	Home \| Databases \| WorldLII \| Search \| Feedback Court of Appeal of New Zealand

Home | Databases | WorldLII | Search | Feedback

Court of Appeal of New Zealand

You are here: NZLII >> Databases >> Court of Appeal of New Zealand >> 2006 >> [2006] NZCA 198

Russell and anor as Trustees of the Russell Family Trust v Riverlea Estates Incorporated [2006] NZCA 198 (2 August 2006)

Last Updated: 15 August 2006

IN THE COURT OF APPEAL OF NEW ZEALAND

CA164/05

IN THE MATTER OF the Incorporated Societies Act 1908

BETWEEN JUNE MARY RUSSELL AND JAMES MICHAEL RUSSELL AS TRUSTEES OF THE RUSSELL FAMILY TRUST
Appellants

AND RIVERLEA ESTATES INCORPORATED
Respondent

Hearing: 22 May 2006

Court: O'Regan, Arnold and Ellen France JJ

Counsel: J P Takas for Appellants
M S Henderson for Respondent

Judgment: 2 August 2006

JUDGMENT OF THE COURT

A The appeal is dismissed.

B The respondent is awarded costs of $1,500 together with usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Ellen France J)

Table of Contents

Para No

Introduction [1]
Factual background [2]
High Court decision [33]
Statutory scheme [38]
Issues [42]
Discussion [43]
Costs [53]
Result [57]

Introduction

[1] This is an appeal against a decision of Wild J in the High Court delivered on 8 July 2005. In that decision, Wild J declined an application by the Trustees of the Russell Family Trust, the appellants, for a declaration that a change to the rule dealing with the division of the assets of the Riverlea Estates Incorporated Society, the respondent, on winding up was ultra vires and void. Wild J awarded costs against the appellants. The appellants appeal against the dismissal of their claim and against the award of costs.

Factual background

[2] The founding members of Riverlea Estates Incorporated ("the Society") leased house properties on land previously known as Stewarts Gully near Christchurch.
[3] The property had been used in various ways. For example, after World War II, it was developed by the Army as a training camp with streets, barracks and Army huts. It came into private ownership and by then there were some 77 dwellings rented to members of the public. Some of these were used as permanent homes and some as holiday homes. The owner of the property in 1979 told the lessees that it wanted to sell the land. The owner had a proposal for the lessees but that was rejected. Broadly speaking, the lessees did not want third party ownership.
[4] There was then discussion amongst the lessees of various options. Ultimately, they decided to form an incorporated society to purchase the property. The Society was duly incorporated on 24 March 1980. At that point it had 22 members. The rules of the Society relevantly provided for the following objects:

(a) To provide security of tenure, amenable living standards and promote community facilities within the Riverlea Estates area of land formerly known as Stewarts Gully and in any other areas of land which may be purchased, leased, acquired or in which the Society may have any interest from time to time.
(b) To maintain and promote the rights and privileges of its members collectively and individually.
(c) To take such action as the officers may consider advisable in the interest of members.
(d) To do all such lawful acts and things as are incidental or conducive to the attainment of the abovementioned objects or any of them or any other objects which the Society may from time to time establish.

[5] Membership of the Society was open to any proprietor of a lot in the area of land owned by the Society. There was provision for the admission of new members. Membership was construed as one membership interest carrying one vote per lot irrespective of the number of owners of any particular lot.
[6] The rules dealt with the resignation and expulsion of members and with the officers of the Society. They made provision for an Annual General Meeting and provided that at any annual, quarterly or special general meeting of the Society the quorum was ten members. The rules also dealt with the Society’s finances.
[7] Rule 35 dealt with the winding up of the Society and provided:

The Society may be wound up by majority of the members present at a general meeting provided that proxy votes may be accepted in accordance with these Rules. The resolution to wind up if passed by a majority at the previous meeting shall be confirmed at a subsequent special meeting called for that purpose but held not earlier than thirty days after the date on which the resolution so to be confirmed was passed. Voting by post shall be authorised under this Rule.

[8] Rule 35 was amended in 1991 to increase the majority required to vote in favour of winding up from a simple majority to 7/8ths of the members present.
[9] Importantly, in terms of this appeal, r 36 provided:

Before any winding up all debts due by the Society shall be paid and any balance of the Society’s funds shall be divided equally among the members of the Society at that time.

[10] Rule 44 dealt with alterations to the rules and provided:

No alteration of or addition to these Rules shall be made except at an Annual General Meeting or quarterly or special general meeting called for that purpose and then only in pursuance of a notice of motion provided in writing by the Secretary in accordance with the Rules previously appearing.

[11] The Society bought the Stewarts Gully property and it was transferred to the Society’s name on 25 July 1980.
[12] Leases were prepared. Following a meeting on 24 February 1980, it was resolved that the lease for members would be for a term of 21 years with right of renewal. The lease for non-members would be for 12 months with right of renewal. Because there was no legal subdivision, there were no legal boundaries between the lots. The lots were of different sizes and were set apart by hedges or fences.
[13] A ground rent was set for each lot. The ground rent did not alter with the size of the lot but depended only on whether or not the lessor was a member of the Society.
[14] There was evidence that the founding members did consider other forms of ownership. Freeholding was rejected for a number of reasons including the costs of subdivision.
[15] Accordingly, the position was that there were some sections which were larger and probably more valuable than other sections but the members agreed each to contribute equally in terms of the ground rental. Mr Lloyd, a solicitor who gave advice to members at the time the Society was set up, said that the founding members:

... decided upon a regime of equality since each contributed money equally. They knew that on dissolution, whenever that may be, each member would receive an equal share of the assets. The concept of assessing value or rent based on unsurveyed sections of varying size, was just seen as too difficult and contentious. A pragmatic decision was made.

[16] Over time, there was further discussion about the possibility of freeholding. In particular, there was consideration of this in 1994 when the Society sought a report from its solicitor about what was entailed in freeholding. Nothing came of that when members were told they would have to pay money.
[17] The possibility of subdividing and freeholding arose again in 2000. There was a formal resolution by the Society’s committee at a meeting on 17 April 2000 to examine the feasibility of freeholding.
[18] On 30 October 2000, the Society decided to lodge an application with the Christchurch City Council to subdivide the property. The application was granted by the Council on 16 April 2002.
[19] There then followed discussions about the mechanics of freeholding. With the assistance of the Society’s lawyer, various options were considered. At a meeting on 27 January 2003, specialist tax advice was sought.
[20] On 24 April 2004, the then chairperson of the Society told members at its quarterly meeting about the advantages and disadvantages of the freeholding option. Members agreed to a process in the course of which they had the opportunity to make written submissions about their ideas or preference for freeholding. The process was to culminate in a meeting which would vote on freeholding and/or winding up.
[21] Surveyors were engaged to draw up a plan of subdivision which was deposited with the Land Transfer Office on 29 September 2004. Eighty-seven new titles issued upon deposit. Four of those vested in the Christchurch City Council, two as recreation reserves and two as local purposes reserves. That left 83 titles which were to the lots on the property and vested in the Society.
[22] Six of those titles were for lots on which there was no dwelling. These lots were sold to provide funds to pay for the subdivision and freeholding processes.
[23] At a meeting on 16 November 2004 the Society’s committee decided to instruct its solicitors to provide further advice upon the legal options for freeholding. The partner in the law firm who obtained those instructions made an affidavit in the proceeding. Her evidence was that the Society’s instructions were to prepare a proposal by which Society members could obtain freehold title to their lots in a "fair and legal way".
[24] The next step was that four members approached the chairperson and told him they were concerned about their financial ability to take part in the freeholding process if it meant they had to purchase their land at market value. There was evidence before Wild J from these members setting out the financial difficulties they would face if they had to purchase their lot at its market value.
[25] The further report from the solicitors was obtained. The chairperson wrote to the lawyer on 9 March 2005 noting that the committee had unanimously voted to proceed to freeholding. The chairperson noted that there were two issues seen as "vitally important" to the members. The first was the advice that the rules could be changed to allow for unequal shares on winding up. This was seen as a mechanism to allow all members to freehold their sections without having to make any additional payment. The chairperson asked whether the lawyer was sure that this would be done under the terms of the Incorporated Societies Act. It was noted that there was one member who would dispute that. The second issue was that the whole transaction could be completed by a series of paper transactions as far as the members were concerned.
[26] Matters then proceeded to a meeting on 11 April 2005. Forty one members attended with an additional seven proxy votes being held (i.e. 48 of 75 members were represented). The lawyer spoke to her report outlining in more detail the various options. The minutes also set out an explanation of the proposed changes to r 35 and r 36 and why they were to be changed. The meeting then voted that the Society proceed to freehold the sections to individual members at market value based on the land values contained in the latest Christchurch City Council valuation, with settlement contemporaneous with the winding up of the Society. The meeting also voted to alter the existing r 36 and replace it with the following:

Before any winding up all debts, costs and liabilities of the Society shall be paid and any balance of the Society’s funds shall be divided among the members of the Society at the time in accordance with the following:

(i) A payment equal to the amount paid by the member for the member’s section.
(ii) Any surplus after payments referred to in (i) above shall be divided equally among the members.
[27] The change made to r 35 was to delete the reference to "seven-eighths" of the members present and replace it with "51%" of the members, thus returning the requirement to its pre-1991 form. The motions were passed 44:4 with J Russell asking that it be noted that "they" had voted against the motion.
[28] The Society’s lawyer provided the High Court with an analysis of the financial consequences of the Society distributing its assets equally to its members. This was the position:

(a) Based on the 16 December 2004 rating valuation issued by the Christchurch City Council, the Society’s total land asset pool was worth $3.72 million. As there were 77 lots, the average value per lot would be approximately $48,312.
(b) If there was an equal distribution in accordance with the original r 36, forty members would have to make payments to the Society and thirty-seven members would receive a payment from the Society.

[29] The payments the forty members would have to make ranged from $26,688 down to about $1,700. The payments that would have been received by members were $8,311 (27 members) or $3,311 (10 members). The appellants are amongst the twenty-seven members who would have been entitled to a payment of $8,311.
[30] The approved changes to the rules were registered on 26 April 2005 in accordance with the Incorporated Societies Act.
[31] The Society, at a special general meeting held on 2 May 2005, resolved to wind itself up under the provisions of its new r 35 and r 36 and in accordance with the Incorporated Societies Act. Thirty-three members voted for that motion and three against.
[32] Mr Russell had objected to what was occurring at the time and subsequently issued proceedings.

High Court decision

[33] Wild J accepted that the power to amend the rules was not unfettered. The approach the Judge took was that the rules could not be amended in a way conflicting with its fundamental objects or in a way which went beyond the "scope of the venture" contemplated when the member joined. This is the test as set out in Waitakere City Council v Waitemata Electricity Shareholders Society Inc [1996] 2 NZLR 735 (HC) at [28]. Wild J noted that it was also well settled that for the purposes of that limitation a wide scope would normally be given to a Society’s fundamental objects (see Waitakere City and Thellusson v Viscount Valentia [1907] 2 Ch 1 (CA)).
[34] The Judge found that r 36 had been altered in accordance with r 44 and registered and so came into effect in terms of s 21(3) of the Incorporated Societies Act.
[35] Wild J said that the fact the Society had operated in the same way for 25 years was not determinative, given r 44 had, similarly, always provided for a rule change. Hence, the Society’s members had always known their contract with the Society could change.
[36] The Judge saw the Society’s fundamental aim as being to achieve security of tenure. The arrangements for freeholding met that object. Equality in terms of the distribution of assets on dissolution, by contrast, was not an object and indeed could be irreconcilable with the object of security of tenure. Wild J concluded that there had been no breach of the contractual entitlement of the appellants and the rule change was consistent with the objects.
[37] Wild J recorded that he had discussed with counsel the appropriateness of ordering that the appellants’ costs were to be paid out of the Society’s funds. Wild J said that "on reflection" this was not seen as appropriate. The appellants were ordered to pay the Society’s costs on a 2B basis together with its reasonable disbursements.

Statutory scheme

[38] Section 6 of the Incorporated Societies Act 1908 sets out the matters which are to be dealt with in the rules of an incorporated society. The rules are to include the objects, provision for membership and other procedural matters. Section 6(1)(e) provides for the rules to address "[t]he mode in which the rules of the society may be altered, added to, or rescinded:". Section 6(1)(k) states that the rules are to provide for "[t]he disposition of the property of the society in the event of the society being put into liquidation:".
[39] Section 21 deals with the alteration of rules. Section 21(1) states that:

A society may from time to time alter its rules in a manner provided by the said rules, but subject to the provisions of this Act.

[40] Section 21(2) goes on to provide that alterations to the rules must be in writing, signed by at least three members, and delivered to the Registrar with a certificate to the effect the alteration complies with the rules. There is no challenge based on these procedural aspects.
[41] The Registrar, if satisfied the alteration has been duly made, registers the alteration and the alteration takes effect. The Registrar must be satisfied the alteration does not prejudicially affect any existing creditor or that all such creditors consent to the alteration.

Issues

[42] It is common ground that the right to change the rules is not unfettered. It is agreed that the Society cannot amend its rules in a way which is contrary to its fundamental objects or go beyond "the scope of the venture" contemplated when members joined. The issue is the application of that test as set out in Waitakere City to the facts of this case.

Discussion

[43] The high point of the appellant’s case is that the founding members of the Society turned their minds to these matters at the outset and opted for an arrangement based on equality of interest in the assets of the Society. That notion, the appellants say, has therefore been the foundation of the scheme from its inception.
[44] However, as the respondent emphasises, the concept of equality is not represented in the objects. While the appellants argue the objects are not the only way in which the scope of the venture is to be assessed, they are obviously a critical part of that assessment. It is also plain that for these purposes a "wide scope" is usually given to a society’s fundamental objects (Laws of New Zealand Incorporated Societies at [24] with reference to Waitakere; Thellusson v Viscount Valentia; and Morgan v Driscoll (1922) 38 TLR 251); and see the discussion in Paul, The law and administration of incorporated societies (2ed) at 39).
[45] In reliance on Black White & Grey Cabs Ltd v Reid [1980] 1 NZLR 40 (CA), the appellants emphasise that given the approach to equality the change to r 36 to provide for unequal distributions to members upon the winding up of the Society was not something within the contemplation of members at the time they entered the scheme.
[46] Apart from the fact that equality is not reflected in the objects, the problem with this argument is that the rules on their face contemplated changes might be made. The appellants’ argument taken to its logical conclusion would prevent any change to the dissolution provision which affected the equality idea in any way. That cannot be right.
[47] The appellants maintain Wild J was wrong to place any reliance on the object of security for tenure and on any associated difficulties members might have had in obtaining their freehold title. We accept that there is something odd about a Society attaining an object by winding itself up. But we agree with Wild J that security of tenure was an important object of the Society from the outset, and that what was proposed was intended to ensure that ultimate security of tenure (i.e. freeholding) was available to all members.
[48] As to the difficulties of individual members, the Judge made an assessment those difficulties were real and we see no error in the approach taken. While this factor should not be overstated, it is not irrelevant. The objects do include the maintenance and promotion of the rights and privileges of members, collectively and individually.
[49] The appellants say that Wild J was wrong to rely on the fact freeholding had been in contemplation at an earlier point. There was, however, an evidential basis for placing some weight on the fact freeholding had been considered on earlier occasions but not pursued because of costs issues. We see no error here.
[50] The appellants also rely on authorities such as Brown v Dale (1878) 9 Ch D 78 for the proposition that there is a prima facie assumption of equal distribution. The cases relied on by the appellants do not establish however that the rules cannot provide for unequal distribution as has occurred here.
[51] Finally, the appellants suggest that there is an analogy with minority oppression cases. The Judge does not address this as it was not pleaded. Assuming this is an apt analogy, which we doubt, there is no evidence to support such a claim. Further, a considered process was followed with legal and other advice being obtained. All members had the opportunity to participate in the decision making, and it is notable that most of those who stood to gain from the previous "equal division" rule did not oppose the amendment.
[52] The appellants sought to add a claim for damages. As we have found there has been no breach, no issue of damages arises. It would not, in any event, have been appropriate for us on appeal to deal with such a claim which was not pleaded or argued in the High Court.

Costs

[53] The appellants challenge the decision of the Judge to award costs against them in the High Court. The appellants’ argument is that there was a general benefit to all members of the Society in the litigation.
[54] In terms of costs in this Court, the appellants say that if they are unsuccessful then costs should lie where they fall.
[55] Wild J considered, but ultimately rejected, the possibility of costs being met by the Society. The Judge made that assessment after having heard the evidence. We agree with the respondent that Wild J was best placed to determine the question of costs and there is no basis for disturbing his assessment. As to any more general benefit from the litigation, it is relevant that although others are disadvantaged by the rule change they have not challenged the change.
[56] The respondent seeks costs in this Court. We see no reason why costs should not follow the event. The respondent is entitled to costs of $1,500 together with usual disbursements.

Result

[57] The appeal is dismissed. Costs of $1,500 together with usual disbursements are awarded to the respondent.

Solicitors:
J Takas, Dunedin, for Appellants
Corcoran French, Christchurch, for Respondent

NZLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.nzlii.org/nz/cases/NZCA/2006/198.html

[2]	The founding members of Riverlea Estates Incorporated ("the Society") leased house properties on land previously known as Stewarts Gully near Christchurch.
[3]	The property had been used in various ways. For example, after World War II, it was developed by the Army as a training camp with streets, barracks and Army huts. It came into private ownership and by then there were some 77 dwellings rented to members of the public. Some of these were used as permanent homes and some as holiday homes. The owner of the property in 1979 told the lessees that it wanted to sell the land. The owner had a proposal for the lessees but that was rejected. Broadly speaking, the lessees did not want third party ownership.
[4]	There was then discussion amongst the lessees of various options. Ultimately, they decided to form an incorporated society to purchase the property. The Society was duly incorporated on 24 March 1980. At that point it had 22 members. The rules of the Society relevantly provided for the following objects:

[5]	Membership of the Society was open to any proprietor of a lot in the area of land owned by the Society. There was provision for the admission of new members. Membership was construed as one membership interest carrying one vote per lot irrespective of the number of owners of any particular lot.
[6]	The rules dealt with the resignation and expulsion of members and with the officers of the Society. They made provision for an Annual General Meeting and provided that at any annual, quarterly or special general meeting of the Society the quorum was ten members. The rules also dealt with the Society’s finances.
[7]	Rule 35 dealt with the winding up of the Society and provided:

[8]	Rule 35 was amended in 1991 to increase the majority required to vote in favour of winding up from a simple majority to 7/8ths of the members present.
[9]	Importantly, in terms of this appeal, r 36 provided:

[11]	The Society bought the Stewarts Gully property and it was transferred to the Society’s name on 25 July 1980.
[12]	Leases were prepared. Following a meeting on 24 February 1980, it was resolved that the lease for members would be for a term of 21 years with right of renewal. The lease for non-members would be for 12 months with right of renewal. Because there was no legal subdivision, there were no legal boundaries between the lots. The lots were of different sizes and were set apart by hedges or fences.
[13]	A ground rent was set for each lot. The ground rent did not alter with the size of the lot but depended only on whether or not the lessor was a member of the Society.
[14]	There was evidence that the founding members did consider other forms of ownership. Freeholding was rejected for a number of reasons including the costs of subdivision.
[15]	Accordingly, the position was that there were some sections which were larger and probably more valuable than other sections but the members agreed each to contribute equally in terms of the ground rental. Mr Lloyd, a solicitor who gave advice to members at the time the Society was set up, said that the founding members:

[16]	Over time, there was further discussion about the possibility of freeholding. In particular, there was consideration of this in 1994 when the Society sought a report from its solicitor about what was entailed in freeholding. Nothing came of that when members were told they would have to pay money.
[17]	The possibility of subdividing and freeholding arose again in 2000. There was a formal resolution by the Society’s committee at a meeting on 17 April 2000 to examine the feasibility of freeholding.
[18]	On 30 October 2000, the Society decided to lodge an application with the Christchurch City Council to subdivide the property. The application was granted by the Council on 16 April 2002.
[19]	There then followed discussions about the mechanics of freeholding. With the assistance of the Society’s lawyer, various options were considered. At a meeting on 27 January 2003, specialist tax advice was sought.
[20]	On 24 April 2004, the then chairperson of the Society told members at its quarterly meeting about the advantages and disadvantages of the freeholding option. Members agreed to a process in the course of which they had the opportunity to make written submissions about their ideas or preference for freeholding. The process was to culminate in a meeting which would vote on freeholding and/or winding up.
[21]	Surveyors were engaged to draw up a plan of subdivision which was deposited with the Land Transfer Office on 29 September 2004. Eighty-seven new titles issued upon deposit. Four of those vested in the Christchurch City Council, two as recreation reserves and two as local purposes reserves. That left 83 titles which were to the lots on the property and vested in the Society.
[22]	Six of those titles were for lots on which there was no dwelling. These lots were sold to provide funds to pay for the subdivision and freeholding processes.
[23]	At a meeting on 16 November 2004 the Society’s committee decided to instruct its solicitors to provide further advice upon the legal options for freeholding. The partner in the law firm who obtained those instructions made an affidavit in the proceeding. Her evidence was that the Society’s instructions were to prepare a proposal by which Society members could obtain freehold title to their lots in a "fair and legal way".
[24]	The next step was that four members approached the chairperson and told him they were concerned about their financial ability to take part in the freeholding process if it meant they had to purchase their land at market value. There was evidence before Wild J from these members setting out the financial difficulties they would face if they had to purchase their lot at its market value.
[25]	The further report from the solicitors was obtained. The chairperson wrote to the lawyer on 9 March 2005 noting that the committee had unanimously voted to proceed to freeholding. The chairperson noted that there were two issues seen as "vitally important" to the members. The first was the advice that the rules could be changed to allow for unequal shares on winding up. This was seen as a mechanism to allow all members to freehold their sections without having to make any additional payment. The chairperson asked whether the lawyer was sure that this would be done under the terms of the Incorporated Societies Act. It was noted that there was one member who would dispute that. The second issue was that the whole transaction could be completed by a series of paper transactions as far as the members were concerned.
[26]	Matters then proceeded to a meeting on 11 April 2005. Forty one members attended with an additional seven proxy votes being held (i.e. 48 of 75 members were represented). The lawyer spoke to her report outlining in more detail the various options. The minutes also set out an explanation of the proposed changes to r 35 and r 36 and why they were to be changed. The meeting then voted that the Society proceed to freehold the sections to individual members at market value based on the land values contained in the latest Christchurch City Council valuation, with settlement contemporaneous with the winding up of the Society. The meeting also voted to alter the existing r 36 and replace it with the following:

(i)	A payment equal to the amount paid by the member for the member’s section.
(ii)	Any surplus after payments referred to in (i) above shall be divided equally among the members.
[27]	The change made to r 35 was to delete the reference to "seven-eighths" of the members present and replace it with "51%" of the members, thus returning the requirement to its pre-1991 form. The motions were passed 44:4 with J Russell asking that it be noted that "they" had voted against the motion.
[28]	The Society’s lawyer provided the High Court with an analysis of the financial consequences of the Society distributing its assets equally to its members. This was the position:

[29]	The payments the forty members would have to make ranged from $26,688 down to about $1,700. The payments that would have been received by members were $8,311 (27 members) or $3,311 (10 members). The appellants are amongst the twenty-seven members who would have been entitled to a payment of $8,311.
[30]	The approved changes to the rules were registered on 26 April 2005 in accordance with the Incorporated Societies Act.
[31]	The Society, at a special general meeting held on 2 May 2005, resolved to wind itself up under the provisions of its new r 35 and r 36 and in accordance with the Incorporated Societies Act. Thirty-three members voted for that motion and three against.
[32]	Mr Russell had objected to what was occurring at the time and subsequently issued proceedings.

[33]	Wild J accepted that the power to amend the rules was not unfettered. The approach the Judge took was that the rules could not be amended in a way conflicting with its fundamental objects or in a way which went beyond the "scope of the venture" contemplated when the member joined. This is the test as set out in Waitakere City Council v Waitemata Electricity Shareholders Society Inc [1996] 2 NZLR 735 (HC) at [28]. Wild J noted that it was also well settled that for the purposes of that limitation a wide scope would normally be given to a Society’s fundamental objects (see Waitakere City and Thellusson v Viscount Valentia [1907] 2 Ch 1 (CA)).
[34]	The Judge found that r 36 had been altered in accordance with r 44 and registered and so came into effect in terms of s 21(3) of the Incorporated Societies Act.
[35]	Wild J said that the fact the Society had operated in the same way for 25 years was not determinative, given r 44 had, similarly, always provided for a rule change. Hence, the Society’s members had always known their contract with the Society could change.
[36]	The Judge saw the Society’s fundamental aim as being to achieve security of tenure. The arrangements for freeholding met that object. Equality in terms of the distribution of assets on dissolution, by contrast, was not an object and indeed could be irreconcilable with the object of security of tenure. Wild J concluded that there had been no breach of the contractual entitlement of the appellants and the rule change was consistent with the objects.
[37]	Wild J recorded that he had discussed with counsel the appropriateness of ordering that the appellants’ costs were to be paid out of the Society’s funds. Wild J said that "on reflection" this was not seen as appropriate. The appellants were ordered to pay the Society’s costs on a 2B basis together with its reasonable disbursements.

[40]	Section 21(2) goes on to provide that alterations to the rules must be in writing, signed by at least three members, and delivered to the Registrar with a certificate to the effect the alteration complies with the rules. There is no challenge based on these procedural aspects.
[41]	The Registrar, if satisfied the alteration has been duly made, registers the alteration and the alteration takes effect. The Registrar must be satisfied the alteration does not prejudicially affect any existing creditor or that all such creditors consent to the alteration.

[43]	The high point of the appellant’s case is that the founding members of the Society turned their minds to these matters at the outset and opted for an arrangement based on equality of interest in the assets of the Society. That notion, the appellants say, has therefore been the foundation of the scheme from its inception.
[44]	However, as the respondent emphasises, the concept of equality is not represented in the objects. While the appellants argue the objects are not the only way in which the scope of the venture is to be assessed, they are obviously a critical part of that assessment. It is also plain that for these purposes a "wide scope" is usually given to a society’s fundamental objects (Laws of New Zealand Incorporated Societies at [24] with reference to Waitakere; Thellusson v Viscount Valentia; and Morgan v Driscoll (1922) 38 TLR 251); and see the discussion in Paul, The law and administration of incorporated societies (2ed) at 39).
[45]	In reliance on Black White & Grey Cabs Ltd v Reid [1980] 1 NZLR 40 (CA), the appellants emphasise that given the approach to equality the change to r 36 to provide for unequal distributions to members upon the winding up of the Society was not something within the contemplation of members at the time they entered the scheme.
[46]	Apart from the fact that equality is not reflected in the objects, the problem with this argument is that the rules on their face contemplated changes might be made. The appellants’ argument taken to its logical conclusion would prevent any change to the dissolution provision which affected the equality idea in any way. That cannot be right.
[47]	The appellants maintain Wild J was wrong to place any reliance on the object of security for tenure and on any associated difficulties members might have had in obtaining their freehold title. We accept that there is something odd about a Society attaining an object by winding itself up. But we agree with Wild J that security of tenure was an important object of the Society from the outset, and that what was proposed was intended to ensure that ultimate security of tenure (i.e. freeholding) was available to all members.
[48]	As to the difficulties of individual members, the Judge made an assessment those difficulties were real and we see no error in the approach taken. While this factor should not be overstated, it is not irrelevant. The objects do include the maintenance and promotion of the rights and privileges of members, collectively and individually.
[49]	The appellants say that Wild J was wrong to rely on the fact freeholding had been in contemplation at an earlier point. There was, however, an evidential basis for placing some weight on the fact freeholding had been considered on earlier occasions but not pursued because of costs issues. We see no error here.
[50]	The appellants also rely on authorities such as Brown v Dale (1878) 9 Ch D 78 for the proposition that there is a prima facie assumption of equal distribution. The cases relied on by the appellants do not establish however that the rules cannot provide for unequal distribution as has occurred here.
[51]	Finally, the appellants suggest that there is an analogy with minority oppression cases. The Judge does not address this as it was not pleaded. Assuming this is an apt analogy, which we doubt, there is no evidence to support such a claim. Further, a considered process was followed with legal and other advice being obtained. All members had the opportunity to participate in the decision making, and it is notable that most of those who stood to gain from the previous "equal division" rule did not oppose the amendment.
[52]	The appellants sought to add a claim for damages. As we have found there has been no breach, no issue of damages arises. It would not, in any event, have been appropriate for us on appeal to deal with such a claim which was not pleaded or argued in the High Court.

[53]	The appellants challenge the decision of the Judge to award costs against them in the High Court. The appellants’ argument is that there was a general benefit to all members of the Society in the litigation.
[54]	In terms of costs in this Court, the appellants say that if they are unsuccessful then costs should lie where they fall.
[55]	Wild J considered, but ultimately rejected, the possibility of costs being met by the Society. The Judge made that assessment after having heard the evidence. We agree with the respondent that Wild J was best placed to determine the question of costs and there is no basis for disturbing his assessment. As to any more general benefit from the litigation, it is relevant that although others are disadvantaged by the rule change they have not challenged the change.
[56]	The respondent seeks costs in this Court. We see no reason why costs should not follow the event. The respondent is entitled to costs of $1,500 together with usual disbursements.