaintiff’s pleadings have been the subject of five successful strike out applications.[56]  The appeals to the Court of Appeal were unadvisedly made as they were unsuccessful and resulted in an at least one indemnity costs order.
  10. [71]
    There was a lapse of time under s 73(2)(b) in starting the claim between 21 July 2011 and 27 September 2013 that was also inordinate and is unexplained on the evidence.
  11. [72]
    There is evidence of improper conduct under s 73(2)(c) in that plaintiff has had a purpose in prosecuting the proceeding beyond simply obtaining the relief claimed.  On 30 November 2015, evidence of that emerged when the claim first came on for trial, and it was apparent that the plaintiff had not pleaded grounds of invalidity on which he wished to rely that would necessarily adjourn the trial.  In that context, this exchange occurred between the Judge and the plaintiff: 

“HIS HONOUR: …say… that decision is set aside, what’s that going to achieve from your point of view?  It’s a society that have fairly clearly indicated they don’t want you…

PLAINTIFF: Maybe that’s why I want to be in their face.”

  1. [73]
    That evidence may raise a question of abuse of process by a collateral purpose that may amount to oppression.[57]  But it is not necessary to decide a question of that kind in order to decide this application.  The court should not do so, as well, because the application was not made on that ground, although the Association relied on that evidence as malice on the part of the plaintiff.
  2. [74]
    Overall, when the proceeding was started, it may have been unreasonable to make the application raised by the claim under s 73(2)(b), although I consider that question with caution recognising the possibility that the benefit of hindsight could affect that view.
  3. [75]
    Under s 73(2)(a), a relevant factor for the court to refuse to make an order on the claim is that the issue is “trivial”.  There is no bright line test for what is trivial.  A claim for reinstatement by a wrongly terminated member of an incorporated association would not ordinarily be regarded as trivial.[58] 
  4. [76]
    But it should not be overlooked that the plaintiff’s claim for pecuniary damages for breach of contract is limited to a particularised amount, at 2011, of about $1,300 per annum.  The ordinary pecuniary loss before a claim is brought in this court for damages for breach of contract is in excess of $700,000, because monetary claims for that cause of action below that amount are within the jurisdiction of the District Court of Queensland[59] and below $150,000 within the jurisdiction of the Magistrate’s Court.[60]  Claims  for damages for breach of contract below those amounts are ordinarily transferred to the appropriate court of monetary jurisdiction to reduce costs.[61]
  5. [77]
    A rough pecuniary indicator of the relative triviality of the claim for pecuniary loss also exists in the fact that the plaintiff has been ordered to pay in excess of $130,000 in costs of the interlocutory proceedings to date which is approximately 100 times the claimed annual value of the alleged pecuniary loss at 2011, before interest or inflation are taken into account.
  6. [78]
    As well, or alternatively, under s 73(2)(c), the unreasonable conduct of the plaintiff has clearly added to the cost of the proceeding.  That is illustrated by the plaintiff’s unsuccessful appeals[62] and unsuccessful application for special leave to appeal,[63] the plaintiff’s abject failure to observe the implied undertaking to the court under r 5 of the UCPR so as to bring the claim to a final decision and the plaintiff’s attempt on the hearing of this application by his many affidavits to introduce a range of additional allegations of complaint about the conduct of the Committee in 2011, beyond those pleaded in the statement of claim.
  7. [79]
    There should be hesitation before summarily terminating a proceeding that has dragged along in the court’s lists as long as this one, where the plaintiff may have a “reasonable cause of action” against the Association, in the technical sense,[64] and where twice before the proceeding has been brought up to the point of trial.  Nevertheless, s 73 of the Act has a clear purpose, that a proceeding constituting an application to enforce the performance and observance of the rules of an incorporated association and the rights and obligations of members between themselves and between the incorporated association and any member is in a special class where the factors identified in s 73(2) may warrant a refusal to make an order on the application.
  8. [80]
    Although with some hesitation, I conclude that the operation of those factors in the present case justifies the conclusion that the discretionary power to refuse to make an order on the application is engaged and that such an order should be made in the form of an order permanently staying the proceeding against the Association which is the only remaining defendant.

Footnotes

[1]  See, eg, https://www.petrescue.com.au/groups/11378/Cavalier-King-Charles-Spaniel-Rescue-Qld-Inc

[2]  Rule 9(3).

[3]  Rule 10.

[4] Uniform Civil Procedure Rules 1999 (Qld), r 477.

[5] Bass v Permanent Trustee Company Ltd & Ors (1999) 198 CLR 334, 355 [45].

[6]  For example, by being limited to material facts and not evidence (or legal argument): Uniform Civil Procedure Rules 1999 (Qld), r 149(1)(b).

[7] Associations Incorporation Act 1981 (Qld), s 14(2)(a).

[8] Associations Incorporation Act 1981 (Qld), s 14(2)(b).

[9] Associations Incorporation Act 1981 (Qld), s 21.

[10] Associations Incorporation Act 1981 (Qld), s 22.

[11] Associations Incorporation Act 1981 (Qld), s 25.

[12] Associations Incorporation Act 1981 (Qld), s 26.

[13] Associations Incorporation Act 1981 (Qld), s 27.

[14] Associations Incorporation Act 1981 (Qld), s 28

[15] Associations Incorporation Act 1981 (Qld), s 46(2).

[16] Associations Incorporation Act 1981 (Qld), s 60(1)

[17] Associations Incorporation Act 1981 (Qld), s 60(2).

[18] Associations Incorporation Act 1981 (Qld), s 63A(1).

[19]  Compare and contrast Associations Incorporations Act 1984 (NSW), s 11(2) considered in McClelland v Burning Palms Surf Life Saving Club (2002) 191 ALR 759, 786-788 [103]-[109].

[20] Corporations Law, s 140 (previously s 180); Companies (Queensland) Code, s 78; Companies Act 1961 (Qld), s 33; Companies Act 1931 (Qld), s 32; Companies Act 1863 (Qld), s 10; Joint Stock Companies Act 1856 (Imp), s 7.

[21] Companies (Queensland) Code, s 78(1)(b).

[22] Joint Stock Companies Act 1856 (Imp), s 7.

[23]  Paragraph 15.

[24] Gardner v Dairy Industry Authority (NSW) (1977) 52 ALJR 180, 188-189.

[25] Ainsworth v Criminal Justice Commission (1992) 175 CLR 564, 582.

[26]  (1934) 51 CLR 358.

[27]  (1934) 51 CLR 358, 372-373.

[28]  (1934) 51 CLR 358, 373.

[29]  Robert P Austin, Ian M Ramsay and HAJ Ford, Ford, Austin & Ramsay’s Principles of Corporations Law (LexisNexis Butterworths, online, 2022); Australian Corporations Law Principles and Practice (LexisNexis Butterworths, online, 2022).

[30]  Robert P Austin, Ian M Ramsay and HAJ Ford, Company Directors: Principles of Law and Corporate Governance (LexisNexis Butterworths, 2005).

[31]  Jason Harris, ‘The Corporate Constitution as a Statutory Contract: Artifice or Anachronism?”’ (2020) 36 Australian Journal of Corporate Law 25, 30-31.

[32]  Jason Harris, ‘The Corporate Constitution as a Statutory Contract: Artifice or Anachronism?”’ (2020) 36 Australian Journal of Corporate Law 25, 40-41.

[33]  Andrew Keay, ‘Exploring the Rationale for Board Accountability in Corporate Governance’, (2014) 29 Australian Journal of Corporate Law 115.

[34]  Andrew Keay, ‘Exploring the Rationale for Board Accountability in Corporate Governance’, (2014) 29 Australian Journal of Corporate Law 115, 126-127.

[35]  (2014) 253 CLR 169, 187–189 [23]-[29].

[36]  C.f. Kim D Weinart, ‘Legal Duties as Part of the Governance Framework for Incorporated Associations: A Comparative Analysis’, (2014) 29(1) Australian Journal of Corporate Law 38.

[37] Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232; For a recent case following Salcedo see Halvorson & Anor v Birkenhead Super Pty Limited atf Birkenhead Superannuation Benefits Fund [2021] QCA 211.

[38] Rules of the Supreme Court 1900 (Qld), O 18 r 1, O 18A r 1 and O 19 r 1.

[39] Uniform Civil Procedure Rules 1999 (Qld), r 292(2)(a).

[40] Uniform Civil Procedure Rules 1999 (Qld), r 293(2)(a)

[41] Uniform Civil Procedure Rules 1999 (Qld), r 292(2)(b) and r 293(2)(b).

[42] Rules of the Supreme Court 1900 (Qld), O 22 r 31.

[43] General Steel Industries In v Commissioner for Railways (NSW) (1964) 112 CLR 125, 129-130; Dey v Victorian Commissioner for Railways (1949) 78 CLR 62, 84, 90-91 and 109.

[44] General Steel Industries In v Commissioner for Railways (NSW) (1964) 112 CLR 125, 130; Dey v Victorian Commissioner for Railways (1949) 78 CLR 62, 84.

[45] Webster v Lampard (1993) 177 CLR 598, 602.

[46] Spencer v Commonwealth (2010) 241 CLR 118, 128-131 [17]-[24].

[47] Cox v Caloundra Golf Club Inc [1995] QSC 246, p 7.

[48]  Examples are Kenney v Shailer Park Netball Association [2006] QSC 403, pp 4-6; Feyen v Charlton & ors [206] QSC 122, [90]-[92].

[49]  [2015] 1 Qd R 542 [19], [21], [30] and [51]-[52].

[50] Cox v Caloundra Golf Club Inc [1995] QSC 246, p 9.

[51] Cox v Caloundra Golf Club Inc [1995] QSC 246, p 9; see also Re Magaccis [1994] 1 Qd R 59, 67-68.

[52]  Court documents 311, 312, 337, 338.

[53]  Court documents 1, 85, 90, 99, 100, 102, 103, 107, 128, 129, 131, 139, 141, 147, 161, 241, 242, 246, 249, 258, 263, 304 and 318-338 inclusive.

[54] Thompson v Cavalier King Charles Spaniel Rescue (Qld) Inc [2020] QCA 2; Thompson v Cavalier King Charles Spaniel Rescue (Qld) Inc [2019] QCA 110; Thompson v Cavalier King Charles Spaniel Rescue (Qld) Inc & Ors [2015] QCA 10.

[55] Thompson v Cavalier King Charles Spaniel Rescue (Qld) Inc & Ors [2020] HCASL 91.

[56] Thompson v Cavalier King Charles Spaniel Rescue (Qld) Inc [2020] QSC 234 [14]-[20].

[57] Williams v Spautz (1992) 174 CLR 509, 522-523.

[58] Perren v Nambour Bowls Club Inc [2018] QSC 148, [52].

[59] District Court of Queensland Act 1967 (Qld), s 68(1)(a).

[60] Magistrates Court Act 1921 (Qld), s 4(1).

[61] Civil Proceedings Act 2011 (Qld), s 25(2).

[62] Thompson v Cavalier King Charles Spaniel Rescue (Qld) Inc & Ors [2020] QCA 2; Thompson v Cavalier King Charles Spaniel Recue (Qld) Inc [2015] QCA 10;

[63] Thompson v Cavalier King Charles Spaniel Rescue (Qld) Inc [2020] HCASL 91.

[64] Spencer v The Commonwealth (2010) 241 CLR 118, [22]-[24]

Close

Editorial Notes

  • Published Case Name:

    Thompson v Cavalier King Charles Spaniel Rescue (Qld) Inc

  • Shortened Case Name:

    Thompson v Cavalier King Charles Spaniel Rescue (Qld) Inc

  • MNC:

    [2022] QSC 82

  • Court:

    QSC

  • Judge(s):

    Jackson J

  • Date:

    09 May 2022

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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