Hockenhull v Stephens
[2016] NZHC 1242
•3 June 2016
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2016-419-000148 [2016] NZHC 1242
BETWEEN PETER WAYNE HOCKENHULL, KARL
JAMES OSBORNE, SANDRA OSBORNE, TAMARA JANE KEREOPA, LAWRENCE BAKER, JOHNY COLE, SEAN ELLISON, QUEENIE TUKIRI AND DEANE TREMAYNE
Applicants
AND
RICHARD STEPHENS First Respondent
RAGLAN CLUB INCORPORATED Second Respondent
Hearing: 3 June 2016 Counsel:
AB Foster for Applicants
SW Hood and JD Savage for RespondentsJudgment:
3 June 2016
JUDGMENT OF ASHER J
Solicitors:
Foster & Milroy, Hamilton.
Norris Ward McKinnon, Hamilton.
HOCKENHULL v STEPHENS [2016] NZHC 1242 [3 June 2016]
Introduction
[1] The Raglan Club Incorporated (the Club) is a longstanding Raglan entity, having been incorporated on 23 August 1957. It has 1042 members. Although it has a bowling green, it is more than just a sports club and has a social function within the Raglan community, which has a total population of approximately 3,000. Unfortunately a division has arisen between members. I have to determine an interim injunction application brought by nine members naming the patron of the Club Richard Stephens as the first respondent, and the Club itself as the second respondent.
[2] The applicants seek orders restraining Mr Stephens from managing and controlling the affairs of the Club, restraining the Club by its members or agents from managing and controlling its affairs, save by the applicants, and vesting the management and control of the affairs of the Club in the applicants. It can be seen that there is a mandatory aspect to the orders sought.
Background
[3] The applicant Peter Hockenhull was elected president of the Club at the annual general meeting held in July 2015. He had been a long serving committee member of the Club’s services section and had been an executive member of the Club since 1997. He had also served previously as president of the Club. He had been elected along with an executive of 10 others.
[4] It seems that some differences arose between the executive and some staff members working at the Club. I will not go through the details of the dispute and the issues, but a consequence was that on 24 February 2016 Mr Hockenhull sent a letter to some or all of the Club employees advising that the executive had decided to do a full staff restructure “due to our financial position”. Some employees were advised that their positions would be “disestablished” and others were advised that there would be new contracts offered in respect of their positions. Lawyers became involved and a letter was sent on behalf of some employees alleging that they had grounds for a personal grievance of unjustified dismissal.
[5] On 4 March 2016 a letter was sent on behalf of the executive of the Club stating specifically that they withdrew from any position that suggested that the employment of the staff members was at an end. There was advice that a de novo review of staffing would be undertaken.
[6] These events appear to have given rise to considerable concern on the part of a large number of Club members. On 29 February 2016 a requisition under para 11 of the Club’s constitution was sent to the executive secretary of the Club signed by more than 50 financial members. It stated that the members believed that the executive was acting illegally in restructuring the staff and management of the Club, alleging some unspecified “unacceptable behaviour” and actions causing severe financial penalties. The notice requested a special annual general meeting to be called “as soon as possible” to consider the following resolutions:
(a) That the president be removed from the executive due to a vote of no- confidence from the members.
(b)That the management and staff structure that had been in place during the last few years be reinstated as far as is possible, and affected staff to be reinstated.
[7] No immediate action was taken by the executive secretary or the executive in the weeks that followed. The executives’ regular meeting took place on Tuesday,
29 March 2016. At that meeting the executive considered the 29 February 2016 notice.
[8] Prior to that meeting a notice of special meeting had been issued to Club members. It was headed “Important notice to Club members. Notice of special meeting” and stated that due to the failure of the executive secretary to comply with clause 11 of the constitution the undersigned were calling a special meeting on Sunday, 10 April at 10 am at the Club.
[9] At the 29 March 2016 meeting the executive resolved to allocate a date of
1 June 2016 for the special general meeting that had been requested by the members. There was no recognition of any valid meeting to be held on 10 April 2016.
[10] However, a meeting on 10 April 2016 did take place. 207 members attended. The meeting was chaired by the President of Clubs New Zealand, Mr Bryan Ferguson, who was chosen as an independent chair for the meeting. The minute records:
Chairman Bryan spoke to the Club Lawyer yesterday who felt it was not a legal meeting as it was not called by the Executive. However, the members are entitled to call this meeting as they have done. He would like to hear any ideas of a way to move the Club forward.
[11] At the meeting a member, Josie Warren, moved an amendment to the resolution so it read that rather than just the president being removed from office it was the “president and executive” that would be removed from office. That resolution was so amended and was put, and carried by a vote of 188 for, and 19 against. The second resolution relating to the staff was put and also carried.
[12] The minutes record that a further motion was carried that had not been notified. It was to:
… formalise the conscription of Patron Richard Stephens and Life Members to step in to take on the governance role until the AGM when a new President and Executive will be elected. That they have the freedom to ask whomever else they choose to assist.
[13] I should note that Mr Foster for the applicants submits that there were effectively four motions in total, as the amended motion to remove the executive as well as the president should be seen as a new motion entirely.
[14] It seems that following this meeting, whatever the legal position, there was a de facto change in the situation. The executive that had been appointed in 2015 ceased to function as the executive and the patron and others took over their role.
[15] There was no immediate legal response to these changes. Mr Hockenhull explains that he had an accident and had broken his leg. Proceedings were
ultimately filed on 12 May 2016 seeking an interim injunction ex parte. On 13 May
2016, Faire J by minute declined to issue a without notice injunction and directed listing in the usual way.1 There were then timetable directions which have led to this hearing.
[16] The principles applicable to interim injunction applications are well settled. The broad approach set out in American Cyanamid Co v Ethicon Ltd still applies,2 although with some adaption to the New Zealand context, in particular the comments of the Court of Appeal decision in Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd.3 The two broad questions are whether there is a serious question to be tried in the proceeding, and where the balance of convenience lies.
Serious question to be tried
[17] The statement of claim pleads that the special general meeting of 10 April
2016 was ultra vires and that the resolutions passed were also ultra vires. The relief sought was the injunction sought in this interim injunction hearing, together with costs.
[18] Mr Foster sensibly accepts on behalf of the applicants that the executive secretary should have called a special general meeting following receipt of the
29 February 2016 requisition, and failed to do so. He submitted that the omission could be regarded as an irregularity capable of being cured. He submitted that the resolutions passed at the special general meeting on 10 April 2016 were ultra vires. There was no authority or power for the members of their own volition to call a special general meeting. He submitted the so-called amendment to remove the executive as well as the president was effectively a second new motion and could not be properly regarded as an amendment. Thus, despite Rule 11 of the constitution allowing amendments to resolutions, the amendment was not effective. He pointed to the fact that no notice had been given of the amendment and of the last two resolutions passed, and that there was no power or right in the rules for the lawful
passing of such resolutions. These were not irregularities that could be rectified.
1 Hockenhull v Stephens HC Hamilton CIV-2016-419-148, 13 May 2016.
2 American Cyanamid Co v Ethicon Ltd [1975] 1 All ER 504 (HL).
3 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 140 (CA).
[19] To this Mr Savage responds that any non-compliance with the rules amounted to an irregularity. He emphasised that the resolutions were passed in the context of a special general meeting attended by approximately 20 per cent of members, and that the vast majority of members present supported the resolution. He relied on the decision of Barrett v Te Runanga O Ngati Pu Inc where there had been a failure to call a meeting as required by the rules and the members had responded by calling a
meeting themselves.4 In that case Chambers J had found no merit in an argument
that requisitioning members who had been denied a meeting by the executive, could not call a meeting themselves. He held they could. He also noted that the rules of that society had anticipated situations not explicitly dealt with by the rules.
[20] Mr Savage, relying on the internal management rule, submitted that if that which was done could be cured by a simple majority of members then it was not ultra vires but only an irregularity. Given that any ultra vires acts of the members could be cured by a resolution at the annual general meeting the actions should not be regarded as ultra vires. He placed particular weight on the foreword to the rules which provided:
It should be appreciated that no code of rules governing our Club has yet achieved such perfection as to cope with every situation.
Unusual incidents not definitely provided for in the rules or regulations occasionally occur. It is well therefore to remember that the rules and regulations have been framed in the belief that commonsense will prevail and that in the absence of any express rule or regulation such commonsense and flexibility will find a way to making our club more social and enjoyable for all members.
[21] In my assessment there is a serious question to be tried. There can be little doubt that the meeting of 10 April 2016 was validly called in light of the obstruction shown by the secretary, with the consequence that notified resolutions could well have been valid. Members can call a meeting in such circumstances, when faced with a deliberate breach of the rule for calling members by the executive. The foreword to the rules effectively permits such an action. No specific rule covers a deliberate breach of the rules by the executive, and the action in response can be seen
as reasonable and in accordance with the spirit of the rules.5
4 Barrett v Te Runanga O Ngati Pu Inc [2002] NZAR 296 (HC).
5 See by analogy r 1.6(2) of the High Court Rules.
[22] However, the resolutions that were ultimately passed went considerably further than those notified. It may be the case, as Mr Savage submits, that given the number of members that were actually present there was no material unfairness in the process adopted. But members who were not there had no notice of the resolution ultimately passed which, in removing all the executive rather than just the president, was a significant extension.
[23] I do not have enough material before me to form any final view on the validity of the resolutions. As I have said, the failure of the executive also to respond promptly to the request for an urgent special general meeting is a relevant factor in any assessment. The executive had deferred the resolutions to a meeting that was to take place on 1 June 2016. I have no doubt it would be argued at a substantive hearing of this proceeding that, faced with that development, it was reasonable to proceed with further motions at the 10 April 2016 meeting. In particular it may be argued that the executive had shown itself to be siding with the president against any urgent resolution of the impasse, by supporting the deferment.
[24] In conclusion, while I find that there is a serious question to be tried, I cannot characterise it as strong.
The balance of convenience
[25] There is a satisfactory undertaking as to damages.
[26] The delay of a month in issuing these proceedings works against the granting of an injunction. Mr Hockenhull was only one of the applicants and his broken leg is not a satisfactory explanation for the delay. The delay of a month, although only a month, must be seen as significant given that in five weeks time there will be an annual general meeting where a new executive will be elected. Therefore approximately a third of the time for which an interim injunction could have relevance passed before these proceedings were filed.
[27] Mr Hockenhull in his affidavit does not say much about what has happened since 10 April 2016. It is clear that, as I have said, there has been a de facto takeover of the persons nominated at the 10 April meeting, and that the old executive has
ceased to have a practical function. Mr Hockenhull does not suggest that there has been any problems in the way the Club has been run since then.
[28] The patron of the Club, Mr Stephens the first respondent, in his affidavit asserts that if the interim injunction is granted members will no longer frequent the Club premises, there will be a loss of trading income as a consequence, there will be a loss of staff, and a loss of membership and membership fees. He does not give any further detail of the possible damage. However, given that when the special general meeting was called the vast majority of members were clearly opposed to the applicants continuing as the executive, there is no reason to doubt Mr Stephens’ assertions. Members will be most unhappy to find the outcome that they voted for on 10 April 2016 reversed. I consider that the Club turnover could be greatly reduced if the injunction was granted, and there could be serious staff resignations, or impaired performance.
[29] Given that there is only five weeks to go before a regular vote will take place, I conclude that to issue an injunction and change the executive for a second time in respect of that five week period would be disruptive and could cause some real damage as Mr Stephens asserts. The balance of convenience is, therefore, against the granting of an “injunction”.
Overall justice
[30] I must stand back and look at where the overall justice of the case lies. There is no reason to believe that any of the applicants or the first respondent have acted improperly and not with the best of motives. There is nothing to indicate that one group of executives would make a better job of running the Club than another, although I do have to recognise that some of the staff appear to have fallen out or to have tensions with members of the old executive.
[31] Given that the Club seems to have run in a satisfactory way since 10 April
2016, and the status quo appears to have the support of most members, it seems to me that this position should continue for the next five weeks until the annual general meeting. It is at that point there can be a regular and lawful debate about the way forward for the Club and a proper election of members. For the Court to impose a
significant change to the present situation today would in my view be unwise given that anything ordered would only last for that short period of time.
[32] I do recognise the point made by Mr Foster that the applicants are concerned as to the effect of these events on their reputations. Two things could be said to that. First, as I have outlined, there is nothing in the material before me to indicate that the applicants have acted with impropriety deserve any strong opprobrium. Second, this is only the interim injunction decision. If the applicants wish to continue with the proceedings to seek vindication, they may do so. That might be seen as unfortunate because in the long term, the dispute should move to a lawful resolution at the annual general meeting on 10 July 2016. But should the applicants wish to pursue the claim that they have filed, there will be nothing to stop them from doing so.
[33] Therefore I conclude that the overall justice of the situation is against the grant of an interim injunction, and that application should be dismissed.
Result
[34] The application for an interim injunction is dismissed.
Costs
[35] I reserve costs in the meantime. Should the respondents seek costs they may file a memorandum, with the applicants to respond within 14 days.
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Asher J
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