Lukaszewicz v Polish Club Ltd

The Court of Appeal (Ward and White JJA and Emmett AJA) unanimously refused leave to appeal and cross-appeal:

1. [1]

   WARD JA: For the reasons set out by White JA, with which I agree, I joined in the making of the orders on 21 May 2020 in this matter.

2. [2]

   WHITE JA: On 21 May 2020, the court made the following orders:

   1. (1)

      Order that the summons seeking leave to appeal and cross-appeal be dismissed.

   2. (2)

      Order that the purported notices of appeal and cross-appeal be dismissed as incompetent.

   3. (3)

      Order that there be no further order as to costs of the appeal, cross-appeal or applications for leave to appeal.

3. [3]

   These are my reasons for joining in the making of those orders.

4. [4]

   The respondent is a company limited by guarantee and a registered club under the Registered Clubs Act 1976 (NSW). The primary judge found that it operates as a licensed social club catering primarily to the Polish community of Sydney, in particular, the Polish community in and around the inner western suburbs of Sydney. The appellants are or were members of the respondent. They brought proceedings in the Equity Division primarily for relief under s 233 of the Corporations Act 2001 (Cth) on the ground that certain members of the management committee of the Club had engaged in conduct that was oppressive of the members or some of them (Corporations Act, s 232). The primary judge recorded that the appellant’s case was largely brought as an oppression claim (Judgment [6]).

5. [5]

   After a 13-day hearing between January and March 2019 the primary judge (Black J) delivered reasons for judgment on 23 April 2019 (Lukaszewicz v Polish Club Ltd [2019] NSWSC 446). After further hearings, on 6 June 2019, the primary judge granted the following declaratory relief:

6. [6]

   A significant part of the controversy at trial concerned the validity of a resolution passed at an annual general meeting of the respondent on 19 March 2017 to the effect that part of land owned by the respondent (being land at 75 Norton Street, Ashfield and used as a car park adjacent to the respondent’s clubhouse) was not core property in the terms of the then s 41J of the Registered Clubs Act. The appellants had sought declarations that the resolution was void and an order restraining the defendants from taking any steps to sell or dispose of any of the real property of the respondent pursuant to the resolution passed on that day. Those declarations and orders were not made. An interlocutory injunction restraining the defendants from taking any steps to sell or dispose of the Club’s real property was discharged (Judgment [5] and [292]).

7. [7]

   The appellants had sought declarations as to allegedly oppressive conduct in wider terms than the declarations his Honour made. They also sought the appointment of a receiver and manager to the first defendant. They sought orders requiring the second defendant (Mr Ryszard Borysiewicz) to resign as a director and as a member of the respondent, an order restraining him from being involved or attempting to be involved in the affairs and business of the respondent for five years and an order that he make restitution or otherwise pay compensation to the respondent for losses which it was claimed the respondent had suffered. Those orders were not made. On 10 July 2019 the primary judge ordered that, save for the orders made on 6 June 2019, the summons and second further amended statement of claim be otherwise dismissed.

8. [8]

   Being dissatisfied with the limited form of relief granted, on 2 October 2019 the appellants filed a purported notice of appeal. The notice of appeal joined as respondents both the Club (the first respondent) and the five individual defendants. The relief claimed in the notice of appeal included an application for leave to adduce fresh evidence, wider declarations than those the primary judge made, an order requiring the respondent to admit named persons as full members, and a declaration that the “Core/Non-Core Resolution” (that is, the resolution of 19 March 2017) was invalid.

9. [9]

   On 16 October 2019 the respondent filed a notice of cross-appeal. The notice of cross-appeal contended that the primary judge erred in his findings of oppression. The respondent sought an order that the declaration made on 6 June 2019 be set aside. The notice of cross-appeal was also filed purportedly as of right.

10. [10]

    On 30 March 2020 the Registrar made orders by consent granting the appellants leave to file and serve an amended notice of appeal “subject to the second to sixth respondents (the individual defendants in the court below) being removed as respondents”. The amended notice of appeal as filed did remove the individual respondents. All of the grounds of the original notice of appeal were deleted and in their place the following grounds were relied upon:

11. [11]

    The orders sought in the amended notice of appeal were also amended. The orders sought, other than the allowing of the appeal, were:

12. [12]

    On 7 May 2020 I gave leave to the appellant to further amend the notice of appeal and to file a notice of contention.

13. [13]

    The further amended notice of appeal alleges that the primary judge erred in not making a further finding of oppression and seeks additional injunctive relief:

14. [14]

    On 7 May 2020 I said that on the hearing of the appeal both parties should be in a position to say why the appeal and the cross-appeal were competent. I said that if leave to appeal were sought, the application for leave to appeal would be heard on the day fixed for the hearing of the appeal (then 20 May 2020).

15. [15]

    On 12 May 2020 the appellants filed an application for leave to appeal and an extension of time for the filing of the summons seeking leave to appeal. In support of that application the appellants’ solicitor deposed that until the matter was raised by me at the hearing on 7 May 2020 no close attention had been given to whether the appeal and cross-appeal lay as of right. The respondent had not filed a notice of objection as to competency. In support of the application for leave to appeal the appellants’ solicitor deposed:

16. [16]

    On 19 May 2020 the respondent sent to the Registrar and the Court of Appeal researcher written submissions and a draft summons seeking leave to cross-appeal.

17. [17]

    Section 101(2)(r) of the Supreme Court Act 1970 (NSW) provides:

18. [18]

    The appellants claim that the declaration made by the primary judge should be supplemented by injunctive relief that in part reflects the declaration made and in part extends it. The respondent claims by its cross-appeal that the judge erred in making the declaration. These claims raise no issue amounting to a value of $100,000 or more, or indeed of any sum. Nor does the appeal or cross-appeal involve any claim, demand or question to or respecting any property or civil right amounting to or of the value of $100,000, or of any value. Where the issue on appeal has no monetary value leave to appeal is required (Clyne v New South Wales Bar Association (1960) 104 CLR 186 at 205; Re DG and the Adoption Act 2000 [2007] NSWCA 241; (2007) 244 ALR 195 at [17]-[21]).

19. [19]

    Although at the hearing on 7 May 2020 Mr Ireland QC foreshadowed a submission that s 101(2)(r) did not apply where final injunctive relief is the subject of the appeal both the appellants and respondent now accept that leave is required. This is in accordance with authority (Oertel v Crocker (1947) 75 CLR 261 at 295; Nanschild v Pratt [2011] NSWCA 85 at [26]; Jabulani Pty Ltd v Walkabout II Pty Ltd [2016] NSWCA 267 at [80]-[81]).

20. [20]

    Generally it is appropriate only to grant leave to appeal in cases that involve issues of principle, or questions of public importance, or where it is reasonably clear that an error has been made, going beyond what is merely arguable, that occasions an injustice (Be Financial Pty Ltd as trustee for the Financial Operations Trust v Das [2012] NSWCA 164 at [32]-[38]; The Age Co Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26 at [13]). Appellate review will be warranted if there is an “error of principle which, if not corrected, will result in substantial injustice” (Collier v Lancer (No. 2) [2013] NSWCA 186 at [1]). Disproportion between the amount of costs incurred in the litigation and the amount in dispute can itself be a reason for refusing leave, particularly having regard to case management principles and the appropriate allocation of court resources (Carolan v AMF Bowling Pty Ltd t/as Bennetts Green Bowl [1995] NSWCA 69; Gibson v Drumm [2016] NSWCA 206 at [19]-[20]).

21. [21]

    In Carolan v AMF Bowling Pty Ltd Kirby P included in his non-exhaustive list of reasons for Parliament to have limited appeals as of right from the District Court to those involving an amount in issue of at least $10,000 (as the figure then was):

22. [22]

    The appellants submitted that both the appeal and cross-appeal involved matters of general importance, namely the principles upon which a court exercising jurisdiction under the Corporations Act should grant declaratory relief and fashion appropriate orders, having found acts of oppression by a company against members. They submitted that there was a question of general importance as to whether a court should award declaratory relief and no other relief. They submitted that there is no previous known decision where, after a finding of oppression was made, only declaratory relief was granted. They submitted that confining the relief granted to declaratory relief would be unlikely to quell a long-standing and intractable membership dispute.

23. [23]

    The appellants also submitted that the appeal and cross-appeal “raise the question of the extent to which there is a public interest in the administration of the companies limited by guarantee operating as registered clubs”.

24. [24]

    This last question does not arise on either the appeal or the cross-appeal.

25. [25]

    The appellants submitted:

26. [26]

    No question is raised in the appeal or the cross-appeal as to the principles to be applied under s 232 of the Corporations Act in determining whether the affairs of a company have been conducted oppressively. The primary judge’s statement of principles applicable to an oppression claim were not in dispute.

27. [27]

    Nor is it disputed that the injunctive relief the appellants now claim was not sought before the primary judge. The appellants’ second further amended statement of claim did not seek injunctive relief.

28. [28]

    The primary judge said (at [289]):

29. [29]

    Neither the further amended notice of appeal nor the appellants’ written submissions contended that the primary judge erred by not appointing a receiver or an interim board. Mr Ireland QC confirmed that no such contention is advanced. He submitted that the contentions of both parties at trial had presented the judge with a binary choice if oppression were found: either declarations or declarations and the appointment of a receiver. He submitted that in truth, as the primary judge ought to have appreciated, the available remedies were not so limited.

30. [30]

    The appellants contend that the primary judge erred in his approach to the relief granted by not making orders that would prevent the continuation of the conduct the subject of the declaration. But if leave were granted the appeal would not be an appeal de novo. The appellants would need to demonstrate error. If, which I doubt, it is arguable that the primary judge erred by not granting relief that was not asked for, it is not more than merely arguable.

31. [31]

    Nor would the absence of injunctive relief give rise to any substantial injustice. The only effect of granting the injunctive relief sought would be to expose the Club and its directors to the risk of a charge of contempt, in addition to claims for declaratory and injunctive relief, if future decisions on applications for membership, or in relation to the exercise of disciplinary powers against dissenting members, were challenged in future proceedings. That would be a reason for not granting the injunctions sought (see by analogy Commodore Business Machines Pty Ltd v Trade Practices Commission (1990) 92 ALR 563 at 574-575; Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513; [2007] FCAFC 146 at [110]-[112]; ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 259). It indicates that allowing the judgment to stand would not result in any substantial injustice.

32. [32]

    Nor would I expect injunctive relief to quell future disputes. An injunction which restrained the respondent through its officers from giving “undue weight” to one consideration, or “too little weight” to another, or from exercising disciplinary powers for an improper purpose, would be more likely to be productive of future litigation than otherwise.

33. [33]

    As noted above at [25] the appellants submit that at the heart of the dispute were plans for dealing with and developing Club property. The appellants contended that the exercise by members of the management committee of powers to suspend or expel members and their decisions in rejecting applications for membership were taken with a view to manipulating the votes for the meeting of 19 March 2017. But neither the amended notice of appeal, nor the further amended notice of appeal, now challenges the validity of the resolution of that meeting. That resolution concerned land adjoining the clubhouse.

34. [34]

    On 16 March 2020 Stevenson J rejected a challenge by the second appellant to a resolution passed on 1 March 2020 to declare the land on which the clubhouse stands not to be “core property” within the meaning of s 41E(6) of the Registered Clubs Act (Wykrota v Polish Club Ltd [2020] NSWSC 239). That resolution was passed by a majority of approximately 80 per cent. The members also voted by about the same majority to approve of the directors’ proceeding with a proposed agreement for the development of both parcels of land. No appeal or application for leave to appeal has been filed from Stevenson J’s orders of 20 March 2020 dismissing the challenge to the resolution of 1 March 2020.

35. [35]

    The landscape has changed. It does not appear that appellate reconsideration of the primary judge’s findings of fact and exercise of discretion to grant only declaratory relief would have any substantial impact on the future conduct of the Club’s affairs.

36. [36]

    The respondent’s cross-appeal challenges the primary judge’s fact finding. The respondent contends that the primary judge aggregated matters that were not individually capable of constituting oppression to form a “composite whole” that was then found to amount to oppression. These matters also raise no matter of principle or public importance. I am unpersuaded that the respondent’s cross-appeal is more than merely arguable. Nor does the declaration made occasion it any injustice. It provides a reminder to the Club’s directors and management of their duties.

37. [37]

    The respondent submitted that how management of a social club exercises the powers to admit, suspend or expel members raises a question of public importance and that whether the declaration should have been made could assist future management and bring finality to the underlying dispute.

38. [38]

    Finality of the determination of the dispute is not in issue. The primary judge’s determination is final unless leave to appeal is given. Save in one respect, the duties of the directors of the respondent and the principles concerning the operation of s 232 of the Corporations Act are not in dispute.

39. [39]

    The qualification to this is that the respondent submitted that the primary judge erred in failing to find that the management committee had an absolute unfettered discretion whether or not to admit applicants for membership. The primary judge found that the management committee (the directors) were required to accept or reject membership applications in good faith (applying Millar v Houghton Table Tennis & Sports Club Inc [2003] SASC 1 at [193] (Besanko J) and Pettit v South Australian Harness Racing Club Inc (2006) 95 SASR 543; [2006] SASC 306 at [26] (White J)). His Honour added that directors must generally exercise the powers conferred on them in accordance with their statutory and equitable duties to do so in good faith and in the best interests of the corporation (Judgment [146]-[148]). Mr McCulloch SC submitted that the judge’s conclusion was wrong. In written submissions the respondent said that those duties were owed to the Club and not to the applicants for membership. The primary judge did not decide otherwise. His Honour also observed (at [149]):

40. [40]

    I do not think it is reasonably arguable that his Honour’s statement of the relevant principles is wrong.

41. [41]

    Both parties submitted that as both the appeal and cross-appeal had been fully prepared for hearing before the issue of competence of the appeal and cross-appeal was raised by the court, and significant costs had been incurred, there would be an injustice to all parties if the appeal and cross-appeal were not heard on their merits.

42. [42]

    Section 101(2)(r) of the Supreme Court Act reflects a public policy, that the resources of the parties and the court should not be spent in dealing with appeals involving no monetary value, or having a value of less than $100,000 unless leave to appeal is obtained. In appropriate cases, an application for leave to appeal and the appeal are heard concurrently. The appellants’ failure to seek leave to appeal and the respondents’ failure to object to competency and to seek leave to cross-appeal means that no such assessment was made. It is futile to hypothesise what the result of such an assessment might have been.

43. [43]

    Uniform Civil Procedure Rules, r 51.22 provides that if an appeal as of right is restricted by any Act by reference to a specified amount or value, the appellant on the filing of the notice of appeal, must file and serve an affidavit that sets out material facts that show the restriction does not apply. Neither the appellants nor the respondents complied with that rule.

44. [44]

    The public policy underlying the need for leave to appeal in cases such as the present would be put at nought if the parties could ignore the requirement for leave and then successfully submit that leave should be given because they had prepared for an appeal. That would subvert the reasons Parliament imposed the requirement for leave (as to which see [21] above).

45. [45]

    It is not uncommon for the court itself to have to raise the competence of an appeal when the matter comes on for hearing. Nanschild v Pratt and Jabulani Pty Ltd v Walkabout II Pty Ltd are examples of that.

46. [46]

    Resolution of the appeal or cross-appeal could affect the costs orders made below. The primary judge ordered the respondent to pay 15 per cent of the appellants’ costs. Neither party submitted that leave should be given so that the costs order could be reconsidered. That would clearly be inappropriate.

47. [47]

    For these reasons I joined in the orders refusing leave to appeal and cross-appeal and dismissing the purported appeal and cross-appeal as incompetent.

48. [48]

    Both parties failed to have regard (or sufficient regard) to the requirements of s 101(2)(r) of the Supreme Court Act. It was appropriate that without disturbing costs orders already made, the parties should bear their own costs of the purported appeal and cross-appeal and applications for leave to appeal and cross-appeal.

49. [49]

    EMMETT AJA: On 21 May 2020, I joined in orders made that the summons seeking leave to appeal and cross-appeal be dismissed, that the purported notices of appeal and cross-appeal be dismissed as incompetent and that there be no further order as to costs of the appeal, cross-appeal or applications for leave to appeal. I have had the opportunity of reading in draft form White JA’s reasons for joining in those orders. His Honour’s proposed reasons also reflect my reasons for joining in the orders.