Millar v Houghton Table Tennis & Sports Club Inc
[2003] SASC 1
•14 January 2003
MILLAR & ORS v HOUGHTON TABLE TENNIS & SPORTS CLUB INC
[2003] SASC 1
Civil
BESANKO J: The Houghton Table Tennis and Sports Club Incorporated (“the Club”) is an association incorporated under the Associations Incorporation Act 1985. The Club was incorporated on 7 April 1960 under the name “Houghton Gymnastic and Sports Club Incorporated”. The name of the Club was changed to its present name on 14 January 1977.
The Club was initially incorporated under the Associations Incorporation Act 1956. The Associations Incorporation Act 1985 (“the Act”) repealed the Associations Incorporation Act 1956. By reason of a transitional provision in the Act (s 4), the Club became an incorporated association under the Act.
The Club is the registered proprietor of the land at Lot 1, Lower North East Road, Houghton, in the State of South Australia. The land is described in Certificate of Title Register Book Volume 5795 Folio 618. A hall and a building described as a stadium are situated on the land and they are known as the “Ted Hameister” hall and the “Knutsen-Millar” stadium respectively. I will refer to the land and the buildings as the “hall property”.
Certain decisions of the Club with respect to the hall property and with respect to applications for membership lodged with the Club are in issue in this action.
History
Houghton is a small community in the Adelaide Hills about five kilometres east of the suburb of Tea Tree Gully. The population of Houghton is about 150 to 200 people.
Prior to 1954, the hall property was owned by the Independent Order of Rechabites.
In November 1954, the hall property was purchased by Mr Norman John Chamberlain from the Independent Order of Rechabites for the sum of seven hundred and seventy five pounds (₤775). It seems that Mr Chamberlain’s original plan when he purchased the hall property was to use it for private purposes.
In 1960, Mr Chamberlain was persuaded to sell the hall property to the Club for the sum of seven hundred and fifty pounds (₤750). It is unnecessary to set out the reasons why he was so persuaded; it is sufficient to say that Mr Edward Hameister played a leading role in the negotiations. As I have said, the Club was incorporated on 7 April 1960, and Mr Chamberlain transferred the hall property to it on 22 April 1960.
In order to fund the purchase of the hall property, the Club borrowed the sum of five hundred pounds (₤500) from the then Commonwealth Savings Bank of Australia. The bank took a mortgage over the hall property. The Club also borrowed a sum of approximately one hundred and eighty pounds (₤180) from Mr Hameister. The loan from the bank was repaid over a period of five years, and the mortgage was discharged on 7 June 1965. The loan from Mr Hameister was also repaid. The plaintiffs allege, and I accept, that the loans were repaid with funds mainly, if not entirely, generated by the use of the hall property by the Club and others. Such activities included dances and balls held in the hall and in relation to such activities, members of the community at Houghton, and, in particular members of the Club, provided their labour on a voluntary basis. In addition, members of the Club were involved in the upkeep and maintenance of the buildings on the hall property. They provided their labour on a voluntary basis. They also donated materials to the Club.
Prior to 1975 there was also an unincorporated association known as the Houghton Table Tennis club which conducted most of its activities in the hall. In fact, by 1975 the Club’s membership had declined and the hall property was mainly used for table tennis by the unincorporated association. In 1975, a plan was formulated between members of the Club and the unincorporated Houghton Table Tennis club whereby members of the latter body would be elected to executive positions on the management committee of the Club. This took place at the annual general meeting of the Club on 20 November 1975. Mr Knutsen was elected to the position of vice president and Mr Millar was elected to the position of secretary. I assume that members of the unincorporated association became members of the Club.
At the annual general meeting of the unincorporated association on 4 March 1976, a resolution was passed that it “take over the hall and all the responsibilities from the gym club”. In effect, what was meant by this was that certain members of the unincorporated association would become members of the management committee of the Club and ordinary members of the unincorporated association would become ordinary members of the Club. That made the continued existence of the unincorporated association unnecessary and it appears that at some time thereafter the unincorporated association ceased to carry out any activities.
At a meeting of the management committee of the Club on 5 October 1976, the Club resolved to change its name from the Houghton Gymnastic and Sports Club Incorporated to the Houghton Table Tennis and Sports Club Incorporated.
The Constitution of the Club
At a time not made clear in the evidence, the original Constitution of the Club was amended. I do not think the precise date of the amendment matters for the purpose of resolving the issues in this action.
There was no dispute between the parties as to the terms of the Constitution as it presently stands, at least insofar as the provisions relevant to the resolution of the issues in this case, are concerned.
The relevant provisions of the Constitution of the Club are as follows.
“2. Objects
(a) To carry out, foster and support table tennis or any other sports, recreations or amusements as may be determined from time to time by the committee of management.
(b) To buy, lease, rent or otherwise arrange for the use of lands and buildings for the purpose of the Club.
(c) To build and maintain new structures and/or restore, renew, add to or otherwise effect any alterations to any existing buildings as may be deemed suitable or necessary by the Committee of Management to provide facilities for playing under the best conditions and other recreations for members.
(d) To do all such acts and things as are incidental to any of the foregoing events.
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4. Special Powers
For the purpose of carrying out the foregoing objects the Committee shall have the following powers in addition to any other powers given by lay (sic) or elsewhere herein contained:-
(a) To appoint and employ and dismiss officers of the Club and servants and workers and to remunerate them or any of them as the Committee thinks fit.
(b) To invest any moneys of the Club not immediately required upon such securities as are authorised by any statute in force in South Australia for the investment of trust moneys.
(c) To borrow or raise money for the purpose of carrying our (sic) any of the objects of the Club and to secure the repayment of any moneys so borrowed by mortgaging or charging all or any of the real or personal property of the Club upon such terms as the Committee may think fit.
(d) To accept subscriptions and gifts and donations of real or personal property and to raise funds for the purpose of the Club by conducting sporting fixtures of (sic) in any such manner as the Committee may think fit and to expend moneys of the Club in connection therewith.
(e) To expend the moneys of the Club in carrying out any of the objects of the Club but not otherwise.
5. Membership
(a) Membership shall be open to any person who completes the membership application form and after acceptance by the Committee pays the basic membership fee and the subscription prescribed by the Committee for any particular period.
(b) The Committee may refuse, reject, cancel or otherwise terminate any membership and remand, suspend or expel and (sic) member whose conduct is not in keeping with that desired by the Club provided that such member shall be given reasonable opportunity to appear before the Committee and answer to (sic) charge.
(c) A financial member shall be deemed to be a member whose membership fee and subscription is paid not more than four weeks after the first match of the current season or in other cases by the date fixed by the Committee.
(d) For the purpose of the conducting of general meetings voting powers shall be confined to financial members of the age of fourteen (14) years or over at the time of the general meeting.
(e) Life Members may be elected at an Annual General Meeting provided that the motion for such election shall be forwarded to the secretary of the Club at least 28 days prior to the Annual General Meeting and further provided that the notice of motion be accompanied by the written endorsement of at least three financial members of the Club and with a recommendation of the Committee provided that the election be by a two-thirds majority of those present and entitled to vote.
Life Members may attend any General Meeting and shall be entitled to vote at such meeting and may also attend any Committee Meeting but shall not be entitled to vote unless currently holding a position on the Committee but may take part in discussions at the invitation of the chairman. No annual fee or subscription of any kind shall be payable by a Life Member.
6.Subscriptions etc
(a) At the Annual General Meeting the seasonal subscriptions and annual membership fees shall be determined by a resolution.
(b) The status of Members shall be determined by the Committee.
(c) Each member may by (sic) required to pay in additional (sic) to the seasonal subs such other fees or levies as may be determined at a Special General Meeting.
7. Management
(a) The entire Management of the Club shall be vested in the Committee.
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(f) The Committee shall meet at such intervals as it may determine. The President or Vice President may at any time call a meeting of the Committee. Not less than twenty four hours notice shall be given personally or in writing to all members entitled to attend. The quorum at a Committee meeting shall be not less than five members.
(g) The President or Vice President shall call a special meeting of the Committee upon receipt of a requisition signed by at least three Committee Members which requisition shall state the object for which the meeting is required.
8. General Meeting
(a) The quorum for any General Meeting shall be not less than 10 Members.
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(c) The Committee may at any time and shall on the written requisition of not less than 20 Members call a Special General Meeting provided that such requisition shall specify the business to be brought forward to that Meeting.
(d) Not less that 14 days notice shall be given to each Member of the date of the Annual General Meeting or other General Meeting such notice to be by way of circular containing particulars of the business to be transacted at that meeting.
(e) At all General Meetings of the Club Financial Members only shall be entitled to vote. The President at any General Meeting may refuse to allow any person to be present thereat to vote on any resolution if not satisfied that he or she is or is qualified to be a full Financial Member and the decision of the President shall be final and binding unless overruled by a resolution of the same meeting.
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11. Interpretation of Constitution
The Committee shall be the sole authority for the interpretation of this Constitution and the decision of the Committee upon any matter affecting the Club and not provided for by this Constitution shall be final and binding on the Members.
The Status of the Plaintiffs and other Witnesses in the Action
This action was commenced by Mr Ian Millar against the Club. Mr Millar is a carpenter by occupation. He was actively involved in the Club for many years. At various times, he held different positions on the management committee of the Club. In addition, he played table tennis for the Club. He provided his labour to the Club on a voluntary basis, and on one particular occasion, replaced the floor in the hall building.
Mr Millar is a life member of the Club. A foreshadowed challenge by the Club to his status as a life member was not pursued.
Mr Millar disagreed with a decision of the management committee in 1996, and thereafter he had little to do with the Club. He joined a table tennis club in Tea Tree Gully. Mr Millar played no role in the Club between 1996 and early 2002.
Mr Millar knows Mr Robert Day whose involvement in this action I will come to in a moment. Mr Day operates a building company. From time to time, Mr Millar performed work for Mr Day’s company.
Mr Millar was an honest witness and I accept his evidence.
On 11 April 2002, a Master of this Court gave the plaintiff leave to join as additional plaintiffs, Mr Ron Moule, Mrs Carol Moule, Ms Christine Hains and Ms Betty Michels. The Statement of Claim was not amended to reflect the joinder of these parties, nor would it seem were the other Court documents. However, before me both the plaintiff and the defendant proceeded on the basis that the persons who I have named were plaintiffs to the action, and I will proceed on that basis. If any further order is required to regularise the position, then I am prepared to make it.
The status of the plaintiffs, other than Mr Millar, is established by the evidence.
Ms Betty Michels is a life member of the Club. She has been a member of the Club since it was formed, and over the years she has held different positions on the management committee.
Ms Michels knew Mr Hameister well. She explained the circumstances surrounding the purchase of the hall property. She explained that some years ago the hall property was used by the local community at Houghton for table tennis, gymnastics, dances, balls, weddings and birthday parties. In addition, the Club conducted raffles and field days. The funds raised by these activities were used to repay the respective loans from the bank and Mr Hameister.
Ms Michels explained how members of the community helped to maintain and renovate the hall property.
Ms Michels was an honest witness and I accept her evidence.
Mr Ronald Moule is a life member of the Club. He also has held different positions on the management committee over the years. He described the activities conducted at the hall property in similar terms to Ms Michels. At a time not made precisely clear in the evidence, the Club received a grant of $5,000 from a government authority which was used to construct the stadium on the hall property. The stadium was described in the evidence as a very large galvanised iron shed.
Mr Moule has not lived in Houghton since 1985. He has lived at his current address in the suburb of Gilberton, South Australia, since about 1998. Prior to that time he lived in the suburb of Medindie Gardens. He could not recall if he had notified the Club of his change of address, but said that he had received correspondence from the Club at his address in Gilberton. He agreed that between 1985 and 2002 he had not attended more than two meetings at Houghton. In fact, the last meeting he attended before March 2002 was in 1996.
Mr Moule was an honest witness and I accept his evidence.
Ms Christine Hains was formerly Ms Christine Knutsen. She was married to Mr John Knutsen. She became a life member of the Club in 1976.
Ms Hains said that in September 2001 she lived in the suburb of Woodville, in the State of South Australia. Prior to that she lived in the suburb of West Croydon. She did not advise the Club of her change of address. However, she said that Mr Knutsen would have known of her new address.
Ms Hains did not attend any meetings of the Club between 1981 and early 2002.
Ms Hains was an honest witness and I accept her evidence.
Mr Robert Day is not a plaintiff in this action. However, he has played an important role in the events leading to the commencement of the action. Mr Day operates a building company. He has lived in the Houghton district for approximately twenty-one years. He has been prominent in the community. He has campaigned for the retention of a number of community facilities. Through his building company he has been a sponsor of the Club. Mr Day has agreed to pay the plaintiffs’ costs of this action.
Mr Day was an honest witness and I accept his evidence.
It will be necessary for me to mention various aspects of the evidence of each of the plaintiffs and Mr Day, but it is convenient to do so in the context of the relevant events. I will also need to refer to the evidence given by Mr John Knutsen who was the only witness called by the Club. Mr Knutsen is the president of the Club and has held that position since 1977. He was also a member of the unincorporated Houghton Table Tennis club. He was an honest witness and I accept his evidence.
There were some differences of emphasis between the various witnesses. However, on the whole of the evidence there were no major differences on matters of fact between the witnesses.
Events between 1996 and 2001
A special meeting of the management committee of the Club was held on 8 July 1996. Six persons were present including Mr Millar and Mr Knutsen.
Items of business discussed at the meeting included the small membership of the Club and the difficulty being experienced by the Club in meeting costs. Various options, including the sale of the hall property, hiring the hall property to other sporting organizations and amalgamating with another Club were discussed as possible ways of overcoming the difficulties created by the small membership and increasing costs. It was noted that there was a need to “run a recruitment drive, local papers, schools, householders, etc”.
The management committee met again on 2 August 1996. Again, six persons were present including Mr Millar and Mr Knutsen.
The Club’s difficulties were discussed, as were various options to improve the Club’s position. The management committee noted that the Club could survive for one more year, and that there was a need to attract additional sponsors.
An information night for all members was held on 26 August 1996. Twenty members attended including Mr Millar, Mr Moule, Mrs Moule and Mr Knutsen.
The focus of the discussion on the information night was the means by which the Club might attract new members.
Mr Knutsen gave evidence about how the Club has operated over the years. The Club is affiliated with Northeast Hills Table Tennis Association. The Club’s membership has dropped dramatically over the years. In the mid-1970s there were 70 to 80 members. Today, the Club has about 15 active members.
The proportion of members from Houghton district as distinct from those from the Tea Tree Gully and Banksia Park districts has declined over the years.
Between 1996 and 2001 the Club’s declining membership was the subject of discussion by the management committee. Mr Knutsen said that the means by which the Club’s position could be improved was discussed by the management committee on many occasions between 1996 and 2001. The minutes of meetings of the management committee recording this fact were tendered in evidence. Efforts to increase membership have not been successful. It is not possible on the evidence before me to make precise findings about those efforts. Nor, for reasons I will give, is it relevant. Clearly, the efforts to increase the membership of the Club during this period were not successful.
Events in 2001
The management committee met on 3 January 2001. None of the plaintiffs were present. An item discussed at the meeting was the need for all new applications for membership to be vetted at a management committee meeting so that the interests of the Club could be protected. In addition, it was noted that it was imperative that the management committee discuss all types of membership fees.
By March 2001, the management committee was looking to relocate the Club’s activities to premises within the area of the City of Campbelltown.
A Special Meeting of the Club was held on 24 September 2001. The notice of the meeting is dated 14 September 2001. The notice reads:
“You are invited to a special meeting on Monday 24 September at 7:30PM at the clubrooms to discuss the current and future membership status and the overall operations of the Club. This will be followed by an open forum with opportunity for questions.
Your attendance at this meeting would be most appreciated.”
The minutes of the special meeting held on 24 September 2001 were tendered in evidence. Ms Michels is recorded as attending by proxy and Mr Millar is recorded as having tendered an apology. Two important resolutions were passed at the meeting. First, it was resolved that the hall property be put on the market. Secondly, it was resolved that the Club look to lease and re-locate to the Newton Sports Complex stadium.
Mr Millar said that he would have attended the meeting held on 24 September 2001 if he had known the possible sale of the hall property was an item to be discussed. I accept that evidence.
Ms Michels received notice of the meeting to be held on 24 September 2001 but she did not attend the meeting. She gave a proxy vote to the president.
Mr Moule did not receive notice of the meeting to be held on 24 September 2001. He did not attend the meeting on that date. He said that if he had known a meeting was to be held to discuss the sale of the hall property he would have attended the meeting and opposed a proposal to sell the hall property. I accept that evidence.
Ms Hains did not receive notice of the meeting to be held on 24 September 2001.
Mr Knutsen said that notice of the meeting to be held on 24 September 2001 was sent to all current members and life members. His explanation for the fact that Mr and Mrs Moule and Ms Hains did not receive notice of the meeting was that they had changed their respective addresses and that the secretary of the club had used the old addresses.
The evidence on this point is somewhat meagre and the secretary of the Club was not called. However, I accept the evidence of Mr Knutsen and I find that the most likely explanation for the non-receipt of the notice of the meeting by Mr and Mrs Moule and Ms Hains respectively is the fact that the Club did not have current addresses for those persons. To my mind the fact that Mr Millar and Ms Michels did receive notice of the meeting establishes that there was no deliberate attempt by the Club not to give notice of the meeting to life members.
Mr Knutsen said, and I accept, that the decision of the meeting on 24 September 2001 to put the hall property on the market was unanimous. The reason the Club decided to sell the hall property was that it could not afford to continue to conduct its activities there due to lack of interest and lack of players. The minutes of the meeting record that the auction was to take place on 11 February 2002 and was to be carried out by Century 21 Northeast.
There was a management committee meeting on 10 December 2001. None of the plaintiffs attended the meeting. It seems that the meeting was called for the purpose of keeping members of the management committee informed of the progress of the proposed leasing arrangements with the Campbelltown Soccer Club.
Events in 2002
A meeting of the management committee was held on 23 January 2002. None of the plaintiffs attended the meeting. The minutes of the meeting record that land agents had been engaged to sell the hall property. It is recorded that the land agents, “will put up a for sale sign soon”, and that open inspections will be held on 3, 10 and 18 February 2002, with the auction to be held on 20 February 2002.
Mr Millar saw the “For Sale” sign on the hall property in late January 2002 and he spoke to Mr Day about the proposed sale of the hall property.
Mr Day also saw the “For Sale” sign on the hall property in late January 2002. In recent times he had not been approached by the Club and asked for financial assistance.
Mr Day spoke to Mr Knutsen about the proposed sale of the hall property. It is unnecessary to set out the details of that conversation. Mr Day then spoke to a member of the management committee and asked for an application for membership form and details of the membership fee. He received the form and photocopied it to produce 100 copies. He carried out a recruitment drive for new members, and organised a petition calling for the retention of the hall property by the Club. Mr Day obtained a number of applications for membership.
On 6 February 2002, Mr Day gave a letter to Mr Jamieson who is the Treasurer of the Club. The letter enclosed fifty two membership applications together with a cash sum of $520.00 (ie, $10 per application). The money tendered by Mr Day was his own money. Mr Day expressed to Mr Jamieson his shock and surprise at the Club’s decision to sell the hall property.
Mr Jamieson accepted the application forms but he refused to accept the cash sum of $520.00 because (he told Mr Day) he did not know what the application fee was. A short time later, Mr Day gave Mr Jamieson another bundle of membership applications. On this occasion, he did not offer any fees.
At some time between 2 February 2002 and 4 March 2002 the Club signed a Heads of Agreement with the Campbelltown Soccer Club whereby the Club agreed to lease premises at Campbelltown.
On 7 February 2002, Mr Millar issued an Inter Parte Summons against the Club seeking relief under s 61 of the Act. The summons sought the following orders:
“1. A declaration that the defendant has engaged, or proposes to engage, in conduct that was, or would be, contrary to the interests of the members of the defendant as a whole.
2. A declaration that the defendant has engaged, or proposes to engage, in conduct that was, or would be, unfairly prejudicial to the plaintiff.
3. An order directing that the defendant call a special general meeting of its members to consider a certain proposal to sell the defendant’s property at Houghton.
4. Interim and permanent orders restraining the defendant from selling the said property.
5. Interim and permanent orders directing the defendant to withdraw the said property from sale.
6. Orders as to the costs of these proceedings.”
The Inter Partes Summons was supported by an affidavit of Mr Millar, sworn on 7 February 2002. Mr Millar also issued an application (Document No 2) seeking urgent relief in the same terms as the relief sought in the Inter Partes Summons.
On 12 February 2002, the application for urgent relief came on before a Master of this Court. The application was adjourned to a date for argument. On the same day, three members of the management committee made a request in writing that a special meeting of the management committee be held immediately after a proposed hearing in Court on 14 or 15 February 2002.
Mr Knutsen swore an affidavit in response to Mr Millar’s affidavit. In his affidavit, he said:
“With respect to Paragraphs 12 and 13 of the said affidavit, a notice of Special Meeting was forwarded to all members and life members on 14 September 2001.
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We have since discovered that the life members Hains and Mr and Mrs Moule had moved address and had not notified us of their new address. As such, the notice of the special meeting was forwarded to their old addresses without our knowledge.”
The plaintiff’s application for urgent relief came on for argument before a Master of this Court on 14 February 2002. The Master made the following orders:
“1. Costs reserved.
2. I dispense with the filing of pleadings or further affidavits at this stage to enable the parties to continue their negotiations and to hold the appropriate special general meeting.
3. That the application by Doc 2 be adjourned sine die with liberty to either party to apply.
The plaintiff, by its counsel, gives the usual undertaking as to damages in relation to the application by Doc 2 for injunctive relief. The defendant, by its counsel, gives a cross undertaking as follows: not to sell the Ted Hameister Hall pursuant to the resolution passed by the defendant on 24 September 2001. Further, to give the plaintiffs 14 days notice of any alternative proposal to sell the said hall. The plaintiff’s counsel accepts the cross undertaking. The Court also accepts the undertaking in lieu of granting interim injunctive relief. The parties agree that a special general meeting of the defendant will be called at the earliest opportunity consistent with the provisions of the Constitution so that specific resolutions as to the proposed sale of the hall, the future conduct of the Association and the use of the proceeds of sale may be determined in a general meeting.”
In effect, the Club agreed that it would take the action sought in paragraph 3 of the application for urgent relief (ie, to call a Special General Meeting of its members to consider the proposal to sell the hall property).
A meeting of the management committee was held immediately after the hearing before the Master on 14 February 2002. The minutes of that meeting record:
“The lawyer met with us all prior to the hearing and suggested that we admit that we did not comply with the Constitution regarding giving members fourteen days notice of the special meeting held on 24 September 2002 (sic).
We all agreed to be guided by the lawyer.
Please find a copy of the court outcome attached.
The committee will call another special general meeting for 7 March 2002 to be held at the Newton Sports Ground at 7.30pm.”
None of the plaintiffs received notice of the management committee meeting held on 14 February 2002. As a result, none of the plaintiffs attended the meeting.
By letter dated 15 February 2002, the Club sent a notice of the proposed Special General Meeting to be held on 7 March 2002 to Mr Millar. The agenda included items described as the “Relocation of the Club to the Newton Sports Ground” and the sale of the hall property.
On 20 February 2002, Mr Millar and Mr Day wrote to the management committee of the Club enclosing a number of membership applications and a document described as “a Strategic Plan for the Restoration and Re-Development of the Houghton Table Tennis and Sports Club Inc”. Mr Day was the principal author of the plan. The plan contained a number of proposals which the authors said were designed to improve the Club’s fortunes and to ensure it remained active in the area of Houghton.
The management committee met on 4 March 2002. None of the plaintiffs were present at the meeting. The minutes of the meeting record the fact that by that time the Club had received in excess of 180 applications for membership. It was resolved to send a letter to all applicants for membership advising them that their applications would be put “on hold” until after the Special General Meeting on 7 March 2002. It was also noted that the Club’s land agents had advised that the auction of the hall property would be held on 11 March 2002.
Mr Knutsen said that the management committee gave some consideration to the applications for membership which had been received by that time. For example, the districts or areas in which the applicants resided were noted.
The plaintiffs were not given notice of the meeting of the management committee held on 4 March 2002.
Under the Constitution of the Club, life members are entitled to attend meetings of the management committee (clause 5(e)). There is no rule in the Constitution requiring the Club to give notice of such meetings to life members, but I think such an obligation must be implied by reason of the right of the life members to attend such meetings.
A number of the witnesses who gave evidence before me said that it was not the practice of the Club to give notice of meetings of the management committee to life members who were not otherwise members of the committee.
In addition, four of the five plaintiffs who were life members (Mr Millar, Mr and Mrs Moule and Ms Hains) had little to do with the Club over many years, and in the past did not insist on their right to attend meetings of the management committee.
The plaintiffs complained about the fact that they were not given notice of the management committee meetings held on 14 February 2002 and 4 March 2002. Although I find that they were not given notice of the meetings and that they should have been by virtue of the rules, I would not grant any relief in respect of these failures by the Club. The significant resolutions of those meetings have been overtaken by later events. In addition, I find that there was a practice not to give notice to life members, and that for many years none of the plaintiffs complained about the fact that they were not given notice. The breaches constitute irregularities in relation to which this Court will not grant relief. I refer to my discussion of the concept of an irregularity set out below. Alternatively, I would exercise my discretion not to grant relief in view of the practice not to give notice of committee meetings to life members and, in the case of four of the five life members, the fact that they had had little to do with the Club for some years prior to 2002.
On 5 March 2002 the Club wrote to Mr Day advising him that it had received his application for membership, and that all new membership applications were to be treated as “on hold” until after the Special General Meeting to be held on 7 March 2002.
This action by the management committee prompted a further application to the Court by Mr Millar seeking, among other things, an order that the Club deal with the membership applications without delay. The plaintiff asked that the application be listed for urgent hearing.
I should mention at this point that certain members of the management committee had also been successful in obtaining a number of membership applications. They were treated in the same way as the applications collected by Mr Day and others.
Mr Millar’s application came on before a Master of this Court on 6 March 2002 and at that time it was noted by the Court that the parties had agreed that the Club would hold a management committee meeting that evening wherein the question of membership would be resolved by the management committee.
A management committee meeting was held on the evening of 6 March 2002. Mr Millar, Mr Moule, Mrs Moule and Ms Michels attended the meeting as life members. By this time, 201 membership applications had been received by the Club. A motion was passed that all new membership applications remain “on hold” until after the Special General Meeting to be held on 7 March 2002.
The minutes of the management committee meeting held on 6 March 2002 suggest that there might have been a breakdown in communication between the Club and its legal advisers. It seems that the Club’s legal advisers who attended Court on 6 March 2002 were not aware that the management committee had already resolved on 4 March 2002 to defer consideration of all new membership applications until after the Special General Meeting.
The resolution to place all new membership applications “on hold” prompted a further application to this Court by Mr Millar seeking urgent orders restraining the Club from conducting any General Meeting to consider selling or offering for sale, the hall property. That application came on for hearing before a Master of this Court on 7 March 2002. The Master made the following observations and orders:
“1.It would seem that despite my noting an agreement between the parties that the question of membership would be ‘resolved’ by the committee, no such resolution was reached. Indeed, there was a unanimous decision to put the applications ‘on hold’ until after this evenings meeting, an utter negation of the intent of the agreement reached yesterday. So be it. I find there is a serious question to be tried and that the balance of convenience favours the grant of the injunctions sought.
2.Upon the plaintiffs by its counsel undertaking to abide by and comply with any order the Court may make as to damages if the Court later finds that this order has caused loss to the defendant and decides that the defendant should be compensated for that loss.
The Court orders that:
Until further order the defendant be and is restrained whether by itself its agents or employees from conducting any general meeting to consider selling, or offering for sale, the defendant’s property at Houghton.”
It is important to note at this point that the focus of the parties was on whether a General Meeting to consider the sale of the hall property could be held. I do not have any evidence in relation to the events in February and March 2002 other than the Court record but it would seem that it was assumed that the Club would not proceed to sell the hall property on the basis of the resolution of 24 September 2001.
The management committee met again on 11 March 2002. Each plaintiff was present as a life member. All the membership applications were rejected. In addition, it was resolved to call a Special General Meeting on 8 April 2002 subject to the lifting of the Court order made on 7 March 2002.
Various witnesses gave evidence as to what occurred at the meeting on 11 March 2002.
Ms Michels said that some of the membership applications were passed around the table, but she did not think any names were mentioned. She said that Mr Moule asked for permission to address the meeting. Permission was refused by Mr Knutsen.
Mr Moule confirmed the fact that he was not permitted to speak at the meeting. He said that various issues were raised concerning the membership applications, including the fact that the Club did not know what affiliation fees it would be charged by the Northeast Hills Table Tennis Association and the considerable amount of time required to deal with the membership applications. Another issue raised was the fact that a number of the applicants were not table tennis players. Mr Moule said that in his experience that fact had never been a criterion for membership. Mr Moule said that on 11 March 2002 there was no consideration of individual applications for membership.
Ms Hains said that she agreed with the evidence of Mr Moule as to what occurred at the meeting on 11 March 2002. She recalls only a few membership applications being passed around at the meeting.
Mr Millar said that the meeting lasted only some 15 minutes. The committee members did not “go through” the 201 applications for membership. Mr Millar could not recall any occasion while he was an office bearer of the Club, when a membership application was refused. He said that skill as a table tennis player was never a condition of membership. Mr Millar accepted that some of the committee members inspected the membership applications.
Mr Knutsen’s evidence in cross-examination also makes it clear that age or competence as a table tennis player had not, in the past, been relevant to a consideration of a membership application.
On any view, the management committee meeting held on 11 March 2002 was a short meeting of 15 to 20 minutes. There was a suggestion in evidence that a decision on the membership applications could not be made until the Northeast Hills Table Tennis Association had advised the Club of the affiliation fees. The evidence on this point was sparse. There was no evidence of any enquiries made by the Club of the Association. Of itself it could not be a reason to refuse a membership application as distinct from a reason to defer the application. There was also a suggestion in evidence that the management committee might have considered that it was required by the Court to make a decision. Whatever the members of the management committee might have thought, the Court by that time had already granted an injunction.
On 11 March 2002 the Club was proposing to call a Special General Meeting to consider (among other things) the sale of the hall property. The management committee refused the membership applications because it considered that it was the existing members including life members and not a body including new members who should decide if the hall property should be sold. Clearly, the management committee had reason to believe a number of the applicants for membership would vote against the sale of the hall property.
I find that the management committee did not consider each and every membership application. Although some members of the management committee may have perused some of the membership applications, I find that the applications were rejected in effect as a bundle of membership applications.
On 12 March 2002 the Club made an application that it no longer be restrained from the sale of its property at Houghton. Strictly, that was not the terms of the injunction that was in place at that time. The application came on for hearing before a Master of this Court on 13 March 2002. The Master refused the application. He noted the following:
“I am told there has been a change of circumstances and that the committee has met and has considered some 200 applications for membership, all of which have been rejected and that there is no reason to continue the injunction. The other side argues that the applications for membership were not considered lawfully and I have been given certain details of that and in effect claims that the so called consideration was nothing but a sham. That seems to be an arguable position in my opinion and I see no reason to alter my order of 7 March 2002 and that the matter should proceed in accord with that order.”
It is not suggested by the Court record of the proceedings on 12 March 2002 that the Club argued that it should be released from the undertaking it gave on 14 February 2002 that it would not sell the hall property pursuant to the resolution of 24 September 2001.
The management committee met again on 19 March 2002. It noted that by that time 217 membership applications had been received. It resolved to proceed to trial in relation to the action commenced by Mr Millar.
On 26 March 2002 the Club wrote to Mr Day advising him that the management committee of the Club had considered his application for membership and that it had been rejected.
The proposed Special General Meeting for 8 April 2002 did not proceed.
Before considering the issues in the action, it is convenient for me to summarise briefly what I consider to be the relevant legal principles.
Relevant Legal Principles
In order for a member of an association incorporated under the Act to qualify for relief in relation to the affairs of an association, that member must establish the infringement of a legal right. That right might be based on a contract, or an interest in property or some other pecuniary interest. The right might arise by virtue of a provision in the Act. The rights that are given in the Act include rights to be accorded natural justice in certain circumstances (s 40) and a right to obtain relief in relation to oppressive or unreasonable conduct (s 61). The court may grant relief if a member’s right in relation to his livelihood, trade or profession is infringed and, arguably, if a right in relation to reputation is infringed (Cameron v Hogan (1934) 51 CLR 358 at 384).
The only possible grounds for intervention in this case are the infringement or breach of contractual or analogous right, a right to be accorded natural justice under s 40 of the Act or a right to obtain relief in relation to oppressive or unreasonable conduct under s 61 of the Act. There is no suggestion in this case that any of the plaintiffs have been injured in relation to a property right. Section 21 of the Act provides that membership of an association does not (except as may be provided by the rules of the association) confer any right in real property of the association. Nor is there anything to suggest that any of the plaintiffs have been injured in relation to their livelihood, trade or profession, or in their reputation.
Contract or an Analogous Right
I do not think there is anything in the rules of the Club which suggests that they are intended to be legally binding. However, the Club is an incorporated body under the Act, and it has the usual powers of an incorporated body by reason of the Act. That fact in itself may be sufficient to lead to the conclusion that the rules have legal effect (Chiropractic and Osteopathic College of SA Inc v Struthers & Ors (1981) 97 LSJS 49 per King CJ at 51).
The fact that the rules are legally binding is put beyond doubt by s 23 of the Act which provides:
“(1)The rules of an incorporated association bind the association and all members of the association.
(2)The reference in this section to the rules of an association extends to rules, by-laws or ordinances of the association relating to any matter.”
The rules of the Club are binding on the Club and its members by virtue of s 23 (Popovic & Ors v Tanasijevic & Ors [2001] SASC 289 per Williams J (with whom Doyle CJ and Martin J agreed) at para 46).
The possible remedies for a breach of the rules are a declaration and/or injunction. Specific performance is not relevant in this context. There is no claim for damages in this case, and that remedy (even if it is available, which is doubtful) can be put to one side.
It is one thing for a member to establish a breach of the rules of an incorporated association. It is quite another for the Court to make a declaration or grant an injunction. It seems to me that there are at least three principles by reference to which a Court may not grant relief even though a breach of the rules is established.
First, a Court may decline to grant relief because a member does not have standing to complain of the particular breach. By analogy with the principles developed in relation to s 140 of the Corporations Law, it may be said that in relation to certain breaches a member will not have standing to obtain relief (see the discussion in Ford’s Principles of Corporations Law, Ford, Austin and Ramsay, December 2002, para [6.120]).
Secondly, a Court will decline relief if the breach constitutes no more than what is described in the cases as an irregularity (Popovic & Ors v Tanasijevic & Ors per Williams J at para 38). In Green v Page [1957] Tas. SR 66, Burbury CJ described an irregularity in the following terms (at 77):
“Nor would the court have jurisdiction to entertain the present action if the issues between the parties merely involved questions of irregularities in internal management which could be resolved by a general meeting of the members. In the case of irregularities in procedure laid down by the rules of an organisation for convening meetings and in conducting meetings the court refuses to interfere at the instance of individual members of the organisation. This is in accordance with the rule in Foss v Harbottle (55). The basis of the rule was explained by the Court of Appeal in Cotter v. National Union of Seamen (56). Romer J. (as he then was) said:
‘In my opinion, if the thing complained of is a thing which in substance the majority of the company are entitled to do, or if something has been done irregularly which the majority of the company are entitled to do regularly, or if something has been done illegally which the majority of the company are entitled to do legally, there can be no use in having a litigation about it, the ultimate end of which is only that a meeting has to be called and then ultimately the majority gets its wishes.’
See also Edwards v. Halliwell (58) and Solicitor-General v. Wylde (59) per Jordan C.J. But if the issue is one not of mere irregularity in internal management but of an ultra vires act then there is no room for the application of the rule in Foss v. Harbottle (60) and the court will pronounce upon the validity of the act (Stevens v. Keogh (61) per Latham C.J.).”
The principles as to what constitutes an irregularity may not be as clear as some of the cases suggest (Ford’s Principles of Corporations Law (above) para [11.235]). Thirdly, the remedies of declaration and injunction are of course discretionary remedies (as to a declaration, see the discussion in JN Taylor Holdings Ltd & anor v Alan Bond & ors (1993) 59 SASR 432). The discretion must be exercised by reference to well-established principles, but those principles allow a Court to take into account a wide range of matters.
Section 61 of the Act
The section as it appeared in the Act in 1985 was recently amended by the Associations Incorporation (Oppressive or Unreasonable Acts) Amendment Act 2000. As it presently stands, the section provides (relevantly):
“61 (1) A 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.
…
(4) The Court hearing a proceeding under this section may, if satisfied that the association has engaged, or proposes to engage, in conduct that is oppressive or unreasonable, make one or more of the following orders:
(a) an order for regulating the conduct of the association’s affairs in the future;
(b) an order directing the association to institute, prosecute, defend or discontinue specified proceedings, or authorising a member of the association to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the association;
(c) an order restraining a person from engaging in specified conduct or from doing a specified act or thing;
(d) an order requiring a person to do a specified act or thing;
(e) an order for the alteration of the rules of the association;
(f) an order that a former member be reinstated as a member of the association;
(g) any other order that is, in the opinion of the Court, necessary to remedy any default, or to resolve any dispute.
…
(5) The Supreme Court may, in a proceeding under this section, if it considers it appropriate to do so, make an order that the association be wound up or an order appointing a receiver or a receiver and manager of the property of the association.
…
(9) The Supreme Court may not make an order under this section that an association be wound up if it is of the opinion that the winding up of the association would unfairly prejudice members affected by conduct of the association that is oppressive or unreasonable.
(10) If an order is made under this section that the association be wound up, the provisions of this Act relating to the winding up of an incorporated association apply, with such modifications, additions or exclusions as may be necessary, as if the order had been made on an application duly filed in the Supreme Court by the association.
…
(13) If an order under this section makes any alteration to the rules of an association, then, despite anything in any other provision of this Act but subject to the provisions of the order, the association does not have power, without the leave of the Court that made the order, to make any further alteration to the rules inconsistent with the provisions of the order but, subject to this section, the alteration has effect as if it had been duly made by resolution of the association.
…
(15)For the purposes of this section –
(a) an association has engaged, or proposes to engage, in conduct that is oppressive or unreasonable if -
(i)it has taken action, or proposes to take action, to expel a member from the association in circumstances in which the action was, or would be, oppressive or unreasonable; or
(ii)it has engaged, or proposes to engage, in conduct that was, or would be, oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or was, or would be, contrary to the interests of the members as a whole; or
(iii)the rules of the association contain, or are proposed to be altered so that they will contain, provisions that are oppressive or unreasonable;
(b) a reference to engaging in conduct includes a reference to refusing or failing to take action.”
There are differences in wording between s 61 as it appeared in the Act in 1985 and s 61 as it is set out above. For example, in 1985, s 61 included a sub-section in the following terms:
“(7) For the purposes of an application under this section, a breach of the rules of an incorporated association by the committee of the association may be regarded as constituting action that is oppressive to members of the association.”
However, neither party suggested that the amendments to s 61 reduced the scope of the section, and that that was not the intention is confirmed if reference is made to the Minister’s Second Reading Speech when the amendment was introduced.
Counsel for the Club submitted that s 61(15)(a) was an exhaustive definition of the conduct which is oppressive or unreasonable. I think that proposition is right. The relevant paragraph for the purposes of this case is s 61(15)(a)(ii).
Section 61 of the Act is in similar (although not identical) terms to ss 232-234 of the Corporations Act.
A section giving the Court the power to grant relief if the affairs of a company are conducted oppressively has long been a feature of legislation dealing with companies. The relevant section has been amended on a number of occasions. A history of the equivalent section in the companies legislation in New Zealand is contained in the reasons for judgment of Richardson J in Thomas v H W Thomas Ltd [1984] 1NZLR 686 at 690 – 695 (“Thomas”).
I think that, with such modifications as are appropriate, the principles developed in the context of the section in the companies legislation dealing with oppressive conduct should be applied to s 61. I say with such modifications as are appropriate because this Club is not a commercial operation established with a view to generating profits, but rather is what may be described as a small non-profitmaking sporting organization. I will need to return to this point.
In its original form, the section dealing with oppressive conduct in the companies legislation was somewhat narrow in scope, and was given a narrow operation. In Scottish Co-op Wholesale Society Ltd v Meyer [1959] AC 324, the House of Lords held that the word, “oppression” meant “burdensome, harsh and wrongful”. In Re Tivoli Freeholds Ltd [1972] VR 445 at 452 – 453, Menhennitt J said that oppression was conduct which is unfair, burdensome, harsh and wrongful to other members of the company and lacks probity or is consistently illegal or dictated by self-interest.
In Thomas, Richardson J discussed a provision in the New Zealand Companies Act 1955 which contained reference to conduct which was “oppressive, unfairly discriminatory or unfairly prejudicial”. The provision did not contain reference to conduct which was contrary to the interests of the members as a whole. It is also important to note that there are other differences between the section discussed by Richardson J in Thomas and s 61. Nevertheless, the remarks of Richardson J are of assistance and have been followed in subsequent cases.
Richardson J said that he did not think the approach taken by the House of Lords in Scottish Co-op Wholesale Society Ltd v Meyer should be applied to the new section having regard to the changed statutory pattern. He said that in using the words, “oppressive, unfairly discriminatory or unfairly prejudicial”, Parliament was affording a petitioner a wide base on which to found a complaint. He said (at 693):
“I do not read the subsection as referring to three distinct alternatives which are to be considered separately in watertight compartments. The three expressions overlap, each in a sense helps to explain the other, and read together they reflect the underlying concern of the subsection, that conduct of the company which is unjustly detrimental to any member of the company whatever form it takes and whether it adversely affects all members alike or discriminates against some only is a legitimate foundation for a complaint under s 209. The statutory concern is directed to instances or courses of conduct amounting to an unjust detriment to the interests of a member or members of the company. It follows that it is not necessary for the complainant to point to any actual irregularity or to an invasion of his legal rights or to a lack of probity or want of good faith towards him on the part of those in control of the company.”
Richardson J also referred to the notion of fairness, and he expressed the view that the section he was considering was a remedial section, “designed to allow the court to intervene where there is a visible departure from the standards of fair dealing”. Fairness could not be considered in a vacuum or simply from one member’s point of view. The rights and duties of the various groups in a company need to be considered together with the history and structure of the company and the reasonable expectations of the members.
In Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, Young J expressed the view that the underlying concept in s 320(2)(a) of the Companies (NSW) Code, which was in similar terms to s 61(15)(a)(ii), was the concept of commercial unfairness. Young J said that a court should look at the reference to oppressive, unfairly prejudicial or unfairly discriminatory against a member or members or contrary to the interests of the members as a whole, as a composite whole and the individual elements as merely, “different aspects of the essential criterion, namely, commercial unfairness”.
The High Court considered the scope of s 320 of the Companies (NSW) Code in Wayde v NSW Rugby League Ltd (1985) 180 CLR 459. The board of directors of the League decided to reduce the number of teams in a competition it conducted. The Club (Wests) which was to be excluded, challenged the Board’s decision. The League had an article which gave the board of directors the power to determine the teams which took part in the competition.
Brennan J wrote a separate judgment agreeing with the joint judgment of Mason ACJ, Wilson, Deane and Dawson JJ. Brennan J agreed with the observation of Richardson J in Thomas that it is not necessary for a complainant under s 320 to prove any actual irregularity, invasion of his legal rights, or a lack of probity or want of good faith towards him.
There have been many cases on the meaning of the obligation that a majority of members of a company must exercise the powers reposed in them, “bona fide for the benefit of the company as a whole”. In my opinion, they provide assistance in determining the scope of the words in s 61, “contrary to the interests of the members as a whole”.
In the leading case of Peters’ American Delicacy Co Ltd v Heath (1938) 61 CLR 457, Latham CJ (at 481) considered that a decision was not for the benefit of the company as a whole if it was a decision no reasonable man could have reached. Dixon J (as he then was) said (at 512) that the expression was a very general one, “negativing purposes foreign to the company’s operations, affairs and organisations”.
Finally, in this brief overview of the relevant principles in the context of the section in the companies legislation, I mention the fact that the courts have consistently said that they are reluctant to interfere with bona fide decisions of management. The court does not sit on appeal from the management decisions of a company (Wayde at 467 – 468; Howard Smith Ltd v Ampol [1974] AC 821 at 832).
In Popovic & Ors v Tanasijevic & Ors (No 5) (2000) 34 ACSR 1, Olsson J, at first instance, made the following general remarks about the scope of the s 61 as it appeared in the Act in 1985.
“According to its normal meaning the word “oppression” connotes the exercise of authority or power in a burdensome or unjust manner. Section 61 of the Act does not exclusively define its statutory meaning, other than by the inclusive provisions of s 61(7). As appears from authorities such as Re Enterprise Gold Mines NL (1990-1991) 3 ACSR 531 at 538 et seq and John J Starr (Real Estate) Pty Ltd v Robert R Andrew (A’Asia) Pty Ltd & Ors (1991-1992) 6 ACSR 63 (“John Starr”) at 65 et seq, the concept is not susceptible of precise, all embracing definition. At best, decided cases are illustrative of conclusions in specific fact situations.
However, it may at least be said that the section focuses on the effect of particular transactions sought to be impugned or management procedures adopted by those who are in de facto or de jure control. What is in contemplation is a notion of unfairness, according to ordinary standards of reasonableness and fair dealing.
Conduct complained of must be unjustly detrimental to either individual members specifically or, alternatively, members as a whole. It is not necessary to prove lack of bona fides, but conduct beyond power or in breach of statutory, legal or financial duty may well amount to oppression. The very provisions of s 61(7) reveal the importance which the legislature attaches to the proper adherence to the provisions of the Constitution and Rules of an incorporated association. This is because a failure to observe such provisions has the effect of depriving members of their right, as members, to have the affairs of the entity conducted in accordance with its Constitution and Rules (Cf Re H R Hammer Ltd [1959] 1 WLR 62 at 84). In the instant case the defendants have, amongst other things, attempted to propound (and have registered) a purported Constitution and Rules which they must have appreciated was never validly passed and have not even sought to administer the SCWA in terms of it.”
In my opinion, it is appropriate to approach the application of s 61 of the Act to the facts of this case with a number of principles in mind. First, it is not necessary in order to bring conduct within the terms of the section to establish any actual irregularity or invasion of legal rights or a lack of probity or want of good faith. Secondly, in relation to the phrase “contrary to the interests of the members as a whole” it is appropriate to apply a similar test to that applied in the case of the common law requirement that a majority of members must act bona fide for the benefit of the company as a whole. Thirdly, while it is appropriate to approach the application of the section with the underlying theme of unfairness in mind, it is still necessary to consider each of the elements referred to in the section (ie., oppressive, unfairly prejudicial, unfairly discriminatory, or contrary to the interests of the members as a whole) in turn. Fourthly, to the extent that the underlying theme is one of the prevention of unfairness, there is an issue as to how the concept of unfairness is applied in the case of a small non-profitmaking sporting organisation.
A member has no commercial interest in the Club, and therefore any test of commercial unfairness is inappropriate. I suppose that in broad terms, a member has, subject to the provisions of the Constitution, an interest in sharing in the facilities and activities of the Club, and in not being unfairly excluded therefrom. Again, subject to the provisions of the Constitution, a member is entitled to participate in the management of the Club and other decision-making bodies, and not to be unfairly excluded therefrom. In addition, a member has an interest in the longer term aspects of the Club’s operations, and by this I mean that a member has an interest in ensuring that the Club carries on its operations in accordance with its Constitution, and in particular, the objects and powers stated therein.
The Relief Sought by the Plaintiffs
The plaintiffs sought the following relief:
“1.A declaration that, upon a true construction of the Rules of the Defendant, the Defendant was not entitled to reject the applications for membership tendered to it by the said Robert Day.
2.In the alternative, a declaration that upon a true construction of the Rules of the Defendant, the Defendant was obliged to properly consider the aforesaid applications for membership.
3.Further, or in the alternative, a declaration that upon a true construction of the Rules of the Defendant, or alternatively by reason of s. 40 of the Associations Incorporations Act, the Defendant was not entitled to reject any application for membership without first according the applicant a reasonable opportunity to be heard.
4.A declaration that the Special General Meeting called for 7th March 2002 was not called validly and in accordance with the Rules of the Defendant.
5.A declaration that, upon a true construction of the Rules of the Defendant, the Defendant is not entitled to sell the hall property, or alternatively, not entitled to sell the hall property unless the members of the Defendant vote unanimously that it do so.
6.A declaration that the Defendant has engaged, or proposes to engage, in conduct that is oppressive or unreasonable within the meaning of s.61 of the Associations Incorporations Act.
7.Consequential orders pursuant to s.61(4) of the Associations Incorporations Act and specifically:
(a) an order requiring the Defendant to accept, or alternatively, to properly consider, the aforesaid applications for membership
(b) interim and permanent orders restraining the Defendant from selling, or offering to sell, the hall property
(c) interim and permanent orders restraining the Defendant from conducting any general meeting to consider selling, or offering for sale, the hall property.
9.A declaration that the Defendant is in breach of the aforesaid agreement of the 6th March 2002 in failing to properly consider the aforesaid applications for membership.
10. An order for specific performance of the said agreement.
11.Costs.
12.Such further or other orders as this Honourable Court deems fit.”
Power of Sale
The plaintiffs submitted that the Club did not have power to sell the hall property. They pointed to the fact that the Constitution of the Club contains no express power to sell the hall property. The Constitution may be amended, but that requires the assent of three-quarters of the members present and eligible to vote (clause 10).
I reject the plaintiffs’ submission. It is true that although the Constitution gives the power to buy land, and a power to mortgage land, it does not expressly confer a power to sell land. However, s 25(a) of the Act provides:
“25.For the purpose of carrying out its objects, an incorporated association may, subject to this Act and its rules –
(a) acquire, hold, deal with, and dispose of, any real or personal property;”
It is not suggested that there is any other provision of the Act which excludes or qualifies the operation of s 25(a). Simply because the Constitution does not confer a power of sale is not a sufficient reason not to give effect to s 25(a). Clearly, that section can operate when only some powers are stated in the Constitution (s 23(A)(c)(vii)).
A submission by the plaintiffs that the hall property was subject to a trust in favour of the community of Houghton was abandoned after the plaintiffs’ opening.
In my opinion, the Club has the power to sell the hall property.
Would the Sale of the Hall Property be unfairly prejudicial to the Plaintiffs or contrary to the interests of the Members as a whole within the terms of Section 61 of the Act?
The plaintiffs submitted that the proposal to sell the hall property was unfairly prejudicial to them, and is contrary to the interests of the members of the Club as a whole. The plaintiffs put forward the following particulars in support of their submission.
“Particulars
(a)The Defendant is acting contrary to –
(i) the basis on which it purchased and paid for the hall property in and shortly after 1960 and in particular on the basis that it was an asset for the community of Houghton, and paid for (and since maintained) by the exertions of members of the community of Houghton in the understanding that it had been so purchased and
(ii) the basis on which the unincorporated Houghton Table Tennis club, by means of its reverse takeover of the Defendant, was given ownership of the hall property for nothing in 1976-77, namely to keep and maintain the same for the benefit of the residents of the district.
(b)The proposal will lead to the demise of the Defendant as a club fostering sports and recreation for the Houghton community, although that was what it was originally incorporated for.
(c)The sale will result in a valuable asset of the Defendant being converted to cash, and that cash being dissipated and, in any event, used, not for the purposes of the Houghton community, or for the purposes of sports and recreation generally, but for a purpose likely to be of a short term benefit, and by a table tennis club in a different area and likely of no or, at best, limited, benefit to the members of the Houghton community.
(d)The Defendant’s original objects were to foster gymnastics and other sports, recreations and amusements. Although since about the 1970’s the Defendant’s principal activities have been table tennis activities, and its objects have been changed to refer to the fostering of table tennis, the fostering of other sports, recreations and amusements remain part of its objects. The proposal is contrary to the objects of the Defendant in that all the Defendant’s assets will be applied to the advantage solely of those who are involved in it for table tennis.
(e)The proposal will essentially result in the sale (and eventual dissipation) of substantially the whole of the Defendant’s assets, and also will essentially result in the demise of the Defendant.
(f)The Rules of the Defendant specify that its objects include to foster table tennis and other sports and recreations. The Defendant conducts table tennis activities at the hall property. The Defendant also permits other activities, as stated above, to be regularly conducted at the hall property. The sale of the hall property will deny the provision of this sports facility to the Houghton community.
(g)The Defendant has strong links with the Houghton community. It has always been based at Houghton. The Defendant’s hall property, has been, for many years, and remains, a focal point for sports and community activity in the Houghton area. Many members of the Houghton community have utilised its facilities over the years. The sale of the hall property will effectively remove the links that the Defendant has with the Houghton community, and deny to that community an important focal point for community activity.”
As I understand it, the Club’s proposal involves moving its activities to the Newton Sports Complex stadium in Campbelltown. No decision has yet been made about the disposal of the proceeds of the sale of the hall property. Some part of the proceeds will probably be needed to re-establish the Club’s activities at a new premises.
In relation to the plaintiffs’ particulars, I have no doubt that the persons involved in the purchase of the hall property had in mind a facility for use by members of the community at Houghton, and perhaps adjoining areas. The hall property was purchased by the Club in 1960 and has remained in the Club’s name ever since. It is true that over time the activities conducted at the hall property changed to activities mainly involving table tennis, and that members of the unincorporated Table Tennis club were invited to, and did, take part in the management of the Club. However, there was never any transfer of the hall property without consideration from the Club to the unincorporated Houghton Table Tennis club.
It is also true that members of the Club worked tirelessly on a voluntary basis to pay off the loans incurred when the hall property was purchased, and that thereafter they were involved in maintaining the hall property and in the activities conducted on it. It is also true that in times past the hall property was probably a focal point for many activities in the Houghton community. The evidence suggests that that is no longer the case, or if it is, it is only to a much lesser extent.
There is no evidence that the funds generated by the sale would only be used for the short-term benefit of the Club, and I would not make a finding to this effect. There is no evidence that the sale of the hall property would lead to the demise of the Club, and again, I would not make a finding to this effect.
The Constitution makes no reference to the hall property. Other than the name of the Club, it makes no reference to the Club operating only in a particular geographical area (ie., Houghton).
In my opinion, there is nothing in the Constitution which suggests that the retention of the hall property is critical to the continued existence of the Club. This case may be distinguished from authorities such as Vick v Toivonen (1913) 12 DLR 299 and Kowalchuk v Ukranian Labor Farmer Temple Association [1935] 2 DLR 691. There is no suggestion that members who have voted (ie on 24 September 2001) or will vote in favour of the sale of the hall property are acting in bad faith or for an ulterior purpose. There is no suggestion that some members will benefit at the expense of others by the sale of the hall property.
Members might no doubt hold differing views as to the merits or otherwise of selling the hall property. I have no doubt that there are views on either side, and that they are held in good faith and with a good deal of passion. However, s 61 of the Act does not give the Court the power to adjudicate between the two views. That is a decision for the members in general meeting. Were it otherwise, it would mean in this case, for example, the Court would become embroiled in issues which in all likelihood go to the very survival of the Club.
Returning to the terms of the section, I do not think the sale of the hall property would be unfairly prejudicial to the plaintiffs. The sale of the hall property will not lead to a cessation of the Club’s activities in terms of table tennis and there was no attempt by the plaintiffs to show that the relocation of the Club’s activities would affect their ability to take part in the Club’s activities.
Nor do I think that the sale of the hall property would be contrary to the interests of the members as a whole. A decision to sell the hall property is not one motivated by a purpose foreign to the company’s operations, affairs and organisations, or one that no reasonable man could have reached.
If the question is tested by reference to the resolution passed on 24 September 2001, the plaintiffs fail to establish that the decision to sell the hall property falls within the terms of the section. As I have said, there is no suggestion of bad faith. The decision is not unfairly prejudicial to the plaintiffs. It is not a decision that no reasonable person could reach, or one that is foreign to the company’s operations, affairs, and organizations. Although I do not think I need to go this far, in my opinion the decision made by the members on 24 September 2001 was a decision for which there was a reasonable basis.
In reaching the conclusions I have on this issue, I wish to emphasise two points. First, it is not my role to decide if the decision to sell the hall property is the right decision or the wrong decision. That is a matter for the members in general meeting. Secondly, I have not overlooked the substantial contributions the plaintiffs have made to the Club’s activities. However, those matters are not sufficient to bring the decision to sell the hall property within the terms of s 61.
The plaintiffs’ claim for declarations and orders to the effect that the Club has no power to sell the hall property, or that the sale of the hall property would be oppressive or unreasonable within s 61 of the Act, fails.
The Status of the Resolution of 24 September 2001
The plaintiffs submitted that, even if valid at the time it was passed, the Club could no longer rely on the resolution of 24 September 2001. On 14 February 2002, the Club had given an undertaking not to sell the hall property pursuant to the resolution. The undertaking was given to Mr Millar, and to the Court. It is submitted that the undertaking is still in place. Furthermore, it is submitted that there was an agreement between Mr Millar and the Club that the Club would call a Special General Meeting to consider the proposed sale of the hall property. That agreement was reached on 14 February 2002. The Club took steps to call a Special General Meeting.
On the other hand, the Club argued that it ought to be released from the undertaking it gave on 14 February 2002. The undertaking was given in the context of interlocutory proceedings. In fact, the Master said that he accepted the undertaking given by the Club, “in lieu of granting interim injunctive relief”.
The rival contentions of the parties raise a difficult issue.
It seems to me that the resolution stands as a valid resolution of the Club unless there is an order of this Court declaring it invalid and/or preventing the Club from acting on it, or an enforceable agreement preventing the Club from acting on the resolution. If the undertaking is still in place I think I should release the Club from it unless one of those matters is established. It was an undertaking given in lieu of interim injunctive relief. The question now is what final relief should be granted.
The only relief that could have been obtained by the plaintiffs on 14 February 2002 was an interlocutory injunction restraining the Club from selling the hall property (Document No 2, paragraphs 4 and 5). Absent a successful application for summary judgment, the Court would not have made on an interlocutory application an order in terms of paragraph 3 of Document No 2 (ie an order that the defendant call a Special General Meeting of its members to consider a certain proposal to sell the defendant’s property at Houghton).
If one turns to consider the effect of the agreement on 14 February 2002 that the Club would call a Special General Meeting to consider the proposed sale of the hall property, a number of points may be made. First, it is not something the Club agreed to do until trial. It has the characteristic of something which would permanently resolve one issue in dispute between the parties. However, there is nothing to suggest it would resolve all the issues in the action. In fact, it appears that even if such a meeting had been held and a resolution to sell the hall property passed, Mr Millar reserved the right to argue that the Club had no power, or it would be oppressive and unreasonable, to sell the hall property. Secondly, it is strongly arguable that any agreement to hold a Special General Meeting came to an end on 7 March 2002 when Mr Millar obtained an injunction preventing the holding of such a meeting. It is true that it may be said that the need for such an injunction only arose because the Club did not properly consider the membership applications in accordance with its Constitution (see below), but the fact is that the injunction meant that the Club could not carry out its side of the agreement.
Thirdly, and I think most importantly, the only basis for holding the Club to the agreement would be if Mr Millar was entitled to specific performance of the agreement or some form of estoppel arose. Even if the agreement is still in existence, (which I doubt) I do not think a court of equity would grant an order for specific performance. Nor do I think any form of estoppel arose. There is no evidence that Mr Millar has or will suffer any detriment if the Club is not held to the agreement.
It might be said that implicit in the undertaking and agreement is an admission by the Club that the notice it gave of the meeting was defective. That may be accepted. However, the consequences of the admitted facts is a matter of law.
Insofar as it is necessary to do so, I would release the Club from the undertaking it gave on 14 February 2002.
I turn now to consider whether, independently of the undertaking, the plaintiffs are entitled to relief in relation to the resolution of 24 September 2001 because of certain deficiencies and failures in relation to the notice given of the meeting held on 24 September 2001.
Mr Millar received approximately ten days notice of the meeting. He should have received 14 days notice of the meeting (clause 8(d)). Mr Millar did not say the shorter period of notice affected his decision not to attend the meeting. However, Mr Millar received a notice which did not state that an item of business to be considered at the meeting was the proposal to sell the hall property. That was a breach of the rules (clause 8(d)). I have found that Mr Millar would have attended the meeting had he known that the possible sale of the hall property was going to be discussed.
I would not grant relief to Mr Millar in relation to these breaches of the rules.
Other than a resolution involving an alteration to the Constitution, there are no provisions in the Constitution requiring either a special majority or unanimity before particular resolutions are passed. In my opinion, as important as a decision to sell the hall property no doubt is, it is one that can be made by a simple majority of members present and eligible to vote.
I would not grant relief to Mr Millar because the breaches amount to no more than irregularities (Green v Page; Popovic & Ors v Tanasijevic & Ors per Williams J paras 36 – 39). It is within the power of the majority to pass a valid resolution authorising the sale of the hall property. In fact, as at 24 September 2001, the members attending the meeting were unanimous. As against that, five life members are opposed to the sale.
I consider that the breaches of the rules involving Mr Millar are irregularities or matters relating to issues of internal management in the sense that the majority are entitled to pass a resolution authorising the sale of the hall property.
Even if Mr Millar could overcome this point, I would exercise my discretion to refuse relief. Mr Millar had no involvement in the Club’s activities between 1996 and early 2002. He ceased his active involvement in the Club in 1996 after a dispute with the then committee. He then joined and became active in another table tennis club. I am not criticising Mr Millar for doing these things. However, they are relevant to the exercise of the discretion to grant relief. When they are considered together with the fact that the resolution of 24 September 2001 was passed unanimously by those members present, and the fact that there is no evidence to suggest that the breaches of the rules were intentional or motivated by an improper purpose, I am led to the conclusion that I would exercise my discretion against granting relief to Mr Millar.
Mr and Mrs Moule and Ms Hains were entitled to be given notice of the meeting held on 24 September 2001. They were not given notice. I find that that occurred because they had not notified the Club of their new addresses. In those circumstances I do not think that the Club has breached its rules. However, even if there was a breach of the rules, I would decline to grant relief for the same reasons I decline to grant relief to Mr Millar for the breach of the rules affecting Mr Millar, namely, it is an irregularity and I would exercise my discretion to refuse relief.
In relation to Ms Michels, she received a notice which did not identify as an item of business to be discussed at the meeting, the proposed sale of the hall property. She did not complain about the form of the notice in her evidence. I would refuse relief to Ms Michels on the ground that the breach in relation to her is no more than an irregularity.
I would not grant relief to any of the plaintiffs in relation to the resolution of 24 September 2001 on the grounds of the breaches or failures relating to the notice of meeting.
It is appropriate in this context to deal with the Club’s application that the plaintiffs pay it damages in the sum of $2,971.10 on the undertaking as to damages given on 14 February 2002. The damages relate to land agents’ fees said to arise as a result of the postponed sale of the hall property. I reject the application. The order that was actually made on 7 March 2002 (that the Club be restrained from conducting a General Meeting to consider the sale of the hall property) was an appropriate order. The Club had not, and in the result did not deal with the membership applications in accordance with its Constitution (see below). If the Club wished to proceed to sell the hall property based on the resolution of 24 September 2001, and assuming the previous undertaking was still in place, the Club should have applied to be released from the undertaking.
The Applications for Membership
On 11 March 2002, the management committee refused 201 membership applications. I find that the management committee did so because it considered that if the applications for membership were approved, a substantial number of the new members were likely to utilise their voting rights at the proposed Special General Meeting on 11 April 2002 to prevent the Club from selling the hall property.
The first question is whether the applicants are, in fact, members by virtue of the lodging of the application forms. In addition, in the case of at least 52 applications, the applicants through Mr Day offered to pay a fee. In my opinion, the applicants did not thereby become members. The rules expressly provide that the process of securing membership includes “acceptance by the committee” (clause 5(a)). The rules also expressly provide that the management committee may refuse or reject any membership, which I think means any application for membership (clause 5(b)). It follows that this is not a case like Woodford v Smith [1970] 1 WLR 806 where eligible persons who completed a membership form and paid the appropriate fee in accordance with the rules, thereupon became members entitled to vote even though the committee had not approved their membership (see the discussion of Woodford v Smith by von Doussa J in Nurses Memorial Centre of South Australia Inc v Beaumont (1987) 44 SASR 454 at 467 – 468).
Nor, in my opinion, do the applicants for membership have the right to complain about how their applications were dealt with by the management committee. They had no right to be heard at common law, or to have their applications dealt with in a particular way. They had no existing right which was infringed, and the doctrine of legitimate expectation does not apply in the case of a small voluntary incorporated association of this type.
The position of the applicants for membership is not improved by a consideration of the Constitution or the Act.
Clause 5(b) of the Constitution gives certain persons the right to be heard, but it is restricted to existing members who may be subjected to reprimand, suspension or expulsion.
The plaintiffs referred to s 40 of the Act which provides:
“Where the committee of an incorporated association exercises any power of adjudication that it may have in relation to a dispute between its members, or a dispute between itself and members of the association, the rules of natural justice must be observed.”
Section 40 is limited to a dispute between members, or a dispute between the association and its members. The applicants for membership are not members. I mention at this point that the plaintiffs did not argue that they were in dispute with the Club as to how the membership applications had been dealt with and that they were seeking the right to be heard in relation to that dispute. It is true that Mr Moule asked to be heard on 11 March 2001, and that that request was denied. However, the gravamen of the plaintiffs’ complaint in this action is that the applicants for membership have been denied the right to be heard.
It follows that even if an applicant for membership was a plaintiff to this action (or at this late stage applied to be joined) such an applicant would not be entitled to any relief. No right of such an applicant has been infringed.
However, that is not the end of the matter. This is an action by five life members of the Club who complain about the manner in which the management committee dealt with the applications for membership on 11 March 2002.
The plaintiffs put their right to complain about how the management committee dealt with the membership applications on two grounds.
First, the plaintiffs allege that, in acting in the way in which it did, the management committee breached the rules of the Club.
There is no rule in the Constitution which sets out the matters which are relevant to a consideration of a membership application. I reject the plaintiffs’ submission that the management committee was bound to accept the membership applications. There is no rule to that effect, and it would not be appropriate to imply a rule to that effect. I have already rejected the plaintiffs’ submission that the management committee was bound to accord a hearing to each applicant for membership.
The plaintiffs allege that there was a rule to the effect that the management committee was bound to give proper consideration to each membership application before accepting or rejecting the same. Formulated in such a general way, it would be hard to resist the conclusion that there must be such a rule. However, I think one starts with the proposition that there is no express rule in the Constitution specifying how membership applications are to be dealt with. It is possible to imply a term if the usual tests for the implication of terms are satisfied. Those usual tests are to be applied in the context of a small incorporated association which is conducting a sporting activity. That context will affect how a Court applies, for example, the business efficacy test. I think there are difficulties in implying a term in the Constitution, not the least of which is in precisely formulating the term. In view of my conclusion with respect to the plaintiffs’ second ground, it is unnecessary for me to finally decide this point.
Secondly, the plaintiffs submit that the management committee’s rejection of the membership applications was conduct which was unfairly prejudicial to the plaintiffs or contrary to the interests of the members of the Club as a whole within s 61 of the Act. They give the following particulars of this allegation:
“The defendant has rejected and also failed to properly consider bona fide applications for membership in circumstances where the defendant has a dwindling membership and is in real need of new members for the defendant to survive and prosper, and in circumstances where applicants have a strategic plan and an offer of sponsorship for the defendant, and such applicants have proposal for, and present the opportunity for, the defendant to be reinvigorated, made financially secure and have its future guaranteed.”
This Court does not sit to hear appeals from decisions in relation to membership applications. The management committee has a very broad discretion to accept or reject membership applications. A Court will be very slow to interfere with decisions made by a management committee in good faith.
I would reject the plaintiffs’ challenge based solely on the particulars they have formulated. It is not for this Court to determine as a matter of objective fact that the membership applications are bona fide applications, or the efficacy of the strategic plan, or whether acceptance of the membership applications will make the Club financially secure or guarantee its future.
A club like this one may have many reasons for rejecting membership applications. Through its management committee, it may determine that the aims and aspirations of an applicant are not consistent with the objects of the Club. Even if the aims and aspirations of an applicant are consistent with the objects of the Club, the application may be refused because, for example, the Club does not have the ability to cater for an influx of members.
However, I think there are limits to the management committee’s power to reject membership applications. The first limitation is that the power to accept or reject membership applications must be exercised in good faith. There is no evidence of actual bad faith in this case. In rejecting the membership applications, the management committee believed that it was acting in the best interests of the Club.
The power to accept or reject membership applications must also be exercised having regard to the objects of the Club. The relevant object for present purposes is clause 2(a).
“(a)To carry out, foster and support table tennis or any other sports, recreations or amusements as may be determined from time to time by the committee of management.”
I do not understand it to be suggested that the management committee has determined that the Club should carry out, foster and support any other sport, recreation or amusement. The management committee should determine membership applications by reference to the object of carrying out, fostering and supporting table tennis. I think that to exercise the power by reference to any other criterion would be to exercise it for other than a proper purpose.
Turning to the facts of this case, I find that the management committee did not determine the membership applications by reference to the object of carrying out, fostering and supporting table tennis. The applications were rejected in effect as a bundle of membership applications and without proper consideration of each individual application. The purpose of the management committee in refusing the membership applications was to avoid a possible reversal of the decision to sell the hall property.
I am not saying that the management committee was bound to accept any particular membership application or that it was not entitled to take into account a broad range of matters. However, I do think that it failed to consider the membership applications by reference to the objects of the Club, especially clause 2(a).
As I have already said, an applicant for membership cannot complain of such a failure. However, a member is able to complain if that member is able to bring the Club’s conduct within the terms of s 61 of the Act. None of the plaintiffs’ rights were directly affected by the rejection of the membership applications and I do not think that such conduct was oppressive or unfairly prejudicial to, or unfairly discriminatory against, the plaintiffs.
However, the conduct was contrary to the interests of the members as a whole. In my opinion, to refuse the membership applications without regard to whether the decision to accept or reject would carry out, foster or support table tennis is a decision no reasonable man could reach, or one made for a purpose foreign to the Club’s operations, affairs and organisations. The decision on 11 March 2002 to refuse the membership applications was contrary to the interests of the members as a whole within s 61 of the Act.
Conclusions
I think that it is appropriate to require the Club through its management committee to consider each membership application individually and having regard to the objects of the Club. I do not think I can fix a precise time limit for the consideration of the applications, but they should be considered as expeditiously as possible. I am prepared to make orders in these terms, but I wish to hear from the parties as to the precise form of the orders.
For the reasons I have given, I refuse to make any of the other orders sought by the plaintiffs. Insofar as may be necessary, I release the Club from the undertaking it gave on 14 February 2002 not to sell the hall property pursuant to the resolution passed by the defendant on 24 September 2001.
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