Malhi v Auckland Co-Operative Taxi Society Ltd [2014] NZHC 2814; [2015] 2 NZLR 552 (12 November 2014)

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BETWEEN	GURCHARANJIT MALHI and BALWANT DHALIWAL Applicants
AND	AUCKLAND CO-OPERATIVE TAXI SOCIETY LIMITED _Respondent

Hearing:	23 June 2014
Appearances:	John von Dadelszen and Michelle Nicol for the Applicants Gary Judd QC, Kenrick Paterson, Shafraz Khan and Jenna Riddle for the Respondent
_Judgment:	_{12 November 2014}

This judgment was delivered by on 12 November 2014 at 4:30pm pursuant to Rule 11.5 of the High Court Rules.

MALHI & ANOR v AUCKLAND CO-OPERATIVE TAXI SOCIETY LIMITED [2014] NZHC 2814 [12 November 2014]

Number Introduction ..............................................................................................................[1] Background...............................................................................................................[5] Jurisdiction .............................................................................................................[21] First cause of action: Non-compliance with r 37(c) [39] Second cause of action: Unlawful special votes [40]

First cause of action: r 37(c) .................................................................................[45]

be eligible for re-election? [49] If a right exists does r 37(c) retrospectively operate to remove the right? [60] Second cause of action: unlawful special votes...................................................[71] Cast by shareholders who had not requested the ability to do so [79] Cast in shareholders’ homes and businesses and collected by the Society [80] Failing to post the special vote in the mail [81]

they be declared invalid? [88] Is there any prejudice to third parties? [110] Third cause of action: unlawful voting by unfinancial shareholders ............. [111] Result .....................................................................................................................[133]

[1] Messrs Malhi and Dhaliwal, the applicants, are shareholders in the respondent, the Auckland Co-operative Taxi Society Limited (“the Society”). They are both Auckland taxi drivers. Mr Malhi is the owner of Cab 301 in the Society’s fleet. Mr Dhaliwal owns Cab 125.

[2] In 2013 both men stood as candidates for election to the Society’s six member board (“the Board”). Under the Society’s rules two of the six members of the Board are required to retire by rotation but, subject to the rules, may on retirement offer themselves up for re-election without nomination. Messrs Malhi and Dhaliwal were unsuccessful in their bid for the Board. Instead, two candidates who had previously held office on the board continuously since 2004 and 2007 respectively were elected. Messrs Malhi and Dhaliwal were the next highest polling candidates. They claim that there were fundamental irregularities in the way in which the elections were run and the votes cast. They claim that these irregularities amounted to breaches of the Society’s own rules. Had those breaches not occurred they say they would have been elected to the Board.

[3] First, they claim that under r 37(c) of the rules of the Society’s constitution, three members of the Board had, in fact, been unlawfully elected in the previous years’ elections in 2012 and 2013 and as a result their purported election was a nullity, void and of no effect.

[4] The applicants also claim the Society’s rules and bylaws were not complied with in two other ways during the 2013 elections. The two further claims relate to the way Special Votes were dealt with and the votes of unfinancial members. As a consequence it is their case that the results of the election were materially affected. They both say they would have been elected to the Board if the Society had observed and complied with its own rules and procedures.

Societies Act 1908 (“the Act”). It operates from offices in Newton, Auckland.

[6] The Society has approximately 700 members, most of whom own and drive their own taxis. To be eligible for membership a person must hold a taxi or small passenger vehicle licence.¹In addition to the payment of various fees and levies each member is required to purchase a share.

[7] Over recent years the financial fortunes of the Society have fluctuated. The organisation has also been plagued by internal ructions mostly in the form of management and governance issues.

This, it appears, was as a result of the Society’s bank debt rising to approximately

$6.5 million,²the share price dropping from about $30,000 to zero and what the applicants submit was a widely held belief that these unfortunate circumstances occurred because the control of the Society had, for a long time, been vested in a small group of shareholders who lacked the capability or necessary skills to properly manage the Society’s business. In September 2003 an interim Board was elected to manage the Society’s affairs until an elected permanent Board replaced it.

[9] In an effort to alleviate the financial difficulties, special levies were introduced over and above the Society’s usual shareholders’ levy in order to meet the prescribed minimum debt repayment set by the Society’s bank.

[10] With the plunge in the value of shares, 56 shareholders surrendered their shares which were given away for a minimal joining fee.

[11] In mid-2007 the Society’s debt was repaid. Despite this, the Society encountered continuing management and governance issues. These included a high turnover of staff including general managers and financial controllers. An independent audit was undertaken in 2009 which was critical of the Society’s financial management and identified serious mismanagement of its finances, inconsistencies in the application of the Society’s rules which lead to a challenge to

_{the legitimacy of the 2010 Board election results on the basis
that unfinancial}

¹Rule 4(1) extends the class of persons eligible for membership to “[a]ny person, corporation, Company or Incorporated Society”.

members were permitted to vote. Two thefts of money totalling more than $65,000 in the 2010 and 2011 financial years also occurred. The offender has not been identified.

[12] The applicants submit it was against this backdrop and a concern that there might be a repeat of the 2002 issues that a shareholder was promoted to propose the introduction of a new rule designed to limit the period Board members were eligible to remain on the Board. This was r 37(c). It was passed at the 2010 annual general meeting and adopted into the Society’s constitution. It is the effect of this rule which is central to Messrs Malhi and Dhaliwal’s first cause of action.

[13] At this point it is necessary to briefly explain how eligibility for standing for the Board works.

[14] Each year two members of the six person Board are required to retire by rotation but have the right on their retirement and without the need for nomination to stand for re-election for another three year term. Under r 37(c) this right of re- election may now be exercised only at the conclusion of the Board member’s first term, i.e. the maximum period any member may sit on the Board without a stand down period is six years or two consecutive terms. Before r 37(c) was passed there was no limit to the number of consecutive three year terms a Board member could remain on the Board.

[15] After the 2010 Board elections a shareholder, Mr Ronnie Sidhu, challenged the election results on the basis that unfinancial shareholders, contrary to the rules, had been permitted to vote. This challenge failed but it does appear to have been the catalyst for a change on the Society’s part that no member would be entitled to vote whilst any money remained due and payable to the Society.

[16] At the annual general meeting in 2011 another new rule, r 27(a), was passed. It removed the power of members to vote by proxy and substituted voting by secret ballot. At the same meeting there was a proposal to rescind the new r 37(c). This bid failed but it was agreed that legal advice would be obtained on the effect and interpretation of r 37(c). The principal concern revolved around the question of

whether the rule had retrospective effect. In other words, did the requirement under r 37(c) that a Board member serve only two, three year terms apply to elections after the rule was passed or did it affect sitting Board members who had already served two terms on the Board.

[17] On 10 April 2012 a secret ballot was held on a motion to repeal r 37(c). This failed. However, Mr Gary Judd QC was privately instructed by Mr Graham, the chairman, to provide an opinion on the interpretation of the rule and, in particular, the question of retrospectivity. Mr Judd concluded the rule applied only after it had been passed at the annual general meeting and that the two term limit applied only in relation to elections held after the rule had been passed. Some members expressed disquiet and suggested a second opinion should be sought. It appears that never happened.

[18] At the 2012 Board elections Mr Graham, who has been Board chairman since he was first elected in 2003, was required to retire by rotation. By that time he had completed four consecutive three year terms. In 2012 he was returned for his fourth term with an overwhelming majority of more than 300 votes, apparently the highest ever received by any candidate in the history of the Society.

[19] For the 2013 Board elections five candidates, including Messrs Malhi and Dhaliwal, stood for the two contested seats. Mr Graham was not required to vacate his seat on the Board because he still had two years of his term remaining. Mr Patel and Mr Bhullar, respectively, were the two top polling candidates (votes cast in person plus special votes). Messrs Malhi and Dhaliwal respectively were the next highest. Forty nine shareholders cast their votes by special vote.

[20] Messrs Malhi and Dhaliwal challenge those special votes and seek orders that they be declared null and void. They also claim that some nine shareholders who were disqualified from voting under the bylaws of the Society’s constitution because they were not financial were wrongly permitted to vote. They seek a declaration that these votes be declared void and also seek an order that the two remaining highest polling candidates be declared elected or there be a recount. Alternatively they seek

an order appointing a manager to govern the Society to conduct a fresh election and to hand over control of the Society to that newly elected Board.

[21] A preliminary issue arose relatively late as the parties prepared for the hearing. The Society raises the question of whether this Court has jurisdiction to deal with the matters raised by the applicants. The Society submits this Court has no jurisdiction because the Act under which the Society is registered requires every dispute between a member and the Society to be decided in a manner directed by the rules of the Society if the rules contain any such directions and the decision so made shall be binding and conclusive on all parties without appeal and shall not be

[22] I must thus consider this issue as a preliminary point before discussing the substantive issues raised by the applicants.

[23] The Act confers certain privileges on the Society. A society under the Act is an “artificial entity” and a legal person whose powers are conferred by statute. Thus decisions are amenable to review under the Judicature Amendment Act 1972.

With respect to disputes concerning registered societies the following provisions shall have effect:

Every dispute between a member, or person claiming through a member or under the rules of a registered society, and the society or an officer thereof, shall be decided in manner directed by the rules of the society, if they contain any such directions, and the decision so made shall be binding and conclusive on all parties without appeal, and shall not be removable into any Court, or restrainable by injunction; and application for the enforcement thereof may be made to a District Court: Provided as follows:

(a) the parties to a dispute in a society may, by consent (unless the rules of the society expressly forbid), refer such dispute

to the Registrar, who shall, with the consent of the Governor-General, hear and determine such dispute, and shall have power to order the expenses of determining the same to be paid either out of the funds of the society or by such parties to the dispute as he thinks fit; and such determination and order shall have the same effect and be enforceable in like manner as a decision made in the manner directed by the rules of the society:

(b) the Registrar to whom any dispute is referred may administer oaths, and may require the attendance of all parties concerned, and of witnesses, and the production of all books and documents relating to the matter in question; and any person refusing to attend, or to produce any documents, or to give evidence before the Registrar, shall be guilty of an offence against this Act:

(c) where the rules of a society direct that disputes shall be referred to Justices, the dispute shall be determined by a District Court:

(d) when the rules contain no direction as to disputes, or when no decision is made on a dispute within 40 days after application to the society for reference under its rules, the member or person aggrieved may apply to a District Court, which may hear and determine the matter in dispute:

(e) the Court or Registrar may at the request of either party state a case for the opinion of the High Court on any question of law, and may also grant to either party such discovery as to documents and otherwise, or such inspection of documents, as might be granted by any Court, such discovery to be made on behalf of the society by such officer of the same as such Court or Registrar determines.

[25] In terms of s 12 the Society’s rules do provide for the regulation of internal

(72) Under these rules every dispute between member, Taxi Operator or person and the Society or an officer thereof shall be decided by the Board whose decision shall be binding and conclusive all parties (emphasis added).

[26] Mr Judd for the Society submits that it is the effect of this rule which ousts this Court’s jurisdiction by reason of the operation of s 12 and r 72, both of which provide that any decision on a dispute involving members of the organisation “shall be binding and conclusive on all parties”.

There, under urgency, this Court held that in accordance with s 12 the application made to the Court for relief was in the wrong form. It should have been made to the District Court because, consistent with s 12(d) of the Act, and unlike the respondent in this case, the Hamilton Taxi Society’s rules contained no direction as to disputes.

[28] The application of s 12 has not been extensively considered by the Courts. However, the Friendly Societies and Credit Unions Act 1982 which has a similar provision, has received some judicial attention.⁵Mr Judd refers to Pritchard v

Evans⁶and Douglas v McKenzie⁷which considered the jurisdiction issue. However

in these cases the applicant was either not a member but a trustee, or was not acting in the capacity of a member. Thus the section was not engaged, leaving the Court with jurisdiction. I do not consider those cases to be particularly helpful or analogous to the present.

There the Court dismissed the application for want of jurisdiction on the basis that:⁹

...the club’s rules appear to apply to all aspects of Mr de Montalk’s complaints and accordingly there is no basis on which Mr de Montalk could appeal against any decision of the Registrar since the Registrar had no jurisdiction to become involved in the matter, the statutory requisites to the exercise of jurisdiction under section 79(2) not having being satisfied.

[30] This makes it clear that if a decision falls within the rules of the Society the

[31] Contrast this with Dickey’s Travel Services Limited v Auckland Co-operative Taxi Society Limited.¹⁰There the defendant raised the issue of s 12 and the Court’s jurisdiction. The question which arose in Dickey’s Travel Services was whether the

_{chairman had the authority to decide that there must be a postal ballot
to determine}

⁵Section 78(2) states “...every dispute... shall be decided in the manner directed by the rules of the society or branch... and the decision so made shall be binding and conclusive on all parties.”

⁸_{de Montalk v Onehunga Workingmen’s Club HC
Auckland AP137/01, 29 May 2002.}

¹⁰Dickey’s Travel Services Limited v Auckland Co-operative Taxi Society Limited [1973] 1 NZLR 93 (SC).

the substantive motion. Woodhouse J held that if the management committee was to decide a dispute between a member and an officer of the Society under r 71, the Act requires disputes to be decided in the “manner directed by the rules of the Society”. Whether the Society was acting in the prescribed manner was the very question in issue. If the Society was not acting in the correct manner any decision made would

be a nullity as it had not been made in accordance with the rules.¹¹In full he said:¹²

Rule 71 certainly provides for every dispute a member and an officer of the Society to be decided by the committee; and the Act requires disputes to be decided ‘in manner directed by the rules of the Society’. But the real point of issue in the present case is whether that will be done. The law is not confined to r 27 and the basic complaint of the plaintiff is that two other relevant rules have been misconstrued. If that complaint should be justified and the same misconstruction then taints the committee’s attempt to decide the issue its decision could not possibly be ‘binding and inclusive on all parties’ as r 71 might seem to contemplate. The decision would not be wrong – clearly it would a nullity because it had not been truly made in ‘in manner directed by the rules’. Accordingly, where such a dispute as the present arises the jurisdiction of the Court cannot be challenged.

[32] Mr Judd for the Society submits the situation which confronted Woodhouse J was unique and quite different from the present. As such he submits Dickey’s Travel Services can be distinguished.

[33] Mr von Dazelden on the other hand submits that the question in this case is whether the Society has, in an unbiased way and according to proper legal and interpretative principles, dealt with the issues raised “in manner directed by the rules of the society.” Further, he argues, the Board misconstrued r 37(c) and the electoral bylaws and with the result the Board’s decisions are, as per Dickey’s Travel Services, not only wrong but a nullity because they have not been made “in manner directed by the rules.”

[34] In my view, the term “in manner directed by the rules” under s 12, must refer to the dispute resolution procedure set out in the rules. Therefore the principle established in Dickey’s Travel Services is that the Court has jurisdiction to determine

_{whether the dispute was decided in the manner directed by the rules,
meaning by the}

correct process. Otherwise decisions made under an incorrect process would be tainted and a nullity.

[35] This is not a principle which is directly relevant in the current situation because it is clear that the correct process under the rules was to refer the dispute to the Board. The issue here is whether the Board’s decision is full and final in circumstances where the issue relates to the legality of the composition of the Board.

[36] Although neither counsel made submissions to this effect, no doubt because the issue was raised so late, I am satisfied that this Court has jurisdiction. It has long been held that privative clauses do not operate to oust a Court’s power to review for an error of law, within or without jurisdiction.¹³For example in Hockey v Yelland, the High Court of Australia said:¹⁴

The provision that the board's determination shall be final and conclusive is not enough to exclude certiorari. It has been held in Reg. v. Medical Appeal Tribunal. Ex parte Gilmore [1957] EWCA Civ 1; (1957) 1 QB 574, and in S.E. Asia Firebricks v. Non-Metallic Products, at pp 369-370, that a provision that a decision shall be final does not prevent the issue of certiorari for excess of jurisdiction or error of law on the face of the record, and in my opinion the addition of the words "and conclusive" does not have that effect. The words of the further provision that the worker shall have no right to have any of the matters which have been determined by the medical board "heard and determined by an Industrial Magistrate, or, by way of appeal or otherwise, by any Court or judicial tribunal whatsoever" are in my opinion quite inapt to take away from the Court its power to issue certiorari for error of law on the face of the record. The words "heard and determined" echo the words of s.13, and although sub-s.(11) excludes any other hearing or determination of the matters the subject of the board's determination, it does not affect the power of the court to decide whether that determination was reached in accordance with law.

[37] The rationale is that a decision based on an error of law falls beyond the jurisdiction of the decision maker, and therefore, is not caught by the privative clause that prevents review of decisions. A decision beyond jurisdiction is not considered a “decision” as such.

[38] Having determined I have jurisdiction I shall now turn to examine this by reference to each of the causes of action.

¹³R v Medical Appeal Tribunal, ex parte Gilmore [1957] EWCA Civ 1; [1957] 1 QB 574 (CA); Jones v Department of

_{Employment [1989] QB 1 (CA); Hockey v Yelland [1984] HCA 72; (1984) 157
CLR 124 (HCA)..}

[39] The essence of this cause of action is that the Board misconstrued r 37(c) and its electoral bylaws. If this is correct the decision could be said to be based on an error of law. Furthermore, as the issue engages the legality of the composition of the Board, natural justice principles come into play as the Board is being asked to rule on its own legality. It follows a breach of natural justice may have consequently occurred. As per Anisminic Ltd v Foreign Compensation Commission, a Tribunal

[40] This cause of action focuses on whether the rules and bylaws in the Society’s

constitution were observed in respect to the special voting at the Society’s 2013

Board elections. Specifically, the applicants allege that the Society’s constitution requires special votes to be sent to the Electoral Officer by mail in order to be valid. The applicants’ allegation is that contrary to those provisions special votes were not posted as required by the rules. The Society submits that the validity of the vote is not determined by the procedural manner via which the vote was cast but rather the integrity of the vote as a whole. The Society also refers to r 28(a) which relevantly states that no secret ballot shall be declared invalid by reason of a variety of failures including an irregularity, want of form, etc. The issue under this head is therefore whether the alleged procedural irregularity falls within r 28. If the validity of the vote is determined by its procedural correctness rather than its integrity, the irregularity is not cured by resort to r 28. The Board thus had no jurisdiction to determine that the special votes were valid. If this is so then the privative clause would not apply.

[41] Furthermore, the Board is being asked to review the process that led to the composition of itself. I am satisfied that there are issues of natural justice involved in this also as the Board clearly cannot be considered to be an independent and impartial decision-maker.

Third cause of action: Unlawful voting by unfinancial shareholders of the Society

[42] The third cause of action relies on the bylaw of the Society’s constitution which relevantly provides that no member shall be entitled to vote while any money remains due and payable to the Society. The funds payable to the Society are defined by reference to a rule¹⁶which empowers the Board to impose levies for capital or special purposes.

[43] The essence of the applicants’ claim under this cause of action is that shareholders who were not financial members because they owed money to the Society at the time they cast their votes were permitted to vote and as a consequence the results of the Board elections were materially affected. The applicants rely on an interpretation of the bylaws which means that a member is ineligible to vote if any payment of outstanding monies was made less than five clear working days before the polling date or before the special vote was posted. In contrast, the Society argues this provision simply ensures that payments are made from cleared funds, in other words in a fashion which is either in cash or effectively cash in the sense that the payment is made from cleared funds and cannot be reversed or dishonoured. Again, in my view this issue relates to a possible error of law. Further natural justice issues also arise on this point.

[44] It follows I hold that this Court has jurisdiction to deal with each of the

[45] The background and context to the passing of r 37(c) and its introduction into the Society’s constitution at the 2010 annual general meeting has already been described.

(37)(a) THERE shall be a Board of Governance of the Society comprising six persons who must be members of the Society and who shall be known as members of the Board.

(b) The members of the Board of Governance holding office at the time of the coming into force of this Rule shall continue to hold office as if elected under this Rule until each such member shall retire in accordance with the provisions hereinafter contained.

(c) No member of the Board of Governance shall remain a member of the Board longer than two consecutive terms of the Board. For contesting re-election to be a member of the Board, such former member would be required to stay outside the Board for at least 3 years.

[47] The applicants submit that this rule should be interpreted so as to preclude those on the Board who have served two terms as at the time the rule was introduced from standing for re-election without an intervening stand down term of at least three years. Further, they submit that the introduction of r 37(c) introduced a legal requirement for retirement that is entirely consistent with the phrase in r 37(b) “until such members shall retire in accordance with the provisions therein after contained” which, from 2010, includes r 37(c).

[48] The issue can be stated simply. Does r 37(c) have retrospective effect? The consequence of a finding that it has retrospective effect is that Mr Graham was not eligible to stand for election in 2012 and Messrs Patel and Bhullar were not eligible to stand for election in 2013. It is common ground that if the applicants are correct that r 37(c) has retrospective effect, Mr Graham, who has held office continually since 2003, would not have been an eligible candidate for the 2012 Board elections and his election to the Board was, as a consequence, contrary to the rules of the Society’s constitution and therefore void and of no effect. The same would apply to Mr Patel and Mr Bhullar. Mr Patel has held office continuously since 2004. He was a candidate in the 2013 Board elections. As the highest polling candidate he was elected to the Board. As with Mr Graham, if r 37(c) is interpreted as having retrospective effect, his election was contrary to the rules and was thus void and of no effect. Mr Bhullar has held office continuously since 2007 and was a candidate in the 2013 Board elections. It is claimed he was also ineligible to stand and having been elected for two, three year terms in 2007 and 2010 was not eligible to stand for

election again in 2013. The applicants submit his election, being contrary to r 37(c)

Do existing Board members have the “right” to hold office and be eligible for re- election?

[49] It is common ground between the parties that the rules form the basis of membership in that when a shareholder becomes a member a contract arises between the member and the Society. Rule 2.6 binds the Society and all its members subject to the provisions of the Act. Section 9 of the Act provides that the rules bind the Society and/or members.

[50] Mr von Dadelszen submits that in 2010 existing Board members may have had an “expectation” that they would be eligible for re-election upon rotation or retirement and Board members who had not then served two consecutive terms on the Board would continue to retain that expectation consistent with the interpretation of r 37(c). But any such expectation was extinguished on the passing on r 37(c).

[51] In support of this proposition he relies on Waitakere City Council v Waitemata Electricity Shareholders Inc where the High Court held that a person joining a society must see rule changes in general but not those which would conflict with the very point of having a society in the first place.¹⁷Mr von Dadelszen submits that if the majority of members approved a change in the Society’s constitution, as they did in relation to the introduction of r 37(c), then it is implicit

that they agree to amend the contract between them, an agreement which was clearly within the contemplation of the shareholders from the time they became members.

[52] Alternatively if there is found to be a right, Mr von Dadelszen submits that the right only arises on retirement as this is when it can be exercised. He submits that the wording of r 39 is clear. Eligibility for re-election arises only upon retirement from office. Rule 37(c) removed any so called right before it could be vested but did not alter the right in respect of members who had not yet served two consecutive

¹⁷Waitakere City Council v Waitemata Electricity Shareholders Society Inc [1996] 2 NZLR 735 (HC)

[53] Mr Judd submits that despite the introduction of r 37(c), existing Board members enjoy a right to continue in office until retired by rotation under r 39. Further, despite r 39, existing Board members have the right to be eligible for re- election without nomination under r 39.

[54] In interpreting r 37(c), Mr Judd submits assistance can be derived from the wording of r 39 which provides as follows:

(39) At the first Annual General Meeting and at every succeeding Annual General Meeting, two members of the Board in rotation shall retire from office. A retiring member of the Board shall continue in office until a successor be appointed. A retiring member [of the board] shall be eligible for re-election and without nomination. The office of a member of the Board of Governance shall become vacant if the Society in general meeting shall pass a resolution declaring his seat vacant or appoint some other member of the Society in his place.

[55] Before the introduction of r 37(c) the effect of r 39 was that a member of the Board was eligible on retirement to re-election without any limitations or restrictions. Mr Judd submits that this provided a member with an entitlement, or a right, to stand for re-election. He submits that this was a right which the member gained on being elected when the member assumed the rights and obligations attached to that role.

[56] Mr Judd submits that although the right becomes exercisable on retirement it exists from the point of election. Each of the three candidates would have served two consecutive terms on their retirement rotation. But for the amendment their expectation and their contractual entitlement at the time they were elected and became a member of the Board is that they would be eligible for re-election without nomination when they next retired by rotation.

[57] Mr Judd draws a distinction between the existence of a right and the exercise of a right. He submits that the right was created when the member was elected even if that right may not be exercisable until retirement. The fact that it is exercisable only on retirement does not exclude the fact that it may have been in existence for the two previous years of tenure as a Board member. In that sense, he submits that

when a candidate who is an existing Board member seeks re-election the candidate is not relying on the fact of retirement but on the right to be eligible for re-election on retirement without nomination because this right was created when he became a member of the Board and endured until retirement.

[58] As Mr Judd acknowledged, the conflict between the two provisions will cease to have any practical significance once there are no longer any Board members who were elected before the rule was inserted. In Mr Graham’s case this would be in

[59] I am satisfied for the reasons advanced by Mr Judd that the right to re- election on retirement, while exercisable only on retirement, is a right created at the time the Board member was elected and endures until the Board member retires unless frustrated by an intervening circumstance.

[60] I have decided that a right existed for a retiring member to be eligible for re- election without nomination, and that this right arose at the time the member was elected to the Board. In light of this I turn to consider the meaning of s 37(c).

[61] The essence of the applicants’ argument is that the rule does not have retrospective effect and thus the principles concerning retrospectivity are not engaged in this case. Mr von Daldszen’s argument is that r 37(c) applies to all elections subsequent to its passing, in other words from the 2010 election onwards. For this reason, the applicants submit that Messrs Graham, Patel and Bhullar were not eligible to stand in various elections after that date.

[62] In contrast, the Society submits that the rule removes the rights of individuals retrospectively because the right to re-election arises from the moment of election.

[63] In Yew Bon Tew v Kenderaan Bas Mara Lord Brightman, delivering the advice of the Judicial Committee, said:¹⁸

¹⁸Yew Bon Tew v Kenderaan Bas Mara [1983] 1 AC 553 (PC) at 558, cited in Secretary of State for

A statute is retrospective if it takes away or impairs a vested right acquired under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new disability, in regard to events already past.

[64] Halsbury states “the test of retrospection in a legal sense is whether the provision is looking backwards in order to interfere with rights and duties already crystallised.”¹⁹

[65] It is well recognised that a contractual provision will not normally be interpreted to retrospectively remove rights unless the provision clearly intended to achieve that result. Both counsel referred to Wutrzberg and Mills Building Society Law.²⁰Mr von Dadelszen submits that the updated 15^thEdition contains the correct statement as to the present state of the law:²¹

2.28 As has been seen from the last paragraph, an alteration of rules may validly change, for the future, the rights, obligations and liabilities attaching to shares already issued, even if notice of withdrawal has been given and has expired. Nevertheless it is sometimes said that an alteration cannot operate retrospectively so as to affect accrued rights. Thus, a rule altering the procedure for the resolution of disputes was held not to affect a member who had already become entitled, under the former rules, to have a case stated determined by the court.¹Further, the central office stated that it would not register a rule conferring a general power to vary interest rates payable by borrowing members, not restricted to cases where such an alteration is consistent with the terms of the mortgage.²However, in a friendly society case, where an alteration of the rules was said to deprive an existing member of an accrued right to a pension, it was held that this was not its effect, but only as a matter of construction, clear words being needed to show an intention to prejudice such accrued rights. It is therefore impossible to lay down any general rules, other than that, if a retrospective effect is intended, this must be made as clear as possible, and that there may be cases (including, but perhaps not limited to those which affect the jurisdiction of the court) in which even the clearest intention will not be allowed to have effect.

¹⁹Halsbury’s Law of England (5th ed, reissue, 2012, online ed) vol 96 Statutes and Legislative Process at 1186 citing L'Office Cherifien des Phosphates v Yamashita-Shinnihon Steamship Co Ltd (the Boucraa) [1994] 1 AC 486 (HL).

²⁰_{E Wurtzberg and John Mills Wurtzberg and Mills:
Building Society Law (looseleaf ed) at [2.28].}

[66] It has been recognised that changes to rules should not apply retrospectively.²²Furthermore, legislative interpretation principles state:²³

It is a general principle of our legal system that new legislation should have prospective effect only. Retrospective laws are seen as oppressive and unjust. They are often ineffective. They may unfairly upset the reasonable expectations of those who plan or act in accordance with the law in force at a particular time.

Given the nature of litigation, the development or clarification of the law will almost always be provided by the courts at and from a time after the time of the events or situations to which the new law then applied. The House of Lords expressly recognised this element of the retrospectivity of the judicial development of the law and the dangers involved in it ...

[68] Furthermore, as with contracts, retrospectivity will not be presumed in legislation unless stated in very clear terms. As Goddard J in Accident Compensation Corp v Thimbleby stated: ²⁵

It is well settled ... that retrospectivity cannot be presumed. The law in this regard is clearly stated in the following passage from Maxwell on the Interpretation of Statutes (12 Ed 1969) at 215:

It is fundamental to the rule of English law that no statute shall be on construed to have retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication.

[69] In my view these authorities support the Society’s interpretation of the effect of r 37(c) on existing Board members. The vested right acquired under the previous rules was vested at the time the Board member was elected and those rights endure, absent express words to the contrary, for the three Board members who are the subject of these proceedings and who were elected after the passing of r 37(c) in

²²Fielding Club v Perry [1929] NZGazLawRp 81; [1929] NZLR 529 (CA) at 540; Dawkins v Antrobus (1881) 17 Ch D 615 (CA) at 632.

²³Law Commission A New Interpretation Act to Avoid “Prolixity and Tautology” (NZLC PP17,

²⁵Accident Compensation Corp v Thimbleby HC Wellington AP41/02, 5 August 2002 at [13].

[70] Due to my determination on this point, it is unnecessary to consider the doctrine of laches or delay which the Society pleaded as a defence.

[71] This cause of action relates only to the 2013 Board elections. The applicants argue that the Society failed to adhere to the special voting procedures prescribed in bylaw 10 and, as a consequence, all but three of the special votes cast in the 2013

[72] Mr von Dadelszen flatly rejects the Society’s submission that all votes should be considered valid so long as the integrity of the vote has not been compromised. He points to the detailed and complex requirements relating to the process of the elections and voting and, in particular, bylaw 3 which provides that the purpose of the detailed prescriptive bylaw is “the preservation of the rights of members to a secret ballot and the preservation of the integrity of the voting system is a matter of great importance.”

[73] Thus, he submits the validity of the vote is related to the procedural manner in which the vote was cast because it is only through the observance of those procedures that members can have confidence in the integrity of the elections which are supposed to be conducted in accordance with the detailed and prescriptive electoral bylaws. He submits that to allow anything less than strict compliance with the electoral bylaws facilitates potential fraudulent voting and makes a mockery of the existence of the rules.

[74] The relief the applicants seek is that this Court declares certain votes cast as invalid although, as Mr von Dadelszen properly accepted, there are practical limitations in that remedy given that the voting papers do not identify the shareholder who cast the vote. As a consequence the applicants seek an order disallowing all special votes with the exception of three which were sent by post and complied with the bylaws.

[75] The bylaws to the Society’s constitution prescribe a comprehensive and prescriptive mechanism covering the voting process as the following extract illustrates. Bylaw 10 in its entirety reads:

(a) In the event that a member would otherwise be eligible to vote on the motion or motions in question or on the election to fill a vacancy or vacancies on the Board but for any reason it will be impracticable for such member to cast their vote between the times and on the date and place fixed for the secret ballot such member may make application in writing, to the Electoral Officer to be provided with a special ballot paper giving the reason or reasons why it will be impracticable for such member to cast their vote during the times and on the date and place to be fixed for the election.

(b) Without any way limiting the generality of the reasons why a member may be entitled to vote as a special voter for the reasons include the following:

(i) The member does not ordinarily work within a radius of 50 kilometres of Taxi House, 10 Macaulay Street, Newton, Auckland and such a member does not reside within 50 kilometers of Taxi House, 10

Macaulay Street, Newton either on business or on holiday on the time and date fixed for the secret ballot it will not be practicable for the member to personally cast his or her vote on the date, time and place fixed for the secret ballot.

(ii) As a result of a member intending to be out of the Auckland area (i.e. out of an area within a 50 kilometer radius of Taxi House, 10 Macaulay Street, Newton either on business or on holiday on the time and date fixed for the secret ballot it will not be practicable for the member to personally cast his or her vote on the date, time and placed fixed for the secret ballot.

(iii) By reason of illness, infirmity, pregnancy or recent childbirth, the member is either unable to attend to vote at the appointed polling place or would incur hardship or suffer serious inconvenience through having to do so.

(iv) The member is by reason of a religious objection, unable to attend to vote on the day of the week on which the polling day falls.

(v) The member satisfies the Electoral Officer that on any other ground it will not be practicable for that

person to vote at the polling place without incurring hardship or serious inconvenience.

(c) Within five days of the date of receipt by the Electoral Officer of a request for a special ballot (and providing the member requesting the same is at the time of the receipt of the request financial and otherwise eligible vote at the election) the Electoral Officer shall post to such member by ordinary post addressed to the address recorded in the Society’s Register of Members a ballot paper as defined in by-law 5 and two envelopes. The first and smallest of the two envelopes shall be marked “voting paper” and shall not otherwise have printed on it any identifying number of mark. The second and largest of the two envelopes shall be numbered with the Electoral Officer recording the envelope number against the name of the member on the Electoral Register and also recording that a voting paper for the secret ballot has been sent to that member. On one side the numbered larger envelope will have printed on it the following address:

(d) After having voted for or against the motion or on the election to fill a vacancy or vacancies on the Board in accordance with the instructions set out on the voting paper the member voting by way of special ballot should fold the ballot paper and insert it in the smaller envelope marked “voting paper”. After sealing this envelope the member should insert it in the larger enveloped address to:

(e) On the back of the larger envelope, the member must sign his/her or their name where indicated and below that where indicated the full name of the member must be printed together with the members fleet number. This larger envelope containing the voting paper envelope must them be sealed and posted to the Electoral Officer. Envelopes personally delivered by some other person or another member will be ruled invalid. To be valid each special vote must be posted. Such special vote must be received by the Electoral Officer by post and then delivered unopened to the Electoral Officer as a special vote.

(f) It shall be for the Electoral Officer to determine in each case whether or not to accept the reason given by the member seeking to vote by way of special ballot and in each case where such special ballot is disallowed the unopened envelope containing the voting papers shall be put to one side and kept separately by the Electoral Officer with a brief note, in writing, of the Electoral Officer’s reasons for declining to accept such special ballot.

(g) The determination by the Electoral Officer of the validity or otherwise of each special ballot shall be made in presence of not less than two scrutineers and in the event that any scrutineer shall challenge the decision of the Electoral Officer to disallow a special vote or to challenge the validity of a special ballot because of the reasons given by the member seeking to cast his/her/their vote by way of special ballot such scrutineer shall record his/her reasons for challenging Electoral Officer’s decision to disallow a special vote in writing, by a sheet that shall be attached to the unopened special ballot paper which shall then be put to one side and reconsidered if and when such special ballot could or might affect the result of the vote on the motion.

(h) The approach of the Electoral Officer and the scrutineers to allowing or disallowing any special ballot shall be to allow special votes unless the member clearly had no entitlement to vote by way of special ballot.

[76] Under these provisions Mr von Dadelszen submits the special vote will be valid only if three pre-conditions are established namely:

(a) it is “impracticable” for a member to cast their vote on election day;²⁶

[77] As a result the appellants submit that the special votes cast were unlawful as they were:

[79] The claim that shareholders cast special votes despite not having requested to do so appears to be conceded by the applicants as being less extensive than pleaded. In the end, this particular claim has been narrowed to a single member; a Mr Narinder Singh, who appears to have cast a special vote without having requested the ability to do so.

[80] Mr von Dadelszen takes issue with the procedure which permitted special votes to be cast in shareholders’ homes and businesses and then collected by the Society contrary to the requirement that special votes be posted. He submits that the special voting procedures are precise and definitive and while certain “compassionate grounds” may provide a justified basis for amending the bylaws, such unauthorised departures from the express requirements of the bylaws is unlawful. Mr von Dadelszen submits that four shareholding members were permitted to cast their special votes at their homes or businesses and have their votes collected by the Society. One was blind and needed his wife’s assistance to cast the vote, another was a widow and two further shareholders could not leave their places of business.

[81] Bylaw 10 requires any member who would be eligible to vote in the Board elections but, for any reason, it is impractical for them to cast their vote, to make an application in writing to the Electoral Officer to be provided with a special ballot paper giving the reason or reasons why it would be impractical for them to vote at the time and place fixed for the election. Bylaw 10 goes on to list, without limiting the generality of the reasons why a member may be entitled to vote as a special voter, the reasons which would make it impractical to cast their vote in the conventional way. These include factors such as :

(b) the member being out of the Auckland area at the time of the election; (c) illness or other condition making the member unable to vote or

incurring hardship or serious inconvenience; (d) religious reasons for being unable to attend;

[82] Mr von Dadelszen points out that bylaw 10(e) uses the word “posted” once and “post” twice and, unequivocally, states “[t]o be valid each special vote must be posted.”

[83] Rule 5(a)(iv) describes the way in which an envelope containing a special vote is to be sealed and then posted to the electoral office, with the correct postage affixed, so that it will be received by the Electoral Officer before 1800 hours on the election date. The bylaw records that:

Only envelopes that have been posted and which have been received by the Electoral Officer prior to the close of voting on the election date will be considered.

[84] Mr von Dadelszen submits that even on the Society’s evidence it appears accepted that special votes were cast in the Society’s office as Mr O’Brien, the Electoral Officer, stated that of the 49 shareholders who cast a special vote, 37 voted in closed office at the Society.

[85] The evidence discloses that the Electoral Officer considered the applications for a special vote and whether the shareholder was entitled to vote. Those shareholders determined by the Electoral Officer to be eligible to vote via a special vote did so in a private room. The vote was sealed and placed in a locked drawer accessible to only two other administrative, non-shareholder, staff. The special votes were kept in the locked drawer until voting day when they were collected by the

Electoral Officer and taken to the polling place to be counted. They were not posted in the manner prescribed by the bylaw.

[86] Mr von Dadelszen submits that such conduct cannot, by any stretch of the imagination, constitute compliance with the unambiguous requirement contained in bylaw 10(e) that “[t]o be valid each special vote must be posted” and, he submitted, equally unambiguously, it must hold that any special vote not posted is not and cannot be valid.

[87] It is plain from the evidence and appears accepted that this bylaw was not complied with. The issue is thus the consequence of this non-compliance.

If special votes were cast contrary to the rules and bylaws should they be declared invalid?

[88] As already noted it is common ground the bylaws were not strictly complied with. However the Society argues that the essence of the rules was observed with the result that the votes cast were valid or should be declared as valid.

[89] As is common with rules of this sort, the Society’s rules specifically provide that no secret ballot shall be declared invalid by a reason of failure to comply with the prescribed times, omissions or irregularities in filling out prescribed forms, any want or defect in the appointment of an official or scrutineer or any mistake or omission or breach of duty by an official, before, during or after the polling, provided the Electoral Officer and the Board are satisfied the secret ballot was conducted substantially in compliance with the rules and bylaws and the failure or

(ii) Any omission or irregularity in filling out any form prescribed by the Rules or the secret ballot by-laws; or

(iv) Any absence of, or mistake or omission or breach of duty by, any official, whether before, during, or after the polling, Provided the Electoral Officer and the Board are satisfied that the secret ballot was so conducted as to be substantially in compliance with the Rules and the by-laws, and that the failure, omission, irregularity, want, defect, absence, mistake, or breach did not affect the result of the secret ballot.

[91] In my view any irregularities or contravention of the bylaws, such as they were, are capable of being cured by reference to r 28.

[92] The prescriptive provisions contained in bylaw 10(e) although requiring validly cast special votes to be received by the Electoral Officer “by post” provides that “envelopes personally delivered by some other person or another member will be ruled invalid” is to ensure that the special vote reaches the Electoral Officer without interference from a third party. The bylaw does not state that envelopes personally delivered will be ruled invalid. This, plainly, is a provision designed to avoid the risk of tampering by a third party. Its purpose is to enhance the integrity of the electoral process and ensure the Electoral Officer receives valid and untampered votes. The mischief the rule was designed to avoid is completely removed if the Electoral Officer himself takes possession of the special votes and delivers them himself to the polling place to be counted as occurred in the present case.

[93] In any event, the most legitimate method of voting is to cast one’s vote by secret ballot. This is the method by which the citizens of democratic societies, including our own, elect their government. I accept the Society’s submission that there is more chance a vote will be interfered with or intercepted if posted by mail rather than when it is cast in person. Furthermore, posting a vote does not ensure delivery. The method adopted in the present case promoted both security and reliability of delivery.

[94] That special votes were permitted to be cast in person amounts to a technical irregularity to which r 28(a)(iv) in particular, is directed. After the complaint was made it was treated as a dispute by the Electoral Officer and the Board. On 5 August

2013 the Board voted that the secret ballot had been conducted “as to be substantially in compliance with the Rules and the by-laws, and that the failure, omission, irregularity, want, defect, absence, mistake, or breach did not affect the result of the secret ballot.”

[95] Following this the Electoral Officer declared in a letter to Mr Malhi that “

the final result of the election held 30^thJuly 2013... shall remain.” He stated that:

The method of casting the special votes is both fair and with precedent over a long period of time. The vote has been cast in a substantially compliant manner and in the spirit of the intention of the registered rules of the Society.

[96] Thus in accordance with s 28 both the Board and the Electoral Officer were satisfied that the secret ballot was conducted substantially in compliance with the rules.

[98] In other words, the emphasis of the scrutineer’s task is on allowing members’ votes unless it is “clear” the member had no entitlement to vote by special ballot. This is an especially important principle because it preserves the democratic rights of the member.

[99] Furthermore this clause and the provisions relating to special voting should not be read in isolation. Regard must be had to the surrounding bylaws and their purposes. For example, bylaw 11 contains nine different offences relating to the conduct of the elections including interfering or influencing votes, erasing and altering the official mark on the ballot paper, interfering with ballot papers and ballot boxes, impersonating others, bribing, undue influence, etc. This provision

emphasises that the purpose of the bylaws is to maintain the integrity of the voting system.

[100] This approach is further emphasised by bylaw 6(z) and 6(aa) which provide as follows:

(z) Except in the case of fraud, no objection shall be made to the validity of any vote cast by way of secret ballot unless such objection shall be notified to the Electoral Officer prior to the commencement of vote counting at such secret ballot or shall be raised by the Electoral Officer, or any one or more of the scrutineers and/or during the counting of the votes and prior to the declaration of the result.

(aa) Other than in the event that fraud shall later be established and subject to the matters set forth earlier in this by law 6, every vote not disallowed on the polling date and whether given personally or by special ballot shall be deemed valid for all purposes whatsoever.

[101] These provisions reflect a practical necessity because once the vote is in the ballot box it is impossible to know who voted for who.

[102] I do not overlook the emphasis which the applicants place on the purpose of such a prescriptive regime which is plainly designed to maintain the integrity of the Society’s voting and electoral system. Nor do I ignore the effect of bylaw 3 which provides as follows:

(a) The preservation of the rights of members to a secret ballot and the preservation of the integrity of the voting system is a matter of great importance. Any breach of these by laws shall be regarded by the Society as requiring the Board to consider whether or not the name of any member committing a breach of Rule 27 or any of these by-laws should be struck off the register of members pursuant to Rule 11 (d) of the Rules.

(b) Any lessee and/or driver found to have committed a breach of these by-laws shall be liable to have their rights to operate as a lessee and/or driver of the Society terminated.

[103] Both these provisions emphasise the importance of maintaining the integrity of the voting process as well as the right of members to a secret ballot. These considerations are of prime importance.

[104] Furthermore, the need for a degree of proportionality is apparent from a reading of clause 3(b). A member is not going to be struck off for failing to comply with the postal requirement of the special vote procedure. But more serious instances of conduct which could compromise the integrity of the voting system would be caught under clause 3(b).

[105] All of these considerations serve to underscore the purpose of the bylaws, particularly bylaw 10. Its purpose is to promote the integrity of the electoral process and ensure that those who are eligible to vote are able to participate in the democratic process of electing their Board.

[106] Another factor which, in my view, assumes significance is the importance to be attached to the exercise of the democratic right to vote. This should not be unnecessarily limited or infringed.

[107] I am fortified in that view by the comments of the Court of Appeal in Wybrow v Chief Electoral Officer³⁰where the Court of Appeal was asked to make a declaratory order determining the meaning of certain provisions of the Electoral Act

1956 regarding the counting of votes at a general election. The relevant provision of the Electoral Act provided that an elector “shall ... exercise his vote by marking his ballot paper by striking out the name of every candidate except the one for whom he wishes to vote.” However, another provision of the Electoral Act provided that a returning officer “shall reject as informal ... any ballot paper that does not clearly indicate the candidate for whom the voter decided to vote”.

... the ultimate object of the democratic system embodied in the Electoral Act is that an elections shall be determined by the wishes of voters recorded at secret ballots. Uniformity in voting methods is not an end in itself. If a

voter fails to understand the instructions but does succeed in making his or her intention clear, we would be very slow to attribute to Parliament the pedantry of insisting on rejection of the vote. Of course the test which Parliament has chosen to adopt for the counting of votes does leave room for argument about whether the intention has been clearly expressed.

[109] The bylaws are in place to protect the integrity of the votes cast. The bylaws also seek to have all votes which are not fraudulently cast count towards the election of every Board member. Bylaw 6(oo) was adopted so that the challenges to the validity of votes and the subsequent election results could not be made lightly. The constitution of the Society has allowed special votes and, in the absence of fraud, they must be held to be valid.

[110] It must be in the public interest and certainly in the best interests of the democratic processes of the Society that every person who wishes to cast a vote should be able to do so. To disallow the special votes cast in the 2013 election would be to prejudice the rights of the shareholders of the Society who were entitled to believe that the correct processes were being followed and that their votes would count. The majority of the shareholders voted for Messrs Patel and Bhullar. To disallow special votes which, but for relatively minor irregularities of process, would otherwise have been valid is to interfere with the democratic process and the wishes of the shareholders of the Society.

[111] This challenge also relates to the 2013 Board elections. The applicants claim that the Society’s rules relating to the ineligibility of unfinancial shareholders to vote was not complied with and, further, this non-compliance altered the election results in a material way.

[112] In response, the Society claims no contravention occurred as all members who voted were financial at the time of voting. Indeed, the Society’s Electoral Officer asserted that he could “confidently state that no shareholders who cast a vote in the election were unfinancial at the time of casting their vote.” The relevant rule is r 65 which empowers the Board to impose, determine and fix levies. The portion

of the rule relevant to eligibility for voting, supplemented by bylaw 5, is set out below:

Any outstanding debt/ monies/ levies owed to the society the day after the due date prior to the General or Special general meeting will exclude members from attending any General Meeting, Special General Meeting Speaking or Voting at any General or Special General Meeting and Voting at all Secret Ballots. ...

[113] Mr von Dadelszen submits that because the Society’s constitution uses the term “secret ballot” in r 65 rather than “special ballot” or “special vote” used elsewhere in the rules, the provisions contained in r 65 may not apply to the special voting process. However, he submits the heading and content of the relevant parts of bylaw 6 make it clear that the restrictions contained in r 65 also apply to special votes. I did not understand the Society to submit otherwise and indeed it would be a curious result if a non-financial member was eligible to cast a special vote but those participating in the secret ballot process were not.

[114] Rule 6(a) creates the prohibition on unfinancial members being entitled to vote. It provides as follows:

(a) No member shall be entitled to be a candidate for election and no member shall be entitled vote whilst any money shall be due and payable to the Society by such member in respect of Rule 65.

(l) Where a member has been ruled ineligible to vote on the polling date solely because a sum of money is due to the Society by such member and has not been paid, the production by such member of a receipt from the Society for all amounts due, signed by either the financial controller or the secretary of the Society and dated prior to the polling date of (if the member has sought to vote by special ballot) the date of the posting of the special ballot by the member, shall prima facie, establish that such member is ineligible to vote subject however to the Electoral Officer confirming through either the financial controller, or the secretary, on the polling date, that such payment has been received and (unless such payment has been made by way of cash and/or bank cheque) that the cheque in payment has been honored. A payment made less than five clear working days prior to the polling date or if the member has sought to vote by special vote less than five clear working days

prior to the date that such member has posted his or her or their special vote and which has not been made either by bank cheque or cash shall not be acceptable to remove any financial ineligibility to vote that the member may have had.

[115] Mr von Dadelszen comments that while the wording of the bylaws is somewhat complicated, it can be interpreted as follows:

(a) if a shareholder is shown as unfinancial on the polling date (i.e. the election date) and is therefore ruled ineligible to vote but wishes to do so:

(i) the shareholder must produce a receipt for all amounts due with the receipt signed by the Society’s financial controller or secretary, and in the words of bylaw 6(l) “dated prior to the polling day” a term defined in bylaw 2 as being the day on which voting shall take place between 8am and 6pm;

(ii) the Electoral Officer must confirm with the Society’s financial controller or secretary that such payment has been received and if payment was made by cheque, that the cheque has been honoured;

(i) any payment was made less than five clear working days prior to the election day; or

(ii) the shareholder has sought to vote by special vote less than five days prior to the date when the shareholder posted a special vote,

[116] From this, Mr von Dadelszen submits that the overall effect of the constitution is that a shareholder is not entitled to vote by way of secret ballot or special vote while any money is due by the shareholder and payable to the Society and, if on polling day a shareholder owes money to the Society and attempts to cast a vote by secret ballot or is found to have cast a special vote that shareholder will be ruled ineligible to vote. Furthermore, if a member who has been ruled ineligible to vote on polling day that shareholder must produce a receipt for all amounts due signed by the financial controller or secretary and dated prior to the polling day if casting a vote by secret ballot or dated prior to the date of the posting of the special vote if casting a vote by special ballot and, unless the payment shown by the receipt was by cash or bank cheque, the Electoral Officer must then confirm with either the financial controller or secretary that such payment has been received and payments made less than five clear working days prior to the polling date do not remove the ineligibility to vote unless those payments were made by cash or bank cheque.

[117] Mr von Dadelszen submits that if that analysis is correct the facts plainly disclose that unfinancial members were permitted to vote in the Society’s 2013

[118] Mr von Dadelszen further submits that even if the other requirements of the bylaw are met, if a payment has not been made five days prior to the date the special vote was posted or prior to the polling day and is neither a bank cheque nor cash, then any financial ineligibility cannot be waived.

[119] In the present case, the applicants submit that at 4.24 pm on 29 July 2013, the day before the election, a list of unfinancial members was printed. Each of those unfinancial members, and one unfinancial member who was not on the list, was found to have voted. The Society challenges this assertion submitting that the print out is not an accurate representation of the unfinancial members on the day of the election.

[120] Mr von Dadelszen submits that on the Society’s own evidence there is clear non-compliance with the rules. Mr Gaur, the financial controller for the Society, identified four of the nine unfinancial members as being financial on election day.

Of the remaining five, four became financial and cast votes by special ballot and the fifth paid in cleared funds on election day and became financial. Thus Mr Gaur’s evidence is that all voting members were financial on election day.

[121] This evidence demonstrates non-compliance with the obligation on the shareholder to produce a receipt signed by the financial controller or secretary dated prior to the polling day if casting a secret ballot or dated prior to the date of the posting of the special vote if casting a vote by special ballot, the only exceptions being payments shown to be in cash or by bank cheque. The applicants argue that the shareholders paid their outstanding monies on the same day they cast their votes making it impossible for them to have complied with the bylaw. Furthermore, it is unclear on the evidence whether the payments were made by cash or bank cheque or some other means and, in any event, if it was by other means, this would require a five day payment period which was clearly not met in the circumstances.

[122] In response, Mr Judd submits there are two fatal flaws with the applicants’ challenge in its third cause of action. First, it cannot be identified who the nine members referred to by the applicants voted for. The ballot papers do not identify the voter. Secondly, even if the ballot papers identified the candidate voted for and it was confirmed that the nine members voted for the two winning candidates, nullifying their votes would not change the election results. This is because the winning margins of the successful candidates were such that the nine votes would have made no difference to the end result in any event. The winning margins were

277 and 241 respectively. Mr Malhi and Mr Dhalwal polled 219 and 212 respectively. The Society claims that it follows the relief sought is futile and the claim moot.³²The Court will decline to judicially review a decision where the

question is academic and relief will be of no utility³³or create no consequential

change³⁴. In Fowler v Rodrique Limited v Attorney-General discretionary relief was refused because to do so would be an exercise in futility.³⁵I accept that submission.

³³Marshall v Natural Spiritual Assembly of the Baha’is of New Zealand Inc [2003] 2 NZLR 205 (HC).

³⁴_{Waikato Regional Airport Limited v A-G [2002] NZCA 61; [2002] 3
NZLR 433 (CA).}

[123] However, even if I am wrong I am satisfied that the relief sought should not be granted for further reasons. Plainly, there were irregularities and breaches of the processes prescribed by the bylaws in relation to bylaw 6 particularly. However, it is important to focus on the primary rule which prohibits unfinancial members from participating in the activities of the Society, including voting at general meetings and secret ballots so long as they are debtors of the Society. The bylaws provide the mechanism by which the objective of the primary rule is to be met.

[124] In particular the relevant part of bylaw 6(l) provides an insight into the

A payment made less than five clear working days prior to the polling date or if the member has sought to vote by special vote less than five clear working days prior to the date that such member has posted his or her or their special vote and which has not been made either by bank cheque or cash shall not be acceptable to remove any financial ineligibility to vote that the member may have had.

[125] The reference to a bank cheque or cash providing the exception to the “five clear working days” requirement demonstrates that the purpose of the rule is to ensure that payments are made from cleared or otherwise guaranteed funds. Its purpose is to ensure payments are made in a way which cannot be reversed or dishonoured after the member has exercised their right to vote.

[126] The evidence is that the members in question were financial at the time they cast their votes even if those payments were made on or about the relevant day of polling by a mechanism other than cash or bank cheque. An EFTPOS payment is of the same nature and quality as a bank cheque or cash. It does not require a five day stand down period to ensure it is honoured. It cannot be reversed.

[127] The bylaws are a relic of bygone times when electronic banking and electronic transfer of funds was beyond the contemplation of the drafters of the rules and bylaws.

[128] Although there is no evidence that receipts were produced it is apparent that active steps were taken to ensure the financial eligibility of those members who cast

votes with Mr O’Brien. He had personally contacted the Society’s accounts department to ensure all members were financial before they were permitted to cast their vote.

[129] Furthermore, if this Court was to declare that the votes cast contrary to bylaw

6(a) be declared void it would deprive those members who were financial members at the time they cast their vote, of their constitutional and democratic right to vote for their Board. Such an interpretation would be to prefer form over substance as would an order that a recount be undertaken of the remaining votes cast in accordance with bylaw 6(a).³⁶

[130] I am fortified in that view by reference to r 28(a) which I have already discussed in relation to the second cause of action. In my view this rule operates in the present case to cure the defects alleged and in particular the failure to comply with the particular provisions prescribed in bylaw 6(l).

[131] In any event, I am satisfied that this is a case where it is appropriate for the Court to exercise its discretion to refuse relief on the grounds that the relief sought derives from a defect in form or a technical irregularity.³⁷Although it is common ground that there has been a breach of the bylaws I am satisfied that the failure to observe the requirements of r 6(l), having regard to the purpose of that bylaw, amounts to a defect in form or a technical irregularity. So long as all monies owed

by the member were paid from cleared funds by the time of voting the requirement to meet the obligation in r 65 that only members who are financial at the time their vote is cast is satisfied.

_{[132] For that reason the relief sought on the third cause of action
is refused.}

³⁶R v Monopolies and Mergers Commission, ex parte Argyll Group Plc [1986] 1 WLR 763 (CA); and

[133] The application for judicial review is declined. Costs are awarded to the respondent on a 2B basis with disbursements as fixed by the Registrar.

High Court of New Zealand Decisions

Malhi v Auckland Co-Operative Taxi Society Ltd [2014] NZHC 2814; [2015] 2 NZLR 552 (12 November 2014)