[2020] WASAT 60
General information, not legal advice.
State Administrative Tribunal (WA)
2020-06-03
Original judgment source is linked above.
ACT : ASSOCIATIONS INCORPORATION ACT 2015 (WA)
CITATION : KAVANAGH and PINE VALLEY PISTOL CLUB INCORPORATED [2020] WASAT 60
Incorporated association - Proper construction of rules - Principles applicable to construction of rules of an incorporated association - Whether Tribunal should reject or omit words contained in rules
Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219
Echunga Football Club Inc v Hills Football League Inc [2014] SASC 201
Kavanagh and Pine Valley Pistol Club Incorporated [2020] WASAT 11
Tokio Marine & Nichido Fire Insurance Co Ltd v Hans Bo Kristian Holgerson trading as Holgerssons Complete Home Service [2019] WASCA 114
At the Committee meeting held on the 19 June 2019, club affiliations were presented for ratification.
At this meeting it was resolved to not accept your re-affiliation for the 2019-2020 membership year in accordance with the Pine Valley Club (sic) Constitution 2018. Rule 5 Section 6.
Membership is for 12 months and is renewable annually upon completion of a member's record form and payment of the applicable subscription.
The Management Committee reserves the right to not accept an application or renewal. The decision not to accept an application shall be communicated to the applicant within 10 days of the Committee's decision.
Response to Ground 1:
[The Club] does not believe that [rule] 5(6) of the [Club's Rules] can be dissected and only the first sentence applied as a form of argument. [Rule] 5(6), in its entirety has been officially recognised by [Department of Mines, Industry Regulation and Safety (DMIRS)] within [the Club's Rules] and the above [rule] is able to be enacted by the [Club] Committee in its entirety.
[The Club] believes that the term 'renewable' in the context of the [Club's Rules] is in the form of a contract between a person who must renew membership 'contract' which may be extended to the end of a new fixed period at the discretion of the Management Committee (sic). As clearly stated in the second sentence of [rule] 5(6). The Management Committee reserves the right not to accept a membership application or renewal.
When the entire [rule] is read, it is clear that the intention of the [rule] is that The (sic) Management Committee may decide not to accept a renewal. It is clear from the wording of [rule] 5(1) (4) that process relating to a refusal of membership under these [rules] relates to new applicants. In each of [rules] 5(2) - (4) the words applicant and application are used and not the words member or renewal.
[The Club] maintains that the processing of memberships and membership renewals falls within [rule] 5(6) and that as the [applicants] did not have their membership terminated, therefore [rules] 8 and 9 are not relevant to this matter and as such no dispute resolution was required.
[The Club] maintain[s] that the [rule] in question is for new applications. The [applicants] were renewing an existing membership and therefore [rules] 5(1) - (4) were not applicable.
Response to Ground 2:
[The Club is] of the opinion that this is an error in nomenclature only and that [rule] 9 (sic) Committee of Management clearly outlines the roles and responsibilities of a management committee. The [Club's Rules] in its current substantive form has been approved by DMIRS on a number of occasions (sic) post the enforcement of the [AI Act] and at no stage was wording of these [rules] questioned. Further to this, the [applicants] signified their acceptance of the [Club's Rules] each year that they applied for a renewal their membership.
Response to Ground 3:
[The Club] believe[s] that as an association, the renewal of memberships is a matter within the complete and exclusive purview of the association, [the Club] has a right to select it is members.
The principles applicable to the construction of the rules of an incorporated association under the AI Act
(1) The rules of an incorporated association bind the association and the members of the association as if
(a) they contained an agreement on the part of each member to be bound by and observe all the provisions of the rules; and
(b) that agreement were duly executed by each member.
(2) Subsection (1) has effect only so far as the rules are consistent with this Act.
(3) The application of this section extends to an association that is, or is deemed to be, an incorporated association immediately before the commencement of this section.
[16] ... The rules of an incorporated association represent the terms of the statutory contract between the members of the association inter se and between the members and the association. It is not a contract, however, which in all respects, attracts those principles which are applicable to contracts in general or to commercial contracts in particular. The rules of an incorporated association not only regulate the conduct of the association but also serve public purposes going beyond the mere delineation of the rights and obligations of the association's members. The principles applicable to the construction of the rules of an incorporated association are akin to the principles applicable to the construction of a corporate constitution. Those principles are explained in Lion Nathan v Coopers Brewery by Finn J and approved on appeal. Those principles are an adaptation of the principles which govern the construction of commercial contracts. The adaption of those principles must recognise as well that the rules to be construed are not those of a financial or trading corporation but an incorporated voluntary sporting association. The need to modify those principles in these circumstances was recognised by Besanko J in Millar & Ors v Houghton Table Tennis & Sports Club Inc. I will come back to this.
[17] The principles applicable to the construction of contracts have been the subject of recent consideration by the High Court in Electricity Generation Corporation (Trading as Verve Energy) v Woodside Energy Ltd. French CJ, Hayne, Crennan and Kiefel JJ said that the meaning of the terms of a commercial contract are to be decided by what a reasonable business person would have understood those terms to mean. This requires consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding of the genesis of the transaction, the background, the context and the market in which the parties are operating.
[18] Those principles, however, must be modified for two reasons when a court is construing the rules of an incorporated association such as this. First, because the rules of an incorporated association have a public dimension. They serve a public purpose and third parties will rely upon them from time to time. They are not merely a private record of a private bargain, rather, the rules of an incorporated association have statutory force by reason of s 23 of the Associations Incorporation Act 1985 (SA). Secondly, the court must recognise that this association is not a commercial operation established with a view to generating profits but rather is what may be described as a non-profit making sporting organisation. In this regard it is proper to recognise that the by-laws are drafted in an ad hoc and piecemeal fashion by lay-persons rather than lawyers, couched in terms intelligible to them but which often lack the consistency, coherence, form and drafting that would be expected in a statute or commercial contract. Accordingly, in my view, the court must approach the construction of a particular by-law, when read in the context of the by-laws as a whole, with a degree of flexibility. This means that the courts should not make too much of infelicities of expression in the by-laws, nor be too quick to identify absurdity, illogicality or apparent inconsistencies. As French J (as he then was) said in the context of interpreting industrial awards, while fractured and illogical prose may be met by a generous and liberal approach to construction, the instrument must make sense according to its ordinary and grammatical language. Nonetheless, because of the public nature of the rules of an incorporated association, I consider it proper to place greaterstore by, what Kenny J in Lion Nathan calls, the constitutive text in construing the rules of an incorporated association as opposed to a private contract. This approach will constrain the ambit of the matters constituting surrounding circumstances to which a court has regard.
[19] This is because the rules of an incorporated association are a deemed contract, created by statute, without the normal elements of a contract having to be established. Its rules speak not only to its members but to third parties who might consider becoming members. Accordingly, it is important that the rules are capable of being construed by third parties by reference to the text of the rules. That is not to say that context is irrelevant to the construction of the rules of an incorporated association. A court can have regard to extrinsic material when construing the rules but, like a corporate constitution, the case for restraint in using such contextual considerations as the surrounding circumstances in the enactment of the rules as an aid to the construction of those rules remains cogent. Nonetheless, some "surrounding circumstances", particularly those that are likely to be well-known, not just to the members of the association, but also to relevant third parties, are part of the contextual considerations to be weighed by a court in construing the rules of an incorporated association.
(a) make application to the Committee in writing on the prescribed form.
(c) All members must comply with all relevant State and Federal Firearms Legislation
(2) The Committee must consider each application made under sub-rule (1) at a Committee meeting and must at that meeting or the next Committee meeting accept or reject that application.
(3) An applicant whose application for membership of the Club is rejected under sub-rule (2) must, if he or she wishes to appeal against that decision, give notice to the Secretary of his or her intention to do so within a period of 14 days from the date he or she is advised of the rejection.
(4) When notice is given under sub-rule (3), the Club in a general meeting no later than the next annual general meeting, must either confirm or set aside the decision of the Committee to reject the application, after having afforded the applicant who gave that notice a reasonable opportunity to be heard by, or to make representations in writing to, the Club in the general meeting.
(5) There shall be the following classes of membership as defined by the Rules of the Club:
The criteria for entry to each class of membership shall, subject to Clause 9, be decided by the members at a general meeting, and membership of a class shall carry such rights and privileges as the Management Committee may from time to time determine.
(6) Membership is for 12 months and is renewable annually upon the completion of a member's record form and payment of the applicable subscription.
The Management Committee reserves the right to not accept a membership application or renewal. The decision to not accept an application shall be communicated to the applicant within 10 days of the Committee's decision.
(i) A person who has not been a financial member for at least 24 months is deemed to be a probationary member.
(ii) During the probationary period the Club reserves the right to expel with prorata refund of annual subscription, less any outstanding levies, any probationary members who, in the opinion of the majority of the Management Committee is considered to be unsatisfactory. The Club further reserves the right to decline to publicly specify the reason for such action.
(2) Each member must pay to the Treasurer, annually on or before 1 July or such other date as the Committee from time to time determines, the amount of the subscription determined under sub-rule (1).
(3) Subject to sub-rule (4), a member whose subscription is not paid within 1 month after the relevant date fixed by or under sub-rule (2) ceases on the expiry of that period to be a member, unless the Committee decides otherwise.
(4) A person exercises all the rights and obligations of a member for the purposes of these rules if his or her subscription is paid on or before the relevant date fixed by or under sub-rule (2) or within 1 month thereafter, or such other time as the Committee allows.
(5) When imposing a levy the Committee shall state the purpose of the levy and the due date.
(6) If the levy is unpaid after the due date the Committee may declare all defaulting members un-financial.
(a) receipt by the Secretary of a notice in writing from a member of his or her resignation from the Club. Such person remains liable to pay to the Club the amount of any subscription due and payable by that person to the Club but unpaid at the date of termination;
(b) non-payment by a member of his or her subscription within one month of the date fixed by the Committee for subscriptions to be paid, unless the Committee decides otherwise in accordance with rule 7 (3);
(c) expulsion of a member in accordance with rule 9.
Suspension or expulsion of members of the Club
(a) Notice of the proposed suspension or expulsion and of the time, date and place of the Committee meeting at which the question of that suspension or expulsion will be decided; and
(b) particulars of that conduct, not less than 14 days before the date of the Committee meeting referred to in paragraph (a).
(2) At the Committee meeting referred to in a notice communicated under sub-rule (1), the Committee may, having afforded the member concerned a reasonable opportunity to be heard by, or to make representations in writing to, the Committee, suspend or expel or decline to suspend or expel that member from membership of the Club and must, forthwith after deciding whether or not to suspend or expel that member, communicate that decision in writing to that member.
(3) Subject to sub-rule (5), a member has his or her membership suspended or ceases to be a member 14 days after the day on which the decision to suspend or expel a member is communicated to him or her under sub-rule (2).
(4) A member who is suspended or expelled under sub-rule (2) must, if he or she wishes to appeal against that suspension or expulsion, give notice to the Secretary of his or her intention to do so within the period of 14 days referred to in sub-rule (3).
(a) the Club in a general meeting, must either confirm or set aside the decision of the Committee to suspend or expel the member, after having afforded the member who gave that notice a reasonable opportunity to be heard by, or to make representations in writing to, the Club in the general meeting; and
(b) the member who gave that notice is not suspended or does not cease to be a member unless and until the decision of the Committee to suspend or expel him or her is confirmed under this sub-rule.
The parties' contentions regarding the second sentence of rule 5(6)
In the process of the construction of a contract, the court will be justified in omitting words, or treating them as superfluous:
...
(b) if those words are inconsistent with, or repugnant to, the objective intention revealed by the contract as a whole.
[a]n instrument should be construed as a whole. A construction that makes the various parts of an instrument harmonious is preferable. If possible, each part of an instrument should be construed so as to have some operation.
In Chapmans Ltd v Australian Stock Exchange Ltd, Lockhart and Hill JJ said, in a passage approved in many subsequent cases, as follows:
It is an elementary proposition that a contract will be read as a whole giving weight to all clauses of it, where possible, in an endeavour to give effect to the intention of the parties as reflected in the language which they have used. A court will strain against interpreting a contract so that a particular clause in it is nugatory or ineffective, particularly if a meaning can be given to it consonant with other provisions in a contract.
... words, even entire provisions, can be rejected or treated as superfluous if they are inconsistent with, or repugnant to, the objective intention or primary purpose revealed by consideration of the instrument as a whole[.]
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.