Emerson Lewis Lawyers recently acted for the plaintiffs in a Supreme Court of NSW proceeding in the Corporations List in which they successfully obtained orders under sections 23 and 67 of the Supreme Court Act 1970 (NSW) to appoint receivers and managers to the defendant company, a public company that operates a Church in Western Sydney, over the assets and undertakings of the company until further order of the Court.

This case, amongst others highlighted below, demonstrates the wide power of the courts to intervene and appoint receivers and managers over a religious association, when the corporate governance is in disorder and disputes ensue between parties who have competing claims about managing the affairs of the company.

The case confirms the important role of receivers and managers to manage the affairs of a company that cannot be guided by the company constitution or articles of association and offers a less destructive solution than appointment of liquidators.

The Court has inherent jurisdiction to appoint a receiver and manager as an officer of the Court to undertake in that capacity the management of the company and have the same rights and powers as that of a member of the religious association or any committee members.

In this case, the Court ordered that the receivers have power to, amongst other things:

• call for applications for membership to the religious association by issuing written notice to persons and make the applications by way of admitting or rejecting the membership applications in accordance with the articles of the company;
• prepare a register of members who are admitted as members of the religious association and then call for candidates to be appointed as members of a committee to assist with the governance of the company;
• convene a general meeting for the company and preside as chairperson at the meeting to ensure that the religious association continues to function; and
• file with the Court a report that summarises the outcome of the process above and identifies the admitted members and committee members and recommends the next steps to be taken for the proper corporate governance of the Church moving forward.

Notably, a unique order was also made in this case relating to the joinder of a party to the proceeding as a defendant. The idea behind the crafting of the order was to have one person be a representative of the interested parties to the application. The defendant assumed the role of the plaintiffs’ contradictor and bound the persons who were granted leave to be heard in the proceedings under orders made by the Court.

Similar case law

The orders made in our case were based on orders made in similar earlier cases.

Cambodian Buddhist Society of NSW and Anor v Meng Eang Thai and Ors [2017] NSWSC 1433

This case concerned the validity of elections for the governing body and management committee of the first plaintiff. The plaintiffs sought declaratory and injunctive relief against many defendants and alleged defects in the methodology used by each faction to purportedly admit members and hold elections.

Lindsay J summarised the principles relevant to the Court’s jurisdiction to appoint a receiver and noted that it is an interim measure to manage the company and assets. The receiver’s role as an officer of the court can remedy conflicts that impact the operation of the company.

Sengthong v Lao Buddhist Society of NSW Incorporated [2016] NSWSC 1408.

The plaintiff applied for an order under section 63 of the Associations Incorporation Act 2009 (NSW) that the first defendant be wound up on the grounds that the Management Committee has acted in a manner that is unfair to the members and on a just and equitable basis.

A receiver and manager’s performance is subject to direction by the Court and any interference may be dealt with as a contempt of court. This is important to maintain discipline and allow the receiver and manager to discharge his or her duties efficiently.

Impact

These cases will have continuing relevance for religious and other not for profit bodies and associations when conflict occurs, and disputes need to be resolved by receivers and managers being appointed by the Court. It highlights the dynamic nature of dispute resolution mechanisms and how processes of the Court can be used to serve the best interests of a company.