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

CACV 364/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 364 OF 2008

(ON APPEAL FROM HCMP NO. 1567 OF 2006)

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BETWEEN

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J U D G M E N T

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Hon Stock VP (giving the judgment of the Court):

Background

1.  In 1991 the plaintiff was enrolled as an associate member of the Foreign Correspondents’ Club. In December 1998 she left Hong Kong and, by paying a ‘one-off’ fee of $2000, changed her membership to a form of absent membership described as ‘life absent member’.

2.  In March 1999 she returned to reside in Hong Kong. In the same month her husband, Mr Nedderman, secured for the plaintiff signing rights on his account as a spouse. This was a right, conferred at the discretion of the Club, deriving from and lasting for only so long as his own membership.

3.  The plaintiff regularly used the Club after her return, utilising the derivative spousal privileges she enjoyed. However, she did not notify the Club of the change in her residence status which was incompatible with her status as an absent member.

4.  In March 2005, there was unpleasantness at a Club committee meeting attended by Mr Nedderman. As a result, his membership of the Club was suspended for six months. On 22 March 2005, the plaintiff’s signing and other derivative spouse privileges were, without prior notice to her, suspended.

5.  On the same day, 22 March 2005, she complained to the Club about the suspension of her spouse privileges adding, in an e-mail to the Club: ‘I am in any event a member in my own right.’ There was an exchange of correspondence between her solicitors and the Club in which her solicitors reasserted the contention that she was ‘an absent member of the Club in her own right.’

6.  Article 7 of the Club’s articles of association requires members of the Club to notify the Board of Governors:

‘… of any circumstance which may effect (sic) his membership classification whereupon the Board shall meet to decide whether such Member’s classification of Membership should be changed. The Board may hold such a meeting on its own volition and in that event it shall give to the Member concerned not less than 14 days’ notice in writing of its intention to review that Member’s classification of Membership.  The Member shall be entitled to appear before the Board at any such meeting or adjourned meeting and may make such representations as he thinks fit.’

7.  Although the plaintiff had returned to reside in Hong Kong, she did not provide the notification contemplated by article 7. Surprisingly, as we shall see, it is not this failure that was cited as the breach for which action was taken against her.

8.  As a result of the March 2005 developments, she asserted membership in her own right but she maintained that she remained an absent member. Her reminder that she was a member of the Club in her own right and her assertion that she was an absent member commenced a chain of events which led to the litigation that has culminated in this appeal. Her regular presence at the Club after her return to Hong Kong, including attendance at certain committee meetings, could hardly have been a secret but it would appear that various officers of the Club were unaware of the fact that she had acquired absent member status.

9.  On 22 March 2005 her membership as an absent member of the Club was purportedly suspended by an act of the Membership Committee or its convener, pending clarification of her status for which purpose the Club wanted to see documents to show she had been out of Hong Kong since December 1998. The decision to suspend her membership as an absent member was taken without affording her any opportunity of being heard.

10.  In late March 2005 the Club wrote to her solicitors that the plaintiff had been granted absent member status in December 1998, pointed out that the Club’s articles of association created liability for monthly subscriptions once an absent member returned to Hong Kong and that ‘if she has been resident in Hong Kong since that time, then she will be required to pay the monthly subscription amount that is in arrears for the past seven years and must reapply to the Club to activate absent membership as an active membership. Further, if she has been a resident since that time and has utilized absent membership while a resident, this is a clear violation of the Club's bylaws. … the Club's financial controller [ has been directed] .. to research the records to determine whether this violation has occurred.’

11.  On 23 July 2005 there was a meeting of the Board of Governors of the Club. The minutes of that meeting are brief but record the conclusion that it was clear that after the change in the plaintiff's status to that of absent member ‘she had been in Hong Kong all along’ and that she was in violation of those articles of association which provided for liability for monthly subscriptions once an absent member returned to Hong Kong. It was resolved that her membership be terminated ‘due to direct violation of… Articles 27 and 28.’

12.  By letter dated 12 August 2005 the Club, through its President, informed her that her life absent membership ‘ will be terminated with immediate effect due to your violation of the Club [memorandum and articles of association] in Articles 27 and 28, as resolved by the Board of Governors on the 23 July 2005.’

13.  It is common ground that the plaintiff was given no prior notice of the intention, manifested in March 2005, to suspend her absent membership.

14.  It is also common ground that the plaintiff was not notified in advance of the meeting of 23 July, of the proposal to terminate her membership, nor in any other way was she provided with an opportunity to answer the suggestion that she was in breach of the articles of association and, if so, to suggest why her membership should not be terminated.

15.  So on 1 November 2005 the plaintiff instituted proceedings by originating summons in the District Court. In March 2006 those proceedings were ordered to continue as if begun by writ and the defendant was ordered to file its defence and counterclaim within 14 days. The proposed defence and counterclaim were not filed because in June 2006 a District Court judge decided that the proceedings had inappropriately been commenced in the District Court and he transferred the case to the High Court.

16.  After the institution of proceedings in the District Court, solicitors acting for the Club wrote to solicitors acting for the plaintiff with an "open proposal" for resolution of the dispute. The letter is dated 2 February 2006. Praying in aid article 28 of the articles of association, which provides that upon an absent member’s "return to Hong Kong" the member "shall be liable for the usual monthly subscription … ", they enclosed a schedule of the dues allegedly payable from March 1999 to August 2005 in the sum of $80275 and proposed that if the plaintiff agreed to pay those dues within a reasonable time, the Club would allow her to resume associate membership.

17.  That proposal was not accepted and by letter dated 9 June 2006 the Club presented the plaintiff with an invoice "for the outstanding subscription fee and gratuity from April 1999 to March 2005” in the sum of $74,105.

The Claim

18.  The Statement of Claim was filed in the High Court in July 2006 and has subsequently been amended. The essence of it was its complaint of a breach of those procedures provided by the articles of association to ensure natural justice for a person threatened with suspension or expulsion. The prayer for relief sought:

(1)  a declaration that suspension and cancellation of membership had violated the rules of natural justice as well as the articles of association and that they were therefore void and that the decisions were taken in bad faith;

(2)  ‘directions for the reinstatement of the plaintiff's membership and the rights and privileges pertaining to the membership’; and

(3)  damages, further (unspecified) relief, and costs.

19.  We are not in this appeal concerned with the claim for damages or the allegation of bad faith since neither was pursued in the court below.

Defence and Counterclaim

20.  The Defence and Counterclaim is dated 19 March 2007 and has subsequently been amended. As amended, it asserts that the plaintiff had made representations to the Club prior to the decision to revoke her absent membership and there is a meaningless reference to the fact that on 12 August 2005 she was given notice of the meeting of 23 July 2005; meaningless because that was notification of the result, not notification of the proposal to hold that meeting or of the subject matter there to be discussed.

21.  It is to be noted that the Defence asserts a breach of articles 27 and 28 of the articles of association as the cause for termination of the plaintiff's absent membership, that is to say, a failure to pay monthly subscriptions allegedly due by operation of those articles from the date of the plaintiff's return to Hong Kong. An alleged breach of article 7, namely, a failure to notify the Board of circumstances affecting her membership classification, is not given as the reason for the impugned decision; and this approach is consistent with the fact that that article is not mentioned in the minutes of the meeting of 23 July 2005 or in the letter of 12 August 2005.

22.  It is then pleaded that if the Club was in breach of the rules of natural justice, the plaintiff's membership has in any event validly been terminated because:

(1)  she failed to pay her account within 30 days of presentation of it in February 2006 and that by reason of article 59 of the articles of association she was automatically no longer a member; and

(2)  the breach of natural justice mattered not because there was no justification for the failure to pay her usual monthly subscriptions after her return to Hong Kong in March 1999;  in other words that she had no answer to the complaint that led to termination of her membership in July 2005.

23.  The Counterclaim is in the sum of $74,105, the membership fees said to be outstanding between March 1999 and suspension of membership in March 2005. The Counterclaim also seeks “ a declaration that the Plaintiff ceased to be a member of the [Club] on 6 March 2006 or such other date as the Court may order.”

The judgment

24.  In the proceedings at first instance, Deputy Judge Mayo formed an adverse view of the plaintiff's credibility. She had asserted that the General Manager of the Club had told her that if she returned to Hong Kong, there would be no need for her to reactivate her associate membership and no liability would arise for monthly subscriptions. The judge did not believe her in relation to this and other matters. He concluded that she was not a frank and honest witness. He found that, in the hope of avoiding the payment of subscriptions whilst enjoying spouse privileges, she had deliberately decided not to inform the Club of her return to Hong Kong.

25.  The judge referred to the evidence of Mr Egan, described as the committee member in charge of constitutional matters, who had provided the Club with legal advice in relation to their proposed handling of the plaintiff's membership issue. His evidence was that he had been unaware that the plaintiff had acquired the status of "life absent member" and that it was impracticable for the Club to police the type of abuse of which he suggested the plaintiff was guilty. Because, he said, it was manifest that the plaintiff had been in breach of the articles of association, he felt justified in advising his colleagues that they could short circuit the provisions in the articles relating to disciplinary proceedings. The speed with which matters were handled was said by Mr Egan to have been justified because he feared that after Mr Nedderman’s membership suspension, the plaintiff would reactivate her associate membership and enable her husband to use the Club through spousal rights which she would seek to accord him.

26.  Not surprisingly, the judge was unimpressed with the way in which the Club had proceeded and with its rationale for denying the plaintiff, whatever the merits of the case might have been, her opportunity to be heard before the suspension and termination decisions were taken.

27.  The judge decided that the rules of natural justice and the articles of association which encapsulated them had been breached.

28.  In relation to the suggested liability for dismissal under article 59 for failure to pay a bill, it is not clear whether he determined that cessation of membership was automatic upon non-payment of the bill presented or that the article presupposed an opportunity for the alleged defaulter to be heard; but he noted that there was a dispute between the parties as to whether the amount was in fact due and he thought it ‘artificial’ that the issue was resolved by a summary process. He found nonetheless that she was liable for the sum claimed and found against her on a limitation period argument that was raised because, he decided, she had concealed her membership so that for the duration of that concealment, time did not run.

29.  The judge was not prepared to direct the Club to reinstate the plaintiff’s absent membership because, he said, by July 2005 she clearly was not an absent member and, further, because he found that it was clear that she was unwilling to pay the monthly subscriptions.

30.  Accordingly, the judge:

(1)  issued a declaration that the Club was in violation of the articles of association and the rules of natural justice and that its determinations to suspend and terminate the plaintiff's membership of the Club were of no legal effect;

(2)  dismissed the plaintiff's claim for reinstatement of membership of the Club;

(3)  dismissed the plaintiff's claim for damages;

(4)  found for the Club on its counterclaim in the sum of $74,105; and

(5)  after a hearing to vary a costs order nisi that there be no order as to costs, ordered the plaintiff to pay the defendant's costs of the action and counterclaim and the costs of the defendant’s application to amend the judgment and vary the order nisi.

The appeal

31.  It is contended first that the judge erred in declining to direct the Club to reinstate the plaintiff’s membership. The relief sought in this regard by the notice of appeal is phrased differently from the declaration sought in the court below. The plaintiff asks for an order that ‘her name be restored to the register of members of the [Club] together with the reinstatement of all the rights and privileges appertaining to her membership’. To what category of membership she asserts she is entitled to be restored is not stated.

32.  The plaintiff further complains that the judge:

(1)  made no determination whether, by reason of her failure to pay the membership fees claimed, she ceased to be a member of the Club;

(2)  erred when he found that the plaintiff’s suggested concealment of her return to Hong Kong was such as to preclude time running against the Club for the purpose of its claim for arrears of fees; and

(3)  ought not to have condemned the plaintiff in costs but ought instead to have awarded to the plaintiff costs of the action and of the applications subsequent to delivery of judgment.

The cross-appeal

33.  By a respondent’s notice, the Club asserts that the judge erred:

(1)  in making a declaration that the Club was in violation of the articles of association and the rules of natural justice; and

(2)  in deciding - according to the defendant’s reading of the judgment - that the Club was not entitled to rely on article 59 of the articles of association to terminate the plaintiff’s membership; the Club asserting by this notice that the decision not to reinstate the plaintiff’s membership be affirmed on the additional ground that in any event membership has been terminated validly under article 59.  The termination relied on in this notice differs however from that relied upon in the Counterclaim: the Counterclaim relies on the schedule of monthly dues presented under cover of the solicitors’ letter of 2 February 2006 whereas the respondent’s notice relies on the invoice dated 9 June 2006.

Relevant Articles

34.  Articles 14, 15 and 17 provide that:

‘14.  If any Member violates the Articles of Association or 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.  …

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 should also have power to reprimand such Member and to suspend the privileges of such Member for such period as it thinks fit.’

35.  Article 19 provides for an appeal by an expelled member, although article 22 precludes that member from enjoying the privileges of membership whilst the appeal is pending.

36.  It will be remembered that the decision of the Board of Governors of 23 July 2005 as notified to the plaintiff on 12 August 2005 was that membership was terminated due to the plaintiff’s alleged violation of articles 27 and 28 of the articles of association. They provide as follows:

‘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 12 months or part of 12 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.’ (Emphasis added)

37.  Articles 54 to 61 inclusive of the Club's articles of association are framed under the heading: " Payment of membership accounts".

38.  Article 54 is in the following terms:

‘An account of all monies owing to the Club by Members shall be made up to the last day of each month and presented for payment not later than the 10th day of the ensuing month and shall become due and payable upon receipt.’

39.  Articles 55 to 58 inclusive make provision for the posting of the name of a member who has not paid his account :

‘55.  If an account is not paid by the 15th day of the month following the month in which such an account was sent to him, the Member’s name shall be prominently posted and he shall be denied use of the facilities of the Club either in his own right or as a guest of another member; exception to this rule may be made for Members who are to be temporarily absent from Hong Kong when the account is rendered, and who shall have made satisfactory arrangements with the Treasurer or Club Manager to cover this circumstance.

56.  No supplies shall be furnished to any Member who may not have settled his accounts according to the preceding Article, and the Club’s employees and the employees of the Club’s agents shall be instructed by the Board through the Secretary or Club Manager whenever this rule is to take effect against a Member.

57.  Notwithstanding anything contained in Article 54 hereof, the Board may at any time it sees fit decide that a Member shall not be granted credit privileges but shall be allowed to use the Club’s bar and restaurant facilities only on a cash basis.

58.  A Member whose name shall have been posted in accordance with Article 55 and who does not settle his account within 30 days from the date of posting shall cease to be a Member of the Club.’

40.  Article 59 contemplates action by the Board notwithstanding the posting provision:

‘Notwithstanding anything contained in Article 54, the Board may at any time as it sees fit, present for payment to any Member his account, and if the person concerned fails to pay such account within 30 days of presentation of such account, he shall ipso facto cease to be a Member of the Club.’

41.  Article 61 provides that :

‘The Board may at its discretion reinstate any person who has been suspended or has ceased to be a Member by virtue of Article 58 or 59 as the case may be.’

Analysis of the appeal

42.  There can be no question but that the suspension of the plaintiff’s signing rights as a spouse is unimpeachable. Spousal signing rights depend upon the subsistence of the primary membership. There is no assertion in these proceedings that the suspension of Mr Nedderman’s membership was invalid. It follows that upon that suspension, the plaintiff’s signing rights as a spouse were validly suspended. Therefore, what we are concerned with in these proceedings is solely the plaintiff’s membership of the Club in her own right.

43.  It has never been the Club’s case that the termination of membership resolved by the Board in July 2005 was an automatic consequence of article 59. As is specifically pleaded, the Board met ostensibly pursuant to the provisions of article 15 to consider a suggested breach of articles 27 and 28. There was, so it seems to me, an oddity in reliance upon articles 27 and 28 for I read them as doing no more than giving rise to a financial liability. The consequences of failing to meet that liability are dealt with by articles 54 to 61 inclusive; but the Board chose to treat articles 27 and 28 as giving rise to a liability the failure to meet which triggered the procedure envisaged by articles 14 and 15. Breach of article 7 was not relied upon as the act which in itself warranted expulsion.

44.  Assuming, for the moment, that the Club correctly read articles 27 and 28 as making available the procedure envisaged by articles 14 and 15, the Club’s assertion that the judge erred in declaring that the suspension and termination of membership was unlawful and of no legal effect is, in my judgment, untenable.

45.  There was a suggestion from Mr Bell that because the result was not unfair, there was no breach of natural justice. It was contended that the result was fair because although there was a breach of procedural rules the plaintiff did not come to court with clean hands. Then there was a contention that there was no breach of the rules of natural justice because there was no substantial prejudice to the plaintiff since the case against her was cut and dried. We were also referred to a line of authorities in cases of applications for judicial review. These had no bearing on the present case because they addressed situations where breaches of procedure were subsequently cured in circumstances where one could say, looking at the matter in the round, that a fair hearing had been accorded.

46.  The committee of a club is in a quasi-judicial position such that in contemplating suspension or expulsion of a member, it is duty bound to accord to the accused person the right to be heard, particularly because suspension and expulsion carries stigma: D’Arcy v Adamson (1913) 29 TLR 367 at 368; Labouchere v Earl of Wharncliffe (1879) 13 Ch D 346 at 350-351; Burn v National Amalgamated Labourers’ Union of Great Britain and Ireland [1920] 2 Ch. 364.

47.  The notion, which the Club appears to have embraced both at the time of the impugned decisions and before this Court, that seemingly open and shut cases derogate from, or excuse a breach of, this duty, is contrary to fundamental and well-established principle:

‘It may be that there are some who would decry the importance which the courts attach to the observance of the rules of natural justice. "When something is obvious," they may say, " why force everybody to go through the tiresome waste of time involved in framing charges and giving an opportunity to be heard?  The result is obvious from the start."  Those who take this view do not, I think, do themselves justice.  As everybody who has anything to do with the law well knows, the path of the law is strewn with examples of open and shut cases which, somehow, were not; of unanswerable charges which, in the event, were completely answered; of inexplicable conduct which was fully explained; of fixed and unalterable determinations that, by discussion, suffered a change.  Nor are those with any knowledge of human nature who pause to think for a moment likely to underestimate the feelings of resentment of those who find that a decision against them has been made without their being afforded any opportunity to influence the course of events.’

John v Rees [1970] 1 Ch. 345 at 402 per Megarry J.

48.  A purported suspension or expulsion effected in breach of the rules of natural justice is, as a matter of law, inoperative:

‘No proceeding in the nature of a judicial proceeding can be valid unless the party charged is told that he is so charged, is called on to answer the charge, and is warned of the consequences of refusing to do so.  As no such notice was given here, I think that the removal is altogether a void act, and I am therefore of opinion that the plaintiff is still a member of the society.’

Innes v Wylie (1843) 1 Car & Kir 261 at 263 per Lord Denman C.J. See also Gray v Allison (1909) 25 TLR 531; Chan Ho Har Wane Daisy v Clear Water Bay Golf and Country Club [1992] 2 HKC 604; and Halsbury’s Laws of England 4th Ed., Vol. 6 para 132.

49.  It is obvious that in first suspending and then, in purported exercise of the powers conferred by articles 14 to 17 inclusive, expelling the plaintiff, the Club was in breach of the rules of natural justice. Those acts were inoperative and, subject only to the question of the effect of article 59 to which I shall turn next, the plaintiff has at all times remained, and remains, a member of the Club. It is not necessary for present purposes for this Court to decide what category of membership she holds. Whether her conduct in not notifying the Club of her change in circumstances, thereby avoiding the liability for monthly dues, has been such as to entitle the Club, after observing the rules of natural justice to withdraw that membership, is also not for us to determine. It suffices to say that (subject to the article 59 issue) the plaintiff has never ceased to be a member. The order sought by the Statement of Claim for "directions for the reinstatement of the plaintiff’s membership" was a strange order to seek. What is now sought, instead, is an order for the restoration of the plaintiff’s name to the register of members. It seems to me to matter not whether such an order is made because the absence of such an order makes no difference in law to the plaintiff’s status, and Mr McCoy on behalf of the plaintiff has intimated that a statement by the Court to this effect will suffice for the plaintiff’s purpose.

Article 59

50.  The Club asserts in these proceedings that article 59 is so phrased as to be divorced from those articles of association which specifically provide for observance of the rules of natural justice in the case of violation of the articles of association or of misconduct; and that the mere fact of non-payment suffices to bring membership to an end.

51.  The plaintiff, on the other hand, argues that the provisions of articles 14 to 17 inclusive cover an article 59 situation, so that expulsion cannot take place under article 59 for non-payment of an account without first affording to the member an opportunity to contend that the account is not due and payable or, if payable, to say why his membership should not be terminated. The plaintiff contends, in the alternative, that if article 59 is not governed by the procedures prescribed by articles 14 to 17, the purported exclusion of the rules of natural justice is contrary to public policy.

52.  I do not think it arguable that article 59 is intended by the articles of association as framed to be subject to the rules prescribed by articles 14 to 17. Article 59 is clearly intended to trigger loss of membership by the very act of failure to pay a sum due after presentation, in accordance with that article, of an account. Article 28 provides for the liability of an absent member to pay monthly subscriptions once he or she returns to Hong Kong. If articles 14 to 17 were intended to apply to a breach of article 28, article 59 would be otiose, for failure to pay a subscription would itself be a breach of the articles and, absent article 59, the procedures under articles 14 to 17 could then be invoked for that breach.

53.  Mr McCoy contends that the contract evidenced by the articles of association to which I have referred was amended when the applicant was accepted as a "Life Absent Member" in December 1998 and that the terms of that amendment are evidenced by the application form which she signed in order to obtain that status.

54.  The form states the plaintiff’s wish to become a life absent member upon payment of HK$2000. This sum contrasts with the annual fee of $300, which at the material time was the absent member subscription referred to in article 27. Mr McCoy then relies on standard remarks made by the Club on the form which advise applicants as follows:

‘REMARKS: (ON YOUR RETURN) Please be advised that once you sign any chits, the monthly subscription will be automatically debited to your account.

If you return for a short trip, you may purchase books of coupons on sale at reception or from the bar after the office is closed at 8:00 p.m.’

55.  His contention is that only once a member returns to Hong Kong and signs chits does the liability to monthly subscription revive. Until then, the person remains an absent member.

56.  I do not agree. What the remarks demonstrate is a concession made by the Club to those who return for a short time enabling them to avoid monthly subscriptions by purchasing coupons instead of signing chits. That, in my opinion, is the only contextual and commonsense interpretation of the contractual intention. There is, in the context of the articles of association as a whole, no magic in the status "life absent member" save for the fact that such a person might, instead of paying $300 per annum, make a one-off payment of $2000; a benefit designed for those who intend to be absent for an extended period.

57.  It seems to me clear that once the plaintiff returned to Hong Kong in March 1999 with the intention of remaining here, her liability to monthly subscriptions crystallized. The fact that she did not notify the Club of her changed circumstances, as by article 7 she was required to do, made no difference to that liability.

58.  There are two further questions that have been advanced for our consideration:

(1)  whether article 59 can take effect when liability for the sum claimed is disputed, or whether it has automatic effect regardless of a dispute; and

(2)  whether it was open to the parties to exclude, by the contract for membership the terms of which are evidenced by the articles of association, a member’s right to a hearing in the event that expulsion was considered by reason of non-payment of an account.  The argument is that to do so is contrary to public policy.

59.  I do not think it necessary to answer either question. That is because I am of the opinion that article 59 does not avail the Club in these proceedings.

60.  The plaintiff’s pleadings rely upon the letter dated 2 February 2006 as constituting the presentation of an account under article 59. I am satisfied that the letter did not purport to present an account under that article. Payment was sought in the context of a "proposal to dispose of this matter", part of which proposal was restoration of associate membership if the outstanding dues were paid within two months, a proposal that sits ill with the terms of article 59.

61.  Although the respondent’s notice seeks to rely on the invoice dated 9 June 2006, no application was made either at trial or before us to amend the pleadings and, given the serious consequences that flow from article 59, properly invoked, I do not think that the defendant should be permitted to change its mind in this way as to which account was intended to be an account under article 59.

62.  But even if that were thought to be an over-legalistic approach, I am of the opinion that the invoice dated 9 June 2006 did not constitute an account envisaged by article 59. Article 59 does not envisage liability to automatic expulsion as the result of a presentation of a standard monthly or, for that matter, a standard cumulative, account. If that were envisaged, there would be no place for article 55. The point may be illustrated by an example. Suppose an account for September of a particular year. Under article 54 the account will be presented not later than 10 October and becomes payable upon receipt. If, however, the account is not paid by the 15 November, the member’s name shall be prominently posted and under article 58, if he has not settled his account by mid December, he will cease to be a member of the Club. Yet if article 59 envisages automatic cessation of membership within 30 days of presentation of an ordinary account, the debtor member will cease to be a member of the Club within 30 days of presentation, namely, in this example, no later than 10 November regardless of articles 55 to 58 inclusive. A consideration of this example and of the wording of article 59 illustrates that article 59 provides for a special measure at the instigation of the Board. I cannotthink that the mere presentation of an invoice over the signature of the Financial Controller, without any notice to the member that the demand is made pursuant to article 59, is intended by the articles of association to suffice to trigger its consequences.

63.  Accordingly, in my judgment, the defendant’s attempt to rely upon article 59 must fail.

The limitation issue

64.  I am satisfied that subject to the limitation period argument, the plaintiff is liable for the monthly fees envisaged by article 28 from the date of her return to Hong Kong in March 1999. Mr McCoy argued that article 54 relieved her of liability because until 2006 no account had been presented to her. The argument is weak since Article 54 does not create the liability for payment. Article 28 does.

65.  By its Counterclaim dated 19 March 2007, the Club claimed the sum of $74,105 as monthly subscriptions due from March 1999. By her Defence to Counterclaim the plaintiff denied liability for the subscriptions but said that in any event the subscriptions for the period between March 1999 and March 2001 did not accrue within six years before the Counterclaim and that to that extent the claim was barred by virtue of the Limitation Ordinance, Cap 347.

66.  In this regard, the trial judge noted the testimony of Mr Egan that although he, as a Board member, was aware that the plaintiff was in Hong Kong after March 1999 and that she visited the Club frequently, he was unaware that she had acquired the status of absent member. It was, he stated, impracticable for the Club to police the status at any given time of members who visited the Club and maintained that it was the responsibility of each member to inform the Club of a change in circumstance. The judge accepted this evidence and held that Mr Egan ‘and his colleagues would understandably not connect her presence with the fact that she was a life absent member unless their attention was specifically drawn to this fact. I also agree,’ he added, ‘… that it was not unreasonable for the Club to place reliance upon members to comply with the Articles of Association and that there was undoubtedly an obligation placed upon members who had taken advantage of the provision relating to Absent Members to report to the Club when they returned to Hong Kong.’ In ordering the plaintiff to pay the amount claimed in the Counterclaim, he held that ‘the plaintiff concealed her membership and this being the case time does not run.’

67.  Section 26 (1) of the Limitation Ordinance provides that:

‘… where in the case of any action for which a period of limitation is prescribed by this Ordinance…

…

(b)  any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; ..

…

the period of limitation shall not begin to run until the plaintiff has discovered the … concealment… or could with reasonable diligence have discovered it.’

68.  The plaintiff argues that she concealed nothing. The Club knew that she had acquired absent membership and the Club knew, by reason of her frequent presence in and after March 1999, that she had returned to Hong Kong.

69.  This argument ignores the contractual duty upon the plaintiff under article 7 to "notify the Board of any circumstance which may affect [ her] membership classification.’

70.  That article is there for the very purpose suggested by the evidence, namely, that a club, particularly one the size of the club in this case, cannot be expected to be alert to every material change of circumstance relevant to the membership classification of each of its members. In this particular instance, the plaintiff was away from Hong Kong for a mere three months: all the more reason for Club officers who saw her regularly at the Club before December 1998 and then in and from March 1999 to assume no change in her membership status. The obligation was upon her to notify the Club that her status as an absent member was no longer appropriate. It is clear from the evidence that she deliberately chose not to do so and ‘where there is a deliberate commission of a breach of duty, eg a breach of contract, it is unnecessary to show that the defendant took active steps to conceal the breach: all that is required is that it is committed "in circumstances in which it is unlikely to be discovered for some time."’: Chitty on Contracts 30^th ed., Vol 1, para. 29-084.

71.  In these circumstances the Limitation Ordinance does not avail the plaintiff and the appeal in this regard must fail.

Result

72.  The plaintiff succeeds in her contention that there was an inconsistency between, on the one hand, the judge’s declaration that the decisions to suspend and terminate her membership of the Club were of no legal effect and, on the other, his dismissal of her claim for reinstatement. The decision to dismiss that claim was made on the suggested merits rather than on the basis that any declaration to the effect that she was still a member was otiose. Since the purported suspension and termination of membership were void acts, the plaintiff remains a member of the Club. This conclusion suffices for her immediate purposes although it does not preclude the Club from examining the history afresh, but if it is to do so it must follow proper process.

73.  The plaintiff fails in her appeal against judgment for the Club on the Counterclaim for outstanding membership dues.

74.  In its cross-appeal, the Club fails in its attempt to set aside the declaration that the Club was in violation of the articles of association and the rules of natural justice and that its determinations were of no legal effect; and fails in its cross-appeal and respondent’s notice in relation to article 59.

Costs

75.  The order nisi made at the time of judgment was that there be no order as to costs on either the claim or the counterclaim. The judge said that the entire mischief would never have occurred had the plaintiff given notice to the Club on her return from Australia but that the Club was itself at fault in failing to accord the plaintiff a hearing.

76.  An application was made to vary the costs order nisi and to vary the judgment.

77.  The judgment as originally drawn omitted the order made by the judge by which he dismissed the plaintiff’s claim for reinstatement of membership and the application to vary the judgment was to correct that omission. The judgment was varied accordingly.

78.  By order dated 16 December 2008 the costs order nisi was varied. The judge ordered the plaintiff to pay the defendant the costs of the action and counterclaim and the costs of the application to vary the judgment and the costs order nisi. Against this order, the plaintiff appeals.

79.  At the conclusion of a hearing on 16 December 2008 the judge provided oral reasons for his order as to costs saying that:

‘It is with some regret that I have come to the conclusion that I must order that the defendant should have its costs, both in the main action and the counterclaim.  I say "regret" because neither side was wholly successful in this action, but in particular, the defendant was clearly at fault in the way they terminated the plaintiff’s membership without affording her any opportunity of making representations in person.  What, however, persuades me that I must make a costs order in favour of the defendant is the letter of 2 February 2006.  In this letter, the club were effectively making an offer to make good the mistakes they made in the past and, clearly, the offer was more favourable than what was ordered under my judgment.  I therefore order that the defendants are to have their costs both in the action and in the counterclaim.’

80.  I see from the transcript of that hearing that there was some reference to a counter-offer a few days after the letter of 2 February by the plaintiff demanding a number of terms including reinstatement of her membership as an absent member, on the basis that she remained entitled to life absent membership.

81.  The letter of 2 February 2006 offered to restore to the plaintiff associate membership if she agreed to pay the outstanding dues within two months and to pay monthly dues from the resumption of her associate membership. Subject to one matter, this was as much as the plaintiff effectively acquired under the judgment of November 2008.

82.  There was however no acknowledgement by the Club that the suspension of the plaintiff’s membership in March 2005 and the termination of her membership in July 2005 were invalid. There is a stigma attached to suspension and termination of membership of a club and an acknowledgement by a club of fault in the process leading up to suspension or termination of membership is a matter of significance to the suspended or dismissed member.

83.  In relation to the Counterclaim, the Club succeeded in relation to the sum claimed but failed in its assertion that membership was terminated by reason of article 59.

84.  In my judgment, the justice of the matter is met by allowing the appeal against the costs orders in the court below and by substituting therefor an order that there be no order as to the costs of and occasioned by the claim and Counterclaim or of the applications to vary the order nisi and the judgment.

85.  As for this appeal, the order made by the judge below dismissing the claim for reinstatement is set aside. Whilst there was no need for an order for reinstatement, because the decisions to suspend and withdraw membership were void, the dismissal of that claim was inconsistent with that finding. I see from the correspondence attached to the affidavit of the solicitor acting for the defendant in the variation applications, that after the judgment of the court below, the Club’s solicitors wrote on 25 November 2008 to those acting for the plaintiff, incorrectly asserting that the judge had granted a declaration that the plaintiff had ceased to be a member on 6 March 2006, adding: ‘ In summary your client has no Associate Membership or any membership in her own name to resume on 1 December 2008 or any other time.’ I note that that letter was in response to an assertion from the plaintiff’s solicitors that the plaintiff would “resume her Associate Membership from 1 December 2008”, a stance quite at odds with her prolonged insistence that she continued to enjoy the status of absent member. I note too that in the pleadings the plaintiff was silent about the category of membership to which she was said to be entitled; that the grounds of appeal and the relief sought thereunder steered clear of stating the category of membership to be specified by the declaratory relief sought; and that in the course of the appeal hearing, Mr McCoy continued to assert that life absent membership persisted so long as chits were not signed. On one view, this history would suggest that there should be no order as to the costs of the appeal. However, in the circumstances that arose upon judgment in the court below, it fell to the Club, whatever the plaintiff’s stance, to determine what category of membership the plaintiff enjoyed in July 2005 when it purported to terminate membership and then to decide whether it was minded to revoke that membership and, if so, whether to categorise her as an associate member or to expel her from the Club, the final decision being subject to consideration of such representations as the plaintiff might make. But the Club did not embark upon that process. Instead, the Club wrongly asserted that the judge had declared that the plaintiff enjoyed no membership and stated that as far as it was concerned the plaintiff enjoyed neither associate membership nor any other category. That was not correct. There was therefore a practical purpose for the plaintiff in launching this appeal and I would make an order nisi that she should have the costs of this appeal. Since the Club has failed in its cross-appeal, I would also make an order nisi that the costs of the cross-appeal and of the respondent’s notice should be to the plaintiff; these costs to be taxed if not agreed.

Hon Hartmann JA:

86.  I agree.

Hon Wright J:

87.  I also agree.

Hon Stock VP:

88.  Accordingly:

(1)  the appeal succeeds to the extent that (i) the order dismissing the claim for reinstatement of membership is set aside and (ii) the order of the court below as to costs is set aside and in substitution therefor there will be an order that there be no order as to costs of and occasioned by the claim and counterclaim or of the applications to vary the costs order nisi and the judgment;

(2)  the cross-appeal is dismissed; and

(3)  there will be an order nisi that costs of the appeal and of the cross-appeal and respondent’s notice be to the plaintiff to be taxed if not agreed.