Re Ryde Ex-Services Memorial & Community Club Limited (Administrator appointed)

The plaintiff, Ryde Ex-Services Memorial & Community Club Ltd (“the Club”), is a company limited by guarantee (registered under the Corporations Act 2001 Cth) and licensed under the Registered Clubs Act 1976 NSW. It instituted these proceedings to have the Court determine the validity of a resolution controversially passed at a meeting of its ordinary members.

The members are deeply divided about a proposal, promoted by its Board of Directors, to sell off land, upon which club premises stand, to pay down the Club’s debts.

On 23 November 2014 the members of the Club, in general meeting, purported to pass a resolution necessary, under section 41J of the Registered Clubs Act, to give effect to that proposal.

Members opposed to the proposal have continued their agitation in opposition to it. In doing so, they have contended that the resolution, purportedly passed on 23 November 2014, was invalid.

That contention is based, essentially, on the fact (agreed and established by evidence, particularly Exhibit 1D1) that, upon the motion that became the resolution being moved and seconded, the chairman of the meeting announced that:

Opponents of the Board’s proposal (represented, as yet without a representative order, by the first defendant as the Club’s contradictor) maintain that:

The first defendant contends that the invalidity he attributes to the resolution is reinforced by (but not dependent upon) the following additional facts, which I take as established by evidence before the Court:

The draft minutes of the meeting record that the procedural motion moved upon closure of voting was declared by the chairman to have been “not carried”, but the mover of the motion deposes that the chairman, after conferring with the chief executive officer of the Club, refused to accept the motion on the basis that it “would not be legally viable”. I accept that evidence. I proceed on the basis that the chairman did not accept the formal procedural motion advanced at the end of voting.

The chairman’s initial announcement about voting procedure was not the subject of any vote, by way of a show of hands or otherwise.

The draft minutes of the meeting suggest that the chairman announced that “[the] Board (consisting of seven members of the Club) have requested a ballot, mainly due to it being 38° with no air conditioning, with the voting process being more manageable than a show of hands.”

A transcript of the opening phase of the meeting (Exhibit 1D1) records nothing of the sort. The chairman simply made the following announcement before calling for a mover and seconder of the motion:

After the motion was moved and seconded, the chairman made the following further announcement:

At about the same time as this further announcement was made the process of voting commenced, with members moving into and out of the hall.

The transcript of the meeting records no demand for a poll by any member of the Club.

An agreement by directors of the Club outside, and indeed before, the meeting that a (secret) ballot be conducted in lieu of a show of hands is not a substitute for a voting procedure “by a show of hands” or a “demand” for a poll, in lieu of a show of hands, at the meeting.

Although the evidence indicates that the Club’s’ Board of directors had agreed, two days before the meeting, upon the form of the voting procedure announced by the chairman at the commencement of the meeting, given that his bona fides is not in dispute in these proceedings, I pay him the courtesy of proceeding on the assumption that the voting procedure he announced was announced by him acting on his own authority, not as a delegate of the Board.

There were complaints from the floor of the meeting about the chairman’s announced procedure, coupled with an assertion that any votes cast before “both sides of the story” had been heard in formal debate would be invalid. However, the voting procedure announced by the chairman was implemented without anybody moving a procedural motion that the chairman’s decision, embodied in the announcement, be dissented from: cf, ES Magner, Joske’s Law and Procedure at Meetings in Australia (11th ed, Law Book Co, Sydney, 2012), paragraph [6.75]; Wishart v Henneberry (1962) 3 FLR 171 at 173.

Whether his decision would have been upheld, or overturned, had it been tested in that manner cannot now be known. Nor can one confidently know why a motion of dissent was not moved. Members in attendance may have been ignorant about meeting procedure. Just as plausibly, opponents of the Board’s proposal may not have had the numbers to challenge the chairman. They may have thought their best strategy to be to use the Chairman’s decision as a debating point against, or as a ground for a prospective challenge to, the substantive motion under consideration. One cannot know their individual, or collective, subjective states of mind, though inferences may have to be drawn, objectively, from the whole of the evidence available.

Had a motion of dissent been put and rejected by the Chairman it may have been arguable that there was a lack of bona fides on his part: Corpique (No 20) Pty Limited v Eastcourt Limited (1989) 15 ACLR 586 at 597; 7 ACLC 794 at 803.

Nevertheless, despite the disappointment with the outcome of the meeting amongst those who have opposed the Board’s proposal, these proceedings fall be determined on the basis that nobody has challenged the bona fides of the chairman of the meeting.

Whether technically permissible or not, his decision about the voting procedure adopted was, in the abstract, plausible; not manifestly unreasonable having regard to the welfare of members of the Club in attendance. It is common ground that: (a) the venue for the meeting was uncongenial during hot weather that prevailed at the time of the meeting; and (b) that factor was said to be a factor taken into account by the Chairman.

Likewise, whether or not the voting procedure adopted was technically permissible, the chairman had plausible grounds for believing, as he evidently did, that, by the time the contested motion had been moved and seconded, all members of the Club had had ample opportunity to be informed about the general nature of the business to be transacted.

The meeting at which the contested resolution was passed was immediately preceded by another meeting (of about one hour’s duration) which brought to an end an earlier meeting (held on 10 August 2014) that had been the subject of an adjournment. Supporters and opponents of the Board’s proposal appear largely (but I cannot say completely) to have joined issue by the time of the chairman’s announcement about voting procedure at the second of the two meetings held on 23 November 2014. The combined notices of the meetings distributed to members of the Club incorporated “Notes to Members” that summarise the Board’s proposal and record that the Club had held “information sessions” for the benefit of members since the meeting of 10 August 2014.

The chairman’s decision about voting procedure is susceptible of different colours depending upon whether regard is, or is not, had to the broader context in which the decision was made.

If regard is had to the fact of the meeting held on 10 August 2014, the fact of systematic information sessions being held for the benefit of members subsequent to that meeting, the fact of the adjourned meeting being held immediately before the meeting at which the contested resolution was passed, the fact that the notices of meeting for the meetings of 23 November 2014 were accompanied by explanatory notes and the fact that the physical welfare of members attending those meetings would not have been assisted by exposure to prolonged attendance, the chairman’s decision appears, in the abstract, to have been reasonable.

If, on the other hand, regard is not had to those factors, the decision can more readily be seen as curtailment of debate on a controversial motion, limiting an opportunity otherwise available to its opponents to be heard against it and to persuade other members to their cause.

Section 41J of the Registered Clubs Act prevents disposal by a registered club of any “core property” of the club (section 41J (3)) unless:

“Core property” is defined by section 41J (1). That definition empowers club members to “declare” that particular property is, or is not, “core property”. Subject to any such declaration, “core property” of a registered club is defined to mean “any real property owned or occupied by the club” that comprises:

Section 41J (1) defines not only “core property”, but also the converse concept of “non-core property”. Non-core property of a registered club is “any real property owned or occupied by the club that is not core property”.

Section 41J (2) mandates that each annual report of a registered club specify the core property and non-core property of the club as at the end of the financial year to which the report relates.

The resolution under challenge in the current proceedings purported, by declarations under section 41J(1), to redefine the “core property” and the “non-core property” of the Club.

It did so for the purpose (identified in paragraphs 6-8 of the “Notes to Members” published as an integral part of the Notice of Meeting pursuant to which the meetings of 23 November 2014 were convened) of empowering the Club’s Board of Directors, on conditions:

The parties before the Court agree that it is not necessary, in these proceedings, to review the state of the Club’s finances or to question the bona fides of the Club’s directors. Nor is it necessary to consider wider questions relating to management of the Club.

Suffice to say that there are genuine concerns about Club’s finances, and equally genuine concerns about any prospective sale of club property as a means of addressing concerns about the Club’s solvency.

The focus of the current proceedings is on the validity, or otherwise, of the resolution under challenge.

The general meeting held on 23 November 2014, at which the contested resolution was passed, was not the first to be convened to discuss whether there should be a sell-off of club property.

As has been noticed already, a general meeting held on 10 August 2014 considered a proposed resolution on the same topic.

It was less discriminating than the one purportedly passed on 23 November 2014. It did not specifically identify property proposed to be declared non-core property, as did the resolution ultimately passed.

The earlier, proposed resolution was to the following effect:

The meeting of 10 August 2014 had become mired in controversy, evidently with fairly evenly balanced voting blocks, as a result of which the meeting was (after contested debate) “adjourned to a date to be confirmed in writing so that members can gather and receive further information on the proposal” for the sale of club property.

The notice of meeting pursuant to which the second meeting of 23 November 2014 was convened was accompanied by a separate notice that the adjourned meeting of 10 August 2014 would be held, first, on that date.

The two notices of meeting, incorporated in the one document, provided for (as happened) a resumption of the adjourned meeting on 23 November 2014, followed immediately by the freshly convened meeting.

No complaint is made about this procedure or the combined notices of meeting.

On 23 November 2014 the adjourned meeting resumed at about 10:30am. The President of the Club (who chaired both meetings that day) immediately proposed that the meeting close so that the fresh meeting could commence. After about an hour of debate, indicative of ongoing controversy, the meeting was closed. The motion moved and seconded on 10 August 2014, upon closure of the adjourned meeting, lapsed unpassed.

Uncertainty attends the precise timing of the closure of the first (adjourned) meeting and the commencement of the second (fresh) meeting held on 23 November 2014. The draft minutes of the former record that it closed at 11:30am. The draft minutes of the latter record that it opened at 11:20 am. Nothing is said to turn on the discrepancy, however. There is no controversy about the sequence of events in this respect. The adjourned meeting closed, the fresh meeting commenced immediately thereafter.

Conscious of continuing opposition to the Board’s proposal to sell off property, and of continuing complaints that the contested resolution of 23 November 2014 was invalid because of the voting procedure adopted, the Club commenced the present proceedings (by an Originating Process filed on 9 December 2014) seeking relief under the Corporations Act, section 1322 (4).

Section 1322 is in the following terms (with emphasis added):

The Club’s Originating Process claimed relief to the following effect:

The Originating Process named two defendants.

The first is a former director of the Club who, in fact, is representative of those members of the Club opposed to the resolution under challenge. No order has yet been made for him formally to represent those members but, subject to allowing the parties an opportunity be heard, such an order would appear to be appropriate for an orderly determination of the proceedings: John v Rees [1970] Ch 345 at 369H-374E (especially at 369H-370H, 371G-372A and 373H-374C); Ahmed v Chowdhury [2012] NSWSC1452 at [47]; Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466 at 475 [23], applying Cuthbertson v Hobart Corporation (1921) 30 CLR 16 at 24-25. The first defendant served as the Club’s contradictor with the benefit of affidavits sworn by like-minded members of the Club.

If representative orders are to be effective to bind all members of the Club, procedurally, all persons who have a material interest in the outcome of the proceedings (that is, all members of the Club) should be either joined or represented in the proceedings. Given that full argument has been had, for and against validity of the resolution purportedly passed on 23 November 2014 (with the plaintiff and the first defendant, respectively, having carriage of the argument on either side), it may be appropriate to make representative orders appointing the plaintiff to represent the case for validity and the first defendant to represent the case for invalidity, and those undecided, to cover the field.

The second defendant is a land developer with a prospective interest in development of the Club’s property should the Club be at liberty to sell part of its land. Although represented at the hearing of the proceedings, it limited its submissions to a formal adoption of those made on behalf of the Club.

On 21 January 2015 the directors of the Club appointed an administrator pursuant to the Corporations Act, section 436A.

I assume that any necessity, under section 41 of the Registered Clubs Act, for the appointment to be approved by the Independent Liquor and Gaming Authority has been satisfied.

The validity of the administrator’s appointment was under challenge in the days leading to the date appointed for the hearing of the current proceedings. That challenge dissipated in due course. However, in aid of an orderly determination of the current proceedings, on 4 February 2015 (the day before the date appointed for the hearing of the proceedings) I made the following orders with the consent of all parties to the proceedings and the administrator:

The proceedings give rise to three questions for determination:

On the hearing of the Club’s Originating Process the parties joined in requesting (and I agreed) that, should the third question arise, consideration of it be deferred so as to allow the Club’s administrator time to consider how best to proceed with administration of the Club’s affairs.

As acknowledged by senior counsel for the Club, the primary objection that could be taken to the validity of the contested resolution is that the voting process (by a poll in the form of a secret ballot) commenced before debate on the motion under consideration had concluded or, indeed, before it had commenced.

Counsel agree that no provision of the Corporations Act or the Constitution of the Club deals explicitly with the issue whether a poll may commence to be taken during discussion, or debate, on a motion proposed for consideration.

Counsel also agree that there is a dearth of authority bearing specifically upon the issue.

The apparent absence of any case directly in point reflects the infinite variety of factual settings in which questions about meeting procedure may arise; the fact-sensitive character of particular cases; the importance of identification of principles governing a determination of the proceedings; and the purposive character of the law.

Senior counsel for the Club referred in argument to the following statement made by the late Dr Eilis Magner in the latest edition of Joske’s Law and Procedure at Meetings in Australia (11th edition, 2012) at paragraph [7.15]:

Senior counsel for the Club also referred to observations of Young J in Re Adams International Food Traders Pty Ltd and the Companies Code (1988) 13 NSWLR 282 at 283 E-F:

These observations led counsel to the judgment of McLelland J in Re Direct Acceptance Corporation Ltd (1987) 5 ACLC 1,037. There, at 1,041-1,042, his Honour made the following observations (with emphasis added) about the conduct of a meeting of shareholders convened to consider a scheme of arrangement:

In contending for the validity of the contested resolution senior counsel for the Club accepted, on the basis of these authorities, that in determining the general parameters within which a chairman must operate in controlling debate, there is at least some entitlement on the part of those opposing a motion to be heard.

However, he submitted that the current proceedings involve a subtly different question: namely, whether participants in a meeting have an entitlement to demand that those voting listen to all the arguments prior to casting their vote. He noted that business conducted at a meeting is not invalidated because those present and voting do not pay attention to speakers, or attend the meeting with their minds made up, prepared to vote without regard to what may be said in debate. He submitted that speakers at a meeting of a company are not entitled to demand of members in attendance that they give dispassionate consideration to arguments that the speakers might wish to present.

Absent special arrangements, he submitted (correctly and uncontroversially), the members of a company do not hold their voting powers pursuant to any fiduciary obligation, but are entitled to exercise their voting rights on the basis of whatever private motivations or interests they may have: North-West Transportation Company Ltd v Beatty (1887) 12 App Cas 589 at 593-594.

The Club accepted that what occurred at the meeting at which the contested resolution was passed was unusual. However, it contended that permitting voting almost as soon as the contested motion was moved and seconded did not, in this particular case, curtail debate, as: (a) debate was allowed to continue; and (b) any member who wished could have stayed throughout the whole of the discussion before voting, as an unquantified number of members did.

Senior counsel for the first defendant joined issue with the Club in submissions summarised in paragraphs [6]-[7] above.

In support of those submissions he cited, inter alia:

Given that both sides of the present argument take Re Direct Acceptance Corporation Limited (1987) 5 ACLC 1,037 at 1,041-1,042 as foundational, insight into the observations made by McLelland J may be obtained from a consideration of the two authorities his Honour cited.

So far as is material, the headnote to Wall v London and Northern Assets Corporation [1898] 2 Ch 469 records the following:

This summation is based upon observations respectively made by Lindley MR at 480-481 and by Chitty LJ at 483.

Lord Lindley’s observations (with emphasis added) were as follows:

Chitty LJ’s observations were as follows:

In Caruth v Imperial Chemical Industries Ltd [1937] AC 707 the House of Lords had to consider the validity of a resolution purportedly passed at a meeting of a class of shareholders (holders of deferred shares), held in the midst of other (ordinary) shareholders attending a general meeting of the company, in favour of a reduction of the company’s capital. The leading judgment was that of Lord Maugham. Lord Russell of Killowen delivered a concurring judgment, with additional reasons. Lord Blanesburgh delivered a separate judgment, with contrary reasoning but concurring in the result.

Lord Maugham made the following observations about meeting procedure at [1937] AC 766-768 (with emphasis added):

Having agreed with the opinion of Lord Maugham (at [1937) AC 759), Lord Russell of Killowen made the following observations about meeting procedure at 760-762:

In the headnote to the case (at [1937] AC 709-710) Lord Blanesburgh’s reasoning is summarised thus:

Lord Blanesburgh counsels perfection in meeting procedure against a risk of abuse. He favours strict adherence to formalities.

Organisational Framework for a Corporate Decision. The Club, as a company limited by guarantee and a registered club, is governed by the Corporations Act 2001 Cth, the Registered Clubs Act 1976 NSW and its Constitution.

Broadly defined, and dependent on context, a “company” is an association of persons with a common object.

Its character as an association of persons recognised by law, as a body corporate (Corporations Act, sections 119 and 124), carries the consequence that the law must provide, inter alia, a principled structure for regulation of the affairs (including decision-making processes) of the association.

Allowance must be made for the context in which a particular association operates, including the nature of the association and the purpose, or purposes, for which it was formed. What may be essential to the effective operation of a commercial association (in which each member holds a share in a property-holding, profit-driven entity) may not work for a social, political or religious association in which members hold no proprietary right: eg, Cameron v Hogan (1934) 51 CLR 358 at 370-371.

Under the Corporations Act:

The Corporations Act contains provisions governing meetings of members of a company (Part 2G .2), including provisions relating to:

The requirement in section 250J of the Corporations Act that “[a] resolution put to the vote at a meeting of a company’s members must be decided on a show of hands unless a poll is demanded” is a “replaceable rule” within the meaning of section 135 (1) of the Act. It is, accordingly, able to be “displaced or modified” by a company’s constitution: section 135 (2). This is what the Club has done. Article 4 of its Articles of Association provides that “[pursuant] to section 135 (2) of the [Corporations] Act, all replaceable Rules referred to in the Act are hereby displaced or modified as provided in these Articles”. Articles 65-66 substantially cover the field traversed by section 250J. They do so in a way which, for the purpose of these proceedings, leads to a substantially similar legal requirement: “Every question submitted to a meeting shall be decided by a show of hands (unless a poll is demanded by a five (5) members) …”.

The Corporations Act requires that a meeting of a company’s members must be held for a proper purpose (section 249Q) and at a reasonable time and place (section 249R).

Section 249S has no material application to the current proceedings, but its terms are instructive as to what is required in the holding of a meeting of members. It provides that a company may hold a meeting of its members at two or more venues using any technology “that gives the members as a whole a reasonable opportunity to participate”.

Under the Registered Clubs Act:

Under the Constitution (Articles of Association) of the Club:

Under the Constitution (Memorandum of Association) of the Club, the objects for which the Club is established include:

Although management of the business and affairs of the Club is the responsibility of its Board of Directors under its Constitution (Article 44), there is in this case no necessity to consider the distribution of decision-making responsibility between the Board and the membership of the Club (along the lines considered in National Roads & Motorists’ Association v Parker (1986) 6 NSWLR 517 at 521C-E) because:

The Role of the Chairman and Regularity of his Decision. The validity or otherwise of the resolution under challenge in these proceedings depends, in large measure if not necessarily, upon whether the Chairman’s decision about voting procedure was within power or, at least, is now beyond challenge.

It was a decision easily characterised as “irregular” because:

Had the chairman invited the meeting to vote upon the voting procedure the subject of his announcement (by a show of hands and, if demanded, a poll) and had that voting procedure been adopted by a vote of members present at the meeting, then, absent some other vitiating factor, strong grounds would have existed for a determination either that the resolution subsequently passed via that procedure was valid or, at least, that it could be saved from invalidity by operation of the Corporations Act, section 1322. A properly convened meeting has an inherent power to regulate its own affairs (including matters which are incidental to the manner in which the meeting is conducted) in the absence of express provisions to the contrary: Alliance Craton Explorer Pty Ltd v Quasar Resources Ltd [2010] SASC 266 at [81].

Despite apparently audible complaints from the floor of the meeting, no member moved a motion of dissent from the Chairman’s decision and, apparently, at least some members took the opportunity to cast a vote and leave the meeting before debate on the substantive business of the meeting concluded.

As illustrated by a Caruth v Imperial Chemical Industries Ltd [1937] AC 707 at 760-762 and 766-768, attendees at a meeting may waive an objection that they might otherwise have to a meeting procedure, and be taken to have assented to a procedural course adopted at a meeting.

The absence of a motion of dissent from a procedural decision announced by a chairman cannot necessarily be taken as a waiver of objection to, or acquiescence in, the decision.

Where there has been a comprehensive crystallisation of members into camps of those for, and against, the substantive business under consideration, and those opposed to the resolution ultimately passed concerning that business have had an opportunity to marshal their forces, it may be open to a court to hold that, notwithstanding complaints articulated as debating points, members who have allowed a meeting to proceed without moving a formal motion of dissent may be taken to have acquiesced in a decision taken by the chairman. I am not confident that that degree of cyrstallisation of opinion can be found in the present case.

Upon a review of the course of the meeting under consideration in these proceedings, kept to the fore must be the purpose for which the meeting was convened: in substance, to ascertain the preparedness of ordinary members of the Club to authorise the Club’s Board of Directors to dispose of part of the Club’s property in a redevelopment of Club premises designed to strengthen the Club financially.

At the hearing of the proceedings no challenge was made to the efficacy of the Notice of Meeting pursuant to which the meeting under review was convened. In the absence of such a challenge, the Court can proceed on the basis that it duly served its purpose; namely: (a) to give sufficient information so as to enable ordinary members of the Club to determine whether or not to attend the meeting; and (b) to provide to ordinary members such information, within due time, that they might arrange their affairs so as to attend the meeting if so inclined: Ryan v Edna May Junction Gold Mining Company No Liability (1916) 21 CLR 487 at 496 and 500.

It may be accepted that, in convening the meeting, the Club’s Board members discharged their fiduciary duty to provide such information as fully and fairly informed ordinary members of the Club of what was to be considered at the meeting, enabling them to judge for themselves whether to attend the meeting and vote for or against the Board’s proposal or whether to leave the foreshadowed business to be determined by the majority attending and voting at the meeting: Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 at 466B-C.

Various formulations of the duties of a chairman (all subject to express provisions governing the particular company) are commonplace:

Subject to any express provision governing him or her, the chairman of a meeting has prima facie authority to decide all incidental questions which arise at the meeting, and necessarily require decision at the time: In re Indian Zoedone Company (1884) 26 ChD 70 at 77. Nevertheless, a chairman remains a servant, not the master, of the meeting. Any mastery a chairman may exercise over a meeting depends on his or her due recognition of that truth.

The powers exercisable by a chairman are not unfettered: Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466 at 480 [39]:

At a company meeting a member is generally entitled, not only to vote, but also to hear and to be heard in debate - powers conferred on a chairman in the conduct of a meeting being designed to facilitate the presence of those entitled to debate and vote on a resolution at a meeting where such debate and voting is possible: Byng v London Life Association Ltd [1990] Ch 170 at 188H.

Although different formulations can be found of the grounds upon which the Court will interfere with an exercise of a chairman’s broad discretionary powers in the conduct of a meeting (some of which are noticed in Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466 at 480 [40]-482[42]; Australian Olives Ltd v Stout (No 2) [2007] FCA 2090 at [20]; and McKerlie v Drill Search Energy Ltd (2009) 72 ACSR 288; [2009] NSWSC 488 at [27]-[35]), each formulation has at its core, first, recognition that any exercise of discretion by a chairman must be bona fide in exercise of the purpose for which the discretion was conferred and, secondly, the chairman’s decision must be measured against that standard.

In so measuring the decision of the Club’s Chairman under review in these proceedings, I put to one side a vice that might be thought to be inherent in the decision.

Although the number of members in attendance at the subject meeting appears never, in fact, to have fallen below that required for a quorum, the voting procedure announced by the Chairman invites the question whether attendees at the meeting were exposed to a risk that, if they did not vote early but other members did vote and depart from the meeting early, they might lose their opportunity to vote for want of a quorum: ES Magner, Joske’s Law and Procedure at Meetings in Australia (11th ed, 2012), paragraph [5.05]; Ball v Persall (1987) 10 NSWLR 700.

That risk can be discounted, however, on the authority of In re Hartley Baird Ltd [1955] Ch 143. There, as found here in article 62 of the Club’s Articles of Association, the constitution of a company provided that “[no] business shall be transacted at any general meeting… unless a quorum… is present when the meeting proceeds to business”. That was held sufficient to sustain a meeting’s conduct of business provided that a quorum was present at the beginning of the meeting, even if those in attendance fell below the quorum thereafter.

No party to these proceedings has suggested that the validity of the resolution under challenge was affected by the absence, or a risk of absence, of a quorum.

The Disputed Resolution was Invalid. Nevertheless, subject to the operation of section 1322 of the Corporations Act, the resolution must be held invalid.

That is because:

Unauthorised Voting Procedure Not a Procedural Irregularity. The validity of the resolution under challenge is not saved by section 1322(2) of the Corporations Act because:

Experience teaches that a right to vote is such a precious thing (so easily denied, and rendered nugatory, by manipulative departures from a course chartered for orderly, informed decision making) that the law must lean towards characterisation of it as a thing of substance, not merely adjectival, not merely a matter of procedure.

An unauthorised, unilateral decision taken by the chairman of a meeting of members of a company (governed by rules) to invite, and to treat as formal, votes cast in an unorthodox manner and outside the sequence of events advertised before the meeting as a parameter of debate leading to an orderly decision, on a question of vital importance, to bind all members entitled to vote (and, indeed, others involved in the company), is capable of operating (and, in this case, must be taken to have operated) as a denial of a right to have a vote taken at the appointed time and according to known rules. With apologies to Shakespeare (Romeo and Juliet, Act 2 Scene 2), a rose by any other name may smell as sweet, but not so a “vote” irregularly taken. A method of voting to which members are entitled cannot readily be displaced by another method of voting imposed on them in denial of that entitlement.

Validation Order Not Available. An order validating the resolution under challenge cannot be made under section 1322(4)(a) of the Corporations Act because the nature of the invalidity attaching to the resolution is such that the Court cannot be satisfied (as it must, under section 1322(6), be satisfied) “that no substantial injustice has been or is likely to be caused to any person”.

Whether a different result would have been produced at the meeting had a regular form of voting procedure been adopted cannot be known with certainty; but it cannot be excluded as a real possibility in light of the course of the meeting and the course of the adjourned meeting preceding it. The business under consideration by the meeting was, on any view, foundational to the continuing operation of the Club. The notice of meeting invited members to attend, and to participate in proceedings, on the basis of a voting procedure for which the Club’s Constitution provided.

Caution is required in attributing any significance to the fact that some, but not all, members anticipated a different voting procedure because of inside knowledge of discussion at a meeting of the Club’s Board. Nevertheless it is a factor that members dissatisfied with the outcome of the meeting are entitled to have taken into account, and not counted for nothing, upon a consideration whether “substantial injustice” has been or is likely to be caused to any person. Proponents of the resolution may have had an unfair advantage in securing the attendance of less committed, but politically aligned, members who might not have attended the meeting at all, or might have left without voting, had the course of the meeting followed that foreshadowed in the notice of meeting served on everybody.

Implicit in denial of a right to vote – even so fleeting a right as a right to a show of hands – is a denial of a right to a reasonable opportunity to participate in the process of corporate decision making. A show of hands (or a poll called for in lieu of a show of hands) may provide a litmus test of voting intentions on larger questions yet to be debated or put to a vote, an opportunity for participants in a meeting to test numbers, a measure of whether real opportunities for persuasion to one view or another are present.

It is not necessary, or prudent, for a judge to lay down rules, about whether (and, if so, how much) structured debate is a pre-requisite for there to be a valid expression of corporate will. A unanimous meeting of minds might proceed, unhindered by debate, to immediate decision. There can be no absolute rule that all members of a constituency have a right to speak, or a right to be heard. Nor can there be an absolute rule that every other member has an obligation to listen or, more importantly, to hear. It is not for no reason that patience is generally described as a virtue.

There are too many variables for the law to pretend to anything other than principled pragmatism, leaving much to the discretion (practical wisdom) of a chairman, on the spot. A primary object of a meeting is to ascertain, reliably, the corporate will on a question, fairly stated, for decision. On the whole, the law is vigilant in its preference for substance over form. However, there are occasions when insistence on form is a prerequisite for revelation of underlying substance. For those inclined to think a right to vote is merely a matter of form, this must be one of those occasions.

Although the requirements of section 1322(6)(a) may be taken to have been satisfied because, as I find, the chairman of the meeting and those acting under his supervision in the conduct of the meeting acted honestly, the inability of the Court to make a finding of an absence of “substantial injustice” required by section 1322(6)(c) is fatal to the Club’s claim for relief under section 1322(4).

For completeness, I record that, had I thought that section 1322(2) was otherwise available to save the disputed resolution from invalidity, I would have been disposed to express the opinion (contemplated by section 1322(2)) that the chairman’s irregular voting procedure “has caused or may cause substantial injustice that cannot be remedied by any order of the Court” and, accordingly, declared that the resolution was invalid on that account.

For these reasons, subject to allowing the parties an opportunity to be heard on the form of the orders, I propose to make the following orders and notations:

[Note: after allowing the parties an opportunity to be heard as to the form of orders to be made, Lindsay J made orders and notations in accordance with paragraph 126 of these Reasons.]