Committees and the Power of Society Members

What is the issue?

A question reasonably frequently asked of me is whether a general meeting of members can over-rule decisions of a society’s executive committee or direct the committee to do something.  Such questions are not capable of a definite answer, and before trying to respond to them I always look at the society’s constitution which may or may not provide an answer (as the relationship between the executive and a general meeting may be prescribed in the constitution).

General principles

There are some relevant general legal principles, covered in my Law of Societies text (footnotes are omitted, but case references are inserted):

6.2.3      General meetings of a society and its executive

The relationship between the members in general meeting and the executive needs to be clearly understood, as some members of an executive act as if they are laws unto themselves. This can, unfortunately, become part of the culture of a society, but should not, as the executive must always be subservient and accountable to the membership at large through general meetings of members. This point is illustrated by [a] decision involving companies [Re South British Insurance Co Ltd (1980) 1 BCR 286 at 288] — with the quotation adapted to societies:

An annual meeting of the [members of a society] is an important event. Not only is there a statutory obligation on the [society] to call such a meeting, it contracts with its [members] by its [rules] that it will do so. It is the one occasion in the year when the [members] have a right to meet the [executive] and to question them on the [society’s] accounts, the [officers’ or executive’s reports], and the [society’s] position and prospects. In addition they have a right to vote on, and if appropriate discuss . . . the election of [the executive].

6.2.4      Executive accountability

The executive of a society is accountable to the membership for its management and administration of the affairs of a society, primarily through general meetings of members. …

8.1         Authority of general meetings
8.1.1      Overriding authority

General meetings of the members of a society, and the meetings of trustees of a trust, are ultimately more important than any meetings of any executive or the actions of any of the entity’s officers.

8.1.2      Critical functions

General meetings of a society and meetings of trustees set the policy of the entity, but general meetings of a society have other critical functions:

    • At the annual general meeting the executive is specifically accountable to the general membership for its stewardship over the previous year, and may be held to account at any special general meeting
    • Any challenge to the officers or executive is resolved in a general meeting.

Constitutional provisions

There may be provisions in a constitution expressly or inferentially indicating whether or not a general meeting can make decisions binding on the executive:

  • A rule giving the executive power to govern and exercise the society’s powers might be argued to permit the executive to make decisions that cannot be challenged, but such a result seems to me to be wrong in principle.
  • A rule empowering a general meeting to remove a member or members of an executive can be argued to indicate that a less drastic decision (over-ruling the executive) should be lawful.
  • A rule may provide that an executive may make decisions on issues not covered in the constitution unless a general meeting sets the decision aside.  Such a rule could be interpreted as confirming the general proposition that an executive’s decisions are always subject to reversal by a general meeting, or as confirming that the executive can make binding decisions where an issue is not provided unless the constitution provides otherwise.

Where there is no power to remove a committee or some of its members, the Law of Societies text suggests the following at 6.11.2 (again, relevant footnotes are inserted in square brackets):

Even where there is no express power of removal, it is commonly assumed that a motion of no confidence once passed removes an officer.  [The assumption may derive from the parliamentary convention that the passing of a motion of no confidence in a government will lead to the resignation of the government.  For example, see Swan v Massey University Students’ Association [1972] NZLR 985 where it seems to have been assumed that a resolution of no confidence had the effect of removing a president of a society; and see the obiter comments in Booth v Arnold [1895] 1 QB 571 at 579 (CA) in relation to a company.]  That assumption is often acted on, with the officer resigning. The literal wording of such a resolution, for example, “That this society has no confidence in the president”, does not actually direct the removal.  Rather than use the time-honoured but, on analysis, meaningless form of words, it would be better to move, “That the president be invited to resign from office”.

 Before a statutory power of removal of company directors was incorporated into company law, in the late nineteenth century the English Court of Appeal held that directors could not be removed unless a company’s constitution contained such a power.  [Imperial Hydropathic Hotel Co Ltd, Blackpool v Hampson (1882) 23 Ch D 1 (CA), one judge observing that where there was no power of removal those seeking such removal could first change the company’s constitution and then seek the desired removal.]  There is no statutory power to remove a society’s executive, which means that for societies, logic similar to that which led the English Court of Appeal to its decision could be applied in New Zealand.  However, the contrary argument is that this English decision should not be applied here as it fails to recognise the primacy of general meetings of members.

Conclusion

As indicated in the final quotation above, my view is that, in the absence of clear constitutional provisions to the contrary, an executive is always subject to decisions of members in a general meeting as a society ultimately exists to serve the members generally.  If that is not correct, then members could simply change the constitution and give themselves express power to remove their committee if they consider that to be in the best interests of the society.

This is one of a series of articles on societies and charitable trusts (originally published in the NZ Lawyer magazine) by Mark von Dadelszen, a Hastings lawyer and author of Law of Societies, 3rd Edition, 2013. If any reader has examples of issues that have arisen or questions about societies or charitable trusts that might be a suitable subject for one of these articles please contact Mark at mark.vondadelszen@bvond.co.nz.