Kumar v Satsang Hindu Maha Sabha of NSW Incorporated (No 2)

In Kumar v Satsang Hindu Maha Sabha of NSW Incorporated [2019] NSWSC 134 (the “First Decision”), the Court made declarations as to the proper construction of the Settlement Agreement. This judgment should be read as a continuation of the First Decision. Defined terms in the First Decision have the same meaning in these reasons and I will apply the same principles of contractual interpretation set out in paragraphs [25] and [26] of the First Decision.

Since the First Decision, there have been further developments which have raised new issues under the Settlement Agreement. It will be recalled that the Settlement Agreement makes provision for how new members may join the Association. Three hundred and five people, some aligned with the plaintiffs and others aligned with the second and third defendants, applied to join the Association.

Under the Settlement Agreement, new applicants for membership qualified to become a member of the Association if, among other things, they had been “approved for membership of the Association by the Committee” constituted for that purpose (the “Committee”) and which was “responsible for vetting new members”. To the evident surprise of all of the parties, the Committee rejected all the applications from new members on the theological ground that by participating in the electoral process the applicants were not acting in accordance with the Hindu principles known as the Sanatan Dharam. Accordingly, the applicants did not meet one of the express qualifications to be a member of the Association, being that the applicant “follows or intends to follow and respect the principles of the Sanatan Dharam”.

The primary question for determination was whether the words “approved” and “vetting” meant that the Committee had a substantive role in considering the applications (the defendants’ position) or whether the Committee’s role was limited to an administrative one to approve membership applications where those applications were regular on their face (the plaintiffs’ position).

The plaintiffs put two further arguments. They submitted that if the defendants’ construction of the relevant clauses of the Settlement Agreement was correct, then the Committee had still failed to carry out its role in accordance with the Settlement Agreement because it had taken into account irrelevant considerations, including the theological matters which had formed the basis of the rejection of the new members. Second, the plaintiffs brought an alternative claim under the Contracts Review Act 1980 (NSW) (the “CRA”) that the Settlement Agreement was unjust and that the Court should order an independent party to determine the eligibility of the new members strictly by reference to what was contained in the membership application forms that had been submitted.

The matter had again come before me in the Duty List on 18 March 2019. It was urgent because the meeting at which the new members were intending to vote (if admitted to membership) was to take place on 30 March 2019. I gave the plaintiffs leave to file an Amended Summons to raise the new issues and directed the parties to file written submissions. I heard the argument on 22 March 2019. At the end of that hearing, I was able to inform the parties that the Court accepted the defendants’ interpretation of the Settlement Agreement, that the Court was satisfied that the Committee had gone about its work in accordance with the Settlement Agreement, and that the Settlement Agreement was not unjust, so that it did not attract the operation of the CRA.

I made these orders:

These are the reasons for those orders.

The surrounding circumstances for the determination of these new questions remain the same as those set out in paragraphs [11] to [16] of the First Decision. In addition, the parties agreed that further surrounding circumstances relevant to the question of construction were these facts:

It is convenient at this point to set out the relevant terms of the Settlement Agreement (emphases added):

On 22 February 2019 a letter of instructions (the “Letter”) was sent to the Committee over the signatures of the solicitors for each of the parties. The terms of the Letter had been negotiated between the parties. Those terms included:

Neither party contended that the Letter was either a variation of the Settlement Agreement or a further agreement between the parties, particularly insofar as it directed the Committee to act unanimously. Nothing turns on this because, in fact, the Committee did act unanimously. The Letter otherwise appeared to be a recitation on behalf of the parties of how they understood the Settlement Agreement was to work. The parties agreed that the Letter could have no effect on the construction of the Settlement Agreement because it was post-contractual conduct.

The Committee was given 305 application forms from new members. The form had been prepared by the parties based upon the membership application form attached to the 2009 Constitution. Each membership form contained these statements:

On 10 March 2019 the Committee returned all 305 applications to the Secretary of the Association. The Committee had rejected all of them.

On 15 March 2019 the solicitors for the plaintiffs wrote to the Committee asking them “to provide brief reasons” as to why each application had been rejected.

Although the Committee had no obligation under the Settlement Agreement to provide reasons for their decision, they did so on 19 March 2019. Their letter (the “Reasons”) included:

On 18 March 2019 I granted leave to the plaintiffs to file in Court an amended summons which included these prayers for relief:

Before turning to the parties’ submissions, two preliminary points should be noted.

First, the plaintiffs sought to make something of what they described as the “finding” in paragraph 4 of the Reasons that “by being involved in this process the proposed new members are clearly following or intending to follow and respect the principles of the Sanatan Dharam”. The defendants submitted that the sentence was clearly in error and should have read (emphasis added) “by being involved in this process the proposed new members are clearly not following or intending to follow and respect the principles of the Sanatan Dharam”.

Reading the Reasons as a whole, the Court accepts, on the balance of probabilities, that “not” is missing from paragraph 4. However, nothing really turns on this. Even if the starting point of the Committee’s Reasons is that the applicants, by submitting their applications, were purporting to follow or intending to follow and respect the principles of the Sanatan Dharam, the conclusion of the Committee was, nevertheless, that the applicants were not doing so because of their involvement in what the Committee perceived to be a political process. The Committee’s conclusion is unarguably clear, notwithstanding how paragraph 4 is to be read.

Second, the parties accepted that it was no part of the Court’s function to review the correctness of the theological opinion expressed by the Committee and they did not seek to tender any expert evidence on the topic. That approach is correct. In the western legal tradition it reflects a position taken by civil courts as early as the first century, when the Book of Acts records that the apostle Paul was brought before the proconsul Gallio. The proconsul declined to entertain the dispute, saying “if it were a matter of crime or serious villainy, I would be justified in accepting the complaint of you Jews; but since it is a matter of questions about words and names and your own law, see to it yourselves; I do not wish to be a judge of these matters.” (see Acts 18: 14-15 NRSV). Modern judicial expressions of the same sentiment may be found in Attorney-General (NSW) v Grant (1976) 135 CLR 587 at 612 (per Murphy J); Church of the New Faith v Commissioner of Payroll Tax (Vic) (1983) 154 CLR 120 at 150 (per Murphy J); Uniting Church of Australia Property Trust (NSW) v Vincent (unreported, NSWCA, Kirby P, Clarke and Sheller JJA, 19 August 1994) at 10 per Kirby P and cited in Ulman v Live Group Pty Ltd [2018] NSWCA 338 at [248]; and Catch the Fire Ministries Inc v Islamic Council of Victoria Inc [2006] VSCA 284; (2006) 15 VR 207 at [36] per Nettle JA.

The Court accepts the defendants’ submissions as to the proper construction of clauses 3 and 4 of the Settlement Agreement. Those submissions form the basis of what follows. I will then explain why I have not accepted the plaintiffs’ submissions.

While not determinative of the meaning of words in the context of a particular agreement, dictionary definitions are “at least a guide to the conventional meaning of words”: Lewison and Hughes, “The Interpretation of Contracts in Australia” Law Book Co, 2012 at [5.03]. In this case, clauses 3 and 4 need to be read together, in particular the use of “approved” in clause 3(i)(d) and “vetting” in clause 4. Clause 3(i)(d) requires that the applicant be “approved for membership of the Association”. “To approve” is defined in the Shorter Oxford English Dictionary 6th edn as, among other things, “to confirm authoritatively”.

That definition supports a substantive rather than merely administrative function. However, insofar as it might be thought that there was any ambiguity about whether “approve” involved a substantive rather than merely administrative task, that is resolved by the context of the approval in clause 3(i)(d) having to be by the Committee which, under clause 4, is “responsible for vetting new members along the strict guidance of clause 3(i) above”.

The Shorter Oxford Dictionary, 6th edn, defines “vet” to mean “examine (work, a scheme, person, etc) carefully and critically for deficiencies or errors; spec. investigate the suitability of (a candidate) for a post requiring particular loyalty and trustworthiness”. Similarly, the Macquarie Online Dictionary defines “vet” to include:

A reasonable person apprised of the surrounding circumstances would understand from the combination of “approve” and “vet” that the parties to the Settlement Agreement intended that the role of the Committee pursuant to clauses 3 and 4 of the Settlement Agreement was to be a substantive one. That conclusion is fortified when one of the relevant surrounding circumstances is that two of the three members of the Committee are Hindu priests. Given that the dispute resolved by the Settlement Agreement concerns the affairs of the Association, which conducts a Hindu temple, and that the first qualification for membership of the Association is that the applicant “follows or intends to follow and respect the principles of the Sanatan Dharam”, the choice of two pundits as members of the Committee clearly points to an expectation that they would bring their theological expertise to the vetting and approval process.

The foregoing conclusions reflect the submissions of the defendants. There are two additional reasons why I have accepted those submissions:

Once this construction of clauses 3 and 4 is accepted, then it cannot be said that the Committee has failed to do what it was required to do. It decided that by applying for membership to participate in the electoral process, the applicants were not following or intending to follow and respect the principles of the Sanatam Dharam. Without passing on the correctness of the theological opinion expressed by the Committee and only looking at the Reasons within the four corners of the document, the Reasons are rational and logical. Contrary to the alternative case advanced on behalf of the plaintiffs (which assumed the construction advanced by the defendants), I do not agree that by approaching the matter theologically the Committee has taken into account irrelevant considerations or otherwise failed to fulfil the task committed to it by the Settlement Agreement.

In that regard, it is, with respect, not apt for the plaintiffs to refer in the amended summons to the Settlement Agreement having been “breached”. The members of the Committee are not parties to the Settlement Agreement. Their role is analogous to the familiar one of an expert required to perform a determination under a contract. The question is whether the expert has performed the task contemplated by the contract (see Legal & General Life Australia v A Hudson (1985) 1 NSWLR 314; G Lubofsky, “Setting Aside Expert Determinations – A Comprehensive Review” (2018) 92 ALJ 529). Failure to do so does not result in a breach of the contract. It is rather that the expert’s determination does not meet the contractual description of the determination so that it does not have whatever effect the contract provides it should have on the rights and liabilities of the parties to the contract.

The Court will next consider the several arguments on construction advanced by the plaintiffs.

First, it was submitted that the evident purpose of the Settlement Agreement was to resolve the issues in dispute between the parties and not to create new disputes. A reasonable observer would resist a construction of the Settlement Agreement that the Committee could engage in any other conduct other than an administrative task, because this would only add to the matters in dispute because the validity of the other steps taken by the Committee would necessarily become an issue between the parties. This argument is rejected precisely because the parties have committed the approval process to the Committee as respected and independent people. The parties to the Settlement Agreement have expressly left the approval for membership of the Association to the Committee without further recourse.

Second, it was submitted that because the process of approval of new members was a matter done entirely on the papers, all that was contemplated was an administrative task. This argument is rejected because it assumes what it seeks to prove.

Third, it was submitted that if a theological assessment was to be undertaken, a lay person would not have been included on the Committee. I do not agree. First, the pundits are in the majority, if it were the case that the Committee was to function by majority. Insofar as there was a subsequent direction for the Committee to function unanimously, the parties accepted that could not influence the construction of the Settlement Agreement. In any event, it just does not necessarily follow that the inclusion of a lay person excludes the possibility of the Committee undertaking a theological assessment.

Fourth, it was submitted that the Committee members were selected on the basis that they were respected, independent Hindus, and not for their theological expertise. This submission ignores that facts that two of the Committee members who were selected are pundits and that the dispute concerns the affairs of a religious organisation.

Fifth, it was submitted that no instructions were provided to the Committee to carry out any independent inquiries because the information on the form was to be accepted at face value. This argument, again, assumes what it has to prove. As I have already observed, the parties could have agreed that the membership applications were to be taken as sufficient proof of their contents.

Sixth, it was submitted that the nature of the task the Committee was required to carry out did not indicate that there was any need for religious or spiritual expertise. That submission again fails to grapple with the fact that the Settlement Agreement required the Committee to “[vet] new members along strict guidance of clause 3(i) above”, which included that a person “follows or intends to follow and respect the principles of the Sanatam Dharam”.

Insofar as the plaintiffs advanced an alternative argument that there had been a “breach” of the Settlement Agreement on the construction advanced by the defendants, I have already dealt with that argument in paragraph [29] above. The Court does not accept the various criticisms of the Reasons advanced by the plaintiffs. Once the defendants’ construction of clauses 3 and 4 of the Settlement Agreement is accepted, it cannot be said that the Committee asked itself the wrong question or misconceived its function under the Settlement Agreement by applying theological considerations.

The gravamen of the plaintiffs’ complaint relying on the CRA was that the consequences and effect of the Settlement Agreement as performed were unjust in the sense of substantive injustice. No complaint was made with respect to the unfairness of the methods used to make the agreement (procedural injustice): see West v AGC (Advances) Limited (1986) 5 NSWLR 610 at 620E-622B.

The plaintiffs relied on two specific matters under s 9(2) of the CRA:

The fundamental difficulty with the plaintiffs’ case under the CRA is that they are unable to point to any relevant injustice and by whom it has been suffered. Most importantly, the decision of the Committee does not appear to have worked any injustice on the parties. Nor, as the Reasons make clear, does the decision permanently shut out the new members from later applying for membership. The problem for the plaintiffs is that a surprising outcome is not necessarily an unjust outcome.

The defendants based their resistance to the plaintiffs’ case under the CRA by reference to this last point. Even if, contrary to the Court’s conclusion, there had been some injustice, the defendants drew attention to s 9(4):

The Court accepts the defendants’ submission that s 9(4) is a complete answer to the plaintiffs’ reliance on the CRA. I accept that submission because if, for the sake of the argument, the operative injustice was the rejection of all applications on theological grounds, it was not reasonably foreseeable at the time the contract was made.

On the other hand, the very process established by clauses 3 and 4 of the Settlement Agreement necessarily includes the possibility that some, many, and perhaps even all, of the applications could be rejected. Looking at the matter from that point of view, then the outcome is in any event not unjust for the purposes of the CRA.

The defendants’ arguments based upon s 9(2)(d) either assumed the plaintiffs’ construction (by asserting that the process was confined to an examination of the papers) or submitted that the “moral virtue” of new members was difficult, if not impossible, to assess. This latter argument cannot succeed because the Committee was not called to sit in judgment on the “moral virtue” of the new applicants for membership.

The plaintiffs’ reliance on s 9(2)(l) similarly fails. The plaintiffs’ complaint is that the Settlement Agreement contemplates what they submitted was an “open and transparent process” which is not what has happened. They submitted that the purpose and effect of the Settlement Agreement have been entirely abrogated and that the Committee considered factors other than those that it was required to consider by the Settlement Agreement.

The Court does not agree. Having accepted the defendants’ construction of clauses 3 and 4, it follows that the Committee has done what it was required to do under the Settlement Agreement. That conclusion is not impeached by the fact that the mechanism for approving new members under the Settlement Agreement has produced a result that was unexpected by, and is clearly surprising to, the parties to the Settlement Agreement.