Incorporated societies update - do your club's rules need a refresh?

A recent case heard in the High Court in Auckland provides a good reminder that there can be time-consuming consequences for sports clubs and other incorporated societies if their rules are not fit-for-purpose.  In Middledorp v Avondale Jockey Club [2019] NZHC 901, Mr Middledorp brought legal proceedings against Avondale Jockey Club (“Avondale”) after he was suspended from the club’s executive committee on two occasions.          

The suspensions occurred in the context of Avondale’s prospective plans to rationalise its landholding.  Avondale’s position was summarised by the Court as follows: “…Mr Middledorp has been making trouble by refusing to accept decisions of the majority of the committee and has gone behind the committee’s back in order to undermine the committee’s decisions.”  

His behaviour included anonymously posting online about the plans and the parties involved, contacting an existing client of a consulting company advising Avondale without the committee’s approval, and sending an anonymous “Letter of Concern” to club members and other third parties ahead of Avondale’s Annual General Meeting.

While Avondale’s rules did not explicitly provide for suspending committee members, there was a process for removing club members, and the following catch-all clause: “Rule 55:  If any case occurs which is not provided for in these rules, it shall be determined by the committee.” Mr Middledorp was suspended for 3 committee meetings in November 2016, and again for 4 committee meetings in December 2017.

Mr Middledorp pleaded 5 causes of action, one of which being that Avondale was in breach of its rules by suspending him.  The Court found in favour of Avondale in 4 of the causes of action but found that the committee did not have the power to suspend Mr Middledorp as it did, and that Rule 55 was limited to procedural matters, rather than providing the committee with the power to take disciplinary matters against committee members.  This decision provides useful reminders to incorporated societies:

• Incorporated Societies are amenable to judicial review in some situations – meaning they need to be careful to ensure they have a clear set of rules, especially when it comes to disciplinary matters concerning club or committee members;
  
  
• A catch all provision like Rule 55 in Avondale’s rules may be found by a Court to be restricted to procedural matters, as was the case here; and
  
  
• While Avondale was largely successful in this case, not all of its costs were awarded and the legal proceedings no doubt distracted the committee from its core business – it is worth ensuring your rules are fit-for-purpose!

Incorporated Societies Bill – back on track!

In February 2014 the previous Government agreed to amend the Incorporated Societies Act 1908, and a proposed Incorporated Societies Bill Exposure Draft was released for public comment.  After a hiatus, in May 2019 the Government agreed that a re-drafted Incorporated Societies Bill (“Bill”), incorporating aspects of the feedback received, would be introduced to Parliament later this year.  It has been indicated that the Bill will, amongst other things, standardise financial reporting obligations on societies whose accounts meet certain thresholds (e.g. $30,000 or more in assets), clarify officers’ duties, and provide that societies must set out procedures for resolving disputes between members in their rules. 

How we can help

Ford Sumner specialises in a range of practice areas and has experience working with incorporated societies, including sports clubs, on governance, commercial, and employment and disciplinary matters. Crucially, we understand the practical realities and challenges that incorporated societies face because our solicitors are at the coal face.  Partner Jaesen Sumner is Chairman of OBU Rugby Club in Wellington, lawyer Sean Durkin is a rowing coach and Wellington Rowing Association Board Member, and law clerk Jack Green also sits on the OBU executive committee.

If you are interested in how we may be able to help your organisation, or you would like to keep up to date on the Bill, how it might affect you and its progress through Parliament, please contact Jaesen Sumner.