Management Committees must adhere to it’s Constitution regarding the scope of their powers, including membership admission. The following case demonstrates the important role of a Company’s Constitution in clarifying and limiting the powers of the management committee.
Singh v Brisbane Sikh Temple
The case of Singh v Brisbane Sikh Temple (Gurdwara) Inc [2022] QSC 17 examined the actions of the Brisbane Sikh Temples management committee regarding membership admission to their incorporated association.
Justice Kelly found that after reviewing the respondent Brisbane Sikh Temples Constitution, the management committee had acted for an improper purpose through the imposition of a criterion which limited membership numbers.
Facts
Background
1. The Brisbane Sikh Temple (the Temple) is an incorporated Association under the Associations Incorporation Act 1981 (Qld).
Membership Drive
2. In March 2021, the Temple undertook a membership drive for new members. i
3. At the time of the membership drive, the membership count was 235 members.ii
4. Clause 4(2) and 5(6) of the Temples Constitution stated that the number of members shall be unlimited. iii
5. By the end of the drive, there were 3156 applications. iv
Determination of Applications
6. The management committee limited approval of membership application due to a variety of concerns including:
a. Uncertainty about bona fides of all applications
b. Disruptive behaviour of applicants during the application process.v
c. Health and Occupancy Concerns about the Temples Capacity
i. The months prior to and immediately after the drive, the COVID-19 restrictions were in place for public gatherings.
7. Based on these factors, the management committee decided the selection of members would be based on a new criterion. vi
8. The new ‘criteria’ based membership approval on if an applicant was a previous member within the previous five years.vii
9. The outcome of this criteria was that 2151 applications were rejected and 1005 memberships were approved. viii
10. An application was bought by a group of three rejected applicants under s72 and s73 of the Associations Incorporation Act 1981 (Qld).
Issue
Was the decision by the Management committee to limit membership based on its own criteria in breach of, or without regard to, provisions of the Constitution such that any decisions based the exercise of power would be void?ix
Courts Findings – The Management Committee went beyond the scope of it’s powers
The Management Committee had a fiduciary role to act bona fide and for a proper purpose when considering applicants for membership.x Justice Kelly analogized this power to that of company directors issuing new shares.
In examining the act of the Management Committee, Justice Kelly considered whether the actions were:
- Exercised in Good faith
- Fit for a proper Purpose
Good Faith
It was established that the actions of the management committee were done in good faith.xi Hence, the focus of the Case turned upon the second limb of whether this was beyond the scope outlined within the Constitution.
Fit for a Proper Purpose
The Management Committee had the discretionary power to reject and accept applications. Although they argued that this power was unfettered, the Court disagreed. Justice Kelly noted that several clauses of the Constitution maintained that there was not to be a limit on the membership numbers.
Consequently, since this was explicitly outlined in the Constitution, the management committee’s discretion couldn’t “be lawfully exercised by reference to a criteria that was not contained in the Constitution and which was designed to limit the admission of members.” xii
The judge concluded that the health and occupancy concerns were valid. However, the visitation and occupancy concerns were a separate factor to the assessment of membership.xiii Therefore, the rejection of members based on the criterion was void as it was exercised for an improper purpose.
Natural Justice – Separate Issue
The applicants separately submitted that the Temples failure to give reasons denied them natural justice.xiv The Court found that since there was no provisions within the Constitution requiring reasons, this issue was rejected.
Lessons
Decisions must adhere to the Companies Constitution
The actions of the Management Committee were simultaneously in good faith yet for an improper purpose. This case demonstrates that the actions of the managing operators of a company must follow the provisions within the Constitution.
Engaging Legal Counsel to Clarify the Constitution
Managing Members and Directors must be aware of the provisions of the Constitution. If there are concerns or uncertainty, legal counsel should be engaged.
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