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The Supreme Court of NSW in Cambodian Buddhist Society of NSW v Meng Eang Thai has appointed a receiver to return the Cambodian Buddhist Society of NSW (the Society), to constitutional order (replace the constitution, oversee admission of membership and election of the board) having found that the affairs of the Society were ‘littered in conflicts and anomalies’.
The case centered on a dispute between two rival factions and would-be regimes of the Society, each arguing they had been validly elected. In a surprise to both parties, Justice Sackar found that neither regime had been validly elected, as a special resolution some 16 years earlier, purporting to alter the constitution from a democratically-elected committee structure to a presidential-style regime, had not validly passed.
Although no minutes were recorded of the meeting in 2000 when the Society purported to change their constitution, a handwritten annotation on the amended constitution stated ‘25 votes in favour’, ‘16 vote against’, falling short of the 75% requirement in the then Associations Incorporation Act 1984 (NSW). Because this was in neither party’s interests, several unsuccessful arguments were raised in support of the proposition that although the resolution was invalid, it should be treated as valid.
- It was argued that section 1322 of the Corporations Act 2001 (Cth) (the Act) could apply. This section provides that a proceeding under the Act is not invalidated by procedural irregularities unless a Court is of the opinion the irregularity caused or may cause substantial injustice which the Court cannot otherwise remedy. Justice Sackar viewed the failure to pass the constitutional amendments as a ‘matter of substance’, noting that the constitution was ‘the lifeblood of the Society’.
- Presumption of regularity: this common law principle holds that it is appropriate to presume, in the absence of contrary evidence, that procedure was properly followed. Owing to the existence of the handwritten note, there could be no presumption of regularity.
- Ratification: this is the amelioration, after the fact, of an invalid resolution, by way of a further resolution. Because there was no evidence of a later members’ meeting passing a motion to sanction the invalid constitutional amendments, ratification could not be relied upon.
The decision underscores the importance of holding meetings in accordance with the relevant Act, Regulations and your organisation’s constitution. See Not-for-profit Law’s page on holding meetings for in-depth information on proper governance as it relates to meetings and resolutions. It also shows the readiness of the courts to intervene in the affairs of those incorporated associations with lax governance standards.
An interesting question left unanswered in the judgment is to what extent decisions made by the regimes since 2000 are valid or invalid, flowing as they do from a flawed special resolution. We know that under sections 23 and 24 of the current Associations Incorporation Act 2009 (NSW), third parties are entitled to make a range of assumptions when dealing with incorporated associations, including that an association’s constitution has been complied with. The rights of third parties therefore seem to be protected. But would a member be able to challenge a prior adverse decision by an unconstitutional regime? The answer is unclear from this judgment. For more information on the rights of members, see our section on Members on the Not-for-profit Law website.
His Honour was of the view that ‘the sole genesis of discontent in the community’ was the Assistant Abbott, a monk who had broken his oath of celibacy and had set about contriving falsehoods and creating divisions, including by sending a letter full of untruths to the Department of Immigration and Border Protection in an attempt to have deported to Cambodia three disapproving monks. At Not-for-profit Law we often hear about internal disputes with aggrieved members. See our page on Resolving internal disputes.