L CHAN V THE SEYIP ASSOCIATION OF NEW ZEALAND INCORPORATED HC WN CIV-2006-485-558

L CHAN V THE SEYIP ASSOCIATION OF NEW ZEALAND INCORPORATED HC WN CIV-2006-485-558 18 October 2007IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV-2006-485-558UNDER The Judicature Amendment Act 1972 and under the Rules of the Seyip Association of New Zealand IncorporatedIN THE MATTER OF the Incorporated Societies Act 1908BETWEEN L CHANPlaintiff AND THE SEYIP ASSOCIATION OF NEW ZEALAND INCORPORATEDDefendant Hearing: 10 October 2007 Appearances: K Lakshman - Applicant PSJ Withnall - Respondent H Dempster - The Registrar of Incorporated Societies Judgment: 18 October 2007 at 3.00 pmJUDGMENT OF ASSOCIATE JUDGE D.I. GENDALLThis judgment was delivered by Associate Judge Gendall on 18 October 2007 at 3.00 p.m. pursuant to r 540(4) of the High Court Rules 1985.Solicitors: Lower Hutt Law Centre, PO Box 30619, Lower Hutt S. Dyhrberg, PO Box 10911, Wellington H Dempster, Crown Law Office, PO Box 2858, Wellington CentralINTRODUCTION[1] On 18 July 2007 the plaintiff filed an application to join the Registrar of Incorporated Societies as a second defendant to this proceeding pursuant to rules 8 and 97 High Court Rules. This application was opposed by the Registrar of Incorporated Societies ("the Registrar").BACKGROUND FACTS[2] The defendant is a duly incorporated society registered under the Incorporated Societies Act 1908 having been incorporated in 1949. The plaintiff is a member of the defendant society. [3] The essential complaint made by the plaintiff in this proceeding is that for approximately the last 20 years a small group of men has controlled the affairs of the defendant association and run them, it is said, as if the defendant were their private club. The claim is that they have done this without regard to the interests of all the members of the defendant association who live in different parts of New Zealand and in disregard of the defendant's constitution and the provisions of the Incorporated Societies Act 1908. By way of example, it is said that the defendant has not followed the law and its constitution in a number of ways including: a) A failure to hold proper Annual General Meetings since 1986. b) A failure to have proper elections at those Annual General Meetings also since 1986. c) A failure to validly pass a motion amending the constitution of the defendant. d) A decision taken to wrongly register the amendment to the defendant's constitution with the Registrar. e) A failure to have the accounts of the defendant properly prepared and audited and failing to present them to the Annual General Meeting forapproval since 1986, and further, a failure to inform members of the defendant that a bank mortgage over its assets remained undischarged and that an agreement to mortgage to other parties had been entered into. f) A decision taken to wrongly transfer the sum of $18,000.00 to a "Social Club" account set up by the individuals in question. [4] The present proceeding originally took the form of an Application for Judicial Review under the Judicature Amendment Act 1972. It appears, however, that it may really have related to matters which were pleaded as breaches of contract on the part of the defendant. [5] On 16 July 2007 the plaintiff purported to file an amended statement of claim which named the Registrar as second defendant. It is this amended statement of claim which is currently before the Court and is effectively the subject of the present joinder application. [6] This amended statement of claim makes allegations against the Registrar. I leave aside at this point the question whether the amended statement of claim ought to have been filed or accepted for filing given that at this point no order has been made to join the Registrar to this proceedings – Kirkland v Jaco's Timber Company Limited Unreported High Court Dunedin CP45/97 1 May 1998.[7] In so far as the allegations against the Registrar in the amended statement of claim are concerned, however, before me Mr Lakshman for the plaintiff conceded that a number of these allegations could not stand nor could they be the subject of a Judicial Review Application. [8] This in effect left only one allegation outstanding against the Registrar. This was outlined in paragraphs 18-21 of the amended statement of claim which reads:"18. On or about 30 January 1997 the First defendant, acting through the said Messrs Vernon Chan and Ken Chan and through Mr DannyLouie, registered a notice of amendment to the rules with the second defendant (the Registrar) which purported to add a new clause to Rule 5 as follows: 'The Executive Committee shall manage the affairs of the Association and may exercise all the powers of the Association except for those required to be exercised by a General Meeting.' 19. The said notice of amendment is of no effect and its registration constitutes a breach of the contract between the first defendant and the plaintiff because the amendment was not, as required by Rule 11, passed by at least nine members of an Executive Committee which had been duly elected pursuant to Rules 7, 5 and 8. 20. The second defendant, in purporting to register the purported amendment of Rule 5, was exercising a statutory power of decision under Section 2 of the Judicicature Amendment Act 1972 ("the 1972 Act"). 21. Because the amendment was not made in accordance with the rules of the first defendant, the second defendant had no power to register the purported amendment and registered the purported amendment under a mistake of fact."COUNSELS' ARGUMENTS AND MY DECISION[9] The present application is made pursuant to Rule 97 High Court Rules which states:"Striking Out and Adding PartiesThe Court may at any stage of a proceeding, either upon or without the application of any party, and on such terms as appear to the Court to be just, order –a) That the name of any party, whether as plaintiff or as defendant, when improperly or mistakenly joined be struck out. b) That the name of any person who ought to have been joined, or whose presence before the Court may be necessary to enable the Court effectually and completely to adjudicate upon and settle all questions involved in the proceeding be added, whether as plaintiff or defendant. .[10] Joinder under the Judicature Amendment Act 1972 is dealt with under Section 10 of that Act. Notwithstanding this, however, the plaintiff relies on rule 97 in its present application. [11] In setting out the current approach to Rule 97 applications, McGechan on Procedure at para HR97.05 states:"HR97.05 Current ApproachThe object of the rules is to provide for the inclusion of necessary parties, rather than to enable judgment to be obtained in the absence of necessary parties. In Minister of Education v DeLuxe Motor Services (1972) Limited [1990] 1NZLR27 (CA), the Court of Appeal, holding that necessary parties had not been joined, vacated part of the judgment under appeal and remitted the case to the High Court for joinder and rehearing. See also Performing Rights Society v London Theatre of Varieties Ltd ([1924] AC1 at page 14. The rules are to be construed with Rules 73, 74(3) at least, and probably the whole of Rule 74. The current approach in New Zealand to joinder is liberal. In Westfield Freezing Company Limited v Sayer & Co (NZ) Limited [1972] NZLR137 (CA), at page 143, a local plaintiff company was permitted to join both its overseas parent as an additional plaintiff and the overseas parent of the local defendant as a further defendant. "[12] As McGechan on Procedure notes, the New Zealand Courts approach to joinder is a liberal one. As an example, in Taranaki Farmers Meat CompanyLimited v Morgan [1925] NZLR513 (CA), the joinder of 113 plaintiffs alleging misrepresentation and consequent right to rescind contracts to take shares was permitted. This liberal approach was also endorsed in Technic Bitumen Pacific Ltd v Shell NZ Ltd 3 December 1999 High Court Wellington, Master Thompson CP192/99. See also Mainzeal Corporation Limited v Contractors Bonding Limited(1989) 2PRNZ47. [13] In the plaintiff's amended statement of claim as I have noted he makes a number of complaints about the defendant's failure to discharge its statutory obligations. The plaintiff contends that before commencing this proceeding he requested the Registrar to intervene with respect to the matters of which he complained, but he refused. [14] The plaintiff submits that it is appropriate to join the Registrar here as he ought to have been joined to enable the Court effectually and completely to adjudicate upon and settle all the issues in the current proceeding because the alleged breaches of the Incorporated Societies Act 1908 by the defendant it is said involve matters in which the Registrar has a statutory interest. [15] That said, before me as I have noted, Mr Lakshman, for the plaintiff acknowledged that a number of the allegations in the amended statement of claim could not justify the joinder of the Registrar either in the sense of judicial review of his actions or otherwise. [16] This left the one remaining allegation against him noted at paragraph [8] above. This allegation concerned section 21 of the Incorporated Societies Act 1908 and related to what was said to be his decision to accept for registration an amendment to the rules of the defendant Association. [17] The relevant parts of section 21 Incorporated Societies Act 1908 provide:"21. ALTERATION OF RULES1. A society may from time to time alter its rules in manner provided by the said rules, subject to the provisions of this Act.2. Every alteration of the rules must be – a) in writing; and b) signed by at least 3 members of the society; and c) delivered to the Registrar accompanied by a certificate by an officer of the society or a solicitor certifying that the alteration has been made in accordance with the rules. 3. The Registrar, if satisfied that the alteration has been duly made, and that the rules as so altered conform in all respects to this Act, shall register the alteration in like manner as in the case of the original rules, and the said alteration shall thereupon take effect according to the tenor thereof. Such registration shall be conclusive evidence that all conditions precedent to the making of the alteration, or to the registration thereof, have been duly fulfilled. 3A. Notwithstanding anything in subsection (3) of this section, the High Court, on an application made to it by any member of the society, may in its discretion, if it is satisfied that any such condition as aforesaid has not been duly fulfilled, declare the alteration to be void in whole or in part, and order that the registration be cancelled in whole or in part, ."[18] As I understand the plaintiff's pleading in paragraphs 20 and 21 of his Amended Statement of Claim (noted at paragraph [8] above) he contends that the Registrar in purporting to register the amendment to Rule 5 of the defendant's constitution was exercising a statutory power of decision under section 2 of the Judicature Amendment Act 1972 and as the amendment, it is said, was not made in accordance with the defendant's rules, the Registrar had no power to register that amendment and it was registered under a mistaken fact. [19] In my view, however, these contentions are somewhat wide of the mark. They ignore the provisions of section 21(3A) Incorporated Societies Act 1908 noted at paragraph [17] above.[20] As I see the position, section 21 Incorporated Societies Act 1908 provides a clear administrative procedure for a society to amend its rules. Section 21(3) requires the Registrar to register an alteration to the rules if he is satisfied that the alteration has been duly made and that the rules as so altered conform in all respects to the Incorporated Societies Act 1908. If satisfied on these matters the Registrar must register the amendments. [21] Before me, Counsel referred to the decision on Bouzaid v Horowhenua Indoor Bowls Centre Inc. [1964] NZLR187. That case in many ways similar to the present situation before the Court, was decided in terms of section 21(3) Incorporated Societies Act 1908. In Bouzaid the plaintiffs issued proceedings for injunctions and declarations to set aside an alteration to the rules of the defendant society which had been registered with the Registrar. The Court in that case concluded that it could not go behind the certificate of the Registrar that all conditions precedent to the making of the alteration to the rules of the defendant society and to its registration had been duly fulfilled. The plaintiffs' claim failed. [22] As a result, it seems that section 21(3A) Incorporated Societies Act 1908 was enacted in 1971. As I have noted, this subsection provides that the High Court on an application by a member of a Society may in its discretion if it is satisfied that the Registrar has not properly accepted for registration any alteration to the rules of a society, declare the alteration to be void in whole or in part. The Court may then order the registration be cancelled in whole or in part and on delivery to the Registrar of a sealed copy of the order the Registrar is to amend the register accordingly. [23] Before me, Counsel for the defendant argued that section 21(3A) was designed specifically to deal with the complaint made by the plaintiff here concerning the amendment to the defendant's rules. Further, he contended that it is not a section that could possibly be capable of judicial review. Section 21(3A) does give the Court (not the Registrar) an ability to go beyond the documents provided to support an amendment to a society's rules to see if the rule change was properly made. This subsection provides in effect an appeal against a decision of the Registrar to accept an amendment for registration. It is a provision for attacking theoutcome of that decision and not the process reached by the Registrar in reaching the decision. [24] Counsel for the defendant therefore contends that the presence of section 21(3A) provides the proper means for considering a registered amendment to the Society's rules and this is not capable of judicial review. And as the plaintiff's present application to join the Registrar relates solely to this section 21(3) decision, the proper process to be adopted is for an application to this Court to be made under section 21(3A) to cancel registration of the amendment rather than any attempt to judicially review the Registrar's decision. [25] In my view there is substance in these contentions. In terms of Rule 97 High Court Rules to succeed in his present application the plaintiff must show that the presence of the Registrar before the Court is necessary to enable the Court effectually and completely to adjudicate upon and settle all questions involved in the present proceedings. [26] In my view the appropriate course for the plaintiff here is to make an application under section 21(3A) Incorporated Societies Act 1908 and this has not occurred. [27] That said, it necessarily follows that at this point the present application to join the Registrar to this proceeding must fail.CONCLUSION[28] The plaintiff's joinder application therefore is dismissed. [29] Further time tabling directions to progress this matter are required. The following directions are now made: a) The plaintiff is to have a period of 20 working days from the date of this judgment to file and serve any amended statement of claim in this proceeding he may wish to and to file and serve any application to theCourt in terms of section 21(3A) Incorporated Societies Act 1908 and supporting affidavit(s). b) The defendants are to have a period of 40 working days from the date of this judgment to file and serve statements of defence to the amended statement of claim and their opposition (and supporting affidavit(s)) to any application under section 21(3A) Incorporated Societies Act 1908 which may have been filed. c) This matter is then to be the subject of a Directions Telephone Conference before me at 9.30 am on 18 December 2007 to review the position and amongst other things to consider any discovery issues which may remain. [30] As to costs on the present application, if they are in issue between the parties and Counsel are unable to resolve that matter between themselves then memoranda may be filed sequentially on this issue and in the absence of either party indicating that they wish to be heard on the matter I will decide the question of costs on the basis of the material filed.'Associate Judge D.I.Gendall'