CACV 14/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 14 OF 2008

(ON APPEAL FROM HCMP NO. 2316 OF 2006)

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J U D G M E N T

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Hon Rogers VP:

1.  This was an appeal from a judgment of Saunders J given on 10 August 2007.  The matter before the judge was an originating summons seeking various declarations and an injunction against the first defendant, which by that time remained the only defendant.  The judge gave judgment in favour of the plaintiff.  Following a further hearing he made various orders including declarations, which will be referred to below, and granted an injunction against the first defendant requiring it to convene a meeting of its Council within a month of that date, and in any event not later than 20 January 2008 to reconsider the plaintiff’s application for the reinstatement of its membership in the defendant and to inform the plaintiff of the results of the said application and, in the event that the defendant refused the application, to inform the plaintiff of the reasons for its refusal of the application within one week after the conclusion of the meeting.  The judge awarded costs in favour of the plaintiff to be taxed if not agreed.  At the conclusion of the hearing of this appeal judgment was reserved which we now give.

Background

2.  As its name would suggest the plaintiff is an organisation devoted to the sport of shooting.  In 1994 the plaintiff together with the other organisation in Hong Kong devoted to the sport of shooting, namely the Hong Kong Gun Club (“the Gun Club”), caused the incorporation of the first defendant.  The purpose of the first defendant was clearly to act as the governing body of the sport of shooting in Hong Kong.  The objects of the first defendant as set out in the Memorandum included the following:

“(a)  To act as the governing body of all shooting discipline under the rules of the Union International de Tir (UIT), the International Olympic Committee (IOC), and the Commonwealth Games Federation (CGF).

(b)  To select teams from the public to represent Hong Kong in international competitions in the Union International de Tir (UIT), the International Olympic Committee (IOC) and the Commonwealth Games Federation (CGF).

(c)  To be affiliated to the Amateur Sports Federation & The Olympic Committee (ASF&OC) of Hong Kong.

(d)  To promote the sport of shooting under the UIT, IOC and CGF rules and regulations in every way in which the Council of the Association (hereinafter called ‘the Council’) shall think proper and to take all such steps as shall be deemed necessary or advisable for preventing infringements of the rules and laws of the sport, or other in proper methods or practices in such sport and for protecting it from abuses.”

3.  As such, it may be concluded that the first defendant’s purpose was an important one in the sport of shooting in Hong Kong.  Any representation from Hong Kong in international competitions in shooting would have to come with the authorisation from the first defendant.  It was also clearly going to take a major role in organising the sport.

4.  It was evident that the plaintiff and the Gun Club would together control and be involved in the operation of the first defendant.  It is not for this court to determine the root cause of the dispute which has emerged between the plaintiff and the first defendant.  It suffices to say that by 2006 the relationship between the plaintiff and the first defendant had become somewhat acrimonious.

5.  Under the terms of Article 13 of the first defendant’s Articles all annual subscriptions became due and payable in advance on or before the first day of January every year.  Article 15 reads as follows:

“Any Member or Associate Member whose annual subscription shall remain unpaid for a period of 90 days shall cease ipso facto to be a member of the Association, and shall forfeit all rights in the Association but may be reinstated upon full payment of the outstanding subscription.”

6.  There is no dispute between the parties that the plaintiff’s 2006 subscription was not paid within the 90-day period and, hence, the provisions of Article 15 applied and the plaintiff ceased to be a member of the first defendant.  In early July 2006 the plaintiff issued what was referred to as an Armoury Notice.  The effect of that was that members of the first defendant would not be permitted to use the facilities of the plaintiff’s range unless they were also members of the plaintiff.

7.  At the end of that month, in a letter dated 28 July 2006 but apparently sent by fax a day or so later, the plaintiff, under the hand of its chairman, wrote to the Deputy Director of the Leisure and Cultural Services Department (“LCSD”), which was the funding agency for the plaintiff and the first defendant, drawing attention to a number of matters of complaint in respect of the first defendant.  Those included complaints about the financial management of the first defendant, the conduct of the Annual General Meeting, the management of the sport of shooting in Hong Kong including the training, internal disputes within the first defendant involving the plaintiff and various other matters.  The letter was also copied to the Sports Federation and Olympic Committee (“SF&OC”) on the pretext that it was in that body’s function “to ensure a good and clean management of sports in Hong Kong.”

8.  In August 2006 the plaintiff issued various circular letters the purport of which was that there was still an ongoing dispute, and that the first defendant would not receive assistance from the plaintiff although the plaintiff expressed its desire to assist the sport of shooting in Hong Kong.

9.  Suffice it to say that there was a change of heart on the part of the plaintiff in September 2006 when it wished to have its membership of the first defendant reinstated.  A cheque for the full amount of the annual subscription was sent but that was returned under cover of a letter 15 September 2006 the material part of which read:

“It is clear without doubt by your notice to us and by your corresponding notices respectively to the Companies Registry, LCSD, Sports Federation & Olympic Committee of Hong Kong, Police Licensing Office and perhaps your members that you have resigned from our Association as our member.  Please note that your resignation has been duly accepted under a resolution passed at our Council Meeting.”

10.  The reference to the Council Meeting was to that which had been held on 24 August 2006 paragraph 1 of which read:

“1)  Withdrawal of HKRA from HKSA and HKRA’s conduct subsequent thereto:-

Copy of (a) a written notice dated 30/6/2006 served upon HKSA by HKRA stating, inter alia, that it was no longer a member of HKSA as from the 31/3/2006, (b) HKRA’s “Armoury Notice” dated the 5/7/2006, (c) HKRA’s letter of compliant dated 1/8/2006 addressed to LCSD and copied to SF&OC against HKSA (d) HKRA’s letters dated the 2/8/2006 and 20/8/3006 (sic) respectively demanding for the removal of HKSA’s arms stored at HKRA’s armoury and (e) HKRA’s notice dated 20/8/2006 to all ROs, Als & ISSF Jury were tabled before the Council Members for their reference.

i.  With regard to HKRA’s notice dated the 30/6/2006, the Council after having also taken into consideration of the corresponding notices given by HKRA to the Companies Registry, the LCSD, SF&OC and Police Licensing Office in early July and August had resolved that the said notice be treated as a “letter of resignation” from HKRA with retrospective effect from the 1/4/2006 and the fact that HKRA was no longer a member of HKSA as sought by HKRA was duly confirmed and recorded; &

ii. &nbspHKRA’s conduct related to the issuance of all those letters and notices subsequent to its withdrawal from HKSA had also been reviewed by the Council.  It was concluded that such conduct reflected upon HKRA’s determination, (a) to destroy the good image of HKSA as being the governing body of all the shooting sport under the ISSF rules and regulations in Hong Kong, (b) to oppose to HKSA being a competent controlling body of the shooting sport in Hong Kong, and, (c) to break away from and not to operate under HKSA in the training of national shooters and organizing shooting activities (pistol and rifle disciplines).  by virtue thereof, the Council had resolved that any future application (if any) by HKRA to be re-admitted as a member of HKSA be rejected.”

The judgment below

11.  The judge came to the conclusion that as at the end of the 90-day period the plaintiff had ceased to be a member of the first defendant and questions of resignation were therefore irrelevant.  He then held that the provision in Article 15 meant that there was a discretion as to whether the plaintiff would be reinstated on payment of the outstanding subscription.  The judge went on to consider whether the discretion had been properly exercised.  In paragraph 91 of the judge said:

“As has been demonstrated, the Council did not in fact meet following the receipt of the application for reinstatement upon payment of the subscription by the HKRA.  There is no evidence even that the Chairman notified the Council of the application for reinstatement.”

12.  The judge also pointed out that in so far as the chairman of the first defendant had relied upon the decision of the Council of 24 August as the grounds for rejecting the application to reinstate there clearly had been pre-judgment of the issue.

13.  Having reached that conclusion, which would appear to be correct and has not been challenged in this court, the judge then went on to consider the minutes of the meeting of 24 August 2006.  The major point dealt with was the letter dated 28 July 2006.  The judge held that the plaintiff was entitled to raise the matters despite the fact that subsequently the complaints had been held by the LCSD to be unjustified.  The judge then said that the letter had been sent to the “LCSD, and one other body appropriately interested in sporting control in Hong Kong, the SF&OC.  Subsequently, upon investigation, with the complaints being found to be unjustified, there has been no damage to the image of the HKSA.”

14.  On that basis the judge then said at paragraph 110 that he was “satisfied that it was not open to the Council of the HKSA to rely upon the letter of complaint as the basis of the refusing to exercise its discretion to reinstate the HKRA as a member.”  Likewise, the other matters referred to in the first paragraph in the minutes of 24 August were also held by the judge to be matters which would not justify refusal of reinstatement.

This appeal

15.  At an early stage in the hearing of this appeal, following a discussion as to the overall desirability of this litigation, the parties sought an adjournment in order to attempt to resolve their differences.  Since it appeared that the only possibility was that the hearing of the appeal be adjourned for mediation to take place, this court refused that adjournment since, although it is highly desirable that a settlement take place and, if it be necessary to achieve it that there should be mediation, any such steps should have been taken prior to the hearing of the appeal.  Without any specific proposals for settlement it would not be right that this court should grant an adjournment.

16.  The first matter to be considered was the status of the plaintiff following its failure to pay the annual subscription on time and within the 90-day period, and the later attempt to pay the amount owing in September of that year.

17.  In my view it is unnecessary to recite all the Articles, specifically those which relate to the admission of members to the first defendant and their ability to resign.  Article 15 makes clear that it is mandatory that a member ceases to be a member upon non-payment of the annual subscription within the 90-day period.  The word “shall” affords no lee-way in such an interpretation.  In contrast the Article then goes on to say that the member “may” be reinstated.  “May” of itself imputes that there is some residual discretion in the matter.

18.  Mr Coleman SC, in arguing the cross appeal on behalf of the plaintiff, pointed out that reinstatement was, in its nature, very different from an initial admission as a member.  He also pointed out that whereas the provisions in the Articles as to admission were clear that it was the Council that took the relevant decision as to admission, Article 15 was silent as to which body should exercise the discretion as to reinstatement.  It was also pointed out that whilst the decision as to admission was, under Article 5, a three-fourths majority, there was no indication as to the majority that was required when the member sought reinstatement.

19.  In my view Mr Yuen SC, who appeared on behalf of the first defendant, was correct when he drew this court’s attention to Article 44, which provided that the affairs of the Association shall be governed by the Council.  It was therefore, for the Council to consider the question of reinstatement.

20.  Mr Coleman also drew this court’s attention to the speech of Lord Hoffman in the case of Regina v Inland Revenue Commissioners, ex parte Newfields Developments Ltd [2001] 1 WLR 1111.  However the purpose and provisions of section 416(6) of the Income and Corporation Taxes Act 1988 with which that case was concerned were very different from Article 15.  I need say no more than I derive no assistance from any reference to the meaning of the word “may” in a completely different context.

21.  In my view the judge was correct in not only holding that the first defendant had to exercise its discretion as to whether the plaintiff should be reinstated, but that if reinstatement was not permitted then reasons should be given.  It is right to say that Mr Yuen, on behalf of the first defendant, did not dissent from the suggestion that reasons should be given.  It has to be borne in mind that the first defendant, being the governing body for the sport of shooting in Hong Kong, was and remains in a semi-public position.  Not only does it control the sport of shooting in Hong Kong but, effectively, it controls the representation of Hong Kong in international shooting events.  It thus performed and continues to perform an important public role.

The declarations

22.  As already noted, the judge made the various declarations.  In respect of the first three declarations I consider that he was entitled to make them.  They related to the fact that the plaintiff had not resigned its membership in the first defendant and that it was not entitled, as of right, to be reinstated as a member since the first defendant had a discretion in the matter.  The judge also made a declaration that the appropriate quorum for a meeting of the Council of the first defendant was 4 Council members.  In respect of that last declaration no submissions were made on this appeal, and it would appear that in this regard the judge had considered fully the history of the matter.

23.  However the judge then went on to make the following declarations:

“The 1^st defendant is not entitled to rely on the matters stated in the minutes of the meeting of its Council of 24^th August 2006 or those set out in the letter dated the 29^th September 2006 from Messrs. Chaine Chow & Barbara Hung, to refuse to reinstate the membership of the Plaintiff in the 1st Defendant;

The 1^st Defendant is not entitled to rely on the matters stated in the minutes of the meeting of its Council of 24^th August 2006 or those set out in the letter dated the 29^th September 2006 from Messes Chaine Chow & Barbara Hung, in reconsidering the plaintiff’s application for reinstatement of its membership in the first Defendant;”

24.  With respect, it appears to me that the declarations on their face are slightly obscure.  To take the Minutes of the meeting of 24 August 2006, the first paragraph relates to various specific acts done by the plaintiff.  The paragraph under (ii) relates to categorisation of that which the first defendant has attributed to the plaintiff, namely a determination to destroy the good image of the first defendant, to oppose the first defendant being a competent controlling body of the shooting sport in Hong Kong and to break away from and not to operate under the auspices of the first defendant in the training of national shooters and organising shooting activities.

25.  The judge held, in effect, that the plaintiff was entitled to its views which were expressed in the letters referred to in the first paragraph of the Minutes and, indeed, was entitled to take the action of issuing the Armoury Notice.  He went on to decide, however, that the complaints were unjustified.  Whether or not there was sufficient evidence to make that further holding is by no means clear, although it is true that the LCSD did thus express themselves in a letter.

26.  Having held that the Council had not given due consideration to the exercise of its discretion to reinstate the plaintiff, in my view the court should not have gone on to consider the matters that may, or may not, be taken into consideration in the exercise of such a discretion.  If, indeed, it was the plaintiff’s determination to destroy the good image of the first defendant and to oppose it from being the controlling body of the shooting sport in Hong Kong I am not, at the moment, convinced that those are matters which could not be taken into consideration in the exercise of the Council’s discretion.  Nor would I express a view as to whether the dissemination of the letter dated 28 July 2006 to the SF&OC, if not also the LCSD, was not a matter which could be taken into consideration in this context.  In so saying I emphasise that I am not giving any concluded view as to whether these are appropriate matters for the Council to take into consideration.  The matter is, at the moment, entirely speculative.

27.  Since the issue on the appeal was primarily the existence of these declarations, I consider that this appeal should be allowed and the cross-appeal by the plaintiff that it had an absolute right to reinstatement (as opposed to one where in the right was subject to the exercise of the first defendant’s Council’s discretion), must be dismissed.  In those circumstances I would make an order accordingly.

28.  I would also make an order nisi that the costs should be in favour of the first defendant on the appeal.  Given the overall outcome of the litigation I would not disturb the order of costs in favour of the plaintiff in the court below.

Hon Cheung JA:

29.  I agree.

Hon Stone J:

30.  I agree with the judgment of the Vice-President and have nothing to add.