Out of Bounds and Gone to the Dogs

Two judgments handed down by the Queensland Supreme Court days before Christmas 2021 join the growing number of cases where peak bodies are being caught out by their old constitutions and lack of understanding of their provisions.

The 2 cases involved Netball in Queensland ^[1] and Canine Control Council (Queensland) trading as Dogs Queensland^[2].

Out of Bounds

Netball Queensland is a company limited by guarantee, which was established in 1971 as the governing body for netball in Queensland.

Ipswich Netball Association Inc (Ipswich Netball) is an incorporated association and is recognised by Netball Queensland as representing a geographic area or group of clubs.

A series of disputes arose between the two. Netball Queensland’s board resolved:

• not to renew Ipswich Netball’s affiliation;
• not to re-affiliate Ipswich Netball unless there was a major change in the management committee; and
• not to consider affiliation of Ipswich Netball until after its AGM and SGM, with assurances in relation to conduct and civil and responsible communication.

Ipswich Netball sought the assistance of the Queensland Supreme Court to declare that its non-renewal of affiliation was as invalid.

After examining Netball Queensland’s company constitution, the Court noticed a distinction between a member and an ‘affiliation’. While the constitution gave Netball Queensland power to make decisions about members, this was not the case for affiliations.

In fact, it found that affiliated members were a class of members that are largely protected by the corporate law from the arbitrary variation of their rights, unless the constitution said otherwise, and it did not in this case.

So the statutory default provisions apply, being that the class rights may only be varied by a special resolution passed at a meeting of the class of members whose rights are being varied or with the written consent of 75% of the members.

Further, the Court found that the policy is an impermissible variation of class rights under the Corporations Act and is therefore invalid. Further remarking that, [at 76]

“It must be said from the outset, that the Policy is poorly drafted. No clear definitions are provided, and the use of the similar terms affiliation, Affiliates and Affiliated Member Associations is prone to confusion. “

The Court found that the decisions were not authorised and were therefore invalid. Netball Queensland was ordered to reinstate Ipswich Netball’s rights and privileges as a Member Association.

Gone to the Dogs

The purpose of Dogs Queensland is to bring together people with interests in breeding, training, and showing purebred registered dogs and to provide them with an opportunity to associate in order to promote best practices.

Mr Woodrow was a member of Dogs Queensland and in 2019 was appointed as a director of Dogs Queensland. Later in 2019, Mr Woodrow was suspended as a member of Dogs Queensland for 4 years because of a social media post that was a breach of Dogs Queensland’s social media policy.

Dogs Queensland then wrote to Mr Woodrow stating that, on the basis of the organisation’s constitution, his position as a director was vacated until the end of his period of suspension.

The Court found that, for the period of his suspension, Mr Woodrow lost all of the benefits of membership. That included the right to nominate for a position as a director.  However, his loss of those benefits had no consequence because he had already been elected as a director, and so the regime for removing directors applied.

There was no constitutional provision requiring a director to be a member of the company to continue to hold the position.

The Court declared the board resolution determining Mr Woodrow had ceased to be a director was ineffective.

Comment

While many recognise the need for legal expertise in drafting a constitution, from time to time by-laws or policies are made or altered without legal review that can result in unexpected consequences as was the case in this situation.

There are increasing numbers of national or state federated bodies, sporting networks and political parties disputes which are spilling into the Courts. Generally, the root causes appear to be legal structures from a bygone era that are not fit for the purposes of the current organisation, and lack of appreciation by the governance team and senior management of such legal structures and their limitations.  Further, the matters appear to end up in the Appeal Courts more often than not, adding to the primary Court costs and lengthy diversions of board and management focus into unproductive disputes.

Ensuring that your constitution and by-laws are fit-for-purpose and understood by all concerned is an ounce of prevention that can save your organisation a fortune and a lot of grief.

[1] Ipswich Netball Association Inc v Netball Queensland Limited [2021] QSC 348

[2] Woodrow v Canine Control Council (Queensland) Ltd (Trading as Dogs Queensland) [2021] QSC 327