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Living on the Edge: Utopia University Ltd

Published online by Cambridge University Press:  24 January 2025

Suzanne Corcoran
Suzanne Corcoran*
Affiliation:
School of Law, Flinders University
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Extract

[R]aces condemned to one hundred years of solitude did not have a second opportunity on earth.

This article considers the impact of the doctrine of legal personality as enunciated in the classic corporate law case, Salomon v Salomon & Co Ltd, on our theories concerning the role of the membership within a corporation, in particular the role of the membership within a university corporation.

Universities live on the edge of corporate law. Although it has been one hundred years since the judgment in Salomon's case, the ground rules of university governance were established well before that judgment. Furthermore, Salomon's case involved a one-man company organised under the Companies Act 1862 (UK) and universities are not typically organised under business incorporation statutes. Nevertheless, Salomon's case has had a dramatic effect on the way we view the constitutional structure of all corporations, including university corporations.

Type
Research Article
Information
Federal Law Review , Volume 27 , Issue 2 , June 1999 , pp. 265 - 281
Copyright
Copyright © 1999 The Australian National University

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References

1 Marquez, G, One Hundred Years of Solitude (1982)Google Scholar.

2 [1897] AC 22.

3 Re Suburban Hotel Co (1867) LR 2 Ch App 737 at 750-751;Re Tivoli Freeholds Ltd [1972] VR 445;Strong v j Borough& Sons (Strathfield) Pty Ltd (1991) 5 ACSR 296 at 299-300; Roberts v Walter Developments Pty Ltd (1997) 15 ACLC 882. For a general discussion of the principle see B H McPherson, “Winding Up: 'Just and Equitable' Ground” (1964) 27 Mod LR 282 at 286-293. The cases dealing with quasi-partnerships also discuss the underlying association of members. See M R Chesterman, “The 'Just and Equitable' Winding Up of Small Private Companies” (1973) 36 Mod LR 129.

4 For a discussion of this problem in relation to the business corporation see J D Reydon, “Directors' Duties and theCompany's Interests” in P D Finn (ed), Equity and Commercial Relationships (1987).

5 “Uni Unveils Private Campus” Age 9 July 1997; “Privatisation Push Gathers Pace on ThreeCampuses” Australian Higher Education Supplement 9 July 1997 at 33.

6 [1897] AC 22 at 30.

7 Kyd, S, A Treatise on The Law of Corporations (1793) Vol I, BlGoogle Scholar.

8 W Blackstone, Commentaries on the Laws of England (1765) Vol 1 Ch 18 at456-457.

9 Sutton's Hospital Case (1612) 10 Co Rep la, 23a.

10 See Sutton's Hospital Case, ibid; W Shepheard, Of Corporations, Fraternities, and Guilds (1659) at 121; S Kyd, above n 7 at 1; J Chitty, A Treatise on the Law of the Prerogatives of the Crown (1820).

11 W Blackstone, above n 8 (1765) at 457-460.

12 See Sutton's Hospital Case, above n 9.

13 W Blackstone, above n 8 at 467-468.

14 University of Melbourne; Ex Parte McGurk (Visitor) [1987] VR 586 at 587. See W Ricquier, “The University Visitor” (1978) 4 Dalh LJ 647 at 650. In matters involving the exercise of discretion by a university member or officer, the Visitor may not interfere if that discretion was exercised honestly. Ex parte Wrangham (1795) 2 Yes Jun 610 at 625; 30 ER 803 at 810-811. This is a case involving the election of fellows. See also Attorney-General v Black (1805) 11 Yes Jun 191; 32 ER 1061. But, an appeal to the Visitor will lie in any situation where the discretion was improperly exercised, for example, due to a failure to comply with the requirements of natural justice or due to corrupt or illegal motives.

15 Re University of Melbourne; Ex Parte de Simone (Visitor) [1981] VR 378 at 386. The question of who is a corporator or member is determined by reference to a university's statutes and general corporate law. Academic officers and academic staff will be members, graduates and students might be members and other employees of a university generally are not.

16 See Hines v Birbeck College [1986] 2 WLR 97; Thomas v University of Bradford [1987] AC 795 Courts have held contracts referring to the internal rules of the university or incorporating university statutes were within the visitor's jurisdiction to the extent that interpretation of the contract requires interpretation of the university's statutes. Ibid. Even when a person's contract does not specifically refer to the university statutes, a person may take a position of employment subject to those statutes. See P Smith, “The Exclusive Jurisdiction of the University Visitor” (1981) 97 LQR 610 at 639. This is also consistent with general corporate law.

17 [1897] AC 22 at 30 per Halsbury LJ (emphasis added).

18 For a contemporary discussion of this problem see Blair, M, Ownership and Control: Rethinking Corporate Governance forthe Twenty-first Century (1995)Google Scholar.

19 There are some situations where the courts have been willing to treat unincorporated associations as separate legal entities. These cases involve situations where a statute can be said to support the treatment of the entity as separate from the members. In these situations the courts find that the legislature has expressly or impliedly directed that such an association be treated as a legal entity for the purposes of a particular statute. See Willis v Association of Universities of the British Commonwealth [1%5] 1 QB 140; Bailey v Victorian Soccer Federation [1976] VR 13; Re Independent Schools' Staff Association (ACT) (1986) 60 ALJR 458; Poulis v Adelaide Uni Union (1982) 99 ISJS 227 at 239-240.

20 Courts have traditionally been reluctant to interfere in the internal affairs of an unincorporated association but have done so when important personal rights were involved or natural justice had been severely breached. See Free Church of Scotland v Overtawn [1904] AC 515; Macqueen v Frackleton (1909) 8 CLR 673; Cameron v Hogan (1934) 51 CLR 358; Harrison v Hearne [1972] 1 NSWLR 428; Finlayson v Carr [1978] 1 NSWLR 657; Plenty v Seventh-day Adventist Church of Port Pirie (1987) 132 ISJS 299; Scandrett v Dawling (1992) 27 NSWLR 483.

21 Stakeholders are individuals or entities with an interest in a corporation that does not involve shareholding, for example, creditors or employees. Fundamental questions arise as to the definition and legal recognition of such interests as a matter of modem corporate law.

22 Earl of Halsbury (ed), The Laws of England (1910) Vol 12 para 222.

23 Ibid.

24 Clark v University of Melbourne [1978] VR 457 at 461; St David's College, Lampeter v Ministry of Education [1951] 1 All ER 559 at 560.

25 Vaisey Jin St David's College, Lampeter v Ministry of Education [1951] 1 All ER 559 at 560.

26 Ibid at 561.

27 Halsbury's Laws of England (4th ed 1990) Vol 15 para 256 ff.

28 Ibid.

29 Clark v University of Melbourne [1978] VR 457 at 462.

30 Ibid.

31 From the Shorter Oxford Dictionary (3rd ed) Vol II p 2305, cited in ibid.

32 “State action” is a doctrine applied by courts in the United States under which the actions of a reputedly private party can be atbibuted to the state when there is a sufficiently close nexus between the government and the challenged action of the regulated entity so that the action of the latter may be fairly treated as that of the government itself. Jackson v Metropolitan Edison Co 419 US 345 at 351 (1974) per Rehnquist J; see also Lugar v Edmondson Oil Co 457 US 922 (1982); Patrick v Burget [1988] 486 US 94.

33 Chitty, J, A Treatise on the Law of the Prerogatives of the Crawn (1820) at 122Google Scholar.

34 See Australia & New Zealand Banking Group Limited and Michael Tyler v The University of Adelaide and the State Bank of South Australia (Supreme Court of South Australia, Perry J, Judgment Number S3836 of 1993, 4 March 1993, unreported).

35 Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285; Richard Brady Franks Ltd v Price (1937)58 CLR 112 See generally HA J Ford, RP Austin and Ramsay, IM, Ford's Principles of Corporations Law (8th ed 1997) at 321Google Scholar; R P Austin, “Moulding the Content of Fiduciary Duties” in Oakley, A J, Trends in Contemporary Trust Law (1996) at 164Google Scholar; Pennington, R, Pennington's Company Law (6ed 1990) at 583-4Google Scholar; R Pennington, Directors' Personal Liability (1987) at 37-39; PL Davies, “Directors Fiduciary Duties and Shareholders” in E McKendrick (ed), Commercial Aspects of Trusts and Fiduciary Obligations (1992) at 83. See also J Jackson, “The Liability of Executive Officers under the Corporations Law” (1991) 3 Bond LR 275.

36 Details about the new company are taken from the University's information brochure, Melbourne University Private, dated 16 February 1998 and from documents on file with the Australian Securities and Inveshnent Commission (ASIC).

37 Bernard Marks v CCH Australia Limited and University of Melbourne (Supreme Court Victoria, No 2197 of 19%, 31 October 19%, unreported).

38 “Uni Unveils Private Campus” Age 9 July 1997; “Privatisation Push Gathers Pace on Three Campuses” Australian Higher Education Supplement 9 July 1997 at 33.

39 ASIC Document No 013 058 058. It is interesting that while the new university is explicitly called “private” the ASIC Company Extract on the new university lists its 'principal activity' as “public university”.

40 “Buyer Education” Bulletin 5 August 1997 at 42.

41 Weekend Australian September 19-20, 1998 “MUP Blazes Private Trail” at 5. See also, Weekend Australian September 6-7, 1997 “Private Uni Offers $2.5 bn and 3600 Jobs” at 5; “Uni Unveils Private Campus” Age 9 July 1997; “Privatisation Push Gathers Pace on Three Campuses” Australian Higher Education Supplement 9 July 1997 at 33; “Buyer Education” Bulletin 5 August 1997 at 42; “The Corporate Campus” Australian 5 June 1997 at 13.

42 Melbourne University information brochure, Melbourne University Private, 16 February 1998 at 6-11. See also Weekend Australian 19-20 September, 1998 “MUP Blazes Private Trail” at 5.

43 Ibid.

44 Ibid at 6.

45 Ibid at 2.

46 Ibid at 6.

47 Melbourne University Act 1958 (Vic), s 4.

48 Melbourne University Act 1958 (Vic), s 20A.

49 Melbourne University Act 1958 (Vic), s 28.

50 Aboven42.

51 Professor Gilbert agreed with CCH in March 1996 that CCH ought to be able to cease funding the chair at their sole discretion. Witness Statement of Alan David Gilbert (31 October 1996) at para 8. Professor Gilbert testified that he was surprised to discover later that the Dean of Law thought that the matter was more complicated (Witness Statement at para 12), an opinion apparently shared by the Registrar (Witness Statement at para 20). Legal advice was sought from the University legal advisers sometime in early August. Following that legal advice, Professor Gilbert wrote to CCH saying that while the University accepted the repudiation it was reserving all of its rights under the contract. (Witness Statement at para 20). See also Testimony at 110-112.

52 The appointment and continued tenure of Professor Marks at the University of Melbourne was contingent upon the funding of thechair by CCH. It was clear from the testimony and other evidence that Professor Marks would not have accepted the appointment to the chair if CCH had an option to terminate the funding of the chair or if the chair had not been a tenured position with the usual rights and privileges attached to such a position. Judgment at5-6.

53 Testimony of Vice-Chancellor Gilbert, Transcript at 123.

54 Testimony of Vice-Chancellor Gilbert, Transcript at 122-123. This is also evidenced by the vice-chancellor's refusal to discuss the matter with Professor Marks and his request to CCH that it also decline to discuss the matter with Professor Marks.

55 Presumably CCH was an existing sponsor but this issue is not discussed in the opinion. In making his order for costs, Mandie J ordered that CCH be responsible for its own costs, agreeing that Professor Marks was the ultimate victim of CCH's “fundamental breach of its obligations to the university” and stating that “it would be a travesty of justice” for the plaintiff to be obliged to pay costs to CCH. Revised Ruling of Mandie J, 20 December 1996.

56 Amended Statement of Claim, 12 September 1996, para 13.

57 Bernard Marks v CCH Australia Limited and University of Melbourne (Supreme Court Victoria, Mandie J, No 2197 of 19%, 31 October 19%, unreported).

58 Mills v Mills (1938) 60 CLR 150 at 188 per Dixon J; Ngurli v McCann Ltd (1953) 90 CLR 425 at 438; Peter's American Delicacy Co v Heath (1939) 61 CLR 457; Australian Innovation v Paul Alexandre Petrovsky (1996) 14 ACLC 1357 at 1361 per Lockhart J. See also HA J Ford, RP Austin and I M Ramsay, above n 35 at 300-311. For a detailed analysis of possible formulations of “best interests” see J D Reydon, above n 4.

59 Melbourne University Act 1958 (Vic) s 4 lists the “members” of the university. The list includes the Council, the professors, academic staff, graduates, students and others.

60 See Walker v Wimborne (1976) 137 CLR 1.

61 “Buyer Education” Bulletin 5 August 1997 at 43. We might also ask whether consideration of the interests of sponsors is similar to considering the interests of creditors. In situations of insolvency or near insolvency the interests of creditors may overtake the interests of members. Kinsela v Russell Kinsella Pty Ltd (in liq) (1986) 4 NSWLR 722; Nicholson v Permakraft (NZ) Ltd (in liq) [1985] 1 NZLR 242.

62 See, for example, Mills v Mills (1938) 60 CLR 150; Ngurli Ltd v McCann (1953) 90 CLR 425; Harlowe's Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL (1968) 121 CLR 483; Hogg v Cramphorn Ltd [1%7] Ch 254; Ashburton Oil NL v Alpha Minerals NL (1971) 123 CLR 614; Teck Corporation Ltd v Millar (1973) 33DLR (3d) 288; Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821; Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285; Bailey v Mandala Private Hospital (1988) 6 ACLC 43; Darvall v North Sydney Brick and Tile Co Ltd (1988) 6 ACLC154.

63 Weekend Australian, September 6-7, 1997 at 5.

64 See Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821; Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285; and Gambotto v WCP Ltd (1995) 182 CLR 432. Proper purpose requires an analysis of constitutional arrangements within a corporation and a consideration of the purposes for which powers are conferred.

65 Salomon v Salomon [1897] AC 22 at 31.