1.
Introduction
Incorporated
associations or not-for-profit (NFP) organisations, ranging from simple
community groups and sporting clubs to larger organisations providing a wide
range of services to the community, are important part of our lives and the
economy. In Western Australia there are nearly 20,000 not-for-profit
groups registered as incorporated associations[1].
An incorporated association is able to pursue its objects by applying for
grants, opening bank accounts and holding property in its own name, while
limiting the exposure of its members to personal legal liability. Poor governance of associations and pecuniary
interests by the people who manage the organisations had been an issue,
especially considering the loosely held legislative requirements and lack of
monitoring and implementation machinery. The introduction of the new era of
governance and reporting regime by legislating the Associations Incorporation
Act 2015(hereafter
referred as “the Act”) was a commendable initiation by the Western Australian
Government. The Act has made incorporated
associations on almost same line as a company registered under the Corporations
Act 2001; introducing the provisions for corporate governance, duties owed by the
management committee members, fraud on minority, dispute resolution process
etc. This article mainly discusses the grievance procedures for members of an
association, such as complaints and dispute resolution mechanisms.
2.
History
of association legislation
The first legislation in this area in Western
Australia, was the Association Incorporation Act 1895 (hereinafter referred to
as ‘1895 Act’) which got Royal Assent on 2nd October 1895[2].The preamble of 1895 Act reads
“An Act to make provision for the incorporation of Religious and other Bodies”.
The 1895 Act contained only 16 sections, which mainly provided for the
incorporation of an association for not-for-profit and non-trading purpose. The 1895 Act was repealed by the Associations
Incorporation Act 1987 (herein after referred to as ‘1987Act’). The 1987 Act
was legislated after getting the recommendations of the Law Reforms Commission
Report[3]. The 1987 Act had 48
sections and two Schedules, and a subsidiary legislation was also promulgated[4]. The 1987 Act was
repealed by the Associations
Incorporation Act 2015, as per section 185 of the Act.
3.
Associations
Incorporation Act 2015
3.1.
Discussions in the Parliament: In 1996, the then Minister for Fair Trading, the Hon
Cheryl Edwardes MLA, approved a review of the Associations
Incorporation Act 1987. As a result, the
then Ministry for Fair Trading invited submissions from the public through
print media advertising in relation to amending the Act. Following receipt of
14 submissions and numerous other unsolicited requests to alter provisions of
the Act, during 1998 the Ministry released a Consultation Paper outlining 17
proposals to amend the Act. Fifty-one submissions were received in response to
the Consultation Paper[5]. The review of the Act was
completed in 2006 and Bill was tabled as a green bill in Parliament, but this
Bill could not be passed. Eventually, the Associations Incorporation
Bill 2014 (No.90 of 2014) comprising 232 sections (184 of them are substantive
and the rest are transitional and other sorts of provisions) was introduced in
the Legislative Assembly, first and second reading on 11/09/2014[6];
second reading agreed on and considered in detail on 27/11/2014[7];
amendments adopted on 24/03/2015[8];
and third reading on 26/03/2015. The Bill was introduced in the Legislative Council,
first and second reading on 26/03/2015[9],
second reading agreed and third reading on 20/10/2015[10]. Royal Assent was given on 2 Nov 2015 as Act
No. 30 of 2015[11]. Different
sections of this Act came into operation on Royal assent and Proclamation as follows:
sections 1 and 2 on 2 Nov 2015[12]
on Royal assent as per s. 2(a); Act other than sections 1 and 2, on 1 Jul 2016
as per s. 2(b)[13]
of the Act. The Associations Incorporations Regulations 2016 (hereinafter
referred to as ‘Regulations’) was proclaimed[14]
as the subsidiary legislation as per section 183 (1) of the Act, which contains
model rules, details of payment of fees and the prescribed forms.
3.2.
Major improvements: Hon.Michael Mischin MLC, the Minister for
Commerce, said to the Parliament that the objective
in introducing the Bill is to provide a framework of regulation for
not-for-profit organisations such as sport and recreation clubs, societies and
community groups in Western Australia, but leave the internal management of
associations largely to the members; the
government’s key goal in advancing these reforms is to achieve a balance
between the need for reasonable regulation and the desire for incorporated
associations to be able to function autonomously and effectively.[15]The Act categorised associations into three tiers
for reporting requirements. The Act no longer requires the requirements of
‘permitted trading’ test. The Act also introduced a governance system for organisations,
mandatory internal dispute resolution procedures, casting duties on the
management committee including the following: duty to disclose a material
personal interest, duty of care and diligence, duty of good faith and proper
purpose, use of position and information, duties with respect to incurring debts
while insolvent. Significant penalties (and modified penalties in Schedule 4 to
the Regulations) are prescribed of up to $10,000, for breach of the provisions
in the Act.
3.3.
Administration: The
Act is the portfolio of the Minister for Commerce, and the agency principally
assisting the management of the Act is Department of Mines, Industry Regulation
and Safety. There is an online platform created by the Department for the use
of office bearers to transact with department. All incorporated
associations are required by the Act to provide for the Schedule 1 items in
their rules. A transition period for complying with the new
legislation was given up to 30 June 2018
as per section 198 of the Act , after which if an association’s rules
fail to address a Schedule 1 matter, the relevant provision of the model rules
will be deemed to apply as per section 201(1) of the Act.
4.
Problems
facing associations
The incorporation
of association is an easy way to gain corporate personality, tax exemptions, funding,
concessions and benefits from government and non-government agencies. But there
are many instances of using these organisation for unscrupulous purposes and
personal profiteering, by the people who manage the organisation. Administrative costs such as salary and
office expenses of some NFP organisations amount to 90 % or more of their
revenue, which implies that their objectives are not met. As an example, NSW
RSL president reveals new investigation underway for financial irregularities[16].
Even though sometimes members or public are aware of the malpractices, they
have limited recourses of dispute resolution either adversarial or inquisitorial.
There can also be disputes arising between members or between association and
members. Hence, the dispute resolution mechanism is a necessary mandatory
system envisaged under the Act.
5.
Internal
dispute resolution
5.1. Explanatory
Memorandum to the Associations Incorporation Bill 2014 says one of the key
reforms of the in the new Bills is: a dispute resolution
system that requires each association to have an internal dispute resolution
process in its rules, and that any unresolved disputes between members of an
incorporated association, and incorporated associations and their members can
be heard by the State Administrative Tribunal (SAT)[17]. Hon Kate
Doust (South Metropolitan — Deputy
Leader of the Opposition) participated in the discussion on in the Legislative Council,
and said “we were talking about each
association setting up their rules for their own internal dispute procedure,
which I thought was an eminently sensible change. When a dispute, difficulty or
serious dysfunction that occurs in an association has been referred to the
commissioner but cannot be resolved, the commissioner is able to apply to the
State Administrative Tribunal to appoint a statutory manager to administer the
affairs of the association. That can happen from time to time. I do not know
whether that happens necessarily at the level of the smaller associations, but
certainly that dysfunction sometimes happens in larger groups. It is probably
an important change to be able to appoint somebody who can manage those
affairs, particularly as there may be significant sums of cash or assets
attached to that association”.[18]
Vast majority of incorporated associations are small (tier-1 which means association
with income of less than $250,000 per annum[19]).
It is not practical for such small entities to pursue costly external dispute
resolutions. The Act introduced that it is mandatory to have an internal
dispute resolution within every association, and also provided added mechanism
for external dispute resolutions.
5.2. Rules of the association: As in the Corporations Act 2001[20],
as per section 21 (1) of the Act, the rules of an association forms the terms
of a contract between the members and association .As per section 22 and
Schedule 1 Division 1item 18 of the Act, all associations must include a
procedure for dealing with any dispute under or relating to the rules (a)
between members, or (b) between members and the incorporated association. The
members and managing committee of the association can utilise these dispute
resolution procedures in a formal manner. If the association’s rules do not
include a dispute resolution process, the procedure in the model rules deems to
apply. Division 3 of Part 4 of the model rules as per Schedule 2 to the
Regulations provide for resolving dispute by committee, while Division 4 of
Part 4 provides for procedure of mediation. Model rule 19 provides that the parties to a dispute must attempt
to resolve the dispute between themselves within 14 days after the dispute has
come to the attention of each party. Rule 20 provides for the procedures for
dealing with the dispute by the committee, in case the dispute could not be
resolved by themselves. Rule 21 provides for the determination of the dispute
by the committee, and the parties right to request for a mediator’s
appointment.
5.3.
Mediation: If the management
committee could not resolve the dispute, the next step would be the methods of
Alternate Dispute Resolution which could include conciliation, mediation or arbitration.
Rule 23 provides for the appointment of mediator and Rule 24 prescribes the
mediation process. Association can seek the help of professional mediators in
this case. Mediation process is the last stage of dispute resolution internally
by an association. A
professional mediator can assist the parties to come to a negotiated settlement
and if necessary to formalise the terms of their agreement in a legally binding
way, but this could become expensive.
5.4. Other internal systems: The rules should include a provision for calling a
special general meeting by the aggrieved members. Committee members can be
removed by this meeting through a resolution, as set out in the rules, if they
are not acting in the best interests of the association or if they cause
discontent among the committee. Similarly , as a last resort , a member can also be removed or suspended for
reasons such as serious criminal conduct, failing to comply with the rules and
bringing the association into disrepute .The procedures set out in the rules
should be followed , especially the rules of natural justice .
6.
Administrative
review
6.1. Department of Mines, Industry and Safety: The
aggrieved member can formally complain to the department of Mines, Industry and
Safety (hereinafter referred as ‘The department’), but the department has only
limited power. Department’s main role is to make sure that associations comply
with the Act. When a possible breach of the Act, Regulations or Rules of the
Association is in dispute; the department can intervene to ensure that the law
has been complied and the dispute resolved. The department will not investigate
disputes between individual members of the association or an individual and the
association[21].
6.2. Appointment of statutory manager: As a new initiative under the Act, the Commissioner (designated person under section 153 of the Act) may
apply to the State Administrative Tribunal for the appointment of statutory
manager to administer the affairs of an association[22].
The State Administrative Tribunal under section 110 of the Act, on such
application, can make an order appointing a statutory manager subject to the
terms and conditions determined by SAT. The members of the management committee
of the association are suspended from office on the appointment of a statutory
manager, and the statutory manager has the functions of the management committee.[23]
7. Prosecution
The Commissioner may investigate the complaint, and
take action as required, which may include prosecution for breach of the Act. The
penalty for breach is provided in the relevant sections of the Act. The offences specified in Schedule 4
attached to the Regulations are offences for which an infringement notice may
be issued with modified penalty under the Criminal
Procedure Act 2004 Part 2.
The modified penalty specified opposite an offence in Schedule 4 attached to
the Regulations is the modified penalty for that offence for the purposes of
the Criminal Procedure Act 2004 section 5(3).
8.
State
Administrative Tribunal review
Until
the passing of the Act, the only external recourse under the 1987 Act was to
apply to the Supreme Court. The Act, now provides for determination of some
disputes by SAT. As per section 182 of the Act, if a dispute cannot be resolved
under the procedure provided for as required by Schedule 1 Division 1
item 18; either the incorporated association concerned; or the member of the association involved
in the dispute, can make an application to the State Administrative Tribunal to
have the dispute determined by that Tribunal. The SAT has powers to refer the
dispute to mediation under section 182 (2) of the Act ; or can give orders
directing for the rules to be followed, declaring and enforcing the rights and
obligations between members, declaring and the rights and obligations between
the association and members under section 182 (3) of the Act. In Kelmscott Senior Football Club[24], SAT interpreted
that section 182 did not apply
to an existing incorporated association that had not yet introduced a dispute
resolution procedure into its rules as required by the Act. An ordinary member
of an association was able to successfully obtain a SAT consent order under
section 182(1) of the Act , in the case of Club Malayalam[25],
which required the association to conduct general meeting , present
financial reports and elect new committee members in addition to
provide the register of members to the concerned member.
9.
Judicial
review
9.1. Court process: If the
disputes relate to issues beyond the purview of the SAT (e.g.: misappropriation
of funds), the judicial review is the next step. There are no specific
references in the Act to further judicial process to be followed in such
instances. In Western Australia, judicial
review applications can be made to Magistrate Court, District Court or Supreme
Court based on their jurisdictional limits.
Most of the litigation in the area of associations’ law involves claims by
members of associations that they have been unfairly excluded from an
organisation or that the process used to expel them has been contrary to the
association’s rules.
9.2. Standing and justiciability: The
members or association or the Commissioner are only able to apply for an administrative
or judicial review under the Act. It would be difficult for an outsider to
pursue a case, even if he has information about the irregularities in the
association.
10.Suggestions for improvement in the dispute
resolution
Even
though, significant changes are implemented in the dispute resolution methods
by the Act, there could be more initiatives to streamline the details of the
system. Currently, the department is in the role of only a passive spectator,
by not actively involved in the disputes. This effectively force members to
pursue either administrative review or judicial review. The department could efficiently
involve as investigators and mediators to resolve the matters easily and cost
effectively. The jurisdiction of SAT regarding the provisions of the Act is
limited. The orders that can be made by SAT are also inflexible, where no
financial compensation that can be ordered by SAT. There could also be more
clarity on judicial review applications as to standing of applicants, jurisdictions
of various judicial authorities. For example , in South Australia, the Act[26]
provides that an aggrieved member or former
member of an incorporated
association may apply to the Supreme Court or the
Magistrates Court for an order under this section on the ground that the association has
engaged, or proposes to engage, in conduct that is oppressive or unreasonable,
and for the purposes of the relevant law[27]
, the proceeding is a minor civil claim [28] . In Western Australia, a similar provision
would be highly beneficial for fair accessibility to the judicial process.
11.
Conclusion
It is
undoubtedly true that the new Act brought a new era of corporate governance,
reporting and dispute resolution. For
most of the associations, the rules provide sufficient mechanism for internal dispute
resolution. The effectiveness of external review provisions under the Act is not
fully tested at the moment as there are only few court cases, but it can be
seen that there are obstacles for an ordinary person to purse such process. The
process of dispute resolution process should be streamlined to make it
approachable and feasible for members, by more involvement of the department, and
making the administrative and judicial review, flexible and convenient. This
would provide more confidence to the public, which will ultimately help
associations to meet their social commitments.
BIBLIOGRPAHY
A.
Articles/Books/
Reports
Department of Mines, Industry
Regulation and Safety, “A guide for
incorporated associations in Western Australia” (August 2019) 3
Law Reform Commission of
Western Australia, Associations Incorporation Act 1895-1969 (Project No
21, March 1972)
B.
Cases
Kelmscott Senior Football Club Inc v
Western Australian Amateur Football League Inc [2018] WASAT 6
C.
Legislation
The
Association Incorporation Act 1895
The
Association Incorporation Act
1985 (SA)
The Association
Incorporation Act 2015
The Associations Incorporation
Regulations 1988
The Corporations Act 2001
Explanatory Memorandum, Associations
Incorporation Bill 2006 (WA)
Explanatory Memorandum, Associations
Incorporation Bill 2014 (WA)
The
Magistrates Court Act 1991
(SA)
Minister for Commerce
(WA), ‘The Association Incorporation Act section 2(b)’, West Australia Government Gazette, No, 25/16, 24 Jun 2016, 2291,
2292
D.
Other
Angela Lavoipierre, ‘NSW RSL
president reveals new investigation underway for financial irregularities’, ABC News (online), June 16
2017 < http://www.abc.net.au/news/2017-06-16/nsw-rsl-under-investigation-for-new-financial-irregularity-cases/8623770
Western Australia, Parliamentary Debates, Legislative
Assembly, 11 September 2014, 6122-6214 (P.T.Miles, Parliamentary Secretary)
Western Australia, Parliamentary Debates, Legislative Assembly,
27 November 2014, 9016-9026
Western Australia, Parliamentary Debates, Legislative Assembly,
24 March 2015, 2057-2076
Western Australia, Parliamentary Debates, Legislative
Council, 26 March 2015, 2283-2285
Western Australia, Parliamentary Debates, Legislative
Council, 26 March 2015, 2283 (Michael Mischin, Minuter for Commerce)
Western Australia, Parliamentary Debates, Legislative Assembly,
10 November 2015, 7953
Western Australia, Parliamentary Debates, Legislative
Council, 16 November 2015, 8233
Western Australia, Parliamentary Debates, Legislative
Council, 15 Oct 2015, 7433 (Kate Doust, Deputy Leader of the Opposition)
[1] Department of Mines, Industry Regulation
and Safety, “A guide for incorporated
associations in Western Australia” (August 2019) 3.
[3] Law Reform Commission of Western
Australia, Associations Incorporation Act 1895-1969 (Project No 21,
March 1972).
[4] The
Associations Incorporation Regulations 1988.
[6] Western Australia, Parliamentary Debates, Legislative Assembly, 11 September 2014,
6122-6214 (P.T.Miles, Parliamentary Secretary).
[7] Western Australia, Parliamentary Debates, Legislative Assembly, 27 November 2014,
9016-9026.
[8] Western Australia, Parliamentary Debates, Legislative Assembly, 24 March 2015,
2057-2076.
[9] Western Australia, Parliamentary Debates, Legislative Council, 26 March 2015, 2283-2285.
[10] Western Australia, Parliamentary Debates, Legislative Council, 20 October 2015, 7520-7529.
[11] Western Australia, Parliamentary Debates, Legislative Council, 16 November 2015, 8233;
Western Australia, Parliamentary Debates,
Legislative Assembly, 10 November 2015, 7953.
[12] Western Australia, Parliamentary Debates, Legislative Council, 16 November 2015, 8233;
Western Australia, Parliamentary Debates,
Legislative Assembly, 10 November 2015, 7953.
[13] Minister for Commerce
(WA), ‘The Association Incorporation Act section 2(b)’, West Australia Government Gazette, No, 25/16, 24 Jun 2016, 2291,
2292.
[14] Ibid.
[15] Western Australia, Parliamentary Debates, Legislative Council, 26 March 2015, 2283
(Michael Mischin, Minuter for Commerce).
[16] Angela Lavoipierre, ‘NSW RSL president
reveals new investigation underway for financial irregularities’, ABC News (online), June 16 2017
< http://www.abc.net.au/news/2017-06-16/nsw-rsl-under-investigation-for-new-financial-irregularity-cases/8623770.
[18] Western Australia, Parliamentary Debates, Legislative Council, 15 Oct 2015, 7433 (Kate
Doust, Deputy Leader of the Opposition).
[19] Section 64 (1) (a) (ii) of the Association Incorporation Act 2015.
[20] Section 140 (1) of the Corporations Act 2001 (Cth)
‘A company’s constitution (if any) and any replaceable
rules that apply to the company have effect as a
contract.’
[21] Department of Mines, Industry Regulation
and Safety, “A guide for incorporated
associations in Western Australia” (August 2019) 49.
[23] Section 111 (1) of the Associations Incorporation Act 2015.
[24] Kelmscott Senior Football Club Inc v Western Australian
Amateur Football League Inc
[2018] WASAT 6.
[27] The
Magistrates Court Act 1991 (SA).
[28] Section 61, The Associations Incorporation Act 1985 (SA).
