Winning an Incorporated Association’s Oppressive Conduct is Only Half the Battle

The Associations Incorporation Reform Act 2012 (Vic) (AIR Act) provides members of incorporated associations with broad avenues of relief where an association has engaged in oppressive conduct. Section 68 of the AIR Act equips the Magistrates’ Court of Victoria with wide powers to grant a range of orders, including orders affecting an association’s rules, governance and membership. However, the mere existence of these powers does not mean that a Court will automatically grant the relief sought by a plaintiff, even where oppressive conduct has been established.

The decision in McNeill v The Australian Children’s Choir Incorporated [2022] VMC 30 demonstrates that establishing oppressive conduct does not guarantee the remedy sought by a plaintiff.  Even where oppressive conduct is made out, the Court will carefully exercise its discretion to determine the appropriate relief in the circumstances.  The decision offers guidance on the exercise of the Court’s powers under the AIR Act, issues of standing to seek specific remedies, and principles that influence the relief ultimately granted. It serves as a reminder that a successful oppressive conduct claim does not necessarily guarantee the granting of a plaintiff’s preferred outcome.

Dispute Background and Facts

The plaintiff, Susan McNeill, was a member and committee member of the Australian Children’s Choir Incorporated (the Association), which was incorporated under the AIR Act. The Association is a non-for-profit organisation that provides children with musical education, training and performance experience. It is regulated the by rules adopted in November 2016 Association (the Rules).

On 13 August 2020, a special general meeting of the Association was held, where Susan was suspended and therefore, was not permitted to attend or vote at an annual general meeting of the Association held on 7 November 2020 (AGM). Susan was suspended following allegations that she improperly accessed children’s medical records in her capacity as a Performance Co-Ordinator.

Susan claimed that her suspension constituted “oppressive conduct” pursuant to section 68 of the AIR Act, and that the Association breached section 61 of the AIR Act by prohibiting Susan from participating in the AGM.

Section 68 of the AIR Act enables the Magistrates’ Court of Victoria to make a wide range of discretionary orders if it is satisfied that an incorporated association has engaged, or proposes to engage in, oppressive conduct (e.g., the Magistrates’ Court may grant an order for the alteration of the rules of an association, or for a former member to be reinstated as a member of the association).

Section 68 of the AIR Act also defines “oppressive conduct”, which encompasses conduct which is –

• unfairly prejudicial to, or unfairly discriminatory against, a member of the incorporated association (including in the member’s capacity as a member of the committee); or
• contrary to the interests of the members of the incorporated association.

Section 61 of the AIR Act prohibits an association from preventing a member from attending or voting at any general meeting. A breach of this rule carries a penalty of twenty (20) penalty units. However, this prohibition does not apply where a member’s rights have been suspended in accordance with the association’s rules. Importantly, section 61 also provides that an association’s contravention of this provision constitutes oppressive conduct for the purposes of section 68.

Since the commencement of these proceedings, Susan resigned as a member of the Association and did not wish to have her membership reinstated. Instead, Susan sought from the Court that –

• the Association pay a pecuniary penalty of $3,304.40 for the contravention of section 61 of the AIR Act; and
• the Association publish a statement to its members to the effect that: “The Australian Children’s Choir Inc confirms Susan McNeill was authorised to access children’s medical records as Performance Co-Ordinator and it regrets any suggestion made by the Australian Children’s Choir Inc or its officers that she was not so authorised”.

The Association denied these allegations, and argued that –

• Susan had no standing to seek a pecuniary penalty for an alleged contravention of the AIR Act; and
• Susan was not a member of the Association on 13 August 2020 and that her suspension pertained to her role as Performance Co-Ordinator and committee member. Therefore, the Rules governing disciplinary procedures and suspension of members did not apply to Susan.

The Association conceded that if Susan was deemed a member, the disciplinary process under the Rules had not been followed.

Questions Before the Court

The Court was required to determine –

• whether the Association had engaged in “oppressive conduct” within the meaning of section 68 of the AIR Act by suspending Susan;
• whether Susan had standing to pursue a pecuniary penalty against the Association for breach of section 61 of the AIR Act; and
• whether it was appropriate to grant an order compelling the Association to publish a statement to its members and if not, what other remedy is appropriate in the circumstances.

Decision

Magistrate Greenway held that Susan did not have standing to seek the pecuniary penalty sought for the alleged contravention of section 61 of the AIR Act.  In reaching that conclusion, his Honour preferred the Association’s interpretation that section 61 does not specify who may commence proceedings for an offence under that provision and that the AIR Act does not otherwise identify who may bring proceedings for offences against the Act.  His Honour further founds that section 61(3), together with the accompanying note and section 68, did not constitute an “express provision” identifying who may commence proceedings for the purposes of section 194 of the Australian Consumer Law and Fair Trading Act 2012 (Vic).  Accordingly, section 194(1) applied, with the result that only the Director of Consumer Affairs Victoria, or a person authorised by the Director, had standing to pursue a civil penalty for breach of section 61 of the AIR Act.  The Court also observed that section 68 of the AIR Act does provide for the imposition of pecuniary penalties as relief in oppressive conduct proceedings.

His Honour also held that Susan was a member of the Association as at 13 August 2020 as she continued to hold office as a committee member until the AGM on 7 November 2020 and had not ceased membership in accordance with the rules. As Susan was deemed a member, it was common ground that the relevant disciplinary process under the Rules was not observed by the association.

In respect of the statement Susan sought, his Honour held that an order requiring the Association to circulate a written notice was not an appropriate form of relief.  His Honour observed that a Court will not ordinarily interfere with the decisions of an association unless it exceeds its powers and the decision results in injury to property or to civil rights.[1] Importantly, it was common ground that the Association had failed to follow the disciplinary process required by its Rules.  In those circumstances:

• there was no basis for the Court to enquire further into the underlying dispute between the parties; and
• the Court declared that Susan’s suspension from the Associated was unlawful, void and of no legal effect.

Key Takeaways and Lessons

Importantly, this case emphasises the distinction between establishing a contravention under the AIR Act, and obtaining a particular remedy for that breach. While Susan successfully challenged the validity of her suspension, the Court refused to award either of the substantive remedies she sought. Rather, the Court formed its own view on the appropriate remedy in the circumstances.

Ultimately, this case offers essential lessons for members and associations, including –

1. the Court’s powers under section 68 of the AIR Act are broad, but discretionary;
2. associations must strictly comply with their internal rules when disciplining members;
3. a successful claim under the AIR Act does not guarantee the plaintiff’s preferred remedy; and
4. Courts remain reluctant to interfere unnecessarily with the internal affairs of associations.

If you require advice regarding a dispute with an incorporated association, a potential oppressive conduct claim, or compliance with the AIR Act, please contact our Litigation & Dispute Resolution team on (03) 5273 5273.

[1] See Dickason v Edwards [1910] HCA 7; (1910) 10 CLR 243, 255.