An v Joo

These proceedings concern a dispute about the management of the Open Door Church, which is a Korean Presbyterian Church and a member of the Australian Synod of the General Assembly of Korean Presbyterian Churches in Oceania.

On 29 January 2019 the Court heard two motions in connection with the dispute. On 31 January 2019 orders were made consequential upon those motions. While dealing with a number of procedural matters, the primary purpose of those orders was to make provision for the conduct of fresh elections of the management committee of the incorporated association related to the Open Door Church and for an independent financial investigation to be completed before that election. These are the reasons for those orders which, for convenience, are reproduced at the end of these reasons.

The plaintiff (“Mr An”) is a member of the congregation of the Open Door Church. He was represented by Mr M Condon of Senior Counsel with Mr N Kabilafkas of Counsel. Mr An was the applicant on one of the motions before the Court, seeking leave to file a further amended statement of claim and other relief, including injunctions against the defendants from dealing with the assets associated with the Open Door Church other than in the ordinary course of business.

The first and second defendants were respondents to both of the motions. They were represented by Mr D Creais, solicitor. Mr Creais informed the Court that his clients no longer have any position in the Open Door Church or its related entities and did not wish to be heard in opposition to either of the motions. In those circumstances, Mr Creais and his clients were excused from the hearing without objection by any other party.

Among other things, the further amended statement of claim propounded by Mr An sought to join seven new defendants as the tenth to sixteenth defendants (the “New Defendants”), who from either 11 March 2018 or 1 July 2018 had (putting the matter neutrally) been acting as the management committee of the Open Door Church in its corporate manifestation under the associations incorporation legislation (currently the Associations Incorporation Act 2009 (NSW) (the “Associations Act”)).

In addition to being a respondent to Mr An’s motion, one of the New Defendants, Mr C G Jeon, was the applicant in the second notice of motion that was before the Court, about which more will be said below. Dr C Birch of Senior Counsel appeared with Mr J Mack of Counsel for the New Defendants.

The fifth, sixth and seventh defendants were represented by Mr D Smallbone of Counsel. The Court was informed that those defendants are no longer involved in the affairs of the Open Door Church and would not be standing for election in any new election that may be held. Mr Smallbone and his clients were also excused from participation in the hearing without objection by any other party.

The eighth defendant is Open Door Korean Cultural Society Limited (the “Company”). It owns property connected with the activities of the Open Door Church. The validity of the registration of the Company as a company limited by guarantee is an issue in the proceedings. The Company has filed a submitting appearance save as to costs.

The ninth defendant is the Open Door Church Incorporated (the “Church”). It is a corporate manifestation of the Open Door Church pursuant to the Associations Act. The circumstances of its management are also a matter of controversy in the proceedings and it has entered a submitting appearance save as to costs.

There being no doubt that the Open Door Church is a charitable organisation, the Court also had the advantage of submissions on behalf of the Attorney General for New South Wales, who consented to being joined after the New Defendants to become the seventeenth defendant in the proceedings. Mr P Singleton of Counsel appeared for the Attorney General.

On or about 1 January 1996, Korean adherents of the Presbyterian Church established the Open Door Church as an unincorporated association.

On 5 February 1998, the eighth defendant, then known as The Open Door Korean Cultural Society Incorporated (the “Society”) was incorporated as an incorporated association pursuant to the predecessor of the Associations Act. The Society is a charity registered by the Australian Charities and Not for Profits Commission (“ACNC”) for the purposes of advancing education and is alleged to hold its property on trust for the charitable purpose of advancing the education of those raised in the faith of the Korean Presbyterian Church.

On 25 September 2003, the unincorporated association known as the Open Door Church was incorporated pursuant to the predecessor of the Associations Act to become what I have referred to as the Church (see paragraph [9] above) and adopted a constitution, being (the parties now agree as applicable) the “Model Rules for Associations incorporated under the Association Incorporation Act, 1984” (the “Model Rules”). The Church is a charity registered by the ACNC for the purpose of advancing religion and is alleged to hold its property on trust for the charitable purpose of advancing the faith of the Korean Presbyterian Church.

From about July 2016 Mr An began to raise queries about the financial affairs of the Church and the Society.

In or about September 2016, (again putting the matter neutrally) steps were taken which purportedly had the effect of transferring the registration of the Society to a company limited by guarantee under the Corporations Act 2001 (Cth) (the “CA”) to become what I have referred to as the Company (see paragraph [8] above). The sole member of the Company is the Church. In these proceedings Mr An challenges the validity of the transfer of the registration of the Society to become the Company.

Mr An commenced these proceedings by filing a summons on 9 March 2017. The relief which he seeks challenges the validity of the transfer of the registration of the Society to become the Company, seeks declarations concerning irregularities in the conduct of the annual general meetings of the Church from 2012 to date and prays for the appointment of a receiver and manager to the assets of the Church and the Company in order to conduct elections of their management committees and to investigate their financial affairs. It is important to note that Mr An’s subsequent pleadings do not identify any specific, alleged examples of financial impropriety (as opposed to allegations of a more general nature concerning irregularities in the conduct of the affairs of the Church and the Company).

On 5 April 2017 the relevant defendants gave conditional undertakings intended to preserve the status quo in relation to the assets of the Church and the Company, subject to their continuing to be managed in the ordinary course of business. Those undertakings have been maintained by the relevant defendants through the subsequent interlocutory stages of the proceedings and are continued as part of the orders which I made.

On 30 May 2017 Mr An filed a statement of claim.

On 9 June 2017 the Attorney General, through the Solicitor-General in the latter’s role as delegate of the Attorney General, gave his consent to the commencement of these proceedings by Mr An pursuant to s 6 of the Charitable Trusts Act 1993 (NSW).

On 24 July 2017 the Church and the Company entered submitting appearances save as to costs.

On 17 August 2017 defences and a cross-claim were filed.

General meetings of the Church were held on 11 March 2018 and 1 July 2018. There was no dispute at the hearing before me that there were irregularities in the conduct of those meetings (as to which, see paragraph [29] below) including in relation to the election of the management committee of the Church. There was also no dispute that, in the absence of a declaration by the Court, the New Defendants, as the current purported management committee of the Church, could not be said to have been validly elected to their respective positions. The Church is therefore currently without a validly constituted governing body.

On 13 September 2018 Mr An filed his notice of motion for leave to file a further amended statement of claim to incorporate complaints about the meetings of 11 March 2018 and 1 July 2018, for consequential orders and for injunctions to maintain the status quo.

On 21 December 2018, by leave which I granted, Mr Jeon filed his notice of motion, seeking relief which included:

The Church has obtained an extension from NSW Fair Trading up until 31 March 2019 in order to hold its annual general meeting.

I heard both Mr An’s motion and Mr Jeon’s motion on 29 January 2019.

Commendably mindful of their obligations under s 56 of the Civil Procedure Act 2005 (NSW) to facilitate the just, quick and cheap resolution of the real issues in dispute between them, the parties conducted the hearing before me on the basis of a number of concessions (some of which were formally made only for the purposes of the hearing) intended to narrow the issues. With some modifications which it is not necessary for me to record, the active parties, in particular the New Defendants, consented to the relief sought in Mr An’s notice of motion either by the making of orders or the giving of undertakings. Those matters are all reflected in the orders which I subsequently made.

In relation to Mr An’s motion, it was common ground that s 1322(4) of the CA applied to the Church, citing the decision of McDougall J in Chen v Liu [2015] NSWSC 161 (“Chen”), a case factually similar to the present insofar as it concerned an incorporated association whose affairs were deadlocked. The parties accepted that if s 1322 were engaged, the Court could grant relief on conditions including in relation to the holding of a meeting to elect a new management committee of the Church. Section 1322 of the CA includes:

Dr Birch SC also informed the Court that by reason of admissions made by the existing defendants in their current pleadings, as well as taking into account events which have occurred since the proceedings have been commenced, he did not want to be heard against the proposition that there had been irregularities in relation to the management of the Church and the Company over a number of years. For the purposes of the application of s 1322 to Mr Jeon’s motion, the parties ultimately accepted that there had been these irregularities (the “Irregularities”) in relation to the affairs of the Church:

Once it became apparent that there was no substantive opposition to the relief sought in Mr An’s motion, the focus of the hearing turned to Mr Jeon’s motion. Dr Birch SC urged upon the Court that this was a case which cried out for an approach similar to that adopted by McDougall J in Chen relying upon s 1322(4)(a) and the just and equitable ground in s 1322(6)(a)(iii) of the CA to bring about fresh elections of the management committee. Dr Birch SC submitted that, as with many such disputes concerning religious congregations, there was a real risk that the present dispute could grow into one of great complexity, length and expense for all the parties. In particular, he contended that if every irregularity alleged in the further amended statement of claim were to be the subject of a full hearing, a case lasting many days would undoubtedly ensue with very little consequential benefit to the parties other than a determination that the particular contraventions had or had not occurred. On the other hand, because there was going to have to be a meeting of the Church by 31 March 2019, the best way to resolve matters would be to facilitate the lawful conduct of new elections at that meeting by removing any doubt about the power of the persons currently occupying the positions on the committee of management to conduct that meeting by the Court validating their position pursuant to s 1322(4)(a) of the CA on stringent conditions as to the conduct of the meeting to elect a new management committee.

The only opposition to a solution along the lines sought by Mr Jeon’s motion was from Mr An. One objection was that if fresh elections were to be held, it was important for the electorate to be informed by an independent source as to whether or not the financial affairs of the Church and the Company had been properly managed. To meet this issue the parties accepted that an independent audit should be conducted. Given that the most of the records were maintained in Korean, I accepted Mr Birch SC’s submission that it would be most efficient (including as to costs) if the independent accountant conducting the audit is fluent in written and spoken Korean.

Mr Condon SC also foreshadowed that, in particular, he had a number of submissions to make on the question of whether the Court could be satisfied, for the purposes of s 1322(6)(c) of the CA, that no substantial injustice had been caused to Mr An by reason of the Irregularities. Without foreclosing Mr Condon SC’s right to put whatever submissions he was instructed to make against the kinds of orders sought by Mr Jeon, I indicated to the parties that, subject to matters of detail, I accepted Mr Birch SC’s submissions that it was just and equitable for orders to be made of the kind proposed in Mr Jeon’s motion for the reasons Dr Birch SC had advanced (see paragraph [30] above). The just, quick and cheap resolution of the proceedings would, in my view, be far more likely achieved by moving towards the swift conduct of an election for the committee of management for the Church, coupled with an independent investigation of the financial affairs of the Church and the Society for a reasonable number of years. To enable this to occur required the validity of the current management committee to be confirmed. After the luncheon adjournment, Mr Condon SC informed the Court that his instructions were to make submissions about the details of any orders to be made under s 1322(4)(a).

The argument, better thereafter described as a co-operative exchange between the bench and the parties, then proceeded by reference to a draft set of orders under s 1322 helpfully prepared by Mr Singleton on behalf of the Attorney General. There was general agreement about most the aspects of the form of the orders to be made and it is only necessary for me to record briefly one matter about which there was active contention. However, before doing so, I should first deal with what is, in effect, a further statutory pre-requisite to the making of an order under s 1322(4)(a) in addition to the Court being satisfied that it is just and equitable for an order to be made.

Section 1322(6)(c) of the CA provides that the Court must not make an order under s 1322(4)(a) unless it is satisfied, relevantly for present purposes, “that no substantial injustice has been or is likely to be caused to any person”. There are two aspects to this. “Has been” invites an inquiry as to the effect of the irregularity sought to be cured. “Likely to be” draws attention to the effect of the proposed order. There was no suggestion that the proposed order would cause anyone an injustice, substantial or otherwise. However, in the present case a person who had suffered substantial injustice could be thought to be Mr An, who was irregularly deprived of the opportunity to stand for election to the management committee of the Church.

For the following reasons, the Court is satisfied that the Irregularities have not caused substantial injustice to Mr An in the particular factual circumstances of this case:

The only particular matter on which there was some argument in relation to the orders was the suggestion that as a condition of the order those defendants (including the New Defendants) who had purported or were purporting to hold office in the Church and the Company should not be permitted to offer themselves for election at the meeting that would be held pursuant to the orders. During the course of argument I had mentioned to the parties that I would have been prepared to impose such a condition with the consent of all interested parties. When that consent was not forthcoming, Mr Condon SC submitted that I should in any event impose that condition on the basis of the various admitted irregularities (including the Irregularities). Mr Birch SC submitted in response that the Court should, in effect, take judicial notice that in voluntary organisations it can be difficult to find sufficient qualified and interested people to hold executive office and the Court should not reduce the pool of possible candidates.

I declined to impose a condition that past and present purported officeholders could not stand at the next election. I did not think it appropriate to do so when there had been no debate before me about the particular roles of particular individuals. I would not make such an order in the absence of a proper examination on evidence in relation to each person who would be affected by such a condition and without having given each such person an opportunity to be heard. Even assuming the evidence was available and the relevant parties ready, it would have extended the hearing well beyond the time allocated and introduced issues which would not have facilitated the just, quick and cheap resolution of the central question that Mr Jeon’s motion presented for determination.

Pursuant to a direction I had made on an earlier occasion, the existing and New Defendants attended the hearing. I infer from the large number of people in the well of the Court that other members of the congregation were also present. The orders include that a Korean translation of this judgment should be posted on the Church’s website, so I assume it will be read by members of the congregation who were not present in Court. For that reason it is appropriate for me to record some observations to the effect of those I made during the course of the hearing.

It is clear from the existing defendants’ own pleadings and the evidence to date that for some years the financial and constitutional affairs of the Church and the Society have been run with disregard for the relevant legal requirements that apply to incorporated entities. Whether this has occurred as a result of, as one possibility, innocent or benign incompetence, or as another possibility, deliberate and self-interested misfeasance on the part of purported officeholders, is not a matter which the Court has yet had to decide. At this stage the Court has no view about which it might be.

However, the course of the proceedings thus far shows that many of Mr An’s concerns have been vindicated and that he had good grounds to bring this case. Without knowing what the outcome might be, it is obvious that the forthcoming independent audit of the Church and the Company will be an important mechanism for everyone who has an interest in the matter to find out if the various irregularities admitted by the current defendants are a symptom of underlying, serious financial irregularity.

As Dr Birch SC submitted, the history of disputes in this Court about the internal affairs of religious organisations includes many examples of cases which have run for years at enormous, disproportionate financial cost to the participants and which can only have seriously damaged the communities involved, including impairing their capacity to provide the spiritual and practical support to their members which is usually the very reason for their existence. This is why the Court encourages the parties in this case to continue what they began at the hearing in terms of concentrating their efforts on bringing the present dispute to an early conclusion by sensible compromise.

The evidence shows that over the years the Open Door Church has given effect to the Christian principles which it espouses by doing much good work not only for its congregants but also for members of the wider Korean community, especially those who are learning to make a life in a new language and culture. It is to be hoped that those same principles will inform the conduct of the forthcoming election and the resolution of any issues disclosed by the work of the independent auditor.

The orders of the Court made on 31 January 2019 were: