Kabbara & Ors v Australian National Sports Club Incorporated

1. [1]

   The Defendant is an incorporated association known as Australian National Sports Club Incorporated (“the Club”). The 19 Plaintiffs were all members of the Club in 2017 and were informed that they had been expelled by the Club. The Plaintiffs claim that their expulsion had no proper basis. One of the Plaintiffs (Mr Belal Pickering, the Fifteenth Plaintiff) discontinued his proceeding against the Club in December 2019.

2. [2]

   The hearing of the matter was originally fixed to commence on 31 March 2020. To reduce the length of the hearing, agreement was reached that the claims of wrongful expulsion for all Plaintiffs would be determined by the outcome in relation to three “test” members. The group of members that each of the three test members represents has been clearly defined and accepted. There are differences in the reasons for expulsion of each of the Plaintiffs given by the Club, but these differences are not presently significant, for reasons which will shortly become apparent.

3. [3]

   As a result of the COVID-19 virus, from 24 March 2020 civil hearings have been subject to a directive of the Court that they are (save for limited exceptions) to be heard remotely by means of audio-visual link (“AVL”). At a directions hearing on Wednesday 25 March 2020, the limitations of the AVL system became apparent. A further directions hearing was held the following day at which various alternatives were discussed (and some of the problems apparent the day before were resolved). The parties through their legal advisors decided that the best way forward in the present circumstances was to have an issue (or issues) common to all Plaintiffs determined as a separate question pursuant, effectively, to rule 28.2 of the Uniform Civil Procedure Rules 2005 (NSW), a determination which involved no factual contest or cross examination of witnesses. This possibility had been canvassed by the Plaintiffs last year, but ultimately not pressed. I acceded to the request for a separate determination and also the parties’ request that the hearing of the separate question(s) commence on 2 April 2020 rather than on 31 March 2020 (the original start date for the hearing).

4. [4]

   The separate questions for determination (“the Separate Questions”) are framed as follows:

   1. (1)

      Did the Constitution of the Defendant contain the term as pleaded at paragraph [29] of the Statement of Claim (‘Fairness Term’)?

   2. (2)

      Did the Constitution of the Defendant contain the term as pleaded at paragraph [28] of the Statement of Claim (‘Expulsion Term’)?

5. [5]

   The Fairness Term set out at paragraph 29 of the Statement of Claim is as follows:

6. [6]

   The Expulsion Term set out at paragraph 28 of the Statement of Claim is as follows:

7. [7]

   At the commencement of the hearing, I raised with Mr N. Furlan of Counsel, who appears for the Plaintiffs, and Mr D. Stewart of Counsel, who appears with Ms K. Hooper for the Club, what would be the consequence of a conclusion that one or other of the Fairness Term or Expulsion Term is to be implied and what would be the consequence if neither term is implied. There is no dispute that if the Separate Questions are answered favourably to the Plaintiffs, the Court will need to fix a hearing for the determination of whether the Expulsion Term and the Fairness Term were breached by the Club. There will also be an additional issue of whether the power to expel was exercisable by the members of the Interim Caretaker Committee (“the ICC”) as opposed to the Management Committee (“the ICC Question”), and whether, as the Club contends, the Club was free to terminate the contract between the Club and the Plaintiffs at any time (“the Termination Question”). It was agreed that if the Separate Questions are determined adversely to the Plaintiffs then the Court would need to determine, at a future hearing, the ICC Question and the Termination Question, and also whether there is any power to expel members in the Constitution (see T7 - T12).

8. [8]

   I received detailed and helpful written submissions from Counsel prior to the hearing (“the PWS” and “the DWS” respectively), and Counsel also addressed the issues at the hearing.

The Club

1. [9]

   The Club is registered under the provisions of the Associations Incorporation Act 2009 (NSW) (“AIA”). The Club operates under a Constitution dated 27 November 2010 (“the Constitution”): see Exhibit A 232-265. By s 26 of the AIA, the Constitution binds its members as if it were a contract between them under which each member agrees to observe its provisions.

2. [10]

   A Court Book was prepared for the full hearing, but for the Separate Questions only a small number of documents are relevant. This reduced bundle was marked Exhibit A, but the page numbering comes from the full Court Book.

3. [11]

   Each of the test Plaintiffs joined the Club after November 2010.

4. [12]

   There is no dispute between the Plaintiffs and the Club that the disputes between the Plaintiffs and the Club are justiciable and that the Court can grant declaratory relief of the type sought by the Plaintiffs in this matter: Luen Fook Tong Inc v Lowe [2011] NSWSC 1004.

5. [13]

   In May 2017 the Club commenced proceedings (2017/153989) against a number of individuals, including Mr Kabbara (the First Plaintiff), Mr Barake (the Ninth Plaintiff) and Mr Mousa (the Tenth Plaintiff), who are the three test Plaintiffs in the current proceedings. Mr Kabbara, Mr Mousa and Mr Barake were members of the Management Committee of the Club. The Club had purportedly dismissed them (and the other members of the Club’s Management Committee), and replaced the Management Committee with an “Interim Caretaker Committee of three Life Members” (i.e. the ICC, as previously defined). The Club sought declaratory relief that the Defendants in those earlier proceedings no longer constituted the Management Committee of the Club, but the Club discontinued its proceedings. Whilst it was agreed that in the present case the validity of the dissolution of the Management Committee is not an issue, the fact that the expulsion was by the ICC does have potential relevance to the outcome of the case (but not the determination of the Separate Questions), because the Plaintiffs contend that the power to expel was given to the Management Committee not the ICC.

The Constitution

1. [14]

   The following provisions of the Constitution (with emphasis added by me) are relevant to the issues raised by the Separate Questions:

2. [15]

   The only express reference to expulsion in the Constitution is found in cl 11(c), which provides that a person ceases to be a General Member of the Club if that person is expelled from the Club. Clause 22, although it deals with disciplining of members, does not itself refer to expulsion.

3. [16]

   It will be observed that cl 22 makes reference to a current “Policy and Procedures Manual” (“PPM”). The Club has in correspondence asserted that there is no PPM (see CB 508-510), and Mr Stewart has made a similar assertion from the Bar table. There is no evidence from the Club that no PPM was ever created or promulgated, or that if one was created and promulgated, that it was withdrawn.

4. [17]

   Noting the absence of any express wording in the Constitution referring to the power of expulsion or the terms on which expulsion can be effected, the Plaintiffs say that “the only power of expulsion that is in this constitution, is one that is [conditional] upon the two terms pleaded”, being the Fairness Term and the Expulsion Term, and that if the Court finds that neither term forms part of the Constitution, then the Plaintiffs’ position is that “the power to expel is not in the Constitution”: see T6.40 - T7.11. The Club’s position is that neither the Expulsion Term nor the Fairness Term are to be implied, and that the Club has an unfettered power to expel. The Club also contends that it has the right to terminate membership at its complete discretion, subject only to possibly a requirement for reasonable notice to be given (the Termination Question, as previously defined above). This later argument (which it is agreed is not for determination as part of the Separate Questions) relies on the fact that there is a contract between the Club and its members and asserts that, like most contracts which are not for a specified period, the Plaintiffs’ contracts with the Club are terminable at will: see, for example, Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438.

The Expulsion Term

1. [18]

   I shall deal first with the Expulsion Term since, logically, the basis for expulsion, or possible expulsion, needs to be identified before any issue of fairness arises.

2. [19]

   The Plaintiffs contend that the Expulsion Term is to be implied on three alternative bases (which I will refer to as “limbs” of the Plaintiffs’ argument):

   1. (1)

      From the express words of the Constitution (“first limb”).

   2. (2)

      From the nature of the Contract, i.e. as a legal incident of the class of contract to which the Constitution belongs (“second limb”).

   3. (3)

      To give the Constitution an effective operation (“third limb”).

3. [20]

   In support of the contention that the Expulsion Term is to be implied from the express words of cls 11 and 22, Mr Furlan relies on the following matters:

   1. (1)

      Clause 11 provides that membership can be lost for several reasons other than expulsion, some of which do not require any further expansion, i.e. conviction in Australia of a criminal offence is complete in itself. Clause 11(c) does not make any attempt to deal with reasons for expulsion – it assumes that there is, from some other source, a power of expulsion, and gives no hint or suggestion of what those reasons might be.

   2. (2)

      Clause 22, whilst not referring to “expulsion”, enumerates two possible bases for complaint and consequential disciplinary action. Expulsion can be described as a disciplinary result and, indeed, a final form of disciplinary action for a member of a club.

   3. (3)

      If the two (and only two) reasons for disciplinary action are those specified in cl 22, there is no uncertainty as to the grounds for expulsion. The two matters mentioned are matters of significant import and seriousness, and every new member is immediately aware from reading cl 22 of conduct which may have disciplinary consequences.

4. [21]

   The Club, through the DWS, submits that:

   1. (1)

      The Constitution is “entirely effective in its operation without the Expulsion Term” (DWS 1.26).

   2. (2)

      The Expulsion Term is not so obvious that it goes without saying.

   3. (3)

      The Expulsion Term is not capable of clear expression and the Plaintiffs are seeking to “add conditions to the exercise of that (otherwise) clearly stated power”, and by seeking to merge cls 11 and 22 they are, in effect, “redrafting the Constitution”.

   4. (4)

      Clause 22 does not refer to “expulsion” of General Members and the DWS contend that in the absence of a PPM “if cl 22 is read as imposing a restriction or precondition on the power to expel there is no power in the Defendant to expel a General Member at all.” Courts should be astute to adopt a construction which will preserve the validity of a contract: Hillas & Co Ltd v Arcos Ltd [1932] 43 Ll.L Rep 539; (1932) 147 LT 503; Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571 at 589 per Mason J (as His Honour then was).

   5. (5)

      Nothing in the authorities on incorporated associations supports the proposition that terms in the nature of the Expulsion Term are implied as a matter of law into the constitutions of incorporated associations.

5. [22]

   It should be noted that [21](1), (2) and (3) above are really dealing with the third limb of the Plaintiffs’ argument and [21](5) above is dealing with the second.

6. [23]

   The DWS erroneously treat the Plaintiffs as accepting that there is a power to expel simpliciter found in the Constitution, whereas the Plaintiffs’ position is that the only way in which a power to expel can be discerned is by reading cls 11(c) and 22 together. Thus, cl 11(c), whilst premised on there being a power to expel in the Constitution, does not itself confer any power to expel or provide any indication as to the bases of disciplinary action but, rather, deals with the consequences of expulsion, and cl 22 provides the bases for disciplinary action.

7. [24]

   The three alternative limbs on which the Plaintiffs put their case find expression (as three of four categories) in the decision of Hodgson J (as His Honour then was) in Carlton & United Breweries Ltd v Tooth & Co Ltd (1985) 6 IPR 319 (Hodgson J, 11 June 1985, unreported). This categorisation was referred to and adopted by Young J (as His Honour then was) in Carlton & United Breweries Ltd v Tooth & Co Ltd (1986) 7 IPR 581 at 605-606, and again referred to with approval by Heydon JA in Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [28]-[31], and see also New South Wales Rifle Association Inc v Commonwealth [2012] NSWSC 818; (2012) 266 FLR 13 at [115] and [126]-[127] per White J (as His Honour then was). The passage from Hodgson J’s judgment, as quoted in Carlton (Young J) and Brambles, is as follows:

8. [25]

   In Carlton (Hodgson J), Hodgson J makes reference to the judgment of Higgins J in Marcus Clarke (Vic) Ltd v Brown [1928] HCA 12; (1928) 40 CLR 540 at 553-554, in which Higgins J accepted that a term can be implied from the express words used in a contract, although His Honour, in dissent, was of the view that the principle was not applicable to the case at hand.

9. [26]

   There is no doubt that the Courts have accepted that this category exists, but I think it is not only the judgment of Higgins J which lends support but also the majority’s decision (Knox CJ, Isaacs and Powers JJ). The case concerned a hire purchase agreement entered into by Mr Brown with the Appellant (“the seller”) in respect of a motor car. Brown’s case was that he had bought (through hire purchase) a new car, but what was sold to the financier and hired to him was a used car. None of the documents issued expressly described the car as new, but the order form contained a statement that all new cars were sold subject to a guarantee and that second-hand cars were not. The hire purchase agreement which Brown signed repeated the reference to the guarantee and also stated that the agreement excluded any implied “warranty undertaking or agreement other than is herein set forth”. The seller sued Brown for rental and Brown cross claimed seeking, in effect, rescission of the agreement and claiming that the seller had misrepresented the vehicle as new. The Victorian County Court found in Brown’s favour and the Victorian Court of Appeal rejected the seller’s appeal. The majority in the High Court rejected the appeal. In addition to Higgins J, Starke J dissented.

10. [27]

    Higgins J was of the view that the statement that “no guarantee is given with second hand cars” was not convertible into a statement that the car sold is new and he expressed the view that no implication that the car is new should be adopted unless it is necessary or unavoidable. Starke J agreed with Higgins J that there should be a new trial holding that:

11. [28]

    The majority applied the principle in Fowkes v Manchester and London Life Assurance and Loan Association (1863) 3 B&S 917 at 929 per Blackburn J, that in all deeds and instruments the language used by one party is to be construed in the sense in which it would be reasonably understood by the other party. Since paragraph 11 of the terms said that all new cars were sold subject to a guarantee, paragraph 13 said that no guarantee was given with second-hand cars, and Brown was provided with a guarantee:

12. [29]

    Thus, in Marcus Clarke, the term that the car was a new car was implied from the combined effect of two documents, neither of which itself contained the term. In the present case there are not two documents but one – the Constitution. One clause (cl 11(c)) envisages that General Members can be expelled and another clause (cl 22) gives a basis for disciplinary action. If cl 22 does not define the reasons available for expulsion, then no clause does. I will deal with the issue of the PPM in relation to the Fairness Term, but on the face of cl 22 there is nothing to indicate that the PPM would provide the reasons for expulsion.

13. [30]

    The Expulsion Term gives the Constitution a clear, “congruent” and internally consistent operation (see Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522 at [16] per Gleeson CJ, McHugh, Gummow and Kirby JJ), whereas the construction advanced by the Club would permit expulsion for reasons that are not known to or made clear to members at the time of joining or, indeed, at any time, which would, as Mr Furlan submitted, produce a plainly unreasonable and unjust result, a relevant consideration: see, for example, Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at [35], and also see ABC v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109-110 per Gibbs J (as His Honour then was), in which His Honour explains that the principle is not limited to commercial contracts.

14. [31]

    I think it is the Plaintiffs’ proposed construction of the Constitution that prevents the Constitution from having no real content for grounds of expulsion, and I agree that it is most unlikely that it was intended that the Club could expel a member on any basis whatsoever without members being informed of what the basis might be. I should also note that in the context of terms implied by reason of express words used (i.e. Hodgson J’s first category), as here, issues of the type that arise in Hodgson J’s fourth category (as in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; (1977) 52 ALJR 20, and see also Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 442 per McHugh and Gummow JJ, and Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169 at [113] per Gageler J) are not relevant in relation to the first category: see Brambles at [30].

15. [32]

    In view of my conclusion in relation to the first limb of the Plaintiffs’ argument, I do not think it is necessary to consider the second and third limbs advanced in the PWS.

The Fairness Term

1. [33]

   In contending that the Fairness Term exists, the Plaintiffs rely on the same three limbs as they do for the Expulsion Term, which (as noted previously) correspond with categories one, two and four in the passage from Carlton (Hodgson J) set out at [24] above. In relation to the first limb (an implication by construction from the express words of the contract), the words in the contract on which the Plaintiffs rely are:

   1. (1)

      Clause 10(d), which provides that a General Member may make “representations” orally or in writing at any meeting in which their General Membership is under consideration.

   2. (2)

      Clause 11(c).

   3. (3)

      Clause 22. The Plaintiffs point out that cl 22 has six requirements, each one of which must be strictly complied with (see Goodwin v Vietnam Veterans Motor Cycle Club Australia NSW Chapter Inc [2008] NSWSC 154; (2008) 72 NSWLR 224 and Rana v Survery [2012] NSWSC 439):

2. [34]

   Whilst there is much to be said for this contention, I think the position in relation to the second limb is very clear, and so I will not deal further with the first limb.

3. [35]

   In relation to the second limb – implication in law from the nature of the contract – the Plaintiffs rely on the following authorities: Dickason v Edwards [1910] HCA 7; (1910) 10 CLR 243 at 255 in which O’Connor J said:

4. [36]

   The Club resists the contention that the Fairness Term should be implied on the following grounds:

   1. (1)

      A term will not be implied unless the contract is commercially ineffective without it: BP Refinery at 292 and Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 346, Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41 at 66, 118 and 139. The Constitution is not ineffective without the Fairness Term.

   2. (2)

      The fact that a contract would be more onerous or harsh without the Fairness Term is not a reason to justify its implication.

   3. (3)

      The term must be so obvious it goes without saying.

   4. (4)

      It must be capable of clear expression: Ansett Transport Industries (Operations) Pty Ltd v Commonwealth [1977] HCA 71; (1977) 139 CLR 54 at 62 per Gibbs J (as His Honour then was). The Plaintiffs have not pleaded the content of the Fairness Term, and a term of “fairness” is not one amenable to clear expression, rather, “it is inherently imprecise” (DWS 1.18).

   5. (5)

      Where there is a variety of conflicting terms that might be equally plausible, none will be sufficiently obvious to be implied: Codelfa at 355-356.

   6. (6)

      The Constitution refers to a PPM, so:

5. [37]

   It will be observed that the Club relies on the reference to the PPM as a reason to rebut the Fairness Term. I agree that the parties to the Contract must have envisaged that there would be a PPM. If there was a PPM, then consideration could be given as to whether its terms are consistent or inconsistent with the requirement for procedural fairness. The Club’s failure to produce a PPM without evidence from it that there is no such document creates an anomaly. If there is no such PPM then, strictly, it might be said that no one can be disciplined under cl 22 because the terms of the Constitution must be followed precisely (see [39] below), and if no one can be disciplined then perhaps there is no power to expel – but this issue does not form part of the Separate Questions. There is nothing in the Constitution which contradicts or ousts the requirement for fairness. I accept that on current authority a PPM might have that effect, but no PPM has been put forward (and the Club says that is because there is none) so it cannot be accepted that the non-existent PPM “expressly or by necessary implication” negatives the implication of the Fairness Term. I accept the Plaintiffs' contention that if the Expulsion Term exists (as I have found it does) then, unless expressly or by necessary implication excluded, the Fairness Term exists as well, and the Club has failed to demonstrate that the requirement for fairness has been excluded expressly or by necessary implication.

6. [38]

   This is reinforced, in my view, by the terms of cl 22 which envisage a procedure in disciplinary matters: see [33](3) above. The Plaintiffs also rely on the requirement for payment of annual membership fees and cl 10(d) which requires a member to be given an opportunity to be heard (orally or in writing) at any meeting in which “their General Membership is under consideration”. I would add that not only does 10(d) point to recognition of a requirement of fairness but it also rather suggests that whatever procedure was intended to exist under the PPM involved consideration of expulsion by the Club’s members, not simply the Management Committee – perhaps following a resolution of the Management Committee. An example of that kind of provision can be seen in Goodwin (supra) at [7] and another example is found in McClelland v Burning Palms Surf Life Saving Club [2002] NSWSC 470; (2002) 191 ALR 759 per Campbell J (as His Honour then was) at [72]. Again, this is not a matter that falls within the Separate Questions.

7. [39]

   In Samuel v St George Leagues Club Ltd (NSWSC, 20 October 1992, Powell J, unreported), Powell J (as His Honour then was) set out the principles of law applicable to clubs, a passage cited in full and followed in Hornby v Narrandera Ex-Servicemen’s Club Ltd [2001] NSWSC 235 per Hamilton J at [8] (and see McClelland at [74]):

8. [40]

   In McClelland, Campbell J noted at [82] in relation to private clubs that:

9. [41]

   The other points made in the DWS set out at [36](1)-(4) are points relevant to the third limb of the Plaintiff’s argument (i.e. the fourth category identified in Carlton (Hodgson J) and enumerated in the BP Refinery case), but they do not apply to the second (or first) limb of the Plaintiff’s argument.

10. [42]

    Samuel, Hornby and McClelland all make clear that expulsion (or suspension) must be exercised in accordance with the rules of natural justice (unless the rules are excluded expressly or by necessary implication) and that those rules are capable of ascertainment. Contrary to the suggestion in the DWS that a requirement of procedural fairness is “inherently imprecise”, Samuel enunciates a minimum content for the rules of natural justice in the context of clubs, which I take to be synonymous with “procedural fairness”.

11. [43]

    I do not accept the Club’s contention that the rules of natural justice are only to be implied where there is some procedure specified, such as a “hearing”. The first principle enunciated by Powell J in Samuel is that a club has no power to suspend or expel unless the power is contained in its constitution, and the third principle is that the rules of natural justice must be applied unless the rules are excluded expressly or by necessary implication. Neither Samuel nor the passages from Rose and Dickason set out at [35] above, nor the passages from McClelland set out at [40] above, contain the qualification the Club contends for. The requirement that the member subject to possible expulsion be given, for example, the right to be heard on that issue is part of the natural justice requirement – it is not dependant on there being a reference to a hearing in the Constitution and it can be applied to the Expulsion Term, which I have found exists in the Constitution as an implied term. There is just as much, if not more, reason to imply the Fairness Term where no reference is made to a hearing than where a hearing of some kind is specified. There is nothing in the Constitution which contradicts, or is inconsistent with, the implication of the requirements of procedural fairness in exercising a power to expel. Indeed, a number of the Constitution’s terms, such as cls 10(d) and 22, clearly support the implication of the basic requirements of natural justice as elaborated by Powell J in Samuel set out at [39] above.

12. [44]

    It follows that, in my view, the Constitution contains the Expulsion Term and the Fairness Term.

13. [45]

    I therefore answer the Separate Questions:

    1. (1)

       Yes.

    2. (2)

       Yes.

14. [46]

    The Club should pay the Plaintiffs’ costs of the Separate Questions.

15. [47]

    The matter should be listed before the Equity Registrar to obtain a hearing date for the balance of the proceedings.