Silver Sponsor
Clubs in the Courts
Level 25, 1 O’ Connell Street, Sdyney NSW 2000 + 61 2 8248 5800 www. tglaw. com. au
Over the course of this year, courts have handed down a number of decisions that are relevant to clubs. Below is a summary of some key cases which provide useful lessons for clubs.
Breaking the impasse
Clubs should be wary of how damaging disputes at an executive level can become. In the matter of Coogee Sports Club Ltd [ 2016 ] NSWSC 817, a dispute arose between directors which resulted in the Club taking the unusual step of applying to the NSW Supreme Court to appoint a receiver to itself.
The Club’ s constitution required it to have five ordinary directors with four directors constituting a quorum for a Board meeting. A divide arose between one director and the remaining directors which resulted in the Bank effectively“ freezing” the Club’ s bank accounts, allegedly on the instruction of one director. This was discovered by the other directors when cheques in favour of suppliers were dishonoured.
The Bank took the position that it would not lift the freeze on the accounts until all directors had signed off that the dispute had been resolved. As a result, the Club was unable to pay its debts. No doubt aware of their potential personal liability in relation to the solvency of the Club, the remaining directors resolved that in their opinion the Club was insolvent or likely to be insolvent in the future and that it was necessary to appoint an administrator.
The Club required approval from the Independent Liquor and Gaming Authority to appoint an administrator under section 41 of the Registered Clubs Act. It is not clear from the judgment but it appears that the Authority was not able to immediately make such a decision prior to a later date. Due to the dire financial situation facing the directors, they determined to approach the Court for the appointment of a receiver.
The Court noted that it will not usually appoint a receiver on an ex parte application except in the case of an emergency, in extraordinary circumstances or where satisfied that the creditors would support the application. The Court was satisfied that this was an extraordinary case and that the Club was facing an emergency not being able to pay its creditors, including its electricity supplier who was threatening to cut off power to the Club premises.
To allow or not to allow
Boards and management should take greater care when admitting members to their clubs, to make sure there are no additional requirements in place that might affect their discretion in deciding whether to admit the member or not. This is particularly important when the club is deciding whether to re-admit a member who has previously been expelled or had their membership lapse for failure to pay fees.
In Walker v New South Wales Bar Association [ 2016 ] FCA 799, Ms Walker, a barrister, was unsuccessful in challenging the refusal of the NSW Bar Association(“ the Association”) to consider her application for appointment as Senior Counsel.
The Association appoints Senior Counsel each year. The purpose of this designation is to set apart Senior Counsel from the ranks of other practising barristers in New South Wales on the basis of their excellence. The designation also carries the potential to deliver significant economic benefits, as Senior Counsel typically charge higher fees and receive more lucrative briefs.
Ms Walker’ s application for appointment as Senior Counsel was refused because it did not meet the criteria embodied in a Protocol adopted by the Selection Committee of the Bar Association. Ms Walker sought to challenge this decision in the Federal Court.
Courts will not intervene in the affairs of voluntary associations unless the member can show that:
• his or her rights in the property of the association have been interfered with;
• the rules of the association amount to an enforceable contract between the association and its members which the association has breached; or
• the association has damaged the member’ s livelihood or reputation.
IQ 28