New South Wales Supreme Court CITATION : Hornby v Narrandera Ex-Servicemen's Club Ltd [2001] NSWSC 235 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 5050/99 HEARING DATE(S) : 25 August and 3 November 2000 JUDGMENT DATE : 3 April 2001 PARTIES : William John Hornby (P) Narrandera Ex-Servicemen's Club Limited (D) JUDGMENT OF : Hamilton J COUNSEL : G F Jauncey (P) M Ashhurst (D) SOLICITORS : Friend & Co (P) Pigott Stinson Ratner Thom (D) CATCHWORDS : ASSOCIATIONS AND CLUBS [13] - Expulsion, suspension and disqualification - Right of expulsion - Incorporated club - Articles of association must be strictly complied with. Calvin v Carr [1977] 2 NSWLR 308; [1979] 1 NSWLR 1 Gates v Vickery (1973) ACLC 27,517 Innes v Wylie (1844) 1 Car & Kir 257; 174 ER 800 Samuel v St George Leagues Club Ltd NSWSC 20 October 1992 unreported, Powell J CASES CITED : Thomson v Earlwood-Bardwell Park RSL Club Ltd [1999] NSWSC 243 University of Ceylon v Fernando[1960] 1 WLR 223 Wiseman v Borneman [1971] AC 297 Young v Ladies' Imperial Club Limited [1920] 2 KB 523 Halsbury's Laws of England, 4th Ed, Vol 6 [Reissue] (1991), tit Clubs [233] DECISION : Suspension invalid. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J TUESDAY, 3 APRIL 2001 5050/99 WILLIAM JOHN HORNBY v NARRANDERA EX-SERVICEMEN'S CLUB LIMITED JUDGMENT 1 This suit arises from the suspension of the plaintiff from membership of the defendant Club for five years. As to the suspension and expulsion of members, the articles of association of the defendant provide as follows: " SUSPENSION AND EXPULSION 32. If any member shall wilfully refuse or neglect to comply with any of the provisions of the Memorandum of Association or of these Articles of the Club or the By-Laws thereof or be in the opinion of the Committee guilty of any conduct prejudicial to the interests of the Club or be guilty of conduct within or without the precincts of the Club which in the opinion of the Committee is unbecoming of a member or which shall render him unfit for membership, the Committee shall have power to reprimand, suspend for such period as it considers fit, expel or accept the resignation of such member and to erase his name from the register of members provided that: (a) Such member shall be notified of any charge against him pursuant to this Article by notice in writing by a prepaid letter posted to his last known address at least seven clear days before the meeting of the Committee at which such charge is to be heard. A similar notice shall be sent to the accuser (if any). (b) The member shall be entitled to attend the hearing for the purpose of answering the charge or may answer the charge in writing. (c) The Committee may, and shall if requested so to do by the person charged or the accuser (if any) at least seven days before the date of hearing, cause a notice to be sent to any other member to appear and give evidence. (d) The Committee may on the date fixed for hearing, proceed to take evidence may if thought fit, adjourn the hearing to a future date and it shall not be necessary to give notice of adjournment to any party concerned. (e) The voting by the members of the Committee present at such meeting shall be as determined by the Committee and no motion by the Committee to reprimand, suspend or expel a member shall be deemed to be passed unless a majority of the members of the Committee present vote in favour of such motion. (f) If the member fails to attend such meeting the charge or complaint may be heard and dealt with and the Committee may decide on the evidence be ore it, the member's absence notwithstanding, having regard to any representations made to it in writing by the member charged." 2 The plaintiff became a member of the Club in 1991. In 1992 he was elected as a director and in 1993 he was elected vice president, which position he retained until his suspension in 1997. One Edward Rose had been elected president of the Club and, as a result of a dispute, relations between Mr Rose and the plaintiff had deteriorated. The subject matter of the dispute was whether Mr Rose had been on active service so as to be properly qualified to be president. At a meeting of the local sub-branch of the Returned Services League ("the RSL") held in a room at the Club premises on 7 October 1997 there was a verbal dispute between them. Whilst the plaintiff was speaking during the course of the meeting, he saw Mr Rose pointing his finger to his head, which he believed "was indicating that I was insane or otherwise being insulting about me". The plaintiff says that he said to Mr Rose, "If you do that again I will push your head against the wall." The chairman of the meeting reprimanded him and said words to the effect that that was the end of the matter. 3 On 30 October 1997 the secretary/manager of the Club wrote to the plaintiff as follows: "re: Incident Tuesday 10th October, 1997 I refer to the above mention [sic] incident that occurred in the Club. The Board of Directors has requested me to inform you that they request that you appear before a suspension committee meeting of the Board of Directors to answer allegation [sic] pertaining to Article 32 of the Club Articles of Association, Conduct unbecoming a member. The meeting is to take place on Friday 7th November 1997 at 6:00 p.m. in the Club Board Room." 4 As to what occurred at the meeting on 7 November 1997 the plaintiff in his affidavit deposed as follows: "16 When I attended the meeting on 7 November 1997, the Chairman, Mr G. Overs said words to the effect, 'please give us your explanation of the events which took place at the meeting on 7 October, 1997' I put forward my version of the event as outlined in paragraph 13 above. I was then asked to leave the room whilst the committee called further evidence. 17 Wal Charles and Tony Basham were called as witnesses to give evidence of events at the meeting of 7 October, 1999. Jack Clark, who did attend the meeting of 10.10.97 did not attend the hearing. I am unaware as to why a notice was not sent to Jack Clark to attend at the hearing to give evidence. Mr Rose did not attend the suspension committee meeting. 18 After the committee had apparently heard the evidence of Wal Charles and Tony Basham, I was recalled to the room. I was not informed as to what evidence Mr Charles and Mr Basham had given to the committee and I was never given the opportunity to ask them any questions. I was then asked to leave the room whilst the committee made a decision. 19 Some time later I was called back into the room and informed that I had been suspended for five (5) years." 5 The minutes of the meeting are in evidence and substantially confirm the plaintiff's account of what he said at the meeting and of his exclusion during the evidence of Mr Charles and Mr Basham. What they said in his absence was recorded in the minutes of the meeting: " W. CHARLES At this time the Chairman requested that the Secretary Manager ask Wallace Charles to attend the meeting as a witness. The Chairman welcomed Mr. Charles and asked him to relate the incident in his own words. Mr. Charles stated that at the meeting there was heated debate regarding the letter and that Mr. Hornby said to Mr. Rose 'If you do that again I will put your head through the wall'. Director G. Lonnie asked Mr. Charles whether Mr. Rose had antagonised Mr. Horn by using his finger to his head. Mr. Charles stated that there was a finger to the head but was not certain of it [sic] meaning, but the manner was antagonistic. Director J. Blain asked Mr. Charles if the matter was handled by the RSL meeting. Mr. Charles stated that it was handled at the last RSL meeting and that he told the RSL meeting that 'the matter was finished and that was it!' Chairman G. Overs asked if there were any further questions to be asked of Mr. Charles. Chairman G. Overs thanked Mr. Charles for attending the meeting and requested the Secretary Manager to call Anthony Basham to the meeting as a witness. A. BASHAM Chairman G. Overs thanked Mr. Basham for attending the meeting and asked him to give his interpretation of the incident. Mr. Basham stated that at the meeting of the RSL debate took place regarding the letter and that a heated argument had taken place. He added Mr. Hornby said to Mr. Rose keep going and I will put your head thought [sic] the wall. Director A. Walch asked Mr. Basham if Mr. Rose had used a finger or was he aggressive to him in any way. Mr. Basham stated that he was taking the minutes of the meeting and that his view was impaired. Director J. Blain asked whether the meeting had been taped and was the tape available. Mr. Basham stated that the tape was available through the freedom of information act [sic]. Chairman G. Overs asked if there were any further questions to be asked of Mr. Basham. At this time Chairman G. Overs thanked Mr. Basham for attending the meeting." After a complicated round of motions and voting the plaintiff was suspended from membership for five years as previously stated. 6 The plaintiff claims that the decision was invalid because of his exclusion from the hearing contrary to the provisions of article 32 and in denial of natural justice. He also claims that the decision was invalidated by the absence as a witness of Mr Clark, both in itself and by reason of his deprivation of an opportunity to cross examine Mr Clark. 7 The Club does not deny that it was bound by the provisions of article 32, nor, indeed, that it was subject to the dictates of natural justice, but says that the provisions of article 32 were complied with and the dictates of natural justice were met by what occurred. It says, among other things, that the absence of the plaintiff during the evidence of Mr Charles and Mr Basham was immaterial because that evidence either accorded with or did not substantially contradict the version given to the committee by the plaintiff himself and was therefore not adverse to him. 8 In Samuel v St George Leagues Club Ltd NSWSC 20 October 1992 unreported, a club case with distinct similarities to the present case, Powell J (as his Honour then was) said: "I proceed upon the basis that the principles of law which are relevant to a case such as the present are as follows: 1. A club, such as the Defendant, may not suspend, or expel, a member unless a power to do so is contained in what might be called its 'constituent statute'. 2. Unless a deviation therefrom is sought, or assented to, by the member to be affected, the power to suspend, or expel, if it is to be validly exercised, must be exercised strictly in accordance with the procedures laid down in the club's 'constituent statute'. 3. Since the rights of a member of a club such as the Defendant are proprietary in nature, then, unless the 'constituent statute' expressly, or by necessary implication, provides to the contrary, the power to suspend, or expel, must be exercised in accordance with 'the rules of natural justice'. 4. Although the 'rules of natural justice' to be applied in any particular case depend upon the circumstances (see for example Russell v Duke of Norfolk [1949] 1 AER 109 at 118) what is required for the valid exercise of a quasi-judicial function, such as the exercise of a power to suspend, or expel, is judicial fairness (see Mobil Oil Australia Pty Ltd v Federal Commissioner of Taxation (1963) 113 CLR 475 at 504). 4. In my view, the minimum requirements of judicial fairness are that: (a) the accused person be fairly apprised of what is alleged against him (see Hall v NSW Trotting Club (1971) NSWLR 378; Calvin v Carr (1977) 2 NSWLR 308; (b) the accused person must have a fair opportunity to bring forward material to correct or to controvert any allegation made against him; (c) the accused person is entitled to have the tribunal before which he appears consider, evaluate and form an opinion on, what is put on each side in an honest and unbiased way and unaffected by any ulterior, or extraneous motive (see for example Barnes v Oliver (1970) 16 FLR 366; Stollery v The Greyhound Racing Control Board (1972) 128 CLR 509; Dale v New South Wales Trotting Club (1978) 1 NSWLR 551). 6. Depending upon the nature of the charge, and the potential consequences to the accused of an adverse finding, the accused may also be entitled: (a) to be given detailed particulars of matter with which he has been charged; (b) to be given, in advance of any hearing of the charge, a statement of 'evidence' to be tendered to support the charge; (c) to have the assistance of competent legal representation (see Petty Greyhound Race Association (1969) 1 QB 125; (1970) 1 QB 46; Enderby Town Football Club Ltd v Football Association (1971) Ch 591; McNab v Auburn Soccer Sports Club Ltd (1975) 1 NSWLR 547. 7. An accused person's right to an unbiased tribunal entitles him: (a) except in cases of necessity', to have those who act as prosecutors not take part of the deliberations of the Tribunal (see Dickason v Edwards (1910) 10 CLR 243; Australian Workers Union v Bowen (No 2) (supra)); and (b) to have strangers excluded from taking part in the tribunal deliberations (see Macsween v Fraser (1956) 1 FLR 10; Steuart v Oliver (No 1) (1971) 19 FLR 99; Ethell v Whalan (1971) 1 NSWLR 416)." See also the decision of Bryson J in Thomson v Earlwood-Bardwell Park RSL Club Ltd [1999] NSWSC 243. 9 Earlier authority for the proposition that the power to suspend or expel "must be exercised strictly in accordance with the procedures laid down in the Club's 'constituent statute'" is contained in the judgment of Street CJ in Eq in Gates v Vickery (1973) ACLC 27,517 at 27,519, where his Honour said: "The Courts have consistently taken the view that a provision governing the expulsion of a member of a club must be strictly complied with if the expulsion is to be valid. For example, in Daley's Club Law, 4th ed., p. 25, the learned author states - 'A power of expulsion must be exercised with meticulous attention to the rules which create it, and if any single formality is omitted the purported expulsion is of no effect; for instance, where, under the rules, a certain number of days' notice should be given to consider the question of the expulsion, if the notice is a day late, the expulsion is annulled.' To similar effect is a statement in Wertheimer's Law of Clubs, 5th ed., p. 117 - 'Where the rules of a club provide (as they usually do) a Power of expelling a member in the event of his misconducting himself or in any other event, the power must not only be exercised in strict accordance with the rules, but there must be no absence of good faith.' I add a reference from Halsbury, 3rd ed., Vol. 5, p. 262, in the article dealing with clubs - 'A power of expulsion must be exercised in strict conformity with the rules by which it is given, otherwise the purported expulsion will be inoperative.' Those general observations are made in the context of the rules of clubs. I do not lose sight of the fact that the present club has been incorporated as a company. In my view, however, the principles that have grown up surrounding clubs provide guidance by analogy to the construction and application of articles of association of incorporated companies that are in truth and substance clubs. It is a consequence of the liquor laws of this State that what would otherwise would be unincorporated clubs derive benefits and advantages from becoming incorporated. There is undoubtedly a change in legal substance, but to all outward appearances, and certainly so far as the internal affairs of these organisations are concerned, they remain as clubs, albeit clothed with corporate entity. In any event, if one were considering this as a matter of company law, and contemplating compulsory expropriation of the shares of a shareholder, then it would be entirely valid to say that the directors would be required to proceed with strict and meticulous attention to the requirements of the articles before terminating a shareholder's status as a shareholder." 10 The passage quoted by his Honour from Halsbury appears in identical terms in the current edition: Halsbury's Laws of England, 4th Ed, Vol 6 [Reissue] (1991), tit Clubs [233]. Of the cases commonly cited in the texts to support this proposition, Innes v Wylie (1844) 1 Car & Kir 257; 174 ER 800 does not really appear to me to be authority for the proposition, but is an interestingly early case in which a resolution of expulsion from a non proprietary club was held to be invalid for breach of the common law rules of natural justice. However, in Young v Ladies' Imperial Club Limited [1920] 2 KB 523 Warrington LJ said at 532: "The matter is, to my mind, not a mere technicality, especially as it involves the question whether or not the vexation, and perhaps something worse, should be imposed upon a member of having her name erased from the list. It seems to me of great importance that rules which have been made for the purpose of regulating the proceedings of the committee in respect of such a matter ought be strictly adhered to." And Scrutton LJ said (at 536): "It is of importance, it appears to me, that a Club committee should understand that they must act regularly in expelling members, and, consequently, I do not feel able to say, as a judge of first instance, that a farthing damages shows that the action should not have been brought, because I think there is some public importance in making clear to club committees that they must act regularly in the expulsion of members; and it follows, therefore, that in my view the costs here and in the Court below should be given to Mrs Young." 11 Article 32 provides that the member charged shall be entitled to attend the hearing and that the committee may at the hearing proceed to take evidence. The member charged may alternatively make a submission in writing. The defendant draws attention to the entitlement to attendance at the hearing. It is in terms "for the purpose of answering the charge". It argues that the only attendance to which entitlement is given is such attendance as is necessary to enunciate a defence and that there is no entitlement to be present during the taking of evidence. The fact that it is not necessary to notify the person charged of an adjourned day for the hearing (sub article (d)) may also be thought to detract from an entitlement to be present at the hearing. But, since, if a member charged is present at the hearing, he will know of any adjourned day, it would seem that this provision is only to dispense with a need for notice to a charged member who has not attended the original meeting. The article gives the procedure a certain formality: it speaks of proceeding "to take evidence" and provides for the summoning of other members "to appear and give evidence". Furthermore, the entitlement is to be present "at the hearing", not simply to attend the meeting to make a defence (cf the relevant articles in Samuel v St George Leagues Club Ltd supra and Thomson v Earlwood-Bardwell Park RSL Club Ltd supra). Looking at the article in its entirety, in my view the correct interpretation of it is that it is intended to give an entitlement to attendance at the whole of the hearing if the person chooses to attend, so that he may hear the evidence and what else is said for the purpose of making a submission in defence. Whilst on the one hand it might be said that the evidence given in his absence was not seriously detrimental to the plaintiff, on the other hand he was excluded from the whole of the hearing, and deprived of hearing the whole body of evidence given against him; he was allowed to be present only at the commencement for the purpose of telling his own story. In my view, there has not been a compliance with the requirements of the article and, whether or not what occurred can independently be characterised as a breach of the rules of natural justice, the procedure required by the article has not been complied with and the resolution of suspension is invalid on that ground. 12 In view of that finding it is unnecessary for me to consider whether the rules of natural justice were breached, if article 32 were construed as not entitling the plaintiff to be present at the hearing except for the limited purpose of enunciating a defence. This is a nice question which would require a determination as to whether the dictates of fairness were answered in all the circumstances (see Wiseman v Borneman [1971] AC 297 per Lord Reid at 308 and Lord Morris of Borth-y-Gest at 308 - 309) and taking into account the significance or insignificance of the material received in his absence (see Thomson v Earlwood-Bardwell Park RSL Club Ltd supra); whether or not the substance of it was subsequently communicated to him (cf University of Ceylon v Fernando[1960] 1 WLR 223 with Calvin v Carr [1977] 2 NSWLR 308, reversed by the Privy Council, but on other grounds: [1979] 1 NSWLR 1) and the fact that virtually the whole of the hearing except his own statement was conducted in his absence. But, as I say, it does not fall to be determined. Neither do I need to consider whether the fact that the accuser was not summoned by the committee to give evidence and the charged member had no opportunity to question him was itself a denial of natural justice, although I doubt whether this ground could be made out. 13 Subject to any submissions put to me concerning the form of the orders and the appropriate regime as to costs, the orders I propose are: (1) Declare that the resolution of the committee of the defendant on 7 November 1997 that the plaintiff be suspended from membership of the defendant for the period of five years was invalid and of no effect. (2) Order that the defendant pay the plaintiff's costs of these proceedings. …oOo… Last Modified: 04/05/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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