Case Note for Member Disputes in Incorporated Associations

Singh & Ors v Brisbane Sikh Temple (Gurdwara) Inc [2022] QSC 151, a recent case where member disputes in incorporated associations was brought before the courts.

Case Note for Member Disputes in Incorporated Associations: Singh & Ors v Brisbane Sikh Temple (Gurdwara) Inc [2022] QSC 151

 

The recent Supreme Court of Queensland decision of Singh & Ors v Brisbane Sikh Temple (Gurdwara) Inc [2022] QSC 151 involved an application for the appointment of a receiver over an incorporated association in relation to a membership dispute between factions of members in an incorporated association.

 

Background

The Respondent was an incorporated association, and the applicants were members of the respondent.

In 2021, the applicants brought an application for an urgent interlocutory injunction, seeking to restrain the respondent from considering or resolving upon the election of the management committee at the Respondent’s annual general meeting.

It was alleged in the course of the case history that the respondent’s management committee rejected 2,151 number of membership applications for the respondent in about August 2021.

In February 2022, the Honourable Justice Kelly declared that the management committee’s decision in August 2021 to reject the 2,151 applications for membership to be void and of no effect. The Honourable Justice Kelly also directed the management committee to consider the rejected applications in accordance with the respondent’s Constitution and according to law. (To read our case note on this February judgement, visit Singh v Brisbane Sikh Temple).

In April 2022, the Honourable Justice Jackson made consent orders which required the management committee to use its best endeavours and take all reasonable steps to cause the respondent to comply with the orders made by the Honourable Justice Kelly in 25 February 2022 .

The consent orders created a timetable for:

    • the management committee to reconsider in accordance with the respondent’s Constitution and according to law the 2,151 applications previously rejected by it;

    • the management committee to hold a meeting which would formally vote to accept or reject the reconsidered rejected applications; and

    • the respondent to take reasonable steps to notify each successful applicant that their application had been accepted and to notify each unsuccessful applicant that their application had been rejected.

The reconsideration process occurred in May 2022, with a number of applicants being rejected for various reasons. The applicants alleged various irregularities regarding the reconsideration process, and sought an order for the appointment of a receiver to the respondent to:

    • reconsider the rejected applications, approve or reject them in accordance with the respondent’s Constitution and according to law, and settle the register of members;

    • convene a general meeting to vote on the election of the management committee; and

    • make all decisions about the process and procedures to be adopted for the general meeting.

The Honourable Justice Applegarth summarised the applicants’ case as this:

The applicants have not sought directions under the Uniform Civil Procedure Rules 1999 (Qld) to enforce compliance with the 4 April orders or to cure alleged non-compliance with them. They have not commenced a proceeding that seeks as relief declarations that all or some of the management committee’s reconsideration decisions are void or of no effect. Instead, having consented to the reconsideration process order by Jackson J on 4 April 2022, they now seek to take the reconsideration process out of the hands of the management committee and place it in the hands of a court-appointed receiver.

Evidence was submitted that the appointment of a receiver would cost the respondent at least $200,000.

 

Selection of Relevant Law

In consideration the application before him for the appointment of a receiver, the Honourable Justice Applegarth turned to the decisions of National Australian Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386 and Lamers v Arvind Pty Ltd [No 2] [2019] WASC 491.

In doing so, the Honourable Justice Applegarth made the following comments in the judgment:

Before the jurisdiction to appoint a receiver is exercised, the Court must be satisfied that the case in favour of appointment is strong. 

The appointment of a receiver is a drastic remedy to be exercised with care and great caution.

Consistent with this approach, it has been said that “no court will make such an order unless convinced of its necessity”.

 

Findings of Note

The Honourable Justice Applegarth acknowledged that there were serious questions raised about the correctness or competence of decisions made by the management committee in the reconsideration process. Further, the Honourable Justice Applegarth noted the respondent’s secretary has responded to note few decisions are accepted by the secretary as having been wrong and are subject to recommendations to be made at the next meeting of the management committee to correct them and to accept an application.

However, the Honourable Justice Applegarth observed the respondent’s constitution had an appeal process for rejected membership, which could be appealed to a general meeting of the respondent. The Honourable Justice Applegarth observed that the appeal process had not been engaged with by many of the rejected applicants. On this point, the Honourable Justice Applegarth stated “In circumstances in which appeal rights have not been exercised, I am not convinced that it is appropriate to appoint a receiver.”

Ultimately, the Honourable Justice Applegarth held that the appointment of a receiver was not necessary, and found against the applicant. Summarising many of his findings, the Honourable Justice Applegarth stated:

The appointment of a receiver is a drastic remedy to be exercised with great caution. I am not convinced that such an order is necessary. I am not persuaded that it is just or convenient to appoint a receiver, given the substantial costs associated with such a process. I am not persuaded that it is just or convenient to appoint a receiver in circumstances in which no proceeding has been commenced that seeks orders setting aside all or some of the reconsideration decisions and which might resolve the facts that are in dispute before me. The appointment of a receiver would not determine the validity of the reconsideration decisions made by the management committee pursuant to the 4 April orders. It would involve different decisions being made without the management committee’s decisions having been set aside. It also would be a costly exercise.

 

Lessons Learned 

This decision highlights a few important considerations for members of an incorporated association in seeking to resolve a member dispute:

    • Seeking that the Court appoint a receiver should only be considered by members in drastic circumstances;

    • Unless the facts of the are particularly dire, it would be wise for incorporated associations and its members exhausting all internal and constitutional remedies before seeking the intervention of the court; and

    • The decision highlights yet again the reluctance of the Court to intervene in the internal decision making and management of incorporated associations.

 

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Helpful Links 

https://corneyandlind.com.au/not-for-profit/can-management-committee-limit-membership-numbers/

https://corneyandlind.com.au/resource-centre/migration-of-an-incorporated-association-to-a-company-limited-by-guarantee/

https://corneyandlind.com.au/commercial-law/director-identification-numbers/