Trouble at the Courts – anyone for tennis?

Anyone for tennis?

Just before the out-of-town bach owners and holidaymakers increased the population of Pauanui on the Coromandel Peninsula for the Christmas holidays, on 16 December last year, the High Court in Hamilton issued a judgment in Reeves & Hartstone v Pauanui Sports and Recreational Club Inc (CIV-2010-419-1599). The decision made no new law and is not otherwise greatly noteworthy (other than for those who own property at Pauanui or enjoy its facilities), but it highlights a number of points about the operation of community organisations and what can be done when things go wrong.

Pauanui Sports and Recreational Club Inc

The society, with a membership of between 1,400 and 1,500, is well-established, and its purposes are to foster sporting, recreational and cultural activities at Pauanui. The society owned a number of properties there, and proposed to sell its tennis courts at Gallagher Park Lane to fund refurbishment of its principal building elsewhere, alleging that the tennis courts were under-utilised, in poor repair, and subject to vandalism. The plaintiffs opposed the sale, asserting that the tennis courts were an important, well-used facility.

The power of an interim injunction

As is common, the High Court proceedings were prompted by the Society’s proposed actions, and an urgent hearing was required because a tender for the sale of the tennis courts was to close on 17 December, the day after the hearing. The Court was satisfied that the society’s processes were defective and an interim injunction was granted to stop the tender process. The Court, of course did not consider the merits of the arguments about whether or not the land should be sold, just the problems about meeting processes. The issue could still be raised again at a later validly called meeting.

Defects in calling a general meeting – notice to the members

The society called a general meeting of members to approve the proposed sale of the tennis courts land. The rules provided that notice of such meetings was to be sent to members 21 clear days before the meeting. Approximately 10% of the notices were sent late because the society did not have complete or accurate addresses for all members.
Lesson 1: Section 22, Incorporated Societies Act 1908, requires a society to maintain a register of containing the names, addresses, and occupations of members, and the dates they became members. The failure to do so contributed to the late notice to many members.
Lesson 2: If rules require a certain period of notice to be given to members, failure to comply may (as here) result in the meeting being treated as being invalid. A rule covering minor notice discrepancies was not considered to redeem the problem.

Alleged misrepresentation of facts to the members

While their complaints were not upheld, the plaintiffs claimed that the requisite majority to approve the sale of the tennis courts and the basic facts justifying their sale had been misrepresented to the members in the explanatory memorandum sent with the notice of meeting.
Lesson 3: Those calling meetings must be conscious of their legal obligation adequately to disclose the purpose of the meeting so ordinary members may fairly understand what the meeting is about.

Alleged procedural unfairness

The plaintiffs complained that the meeting chairman unfairly curtailed debate by preventing speakers from speaking after an hour of debate, and asserted that scrutineers were appointed without approval of the meeting. The Court did not uphold these arguments.
Lesson 4: A chairperson is entitled to limit the length and number of speeches, as long as a fair and sufficient opportunity is given to members to present different and opposing points of view. Unless the rules provide otherwise, a chairperson has a discretion to appoint scrutineers.

Democracy or apathy in action?

As mentioned at the beginning of this article, the Pauanui Sports and Recreational Club had between 1,400 and 1,500 members. The rules provided that just 50 members (about 3.5% of the members) constituted a quorum for general meetings, or 100 members (about 7% of the members) where a sale or lease of club land was proposed. The decisions being challenged had been made at a meeting at which 170 members were present in person, 10 by proxy, and where there were 255 postal votes. Those involved in some way in making the decision constituted only about a third of the membership. If members cannot be bothered attending meetings, societies end up with a pathetically small quorum requirement in their rules, otherwise meetings cannot be validly held. That means the decisions are commonly made by a small minority of the membership – which is not a good example of democracy in action.
Lesson 5: If members cannot be bothered attending meetings, they cannot be surprised if their society becomes moribund or dysfunctional. The future of a society is (or should be) in the hands of its members.

Lesson 6: Societies depend on volunteers, and sometimes they get things wrong

If you search “everybody, somebody, anybody, and nobody” on Google you will get close to a million hits, many for versions of a story by that famous author of profound truths, Anon. There is also poem by Charles Osgood reminding us of our communal responsibilities:

There was a most important job that needed to be done,
And no reason NOT to do it, there was absolutely none.
But in vital matters such as this the thing you have to ask,
is WHO exactly will it be who’ll carry out this task.
ANYBODY could have told you that EVERYBODY knew,
that this was something SOMEBODY would surely have to do.
NOBODY was unwilling, ANYBODY had the ability,
but NOBODY thought he was supposed to be the one.
It seemed to be a job that ANYBODY could have done,
If ANYBODY thought he was supposed to be the one.
But since EVERYBODY recognised that ANYBODY could,
EVERYBODY took for granted that SOMEBODY would.
But NOBODY told ANYBODY that we are aware of,
That he would be in charge of seeing it was taken care of.
And NOBODY took it on himself to follow through and DO,
What EVERYBODY thought that SOMEBODY would do.

Voluntary organisations depend on volunteers – the “somebodies” who get things done, as best they can. Those “somebodies” are all too often never thanked for a job well-done, taken for granted, criticised for not doing jobs no-one else volunteers to do, while everyone forgets that they do other things in their lives. If somebody is treated like this, can anybody be surprised when nobody volunteers? Everybody is capable of at least saying “thanks” to somebody who volunteers, and anybody could step into the breach to help when somebody cannot (or forgets to) do a job.

 

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.