FEDERAL COURT OF AUSTRALIA

Shelton v National Roads and Motorists Association Ltd [2004] FCA 1393

PRACTICE AND PROCEDURE - Pleadings - Application to strike out Amended Statement of Claim and Amended Application - Pleadings allegedly disclosing no reasonable cause of action - Pleadings allegedly having tendency to cause prejudice, embarrassment or delay - Proceedings allegedly frivolous or vexatious - Purpose of pleadings and particulars generally - Basic requirements for and principles of pleadings - Embarrassing pleadings - the General Steel test for striking out a pleading that discloses no cause of action - Repetition - Imprecise language - Pleadings extraneous allegations -  Pleading conclusions without indicating material facts relied upon - Deficient in the extreme - Pleadings struck out entirely - Federal Court Rules O 11 r 16, O 20 r 2

CORPORATIONS LAW - Management and administration - Annual and Special General Meetings convened to pass resolutions to amend the constitution of the NRMA and to remove certain directors - Declaratory relief sought - Declaratory relief must be linked to a specific right or obligation - No basis for declaratory relief - Procedural irregularity - Insufficient information in Amended Statement of Claim to determine whether irregularities are procedural irregularities that could otherwise be cured under the Corporations Act - Broad discretion of the Court - Courts will be reluctant to intrude on internal administration policies without proper, logical and specific pleadings -  Corporations Act 2001 (Cth) ss 203D, 1322

CORPORATIONS LAW - Oppression of members - Conduct of NRMA allegedly contrary to the interests of the members as a whole - Conduct to be assessed in totality - Question of fact and degree - Objective test for unfairness - Onus on applicant to establish conduct is contrary to the interests of the members as a whole, or oppressive, unfairly prejudicial or discriminatory - Mere disadvantage of being in the minority does not constitute oppression - Grounds set out in ss 232(d) and (e) of the Corporations Act constitute separate bases for the Court's intervention - Pleading should delineate the basis upon which s 232 of the Corporations Act is relied upon - Corporations Act 2001 (Cth) ss 232, 233

Bartlett v Swan Television & Radio Broadcasters Pty Limited (1995) ATPR 41-434 referred to.

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 cited

Dare v Pulham (1982) 148 CLR 658 discussed

Thorpe v Holdsworth (1876) 3 Ch D 637 discussed

Wayde v NSW Rugby League Limited (1985) 180 CLR 459 cited

Morgan v 45 Flers Avenue Pty Limited (1987) 11 NSWLR 573 cited

John J Starr (Real Estate) Pty Limited v Andrew (Australasia) Pty Limited (1991) 6 ACSR 63 cited

Weatherall v Satellite Receiving Systems (Australia) Pty Limited (1999) 92 FCR 873 cited

Turnbull v National Roads and Motorists Association Ltd  (2004) 50 ACSR 44 discussed

Fexuto Pty Limited v Bosnjak Holdings Pty Limited (2001) 37 ACSR 672 discussed

TIMOTHY JOHN SHELTON v NATIONAL ROADS AND MOTORISTS ASSOCIATION LIMITED AND ORS                                                                                                N35 OF 2004

TAMBERLIN J

SYDNEY

29 OCTOBER 2004

THE COURT ORDERS THAT:

1.                  The Application is struck out.

2.                  The Third Amended Statement of Claim is struck out.

3.                  The applicant is granted leave to file and serve a further Application and Statement of Claim.

4.                  The respondents bring in Short Minutes to give effect to these reasons for judgment.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     The respondents seek orders that the Amended Statement of Claim (“ASOC”) and the Third Amended Application, both filed on 21 May 2004, be struck out, and that the applicant pay the respondents’ costs of the motion.  The respondents seek an order under O 11 r 16 of the Federal Court Rules (“FCR”) that the whole of the ASOC be struck out because it discloses no reasonable cause of action and has a tendency to cause prejudice, embarrassment or delay in the proceeding.  In the alternative, an order is sought under O 20 r 2 of the FCR that the proceeding be stayed or dismissed generally because the ASOC discloses no reasonable cause of action and the proceeding is frivolous or vexatious.

The amended statement of claim

2                     The ASOC comprises a formal part in pars 1-11, which sets out some background material.  Paragraphs 12-15 refer to the directors of the first respondent (“the NRMA”) and the lodgement of a requisition by a member, Mr Snodgrass, for the removal of those Board directors who had supported Mr Whitlam, the previous President of the NRMA.  Paragraphs 16-28 deal with this requisition, and refer to the NRMA’s application to the Supreme Court of New South Wales to dismiss that requisition.  These paragraphs contain allegations of intent by persons referred to as “Majority Directors” to implement an “overall plan” to exercise the power vested in them to fill casual vacancies in order to entrench their control and avoid removal.  Paragraphs 29-46, as the heading to this section indicates, are concerned with the exercise of power to appoint casual vacancy directors.  Paragraphs 47-61 refer to a Special General Meeting (“SGM”) held on 17 October 2002.  Paragraphs 62-90 refer to what is said to be the conduct of Majority Directors after 18 October 2002.

3                     Paragraphs 91-98 allege matters concerning a publicity campaign that preceded the 2002 Annual General Meeting (“AGM”) of the NRMA, which was held on 14 January 2003.  Paragraphs 99-112 refer to the 2002 AGM and SGM held on 14 January 2004, and the conduct preceding that time.  Paragraphs 113–123 are concerned with the Notice of the 2002 AGM given on 4 December 2002.  Paragraphs 124-154 relate to matters between that date and the AGM of 14 January 2003.  Paragraphs 155-161 then refer to the conduct of the meeting of 14 January 2003, described as the “Second Special General Meeting.”

4                     Thereafter, pars 162-304 of the ASOC are directed to the alleged conduct of the Board and of the NRMA and its servants and agents between 14 January 2003 to 28 November 2004, when a half-Board election of directors occurred and a new Constitution was adopted by the NRMA.  This section also details the conduct of the Board and the NRMA and its servants and agents at that meeting, and outlines the features of the new constitution.

5                     Paragraphs 301-306 refer to a claim to reinstate the pre-28 November 2003 constitution, or alternatively, to modify the post-28 November 2003 constitution.  Paragraph 307 sets out the relief claimed by the applicant: declarations as to the invalidity of the resolutions at the 2002 AGM and other meetings held on the 14 January 2002, declarations in relation to the characterisation of NRMA’s conduct up to and during the meetings on 14 January 2003; and declarations and orders relating to the adoption of the new constitution and the election of a half-Board of directors at the 28 November 2003 meeting. 

6                     The strike out application is brought on the ground that the ASOC is inadequately pleaded, and that the material that contains is insufficient to support the relief claimed. 

relief sought

7                     A more specific understanding of the nature of the applicant’s claim can be seen by considering the terms of the relief sought as set out in par 307 of the ASOC. 

8                     Orders 1 to 6 sought in par 307 seek declarations related to resolutions passed at NRMA’s 2002 AGM, which are referred to respectively as the “Spill Resolution”, each of the “Appointment Resolutions” and the “Removal Resolutions”, and in relation to the conduct of the NRMA leading up to that meeting.   It is claimed, for example, in sub-pars 307(1) and (2) that the resolutions are invalid and of no effect on a proper construction of s 203D of the Corporations Act 2001 (Cth) (“the Corporations Act”).  Sub-par 307(3) seeks a declaration that the moving of the Appointment Resolutions is invalid on a proper construction of the NRMA’s constitution, and of the Corporations Act.  Further declarations are sought that the Spill Resolution, and each of the Appointment and Removal Resolutions either contravene or “attempt” to contravene the Corporations Act.  Sub-par 307(5) seeks a declaration that the conduct of the NRMA’s affairs in relation to and leading up to and including the holding of the 2002 AGM and the 2003 SGM was contrary to the interests of members as a whole.   

9                     Relief is also sought in relation to the AGM held on 20 November 2003.  Sub-par 307(7) seeks an order that “the current directors be and remain those persons who were directors at 20 November 2002 and whose terms have not expired together with those who have stood for re-election and been re-elected in the 2003 NRMA Half-Board election.”  Sub-par 307(8) seeks an order that Board election scheduled for 2005 be held in accordance with the pre-28 November 2003 constitution. Further declarations are sought that the conduct of the NRMA in relation to the AGM and SGMs of 2003 was oppressive to, unfairly prejudicial to, and unfairly discriminatory against, the applicant and the members of the NRMA.  A declaration is also sought that the NRMAS’s conduct in relation to the 28 November 2003 Board election, including the campaign promoting the special resolution that was carried at that meeting, was and is oppressive, unfairly prejudicial to, and unfairly discriminatory against, the applicant and the NRMA membership. 

10                  Further orders are sought that certain directors are not entitled to hold office, and that they be restrained from occupying positions as directors of the NRMA, and that the NRMA should proceed to declare the result of the 2003 half-Board election.  An order is sought that an independent court-appointed person reviews the November 2003 ballots and reports to the court on the result of the 2003 Half-Board election.  Declarations are sought that the constitution adopted by special resolution on 28 November 2003 is invalid and that the constitution in existence prior to 28 November 2003 is the valid constitution of the NRMA.  It can be seen that the relief sought calls for a wide-ranging intrusion into the affairs of the NRMA, including setting aside its present constitution as adopted by its members and reinstating the previous constitution without any vote by the members.  I am informed that the NRMA has approximately 2 million members.

Submissions and reasoning

11                  The respondents’ first submission in support of their application is that the ASOC does not contain any allegations of fact capable of making out a claim that the resolutions at the meetings contravene s 203D of the Corporations Act.  It is said that none of the allegedly contravened rules of the constitution have been identified, and no facts are pleaded to establish the claim that the requirements of the constitution was not observed.  The respondents submit that the ASOC does not specify how, when, where or by whom s 203D of the Corporations Act was contravened.

12                  Section 203D of the Corporations Act is entitled “Removal by members – public companies” and relevantly provides:

           “Resolution for removal of director

(1)       A public company may by resolution remove a director from office …

Notice of intention to move resolution for removal of director

(2)       Notice of intention to move the resolution must be given to the company at least 2 months before the meeting is to be held.  However, if the company calls a meeting after the notice of intention is given under this subsection, the meeting may pass the resolution even though the meeting is held less than 2 months after the notice of intention is given. …

Director to be informed

(3)       The company must give the director a copy of the notice as soon as practicable after it is received.

Director’s right to put case to members

(4)       The director is entitled to put their case to members by:

(a)               giving the company a  written statement for circulation to members (see subsections (5) and (6)); and

(b)               speaking to the motion at the meeting (whether or not the director is a member of the company).

(5)         The written statement is to be circulated by the company to members by:

(a)               sending a copy to everyone to whom the notice of the meeting is sent if there is time to do so; or

(b)               if there is not time to comply with paragraph (a) – having the statement distributed to members attending the meeting and read out at the meeting before the resolution is voted on.

(6)         The director’s statement does not have to be circulated to members if it is more than 1,000 words long or defamatory.

…”

13                  In my view, there is substance in this submission.  The basis for the declarations sought are not spelt out in the ASOC.  It is not sufficient to seek declarations that simply state an event has occurred, or that there has been unspecified non-compliance, or as to general invalidity of resolutions. Moreover, such declarations would not necessarily give rise to any entitlement or right.  A specific right or obligation should be identified as the subject of the declaratory relief.  Nor is it appropriate, in my opinion, for a declaration of right to be sought on the basis that the general conduct of a body’s affairs in relation to and leading up to specified meetings was oppressive or contrary to the interests of members as a whole.  Section 203D provides a ground which, if made out, enables relief to be granted, but it does not itself give rise to any right or entitlement.

14                  It is submitted for the applicant that the alleged breaches complained of could be cured by s 1322 of the Corporations Act,which provides that proceedings under the Corporations Act are not invalidated because of any procedural irregularity unless the court is of opinion that the irregularity has caused, or may cause, substantial injustice that cannot be remedied by an order of the court.  The ASOC does not allege that the irregularities complained of are not procedural irregularities.  The definition of procedural irregularity is broad and arguably could cover the matters the applicant seeks to raise.  This submission serves to point up the inadequacy of the ASOC.  Accordingly, since it does not particularise the breaches it is not appropriate to decide at this point whether the matters complained of are “procedural irregularities”.  This is an important defect in the ASOC, and as a result, it is not possible to determine whether s 1322 can properly be pleaded.

15                  The language of the declaration sought in sub-par 307(5) of the ASOC, insofar as it refers to the conduct of NRMA’s affairs leading up to and including the 2003 meetings being contrary to the interests of the members as a whole, adopts the language of s 232 of the Corporations Act, which enables the Court to make an order, as set out in s 233, if the conduct of the company’s affairs is found to be contrary to the interests of the members as a whole.  In my view, there is force in the respondents’ submission that a declaration in terms of that set out in this declaration is not a declaration of right.  Rather, it is a finding that conduct is contrary to the interests of members as a whole, which in turn provides a ground on which the court is empowered to make orders conferring rights and imposing obligations.  The relief is of a wide-ranging, discretionary nature.  Further, the ASOC does not specify any relief by reference to the provisions of s 233. 

16                  The respondents contend that there is no power in s 233(1) which enables the Court to make an order that sets aside resolutions passed by members.  They point, for example, to s 233(1)(c), which enables the Court to make orders regulating the conduct of the company’s affairs in the future.  It is submitted that the sections cannot operate retrospectively.  It seems to me that this submission is a substantive argument to be decided in conjunction with the making of appropriate findings at the end of the hearing after a proper pleading has been filed.  It is inappropriate at this point to make any determination in relation to that question.  However, it should be observed that the far-reaching and highly intrusive relief sought makes it imperative that the matters sought to be raised should be properly, logically and specifically pleaded.  The allegations levelled at the NRMA and its directors are extremely serious. 

17                  It will be rarely, if ever, that a court will or should intervene so seriously with the internal management of a large publicly held body corporate such as the NRMA in the general and imprecise manner broadly claimed in the ASOC by way of relief.  A court will be reluctant to interfere with the election preferences of members of a widely held public corporate body where claims have been made and opinions asserted during and in the course of an electoral campaign for control of the corporation.  This is particularly so in a corporation the size of the NRMA which has over two million members.  The relief sought in the present case intrudes into the internal administration and policies of the NRMA and relates to the constitution and operation of the NRMA and its commercial policies.  Accordingly, if such far-reaching relief can be granted (and I reach no conclusion on that at the present time), the pleading must be framed with precision, clarity and conciseness before the Court will declare invalid for example, the democratic decision of members to overturn or drastically modify an existing constitution which has been in operation for almost a year.  The present ASOC falls far short of meeting this basic requirement.

Requirements for pleading

18                  Order 11 of the FCR relates to pleadings.  Under the FCR a pleading must contain a summary statement of the material facts relied upon as the basis for the relief sought, but it is not appropriate to set out the evidence by which those facts are to be proved.  The pleadings are required to be as brief as the nature of the case allows. Where documents or spoken words are referred to in a pleading, it is with regard to their nature or effect, rather than the precise terms.  The pleading can raise points of law.  Under O 11 r 16, a court may at any stage in the proceedings order that the whole or any part of a pleading be struck out where it has a tendency to cause prejudice, embarrassment or delay in the proceedings.  “Embarrassment” in this context refers to a pleading that is susceptible to various meanings, or contains inconsistent allegations, or in which alternatives are confusingly intermixed, or in which irrelevant allegations are made that tend to increase expense.  This is not an exhaustive list of situations in which a pleading may be embarrassing: see Bartlett v Swan Television & Radio Broadcasters Pty Limited (1995) ATPR 41-434.  An example of an embarrassing pleading is where the pleading simply pleads a conclusion.  For the reasons that I set out below, the ASOC contravenes these basic requirements in a number of respects.

19                  Order 20 r 2 of the FCR confers a power on the Court to order that proceedings be dismissed where no reasonable cause of action is disclosed or the proceeding is frivolous or an abuse of process of the Court.  The power to strike out a proceeding is an extreme one and will be only exercised in rare circumstances where the Court is satisfied that the case for the applicant clearly has no real prospect of success: see General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-130 per Barwick CJ.

20                  The relevant principles relating to pleading were summarised by the High Court in Dare v Pulham (1982) 148 CLR 658 at 664 as follows:

“Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it  … they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial … and they give a defendant an understanding of a plaintiff’s claim in aid of the defendant’s right to make a payment into court.  Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded in the pleadings…”

21                  As Jessel MR said in Thorpe v Holdsworth (1876) 3 Ch D 637 at 639, pleadings are designed to define the issue and give the other party fair notice of the case that has to be met:

“The whole object of pleadings is to bring the parties to an issue, and the meaning of the rules … was to prevent the issue being enlarged, which would prevent either party from knowing when the cause came on for trial, what the real point to be discussed and decided was. In fact, the whole meaning of the system is to narrow the parties to definite issues, and thereby to diminish expense and delay, especially as regards to the amount of testimony required on either side at the hearing.”

22                  The primary function of pleadings is to succinctly state the facts relied on which give rise to the relief sought.  The ASOC in the present matter fails to do this for the reasons set out below.

OPPRESSION

23                  It is not practicable to delineate the numerous ways in which oppressive conduct may be established.  The Court will generally look at the overall course of conduct and consider whether it is so unfair that reasonable directors would not consider it fair.  If directors exercise a power so as to impose a disability or burden on a member that is unfair according to ordinary standards of reasonableness and fair dealing, then such conduct may be described as oppressive.  The question is one of fact and degree for the Court to determine, having regard to the view the directors have formed themselves, and allowing for any special skill or knowledge possessed by the directors.  The test of unfairness is objective: see Wayde v NSW Rugby League Limited (1985) 180 CLR 459 at 472 (“Wayde”) per Brennan J; Morgan v 45 Flers Avenue Pty Ltd (1987) 11 NSWLR 573.  The Court should not take a narrow approach to cases of oppression.  It is necessary for the Court to come to a conclusion that there has been conduct unfairly prejudicial to or unfairly discriminatory or oppressive to a member before it makes an order to this effect: see John J Starr (Real Estate) Pty Ltd v Andrew (Australasia) Pty Limited (1991) 6 ACSR 63, and the authorities there collected at 65-67.

24                  The onus of establishing unfairness rests on the applicant asserting the conduct that is contrary to the interests of the members as a whole, or that is oppressive, unfairly prejudicial or discriminatory.  An applicant must actually prove oppression before obtaining relief.  It is not established simply by showing that the majority are in control of the company, or that the applicant is consistently out-voted, or that the majority have made some questionable decisions from a business point of view.  The mere disadvantage of being in a minority does not in itself constitute oppression.  It is necessary for each single allegation in an oppression case to be pleaded clearly in order to assess whether the totality may amount to oppression: see Weatherall v Satellite Receiving Systems (Australia) Pty Limited (1999) 92 FCR 873.  Disagreement with the decision by a majority of shareholders and directors on the part of a minority shareholder does not entitle that shareholder to relief under the section: Re Bountiful Pty Ltd (1994) 12 ACLC 902.

25                  The operation of s 232 of the Corporations Act was recently considered by Campbell J in Turnbull v National Roads and Motorists Association Limited (2004) 50 ACSR 44 (“Turnbull v NRMA”).  In that case, his Honour had to consider whether the grounds in relation to the conduct set out in ss 232(d) and (e) provided two separate bases for the Court’s intervention, namely, being contrary to the interests of the members of a whole, or being oppressive to, or unfairly prejudicial to, or unfairly discriminatory against, a member or members in whatever capacity.  After reviewing authorities and considering the legislative history, his Honour came to the conclusion that the ground of being “contrary to the interest of members as a whole” in s 232(d) was intended to be independent to the ground of being “oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or any other capacity” in s 232(e).   I agree with the conclusion his Honour reached on this point.  In my view, the pleading should spell out the respects in which it is said that the conduct is contrary to interests of members as a whole pursuant to s 232(d), and should also precisely delineate the basis on which s 232(e) is relied on.  This has not been done.  It is of course possible that there will be a considerable amount of overlap between the grounds relied on in relation to subsections (d) and (e), but this does not provide a basis for omitting to address each of the two heads relied on.

26                  In the present case, however, the ASOC does not draw any distinction between the two grounds, and a substantial number of allegations combine the two criteria without laying the ground for each of these separate bases which can give rise to orders under s 233.  The ASOC does not refer to ss 232 or 233 of the Corporations Act in terms or by reference but at times it does use in a rolled-up the language of s 232.  It does not specify how the extensive relief sought, presumably under s 233, will have the effect of remedying the conduct complained of or the consequences of that conduct.  This is largely a result of the fact that the pleading does not delineate the way in which the conduct is unfairly prejudicial, oppressive or discriminatory, nor how the NRMA, in the conduct of its affairs, has impacted detrimentally upon the organisation and its members.  There is a leap from the reference to a alleged irregularities to the allegation that in some unspecified way it is “just and equitable” that the constitution of 2003 should be set aside or dramatically modified, and the previous constitution re-instated.  The remedies provide for in s 233 are designed to alleviate or remove the adverse consequences of conduct carried out in contravention of s 232, but the ASOC is silent as to how this is to be achieved if the applicant is successful.  Even if it were to be established that one or more acts of the NRMA, the Board, or “majority” shareholders were to contravene s 232, it does not necessarily follow that the relief sought should or would be granted under s 233.

27                  In Turnbull v NRMA his Honour pointed out at [51] that:

“The power of the court to make an order … on the ground that something proscribed by the Corporations Act 2001 (Cth) is contrary to interests of members as a whole, is a power which must be exercised with the greatest of care.  The court is extremely reluctant to interfere, in advance, with the ordinary processes of company democracy.  It is a well-established rule of thumb that a court will, only in the rarest of circumstances, injunct the holding of a company meeting.  Questions of what is, or is not, in the interests of members as a whole are often best left to be decided by the officers, organs and procedures of the company itself, or by the court deciding after events have happened, whether those events fall short of a legally required standard of conduct by virtue of their not having occurred in the interests of members as a whole.  If the court is asked to make an order under s 233 on the ground that some proposed course of conduct is contrary to the interests of members as whole there will frequently be factual difficulties in demonstrating with sufficient certainty that the course of conduct is indeed contrary to the interests of members as a whole.” 

28                  As Spigelman CJ pointed out when considering questions of oppression in Fexuto Pty Limited v Bosnjak Holdings Pty Limited (2001) 37 ACSR 672 at [6]:

“[T]here is a need for an single overall judgment to the effect that the affairs of the company are being conducted in a manner oppressive or unfairly prejudicial to, or unfairly discriminatory against, relevantly, Fexuto. This requires the identification of the appropriate range of facts … which constitute “conduct” of the “affairs of” Holdings [the company]. His Honour [the primary judge] approached the task in this way.  As he put it:

‘Although, there may well be cases where each single allegation in itself cold not be regarded as oppressive, I must assess the totality of the allegations to see if there is oppression. The authorities show that this type of case has to be judged on all the circumstances.’ ”

29                  In the same case, Priestley J pointed out at [504] that the reference to oppression or unfair prejudice means that the actual conduct of the affairs of the company must be looked at.  In other words, the focus is on what was being done rather than why it was being carried out.

30                  Having made these observations, I now turn to the specific provisions of the ASOC which are said to support claims for relief concerning the AGM and SGM held on 14 February 2003.  These comprise pars 1 to 161.

THE “Overall plan”

31                  Central to the pleading regarding the events leading up to the February 2003 meetings is the repeated assertion that NRMA had an “overall plan” of conduct dating back to early June 2002.  Paragraphs 27, 60, 76 and 89 are but some of the paragraphs that contain this assertion.

32                  As an illustration, par 27 of the ASOC in relation to an application made to the Court by the NRMA reads:

“The applicant says that the commencement, conduct of the above legal proceedings by the first respondent was oppressive and –

(1)       deprived members from exercising their vote in a timely way within the period prescribed by the Act.

(2)       was part of an overall plan to weaken the impact on the majority composition of the Boardof any resolution [the Snodgrass resolution] which might pass removing any Majority director.

(3)       was part of an overall plan to manoeuvre the dateupon which the Special General meeting might be held or concluded to a date to coincide with the 2002 Annual General Meeting.

(4)       was part of an overall plan to manoeuvre the Special General Meeting to take place after the Annual General Meeting whereat the Spill and Appointment resolutions taken at the latter meeting would override any resolutions for removal at the Special General Meeting and disenfranchise the members at the Special General Meeting.

(5)       was part of an overall plan to manoeuvre the date upon which the Special General Meeting might be held and concluded after a period during which an advertising campaign [related to resolutions of the 2002 Annual General Meeting] would be put into effect supporting the Majority Directors and opposing the continued tenure of the offices of the Minority Directors.

(6)       was part of an overall plan to disenfranchise the members voting at the Special General Meeting.”  (Emphasis added)

33                  Paragraphs 24, 25 and 26 allege that there was a delay in convening the calling of the Special General Meeting, occasioned by the commencement and conduct by NRMA of legal proceedings, which allowed adequate time for the “Majority Directors” to implement a plan to exercise powers to fill casual vacancies to “revitalise” the number of Majority Directors by persons who are not subject to any resolution for removal.  It is alleged that the power to appoint casual directors was an exercise to reinforce and perpetuate the control of the Majority Directors and to disenfranchise the members.  The applicant contends that the exercise of power to institute legal proceedings was designed to defeat the “Minority Directors” and deprive them of control.  It is said in par 26 that “the power to institute and conduct the proceedings was exercised for an improper and collateral purpose of supporting the control of the Majority Directors in order to defeat the Minority directors and deprive them of control.”

34                  In addition to the repetition, imprecise language, and the pleading of extraneous allegations, the pleading is deficient in the extreme.  In my view, the respondents have made a well-founded submission that the ASOC is defective because there is no pleading of material facts which provide any basis for the assertion that there was or is any “overall plan”.  There is no statement of material facts that inform the Court as to when, where, how, by whom and in what terms the alleged “overall plan” was formulated or implemented. 

35                  The pleading is cast in generalised, uninformative language.  For example, the circumstances that justify the description of directors as “Majority” or “Minority” are not spelt out.  Nor are facts pleaded to allege how, when and where each of the Majority Directors or their replacements became party to, or assisted in the implementation of, the “overall plan”, and the terms of their participation.  The ASOC consists of a series of alleged actions said to have been taken from time to time with a particular purpose by the NRMA Board, and the general conclusion is drawn that this was pursuant to some comprehensive “overall plan” formulated before the first meetings and maintained throughout the period, with the “replacement directors” over this time being inducted into that plan.  General allegations are made that the Majority Directors exercised their power to fill casual vacancies in order to “revitalise” the numbers of Majority Directors.  No details are given as to this assertion.  The word “revitalise” is uninformative and does not satisfy the requirement for specific pleading.  The mere recital of a miscellany of alleged events coupled with a series of generalised accusations is unacceptable where the applicant is levelling extremely serious allegations against the respondents.

36                  It might be expected that allegations that certain directors have acted in concert pursuant to an “overall plan” would be supported by some specific information as to voting results, patterns, statements, or specific conduct over the relevant period.  This ASOC does not provide this information.  None of the paragraphs that allege that there was an “overall plan” directed to discrete specific meetings, events or tactics, give the necessary details.  It is not stated whether in addition to each “overall” plan there was a concerted general plan or arrangement of a continuous ongoing nature which included all the events or conduct alleged between 2002 and 2003 said to give rise to the oppression, unfairness, discrimination or disenfranchisement.  Moreover, the nature of the connection between persons comprising the minority and the specific nature of the oppression is not expressed.  Nor is there an indication of the understanding on which the majority is said to act in unison.  To a large extent the ASOC reads like an exhortation rather than a pleading which is required to be drafted with the care and precision necessary to define specific issues for resolution.

37                  These defects permeate pars 1-161 of the ASOC, and as a result they do not inform the respondents with the proper clarity and specificity of the nature of the case they have to meet such as would enable them to formulate a defence or deal with the claims made.

38                  I note the respondents’ argument that pursuant to s 1322 of the Corporations Act, that the applicant must satisfy the Court that any procedural irregularity has caused or may cause substantial injustice which cannot be remedied by an order of the Court before that conduct may be invalidated in any proceeding under the Corporations Act.  The Court has a broad discretion and it is necessary to establish a connection between the procedural irregularity and the matter of prejudice claimed which constitutes substantial injustice.  Therefore, a claim of invalidity cannot be made good where there has been procedural irregularity unless it has been shown that irregularity is such as to satisfy to requirements of the section.  It is said for the respondents that the ASOC does not address the necessity for the applicant to meet this requirement.  However, there is a threshold question which will arise as to whether the course of conduct or proceeding in the conduct of a company’s affairs alleged by the applicant amounts to a “procedural irregularity” as opposed to an irregularity of a more substantive or significant nature.  In view of this requirement I do not think it can be concluded at this stage of the proceeding that that this represents a defence to the applicant’s claims.  One difficulty in dealing with such a submission on the part of the respondents in this matter at this point is that the pleading does not set out the procedural irregularities which are the subject of the complaint with sufficient precision to enable any determination to be made as to whether or not the irregularity can be properly descried as a procedural irregularity.

39                  The respondents have submitted that there is no substance in assertions made by the applicant because as a matter of logical reasoning on the facts as pleaded it is not arguable that there could have existed any overall plan dating from June 2003 through to the present time.  However, it is not for me, on this pleading application, to make a final determination on that substantive question.  In my view, the pleading is so inadequate in relation to the identification and involvement of those referred to as the “Majority Directors”, and their replacements, who allegedly acted in concert with them, that it is not possible to determine this matter.  Nor is there any allegation to support the conclusion that members of the NRMA suffered any disadvantage, disability or burden that was unfair according to ordinary standards of reasonableness and fair-dealing: cf Wayde at 467-468 per Brennan J.

Specific challenges

40                  It is not for the Court to attempt to formulate the pleadings for an applicant.  Nor is it necessary to go through every paragraph of the ASOC in this matter.  However, I draw attention to some specific examples raised, which illustrate some particular difficulties with the ASOC as currently framed.

41                  In par 11 there is reference to the NRMA having been under the control of the “Whitlam Board”.  It is then said that Mr Whitlam was convicted for alleged contraventions of the Corporations Act, which attracted a high degree of publicity.  (It should be noted that Mr Whitman was successful in his appeal.)  However, there is then an assertion that the publicity surrounding the “Whitlam prosecution proceedings” attracted a high degree of unpopularity to Mr Whitlam and the Whitlam Board.  These matters do not appear to have any relevance to this action and are cast in meaningless terms.  Nor is it pleaded as to how and in what way the Board could be described as acting in concert or with any joint purpose, which is the suggestion carried by the reference to the “Whitlam Board”.

42                  In par 18 there is an allegation of delay in calling a meeting promptly by instituting legal proceedings.  It is not said how these legal proceedings formed a part of any overall plan.  It is not stated how this action was improper, such that an inference of an intention to delay the meeting would be warranted.  There is reference in par 29 to a number of Majority Directors resigning in a “serial” fashion.  What is meant by this inexact assertion is not clarified.  Nor is there any basis set out to support a claim that it was part of a coordinated plan.

43                  In par 30 there is an allegation that the remaining Majority Directors reconstituted the Board with new members loyal to or supporting the Majority Directors.  No details are given as to the manner in which the new directors joined the Board as “loyal” or  “supporting” of the Majority Directors.  The relationship of the incoming directors to the existing directors is not specified or stated.  These types of difficulties recur repeatedly throughout pars 1-161 of the ASOC.

the november 2003 meetings

44                  In relation to the remaining matters, the ASOC fails to allege facts which would permit a finding that the resolution passed at the 2003 AGM was invalid for want of compliance with the former constitution.  No details are given as to the type and extent of oppression, discrimination or unfairness such as would be capable of remedy by this specific relief sought.  Nor are details given as to how the conduct mentioned was contrary to the interests of members as a whole.  Without any precision as to these matters it is not possible to relate the draconian relief sought to the alleged contraventions.

45                  The applicant pleads that the NRMA made a series of representations in the course of a publicity campaign up to the 2003 AGM, which were false and untrue.  The nature of these wide-ranging alleged misrepresentations can be seen from the descriptions of them in the headings in the ASOC under which they are referred to.  The misrepresentations are alleged under the following headings:

(a)               ‘Country Region representations’(pars 205-211);

(b)               ‘Stability representations’ (pars 212-218);

(c)               ‘Scaremongering representations’ (pars 219-226);

(d)               ‘Financial Waste representations’ (pars 227-233);

(e)               ‘Weak existing constitution and new strong constitution’ (pars 234-240);

(f)                 ‘Sustainability representations’ (pars 241-247);

(g)               ‘Alarmist representations’ (pars 248-253);

(h)               ‘REPRESENTATIONS MADE THROUGH TELEVISION, RADIO AND THE NRMA HOTLINE CALL CENTRE’ (par 254);

(i)                 ‘Unauthorised use of the logo’ (pars 255-259).

46                  The paragraphs referred to under these headings largely read like an emotive address rather than a considered pleading.  The ASOC makes the rolled-up assertions that during the election campaign and the run-up to the 2003 AGM, the NRMA, and its unspecified servants and agents, made certain representations.  The dates, terms, substance, places and recipients of these representations are not specified.  It is said in relation to each of these representations that they were misleading and deceptive and oppressive, and that, but for the making of these representations, the members would not have voted in favour of the passage of the Special Resolution to change the constitution of the NRMA: see pars 212-218, 226, 233, 240, 247 and 253.  These are generalised allegations.  No material facts are pleaded in support of the allegations as to how unspecified groups of shareholders would have voted.  Nor are material facts pleaded to establish the basis upon which it is said that votes would have been cast in a particular way.

47                  The alleged representations referred to in pars 202-259 raise numerous, broad, and largely indeterminate issues.  The assertion of opinion and counter-opinion and the allegations of the falsity of the alleged statements by the NRMA are so generalised as to be largely incapable of determination.  Indeed, these representations are on their face expressions of generalised opinion more in the nature of emotive argument than specific representations of any past, present or future conduct or facts capable of judicial determination.  They are in substance expressions which one might expect to find in the course of a campaign for Board elections or company policy or even a political campaign.  The representations are said to be false by simply reciting the alleged statement, and then asserting the contrary, rather than stating material facts from which conclusions of falsity can be drawn.  The precise terms, dates, times, manner, places and parties are unspecified, and imputations are alleged without giving the basis on which these imputations are said to arise.

48                  Another example of a significant deficiency in the ASOC is in par 192, which is to the effect that an annual report of the Board known as the President’s Report, was a misleading representation because it omitted to inform members of certain consequences of a change in the constitution.  The pleading does not allege the facts, circumstances or provisions in the Board’s report that relate to the relief sought, or that are relied on to make it appropriate or necessary for the Board or the President to disclose such matters.  An allegation of false representation by silence presupposes some circumstances which would give rise to an expectation that a person would not remain silent.  This is not alleged.  Further, it is not alleged precisely what ought to have been stated in the President’s Report. 

49                  In many instances, matters are raised and left hanging without being related to the relief sought.  For example, in pars 195-201, statements and conduct are referred to, but there are no assertions made as to the way in which they are said to be relevant to any of the claims advanced.  The respondents should not be left to guess what is alleged against them.  In particular, the precise oppression, discrimination or unfairness is not articulated.  Nor are the persons who are alleged to suffer these consequences described by name, group or class.  The nature of the disadvantage is not alleged.

50                  In an attempt to meet the deficiencies in particulars there are numerous statements in the submissions of the applicant to the effect that “particulars will be provided on request” and “additional particulars will be provided on completion of subpoena and discovery”.    In the written submissions of Counsel for the applicant, there are many paragraphs in which similar statements are made.  For example, in clause 84 of the “Responses of Applicant to Amended Statement of Claim”, it is said:

“The Applicant says that this is a matter of evidence.  This information is already in possession of the First Respondent possibly directors.  If it is ruled that such particulars are necessary, the Applicant will seek leave to Subpoena before filing any second ASOC.”

51                  This line of submission misconceives the function of pleading.  The obligation on the part of an applicant is to state its case clearly and precisely.  It is not sufficient, for example, to suggest that a respondent must “know” what material facts are relied on by an applicant.  Nor is it sufficient to confess and avoid by suggesting that particular defects in the present pleadings which may exist can possibly be cured in an anticipated later pleading when the applicant has examined unspecified material obtained on subpoena.  It is presumed that an applicant pleads his best case in the pleading and does not proffer a part of a proper pleading or a step on the way to a final pleading.  The claim should specify the applicant’s case on the presently known material.  This type of submission on the part of the applicant is unacceptable. 

52                  Despite numerous references throughout the ASOC to the present constitution of the NRMA, and to its predecessor, and to allegations of contravention of provisions of the constitutions, there is no reference in the ASOC to any specific provision of either constitution.  For example, in pars 287 and 288 there are references to the principal of the features of the new constitution, but there is no specification of any particular provision which is said to produce the consequences referred to, or the way in which those consequences came about.

53                  In par 288 there is an allegation that the NRMA and its servants and agents omitted to inform members as to certain effects of the regional constituency scheme, but no reference is made to the provisions which give rise to these consequences. 

54                  Paragraph 289 is no more than a harangue in that it alleges that the Majority Directors through a publicity campaign made representations in order to induce members to adopt the new constitution, which allegedly features an amendment in response to “a significant and well-publicised and underlying falsehood.”  In par 290 there is a reference to the constitutional changes being implemented to remove “worrisome threats” to the survival of the Majority Directors in office.  There is no particularisation of such threats.

55                  In par 294 it is said that there were similar irregularities in the passage of the Special Resolution, but these are not particularised by reference to specific matters. 

56                  The allegations concerning the new and old constitutions and their relevant characterisations as “weak” or “strong” or “beneficial” or “sensible” are not particularised.  In order to understand precisely what is being alleged in relation to the constitutional provisions, it is necessary to at least refer to the terms of the old and the new constitution which are asserted to be relevant.  The failure to do so is a serious omission.

conclusion

57                  The pleading in the ASOC is so deficient that it should be struck out entirely.  It is not practicable to segregate out particular parts for retention and strike out the remainder of the pleading, having regard to both the integrated nature of the case sought to be made, and the necessity to consider the conduct in question as a composite whole.  The deficiencies are so extensive that I can see considerable force in the respondents’ submission that even after a second attempt, following a previous hopeless pleading, the applicant’s pleading is so opaque as to warrant dismissal of the proceeding entirely.  On balance, I have formed the view that the case indicated on the material before me is not shown to be so deficient that the General Steel standard for dismissal has been satisfied.  I therefore consider that the applicant should have a further opportunity to re-plead.

58                  However, in view of the gross inadequacy of the pleading I consider that this is a case where I should hear the parties as to whether the respondents should be awarded costs and be given leave to proceed to recover costs forthwith of this strike out application as taxed or agreed.  I will hear further argument on the question of costs at a suitable time when the parties have had an opportunity to consider these reasons.  I will make no order as to costs on publication of these reasons. 

59                  Accordingly, I strike out the ASOC in its entirety.  I grant leave to the applicant to file and serve a further pleading.  I order the respondents to bring in short minutes to give effect to these reasons. 

Associate:

Dated:              29 October 2004