The Relationship between Society Committees and General Meetings

The hierarchy of authority in a society

In my opinion, the highest authority within any society is that exercised by the members in general meeting. A society’s committee, in principle, must be always subservient and accountable to the membership at large through general meetings of members. This point is illustrated by a statement in the judgment in Re South British Insurance Co Ltd (1980) 1 BCR 286 at 288, a decision involving companies (the quotation being 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 [committee] 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 committee].

That statement refers specifically to the importance of an annual general meeting, but the same principle must equally apply also to special general meetings.

Management of a society between annual general meetings

The decision in Finnigan v New Zealand Rugby Football Union Inc [1985] 2 NZLR 159 at 166 (the Chief Justice’s decision on this point being upheld by the Court of Appeal, at 177) cited with approval a statement from Halsbury’s Laws of England (4th ed) that “Where under the rules of a registered society the control of its business is vested in the committee of management, the members of the society in general meeting cannot exercise that control.”

While that proposition is clearly correct, in my view it does not recognise that the proposition may be stated rather too broadly:

  • A general meeting of members may replace the committee – The ability of society members under a constitution to call a special general meeting has been described as a “superior right” and “safeguard to members against executives and/or members of council who are out-of-step with the membership” (Schweikert v Burnell [1963] NSWR 821 at 825, ll 40-48, quoted with approval in Buckley v Davis [1994] TASSC 1 (Supreme Court of Tasmania) at para 10). Accordingly, despite the usual constitutional provisions for elections at annual general meetings, a special general meeting to declare vacant all offices and to hold elections may be validly held (see Schweikert v Burnell, with, in effect, the same result being achieved in Barrett v Te Runanga O Ngati Pu Inc [2002] NZAR 296 (HC), without reference to Schweikert). In Barrett, a chairperson originally assumed office informally, with his position regularised at an inaugural annual general meeting. Subsequently unhappy members requisitioned for a special general meeting (the requirements for notice of which were not properly met, in part because of the refusal of the secretary to advertise the meeting and notify members of it), and the chairperson was removed at that meeting by an overwhelming majority. The removed chairperson commenced judicial review proceedings challenging the lawfulness of the meeting. The High Court held that the internal management rule applied to incorporated societies and cured the non-compliance (applying Foss v Harbottle (1843) 2 Hare 461, Turner v Pickering [1976] 1 NZLR 129 and Finnigan v New Zealand Rugby Football Union Inc [1985] 2 NZLR 159).
  • A general meeting may disagree with the committee – Despite the Finnigan decision, where members disagree with decisions made by a society’s committee there seems to me to be no reason in principle why a general meeting cannot over-ride a committee’s decision (especially as a general meeting may, alternatively, replace the committee), but that specific issue has yet to come before a court for decision.
  • A general meeting may ratify committee decisions – It is clear that a general meeting of members can ratify the previous ultra vires act of its committee (a conclusion based on a Privy Council decision in a company case, Irvine v Union Bank of Australia (1877) 2 App Cas 366). However, the Court of Appeal in Stratford Racing Club Inc v Adlam [2008] NZAR 329 stated that “The members in general meeting cannot approve or ratify an act contrary to the society’s objects” (para [27]). Whether members can validate or ratify a committee’s breach of other rules of their society remains undecided, although there is a body of case law on the ratification of the acts of company directors and the extent of the statutory power of ratification by shareholders of certain acts of company directors pursuant to s. 177, Companies Act 1993. That indicates that the nature of the act which to be ratified is relevant – for instance, misappropriation and failure to act in the best interests of a company cannot be ratified. If ratification does not involve ratifying an act contrary to the society’s objects or fraudulent activity and if a significant majority of both the voting and of the entire membership ratify a committee’s actions, a court in its discretion would, in my view, be likely to uphold that ratification.

Putting the issue beyond doubt

The relationship between the members in general meeting and a society’s committee needs to be clearly understood, as some members of committees act as if they are laws unto themselves. This can, unfortunately, become part of the culture of a society, but should not, as the committee must always be subservient and accountable to the membership at large through general meetings of members.

It is desirable that the rules clearly articulate the role, powers, and procedures of the committee between the annual general meetings of a society. A well-drawn set of society rules will define the respective rights of the society’s members and committee, and the relationship between a society’s committee and General Meetings 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.