CLARE, BARONESS BAILLIEU v. THE FOREIGN CORRESPONDENTS' CLUB, HONG KONG

HCMP 1567/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1567 OF 2006

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J U D G M E N T

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Facts

1.  The plaintiff joined the defendant club, a company limited by guarantee, as an associate member in 1991.  In December 1998, she applied to the defendant to change her membership status from associate member to life absent member.  The reason was she was leaving Hong Kong to nurse her aging father in Australia.  The application was effected by the plaintiff paying a one-time payment of $2,000.  As a life absent member, the plaintiff did not have to pay the monthly associate membership subscription.  The plaintiff, however, returned to Hong Kong three months later.  She did not cause her membership status to be changed back to associate member.  She says, and this is controversial, the then general manager of the defendant had told her that unless the defendant should otherwise advise, she would be entitled to hold membership in two classes on her return, namely as an associate member with the membership held indefinitely in life absent status which could be converted to active associate member status at her pleasure, and as a spouse signatory on the account of another associate member, Mr Nedderman, her husband.  She says that was what she did and in her capacity as a spouse signatory, she continued to participate in club affairs and enjoy the use of club facilities.

2.  Subsequently, events happened that caused tension between the plaintiff and the board of governors of the defendant.  On 19 March 2005, Mr Nedderman’s associate membership privileges were suspended.  The plaintiff soon found out that as a result, her status as a spouse signatory had also been suspended.

3.  Moreover, on 22 March 2005, the life absent membership account of the plaintiff was suspended with immediate effect due to “clarifications required for her absence status”.  This was done without any prior notification to the plaintiff.

4.  Correspondence between the two sides ensued.  In a nutshell, the board of governors took the view that upon her return to Hong Kong in early 1999, the plaintiff was no longer entitled to life absent membership status.  Her (active) associate membership status ought to be reactivated and she ought to be paying monthly subscription as such.

5.  Pausing here, it is necessary to refer to articles 27 to 29 of the articles of association of the defendant which read:

“27.     A Member who may be leaving Hong Kong for three or more consecutive months, provided he previously shall have given notice to the Secretary in writing that he desires to have his name placed upon the list of Absent members, and provided that he pays an Absent Member subscription, shall not be liable to pay his monthly subscription for the time he is absent from Hong Kong.

28.       Absent Members shall pay an Absent Member subscription, the amount of which shall be determined by the Board, payable at the commencement of each twelve months or part of twelve months of their absence.  Immediately upon their return to Hong Kong they shall be liable for the usual monthly subscription including the month when such Absent Member returns.

29.       An Absent Member whose Absent Member subscription is in arrears shall cease to be a Member of the Club after six months’ notice has been given to him, such notice to be posted to his last known address.”

6.  Eventually, by letter dated 12 August 2005, the board of governors wrote to the plaintiff informing her that her life absent membership would be terminated with immediate effect due to her violation of articles 27 and 28, as resolved by the board of governors on 23 July 2005.  The plaintiff had no prior notice of the meeting of the board of governors on 23 July 2005 nor the proposed resolution to terminate her membership.

7.  Pausing here again, it is important to refer to articles 14 to 20 of the articles of association of the defendant which read:

“14.  If any member violates the articles of association of By-Laws of the Club or if his conduct shall, in the opinion of the Board, be injurious to the character or interests of the Club, the Board shall consider the case.

15.    When any Member has been accused in writing to the Board of any of the matters in Articles 11 to 14 above, a meeting of the Board shall be convened of which not less than seven clear days’ notice by registered post shall be given to the Member concerned, informing him of the charge against him, of the intention of the Board to hold such a meeting to inquire into the charge and of his right to be present at such meeting and to adduce evidence and address the Board in his own defense.

16.    If within 15 minutes after the time for which the meeting was called such Member shall not appear at the meeting the Board may in his absence hear the evidence against him and may decide upon the matter as it sees fit.

17.    Following such meeting, the Board shall have power to decide that such Member has forfeited his right to Membership of the Club, whereupon it shall direct that the Member’s name shall be deleted from the List of Members and with effect from such deletion he shall cease to be a Member.  The Board shall also have power to reprimand such Member and to suspend the privileges of such Member for such period as it thinks fit.

18.    Written notification of any decision of the Board shall be sent to the Member concerned by registered post.

19.    Any Member expelled from Membership of the Club shall be entitled to appeal against such expulsion to a meeting of the Club convened for such purpose.  Notice of appeal shall be given by such Member in writing to the Board within 14 days of the posting to him of the decision of the Board to expel him and thereupon the Board shall convene a general meeting of the Club within 14 days.  The Board shall in any event review any decision to expel any Member upon the written request of at least six Correspondent Members.

20.    Pending an appeal or pending a review of its decision by the Board, a Member affected by a decision to expel him shall not enjoy the privileges of Membership unless and until any such appeal or review is decided in his favour.”

8.  To cut a long story short, the plaintiff, after making unsuccessful complaints to the board about its respective decisions to suspend her membership and to terminate it, commenced proceedings in the District Court, which were subsequently transferred to the High Court.  In her statement of claim, the plaintiff asks for a declaration that the suspension and cancellation of her membership by the defendant was in violation of the rules of natural justice and therefore void of legal effect.  She prays for directions for the reinstatement of her membership and the rights and privileges appertaining to the membership.  She also asks for damages, further or other relief as well as costs.

9.  By summons, she now seeks summary judgment against the defendant “for declaratory relief as claimed in the statement of claim with damages and costs”.

Law

10.  At common law, there is no inherent power to expel a club member but a member may be expelled if the rules of the club so provide.  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.  Halsbury’s Laws of England (4^th ed, 2003 re-issue), vol 6, paras 131 and 132; Labouchere v Earl of Wharncliffe (1879) 13 Ch D 346; Young v Ladies’ Imperial Club Ltd [1920] 2 KB 523.

11.  Moreover, as has been pointed out in Halsbury’s at para 133:

“133 Prerequisites of decision to expel.  It is necessary that a power of expulsion should be exercised in good faith for the benefit of the club, and not from any indirect or improper motive.

The principles of natural justice must also be observed in exercising a power of expulsion, unless it plainly appears, on the true construction of rules, that the power was intended to be absolute.  If the rules refer the consideration of questions concerning the conduct of members to the committee, the committee is in a quasi-judicial position, and must give reasonable notice to any member whose conduct is impugned, and also a reasonable opportunity of defending himself and meeting the accusations brought against him; and it should not act on ex parte evidence.”

12.  For these purposes, there is no distinction between suspension and expulsion.  In essence, suspension is merely expulsion pro tanto: John v Rees [1970] 1 Ch 345, 397 D (per Megarry J).

Decisions under challenge

13.  In the present case, the articles of association of the defendant clearly provide for the powers of suspension and expulsion (article 17 quoted above), as well as the procedure to follow.  Moreover, the case against the plaintiff, upon which the board of governors purported to act in deciding to suspend and eventually to terminate the plaintiff’s membership, was based on a breach of articles 27 and 28.  In those circumstances, the case fell within article 14 (violation of the articles of association) and the procedure laid down in articles 15 to 20 therefore applied.  Amongst other things, they provided for the giving of not less than 7 clear days notice of the relevant board hearing to the member concerned.  That plainly was not followed.

14.  In any event, as set out above, the rules of natural justice required the board to give notice of the relevant meetings to the plaintiff in order that she could defend herself against the case that was being made against her.  That opportunity was not afforded to the plaintiff.

15.  Mr Bell, appearing for the defendant, submitted that the requirements of natural justice had been met substantially as the plaintiff had indeed written to the board of governors to set out her case before the date of her membership being cancelled.  I do not think this provides an arguable defence at all.  In any event, it does not provide an answer to the breach of procedure laid down in article 15.

16.  It is true that in the plaintiff’s statement of claim, reliance is only placed on the rules of natural justice.  The procedural requirements set out in articles 15 to 20 have not been referred to or relied on.  Strictly speaking, therefore, the plaintiff cannot place reliance on the articles in the present application for summary judgment without amending the statement of claim and making a supplemental verifying affidavit.  For reasons that will become apparent, I do not wish to base my decision on this relatively minor procedural point, which can be cured by suitable amendment.  There are more important matters to deal with.  Mr Bell did not take such a technical point at the hearing.

17.  In the circumstances, I have no doubt whatsoever that the respective decisions to suspend and terminate the membership of the plaintiff in the defendant club were made in breach of the procedure set out in the articles as well as the rules of natural justice.  Subject to what I will now turn to discuss, the decisions were prima facie unlawful, void and of no effect.

Relief

18.  The next question is whether the Court should withhold the declaratory relief sought by the plaintiff.

19.  There is no dispute that declaration is a discretionary remedy, whether in public law or private law, although I note that the case cited by Mr Bell to support his contention that the relief sought by his opponent is discretionary in nature is a public law case (Lam Ping Cheung Andrew v Law Society of Hong Kong [2007] 1 HKC 123).  See Hong Kong Civil Procedure 2007,vol 1, para 15/16/2.

20.  Mr Bell submitted that there are a number of arguable reasons – bearing in mind the present Order 14 context – that the discretionary relief sought might be withheld.

21.  First, Mr Bell argued that the plaintiff, after returning to Hong Kong in early 1999, failed to pay her subscriptions from then until the date of her suspension in March 2005, a period of six years.  This was in breach of article 28.  The plaintiff has continued to refuse to pay the outstanding subscriptions despite the obligation being brought to her attention.  Incidentally, Mr Bell pointed out that there is a factual issue as to whether the general manager told the plaintiff that she could hold her life absent membership indefinitely, and if so whether he had any authority to override the provisions of article 28.

22.  Mr Bell therefore submitted that relief might well be refused at trial on the basis that the plaintiff has not come to court with clean hands.  She seeks the advantage of membership without being willing to honour her own obligations to pay subscriptions and abide by the defendant’s rules.

23.  Mr Bell further submitted that relief might also be refused at trial because the plaintiff had suffered no prejudice: her membership was in any event validly terminated in 2006 because she failed to settle an outstanding account calculated essentially by reference to the associate membership subscriptions that she ought to have paid since her return to Hong Kong in early 1999 (but did not pay), pursuant to articles 54, 55, 58 to 60 of the articles of association of the defendant.  Mr Bell submitted that any finding that the defendant’s conduct was in breach of natural justice and a declaration to such effect would not assist the plaintiff to regain membership. The grant of a declaration in such circumstances would be useless and therefore likely to be refused.

24.  Mr Bell also referred this Court to Glynn v Keele University [1971] 1 WLR 487 for the proposition that relief may be refused even where there has been a breach of natural justice if the plaintiff’s case is wholly unmeritorious.  Mr Bell submitted that if the plaintiff cannot prove that she has a good reason for not paying her subscriptions, the trial judge is entitled to find that her claim is wholly unmeritorious, and refuse to grant a declaration.

25.  In Glynn, a university undergraduate was excluded from residence at the university for going naked in the precincts of the university.  No opportunity to be heard was given to the undergraduate by the vice-chancellor before making the decision.  Pennycuick V-C held that the vice-chancellor failed to comply with the requirements of natural justice.  However, his Lordship was of the view that the court had a discretion to grant any injunction where there had been a failure of natural justice and although the undergraduate had been deprived of the opportunity of making a plea in mitigation, the court would exercise its discretion by refusing to grant the injunction sought since the offence was of a kind that merited a severe penalty and for which exclusion from residence was perfectly proper penalty.

26.  That case was, I note, concerned with the grant of an injunction rather than a mere declaration.  I appreciate that both types of relief are discretionary in nature.  However, generally speaking, the circumstances justifying the refusal of injunctive relief would seem to be wider than those justifying the refusal of declaratory relief: see Spry, The Principles of Equitable Remedies (15^th ed) 395-396, 404-405.  Declaratory relief remains discretionary nonetheless.

27.  In Chan Ho Har Wane, Daisy v The Clearwater Bay Golf and Country Club HCMP 750/1992, 29 September 1992, Bokhary J (as he then was) granted a declaration in favour of the plaintiffs in that case, whose memberships in the defendant club were unlawfully suspended in breach of the requirements of natural justice.  Bokhary J acknowledged that whether to grant the declaratory relief sought was a matter of discretion (paras 37 & 65).  His Lordship went into the question of whether the club had a good and valid reason for suspending the plaintiffs’ memberships and came to the conclusion that it did not.  The learned judge therefore made a declaration, as a matter of discretion, in favour of the plaintiffs that their suspension was in violation of the rules of natural justice and therefore void of legal effect.

28.  Mr Curlewis, acting for the plaintiff in the present application, contended on behalf of his client that she was not obliged to reactivate her associate membership or pay subscriptions on the basis of such membership upon her return to Hong Kong in early 1999.  However, he could not maintain during argument that the contrary contention of the defendant was unarguably bad.

29.  In my view, it is arguable that procedural requirements aside, whether the defendant had a good and valid reason for suspending and terminating the plaintiff’s membership is a relevant and indeed material consideration to take into account in deciding whether to exercise the court’s discretion to grant the declaratory relief sought.

30.  Moreover, I take the view that it is also arguable that the declaratory relief sought in this summary judgment application cannot be realistically divorced from the reinstatement directions (effectively an injunction) also sought by the plaintiff in the statement of claim.  As mentioned, summary judgment is not sought regarding the reinstatement directions.  Mr Curlewis accepted that reinstatement is a matter which has to go to trial in any event.  He argued that the Court could (and should) grant the declaratory relief in this summary judgment application, leaving the question of reinstatement to trial for argument and decision.

31.  As I say, in my view, it is arguable that the two forms of relief cannot be realistically separated from each other on the facts of the present case.  To do as Mr Curlewis suggested would give rise to confusion: if only a declaration is granted at this stage without a consequential injunction, does it mean that the plaintiff can enter the club premises and use its facilities as an associate member, active or life absent, in the meantime, pending the trial on the question of reinstatement directions, on the strength of the declaration alone?

32.  The question is further complicated by the fact that the defendant club has taken the precautionary measure of adopting an alternative route to terminate the plaintiff’s membership under articles 54 to 59, as mentioned above.  That, of course, has a direct bearing on the question of reinstatement directions.  That, in my view, is also arguably relevant to whether the Court should grant a declaration at this stage, or put another way, whether it is beyond argument that if there should be a trial, the trial judge will inevitably come to the conclusion, as a matter of discretion, that such a declaration should be granted.

33.  I should add that there is apparently no urgency for the reinstatement directions, as the suspension of the plaintiff’s husband’s associate membership has been removed, and the plaintiff has since been allowed to resume using the facilities of the club as a spouse signatory on her husband’s account.

34.  Finally, there is also the question of the appeal procedure.  As should be noted, article 19 provides for a right of appeal.  Mr Bell submitted that that remedy is a relevant consideration to be taken into account in deciding whether a declaration should be granted and whether any reinstatement directions should be given.  That will be a matter for trial.  Mr Curlewis countered that on the facts, such a right of appeal was illusory.

35.  I note that a similar argument was raised and rejected by Bokhary J in Chan Ho Har Wane, Daisy, both as a matter of principle and on the facts of that case (paras 34 to 36).  So far as legal principles are concerned, in the light of developments in public law, whether a breach of natural justice can be cured by the availability of an appeal which is procedurally fair depends on the circumstances of the case, and there is no hard and fast rule: see Wade & Forsyth, Administrative Law (9^th ed) 527-530; see also Calvin v Carr [1980] AC 574, where an appeal to the committee of the Australian Jockey Club was held to cure an initial decision of the stewards which failed to observe the principles of natural justice in disqualifying the owner of a horse found to have been raced improperly.  The Privy Council emphasised on the fact that the members’ rights were dependent upon contract, who should be taken to have agreed to accept what in the end was a fair decision, notwithstanding some initial defects.

36.  Insofar the matter turns on the facts, I am unable to say that the defendant’s contention that there was a viable appeal procedure is unarguably bad.

37.  All in all, I am unable to conclude that there is no arguable defence to the plaintiff’s claim for declaratory relief.  In any event, for the above reasons, there ought to be a trial on the claim for declaratory relief, together with that for reinstatement directions.

38.  As regards damages, in my view, the defendant has an arguable defence of set off and counterclaim regarding the outstanding subscriptions calculated on the basis of an active associate membership since early 1999.  In any event, Mr Curlewis was prepared to drop this part of his client’s application for summary judgment.

39.  I should also add, for the sake of completeness, that Mr Bell also put forward his points discussed above as arguable points of defence to the plaintiff’s claim that there had been a breach of natural justice.  I should say that with the exception of the argument based on the availability of an appeal, I do not consider any of them to constitute an arguable defence to the plaintiff’s claim based on the requirements of natural justice.

Outcome

40.  In the circumstances, I order as follows:

(1)     Unconditional leave to the defendant to defend the plaintiff’s action;

(2)     Leave to the defendant to file a defence and counterclaim within 14 days from the date hereof;

(3)    Leave to the plaintiff to file a reply and defence to counterclaim within 14 days thereafter;

(4)    Liberty to apply for further directions.

41.  As regards costs, I make an order nisi that the costs of this application be costs in the cause.  Unless an application to vary the costs order nisi is made by either party within 14 days after this judgment is handed down, the same shall become absolute upon the expiry of the 14 days period.

42.  I thank Mr Curlewis and Mr Bell for their assistance.