CULLEN V OTAHUHU ROVERS RUGBY LEAGUE FOOTBALL CLUB INCORPORATED HC AK CIV-2011-404-005266

CULLEN V OTAHUHU ROVERS RUGBY LEAGUE FOOTBALL CLUB INCORPORATED HC AK CIV- 2011-404-005266 17 November 2011IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2011-404-005266UNDER the Incorporated Societies Act 1908IN THE MATTER OF an application for the appointment of aliquidator under s 26BETWEEN RHYS MICHAEL CULLENPlaintiffAND OTAHUHU ROVERS RUGBY LEAGUEFOOTBALL CLUB INCORPORATEDDefendantHearing: 2 November 2011Appearances: R M Cullen in personR Dellow for DefendantJudgment: 17 November 2011 at 2:30 PMRESERVED JUDGMENT OF WOOLFORD JThis judgment was delivered by me on Thursday, 17 November 2011 at 2:30 pmpursuant to r 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors: Rennie Cox, PO Box 6647, AucklandCounsel: R Dellow, PO Box 3897, Shortland Street, Auckland 1140Copy to: R M Cullen, 99 Huia Road, Otahuhu, AucklandIntroduction[1] Mr Cullen has filed an application under the Incorporated Societies Act 1908 (the Act) for the Otahuhu Rovers Rugby League Football Club Inc. (the Club) to be put into liquidation on the basis that it is unable to pay its debts.[2] The application is opposed by the Club, not only on substantive basis, but also on a procedural basis. It submits that the plaintiff has no standing under s 26(1) of the Act to bring the application because he is neither a member nor a creditor of the Club.[3] The application was called in the Duty Judge List on 2 November 2011 and I heard argument only on the standing of the plaintiff to bring the application.[4] Section 25 of the Act provides:25 High Court may put society into liquidationA society may be put into liquidation by the appointment by the High Court as liquidator of a named person or of an Official Assignee for a named district under the following circumstances, that is to say:(a) If the society suspends its operations for the space of a year; or(b) If the members of the society are reduced in number to less than 15; or(c) If the society is unable to pay its debts; or(d) If the society carries on any operation whereby any member makes any pecuniary gain contrary to the provisions of this Act; or(e) If the High Court or a Judge thereof is of the opinion that it is just and equitable that the society should be put into liquidation.[5] Section 26 of the Act provides:26 Application to Court to appoint liquidator(1) Any application to the High Court for the appointment of a liquidator of a society shall be made by the society or by a member or by a creditor or by the Registrar.(2) All costs incurred by the Registrar in making an application shall, unless the Court or a Judge thereof otherwise orders, be a first charge on the assets of the society.(3) Subject to this Act and to any regulations made under it, Parts 16and 17 of the Companies Act 1993 shall apply, with such modifications as may be necessary,—(a) To the application for the appointment of a liquidator as if the application was an application under section 241(2)(c) of that Act; and(b) To the liquidation as if the liquidator had been appointed under section 241(2)(c) of that Act.[6] Section 26(1) is clear on its face. I am satisfied that, on its proper reading and also by reference to the equivalent procedure in s 241(2)(c) of the Companies Act 1993, s 26(1) sets out an exclusive list of potential applicants. The Club itself can bring liquidation proceedings as can the Registrar of Incorporated Societies. The only other persons able to make an application are a member or a creditor. The crucial issue for determination is therefore whether Mr Cullen is a member or a creditor of the Club.Factual background[7] Mr Cullen was Club treasurer from November 2010 to April 2011. The Club committee took action to remove Mr Cullen from his role as Treasurer after it is alleged that he was unable to properly account for $3,450 of Club funds, which were paid to him when he cashed a Club cheque on 7 April 2011.[8] A meeting of the Club committee was held on 17 April 2011. Mr Cullen was present at the meeting. He was asked for an explanation. After hearing his explanation the Chairman told Mr Cullen that he had two choices – either resign orbe sacked. Mr Cullen is recorded as saying ―I will resign. He was told that hisresignation was accepted and it was effective immediately.[9] Two days later, on 19 April 2011, Mr Cullen emailed the Club Chairman stating ―I am unable to continue as club treasurer and hereby tender my resignation.[10] The Club committee met again on 20 April 2011. The minutes of that meeting record:6. Email. R Cullen: Resignation tabled and accepted by Committee.Mr Tooman: As he was asked to resign don't we have to vote him off as a Member as well, he's just as likely to turn up to the AGMWe should do as Doug said and take a trespass order out on him. Discussion Ensued, Constitution has to be followed.Mark Walker moved that the Committee cancel Mr. Cullen membership to the club immediately.Mr. Tooman seconded. Carried unanimously 7-0 for.(Mrs. Dumper did not vote as not on Committee)Letter to be sent.[11] The Club Chairman then sent a letter to Mr Cullen at 99 Huia Road, Otahuhu advising him of the committee's decision to cancel his membership. He annexes a copy of the letter to his affidavit.[12] A month later, on 20 June 2011, Tamaki Sports Academy Limited, of which Mr Cullen is the sole director, tendered an invoice for $4,830 to the Club in relation to the delivery of 2011 phone books in the Otahuhu and Papakura areas. Seven days later, on 27 June 2011, Mr Cullen served a statutory demand on the Club under s 289 of the Companies Act 1993 by taping it together with a copy of the invoice to the doors of the Club rooms.[13] Although an application was not made to the High Court to set aside the statutory demand, the debt was disputed and the Club went to the Disputes Tribunal about the matter. By order dated 7 October 2011 the Tribunal directed that the Club was not liable to Tamaki Sports Academy Ltd for the sum of $4,830, being the amount claimed following delivery of the 2011 phone books. The Disputes Tribunal found that Mr Cullen and his company were not entitled to invoice the Club for the delivery of the phone books.Submissions[14] As to the Club's submission that he is no longer a member of the Club,Mr Cullen points to various procedural errors in the process. First of all, he refers tothe Club's constitution, Clause 4 of which is entitled ―Cessation of Membership or Removal from any Position of Management. It provides:4 CESSATION OF MEMBERSHIP OR REMOVAL FROM ANY POSITION OF MANAGEMENTa) Persons shall cease to be members on their written resignation, or on the passing of a decision of the Management Committee that they shall cease to be members through failure to pay dues, expulsion or otherwiseb) The Management Committee by majority decision shall have the power and authority to suspend or disqualify for such terms as it thinks fit, or remove from membership any member for misconduct which in there [sic] opinion would bring discredit on the club, provided such member shall have seven (7) days written notice to appear before themc) The Management Committee shall be the sole judge of what constitutes such conduct and shall have full powers of decisiond) The decision of the Management Committee must be given to the member(s) concerned in writinge) Any member(s) wishing to appeal the Management Committee decision shall have the right of appeal Such appeals must be lodged in writing within seven (7) days of the decision reached having been advised in writing to the member(s) by the Management Committee, Refer Clause 14 c of the constitution.[15] Mr Cullen submits that clause 4(b) is clearly not the clause relied upon by the Club committee. Rather, he suggests that the committee purported to exercise the power to terminate his membership under clause 4(a). However, he submits that the Club committee was only able to terminate his membership for cause in that there must have been a breach of the rules proved before the Club committee had power to act. He submits that the reason given in the minutes that ―he's just as likely to turnup to the AGM is not a sufficient reason for terminating his membership. Hesubmits that clause 4(a) does not allow cancellation without reason.[16] Furthermore, he submits that the Contractual Remedies Act 1979 governs the relationship between members and the Club. In that regard, he suggests that s 8 of that Act is applicable. It provides:8 Rules applying to cancellation(1) The cancellation of a contract by a party shall not take effect—(a) Before the time at which the cancellation is made known to the other party;[17] Although the Club chairman annexes a copy of a letter he said he sent to him on 21 April 2011 to his affidavit, Mr Cullen says that the address to which it was allegedly sent was 99 Huia Road, Otahuhu, which was not his postal address. His postal address is PO Box 11-259, Ellerslie, Auckland 1542. He submits that as he did not receive notification of the decision to terminate his membership, it was ineffectual in terms of s 8 of the Contractual Remedies Act 1979 until he received the affidavit of the Club chairman on 27 October 2011. Mr Cullen notes there are rights of appeal in the Club's constitution. He says that he will file an appeal against the termination of his membership if necessary.[18] Mr Cullen also challenges what is recorded as an extraordinary meeting held at the Club on 17 April 2011 at which he was present and advised others that he would resign. He notes that, in terms of the constitution, a quorum for committee meetings is 50% of the committee members, but that it also has to include either the Chairman or the Deputy Chairman and either the Secretary or Treasurer. He notes that the minutes of the meeting record three committee members including the Chairman as present. He acknowledges that at the time he was the Treasurer but submits that he was not told that it was a committee meeting and would have absented himself if he had been so advised, leaving the meeting without a quorum. He also submitted that the meeting was held between normal committee meetings and so was invalid.[19] As to the disputed debt and the decision of the Disputes Tribunal, Mr Cullen complains about the lack of notice of the Disputes Tribunal hearing. He says that an application for adjournment was unfairly declined and he was not provided with a copy of the statement of claim at the hearing. He says that he also expressed a desire to call witnesses but was refused the opportunity to do so by the Disputes Tribunal. In any event, Mr Cullen says that he has now filed a notice of appeal dated 31 October 2011 and submits that, in terms of s 50(7) of the Disputes Tribunals Act1988, the order is of no further effect pending the appeal. Section 50(7) of the Disputes Tribunals Act 1988 provides:50 Appeals...(7) The filing of a notice of appeal against an order or the approval of an agreed settlement or the variation of a term of an agreed settlement shall operate as a stay of any process for the enforcement of that order or that settlement or that variation, as the case may require, but the Tribunal may at any time, on the application of a party to the proceedings, order that any process may be resumed or commenced or, the process having been resumed or commenced, order that it be further stayed.Discussion[20] I have formed the view that Mr Cullen has no standing to make the application for the Club to put into liquidation. He is neither a member nor a creditor. He has obviously had a falling out with the Club Chairman and other Club officials and has an ulterior motive in filing the application.[21] Mr Cullen was a member of the Club until his membership was terminated by the committee in April this year. In my view, clause 4(a) of the Club's Constitutionenabled the Club committee to terminate his membership. Mr Cullen challenges the lawfulness of the extraordinary meeting held on 17 April 2011. However, thatmeeting related only to Mr Cullen's position as treasurer. It did not purport toterminate his membership. In any event, Mr Cullen did confirm his resignation as treasurer by email on 19 April 2011.[22] There is no suggestion that the meeting on 20 April 2011, at which Mr Cullen's membership was terminated, was extraordinary nor that there was not a quorum of committee members present.[23] Although the minutes of the committee meeting record a comment from oneof the committee members that ―he's just as likely to turn up to the AGM it was obvious that Mr Cullen's membership was terminated because the committee had lost confidence in Mr Cullen's honesty and integrity when he was unable to give asatisfactory explanation for what happened to the $3,450 of Club funds in cash which was paid to him on 7 April 2011. In my view Clause 4(a) gives the Clubcommittee a general power to terminate someone's membership for cause.[24] Furthermore, the Contractual Remedies Act 1979 is inapplicable to the relationship between a member and the Club. Their relationship is primarilygoverned by the Club's Rules as set out in the Constitution. Clause 4(e) provides a right of appeal. The time limit for filing an appeal is seven days after the member has been advised in writing of the decision reached. This provision does not, however, suspend the operation of the decision until such time as the member is advised in writing. It relates only to the period within which an appeal has to be lodged.[25] Mr Cullen is also not a creditor. Firstly, the invoice is not in the name of Mr Cullen personally but in the name of Tamaki Sports Academy Ltd, of which Mr Cullen is the sole director.[26] Secondly, the Disputes Tribunal has ruled that there is no debt owing by the Club although Mr Cullen, on behalf of Tamaki Sports Academy Ltd, has filed a notice of appeal to the District Court against the decision of the Disputes Tribunal.[27] I am of the view that s 50(7) of the Disputes Tribunals Act, on which Mr Cullen relies, does not, on its proper interpretation, mean that the Disputes Tribunal order is of no effect pending the appeal. The filing of a notice of appeal only operates as a stay of any process for the enforcement of that order. The order made was not an order for the payment of a sum of money. If it was it could not be enforced. Rather, the Disputes Tribunal order is more in the form a declaration which does not need any enforcement. In that regard, therefore, I am entitled to take account of the order of the Disputes Tribunal in assessing whether or not there is a debt owed by the Club. The Disputes Tribunal considered the evidence placed before it and the submissions of the parties before reaching its decision. Mr Cullen has not shown me good reason why I should put it to one side. Accordingly, it is my view that Tamaki Sports Academy Ltd is also not a creditor.[28] In those circumstances, because Mr Cullen is neither a member nor creditor, his application to liquidate the Club is struck out. He has no standing to bring an application.[29] Costs are to be paid by Mr Cullen to the Club on a 2B basis...Woolford J