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Middeldorp v Avondale Jockey Club Incorporated [2020] NZCA 13 (12 February 2020)

Last Updated: 18 February 2020

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA
CA237/2019
[2020] NZCA 13



BETWEEN

VINCENT JACOB MIDDELDORP
Appellant


AND

AVONDALE JOCKEY CLUB INCORPORATED
Respondent

Hearing:

13 November 2019

Court:

Goddard, Brewer and Gendall JJ

Counsel:

P W David QC and C D Boswell for Appellant
G M Coumbe QC and D A C Bullock for Respondent

Judgment:

12 February 2020 at 11.00 am


JUDGMENT OF THE COURT

  1. The appeal is allowed in part. We make a declaration that the decisions to suspend Mr Middeldorp from the Committee of the Avondale Jockey Club Inc were not authorised by the Club’s Rules and were unlawful.
  2. The appeal is otherwise dismissed.
  1. The respondent must pay the appellant usual disbursements. Apart from that, we make no order as to costs.

____________________________________________________________________

REASONS OF THE COURT

(Given by Goddard J)

Introduction

[1] Mr Middeldorp is a member of the Avondale Jockey Club Inc (the Club). He has been a member of the Club since 1982. He was elected to its Committee in October 2013. Mr Middledorp was a vociferous opponent of decisions made by the Club in relation to the closure of its training track, among other matters. This brought him into conflict with the Club’s officers and the majority of the Committee. That conflict in turn led to Mr Middeldorp filing judicial review proceedings in the High Court raising three issues in relation to the governance of the Club:
[2] In the High Court Gordon J found that the Committee did not have the power to suspend a Committee member under the Club’s Rules.[1] The suspensions of Mr Middeldorp were therefore unauthorised and unlawful. However, the Judge declined to grant a declaration to that effect, having regard to a number of factors including delay in seeking judicial review, and Mr Middeldorp’s conduct. Mr Middeldorp appeals from the refusal to grant a declaration.
[3] Mr Middeldorp also appeals from the findings made by the High Court that:

Summary of outcome on appeal

[4] We have concluded that the High Court erred in declining to make a declaration that the suspensions of Mr Middeldorp were not authorised by the Rules, and were unlawful. The Committee purported to impose a sanction on Mr Middeldorp that it had no authority to impose under the Rules. The factors relied on by the High Court in declining to grant a declaration were not sufficient to displace the starting point that relief should normally be granted in such circumstances.
[5] We are not persuaded that the High Court erred in dismissing Mr Middeldorp’s challenges to the decisions made by the Committee in relation to the 14 membership applications, the operation of the Committee with fewer than 10 members, and the process adopted for conducting elections for Committee membership.

Background

[6] The Club was established in 1889. It is an incorporated society under the Incorporated Societies Act 1908. It is one of three thoroughbred racing clubs in the Auckland Region registered with New Zealand Thoroughbred Racing Inc (NZTR), which oversees thoroughbred racing.
[7] We adopt with gratitude the High Court Judge’s summary of the difficult circumstances facing the Club, and the tensions that has generated:

[6] The Avondale Racecourse was formerly one of New Zealand’s premier racing venues. However, the Club has faced serious financial difficulties since the early 1990s. It even suspended racing for over two years from July 2010 to consolidate its financial position. Whilst it has managed to return to a sound financial position in 2015 under the current president Allan Boyle, who was elected to the Committee in October 2006 and as president in 2012, there are still significant challenges. The Club has been supplementing its income by leasing some of its facilities to the Auckland Council for use as sports fields and to the operator of the Avondale market.

[7] Even more significantly, Avondale Racecourse faces a prospect of closure. A report dated 31 July 2018, commissioned by the Minister of Racing, recommended the closure of a number of venues, including Avondale, as from the 2020/2021 season. On 29 January 2019, NZTR released an industry consultation paper proposing that Avondale be closed from and including the 2024/2025 season, with the Club to then race at Ellerslie Racecourse. However, the Committee remains dedicated to promoting racing at Avondale.

[8] The Club’s position is that during these difficult times, Mr Boyle and the Committee have been trying to bring about positive change, while Mr Middeldorp has been making trouble by refusing to accept decisions of the majority of the Committee and has gone behind the Committee’s back in order to undermine the Committee’s decisions.

[9] Mr Middeldorp disputes the Club’s characterisation of his conduct and says that he has always acted with the Club’s best interests in mind.

Judicial review of decisions by an incorporated society

[8] In its statement of defence the Club pleaded that the challenged decisions are not amenable to judicial review. At the hearing in the High Court, and on appeal before us, the Club accepted that decisions of this kind made by an incorporated society are amenable to review. However, the Club submitted that the court should be hesitant about intervening in the affairs of a club that is not a public body, and that does not perform public functions.
[9] The High Court Judge acknowledged that it is well established that the Court will exercise restraint in intervening in the internal affairs of an incorporated society. However, having regard to the subject matter of the allegations, Her Honour considered that it was appropriate for the Court to consider the issues raised.[2] We agree.[3]

The Club’s Rules

[10] Before turning to the specific complaints made by Mr Middeldorp in relation to the operation of the Club, we set out the relevant provisions of the Club’s Rules as they stood at the relevant time.
[11] Rule 3 sets out the objects of the Club:

3 The objects for which the Club is established are:

(a) To hold race meetings and promote, regulate and assist the sport of horse racing

(b) To do all such other things as the Club or Committee think desirable for the purpose of furthering the objects of the Club or incidental or conducive to the attainment of the objects.

[12] Rule 6 governs election of new members. It provides that the election of members is by decision of the Committee following the procedure set out in the Rules. A candidate for membership must sign a nomination paper on a form prescribed by the Committee, and must be proposed in writing by two members of the Club. An eligible candidate is then balloted at a Committee meeting.[4] Three adverse votes at the ballot exclude the applicant. A ballot is not valid unless at least seven votes are recorded. The procedure at the ballot is under the control of the Committee.
[13] Cessation of membership is governed by rr 16–19. Rule 17 provides for removal of members in certain circumstances:
  1. The Committee may erase from the list of Members any person who has been convicted by a Court of Law of a criminal offence, or in its opinion is guilty of grossly improper or dishonourable conduct or riotous behaviour or drunkenness or of conduct prejudicial to the interests of the Club, whether this shall happen at any race meeting or otherwise.

Before the Committee shall exercise the power herein given, the Secretary shall post to such member at the address shown in the Register of Members not less than seven days notice of the meeting at which his/her conduct or behaviour is to be the subject of inquiry under this rule and requiring such member to attend the meeting of the Committee with such evidence as he/she may consider necessary, and to answer the charge or complaint, and in the event of such member failing to attend or to answer the said charge or complaint the same may be heard and determined by the Committee in his/her absence.

[14] Rule 25 provides for the officers of the Club and the composition of the Committee:
  1. (a) The Committee shall consist of the President, Vice-President and ten members as hereinafter elected.

(b) The President and Vice-President shall be elected annually. In the event of the President for any reason being unable to continue in office, then the office shall be assumed by the Vice-President in an acting capacity until such time as a new President is elected.

(c) No person shall bold the office of President for more than five years from the time of such election.

[15] Rule 26 provides for Committee members to retire by rotation. It assumes that there will normally be 10 Committee members, as contemplated by r 25(a). It reads as follows:
  1. The present Committee of the Club, excepting the President and Vice‑President shall hold office until the next annual meeting of the Club when five members shall retire and five shall continue in office. The first five members to retire shall be the members of the Committee not elected at the annual meeting of 1998. At every subsequent annual meeting the five members who have been longest in office since the last election, shall retire provided that every member so retiring shall be eligible for re-election. If at any time doubt shall arise as to the members of the Committee who should retire as aforesaid, such doubt shall be settled by lot.

[16] Rule 27 sets out the circumstances in which a person ceases to hold office as President or Vice-President, or as a member of the Committee:
  1. A person shall cease to hold office as President or Vice-President, or as a member of the Committee:

(a) Upon ceasing to be a member of the Committee.

(b) Upon accepting or permitting his/her nomination or appointment to any office in any other racing club trotting club, greyhound club, or like organisation, or

(c) If being made a member of the Committee he/she is absent without the consent of the Committee from three consecutive meetings of the Committee.

Provided, however, that rule (b) shall not apply to any office bearer who may be elected or appointed to the New Zealand Racing Industry Board the New Zealand Thoroughbred Racing Board or the Board of the Totalisator Agency Board.

[17] Finally in this group of provisions, Rule 28 deals with casual vacancies on the Committee:
  1. Any vacancy occurring within the Committee after the annual meeting, or by reason of the President or Vice-President being unable to continue in office, may be filled by the Committee. Any member so elected to fill the vacancy shall retain the office only until the next annual meeting. All vacancies not filled under these provisions shall be filled at the first annual meeting after the vacancy occurred. If at the annual meeting the vacancy is not filled the Committee shall appoint a person to fill it.

[18] Rules 41–47 govern meetings of the Committee. Rule 44 provides that the quorum necessary for the transaction of business by the Committee is five members.
[19] The powers and duties of the Committee are set out in r 48. That rule provides, so far as relevant:
  1. The Committee shall conduct, control and manage all the affairs, concerns and business of the Club in all things according to their discretion and in accordance with these rules. For this purpose and without prejudice to the generality of the foregoing, the Committee shall have the power –

...

(h) The Committee shall appoint annually a judge, starter, clerk of the course, clerk of scales and such other officials as the Committee may determine are necessary to conduct race meetings. The Committee shall determine the remuneration and duties of any person appointed. In the absence or disability of any person so appointed, the Committee shall make any necessary arrangements to appoint other persons to perform duties as it thinks fit.

(i) To appoint and at its discretion remove, discuss and suspend all such officers, agents and servants of the Club, whether permanent or temporary or to fix and determine their duties, salaries and other terms and conditions pertaining to their respective appointments.

...

(l) To enter into all such contracts and execute and do all such acts and deeds and things in the name of the Club as it may consider expedient for the purposes of the Club.

...

[20] Finally, under the heading “Bylaws and General”, appear rr 54 and 55:
  1. The Committee shall have the power from time to time to make, alter, amend or repeal any bylaws for carrying out these rules and for the regulation of its own proceedings as it may deem expedient, provided however, that such bylaws shall be entered into a book to be kept for that purpose.
  2. If any case occurs which is not provided for in these rules, it shall be determined by the Committee.

The suspension decisions

The facts

[21] The events that led to the Committee deciding to suspend Mr Middeldorp as a Committee member in November 2016, and again in December 2017, are described in detail in the High Court judgment.[5] In short, Mr Middeldorp strongly disagreed with the advice the Committee was receiving in relation to options for addressing the financial challenges it faced, and with the decisions the Committee was making in light of that advice. He pursued a campaign against the strategy preferred by the majority of the Committee in a manner that involved intemperate, and in the Committee’s view inappropriate, attacks on the Committee and on its advisers.

High Court judgment

[22] The Judge found that the Rules did not contain any express power for the Committee to suspend one of its members, and that in the absence of an express power to that effect it would not be appropriate to imply such a power, or to read the general provision in r 55 that cases not provided for may be determined by the Committee as extending to a power to suspend Committee members.[6]
[23] The Judge dismissed arguments that the Committee did not have the power to form a sub-Committee to hear the second complaint against Mr Middeldorp, and complaints about lack of natural justice and reasonableness of the suspension decisions.[7] There is no appeal from those findings.
[24] The Judge declined to grant the declaration sought by Mr Middeldorp, which was in the following terms:

A declaration that the Club acted illegally and without jurisdiction under the Rules in making the decisions to exclude the applicant from attending the Club committee as an elected member of the committee on 28 November 2016 and 7 December 2017 and that the decisions are void and of no effect.

[25] The High Court Judge said she would “follow the more nuanced approach” to relief adopted by this Court in Rees v Firth,[8] in preference to the approach adopted by this Court in Air Nelson Ltd where it was said that there must be “extremely strong” reasons to refuse relief.[9] On this approach, she said, “[i]t is for this Court to determine in all the circumstances whether it should intervene and grant a remedy”.[10]
[26] The Judge summarised her reasons for declining to grant a declaration as follows:[11]

... I exercise my discretion to decline to grant relief for the following reasons:

(a) Mr Middeldorp has not been seriously prejudiced. He has simply been excluded from attending some committee meetings. At all times he remained a club member. His livelihood and property interests have not been affected.

(b) Related to paragraph (a) above I consider that the error made by th Committee is not of sufficient gravity.

(c) As far as his standing and status are concerned, the Committee was content for the two suspensions to remain confidential to the Committee but Mr Middeldorp himself made the matter public.

(d) There is no practical utility in making the declaration. Both suspension decisions have been carried out. There is nothing further to be reconsidered as a consequence of my judgment.

(e) In relation to Mr Middeldorp’s submission that a declaration would have utility for the future conduct of the Club, there was evidence from Mr Boyle that the Club’s solicitors are in the process of developing a new and more modern constitution. The new constitution is based upon a template circulated to clubs by NZTR and the Club has also looked at the provisions of the Incorporated Societies Bill. That Bill, when enacted, will regulate voluntary organisations in a more up-to-date fashion than is currently the case with the 1908 Act. The current draft of the new Rules includes a power to remove committee members but the intention is also to have a power to suspend committee members. The project to review and revise the constitution was initiated by Mr Boyle in July 2018 before Mr Middeldorp commenced his proceeding. There was to have been a SGM in February 2019 to consider the proposed new Rules. For reasons outside the control of the Club, there has been a delay in finalising the draft Rules.

(f) Mr Middeldorp has delayed in issuing this proceeding. The first challenged decision was made by the Committee on 28 November 2016. The second hearing occurred on 1 December 2017 and Mr Middeldorp was notified of the decision on 7 December 2017. He commenced this proceeding on 4 September 2018. Mr Middeldorp does not provide any explanation for the delay.

(g) There is no public interest in making the declaration.

(h) Finally, I take into account Mr Middeldorp’s conduct. As Mr Middeldorp himself recognised in his letter of apology to the committee, his conduct in emailing the CEO of York “... has resulted in an absolute mess ...”. Mr Middeldorp may count himself fortunate that in relation to the first suspension decision, he did not face a hearing under Rule 17 to determine whether his membership of the Club should cease on the grounds that he had engaged in “conduct prejudicial to the interests of the Club”. He was also fortunate in avoiding a r 17 hearing in relation to the second suspension decision having regard to the alleged prejudicial conduct in circulating the “Letter of Concern”.

Mr Middeldorp’s submissions on suspensions

[27] Mr David QC, counsel for Mr Middeldorp, says that the Judge was plainly right to find that the Club had no authority to suspend Mr Middeldorp from the Committee. The Judge was right to dismiss the argument that a power to suspend could be found in r 55. The Judge was also right to decline to find that there was an implied term permitting suspension of Committee members.
[28] But Mr David submits that the Judge erred in principle in declining to grant a declaration. Where a disciplinary sanction has been imposed in breach of the rules of an incorporated society, he says, the court should invariably declare that to be the case.
[29] Mr David submitted that the fact that the conduct of Mr Middeldorp might have formed the basis for some different form of disciplinary action under the Club’s Rules is irrelevant. The point is that what was done was unauthorised and unlawful. Where punitive sanctions have been imposed by an incorporated society without lawful authority, that cannot be dismissed as a minor or unimportant matter. The imposition of a sanction always has significant implications for an individual’s reputation. In this case Mr Middeldorp, who had been elected to the Committee of the Club, was deprived of the opportunity to participate in its decision-making. The members who voted for him were deprived of his voice at the table, and of his vote on Committee decisions.
[30] The courts have distinguished declarations from other remedies when considering the effect of delay. A declaration is more likely than other forms of relief to be granted where there has been delay.[12] Relief will not normally be refused on the grounds of delay where that delay does not cause any prejudice to the respondent.[13] Declarations always have utility. They provide vindication, and deter future breaches.
[31] In this case, there was no good reason to decline to grant a declaration. There was no material delay. Any delay can be explained by Mr Middeldorp’s attempts to resolve the dispute through other channels. In particular raising the matter with NZTR. There could be no prejudice to the Club from any delay in seeking a declaration.

The Club’s submissions on appeal in relation to suspensions

[32] Ms Coumbe QC, counsel for the Club, submitted that r 55 of the Club’s Rules can be interpreted as empowering the Committee to take disciplinary action in the form of suspension against Mr Middeldorp. There is nothing in r 55 that limits that rule to procedural matters. Rather, it is of general application. Rule 17 addresses the expulsion of Club members. But there is no express rule governing lesser sanctions for members, or discipline of Committee members. So this is a circumstance “not provided for” in the Rules, and therefore within the ambit of r 55. The Committee can fill the gap and impose lesser sanctions than expulsion from the Club, including suspending a Committee member from attending meetings. It would be unsatisfactory if the Committee could not discipline its own members effectively for impropriety, in furtherance of the proper governance and interests of the Club.
[33] Alternatively, Ms Coumbe submitted, a term providing for a power of suspension could be implied into the Rules on normal contractual principles. Such a term is so obvious it goes without saying — it would be surprising if the Committee lacked power to discipline its own members. The term is necessary for business efficacy, to enable the Committee to control members who act contrary to the interests of the Club, other than by the extreme measure of expulsion from the Club. The term can be clearly expressed as:

The Committee may suspend members from attending meetings of the Committee.

[34] Such a term is not inconsistent with any express term of the Rules.
[35] If however the Judge was right to find that there was no power to suspend Mr Middeldorp, she was also right to decline relief. Relief is a matter of discretion. It has not been demonstrated that the Judge erred in principle or was plainly wrong in exercising that discretion. The Judge was right to prefer the more “nuanced” approach to relief adopted by this Court in Rees v Firth.[14]
[36] In any event, Ms Coumbe submitted, in this case there are compelling grounds to refuse a declaration. The error was not of sufficient gravity to justify intervention, and Mr Middeldorp has not been seriously prejudiced. The Committee acted in good faith, believing it had power to suspend as a lesser sanction than expulsion.
[37] Granting the declarations sought by Mr Middeldorp would have no practical utility, as the two suspension decisions have already been implemented and the suspensions have been and gone. Mr Middeldorp remained a Committee member, and has since been re-elected to the Committee. A formal declaration “would achieve nothing”.[15] A declaration would not provide useful guidance to the Club in the future, as new Rules have been adopted which do expressly provide for suspension of Committee members. There was undue delay in issuing these proceedings. The making of a declaration now would prejudice the Club by damaging its reputation and standing at a crucial time when the racecourse is threatened with closure. A declaration might also call into question the validity of decisions made by the Committee during the suspensions, which have been acted on. The Judge was entitled to have regard to the fact that the Club could, having regard to Mr Middeldorp’s conduct, have proceeded to expel him as a member. Mr Middeldorp’s conduct also means that he does not come with “clean hands”: he failed to meet his obligations as a Committee member to act in the best interests of the Club.

Analysis

[38] We agree with the High Court Judge that the Committee did not have the power to suspend Mr Middeldorp.
[39] There is no rule that expressly provides a power to suspend Committee members. There are express powers to expel a member, in certain prescribed circumstances (r 17). The Committee is also expressly given the power to remove or suspend officers, agents and servants of the Club (r 48(i)). But that suspension power does not extend to Committee members. We do not consider that a power as significant as the power to suspend a Committee member — a power that would affect that individual, the representation of members of the Club who elected that individual, and the governance of the Club during the term of any suspension — can be found in a general provision such as r 55.
[40] The pre-conditions for implication of a term were summarised by the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings as follows:[16]

(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.

[41] There has been some debate about whether these are distinct pre-conditions, or whether they are simply different ways in which judges have tried to express the central idea that the proposed implied term must spell out what the contract actually means.[17] We do not need to engage with that debate here. For present purposes it is sufficient to say that on any approach the suggested term cannot be implied. It is not necessary to give the Rules business efficacy. The parameters of any suspension power — the circumstances in which it can be invoked, the procedure to be followed, and the maximum duration of any suspension — are far from obvious. The Rules cannot be read as implicitly including such a power.
[42] It follows that the two suspensions of Mr Middeldorp were not authorised by the Rules, and were unlawful.
[43] As the Supreme Court said in Ririnui v Landcorp Farming Ltd, although relief in judicial review is discretionary, courts today will generally consider it appropriate to grant some form of relief where they find reviewable error.[18] The more fundamental the defect in the decision that is challenged, the more likely it is that relief will be granted. The defect in the Committee’s decision in this case was fundamental: it purported to make a decision imposing a sanction that it had no authority to impose. The factors that may justify a decision to decline relief depend to a significant extent on the nature of the relief sought. If an applicant seeks an order setting aside a decision, delay is likely to be a significant factor, especially where steps have been taken in reliance on the decision. But delay in and of itself is unlikely to be a good reason to decline to grant a declaration recording the lack of authority for the decision, in the absence of any prejudice caused by that delay.
[44] The High Court Judge considered that there were good reasons to decline relief in this case.[19] We take a different view. In particular, we do not consider that there are good reasons to decline to grant a declaration that the suspension decisions were unauthorised and unlawful. Such a declaration serves an important purpose: it vindicates the interests of the applicant, others adversely affected by the decision (here, the members who had voted for Mr Middeldorp and were entitled to have him present and participating in meetings), and the rule of law more generally.
[45] This is not a case in which delay counts against the making of a declaration, in the absence of any prejudice to the Club caused by the delay. The Judge did not identify any respect in which the Club would be worse off as a result of a declaration being made some months later than might have been the case if the proceedings had been commenced earlier. Any impact that a declaration might have on the reputation or standing of the Club would not be increased as a result of delay in the making of that declaration.
[46] Nor was Mr Middeldorp’s conduct, however open to criticism it may have been, a reason to decline to make a declaration that the suspensions were not authorised by the Rules. This is not a case where the same result could have been reached as a matter of substance, and might well have been reached, but there was a procedural defect in the decision-making process. It simply was not open to the Club to suspend Mr Middeldorp as a Committee member. We accept Mr David’s submission that the possibility that some other disciplinary action might have been taken against Mr Middeldorp cannot justify the taking of action for which there was no authority. Nor are we in a position to reach a conclusion on what the outcome might have been if r 17 had been invoked and the procedure contemplated by that rule had been followed.
[47] Applying the guiding principle identified at [43] above, we consider that a declaration should be granted that the decisions to suspend Mr Middeldorp were not authorised by the Rules and were unlawful.
[48] Accordingly, we allow the appeal in relation to the High Court’s refusal to grant relief in respect of Mr Middeldorp’s suspensions from the Committee.
[49] However, we do not consider that the terms of the declaration sought by Mr Middeldorp are appropriate. The declaration he seeks goes beyond recording that the suspensions were unauthorised and unlawful: it would also declare the suspension decisions to be void and of no effect. In the public law context, a finding that a decision was unlawful does not automatically mean that the decision was void. The court needs to go on to consider whether, in all the circumstances of the case, the decision should be set aside.[20] Mr David confirmed that Mr Middeldorp is not seeking to argue that decisions made by the Committee during the two periods of suspension were unlawful or liable to be set aside, or to challenge any other downstream actions taken by the Committee. In those circumstances, we consider that the declaration made by the court should not extend to the validity or effect of the suspension decisions.
[50] Accordingly, we make a declaration that the decisions to suspend Mr Middeldorp from the Committee were not authorised by the Rules, and were unlawful. Membership applications

The facts

[51] In April and May 2017 the Club received 16 membership applications. The evidence of Mr Boyle, the Club President, was that:

Fourteen of the applicants appeared to be associated with Mr Middeldorp (given the timing, and the cross-nominations within the group). I and some other members of the Committee were concerned that these 14 of the applicants might not genuinely wish to be ongoing members of the Club. That is, we wondered whether they each had a bona fide interest in truly being members of the Club, or whether their sole purpose in applying was to support some agenda of a group of trainers, and/or Mr Middeldorp, in opposing the closure of the training operations, such as facilitating a requisition for a Special General Meeting.

[52] In light of those concerns, the Committee decided to defer the 14 applications and ask the Secretary to write to the applicants inviting them to provide their reasons for wanting to join the Club. Thirteen of the 14 applicants did not reply to the Secretary’s letter. In the absence of a response, the Committee voted by a majority at its meeting on 24 July 2017 to decline the membership applications.
[53] The 14th applicant did respond to the Secretary by email, confirming his interest in becoming a member and asking that his application be considered at the next Committee meeting. A question was then raised about whether the 14th applicant was jointly liable for overdue debts owed to the Club by his brother, who was a Club member, for the use of training facilities. The Committee deferred considering his application while his potential indebtedness to the Club was investigated. The minutes of the Committee meeting held on 28 August 2017 record that the inquiries made in the interim suggested that the 14th applicant’s brother was indebted to the Club, and the 14th applicant had agreed to take over responsibility for those debts but had not met them. The minutes record “[t]he application has to be declined on that basis”. The Secretary was asked to write to the 14th applicant to that effect.
[54] The letter written by the Secretary to the 14th applicant dated 20 October 2017 identified two factors that had led to his membership application being declined:

Your correspondence with the Club, relating to the application, implying support for a potential reopening of the now-closed horse training operation at Avondale and ... Advice from one of our Committee that you have a co-liability to the Club for unpaid training fees relating to horse(s) that you and your brother ... were involved with. The Club will not admit as a member a person who has a bad debt record with the Club.

[55] The 14th applicant then sent an email to the Secretary asking the Committee to reconsider his application, and agreeing to look into the unpaid invoices owed to the Club by his brother. His application for membership came back before the Committee at its meeting on 12 February 2018. The minutes record a resolution as follows:

Given that applicant has not addressed the debt issue put to him relating to his involvement with training costs incurred at Avondale concerning [his] brother’s horses or horses that [he] has had an interest in, then [his] application to join is declined. Secretary to write to him.

High Court decision

[56] The High Court Judge found that there was a proper foundation for the Club’s concern that the 14 applicants for membership might not be genuine.[21] The timing of the applications and the connections between the applicants and Mr Middeldorp suggested that the applications might have been made as part of Mr Middeldorp’s campaign to reverse the decision to close the training track, rather than because all 14 had recently formed a genuine desire to become members of the Club.
[57] The Judge did not accept the argument that the membership applications were rejected for an improper purpose. The Judge emphasised that the Committee did not simply resolve to refuse the applications on the basis of their concerns. They asked the applicants to clarify their reasons for wishing to become members. Thirteen of the applicants did not respond, and the Committee then declined their applications. There was no evidence that any of the 13 applicants disputed that decision at the time. There was no evidence that any of them subsequently reapplied for membership or otherwise engaged with the Committee. None of them gave evidence in support of Mr Middeldorp’s application to the High Court.[22]
[58] The Judge summarised her reasoning in relation to the 14th applicant as follows:

[167] In relation to the 14th applicant, there was an unpaid debt. There is no evidence that he attempted to pay the debt and reapply for membership. Although the Secretary, in her letter of 20 October 2017, referred to his possible support for the re-opening of the training facility as a reason for declining his application, the two committee resolutions were on the basis of unpaid debts. That is a standard matter that the Committee takes into account when considering a membership application.

Mr Middeldorp’s submissions on appeal

[59] Mr Middeldorp says that the Committee failed to act in good faith and for a proper purpose in declining the 14 membership applications made in April and May 2017. It is well established that a discretion to admit new members to an incorporated society must be exercised in good faith, for the purpose of advancing the objects of the society.[23] In this case, Mr Middeldorp says, the Committee rejected the 14 applications because the applicants held a different view from the majority on the Committee in relation to the proposed closure of the training track.
[60] Mr David submitted that the Committee was not entitled to reject applications for membership because they come from persons who may have differing views on how best to promote the Club’s objectives. If an applicant is genuine and eligible under the Rules, they are entitled to join the Club. In this case, the applicants were all eligible to be members under the Rules. The approach adopted by the Committee, and its ultimate decision to reject the applications, were the result of the Committee’s desire to perpetuate its control of the Club and ensure its views about closure of the training tracks were not challenged. The reason for the rejection was that the prospective members had differing views on the training tracks, and no more.
[61] This is especially clear, Mr David submitted, from the approach the Committee took in relation to the 14th applicant. The 14th applicant responded to the Committee’s inquiry by saying that he would love to become a member of the Club and support it in any way he could. The Committee nonetheless rejected his application. The letter of rejection expressly referred to the 14th applicant’s support for re-opening of the training tracks, as well as joint liability for his brother’s debt. His views on the training tracks were an irrelevant factor that should not have been taken into account. Mr David also submitted that it was inconsistent and unreasonable to reject the 14th applicant’s membership application because of the debt, when his brother continued as a member of the Club.

The Club’s submissions on membership applications

[62] The Club says that the Rules do not “entitle” an applicant to membership. Applicants who meet the eligibility requirements for membership are not accepted as of right. Election is a matter for the members of the Committee by way of ballot.
[63] There was a proper basis for the Club’s concerns that the applications were not genuine, including the common link in the 14 applications; the large number of applications presented in an apparently co-ordinated way; and the connection between this initiative and Mr Middeldorp’s indication that he intended to requisition a special general meeting with a view to reversing the training track closure decision.
[64] Ms Coumbe drew our attention to the evidence of Mr Boyle that his view was that:

the mere fact that an applicant might support a view opposed to that of the majority of the Committee would not of itself be a reason to decline membership, as long as the person was genuinely interested in being a member and was not, for example, intending to just let their membership lapse after taking the intended action.

Mr Boyle was not cross-examined on his affidavits.

Analysis

[65] We agree with the High Court Judge that there was a reasonable basis on which the Committee could decide to make further inquiries about the genuineness of the 14 membership applications. As the Club submits, there is no entitlement to become a member of the Club. In exercising its judgment on whether to admit a new member, it is reasonable for the Committee to take into account whether there is a genuine desire on that person’s part to become and remain a member of the Club, or whether the membership application is made for the purpose of influencing a single decision of the Club, or in order to advance the interests of the applicants (or some other person), rather than with a view to advancing the objects of the Club. The Committee cannot be criticised for making further inquiries of the 14 applicants. Nor can the Committee be criticised for declining the applications of the 13 applicants who did not provide any response to that inquiry.
[66] The position is more finely balanced in relation to the 14th applicant. He did respond to the inquiry, and expressed a commitment to the Club. The minutes of the meeting at which his application was declined do not refer to his opposition to closure of the training tracks. But this was identified as one of the reasons for the decision in the letter from the Secretary. That was not a factor that could properly be taken into account in determining his application for membership.
[67] On balance, we consider that the Judge was right to reject the challenge to the Committee’s decision. We are not satisfied that the Committee’s decision in relation to the 14th applicant was materially influenced by irrelevant considerations, having regard to:
[68] The appeal in relation to the 14 membership applications is therefore dismissed.

Committee composition and election of Committee members

The facts

[69] It was common ground that throughout the relevant period the Committee did not have the full complement of members contemplated by r 25: a President, a Vice-President and 10 Committee members. At various times during this period the Committee has had between five and eight members.
[70] It was also common ground that the Club had for many years adopted a pragmatic approach to the Rules in relation to election of Committee members. Rule 26, set out at [15] above, provides that at each annual meeting of the Club five members must retire and five will continue in office. In circumstances where there are fewer than 10 Committee members immediately prior to an annual meeting, literal compliance with this rule is not possible. The Committee therefore adopted a pragmatic approach under which Committee members would serve a two year term and then retire, though they could stand for re-election. So, for example, if the Committee had eight members prior to an annual meeting, four would retire at that meeting and four would continue. There would be six vacancies open for nomination and election at that annual meeting: the two unfilled positions and the four positions vacated by retiring members.

High Court decision on Committee issues

[71] In the High Court, Mr Middeldorp said that in these circumstances the Club had been operating and transacting business without a properly constituted Committee. He sought a declaration that the Club has operated in breach of its Rules in the election and appointment of Committee members and by operating with a Committee with less than 10 elected members from the Annual General Meeting of 29 October 2014 until the present.
[72] The Club argued that a term could be implied into the Rules authorising the pragmatic approach that had been adopted.
[73] The Judge accepted the Club’s submission that the following terms could be implied into the Club’s Rules:[25]

(i) In the event [that] fewer than 10 members are elected to the Committee at the AGM, the Committee may operate with the number of members who are so elected;

(ii) In the event there are fewer than 10 members of the Committee, at the next AGM, half the members (those who are longest serving) shall be required to stand for re-election.

[74] The Judge considered that it was consistent with established principles in relation to implication of terms into contracts to imply terms along those lines. On that basis, it was lawful for the Committee to operate with fewer than 10 members and to follow the process it had adopted for elections to the Committee at the annual meetings.[26]

Mr Middeldorp’s submissions on appeal in relation to Committee matters

[75] Mr David submitted that the High Court erred by implying these terms into the Rules. The implied terms accepted by the High Court are not necessary to give the Rules business efficacy, and are contrary to the express terms of the Rules: in particular r 25(a). It is well established that a term cannot be implied into a contract that is inconsistent with the express terms of that contract.
[76] If there was a genuine problem with filling the prescribed number of vacancies on the Committee and operating the Committee in accordance with the Rules, the appropriate response was to call a meeting to amend the Rules, not to depart from them on a pragmatic basis.

Club’s submissions on Committee issues

[77] The Club supported the Judge’s reasoning in relation to implication of terms permitting the Committee to operate with fewer than 10 members, and to adapt the operation of the Rules in relation to retirement of members.
[78] Ms Coumbe emphasised that Mr Middeldorp has been a member of the Committee since 2013. He was retired and re-elected according to the process adopted by the Club in 2015, and did not take any issue with the process at the time.
[79] The evidence of the Club Secretary was that there were too few members willing to stand for election to the Committee, or to be appointed to fill vacancies, despite the efforts of the Committee to attract people. There was no known case of an eligible candidate for a Committee position missing out on being elected.

Analysis

[80] The submissions made by both parties in relation to implication of a term into the Rules concerning the ability of the Committee to operate with fewer than 10 members appear to have proceeded on the basis of a misunderstanding of the Club’s Rules. There is nothing in the Rules that provides that the Committee cannot operate with fewer than 10 members. The quorum for Committee meetings required by r 44 is five members. Provided that quorum is present, the Committee can hold valid meetings and make valid decisions.
[81] Indeed the Rules contemplate the Committee operating, and making decisions, with fewer than 10 members. Rule 28, set out at [17] above, permits the Committee to fill vacancies occurring within the Committee between annual meetings. But it does not require the Committee to do so. The rule goes on to provide that any vacancy that is not filled in this manner “shall be filled at the first annual meeting after the vacancy occurred”. This provision makes it clear that the Committee has the option of continuing to operate with fewer than 10 members, and can properly call an annual meeting despite a shortfall in the total number of members. Rule 28 goes on to provide that if the vacancy is not filled at the annual meeting “the Committee shall appoint a person to fill it”. It is implicit in this limb of r 28 that following an annual meeting at which a vacancy is not filled the Committee can meet even though it does not have a full complement of 10 members, and can make valid appointment decisions.
[82] We consider that it is clearly implicit in the Rules, and in particular r 28, that the Committee is able to operate with fewer than 10 members. It can continue to do so indefinitely provided that it is able to achieve a quorum at its meetings. An implied term to this effect is simply unnecessary.
[83] Turning to the retirement of Committee members by rotation under r 26, it appears the drafter of this Rule failed to identify the possibility that there will be fewer than 10 Committee members prior to an annual meeting — a scenario expressly contemplated by r 28. As noted above, literal compliance with the rule requiring that “five members shall retire and five shall continue in office” is impossible if, for whatever reason, the Committee has fewer than 10 members at the time of an annual meeting.
[84] We accept Mr David’s submission that the term that the Judge sought to imply into the Rules is inconsistent with r 26. We also consider that, far from being obvious, and necessary to give the Rules business efficacy, the implied term approved by the Judge is itself unworkable. Suppose the Committee has seven members prior to an annual meeting: how can half the members be required to stand for re‑election? Must three members stand for re-election and four continue? Or vice versa? As this scenario illustrates, a more detailed and more sophisticated provision would be required to deal with the retirement of Committee members by rotation in all plausible scenarios. Choices would need to be made about a number of minor but practically important issues. We do not think that any one rule can be identified that is so obvious that it meets the test for implication of a term into a contract. And any suggested rule that did work would be inconsistent with r 26 as it presently stands.
[85] We note that the Club has now adopted a new constitution which was provided to us by way of updating evidence. The new constitution contains a detailed rule dealing with this issue.
[86] In circumstances where the Rules were not workable if applied literally, the Club adopted a pragmatic and sensible approach to the operation of the Rules. No person who was willing to serve as a Committee member missed out on election

to the Committee. There were no complaints at the time of any election. No prejudice of any kind to any person has been identified. We agree that the appropriate response to the difficulty posed by the framing of r 28 was to amend the Rules to make them workable. That has now been done. The approach that was adopted by the Club pending a rule change was adopted in good faith, did not give rise to any practical difficulties or concerns, and caused no prejudice of any kind to any person. It is now of historical interest only. No useful purpose would be served by the Court intervening by way of judicial review in this aspect of the administration of an incorporated society. We decline to do so.
[87] We therefore dismiss the appeal from the Judge’s finding that the Committee operated lawfully, albeit for different reasons.

Result

[88] The appeal is allowed in part. We make a declaration that the decisions to suspend Mr Middeldorp from the Committee of the Avondale Jockey Club Inc were not authorised by the Club’s Rules and were unlawful.
[89] The appeal is otherwise dismissed.

Costs

[90] Counsel agreed that any award of costs should be made on the basis that this was a standard appeal to which band A applied, and that we should certify for two counsel.
[91] Mr Middeldorp’s appeal has been successful so far as relief in relation to his suspension is concerned. It was unsuccessful in relation to the other issues pursued on appeal. If the appeal had been confined to the question of relief in relation to the suspension, it would have taken half a day, rather than the full day that it occupied. In those circumstances we consider that honours were broadly even.
[92] The respondent must pay the appellant usual disbursements. Apart from that, we make no order as to costs.






Solicitors:
Wilson Harle, Auckland for appellant
Lee Salmon Long, Auckland for respondent

[1] Middledorp v Avondale Jockey Club Inc [2019] NZHC 901, [2019] NZAR 738 [High Court decision].

[2] High Court decision, above n 1, at [55].

[3] Stratford Racing Club Inc v Adlam [2008] NZCA 92, [2008] NZAR 329 at [53]–[56]; and Reay v Attorney-General [2019] NZCA 475 at [39].

[4] Eligibility for membership is addressed in Rules 12–15.

[5] High Court decision, above n 1, at [18]–[26] and [38]–[44].

[6] At [65]–[72].

[7] At [79], [114] and [128].

[8] Rees v Firth [2011] NZCA 668, [2012] 1 NZLR 408 at [48].

[9] Air Nelson Ltd v Minister of Transport [2008] NZCA 26, [2008] NZAR 139 at [60].

[10] High Court decision, above n 1, at [199].

[11] At [201] (footnote omitted).

[12] P F Sugrue Limited v Attorney-General [2003] NZCA 204; [2004] 1 NZLR 207 (HC) at [73].

[13] BASF New Zealand Ltd v Commissioner of Inland Revenue [1994] 1 NZLR 172 (HC).

[14] Rees v Firth, above n 8, at [48]. Ms Coumbe also referred us to Tauber v Commissioner of Inland Revenue [2012] NZCA 411, [2012] 3 NZLR 549 at [89]–[91]; Secretary for Justice v Simes [2012] NZCA 459, [2012] NZAR 1044 at [117]; Minister for Canterbury Earthquake Recovery v Fowler Developments Ltd [2013] NZCA 588, [2014] 2 NZLR 587 at [164]; and Ngāi Tai ki Tāmaki Tribal Trust v Minister of Conservation [2017] NZCA 613, [2018] 2 NZLR 453 at [60].

[15] Stratford Racing Club Inc v Adlam, above n 3, at [96]–[99].

[16] BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 (PC) at 283; and see also Mobil Oil New Zealand Ltd v Development Auckland Ltd [2016] NZSC 89, [2017] 1 NZLR 48 at [79]–[82].

[17] Mobil Oil New Zealand Ltd v Development Auckland Ltd, above n 16, at [80]–[81]; Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988; and Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72, [2015] 3 WLR 1843.

[18] Ririnui v Landcorp Farming Ltd [2016] NZSC 62, [2016] 1 NZLR 1056 at [112]. See also Auckland Council v Wendco (NZ) Ltd [2017] NZSC 113, [2017] 1 NZLE 1008 at [96]; Rees v Firth, above n 8, at [48]; and Air Nelson Ltd v Minister of Transport, above n 9, at [60].

[19] High Court decision, above n 1, at [201].

[20] Counsel did not address the question of whether the contractual framework in this case might lead to a different approach, and we do not consider that that is an issue we need to resolve.

[21] High Court judgment, above n 1, at [139]–[173].

[22] At [162]–[164].

[23] Stratford Racing Club Inc v Adlam, above n 3, at [58].

[24] There was no cross-examination of Mr Boyle or the Club Secretary (who also swore an affidavit in these proceedings, and was not cross‑examined on it) in relation to the accuracy and completeness of those minutes.

[25] High Court judgment, above n 1, at [187](d).

[26] At [188].

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