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Roger Clarke's Rescue Your ACS - Part 4'

Your Ongoing Support is Necessary to Rescue Your ACS

Roger Clarke, on behalf of a group of senior ACS members

Version of 24 December 2019

This document is at http://rogerclarke.com/SOS/RescueYourACS-Part4.html

Predecessor documents are those of 11 October 2019, 7 November 2019 and 20 November 2019


The Situation

The Australian Computer Society (ACS) is an association incorporated in the ACT in 1966. During 2019, the ACS executive proposed converting to a company limited by guarantee. That is not contentious. However, the Constitution that the ACS executive put forward features very different governance structures and processes from those embodied in the existing Rules.

If that Constitution were to be adopted, its effect would be to wrench control of the professional society out of the members' hands, and grant all power to a self-perpetuating Board.

A campaign was run to defeat the motion. At the General Meeting on 25 October, the campaign against the motion failed by a single vote, and the ACS executive declared victory.

However, a case was brought in the Federal Court, alleging that a string of process irregularities rendered the resolution and/or the meeting invalid.

The judge agreed, and has invalidated the meeting. The bulk of this document contains excerpts from the Submissions made, and the key paragraphs from the judgement.

The result of the case was reported by James Riley in Innovation Australia, on 23 December 2019.

The court action was taken in the name of one member. But a great deal of time and effort was invested by a couple of score key supporters, by almost 200 members who provided proxy votes, and by 75 people who provided donations on the crowdfunding site to support the action. The win in this first round of the campaign belongs to all of us.


Next Steps

The ACS has a right to appeal, which expires in the second half of January 2020. Details of the judge's Orders are currently scheduled be finalised in February. The reasonable expectation is that the ACS will re-present the proposal, but will be constrained to conduct the process appropriately this time.

The campaign to Rescue Your ACS will resume early in the New Year. This time it should be possible for the case against the motion to be communicated to members generally, not just to the small proportion of members that it reached last time. Moreover, the campaign will move beyond what has, of necessity, been a negative stance, to include positive proposals for the Society's Constitution and future.


The Case

The case is Clarke v Australian Computer Society Incorporated [2019] FCA 2175. The case details are here. The full judgement is here.


Excerpts from the Submission and the Judgement

Text from our Submission is in italics. Text from the judgement is in clear text.

2 In this proceeding the applicant challenges the validity of this special resolution and the general meeting on several grounds. These grounds are, in summary:
(a) two of the applicant's proxy votes were wrongly ruled invalid, by reason of a clerical error on the proxy form;

Judgement paras. 155-179:

162. ... Mr Madry's determinations in respect of the proxies miscarried ...

169. ... any issue concerning the identity of Mr Lee and Mr Mitchell and their membership status and eligibility to vote could have been readily and easily resolved, despite their provision of incorrect membership numbers

173. ... Mr Madry's decision to reject or rule the proxy forms submitted by Mr Lee and Mr Mitchell as ineligible miscarried and was erroneous. The provision of the incorrect membership details on those forms was not fatal in terms of their validity and could and should in any event have been corrected to give effect to the clear voting intentions of Mr Lee and Mr Mitchell.


(b) a third proxy vote was ruled unfinancial, the identity of which the ACS failed to disclose to the applicant or member to remedy that status;

Judgement paras. 174-179:

177. ... Mr Madry may well have been justified in not taking any steps after 9.00 am on 22 October 2019 to alert Mr Kautz to the fact that he had not renewed his membership or paid his fees. ... [but] there was evidence that Mr Madry had in fact invited another member who was "unfinancial", but who had nevertheless submitted a proxy, to pay their fees after 9.00 am on 22 October 2019. It would appear that that member's proxy was subsequently regarded as valid or eligible. Mr Madry was unable to proffer or suggest any rational explanation for that inconsistency

178. ... the unexplained inconsistency of the approach taken by Mr Madry is a matter of some concern. It casts some doubt on the fairness and impartiality of the approach taken by Mr Madry.


(c) the ACS contravened Rule 19 of the ACS Rules by failing to give notice of the constitutional changes to all the members, and failing to ensure that the case 'Against' was written by opponents of the changes;

Judgement paras. 88-107:

93 The next question is whether the sending of the 3 July 2019 email amounted to compliance with rule 19 of the Rules. The short answer to that question is that it did not. That is so for at least two reasons.

94 First, the email was unquestionably not sent to "each member" ...

95 Second, the 3 July 2019 email did not "include" a memorandum prepared by opponents of the proposed alteration, as required by rule 19.4.1(d) ...


(d) the 3 October 2019 notice of the special general meeting was defective in form, and not properly served;

Judgement paras.: 108-133

125. Nor could the information, in the form of data or text, in the hyperlinked files, in any sense be considered to have been "transmitted" to an email address specific to the recipients, at least unless, and until, the recipient clicked on the links and read, downloaded or printed the data in the files ... The real difficulty for the Society is that there is no evidence that any, let alone all, all of the recipients of the email did that. Nor could that necessarily be inferred. It follows that the information or data in the hyperlinked files was not "sent" to the recipients of the email having regard to the definition of "send" in the Rules.

129. ... only the email dated 3 October 2019 was "sent" to the members ...

133. The hyperlinked documents included the formal notice of meeting, the explanatory memorandum and the copy of the constitution. The email itself, without those documents, was not capable of complying with rule 13.3.2 because it did not give adequate or appropriate notice of the nature of the business proposed to be dealt with at the meeting.


(e) the Explanatory Memorandum in the notice for the special general meeting was materially misleading; ...

Judgement paras. 134-154:

147. Was the notice of general meeting and explanatory materially misleading in all the circumstances? On balance, the answer to that question is "yes". Mr Clarke's contention that the notice of meeting and explanatory memorandum did not fully or fairly disclose the nature of the changes to corporate governance that would result from the passing of the special resolution should, in all the circumstances, be accepted. That omission, in all the circumstances, was capable of giving rise to the misleading impression that the changes that would result from the repeal of the existing Rules and their replacement by the new constitution were not major or significant changes. ...

148. There could be little doubt that the changes to corporate governance which would flow from the repeal of the existing Rules and the adoption of the proposed constitution were major and significant. ... The impression that was given was that the replacement of the Rules with the new constitution was simply something that had to be done if the legal structure of the Society was to be changed to a company limited by guarantee.

149. ... The fact that members could have engaged in [comparison between the old and the new provisions] does not detract from the requirement that the notice and explanatory memorandum fully and fairly disclose the nature of the changes that would result from the proposal.

151. ... the only real consideration of the nature of the proposed corporate governance changes appeared in an argumentative form in a document containing the case against the proposal. The analysis in the memorandum would not necessarily have appeared to a member to be a purely objective comparison between the existing Rules and the proposed constitution.

154. In all the circumstances, the deficiencies in the notice of meeting and explanatory memorandum were capable of giving rise to the materially misleading impression that the proposed changes to the Rules were not major or significant changes. The notice was accordingly likely to mislead and did not provide full and fair disclosure of the special resolution that was to be put to the vote at the general meeting.


(f) during the special general meeting, the Chair (ACS President) breached his duty to ensure full and proper debate of the proposal.

Judgement paras. 180-193:

186. Mr Clarke's contentions should be accepted and the Society's rejected. It is, in all the circumstances, impossible to conclude otherwise than that Mr Ramasundara's curtailment of the debate was manifestly unreasonable and was not taken with a view to facilitating the proper debate and consideration of the special resolution.

187. One of the difficulties for the Society is that it did not call evidence from Mr Ramasundara. ... it may readily be inferred that Mr Ramasundara's evidence would not have assisted the Society's defence to Mr Clarke's case that Mr Ramasundara's actions at the meeting were in breach of his duties as meeting chair.

188. ... the difficulty for the Society is that there was and is, in all the circumstances, no apparent reasonable or rational justification for what was, on its face, a significant curtailment of the debate. ... There was ... no evidence to suggest that Mr Ramasundara had reason to believe that any debate that may have occurred would have been overly lengthy, or unruly, or disruptive in any way. There was also no evidence to suggest that there were any time or logistical constraints, or that the meeting otherwise had to be completed within any set time.

189. ... it may readily be inferred that the decision to restrict any discussion or debate, following Mr Ramasundara's address in favour of the resolution ... was a decision that was made prior to the meeting, most likely by the Management Committee.

192. ... It may also readily be inferred that [the meeting procedure] was adopted by Mr Ramasundara, perhaps at the behest or direction of the Management Committee, not to facilitate appropriate discussion and debate about the special resolution at the meeting, but to restrict the debate so that the resolution would be put to the vote effectively without demur, dissent or delay. The procedure was an apparent reflection or manifestation of the will of the Management Committee, including Mr Ramasundara, that the resolution be passed. No other reasonable or rational inference is available, particularly in the absence of any evidence from Mr Ramasundara, or indeed anyone from the Management Committee. ...

193. ... Mr Ramasundara breached his duties as the chair of the meeting. It cannot be concluded that Mr Ramasundara's breach of duty was immaterial or could or would have made no difference to the vote, particularly given the closeness of the vote.


Conclusions

110 The Court should find that the applicant's proxies were wrongly disallowed, should set aside those decisions, and make declarations to the effect that the result of the poll was that the motion for a special resolution was defeated.

Judgement paras.194-200:

194. ... The purported disallowance by Mr Madry of the appointment by two members of Mr Clarke as their proxy, or Mr Madry's ruling that the proxy forms submitted by or on behalf of those two members were ineligible, was invalid or unlawful. ...

197. Given the findings that have been made concerning the proxies, it would perhaps be open to declare that the special resolution that was put to the general meeting was defeated. ... [But] the preferable course would be to declare that both the meeting and the special resolution were invalid and to order that the special resolution be set aside and a new general meeting held.


111 Alternatively, by reason of any one of the above grounds, the Court should declare that the special resolution at the meeting on 25 October 2019 was invalid.

Judgement paras.194-200:

194. The Management Committee failed to comply with rule 19 of the Rules. ...

194. ... The Chief Executive failed to ensure that a notice of the general meeting complying with rule 13.3.2 was sent to each member whose address was shown in the register of members in accordance with rule 13.3.1. ...

194. ... The notice of general meeting, explanatory memorandum and other documentation which was hyperlinked in the 3 October 2019 email giving notice of the general meeting gave the misleading impression that the changes to corporate governance that would result if the special resolution was passed were not major or significant changes. ...

195. ... the cumulative effect of all the breaches, defects or deficiencies was unquestionably significant and serious in terms of the lawfulness and validity of the 25 October 2019 general meeting and the special resolution that was passed at it


112 As a consequence, the Court should set aside the decision of the Registrar- General, the second respondent, to approve the incorporation of the ACS as a company limited by guarantee. The Registrar-General has submitted.

Judgement para. 199:

199. ... Orders will be made setting aside ... the permission granted by the Registrar-General to the Society pursuant to subs 82(3) of the Associations Incorporation Act ...


113 The matter should be listed for further hearing in respect of the making of directions pursuant to s 53 AIA in respect of the procedures to be followed for the holding of any further special general meeting, with directions for the parties to attempt to reach agreement as to those procedures, and in the absence of agreement to provide competing proposals and outlines of submissions.

Judgement para. 199:

199. ... As for the holding of a further general meeting, the appropriate course would be to list the matter for a case management hearing in February 2020 for the purpose of considering what, if any, orders or directions should be made for the convening of a general meeting of the Society. To that end, the parties should confer and jointly arrange for the matter to be listed on a mutually convenient date in February 2020


114 The applicant wishes to be heard on costs.

Judgement para. 200:

200. There is no reason why costs should not follow the event. The Society will accordingly be ordered to pay Mr Clarke's costs.