STILL A MEMBER

Evening Post, Volume CIX, Issue 43, 20 February 1925, Page 7

STILL A MEMBER

SIEVWRIGHT CASE

AGAINST WELLINGTON BOWLING CLUB

DAMAGES. OF £1 GRANTED:^

As the result of the reserved judgment of Mr. Justice Ostler in the case of James Dickson Sievwriglit against the Wellington ■Bowling Club, Ltd., Sievwright remains a.- member -of the. club, and retains the one share in tho "Obmpaiiy''which' "his" 'Honour held had been allotted to' und accepted by him. The judgment "was deliv-' ered this morning by the Registrar- of the Supreme,, Court (Mr. W. A. Hawkins) on behalf of his' Honour, who is in New Plymouth. Sievwright was granted £1 damages against tl{e .'club. „ ..- .......^ . . „.y.;... . v ;. I|O His Honour held ..that. there^\yere four points to be "considered. (1) Whether plaintiff had.due notice and an opportunity to appear before the directors? ' ■ ' ■ • , . (2) Whether there ; had. r heen, any want of good faith on the part, of the 1 directors? . . . ' .. J (3) Whether there had been, cause ; for the expulsion? , ' ■ ' 1 i*L lWKeth"er there,'had,.been .due observance of the rules when'the direc'-" tors dealt with the matter?

His Honour decided iv favour of the club on each of the first three questions, but held that as there had not been a strict- or; even a substantial compliance with the rules the purported expulsion was invalid. His. Honour did...not.,deem it neces- ( sary to decide whether the rule governing expulsion was ultra or intra vires, and on this point it is. possible , that an apepal will be lodged against the judgment. '

Clause i of the articles of association ot the defendant provides that the company shall keep a register of shareholders which' shall Contain the following: (1) The name; the address, the'occupatwn(if any) of each shareholder, distinguishing each; shite'liy^te number; (2) the amount paid on the'share of each shareholder; (3) the date at which the name of any person was entered in the register as a shareholder, etc. Clause 6 of the articles provides that this register shall be evidence of any mutter directed by these articles'to-be inserted therein' Clause 7 provides that every person who has accepted a share and whose name is entered on v the, said register:of. shareholders : . . shall be deemed to be a shareholder in the company ' • The register of shareholders was pro- I duced and Contained the plaintiff's name and showed that share. No, 162 was allotted to him on the, 17th August, 1907 _tte has ever since been an active member of the club," said his Honour, .''and, therefore, must be .deejtned to have accepted the share as allotted, although^ no share certificate has ever been issued ? lm-, ,}> therefore, hold that he was a shareholder,' of the; contpah'y. "-X '■'■ V ' ■ Hia Honour reviewed tlie history of,the I case.after, Mr., I.",Hyamsihai'.made a 1 c? m^laint ASainst- plaintiff,' quoted the letters which passed between plaintiff and ; the VVellinstfln, Bowling ■Club, and proceeded: . , ;. . .■■ '■ ' ' natural'"justice." ;':';;;'

'Plaintiff now claims"'that he'.'wns wrongly expelled .from the! club' ; and that the- purported - eSpulsion«Ts' not -valid' plaintiff claims that clause' 23 of the articles under which''.the■.directors, purported ,to act. is ultima:vires; because it purports to give power to-.the company to forfeit shares. AssuminK the article, to be ' intra v:ir,es,,:the first question,.to, determine is whether the power 61 expulsion was '''properly., exercised ;under it.- The law on the' point-is, fortunately well-settled-and cleari.arid 1 tajte it to be as follows:—In exercising a; pjower of, expulsion: from ■*' club' not „onl*. must there be strict' compliance'! ,with the l-ules, but the principle* of aatural justice mustba observed; unless.-it plainly^ appears.,on. the construction of the rul s that the 'power was intended to be an absolute one. ' ■ ;

It is undisputed that in this'case the. power of expulsion on the' Hue construction of-the rules was not intended to be absolute. Clause 23 of th| articles nvakes provision for a charge- against a member of conducting himself in r an-iin-' proper manner being rediicsd'to writing and a copy being -'supplied •to thepersou charged, and it then goes,on, to speak of a due mvestigotion: In that investigation . theoprmciples of ; . natural justice must be observedj and a fair oppdrtutiity be given to;the person ch'aiged- to be heard in his own defence.', FurtheriTthe' directors must act in good faith and. and probable cause.. ' Vihere^these conditions are satisfied;' i.e., (1) that the ' member' expelled has had-due ■ notice, -andean 1 opportunity-.of being heard ;(2) that there has been no want of good faith; (3) that there has been some cause which a reasonable ?m y.x°\ m, en ml, ght consi*r reasonable! (4) that the rules have been observed, then it. is'well'-established' by a Jong.series of authorities that the Court will not .interfere,, even though-it consitters that the committee or directors Kave ih fact come to a 'wrong conclu-'eioni'-r ■•' ■ .. ■ ■ ■■-.■■ : ■; ■■■

I v btys notjce' eeceived:' , ■' "Now, let. us take .these points one by one, and see whether any of them Jiaye not been'observed, always remembering that the onus is on the' plaintiff Iff establish this:—First, did the plain-; tiff receive due; notice and an onportUiuty of making his defence? . In my opinion he did. ; On 25th March, 1924, a ; letter whs written him enclosing a written copy of ..the\ charge and fairly notifying him tliat an inquiry would be held at 5 p.m. thy next day in pursuance of clause 23 of the articles.'Dur-" ing the afternoon of that day plaintiff was on the bowling green,.and although he had nbt then seen the letter, he wbb told that it had been forwarded, and informed of its" contents, and he then fully apprehended its purport arid importance for he said in answer to a-question* by me that he was aware of the' provisions of clause 23, and then began to see that the matter was being treated seriously. He therefore knew that the purport" of the letter Was to invite.him to attend the meeting on the investigation of a charge which might lead to his expulsion. '* "It is true that the notice was"short,; and if plaintiff had complained of this' and said that 1 he would not have time to prepare his defence, and had asked for further time, and the directors had nevertheless proceeded with the investigation m his absence, I-should have been very ready to-hold that he had not had a fair opportunity of making Ihb defence. But plaintiff writes on 26th j March acknowledging receipt of the let- I ter.. He .does not say lie has,not actually I received 'it,; and/that the"- time is too short, -but he unequivocally declines, to appear befoi'6" {he directors Cat all, on the ground that it would be unlbecom:ing to his dijjnitjj to do so. . It is quite clear from this .letter that ho was aware that, the •investigation- was with a view to consider his expulsion, because he not ojily- giVea' his evidence as; tb: the facts of, tlie. .occurrence which' )s-'"the- eubiect .6f; iEo charge-« but"■ 'asks' M\ a copy of all evidence: submitted toi the directorsIt .has been sUggestei thit; thie letter » vi Intuit io the director*. I conitu ■ ■ .■■■ \ ' ' ' \ ■ ■ .--.■••; ' . .'■ I

that I cannot agree with that, but it is a refusal to accept the opportunity giv•en him, and thereupon the directors iad no option but- to' probee'd in' his 'absence..

A FAIR OPPORTUNITY. "Then, it is Buguested on behalf of the plaintiff that the directors,' having taken tlie evidence iv "writing "of' four witnesses on the 22nd March, and one witness on the 24th March, were under a duty, upon plaintiff's refusal-to attend . on the 26th March ,to. summon .tlibsa,, five witnesses again, at that meeting, and go through the solemn and; useless formality of taking.their evidence again. I; regret that'l cannot agree with this contention., If plaintiff had attended the meeting and found that" the five witnesses were not there, and had asked ; for them to be produced so . that ha could question them in- the directors' presence, and the directors luid refused, t should have had no. difficulty in coming tp the conclusion that he had not had a fair opportunity of defending him'-'-' self, but when he refused ri6 "attend., aii * nil, the calling of those five, witnesses again to repeat their statements, would have been "of no assistance to the directors at all in making' their 'investigatidnM of .the: jiharge, and would' have:been a more-useless waste-of time:^ I hold,, therefore, that'plaintiff had a fair opportunity accorded him of being heard, but that he refused to avail himself of it, ...-.,.: \.-,.j.. ..; -.j. ,- o - ,'.„ QUESTION OF. GOOD -FAITH.- -1

; "Secondly.—Has there been a, want ■ of good faith on the part of .the.' directors? The burden of proving this lies on •plaintiff. He has*proved'that' eight' months before he wrote the'defendant' club. complaining about ' certain irregularities which he alleged were being; indulged m in their kitchen, and .that. 3io received a reply from the defendant's secretary, which was no doubt: penned, i with the approval of his directors,? strongly resenting his complaint, .and- ■ suggesting that he resign.' 'The Oiily ' evidence before me, however: as towhe"-' ther this incident swayed &£!&<!&{*■■ m coming to their-decision ,is ..that, of ' Mr. Potter, the then: president,.--who" . say* that he had forgotten this incident,-, and he swears ifwas not" mentioned bV' nny of the,directors. There were- six' directors, and the secretary, present atthe meetings of the 22nd, 24th, and 26thMarch, 1924,. when :this iijvestiKation' was made, _ an d they were unanimous -in their v decision. The t\vo directors who ' were absent also endorsed the action '<of the others Inter. ."The fact that eight 'months pre- \ vwusly,the-d'vectprs had obviously been angry about plaintiff's criticism of .their • conduct of the club's business is not, in my opinion, sufficient in itself to-justify me, in the absence of. any further cvi- ; dpnce, in imputing bad. fqithv.to the S9 : eight directors. If the cause upon which they purported to .act lind been in itself' absurd .or trivial, or unreasonable' that circumstance might have been sufficient in itself.,.tp show, want of-good faith, ■just as in actions for malicious prosecu- ' hon the absence of reasonable and-pro- ' bable cause is irf itself evidence from which malice may bo inferred, but I cannpt;say -that; the: directors had r no . pause in the evidence before them, and- ' this r brmgs;,m6 to. the: third point. PLAINTIFF "STARTED 'TROUBLE.^ ' , ; "Thirdly:: in considering this it is im.portant to see upon what evidenceVthV ...directors..came, to their decision. They had before them Ac written statements <of plaintiff .an* Mr. Hyams and that ' of four independent witnesses. These statements do. not closely ■■ tally,, and it ■would be obviously impossible among ■" their conflicts to arrivey at the exact truth as to what really occui-redi but it "■■ cIT i* o™. {I*m •the. -plaintiff first-' stared the,trouble by making a charga ■-■ lated. liis trousers. Whether this \vas a joke or not it must Jiave been clear ,to .every . O ne. that Hykms .did not so regard^iti and the weight' of levidenca before the 'directors, and upon which ' ..they .acted,--was,thatiit was..«. charos" " •made, without proof by an ahirrv ' ■man who first-pravoked Hyaws.into-clll. illSi jIlT> -^ damned liar, and then re-' .torted With 1, the same epithet, and-fol- ' ,lowed that. Up by assaulting him; and": , then calling him a nliserable jpimp., Sir.' Whittle's evidence Inade the- cliarca ■ much lighter, ::but:-the directors wete ■ e« vi c ' and indeed to consider \ all Ihe evidence, and upon it they, may r,well have come -in the conclusion that' 'it. established these facts. .It they did .;bo, then they;had a reasonable cause'for their action; in forfeiting plain- ■." tiffs share. It is true that Mfc.'Potter^ , said > that his motive in voting for es- : :pulsion was, 1 first; ■ because. he tefjispdi-' to attend and: his refusal, and the^temis • of his letters constituted a direct insult' to the directors, but he'also said that be considered his- conduct '^towards '■ Hyams seriously;-and 'that: was the,-fea^.; son why he was expelled. :• : ■' s

"THE QUESTION OF .COMPHAkGE;: ;! "Fourthly! The last question is whe-N ther the rules wer& strictly ■ complied ■'■>•' \vith. It is a condition precedent 4o the exercise, of a power of expulsion 1 that." the rules must be ■.■'strictly; complied with, and the cases "show ■ that-if th«c» rules ate not strictly complied .-'With',"" then notwithstanding that the mem- ■ ber expelled is riot prejudiced by that V * non-compliance 'the' expulsion is iliop- , erative.. In Labouchere v, Wharncliffe ' (13 Ch. D: 346) the rules provided; fb?' fourteen days' notice of the,meeting'be«v ing given, and, only, thirteen days' not- •■ H )ce 'was given. The was' 'not '■"" m the least-prejudiced by that, slight, , , non-compliance with the rules, as he at* ■'■.' .tended the meeting to defend himself, ■ but nevertheless it was held by 'Jessel, '*'.' Master of; the Roles, that the power ",)Vj|J , , not validly .exercised, and;an injunction '"J" waVgrarited. '„ ... ..'.'. •..:■.:.;.-,, ;.i.:.. 'yiule 23 (Wellington Bowling Club) ' provides: that where (the forfeiture of ,»!.; share;Ls iu,*juestipuVfoiriusooHduqtyf.thV,.. change" against the accused must in the first instance be submitted in writing;" to the directors by a shareholder,;,and » copy of such charge must be forthwith'■;■'■: ' transmitted to the shareholder acciisedli:A written ■ charge wasj in accordance' with the rule, submitted to the directors'on the 18th March, 1924.: ;A'.:c6l% of,' such charge was not transmitted to;the.*. plaintiff until the 25th March;'-1924j"" either 6, or 7 days later. In my opinionl ' this was nbt; a strict compliance wiui.the!''rules.: The grammatical.meaning of the . word 'forthwith' is /immediately.' '■ ■■ -!•■ • agree.that the word must"be used reaV sonably in accordance with'the, circuni- ; stance inwhichit is used, but- where air. ■ act which is required to be done 'forth-i-------with 1 can be . dorio . Without delay,;' 1, it:: : ought to be so done, and if not co doner is not done 'forthwith': see the. decision: >. of the -Court of Appeal in-ex parts' Lamb. In re Southern (19-ch.D..' IG9L ' Moreover,' before the directors,'trans- :, lmtted the written copy of the \charge, the minutes show-that they "had held three separate meetings' to consider the charge on the 19tli, the 22nd, and .24th ' March,; and at the last two meetings ■ they had taken evidence. ', They, tlierejtore, had ample opportunity, to' trans'-"' mit a, written copy of the rules at ail ■ earlier date than the 25th Mai-ch\: ' .-- ------■ "it is contended that this non-coni- ' pliance with the rules was waived by the plaintiff. I am of opinion: that this"- I is not so. In; the letter of tho; 20th : March,, which the secretary \yrt)te: the ;' /plaintiff,, there is :rio intimation '.wlial.': eyer, thatjhe: charge; was being., itivesti- -; undetvclause 23 of the. articles,''f .and,-therefore; no- fair; notice that's ?tlie:% meeting would.consider the 1 question of- - expulsion. Plaintiff, gays that he' did not realte* that thia was being aeric-wly '

considered until ■ tha afternoon of the 25th 'March, -when ho heard about the letter and a copy of the charge having been posted to him. There can be no ; waiver without knowledge. But even if plaintiff could have gathered from the letter of the 20th March that tho charge ' . was being considered under clause 23, < -still, m my opinion, there 13 no - e-\ idence to show that he agreed to waive a strict compliance with the rules. This point was raised in Labouchere v. Wharncliffe (13 Ch.D. 346). In that case there was a hon-comjjliance; with the rules in calling the meeting, thirteen days' notice having 1 been given instead of the requisite fourteen days. The plaintiff attended the meeting, But, according to the evidence,* did -not take ■' any objection to the 'proceedings' on the - ,' score of the insufficiency of "the' notice. - ' It was .contended that this amounted to n -waiver' of the irregularity,' but Jessel M.R. rejected; .this contention. Plaintiff in this ciise on the '25th;'. March wiote the senetary'asking for a written copy .of tlia charge, but .he was not bound to claim that-a breach of the*rules had-already bo'en (committed, by it not having been'transmitted to'him-six days earlier," and tho fact'that, he did'riot so :; claim cannot, in my'opinion',' be' held to be a waiver o£ that breach. *„ "It vtas "also contended that ( .the_ diTectovs when -they* first met,, to consider, Mr. Hyams' complaint, were 'not acting under clause 23, and that they only ae-. termihed, to act under this clause at their meeting on the 24th March, after having taW'.the^Viacn^sr'fomjwit^ nesses, but in my opinion the evidence clearly shows that they, met on the 19th, i March to consider the, complaint under 1 tho powersVgh'cir to thenl by clause 23 of t^e' articles, and it was then that . A they -should have seen 'that written copy *of'the charge was transmitted 'to plaintiff... ' ; " "As."there has no^ been a strict;. oV even—ji; substantial compliance 'with^tlie ' rules,''tlio" puipoi'ted expulsion'is;' in' my opinion, invalid. • : LEGAL POINT/U..NDECIDED. , "Having coma to'this conclusion," it is, in my opinion,' 'unnecessary to consider the question .whether,'clause 23 of ■' the articles is ultra vires-of the■ com- I

pany. Plaintiff claims alternately that it is, but defendant denies this, and v claims that the^ clause is intra vires and, valid. Were it necessary to decide the

point I should be disposed to agree that I" t such an 'article is valid in the case of a lion-trading company, whose members cannot hold mor'= than one share, and t which, though in form a company, is in • substance, nothing more than a bowling j club. • % Ifc is, 1 however, as" I have intimated, unnecessary to decide this ques- \ tion. "The point upon which I have decided this case has not been explicitly- raised in_ the pleadings, although it was explicitly raised in his solicitor's letter to the defendant's 'secretary on tho 27th March. If necessary I shall give leave to amend the pleadings to include this claim, as the defendant has had fair > ' notice of it.

"The plaintiff is, in my opinion, en- , titled to an injunction to restrain the _ defendant company from acting on its directors' resolution.' No evidence was given of any damages, but as a right of property has been invaded the plaintiff js entitled to nominal damages, which I ,' • fix at £1. / "As to the costs, I think they should be awarded to plaintiff on the 'lowest scale, but on this point, if necessary I i am willing to hear the parties." ! At the hearing Mr. A. W. Blair represented plaintiff, and Mr. M. Myers, X.0., and Mr. S. A. Wiren,.the club."