Bath v Singh HC Auckland CIV 2010-404-761

[2010] NZHC 1483

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2010-404-761

UNDER

IN THE MATTER OF BETWEEN

the Judicature Amendment Act 1972 the Declaratory Judgments Act 1908

M S BATH, B S LALLY & P S DHATT

Plaintiffs

AND

D SINGH
First Defendant

AND

M SINGH

Second Defendant

AND

R S LALLY Third Defendant

AND

R SINGH

Fourth Defendant

AND

P SINGH
Fifth Defendant

AND

NEW ZEALAND SIKH SOCIETY AUCKLAND

Sixth Defendant

AND

REGISTRAR OF INCOPORATED SOCIETIES

Seventh Defendant

Hearing:

26 August 2010

Appearances: I M Hutcheson for Plaintiffs

J M von Dadelszen for 1st - 6th Defendants
No appearance for 7th Defendant

Judgment:      27 August 2010

JUDGMENT OF KEANE J

BATH AND ORS V SINGH & ORS HC AK CIV 2010-404-761  27 August 2010

This judgment was delivered by Justice Keane on 27 August 2010 at 4.45 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Date:

Solicitors

Murdoch Price, Auckland

Golian Legal, Auckland

[1]      The members of the New Zealand Sikh Society, Auckland, which I shall call the Society, are divided on two issues that have proved to be intractable. The first, with which this case is concerned, is as to the validity of the variations to the Society's rules made since 2001. The second is equally, if not more divisive. It is whether the executive of the Society is acting responsibly in the interests of its members. That wider controversy, for the purposes of this present application for interim relief, lies in the background.

[2]      When in 1982 the Society was incorporated, under the Charitable Trusts Act

1957,  it  took  the  name  'The  New  Zealand  Sikh  Society,  Auckland  Branch'.  Its objects declared it to be a branch of the New Zealand Sikh Society, in Hamilton, which I shall call the National Society. The Society's power to vary its rules was correspondingly circumscribed. Any variations had to be consistent with the rules of the National Society. They could only be made with that Society's prior approval.

[3]      In  2001, by resolution  at a  general meeting,  the Society varied  its rules without the approval of the National Society. Indeed it severed their relationship. It excised the word 'Branch' from its name. It excised the objects declaring it to be a branch.  It  excised from  the rule conferring its  power to vary its own  rules the National Society's rules as a point of reference and, more fundamentally, that Society's supervising power. On 7 August 2002 these variations were lodged with the Registrar of Incorporated Societies and were registered.

[4]      In letters to the Auckland Society in August 2003 and December 2004, I understand, the National Society protested that these variations were without effect. The Society was unmoved and, since then, has further varied its rules without the approval of the National Society, at the 9 August 2008 annual general meeting, at a special general meeting on 8 February 2009, and at the annual general meeting on 30

August  2009.  By that  last  meeting,  certainly,  the  members  had  become  openly divided.

[5]      This present application for review was brought on 8 February 2010. The plaintiffs applied for, but did not pursue, interim relief. On 1 March 2010 the first - sixth defendants gave to the Court an undertaking not to alter the rules further and to

administer the Society in accord with the rules as they then stood, whether or not properly altered, and to do nothing to render these proceedings nugatory, without first giving the plaintiffs 14 days notice. That qualified undertaking is still in force.

[6]      The applicants, relying on that undertaking, qualified though it was, have sought since to pursue their substantive application seeking a declaration that the variations made since 2001 are invalid and orders directing the Registrar of Incorporated Societies to cancel them and requiring the first - sixth defendants to adhere to the original rules. They seek to restore the relationship between the two Societies. The first - sixth defendants deny any invalidity and by counterclaim seek contrary declarations.

[7]      The substantive application is still well short of a hearing. The pleadings are now complete but discovery is not. Full affidavits have still to be filed. There is to be a half day fixture on 23 November 2010 to resolve an issue of privilege; and, more significantly, an application by the plaintiffs for judgment on the facts admitted by the first - sixth defendants. If need be there is to be a judicial settlement conference in February 2011 and, if all else fails, a five day fixture, perhaps in the middle of

2011.

[8]      The plaintiffs now pursue interim relief because on Sunday 29 August 2010 the Society is to have its annual general meeting and those attending will be asked to pass a resolution ratifying the variations to the rules that are the subject of this present application for review. The plaintiffs seek an interim order requiring the first

- six defendants to withdraw that motion. In every other respect the plaintiffs are happy for the annual general meeting to proceed in the terms notified to members.

[9]      The first issue on this application for interim relief is as to the nature and effect of the motion in dispute. The first - sixth defendants say that it invites the Society's  members  merely  to  ratify  the  variations  already  made  to  cure  any procedural or other invalidity. Such motions, they say, call only for seven days notice. The plaintiffs contend that it invites the members to do much more. The variations,  they  contend,  were  made  invalidly  and  never  took  effect.  There  is

presently nothing to ratify. The motion now in issue must be a motion to vary. That being so, 14 days notice was required and that has not been given.

[10]     More fundamentally, the issue is as to the efficacy of the 2001 variations by which the Society freed itself, when varying its rules, of the control of the National Society. It did so by exercising the power to vary without complying with the two conditions that circumscribe it. Indeed, the Society excised those conditions in the variations  made.  That  the  plaintiffs  say,  and  the  defendants  deny,  makes  the variations invalid and any made since,  relying on the power to vary as varied, equally invalid.

Principles of relief

[11]     To succeed the plaintiffs must establish that there is a serious question to be tried, and that the balance of convenience lies in favour of granting of relief. Ultimately, the overall justice of the case must be considered: Klissers Farmhouse Bakeries Limited v Harvest Bakeries Limited [1985] 2 NZLR 140 (CA) 142.

[12]     As to whether there is a serious question to be tried, the issue is whether there is ‘a tenable combination of resolutions of the issues of law and fact on which the plaintiffs could succeed’: Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VR 309, 311 Lush J. Or, as Wild J remarked in his helpful analysis of the elements of this discretion, permanent relief must be a real prospect: Todd Taranaki Ltd & Todd Pohokura Ltd v Energy Infrastructure Ltd & Shell Exploration NZ Ltd (HC Wellington, CIV 2006-485-2372, 26 January 2007).

[13]     As to where the balance of convenience lies, can also be described, and I agree with Wild J more accurately, as the ‘balance of the risk of doing an injustice’: Cayne v Global Resources plc [1984] 1 All ER 225 (CA), 237, May LJ. If damages will suffice injunctive relief ought not to be granted, but if it is granted and the one enjoined succeeds at trial, can it and will it be compensated by damages itself? These are the invariable questions: American Cyanimid Co v Ethicon [1975] AC 396, 408-

9, Lord Diplock.

[14]     Where the overall justice of the case lies calls for a broader appraisal to which such considerations as whether the plaintiffs have delayed too long in bringing their substantive action, and also the wellbeing of the Society's members beyond those actively engaged in this case come into play.

Disputed motion

[15]     In the notice given the motions, the seventh item on the agenda, is expressed in this way:

•Questions having been raised about the validity of changes to the Rules of the Society and decisions of various General Meetings of the Society, and High Court proceedings having been issued challenging the validity of those changes and those decisions, and

•Whether or not those changes were made in accordance with the provisions of the Charitable Trusts Act 1957 or the requirements of the Rules of the Society that applied to such changes

This meeting:

•Ratifies and adopts the changes to the Society's rules by a Special General Meeting held on 25 November 2001 (registered with the Registrar   of   Incorporated   Societies   on   11   September   2002), amending the name of the Society in Rule 1, and further amending Rules 3, 4, and 24(a), whether or not the prior approval of the New Zealand Sikh Society was obtained to such changes,

•Ratifies and adopts the changes to the Society's rules by the Annual General  Meeting  held  on  9  August  2008  (registered  with  the Registrar of Incorporated Societies on 12 April 2009),

•Ratifies and adopts the changes to the Society's rules by the Special General Meeting held on 8 February 2009 (registered with the Registrar of Incorporated Societies on 10 February 2009),

•Ratifies and adopts actions taken by the Society, its Committee and Officers on the basis that the rules as altered above had been validly altered in accordance with the Society's Rules and the Charitable Trusts Act 1957 and the decisions of the Society's Annual General Meeting held on 30 August 2009 were validly made,

•And confirms that the Society will meet the legal costs and expenses incurred. ...

Serious question to be tried

[16]     The first issue is whether in their substantive application the plaintiffs raise a serious question to be tried; and I assess that in the broadest way. In argument there was fleeting reference to authority and time is short.

[17]     To establish a serious question to be tried the plaintiffs, I consider, must demonstrate not simply that the variations since 2001 may have been passed defectively. They must demonstrate that they have some assurance of declaratory relief. And, to the extent that those deficiencies on which they rely are merely procedural, the plaintiffs are unlikely to be able to do that. For then the Society itself may  well  be  able  to  cure  any  such  deficiency.  The  court  will  be  reluctant  to intervene.

[18]     The more radical question the plaintiffs pose as to the efficacy of the 2001 variation, I consider, stands altogether differently. There, it is open to the plaintiffs to rely on the rule, as it was originally. There they can say that in 2001 the Society did not  exercise  the  power  actually conferred.  Rather,  that  the  Society assumed  an uncircumscribed power it did not have to confer on itself just such an uncircumscribed power. If the plaintiffs can take their argument that far then they are likely also to obtain declaratory relief. The members are unlikely to be able to cure a deficiency of that order. This is not merely a matter of internal management. The rule abrogated confers a supervisory power on a third party, the National Society.

[19]     That being so, the plaintiffs are also able to contend, I consider, that the motion presently for the annual general meeting on 29 August 2010 is incapable of being effective in law whether it is classified as an exercise of the Society's power to ratify, as the first - sixth defendants say, or a power to vary as the plaintiffs say. The plaintiffs are able to argue that it is not open to the members in either event to pass a resolution that will have any effect in law. Whether notice of seven or 14 days ought to have been given is a matter of no consequence by comparison.

[20]     In this analysis I do not ignore the defendants' argument that the variations made, and registered, must be deemed valid until set aside; that these buildings, once

erected, stand until demolished. That is true as far as it goes. It does not detract from my conclusion that in this respect the plaintiffs have identified a serious question to be tried.

Balance of convenience

[21]     There  are  four  reasons,  furthermore,  why  the  balance  of  convenience,  I consider, also favours the plaintiffs. And the first is the fact of the 1 March 2010 undertaking that the first - sixth defendants gave not to do anything to alter the rules further, to administer the Society in accordance with the rules as they then stood, whether or not properly altered, and not to render this present proceeding nugatory.

[22]     That  undertaking  was,  I  accept,  and  remains,  qualified  in  two  ways.  It assumed, as it does still, that the rules the plaintiffs challenge remain operative. Also the defendants reserved, and reserve still, the right to act in any of these three ways on 14 days notice. The fact remains, however, that it was on the basis of these undertakings,  sensibly  or  not,  that  the  plaintiffs  elected  not  to  pursue  their application for interim relief. Had they then pursued that application this present issue may never have arisen.

[23]     Secondly, to the extent that I understand the dispute underlying this argument about the rules, and I understand it very incompletely because affidavit evidence has still to be filed, there has to be a question why the motion needs to be pressed at this present annual general meeting before the substantive application is resolved. It does not appear impelled by any immediate practical issue going to the welbeing of the Society as a whole.

[24]    Rather the motion appears designed to demonstrate that the first - sixth defendants, in the variations to the rules for which they are apparently responsible, and in their administration of the Society, enjoy the support of the majority of the financial members; a factor going to whether the Court should exercise its discretion to grant declaratory relief. That is not a sufficiently impelling reason, I consider, for the Society to be able to step away from the spirit of the undertakings given by the first - sixth defendants. Also, the plaintiffs contend that the financial members who

will attend the meeting, even if a sufficient number under the rules, are not representative of the Society as a whole.

[25]     Thirdly, there is the risk, I put it no higher, that, as the plaintiffs fear, by this motion the defendants may seek a mandate to administer the Society in a manner conceivably inconsistent not just with the rules as they were originally, but in other ways compromising the integrity of the Society as a charitable trust of concern to the plaintiffs and perhaps others. The undertaking given, because it is as qualified as it is, cannot begin to answer any such risk.

[26]     Fourthly, and finally, there can be no inconvenience in maintaining the status quo to the members who will be attending the annual general meeting. The meeting can continue as to all the usual items on the agenda save this one item, the disputed motion, which is better left for another day.

Overall justice and relief

[27]     Standing back, I am satisfied, that the overall justice of the case favours the grant of interim relief applied for. There is a serious question to be tried as to whether the Society took to itself a power it did not begin to have in the variations made in 2001, that could have invalidated any subsequent exercise of power.

[28]     The balance of convenience also favours this present case proceeding to a conclusion uncomplicated by any resolution of the annual general meeting seeking to validate the variations in dispute; indeed, any attempt to validate the 2001 variations might be thought to trench upon the function of this Court.

[29]     Quite what the merits are in the wider dispute it is impossible for me to say on the papers. But it is conceivable that, if the resolution were passed, that could work to the detriment of the Society as a whole, before the validity of its present powers is resolved.

[30]     In this I am conscious that as to the 2001 variations the plaintiffs have only acted this year. However, the issue as to the rules is not to be seen in isolation. It lies

within a broader range of issues between the members of the Society that appears to have culminated in an outright rupture much more recently. When that happened the plaintiffs did apply. If they have delayed that should not, I consider, stand in the way of a grant of interim relief.

[31]   The plaintiffs will have an interim injunction directing the first - sixth defendants to withdraw the proposed motion appearing under item 7 of the agenda, dated  13  August  2010,  for  the  Society's  annual  general  meeting  scheduled  for Sunday, 29 August 2010, pending further order of the Court.

[32]     In the ordinary order of things costs should follow the event. But this is an issue between members of the Society that I am unable to assess in the round on the limited  information  I  have.  Costs  are  better  reserved  for  decision  when  the

substantive application is resolved.

P.J. Keane J