QUESTION TWO

QUESTION TWO

The Canadian American Overseas Club Ltd (CAOC) is a company limited by guarantee incorporated under the Corporations Act 2001 (Cth). The club, based in Melbourne, was established in 1893 by a small group of North Americans that had emigrated to Australia and wanted to maintain traditions of celebrating North American holidays and cuisine. The club is governed by an Executive Committee comprised of a President, two Vice-Presidents and four other executive members, all of whom are elected every year and are appointed directors of the company. The company secretary is a paid employee of CAOC.

Historically, membership has been by invitation only requiring nomination by one full member and the support of two other full members. All club members are members of the company. CAOCs exclusive membership ensured that CAOCs clubhouse, located in Little Collins Street, remained a quiet haven where members could go to relax among like-minded friends with a shared cultural background. Membership was strong throughout the twentieth century, but numbers have fallen steadily over the past 20 years.

CAOCs internal rules adopt the replaceable rules and has a constitution with several special clauses. The constitution includes the following:

17.1 Buildings and Capital Assets The directors shall not sell any buildings or capital assets of the club unless expressly

authorised by special resolution of members in a general meeting. ... 19.3 Qualification for Membership

To be proposed for membership, the candidate must have been: (a) born in North America; or (b) have at least one parent that was born in North America; or (c) spent at least 12 months living in North America. All club members are members of the company.

In late 2020, the Executive Committee proposed merging with another club in the Melbourne CBD to ensure its ongoing financial viability. The Executive Committee conducted a survey of its members and found that the proposal had 65% support 10% less than it would need to successfully vote to merge. It did not publish the survey findings to the wider membership.

In early 2021, the Executive Committee began vetting membership proposals. The Executive Committee began to refuse to admit members who were unknown personally to the committee members and could be opposed to merger. The Executive Committee also began approving new members that were not qualified for membership but were known to support a merger. Additionally, the Executive Committee used its disciplinary powers against CAOC members that circulated an email opposing a merger suspending 10 members for six months.

Last month, the Executive Committee authorised the sale of land for a building that CAOC owned next door to its clubhouse. The building is a four-story commercial property that currently houses two retail stores at the ground level and three floors of consulting suites on the upper levels. The sale was negotiated by one of CAOCs Vice-Presidents who is a real estate agent, but she did not take any commission. The contract was executed for CAOC by the CAOCs President and its Secretary and was executed for the purchaser Melbourne Office Block Pty Ltd by its sole director (who is not a member of CAOC but happens to be the son of member). The purchase price was $6.7 million. Most of the funds from the sale will go to the Bank of Collins St Ltd to repay CAOCs debts.

CAOC remains the owner of its clubhouse and the contents of that building.

REQUIRED

1. a) Discuss the legal avenues that are available to members to challenge the Executive

   Committees actions in relation to the membership of the company.

   (12.5 marks)

2. b) Discuss whether the sale of land from CAOC to Melbourne Office Block Pty Ltd is legally

   valid.

   (7.5 marks)

3. c) If the finances of CAOC do not improve and the company becomes insolvent, discuss the legal and practical options open to the Executive Committee and any risks if they do not act.

   (10 marks) TOTAL = 30 MARKS