Re Yeronga Bowls Club Inc[2023] QSC 275

SUPREME COURT OF QUEENSLAND

Introduction

1. [1]
   This is an application to wind up the Yeronga Bowls Club Inc IA08725 (the Club) on just and equitable grounds under s 90(1)(e) of the Associations Incorporation Act 1981 (Qld) and s 583 of the Corporations Act 2001 (Cth). The application further seeks consequential orders including for the appointment of liquidators and the distribution of surplus assets.

2. [2]
   The application is opposed by Mr Noel Morris, a long-standing member of the Club. I made orders joining Mr Morris to the proceeding, on his request, so that there was a contradictor to the application who would be heard. Mr Morris appeared on his own behalf. Mr Morris also informally represented a group of members of the Club.

3. [3]
   The Club is situated at 171 School Road, Yeronga. The Club’s premises includes a playing lawn green (the green), a brick storage building, a small garden maintenance shed and a two-storey timber and brick building (the clubhouse). The clubhouse is the primary building used by the Club for its operations. On the lower floor of the clubhouse there is a bar, a keg room, a dining area, offices, and a reception area. There is also a veranda along the front of the clubhouse, leading to the green. The upper floor of the clubhouse mainly consists of a function area and two kitchens.^[1]
4. [4]
   The application is brought with the support of the Club’s current management committee (the Management Committee). In their view, the Club is in a dilapidated state, both physically and financially. They say that it is necessary to wind up the Club now to spare it the pain of a slow death as it gradually runs out of money over the coming years.

5. [5]
   On the other hand, Mr Morris seeks the dismissal of the application. He contends that the Club can be repaired with proper management and should not be wound up in circumstances where its existing cash balance may allow it to continue operating well into the future.

6. [6]
   There can be no dispute that the Club, in its current state, cannot go on. The green is closed. The bar is closed. Not insubstantial work would need to be completed before the Club could realistically be operational again. It is on that basis that the applicant makes its primary submission, that it is just and equitable to wind up the Club because it can no longer meet its objects, and the substratum of the Club has failed.

7. [7]
   For the reasons that follow, I am not satisfied that the Club will be unable to reopen, and I am therefore not satisfied that the Club can no longer meet its objects or that the substratum of the Club has failed.

8. [8]
   I dismiss the application.

The Club

Club background and constitution

9. [9]
   The Club is an old institution. The annual reports of the Club indicate that it was established in 1912.

10. [10]
    The current Management Committee consists of the following persons:

1. Chairperson – Kathleen Smith;

2. Deputy Chairperson – Bradley Barratt;

3. Secretary – Dianne Cross;

4. Treasurer – Alan Kennedy;

5. Greens Director – Matthew James Wilson.

11. [11]
    There are also five committee members.

12. [12]
    Ms Smith, Mr Barratt, Mr Kennedy and Mr Wilson each provided affidavits in this proceeding and were subject to cross-examination. They each gave evidence that they have been members of the Club for many years. They all support the winding up application.

13. [13]
    At some point in the 2019/20 financial year, the then management committee made the decision to reduce the Club’s playing hours to only Wednesday and Saturday. It appears that the bar was also only open at those times. The green of the Club closed in January 2023.^[2] From that time, bowls could not be played at the Club.
14. [14]
    Ms Smith’s affidavit stated, ‘the Club’s only real activity is the operation of a bar area.’ However, during cross-examination Ms Smith updated that information providing:

15. [15]
    As such, the Club does not presently trade. As will be seen below, the Management Committee decided to close the Club’s limited operations due to the dilapidation of the Club’s premises and the fact that the Club was operating at a loss.

16. [16]
    Despite its lack of operation, the Club retains 37 members. Ten of those members swore affidavits in this proceeding. In addition, Mr Morris, during his closing address tendered a document titled “Authority to Represent” signed by nine members of the Club. Those members authorise Mr Morris “to represent their common interest in opposing the winding up” of the Club. Four of the signatories of the Authority to Represent did not provide affidavits in this proceeding. Accordingly, a total of 14 members of the Club played some role in this proceeding.

17. [17]
    The Club’s constitution is in evidence. It relevantly provides (emphasis added):

1. “4.
   OBJECTS

The objects for which the Club is established are:

1. To advance and promote the game of bowls;
2. To provide the best possible standard of facilities for members for the social and competitive playing of the game of bowls in accordance with the Laws of the Game prescribed by the [World Bowls Board] and the By-Laws of [Bowls Australia];
3. To provide, develop and promote such activities as from time to time are deemed appropriate to provide good fellowship between members of the Club;
4. To promote and enhance the game of bowls in the local community.

5. POWERS

The powers of the Club are:

1. To control the funds and other assets and the liabilities of the Yeronga Bowls Club (Inc);
2. To subscribe to, and become a member of and co-operate with any other association, club or organisation, whether incorporated or not, whose objects are altogether or in part similar to those of the Club…

[…]

8. To construct, improve, maintain, develop, work, manage, carry out, alter or control any such houses, buildings, grounds, works or conveniences which may seem calculated directly or indirectly to advance the Club’s interests…

[…]

23. To do all such other things as are incidental or conducive to the attainment of the objects and the exercise of the powers of the Club.

17. CLUB MANAGEMENT

1. The general management of the Club shall be under the control of the MC who shall, subject to these Rules and By-Laws, exercise all the powers of the Club.

1. The business and operations of the Club shall be controlled by a MC comprising the following: Chairperson, Deputy Chairperson, Secretary, Treasurer, Greens Director, Provedore, and five (5) Committee members, all of whom shall be members of the Club…

[…]

1. Subject to other Clauses within these rules, every Officer and Members of the MC of the Club shall be elected at the Annual General Meeting of the Club. Officers and Members of the MC shall hold office from the conclusion of the election at which they were elected until the conclusion of the election held at the next ensuing Annual General Meeting of the Club. Officers and Members shall be eligible for re-election.

[…]

29. ANNUAL GENERAL OR GENERAL MEETINGS

1. The Annual General Meeting shall be held within three months of the close of the financial year…

[…]

39. FUNDS AND ACCOUNTS

[…]

10. No member shall be entitled to any benefit or advantage from the Club which is not shared equally with every member thereof.

[…]

46. DISSOLUTION

1. The Club may be dissolved by resolution of the members at a Special General Meeting confirmed by a resolution at a further Special General Meeting called at an interval of not less than (30) days thereafter. The two meetings may be convened by one (1) notice delivered or posted to every financial member fourteen (14) clear days before the date of the first Special General Meeting. The resolution proposed in connection with the voluntary dissolution shall not be deemed to have been carried unless passed by three- fourths of those financial members present and entitled to vote at each of the Special General Meetings.

2. The Club shall be dissolved when the financial membership is reduced to three (3) or fewer members.

47. DISTRIBUTION OF SURPLUS ASSETS

If the Club shall be wound up in accordance with the provisions of the Associations Incorporation Act 1981, and there remains, after satisfaction of all its debts and liabilities, any property whatsoever, the same shall not be paid to or distributed among the members of the Club, but shall be given or transferred to some other institution or institutions having objects similar to the objects of the Club, and which shall prohibit the distribution of its or their income and property among its or their members to an extent at least as great as is imposed on the Club under or by virtue of rule 39(j), such institution or institutions to be determined by the members of the Club provided the institution to which property is transferred is an institution or institutions approved by the Commissioner of Taxation as an institution or institutions referred to in s 23 of the Income Tax Assessment Act 1936 (amended).”

Financial position

18. [18]
    As indicated above, much of this case turns on the present and potential future financial position of the Club. The financial position of the Club is the primary basis for the winding up application. The Club’s finances are facing three key difficulties.

19. [19]
    First, there has been a steadily declining membership since at least 1998. The 109^th Annual Report and Financial Statement of the Club prepared for the Annual General Meeting held on 26 June 2022 records membership numbers as follows:^[4]

20. [20]
    There is nothing in evidence to explain the large drop off in members that occurred in 2007. Regardless, the Club’s membership has long been in decline. Ms Smith gave evidence that by May 2023, the Club’s membership had fallen to 37.^[5] I note that the Club would be automatically dissolved if the membership dropped to 3 or fewer persons.^[6]
21. [21]
    Second, the Club has suffered losses year on year such that its liquid assets are also on the decline. Under clause 38(a) of the Club’s constitution, the financial year of the Club ends on 31 March each year. References to financial years in this section should be read as years ending 31 March.^[7]

22. [22]
    Mr Kennedy’s affidavit annexes annual reports for the Club dating back to the 2016/17 financial year. In each of these years the Club has suffered a significant loss. It can be inferred that the Club was suffering losses prior to this time. So much is clear from the opening words of the Chairman’s Report to the members in the 2016/17 Annual Report:^[8]

“Where to start? It’s been a tumultuous year but thanks to the dedication and professionalism of a tireless committee and the hard work put in by our employees, we have managed to keep the doors open.”

23. [23]
    Prior to 2016, the Club had two playing greens. One of those greens was known as the MacGregor green. In 2016, the MacGregor green was sold for $1,091,413.15. In that same year, the Club sold off its gaming machine licenses for $30,000. Excluding income from those sales, the Club suffered a trading loss in 2016/17 of over $100,000. These losses are largely attributable to the cost of maintaining the playing greens, wages, rates, and insurance. The proceeds from the sale of the MacGregor green have funded the Club’s ongoing trading losses.

24. [24]
    The Club had two primary sources of income, the bar and the green. In 2016/17, the bar turned a profit of $28,855. The green generated a loss of $41,897. By the 2018/19 year, the position had declined. The bar suffered a loss of $7,911.65 and the green a loss of $41,234.86.

25. [25]
    Subsequent years can be summarised as follows:^[9]

26. [26]
    Outlined in more detail below, the steady decline in annual losses is not attributable to an increase in revenue. Rather, the Club began to reduce its opening hours to stem its haemorrhaging. The form of the Annual Reports from 2019 onwards do not allow for an accurate calculation of the profit and loss of the bar and the green specifically. However, it can be inferred that the costs of operating, and the revenue generated by both the bar and the green were in decline through the relevant period.

27. [27]
    If the Club continues in existence and does not begin turning a profit, the sale proceeds of the MacGregor green will eventually run dry.

28. [28]
    Third, the Club’s premises is in a state of disrepair. An affidavit sworn by Bruce Passatti, solicitor for the applicant, exhibits a Work Health and Safety Review prepared by grays.com on behalf of GM Advisory Services.^[10] It is unclear when grays.com inspected the Club’s premises, but the report is dated 13 July 2023. The report makes the following claims about the state of the clubhouse:

“The veranda and the set of stairs leading from the upstairs emergency exit at the rear of the building are in poor condition with nails protruding from most of the timber surfaces.

The timbers on the veranda and stairs are in poor condition and structural integrity is potentially an issue.

The rear external wall and seats around playing green (sic) has paint flaking from it, which may contain lead…

There is significant evidence of potential asbestos containing materials (ACM) found at the inspection. There is no asbestos register for the bowls club site.

The potential ACM include:

• Playing green edge surrounds (worn, some not sealed)
• Window awning roof sheets on the side of the building (mostly sealed)
• External air pipe extending from the main building (mostly sealed)
• Fibre cement corrugated roof and facia on the brick storage building (worn, not sealed)
• Internal walls and ceilings (mostly sealed)
• There is aged linoleum flooring and underlay (some broken into small pieces along the edges).”

29. [29]
    Similar evidence was given by the witnesses called by the applicant. Ms Smith described her view of the present state of the Club’s premises during cross-examination conducted by Mr Morris. She said:

30. [30]
    Similar evidence was given by the Club Treasurer, Mr Kennedy, who said:

“… [W]e had quotes to do upstairs, which the – the requirement now were to put toilets upstairs, have to put a lift in, have to do the complete – refurbish the kitchen and – and those days, we got a quote for half a million dollars. Now it would probably be at 750 to do the upstairs alone, right? Our next problem was we’ve got asbestos on the greens, which restricted barefoot bowls, because we can’t have barefoot bowls people out there and our own players playing on greens where asbestos is – on the – surrounding the – the greens…”^[13]

31. [31]
    The evidence clearly establishes that the Club is in a dire position. It suffers significant trading losses year on year, it has a dwindling membership, and its premises is in a state of disrepair.

Club Management

Steps taken to improve the Club’s position

32. [32]
    In closing submissions, the applicant submitted that the Management Committee has tried every avenue to attract new members and has considered all options having regard to the funds available to the Club.

33. [33]
    Each member of the Management Committee gave affidavit evidence of steps they have taken to salvage the Club. In summary, these steps included:

    1. attempting to find sponsors and grants;

2. conducting a letterbox drop in the surrounding area;

3. approaching the management committee of the New Farm Bowls Club for advice;

4. approaching Bowls Queensland (BQ), the peak body for lawn bowls in Queensland for advice;
5. reviewing the Club’s business model;

6. introducing live music performances;

7. hosting trivia nights.

34. [34]
    I accept that the Management Committee did take the steps referred to in [33](a) to [33](c) above, and did so with a view to re-enlivening the Club. That is:

    1. at some point, the Committee did attempt to obtain sponsors or grants for the Club. In fact, around 2020, the Club was able to obtain a grant to improve the appearance of the Club, which included recarpeting;^[14]

2. the Committee did conduct a letterbox drop at some point, though it is unclear when and to what extent;
3. at least one member of the Committee spoke with members of the New Farm Bowls Club, though it is unclear when that occurred, what advice was given and whether any of that advice was acted upon.^[15]

35. [35]
    I accept that the Committee did take the steps referred to in [33](d) to [33](g) above. However, I do not accept the submission, insofar as it was made, that those avenues were pursued to such an extent that it could be said that they were exhausted as options for attracting new members. Instead, I find that those steps were, at best, tentatively pursued by the Committee.

36. [36]
    As to seeking advice from BQ, the evidence of Ms Smith was:

“The advice from [BQ] was to commit to a very detailed business review – or a business plan. There was really no one at the club at that stage that was really – had the time or was qualified to author that report. They also looked at a program called Jack Attack to promote sort of bowls within the club, so that was taken like to – to the club members. But there again, it relied on a… robust voluntary… base to support that. And no – no one came forward for that. So it was a number of things that really was held up because we don’t ha – well, don’t have that very strong volunteer base.”^[16]

37. [37]
    As to the Club’s business plan, Ms Smith’s affidavit evidence was that the Club had, in recent years, reviewed its business plan in order to build its membership base.^[17] Mr Kennedy’s evidence was that the Club did not have a business plan.^[18] In cross- examination, Ms Smith said that at the time of the review, there was only a ‘weak, very loose’ plan from a previous committee. She said that no new business model was put together, and that the consequence of the ‘review’ referred to in her affidavit was merely that the Club discovered the ‘very loose’ plan established by the previous committee.

38. [38]
    In relation to trivia nights and music and live music performances hosted by the Club, the evidence of Mr Kennedy was:

“We ended up having trivia nights three times. The first one attracted about 50 people. The next one, we didn’t – the management committee didn’t know what was happening on, but that attracted about 30, the third one about 20 people and then the trivia nights were no longer operating. We – after COVID we asked the band, The Trams, which is a rock-n- roll old-time music, to come along and play on Saturdays when we were bowling, and they came in around 2 o’clock, set up and they played music till about 6:30, 7 o’clock at night entertaining visitors. The first one had about 60 visitors. Once again, the visitors went down to about 30 and then about 20.”^[19]

39. [39]
    As such, while the Management Committee did take some steps towards attracting new members, those steps were short-lived and tentative.

40. [40]
    One further point should be made in respect of Management Committee’s steps to improve the Club. Although each member of the Management Committee referred to the dilapidated state of the Club, and particularly the asbestos around the green, there is no real evidence of steps being taken towards rectifying those issues.

41. [41]
    Mr Kennedy estimated that the cost ‘to do upstairs’^[20] would be around $750,000, based on a quote he says he obtained some time ago. He also said that he had obtained a quote for removing the asbestos around the green which came to $50,000.^[21] Mr Wilson, the Club’s Greens Director, gave evidence that he thought that the quote for removing the asbestos around the green was close to $70,000 or $80,000.^[22] He also said that a quote had been obtained to fix some unspecified problem with the clubhouse’s electricity. He said that that quote was around $180,000.^[23]
42. [42]
    None of these quotes are in evidence. In fact, no quotes are in evidence at all. In addition, apart from the grays.com report referred to above, there is no evidence of what works need to be done before the Club can be lawfully and safely reopened. Clearly, there is a significant amount of work that could be done to improve the Club, and some of that work is essential if the Club is to operate. In particular, at the least, it appears that the compromised asbestos containing material around the green requires removal and an asbestos management plan should be commissioned.^[24] There is no expert evidence as to how much of the asbestos on the site would need to be removed or sealed before the Club could reopen.

43. [43]
    There is no concrete evidence from which I could estimate the cost of any works that need to be done. I cannot conclude that the cost of conducting works necessary for the Club to recommence trading would exceed the Club’s current liquid assets.

Management Committee’s approach

44. [44]
    I now turn to consider the steps taken by the Management Committee in relation to winding up the Club. The approach of the Management Committee, from around 2018, was explained by Mr Kennedy during cross examination:

“Well, as we said, there’s a lot of clubs in the Cunningham District and just outside. The decision to help other clubs survive was – to preserve the funds. We weren’t going to – Yeronga Bowls weren’t – wasn’t going to survive. All right. Blind Freddie could see that. So with those funds we had there, and not only the management committee but the other bowlers there could see the future in if we got that money to help other clubs out, that needed the money.^[25]

45. [45]
    This approach was also made clear in the Annual Reports produced by the Club each year. It is telling to compare the 2016/17 Annual Report with the 2017/18 Annual Report. In 2016/17, the Chairman’s (Brett McClelland), report states:^[26]

“To our Treasury Team, Charlie Mengel and Patricia Murray, I thank you. I hope you will be required to stay much later over the coming year, due to having more money to count…

It must be extremely hard for [our bar staff] to have to often make the decision to close the club early…

Kevin runs our pool comp on Sundays, and I’ll tell you this for nothing, without the income that this Sunday afternoon session brings to the Club we would have been in an even more dire situation over the past couple of years than we were – thanks Kevie…”

46. [46]
    The Club Treasurer in that year was Marian Wilson. The Treasurer’s Report has a similar positive tone:^[27]

“Once again suffice to say that it has been another very distressing year – however, we can now be positive and move forward…

The Management Committee has a Vision and a Business Plan. We have enlisted the services of “The Grants Guru” now that we have finances available we are in a position to get grants. David O'Leary will endeavour to get grants on our behalf… Applications will also be made through the Get Playing program for the removal of the asbestos ditches and asbestos seating around Barclay Green.

This is just a start. What we need now are more bowlers using out excellent greens more often. When the facilities have been up-graded we need to attract more social members and look toward having more corporate functions… we can look forward to going on to what the glory days must have been like in past years.”

47. [47]
    These statements reflect an acknowledgment of the difficult situation the Club was in at the time, coupled with an optimism for the Club’s chances at recovery. That optimism had withered by the 2017/18 Annual Report. The Chairman was still Brett McClelland whose report states:

“Where to start! The doors are still open. That’s a positive despite all the rumours and accusations that have been circulating throughout the Club and local community all year…

[W]hile I am a member of this Club, I will fight hard for Yeronga Bowls Club to remain just that – a functioning bowls club…

It’s a pity to see the dwindling number of bowlers turning up for social bowls on Wednesday and Saturdays.”

48. [48]
    In the same annual report, the current Treasurer, Mr Kennedy gave a report stating:

“The following figures from the past 5 years show how the Club is rapidly falling apart with no signs of turning figures around. The Club is struggling to attract new members both Social and Full and a decision has to be made on whether the Club continues or closes the doors and moves to assist other Clubs in our area…

Bowls Queensland is sympathetic to the plight of the Club. They feel that in the best interests of Bowls, the money the Club has, would be best utilised in helping other Clubs survive rather than in 5 years’ time, when significant numbers of other Clubs are forced to close their doors.

To face facts, we have nothing to offer members, e.g. Gaming, Keno, TAB, meals, and having only one green does not help the situation… I know all Club Members love Yeronga Bowls Club, but the time has come when a tough decision must be made. Members – it is now your call.”

49. [49]
    This report was presented to the members at the 105^th Annual General Meeting of the Club held on 23 June 2018. Mr Kennedy’s call to action in the final line of his report was in anticipation of a motion introduced at that AGM to wind up the Club. The minutes of the meeting record the following:

“Brian Boyce: - Spoke about declining membership and the continued losses and proposed to move that:

Motion: That the Management Committee move to close down the Club. We would need to have a professional team employed to achieve this.

Moved:B. Boyce Seconded: M. Wilson Motion Carried: 22 For and 9 against”^[29]

50. [50]
    I note that the minutes record that the motion carried. This was clearly in error. The Club’s constitution, as set out above, requires 75% of the voting members to vote in favour of winding up the Club. In fact, only 22 out of 31 voting members cast their vote in favour of the motion.^[30] As such, the Club continued in existence.
51. [51]
    In the 2018/19 Annual Report Mr Kennedy as Honorary Treasurer stated, “Club members have to decide if Yeronga Bowls Club is a viable proposition to remain trading at a continual loss.”^[31]
52. [52]
    On 18 December 2019, a Special General Meeting of the Club was held. The minutes record:

“AGENDA ITEMS

The purpose of this meeting will be: - to discuss the future of Yeronga Bowls Club Inc.;

- to determine if Yeronga Bowls Club Inc. should be wound up on or before 31 March 2020;

[…]

Results of the Secret Ballot:

53. [53]
    Around 70% of the members voted in favour of the motion which was, again, insufficient for it to pass. Since 18 December 2019, the Club has made no further attempt to pass a resolution to wind up the Club.

54. [54]
    However, the Club continued to hold AGMs in the two subsequent years. In the 2019/20 Annual Report, produced for the 107^th AGM, Mr Kennedy stated:

“The [Management Committee] reduced trading hours of the Club to a Wednesday and Saturday and to be run by volunteers. Not a popular decision by some members but for the Club to survive, cost cutting has to be done.^[33]

55. [55]
    Finally, in the 2021/22 Annual Report, Mr Kennedy’s Treasurer’s report again called for the ending of the Club. He stated, “with continuing losses, ongoing maintenance issues, and no sign of recovery, all members should have ownership for the future of the Club before it is taken out of our hands.”^[34]

Procedural History of the Matter – The AGM

56. [56]
    As noted above, the Club records financial years from 1 April to 31 March. The Club’s constitution, extracted above, requires the Club to hold an AGM within 3 months after the end of the financial year. Historically, the Club’s AGM has been held, in accordance with this timeline, at the end of June each year.

57. [57]
    A monthly Management Committee meeting was held on 9 May 2023. The minutes of that meeting record three notable matters. First, the following motion was carried:

“That the remaining funds from the closure of Yeronga Bowls Club be held in a Trust fund in partnership with Cunningham District Bowls Association for the purpose of management of disbursement of funds to assist Clubs to enhance the growth of the Sport of Bowls.”^[35]

58. [58]
    The language of the motion implies that the Management Committee believed the success of this application to be a foregone conclusion. That view may explain what was to follow.

59. [59]
    Second, it recorded that another meeting of the Management Committee would occur at 6pm on 13 June 2023.

60. [60]
    Third, it recorded that the AGM was to be held on 25 June 2023 at 10am.

61. [61]
    The proceeding came before me for review on 20 July 2023. At that time, I was advised that the Club had not yet held an AGM for the financial year 2022/23.

62. [62]
    The last vote to wind up the Club had occurred almost four years prior, and the last time an AGM was held was almost 12 months prior to the commencement of this proceeding. More current evidence of the views of the Club’s members concerning the future of the Club would be particularly probative evidence for this application. Accordingly, albeit without an order requiring it, I informed the Club on 20 July 2023 that they ought to hold an AGM before the proceeding was set down for hearing.

63. [63]
    No AGM was held.

64. [64]
    Mr Morris, in cross-examination, pressed the members of the Management Committee for an explanation as to why the AGM scheduled for 25 June 2023 did not proceed and why no AGM was held after the proceeding was reviewed on 20 July 2023.

65. [65]
    The only explanation given to the former question was that provided by Mr Kennedy who said that the Committee was “under the advisement from [its] solicitors that the AGM would not have to be held, so there was no need to authorise the cancellation of the AGM, because we were advised that this would be over and done with by the 30^th [of June]”.^[36] That would seem ambitious advice for a solicitor to give in circumstances where this proceeding was only commenced on 16 June 2023, albeit the proceeding was originally listed for hearing on 29 June 2023.

66. [66]
    Relatedly, none of the members of the Management Committee seemed to recall if any meeting was held on 13 June 2023.^[37]
67. [67]
    As to the latter question, Mr Kennedy in his affidavit exhibited email correspondence between the Club and the Office of Fair Trading (OFT) dated 26 July 2023 and 1 August 2023. Mr Kennedy, on behalf of the Club, sought from the OFT an extension of the time in which the Club was to hold the AGM. The OFT informed the Club that an AGM at the end of November 2023 would be suitable to the OFT. Regardless of the position of the OFT, given my comments to the parties during the review on 20 July 2023, I would have thought it clear that an AGM prior to the hearing was appropriate.

68. [68]
    During cross-examination, Mr Kennedy gave the following evidence:

69. [69]
    None of the other members of the Management Committee gave an explanation as to why the AGM was not held, other than by reference to the fact that this proceeding was on foot.

70. [70]
    Given my findings in this judgment it is necessary for the Club to hold an AGM. The fact that an association may soon be wound up is not a sufficient reason to cease to comply with the association’s constitution. The members have a right to elect a management committee. That right can only be exercised if an AGM is called.

71. [71]
    The failure to hold an AGM is relevant only to this extent. It is unclear what the view of the members are overall to this winding up application. One might expect that if sufficient members of the Club opposed the bringing of this application, they would have voted in a new management committee at an AGM. Equally, if the current Management Committee received the overwhelming support of the members, that fact may be relevant to this application.

72. [72]
    Relatedly, if an AGM had been called, another (current) vote could have been held to wind up the Club. If that vote had passed this application would have been made redundant. If the motion had been decisively struck down, it would tell against the grant of the relief sought by the application.

73. [73]
    In any event, I consider it telling, that the current Management Committee, despite clearly wishing for the Club to be wound up, have not held another vote to dissolve the Club, noting the last vote was in 2019. Instead, they have brought this application that will have eaten further into the Club’s remaining cash reserves. That seems an unlikely step for the Management Committee to take unless they had no confidence in a vote to dissolve gaining the necessary votes.

Mr Morris and his evidence

74. [74]
    Mr Morris gave evidence himself. It is not necessary to consider Mr Morris’ evidence in detail, but three points are worth noting.

75. [75]
    First, as indicated throughout this judgment, a core aspect of this case is whether the Club, its members, and its Management Committee, will be willing and able to take steps to revitalise the Club. Mr Morris gave evidence about the steps that he would take in that regard. He said that, given the chance, his intention would be to:

“Reactivate the club in terms of, firstly, opening the bar for three days a week initially and then promote the club actively in a local community, going to the local council member, local state member, even federal member and others, asking them to promote the club, its availability and, essentially, try and rebuild the club.”

76. [76]
    Mr Morris also sought to downplay the seriousness of the defects to the Club’s premises, including the seriousness of the asbestos issue. As I noted above, there is a dearth of evidence as to the extent of any necessary remedial works that would need to be undertaken to resolve the issues in the Club’s premises. Regardless, Mr Morris indicated that, given the chance, he would spend some of the Club’s reserve funds, fixing the green. The Club appears to have sufficient reserve funds for those works to be done based on estimates of costs provided.

77. [77]
    It was put to Mr Morris, in effect, that his plans might fail and he was asked what would happen then.^[38] He stated, “ultimately the club will still be insolvent, but at least I’d try.” That reflects a significant part of Mr Morris’ criticism of the conduct of the Management Committee.

78. [78]
    Second, Mr Morris frankly conceded that much of his cross-examination during the hearing was directed at criticising the Management Committee, as well as some of its past members. Mr Morris sought to establish that various membership applications had been rejected by the Committee on the basis that the Committee could not be satisfied that the relevant applicant for membership was interested in playing bowls. The members of the Committee who were cross examined were unable to give evidence on that point.^[39] He also appeared to argue that the MacGregor green had been sold too cheaply.

79. [79]
    It is unnecessary for me to make any finding on the specific criticisms levelled by Mr Morris, apart from the findings I have already made about the conduct of the Management Committee.

80. [80]
    Third, as noted at [16] above, Mr Morris appears to have had the backing of at least 9 members of the Club, which represents almost a quarter of its members.^[40] That is no small matter. Presumably, members in support of Mr Morris’ position in this application would also vote against the dissolution of the Club. Additionally, the last motion to dissolve the Club was rejected on 18 December 2019 and an AGM has not been held since June 2022. As such, the position of the members who took part in this application is the most recent evidence going to whether the members wish to dissolve the Club.

Winding up law

81. [81]
    I now turn to the principles applicable to the resolution of this proceeding.

82. [82]
    Paragraph 1 of the originating application in this proceeding seeks the winding up of the Club pursuant to s. 91(i) of the Associations Incorporation Act 1981 (Qld) (AIA) and s. 583 of the Corporations Act 2001 (Cth). It appears that the former reference is erroneous and should refer to s. 90(1)(e) of the AIA. Nothing turns on that. Both provisions give this Court the power to wind up the Club if the Court is “of the opinion that it is just and equitable” to do so.^[41]

General principles

83. [83]
    The Court’s power to wind up an entity on just and equitable grounds is broad, and the categories of cases in which it will be appropriate to do so are not closed.^[42] The Court must assess the whole of the circumstances and each case will turn on its own facts. However, before turning to the submissions made by the applicant, it is useful to identify some general principles.

84. [84]
    First, the applicant does not dispute that the Club is presently solvent.^[43] It is an unusual step (sometimes described as extreme) to wind up an entity that is solvent.^[44] As the Court of Appeal noted in Asia Pacific Joint Mining Pty Ltd v Allways Resources Holdings Pty Ltd,^[45] this is another way of saying that a winding up is a remedy of last resort, and should only be ordered if ‘some other less drastic form of relief is available and appropriate.’ Although (as I will describe below) that decision was made in a different statutory context, the remarks are, in my view, equally apposite in the case of a winding of an incorporated association.

85. [85]
    Second, whether it is just and equitable to wind up the Club must be determined, in part, by reference to the terms of the constitution and in particular, the method it establishes for dissolution of the company. In written submissions the applicant made the point in this way:

“… the application has been commenced after two attempts to wind up the Club under its constitution, in circumstances where a majority of the members support the winding up.

In Re New South Wales Leagues Club [2014] NSWSC 1610, Brereton J held that while the support of the majority of members is not sufficient to wind up a club there may be situations in which the normal process should be bypassed.”

86. [86]
    While that is an accurate statement of what was said by Brereton J in New South Wales Leagues Club, the ‘situations’ identified by his Honour do not in any way assist the applicant. His Honour stated at [67]–[71] (emphasis added):

1. “[67]
   Those cases illustrate a number of relevant principles which, for present purposes, may be summarised as follows.

68. [68]
    First, a special majority (75%) of shareholders is entitled by special resolution to cause a company to be wound up voluntarily or compulsorily. While it is open to a simple majority to direct presentation of a petition for winding up, as the legislature has stipulated for a special resolution, the mere wish of a simple majority to withdraw their capital is insufficient to render it just and equitable that the company be wound up.
69. [69]
    Secondly, except in a very strong case, the Court should not interfere with or bypass the domestic forum — the general meeting — which has been established for the management of the affairs of a company and to which decisions by the membership as to its continuance or winding up are primarily entrusted. The grounds in s 461(1)(a) and s 491 require not merely the support of 75% of members, but a special resolution. The requirement for a special resolution bespeaks not only the support of 75%, but also the engagement of the corporate democratic decision-making process, with the requisite notice of the resolution and a duly convened meeting, at which there will be an opportunity for discussion and debate.

70. [70]
    Thirdly, there may be a case for acting on the wishes of a simple majority (or less), and/or bypassing the domestic forum, where the members are being prevented from exercising their rights under the corporate constitution.
71. [71]
    Thus if no more appears than that a special majority of 75% favours winding up, that would be insufficient warrant to resort to the just and equitable ground and bypass the requirement for a special resolution. But it may well be otherwise if the members are being prevented or hindered in the exercise of their internal rights and remedies.”

87. [87]
    In relation to those propositions, his Honour cited the decision of Re Surry Garden Village Trust Ltd,^[46] where it was noted that ‘a very strong case’ must be made out before the Court will avoid the procedures of the association’s constitution. I adopt those statements. This Court should be hesitant to prevent the members from exercising their rights given under the Club’s constitution.

88. [88]
    Clearly that explication of the law does not assist the applicant. If any members are being prevented from exercising their rights, in this case it is those who oppose the proposed winding up.

89. [89]
    The facts of Re New South Wales Leagues’ Club are also relevant here. In that case, the Leagues Club had cash reserves of $9 million but was incurring trading losses of $800,000 per year and had no clear or viable plans for the future, beyond trading until its lease expired or its funds were exhausted.^[47] The Court held the fact that the club operated at a loss did not mean that its substratum had failed, and that while it had no plan presently, that did not preclude one from being developed.^[48]

Submissions of the applicant

90. [90]
    I turn to the specific points made by the applicant. In particular, it was submitted:

1. “28.
   In Re CNPR Limited [2018] NSWSC 989, Black J held that where a company could no longer operate as a going concern, and could no longer meet its objectives, there existed grounds for a just and equitable winding up.^[49]

29. In Asia Pacific Joint Mining Pty Ltd v Allways Resources Holdings Pty Ltd [2018] QCA 48, McMurdo JA, Gotterson JA and Jackson J agreeing, the Queensland Court of Appeal asked:

But to what extent, if at all, is the reasonableness of the applicant’s position affected by the consequences for others of a winding up? In particular, in a given case, could those consequences outweigh the applicant’s interests in obtaining a winding up where that is the only adequate outcome from its perspective?

30. McMurdo JA then went on to hold at [49]:

… Consequently a winding up will be ordered if there is no other remedy which is adequate in that it would redress the consequences of the facts and circumstances which are the basis for relief. This is another way of saying what McPherson J said in Re Dalkeith Investments Pty Ltd about the statutory predecessor of s 467(4) namely ‘that winding up is to be regarded as a remedy of last resort and which ought not to be granted if some other less drastic form of relief is available and appropriate’ …

31. The Court should therefore consider the questions:
    1. Is the application reasonably commenced?
    2. What alternative options are available to the Club?
    3. What is the impact of the proposed winding up on stakeholders?

[…]

34. … The application is sought to avoid a situation of deadlock and a breakdown of the relationships between the limited members,^[50] where no one benefits.”

91. [91]
    Three points should be made about these submissions.

92. [92]
    First, as I noted above, the comments quoted in the above passage from Re Dalkeith Investments Pty Ltd are relevant here. However, it should be made clear that Asia Pacific was decided in the context of s. 467(4) of the Corporations Act. That provision applies where an application is made by members of a company as contributories for, inter alia, winding up on the just and equitable ground. It requires the Court to be of the opinion that the applicant is entitled to relief by winding up or by some other means, and that in the absence of any other remedy it would be just and equitable to wind the company up. Once the Court forms those opinions, s. 467(4) calls for a consideration of whether the applicants are acting unreasonably, and whether other remedies are available.

93. [93]
    Section 467(4) has no application in the present case, at least, because it applies to companies.^[51]
94. [94]
    Whether other remedies are available and the impacts on stakeholders will often be relevant to whether it is just and equitable to wind up an association such as the Club. However, the Court is not required to find that the applicant is acting unreasonably in not pursuing another remedy before a winding up can be ordered under s. 90(1)(e) of the AIA and s. 83 of the Corporations Act.^[52]

95. [95]
    Second, the applicant argues that the Club can no longer trade as a going concern and can no longer meet its objectives. A winding up on this basis will be appropriate where the “substratum of the company” has failed, or it has become impossible to achieve the purpose for which it was formed.^[53] This is, equally applicable to a Part 5.7 body, being an incorporated association.

96. [96]
    Third, the applicant also appears to contend that the members have reached a deadlock. This was described during oral submissions as a “stalemate”.^[54]

97. [97]
    A winding up will be appropriate where an association is predicated on relationships of mutual co-operation, trust and confidence between the members, and those relationships have broken down. An association should not be required to go on where its continuation would be a futility or would require continuing supervision.^[55]

Findings

98. [98]
    Ultimately, the question for determination is whether it is just and equitable to wind up the Club. As indicated by the submissions extracted above, the applicant’s primary contention is that the substratum of the Club has failed and it cannot achieve its objects. I will begin by addressing that submission before briefly turning to whether there has been a deadlock between the members.

Substratum of the Club

99. [99]
    In order to determine whether the substratum of the Club has failed such that it is impossible for the Club to achieve its objects, it is first necessary to identify the objects of the Club.

100. [100]
     As set out fully at [17] above, the Club’s objects include the promotion of bowls and the provision of facilities for the playing of bowls. It is clear that, at present the Club is not meeting its objects. It does not trade and the green is not open. There is no evidence of anything being done to promote and enhance bowls in the local community.

101. [101]
     If the Club is left to continue its current course, it will slowly deplete its remaining cash reserves and become insolvent, or it will be wound up by a resolution of the members. The current course will continue if:

     1. the Club has insufficient liquid assets to repair and reopen the green (and probably the bar); or
     2. despite the Club having sufficient liquid assets to make the necessary repairs, the Club’s membership (and in particular its management committee) is unwilling to contribute the time and effort necessary to affect those repairs and reopen.

102. [102]
     I am not satisfied that either of those possibilities reflect the Club’s current reality.

103. [103]
     As to the first, based on my findings at [42] and [43] , there is insufficient evidence before the Court to determine the extent and likely cost of the works necessary to reopen the green and the bar. It is certainly not possible for me to conclude that the cost of reopening would be an amount close to or in excess of the liquid assets available to the Club. As such, I cannot conclude that the Club is incapable of reopening.

104. [104]
     In addition, as was made clear in Re New South Wales Leagues Club, the fact that the entity is going to trade at a loss is not sufficient for the substratum of the entity to have failed. The purposes of the Club include providing facility for bowls and promoting bowls. The Club’s purposes are not the making of profit.

105. [105]
     It is of course conceivable that if the Club expends the funds required to affect the necessary repairs, it will be left with only enough funds to trade for, say, a year or two, assuming that it continues to suffer the quantum of trading loss that it has historically. On the current evidence I cannot be satisfied that that is the case. Even if I was, that year or two would be time in which the Club is able to meet its objectives. In such a case, it could not be said that the Club’s substratum has failed. It is therefore, not necessary for me to make any findings about the likelihood that the Club will continue to incur significant trading losses if it were to reopen.

106. [106]
     As to the second, it is difficult to assess whether, regardless of its liquid asset position, the members of the Club will expend the time and effort required to reopen the Club. Broadly I accept the evidence of Ms Smith that the Club does not have a very robust volunteer base.

107. [107]
     Regardless, many possibilities are imaginable from this point. In particular, it is unclear:

1. whether the present Management Committee will stand for re- election;
2. whether, if they stand for re-election, they will be re- elected;^[56]
3. whether, if they are re-elected, they will continue to attempt to preserve the funds of the Club, or take steps to reopen;
4. whether, if another Management Committee is elected, they will take steps to reopen the Club.

108. [108]
     It appears from the way that this trial was conducted that, at least, Mr Morris, and likely other members of the Club who filed affidavits opposing this application, would put their efforts towards reopening. It is not inconsistent with the Club’s objects to allow them to try.

109. [109]
     On that basis, I am not satisfied that the substratum of the Club has failed or that the Club is unable to meet its objects. The applicant has not satisfied me that the Club will not be able to reopen, nor that if the Club reopens it will not be able to achieve its objects.

Deadlock

110. [110]
     The submission was made by the applicant, though only tentatively, that there may be a stalemate or a deadlock between the members of the Club.

111. [111]
     Even if the principles applicable to cases of deadlock are relevant here, the submission is not made out on the evidence. The most recent vote of the members to dissolve the Club occurred on 18 December 2019. There is no evidence of any disputes between the members other than this application. Mr Morris (and perhaps some of the other members) disagree with the approach that has, to date, been taken by the current Management Committee. However, there is no evidence that that disagreement cannot be resolved through the ordinary constitutional processes of the Club.

112. [112]
     I am not satisfied that the Club should be wound up on the basis of any perceived deadlock between the members.

Distribution of surplus funds

113. [113]
     A significant amount of evidence was led as to how any surplus funds should be distributed if the Club was to be wound up. Given my findings it is not necessary for me to resolve this point. However, I will briefly address it.

114. [114]
     The applicant submitted that the surplus funds should be distributed to the Cunningham District Bowls Association. Mr Morris asked the Court to order that each member be given an equal share of the surplus funds to distribute to another bowls club of their choice.

115. [115]
     I would not have accepted either submission. Clause 47 of the Club’s constitution states that if the Club is wound up under the AIA, surplus assets (emphasis added):

“shall be given or transferred to some other institution or institutions having objects similar to the objects of the Club, and which shall prohibit the distribution of its or their income and property among its or their members to an extent at least as great as is imposed on the Club under or by virtue of rule 39(j), such institution or institutions to be determined by the members of the Club…”

116. [116]
     In my view, this clause requires a resolution of the members, which would presumably accompany any vote to dissolve the Club. If the point arose, I would have left the determination as to where the surplus funds should go to the members of the Club as required by the constitution.

Conclusion

117. [117]
     For the reasons set out above, the application is dismissed. I make no order as to costs.