HCMP 2316/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

NO. 2316 OF 2006

______________________

IN THE MATTER OF THE HONG KONG RIFLE ASSOCIATION’S
MEMBERSHIP OF
HONG KONG SHOOTING ASSOCIATION

______________________

______________________

______________________

J U D G M E N T

______________________

The reason for the litigation:

1.  This is an internecine dispute between a sporting association and its governing body.   It is both unnecessary and unfortunate that it should have reached the stage of what must be quite expensive litigation.

2.  The Hong Kong Rifle Association, (HKRA), is one of two major shooting associations in Hong Kong, the other being the Hong Kong Gun Club, (HKGC).  I understand that the HKGC has as its primary interest, clay target shooting, whereas the HKRA emphasises other forms of shooting.

3.  The governing body for the sport of shooting in Hong Kong is the Hong Kong Shooting Association, (HKSA).  The HKRA and the HKGC were the first members of the HKSA.

4.  Article 15 of the Articles of Association of the HKSA provide that if a member’s subscription is unpaid for a period of 90 days the member shall ipso facto cease to be a member of the Association but may be reinstated upon full payment of the outstanding subscription.

5.  In the year 2006, the HKRA did not pay a subscription to the HKSA, due on 1 January 2006.  By virtue of Article 15, on 1 April 2006, the HKRA ceased to be a member of the HKSA.

6.  On 9 September 2006, the HKRA sent a cheque for the subscription to the HKSA, and sought reinstatement of its membership.  On 15 September 2006, the cheque was returned to the HKRA, with an assertion that the HKRA had resigned from the HKSA.

7.  The HKRA consulted solicitors, and letters were exchanged.  On 29 October 2006, the solicitors for the HKSA informed the HKRA’s solicitors that reinstatement of membership was discretionary, and that the HKSA had declined to exercise the discretion to reinstate the HKRA’s membership.

8.  The HKRA now brings these proceedings, seeking various declarations and injunctions designed to re-establish its membership of the HKSA.  Notwithstanding that the HKRA is one of two major players in the sport of shooting in Hong Kong, the HKSA resists their resumption of membership of the governing body of the sport.

The formation of the HKRA:

9.  The HKRA has existed as a sporting association since 1924.  Throughout its existence, its primary object has been to promote and encourage amongst its members the sport of shooting throughout Hong Kong by providing facilities for training and regular practice and to provide amenities relating thereto.

10.  On 1 October 1986, the HKRA became a company limited by guarantee, and not having a share capital.  The objects for which the HKRA was established were first, to take over a society known as the Hong Kong Rifle Association, and thereafter put to promote and encourage amongst its members the sport of shooting throughout Hong Kong by providing facilities for training and regular practice and to provide amenities relating thereto and to promote and encourage all kinds of sports.

11.  An important asset held by the HKRA is a rifle range which is situated on top of the Kau Wah Keng High Level Service Reservoir, land administered by the Water Supplies Department of the Hong Kong Government.  This rifle range is held by the HKRA under a tenancy agreement made in March 1980.  As with many other sports facilities in Hong Kong which occupy Government land, a nominal rental of only HK$1.00 per annum (if demanded), is payable for the use of the land.  The term of the tenancy is for one year commencing on 1 April 1990, and thereafter quarterly until such time as it is determined.  The tenancy has not yet been determined, 17 years on, and all things being equal, there is no prospect that it would be determined.

12.  I am told, without objection, that the Kau Wah Keng Range is the only rifle range in Hong Kong which meets full international shooting, (UIT), standards, for the particular aspect of shooting which is undertaken on that range.

13.  Although it is not a specific provision of the tenancy agreement, I am informed by Mr Lau, without objection from Ms Lam, that unless the HKRA is able to maintain its membership of the HKSA, the tenancy will be terminated.

14.  Membership of the HKSA is accordingly important to the HKRA, not only because it is entirely understandable that the HKRA he should wish to have a voice on the governing body of its sport, but also so that it can maintain its range.

Control of shooting in Hong Kong:

15.  On 28 April 1994, the Hong Kong Shooting Association, (HKSA), was formed, as a company limited by guarantee and not having a share capital.  The first subscribers to the HKSA were the secretary of the HKRA, and the secretary of the HKGC.

16.  The essential purpose of the HKSA is to act as the governing body in respect of the sport of shooting in Hong Kong.  That is demonstrated by the first four objects set out in the Memorandum of Association of the HKSA:

“	(a)	To act as the governing body of all shooting discipline under the rules of the Union International 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 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[1]) 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.”

17.  It is necessary to set out certain Articles which are relevant to the dispute between the parties.  They are:

“	2(e)	‘Member’ means a shooting association or club legally constituted in Hong Kong participating in shooting UIT events and maintaining at least 3 permanent and distinct UIT regulation ranges suitable for selection shoots (i.e. 10 m, 25 m, 50 m and/or a clay target range) and which has been admitted to full membership of the Association.
	2(f)	‘Associate Member’ means a shooting association or club legally constituted in Hong Kong participating in shooting UIT events and maintaining at least one permanent and distinct UIT regulation range suitable for selection shoots (i.e. 10 m, 25 m, 50 m and/or a clay target range) and which has been admitted to associate membership of the Association.
	4	The Hong Kong Rifle Association and the Hong Kong Gun Club shall be the first Members of the Association
	6(a)	A Member shall have full rights of membership including the power to vote at General Meetings and the right to nominate three representatives to serve on the Council.
	(b)	An Associate Member shall be entitled to attend but not to vote at any General Meeting.
	9	If the Council shall pass a resolution at a meeting (of which due notice, including notice of the intention to propose such a resolution, shall have been given) that any Member or Associate Member ought to cease to be such member and if such resolution shall be carried by a majority consisting of three-fourths of the Council Members present at the meeting then such resolution shall take effect as from the conclusion of such meeting or from such other time as such resolution may specify and from the time at which such resolution takes effect such member shall cease to be a member provided that at least one week before the meeting at which such resolution was passed, he shall have had notice thereof, and of the intended resolution for his expulsion, and that he shall at such meeting and before the passing of such resolution have an opportunity of giving orally or in writing any explanation in defence he may think fit.
	14	Any Member or Associate Member may resign from the Association by giving to the Secretary General notice in writing of its or his intention so to do and sent to the Registered Address of the Association.
	15	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.
	52	The Council may fix their own quorum, and until otherwise provided, six shall form a quorum.”

18.  The Council of the HKSA consists of three appointed representatives from each Member.  All of the Associate Members, collectively, join together to elect 2 representatives, the Council thereby comprising eight persons.

19.  From its inception in 1994, the HKSA has acted as the governing body of shooting in Hong Kong.

20.  The evidence shows that both the HKRA and the HKSA, (and I assume the HKGC), are dependent to a large extent to the Government for subvention to provide the funds to enable them to operate.  Presumably, individual members of the HKRA and the HKGC pay fees or subscriptions to those clubs giving them a further form of income.  Both the HKRA and the HKGC pay a subscription to the HKSA.

21.  In simple terms the sport of shooting in Hong Kong is substantially dependent upon government subvention, that is, money received from taxpayers.

Differences arise between HKRA and HKSA:

22.  Prior to the year 2006, matters of difference arose between the HKRA and the HKSA. 

23.  There was a question of the financial management of the HKSA.  Immediately prior to the 2005 AGM, the auditor resigned, apparently without any obvious reason, the annual accounts had not been prepared, and there appeared to be issues in relation to the accounts.

24.  There were issues as to the validity and conduct of the 2005 AGM.

25.  There was an issue as to the management of the sport of shooting in Hong Kong.  The HKRA was dissatisfied at the standards of management being undertaken by the HKSA.  In particular there was concern that a person from the Mainland, who was not qualified to represent Hong Kong, had a purported to represent Hong Kong in an international competition.  The situation was aggravated by the fact that the person concerned won a medal in the competition.

26.  There was a dispute over who should be able to represent the HKRA on the HKSA.

27.  The HKRA and the HKSA were not able to resolve these differences amicably, and in the result the HKRA decided not to pay its annual subscription to the HKSA for the 2006 year.

HKRA ceases to be a member of HKSA:

28.  It was with this background that the Council of the HKRA determined not to pay the annual subscription to the HKSA in 2006.  The obligation to pay the subscription arose on 1 January 2006, with the last day for payment, (90 days in terms of Article 15), being 31 March 2006.

29.  On 30 June 2006, a letter was written by the Chairman of the HKRA to the Chairman of the HKSA.  The letter was in the following terms:

“Re HKRA’s Membership Status in HKSA Council

Reference is made to the Art 15 of the HKSA M & A which stipulates:

‘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,…..’

Since the HKRA Council decided not to pay the 2006 subscription, this Association is no longer a member of the HKSA as 31 March 2006, a situation over which neither you nor us have any discretion.

My letter dated 25 June 2006 on HKRA Representatives, which was rudely and insultingly rejected over our telephone conversation on 29 June 2006 is, therefore, no longer relevant.  As there will not be any need for our representation on the HKSA Council.” (sic)

30.  Following this letter the HKRA took further steps.

31.  First, on 5 July 2006, the HKRA published an “Armoury Notice”, in which it announced that with immediate effect no HKSA activities, including training, would be allowed at the Kau Wah Keng Range.  The notice stated that arms and ammunition would not be made available to HKSA shooters who were not HKRA members.

32.  Next, on 28 July 2006, the Chairman of the HKRA wrote a letter addressed to the Deputy Director (Leisure Services), of the Leisure and Cultural Services Department, (LCSD).  That is the Government Department responsible for administering sports activities in Hong Kong, and accordingly, a department deeply involved in issues relating to subvention payments.  This letter, in over four pages of closely typed script, and in comprehensive terms, set out the various complaints the HKRA had about the HKSA.

33.  Next, on both 2 August 2006, the HKRA drew the HKSA’s attention to the fact that there were 73 items of arms in the HKRA arms licence, belonging to the HKSA, which were stored by the HKRA.  Advice was sought as to how the HKSA wished to deal with these arms.  It was the view of the HKRA, that its cessation of membership with the HKSA raised arms legal licensing issues.  A reminder about this matter was sent on 20 August 2006, there having been no response.

34.  Finally, on 20 August 2006, the HKRA issued a circular letter to what were described as “All ROs AIs & ISSF Jury”, (the meaning of these abbreviations was not explained to me), pointing out that since the HKRA was no longer a member of the HKSA, the HKSA would no longer enjoy the privilege of the use of HKRA facilities and other services, including the HKRA manpower for HKSA activities.  The letter contained the following paragraph:

“

It is important that the HKRA can be seen to have the situation under control, i.e. the HKSA and the Government must approach the HKRA for assistance before we volunteer any assistance.  Your Council is, therefore, appealing to you all for you support by refraining to offer your unsolicited assistance in any form for any activity the HKSA organised without the HKRA blessing.” (sic) (emphasised as in the letter).

35.  On 24 August 2006, the Council of the HKSA met.  A number of matters were discussed, but the first, and primary business, was with the dispute with the HKRA.  The minutes record the following terms:

“	1)	Withdrawal of HKRA from HKSA and HKRA’s conduct subsequent thereto:-
		Copy of (a) a written notice dated 30/6/2006 served by the HKSA by HKRA stating, inter alia, that it was no longer a member of the HKSA as from the 31/3/2006, (b) HKRA’s ‘Armoury Notice’ dated the 5/7/2006, (c) HKRA’s letter of complaint dated 1/8/2006 addressed to LCSD and SF&OC against HKSA (d) HKRA’s letters dated the 2/8/2006 and 20/8/2006 respectively demanding the removal of HKSA’s arms stored at HKRA’s armoury and (e) HKRA’s notice dated 20/8/2006 to all ROs AIs & ISSF Jury were tabled before the Council Members for their reference.
		i	With regard to HKRA’s notice dated 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	HKRA’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 ISSF rules and regulations in Hong Kong, (b) to oppose the HKSA being a competent controlling body of the shooting sport in Hong Kong, and, (c) to break away from and not operate under HKSA in the training of national shooters and organising shooting activities (pistol and rifle disciplines).  By virtue thereof, the council had resolved any future application (if any) by HKRA to be re-admitted as a member of HKSA be rejected.” (sic)

There is no evidence that the HKRA were notified of these resolutions following the meeting, or that they were made aware of them prior to the application for reinstatement.

36.  The minutes of the meeting show that there were four Council members present at that meeting on 24 August 2006.  They were the  Chairman, the Treasurer, and two other council members.  There was an apology for absence from one council member.  In attendance at the meeting were two persons described as the Chief Sports Executive, and an Administrative Assistant. 

37.  There is a question as to whether there was a quorum at this meeting.

The HKRA pays its subscription:

38.  On 9 September 2006, the Chairman of the HKRA wrote to the Chairman of the HKSA in the following terms:

“Re HKRA’s Membership Status in HKSA Council

Reference is made my letter dated 30.06.06 re the above.

I am writing to inform you that the RA Council have decided to rescind their earlier decision and wish to reinstate the HKRA membership with the HKSA by way of paying the reduced subscription of $30,000 for 2006 in accordance with the Art 15 of the HKSA M&A.

A cheque is enclosed herewith for your kind consideration.”

39.  On 15 September 2006, the Chairman of the HKSA returned the cheque for the subscription that had been sent, asserting that the HKRA’s:

“	…resignation had been duly accepted under a resolution passed at our Council meeting.”

In fact, there had been no further HKSA Council between that of 24 August 2006, and the act of the Chairman of the HKSA in returning the cheque to the HKRA on 15 September 2006. 

40.  The letter of 15 September 2006, did not inform the HKRA of the terms of the meeting of 20 for August 2006, other than to say that the “resignation” had been accepted.

41.  It was thereafter that solicitors exchanged correspondence.  By a letter dated 29 October 2006, the solicitors for the HKSA informed the solicitors for the HKRA of the terms of the decisions made at the meeting of 24 August 2006, although they did not then disclose the minutes of that meeting.

Resignation or suspension of membership:

42.  The first question is whether or not the HKRA had resigned from the HKSA or, to adopt Mr Lau’s expression, its membership had been suspended upon non-payment of the subscription, and the letter of 30 June 2006.

43.  As may be seen from Articles 14 and 15 of the Articles of Association, (see para 17 above), a quite distinct procedure is prescribed for resignation from the HKSA, and the circumstances in which membership ceases through non-payment of subscription. Resignation requires a specific act on the part of the member, cessation of membership through non-payment requires no specific act, it is simply a consequence of the non-payment of the subscription.  The consequences also are different.  A member who ceases to be a member through non-payment of subscription may be reinstated, but a member who resigns will need to go through the joining procedure, including payment of any joining fee that might be properly payable.

44.  The position adopted by the HKSA was that the HKRA had resigned from the HKSA, and that there was no discretion in the Council to reinstate its membership upon payment of the subscription.

45.  The subscription was due on 1 January 2006.  It was not paid, by deliberate decision, and on 30 June 2006, the letter as set out in paragraph 29 above was sent.  It is this letter that Miss Lam contends constitutes a letter of resignation.

46.  I have listened carefully to Ms Lam’s submissions in this respect.  I am quite satisfied that the letter does not constitute a letter of resignation. 

47.  In terms of Article 14, a letter of resignation must be addressed to the Secretary General of the HKSA.  This letter was addressed to the Chairman of the HKSA. 

48.  The Article concerning resignation is Article 14.  The letter deliberately refers to Article 15, and refers not to resignation but to the consequences of non-payment of subscription. 

49.  I am satisfied that the letter of 30 June 2006, was not, and was not intended to be, a letter of resignation.  It was simply a letter which drew the attention of the HKSA to the factual consequence of the HKRA’s failure to pay its subscription.

50.  There is plainly no basis upon which the HKSA Council was entitled to treat the letter of 30 June 2006, as a ‘letter of resignation’, as it purported to do, at its meeting on 24 August 2006.  The letter plainly was not a letter of resignation.

51.  It may only be a matter of semantics, but I note that in the minutes of the meeting of 24 August 2006, the Council incorrectly refers to the request of the HKRA to be “readmitted” to membership, and not “reinstated”, the expression used in Article 15.  The use of the expression “readmitted”, is consistent, in my view, was resignation under Article 14, and not cessation of membership under Article 15.

52.  I am satisfied that Mr Lau was correct in characterising the status of the HKRA, following its non-payment of subscription for a period of 90 days, as being “suspended” from membership of the HKSA.  That follows from the terms of Article 15, which, while recording that membership had ceased by virtue of the non-payment of the subscription, provided that the HKRA had the opportunity, at the discretion of the HKSA, to reinstate its membership, upon full payment of the outstanding subscription. 

53.  The expression “suspension” is, I am satisfied, an appropriate word to describe the particular status of the HKRA after the lapse of 90 days of unpaid subscription.  After the lapse of 90 days, the membership of the HKRA ceased ipso facto.  From that time it had no rights of membership, but it still had the opportunity to be reinstated to membership upon payment of the outstanding subscription. 

54.  The HKRA, while no longer being a member of the HKSA, held an opportunity that was not open someone who had not yet been admitted to membership.  In my view there is a significant distinction between the HKRA, retaining an opportunity for reinstatement, and some other shooting body seeking admission to membership.  That distinction is appropriately expressed, in the particular circumstances of the HKRA, by the use of the expression, “suspension”.

55.  What is patently clear, is that the HKRA had not resigned its membership.

56.  I accordingly conclude that it is no answer to the claim of the HKRA for statement to membership, for the HKSA to say that the HKRA he had resigned from membership and that consequently the discretionary powers of reinstatement under Article 15 could not be exercised.

Was the HKSA Council meeting of 24 August 2006 inquorate:

57.  At its meeting on 24 August 2006, the Council of the HKSA resolved that any future application by the HKRA to be reinstated as a member of the HKSA should be rejected.  Present at that meeting were four Council members.  The first question that arises was whether there was a quorum at the meeting.

58.  The effect of Article 52, (see para 17 above), was  to fix the quorum for a Council meeting at 6, until such time as the Council fixed a new quorum.

59.  The matter of the quorum came up for discussion at the very first Council meeting on 16 May 1994, and again at the second Council meeting on 22 June 1994.  Present at the first meeting were six Council members, three from HKRA, and three from HKGC.  Present at the second Council meeting were four Council members, two from HKRA and two from HKGC.

60.  The minutes of the first meeting record a discussion between the Council members as to the number for the quorum.  It is clear from the minutes that the matter of concern was that, on the one hand, in order to achieve fairness, if the quorum was reduced to four, there should be two from each of the two member clubs, but on the other hand, there was a risk of deadlock with equal numbers which would be avoided if the quorum were five. 

61.  The minutes of that first meeting further record that a resolution was passed in the following terms:

“

9.6

After discussion, the Council agreed to amend the numbers of quorum to 4 until the situation of the Association changed, i.e. with more shooting clubs joining in later”.

62.  However the minutes of the second Council meeting record that the first matter dealt, was the confirmation of the minutes of the first Council meeting.  Paragraph 1.3 of the minutes of the second meeting record, at the commencement, under a heading: “Confirmation of minutes of last meeting on 16 May 1994”, as follows:

“

The Chairman, Mr T. M. Chow mentioned that, according to Article 52 of the Association, the Council is empowered to fix the quorum for Council Meetings to any 4 members from the Council.  In conclusion it was agreed that any 4 members of the Council may form a quorum for any Council Meeting.  The para 3.9 and 9.5 would then be amended accordingly.” (sic)

63.  It is plain that, subsequent to the second Council meeting of those two paragraphs in the minutes of the first Council meeting, paragraphs 3.9 and 9.5, were amended, for in both of those paragraphs matters have been inserted in parentheses referring to the discussion at the second meeting.  The matters in parentheses, having only been discussed at the second meeting, could not have been contained in the original minutes of the first meeting.

64.  I am satisfied, on the balance of probabilities, that no conclusion as to the quorum was reached at the first Council meeting.  The discussion of the issue of balancing fairness, or equality, with the risk of deadlock, was not concluded in the first Council meeting.  The discussion continued at the second Council meeting, as is apparent from both the minutes of the second Council meeting, and the matters inserted in parentheses into the minutes of the first Council meeting.  It is plain that from the discussion at the second Council meeting, that the earlier suggestion that if the quorum was to be four, those present should comprise two persons from each of the two member associations, was rejected.

65.  Had agreement on the quorum been reached, and the resolution purportedly recorded at paragraph 9.6 actually been passed at the first Council meeting, there would simply have been no need at all, either to discuss the matter further at the second Council meeting, or to insert any matters in the minutes of the first Council meeting, referring to the clarifications made at the second Council meeting.

66.  Although the minutes of the first meeting purport to record, at paragraph 9.6, that a resolution was passed at that first meeting reducing the quorum to four, I am satisfied that the resolution reducing the quorum was not passed until the second meeting.  I am satisfied that, along with the matters inserted in parentheses into the minutes of the first meeting, paragraph 9.6 recording the resolution to reduce the quorum was also added to the minutes of the first meeting, after the second meeting concluded. 

67.  There were only four Council members present at the second Council meeting on 22 June 1994, when the resolution was passed, purportedly in compliance with Article 52, reducing the quorum to four.  But that meeting itself was inquorate, there being only four Council members present.

68.  It is a generally accepted principle that business transacted at a meeting at which a quorum is not present is invalid: see Re Alma Spinning Co (Bottomely’s Case) (1880) 16 Ch D 681; Re Romford Canal Co (1883) 24 Ch D 85; Meyer Queenstown Garden Plaza Pty Ltd v Port Adelaide City Corporation (1975) 11 SASR 504; and Shackleton on the Law and Practice of Meetings, 10^th Ed, 2006, para 6-05. 

69.  Consequently, the resolution purportedly reducing the quorum of a Council meeting to four, having been passed as an inquorate meeting, was invalid.

The consequence of the invalidity of the resolution reducing the quorum:

70.  The law is that if the validity of proceedings at a meeting is to be challenged because of the absence of a quorum, appropriate action must be taken within a reasonable time.  If a meeting has reached decisions which are acted upon and treated as valid by all concerned, it is not within the competence of a person, not concerned at the time, to much later seek to invalidate the proceedings because of a lack of quorum: see Shackleton, para 6-06, and Re Plymouth Breweries, Plymouth Breweries v Penwill (1967) 111 SJ 715.

71.  The Romford Canal Case, (supra), is an example of a situation where resolutions passed at an inquorate meeting were held to be invalid, but because they had been acted upon and treated as valid by all concerned were held to be effective.  In that case the resolutions were passed in 1876, and challenged 13 years later in 1883.  In Plymouth Breweries, (supra), resolutions passed in 1893, approving a scheme of reconstruction, subsequently approved by court order, were held in 1967, to have been passed at inquorate meetings, but again, having been acted upon and treated as valid, were held to be effective.

72.  The inquorate second Council meeting at which the resolution to reduce the quorum to four was passed, was on 22 June 1994.  Over 13 years has passed since that time.  I have no doubt at all, and there was no evidence to the contrary, that since 22 June 1994, all those involved in the administration of the HKSA, including the Council representatives from the HKRA, have proceeded on the basis that the appropriate forum for a Council meeting was four.  Many decisions will have been reached over those 13 years, all of which, save that on 24 August 2006, have been acted upon and treated as valid by all concerned.  That is not at all surprising, for it required a detailed analysis, and comparison, of the minutes of the first and second Council meetings, held over 13 years ago, to determine precisely what had happened.

73.  It is now too late to challenge the decision made on 22 June 1994, to reduce the quorum.  The reduced quorum, having been acted upon and treated as valid since 22 June 1994, is now the appropriate quorum for a Council meeting.

74.  I accordingly hold that the resolution passed at the meeting of 24 August 2006, was a valid resolution passed by the Council.

75.  Mr Lau argued that the resolution to reduce the quorum to four was limited by the words set out in para 58 above, relating to further shooting clubs joining the HKSA in the future.  I am satisfied that expression would not have limited the duration of the reduction in quorum, (had the resolution been properly passed), but that it merely expressed an intention to review the matter in the future.

76.  If I am wrong in the conclusion that I have reached, that the failure to challenge the decision to reduce the quorum to four, on the basis that that decision was made at an inquorate meeting, or that the principle of law that I have stated in paragraph 69 above does not apply to a decision to reduce a quorum, then it follows that the meeting of 24 August 2006, was inquorate, and any decisions made at that meeting would not be valid.  In that circumstance, it would be necessary for the HKSA to convene a proper Council meeting and give appropriate consideration to the HKRA’s application for reinstatement.

An absolute right to reinstatement or a discretion:

77.  Mr Lau contended that upon payment of the outstanding subscription by the HKRA, notwithstanding the use of the word ‘may’ in Article 15, no discretion existed in either the HKSA, or its Council, and that reinstatement of membership, upon payment of the outstanding subscription, was automatic.

78.  The law is clear: the memorandum and articles of association of a company fall to be construed in accordance with the established rules for the interpretation of contracts.  This involves giving to the words used their ordinary meaning derived from the context in which they appear:  see Towcester Racecourse v Racecourse Association [2003] 1 BCLC 260 at 268.  In interpreting a contract the court will have regard to the factual matrix: see Lord Hoffmann in Investors Compensation Scheme Ltd. v. West Bromwich Building Society [1998] 1 WLR 896, HL, at 912-3.

79.  The factual matrix in this matter includes the following relevant facts:

(i)	The HKSA is the governing body for the sport of shooting in Hong Kong, and is the body which is affiliated or associated with the international governing body for the sport of shooting, (UIT), and the governing body in Hong Kong, the SF&OC, for Olympic competition.
(ii)	The HKSA is a publicly funded national sporting body, and 90% of the Government funding received by the HKSA goes to the HKRA.
(iii)	The HKRA and the HKGC were the founding members of the HKSA, and are so recognised by name in the Articles of Association; see Article 4; however no permanent membership is envisaged or provided for in either the Memorandum of Association, or the Articles of Association of the HKSA.
(iv)	At the present time, the HKRA and the HKGC are the only two entities in Hong Kong who are able to meet the qualifications to be a ‘Member’ of the HKSA.
(v)	The Articles Association of the HKSA require that the Council shall have a minimum membership of six, and that each Member shall be entitled to appoint 3 representatives to the Council.  Although not entrenched, as Mr Lau submitted, the right to appoint three representatives remains with the HKRA so long as it is a Member of the HKSA.  A consequence of HKRA ceasing to be a member of the HKSA, together with the fact that now the HKGC is the only Member, and that the associate members appoint only two Council members collectively, is that it is presently not possible for the HKSA to establish a council comprising at least six members.
(vi)	Article 24 of the Articles of Association require that no business shall be transacted at any General Meeting unless two of the Members shall be present.  The presence of Associate Members does not relieve the requirement for there to be two Members present. The combination of the effect of the definition of ‘Member’ and this rule, and the fact that there are only two entities in Hong Kong who are capable of meeting the definition of ‘Member’, means that unless the HKRA is reinstated, or some new entity is formed which would meet the definition of ‘Member’, and succeeds in becoming a member of the HKSA, there can be no General Meeting of the HKSA.  There is no evidence at all of any intention on the part of anyone to form another Association which would meet the definition of Member.
(vii)	The ability to possess arms and ammunition is rigorously controlled in Hong Kong by legislation, which legislation is, and rightly so, strictly enforced.

80.  Article 15 uses the expression ‘may be reinstated’ to make provision for the faculty or power to restore to membership, a Member whose membership had ceased upon non-payment of its subscription.

81.  Mr Lau submits that this is one of those occasions when the expression ‘may’ imposes, not a discretionary or enabling power, but an obligatory duty.  He says that so long as the HKRA pays the outstanding subscription it must be reinstated to membership.

82.  It is right that there are some circumstances in which the word ‘may’ can be held to mean ‘shall’. It is appropriately put in the following passage from the judgment of Mummery LJ in Pelling v Families Need Fathers Ltd [2002] 2 All ER 440 at 446:

“

In its ordinary and natural meaning the word ‘may’ is apt to confer a discretion or power.  It is true that there are certain situations where a discretionary power is conferred for the purpose of enforcing a right and is coupled with an obligation or duty to exercise of power, when required to do so, for the benefit of the person who has the right: (see Julius v Lord Bishop of Oxford (1880) 5 App Cas 214 at 223, 241, [1874-80] ER Rep 43 at 47-48, 57).”

83.  There will be some cases where it is possible to say, in quite categorical terms, that ‘may’ does not mean ‘shall’: see e.g. South Buckinghamshire v Porter [2003] 3 All ER 1 HL, at 24 per Lord Steyn.  There will be others, where, equally categorically, it will be said that ‘may’ means ‘must’, (or ‘shall’): see e.g. R v Commissioners of the Inland Revenue Ex p Newfields Developments Ltd [2001] 4 All ER 400 HL per Lord Hoffman at 407.

84.  Just as Mummery LJ found in Pelling, that in that case, ‘may’ did not mean ‘shall’, neither do I find it to be the case in this matter. 

85.  In determining the true interpretation of the word ‘may’ in the present context the factual matrix is relevant.  To be a ‘Member’ certain criteria must be met.  It will first be necessary for the Council of the HKSA to consider whether those criteria are met, then they may exercise their discretion for or against reinstatement.  Those criteria are set out in the definition of the expression ‘Member’, and comprise (i) a legal constitution in Hong Kong, (ii) participation in shooting UIT events, and (ii) maintaining at least three permanent and distinct UIT regulation ranges as defined.

86.  In the present case there is no dispute at all that the HKRA meets all of the criteria enabling it to qualify as a ‘Member’.

87.  It is correct that the usual rule is that no person has a right to become a member of an association.  The usual rule is that the committee, or whoever is responsible for admission, can refuse to admit any person to membership, however eligible they may appear: see Nagle v Feilden [1966] 2 QB 633.

88.  However, in that case, Salmon LJ also referred to the circumstance of monopolistic associations such as trade unions, the Stock Exchange, and the Inns of Court, which control certain trades or spheres of human activity in which no man can earn his living unless he is admitted to membership of the association.  He had this to say at p 653:

“

There is no doubt that such associations may lay down such minimum qualifications for admission as they in their discretion consider necessary for the protection of the public and for the protection of their trade or profession: R v Askew (1768) 4 Burr 2186.  Nor do I think they need ascribe any reasons for refusing to admit any candidate.  If, however, it can be shown from the reasons which they may give, or from other sources, that a candidate has been capriciously and unreasonably refused admission, it is certainly arguable that the law will intervene to protect him: see Weinberger v Ingles (1825) 4 B & C 855.”

89.  On the same basis, I am satisfied that the Council of the HKSA, being satisfied that a candidate for admission to membership, or reinstatement to membership, meets the relevant criteria, still has an discretion whether or not to admit, or reinstate as the case may be, the membership of the candidate.

90.  The discretion is one however, which may not be exercised capriciously or unreasonably.  This restriction arises from the monopolistic nature of the HKRA, that is as the sole governing body of the sport of shooting in Hong Kong.

Was the discretion exercised properly:

91.  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. 

92.  Instead, the Chairman of the HKSA apparently acted alone, and relied upon the decisions made at the Council meeting on 24 August 2006;

(i)	to treat the letter dated 30 June 2006, from the HKRA informing the HKSA under Article 15 that it was no longer a member of the HKSA, as a letter of resignation; and
(ii)	that any future application (if any) by the HKRA to be re-admitted as a member of the HKSA, be rejected.

93.  The minutes of the meeting of 24 August 2006, set out the matters upon which the Council relied in reaching the decision that a future application by the HKRA for reinstatement to membership would be rejected.  They are:

(i)	The HKRA had resigned its membership on 30 June 2006;
(ii)	The issue of the ‘Armoury Notice’ on 5 July 2006;
(iii)	The HKRA’s letter of complaint concerning the HKSA, of 28 July 2006, to the LCSD, which was copied to the SF&OC;
(iv)	The demand by the HKRA of the HKSA, on 20 August 2006 and 20 August 2006, that the HKSA remove its arms and ammunition stored at the HKRA’s armoury;
(v)	The notice issued by the HKRA to all ROs, AIs and ISSF Jury, on 20 August 2006.

94.  It is necessary to consider each of these in turn to see whether or not they would justify the exercise of discretion not to reinstate the HKRA as a member of the HKSA, it in all other respects complying with the criteria for membership, and having attended the appropriate submission.

Resignation from membership:

95.  The answer here is simple.  The HKRA had not resigned its membership; to do so it would have had to have complied with Article 14.  Instead, the HKRA made it plain that he relied upon Article 15, the consequence of which was that although the HKRA ceased to be a Member by virtue of non-payment of subscription, it retained the opportunity to reinstate its membership upon payment of the subscription.

96.  It was not open to the Council of the HKSA to rely upon an act of resignation by the HKRA as a basis for refusing to exercise the discretion to reinstate the HKRA as a Member, upon its payment of the appropriate subscription.

The Armoury Notice:

97.  The effect of the Armoury Notice was to restrict shooting activities at the Kau Wah Keng Range to HKRA members.  Shooters who were not HKRA members, or were, by virtue of their membership of another club an HKSA member could not rely on their own club’s affiliation with the HKSA to entitle them to shoot at the Kau Wah Keng Range.

98.  Clause 12 of the Third Schedule to the tenancy agreement by which the HKRA occupy the Kau Wah Keng Range provides that the tenant shall comply with the lives of all ordinances in force in Hong Kong.  That will include the Arms and Ammunition Ordinance, and any other ordinance which might impact upon the sport of shooting.  The evidence, unchallenged, demonstrates that it was as a consequence of legal advice that the HKRA issued the Armoury Notice.  The evidence is that the advice received was that under ss 11 & 15 Firearms and Ammunition Ordinance Cap 238, the HKRA may only allow its own members to use firearms on Range.

99.  It is irrelevant whether the advice was right or wrong.  The HKRA were perfectly entitled, indeed probably obliged, to act upon the advice in order to protect their position.

100.  Having ceased to be a member of the HKSA, and being mindful of any obligations they may have under their licence in relation to the range, it cannot be said that the action in issuing the Armoury Notice in any way went to “purport to destroy the good image of the HKSA”, nor “oppose the HKSA being the competent controlling body of shooting in Hong Kong”, (those being the expressions used in minutes of the meeting on 24 October 2006).  The Armoury Notice merely restricted the use of the range in accordance with the legal advice the HKRA had received.

101.  I am satisfied it was not open to the Council of the HKSA to rely upon the Armoury Notice as a basis for refusing to exercise its discretion to reinstate the HKRA as a member.

The letter of complaint:

102.  As it ultimately transpired, none of the matters raised in the letter of complaint were found by the LCSD to be justified.  But that fact does not entitle the HKSA to reach the conclusion that the fact of the complaint either sought to destroy the good image of the HKSA or to oppose the HKSA being the competent controlling body of the shooting sport in Hong Kong.

103.  I have examined the matters raised in the letter of complaint.  It is not necessary for the purposes of this judgment to reach any conclusion as to whether the complaints were true in substance or not.

104.  Having reviewed the evidence I am satisfied that there was a sound factual basis for each matter of complaint, irrespective of the fact that at the end of the day the LCSD did not find complaints to be justified.

105.  Under Article 27 of the Basic Law, Hong Kong residents have a right to freedom of speech.  It would be a denial of that basic freedom if, in order to prevent complaints being made about the conduct of the management of an association, that management were able to prevent a member of the association from expressing complaints, by holding over that member the threat of dismissal from membership.  It is equally a denial of that basic freedom to rely upon the fact of a complaint as a basis upon which to exercise the discretion not to reinstate the membership of the HKRA upon proper payment of the outstanding subscription.

106.  In the HKSA’s solicitor’s letter of the 29 September 2006, it was asserted that the letter of complaint contained defamatory statements.  There was no suggestion that defamation proceedings have actually been issued.  If it is truly believed that the letter was defamatory, then the proper course to follow was to issue defamation proceedings, and not to refuse the HKRA the opportunity to continue its sport under the proper auspices of the established governing body in Hong Kong.

107.  The letter of complaint was a legitimate comment, (albeit subsequently found to be unsubstantiated), on matters of particular interest to all those involved in the sport of shooting in Hong Kong.  It was expressed in moderate terms and confined to matters of genuine grievance held by the HKRA.  It did not, of itself, purport to destroy the good image of the HKSA, nor oppose the HKSA being the competent controlling body of shooting in Hong Kong.  It is right that there letter of complaint raised matters that went to the image of the HKSA and to the competence of the HKSA in controlling shooting in Hong Kong.  If subsequently found to be justified, it would not be the complaints that damaged the image or competence of the HKSA, but its own conduct.

108.  As the letter was not publicly distributed, but sent only to the relevant Government department, LCSD, and one other body appropriately interested in sporting control in Hong Kong, the SF&OC.  Subsequently, upon proper investigation, with the complaints being found to be unjustified, there has been no damage to the image of the HKSA.

109.  The administration of any organisation must be prepared to face criticism from its members from time to time.  It must answer that criticism by demonstrating that the criticism is not justified, and not by the expulsion or refusal to reinstate members who make the criticism.  It would only be in circumstances where the criticism were found to be defamatory that an organisation would be justified in expelling or refusing to reinstate a member.  That is plainly not the case here.

110.  I am satisfied it was not open to the Council of the HKSA to rely upon the letter of complaint as a basis for refusing to exercise its discretion to reinstate the HKRA as a member.

The requirement for the removal of arms:

111.  As with the Armoury Notice, the request that the HKSA remove its arms and ammunition from the HKRA armoury, is simply a matter of appropriate management of the armoury.  Again, it was a step taken on legal advice.

112.  I am satisfied it was not open to the Council of the HKSA to rely upon the requirement that it remove its arms as a basis for refusing to exercise its discretion to reinstate the HKRA as a member.

The circular letter:

113.  The circular letter drew attention to certain people of the fact that the HKRA was no longer a member of the HKSA, and entreated them not to give their support to HKSA activities without the agreement of the HKRA.

114.  In its plain terms it was merely a request, it was not a command or direction to HKRA members.  At the same time the circular letter demonstrated, by reference to the fact the HKRA had provided assistance to the HKSA to the movement of HKSA firearms for the Croatia World Championships, that the HKRA itself was endeavouring not to disrupt the activities of the sport shooting in Hong Kong.  Notwithstanding the cessation of membership of the HKSA, the HKRA continued to cooperate, albeit on a limited basis, with the HKSA.

115.  While the HKSA may have been disappointed that the HKRA members were being asked not to assist them, that they had been so asked was not a sufficient basis to deny the HKRA reinstatement of membership.

Pre-judging the issue:

116.  Although the HKSA is a company limited by guarantee, the practical reality of the situation is that it is an association of members for a particular purpose.  Its purpose is not, unlike the usual case of a company with shareholders, and limited liability, to be in business for a profit.  Instead, its role is limited to the governance and promotion of the sport of shooting in Hong Kong.  It is particularly relevant that the members of the HKSA are not private individuals, but the sporting clubs to whom private individuals belong, should they wish to be engaged in support of shooting.

117.  In the circumstances, and dealing as it does with the rights of its immediate members, the shooting clubs, and indirectly, the rights of the members of the shooting clubs, it is not difficult to conclude that the principles of natural justice must be observed when dealing with those rights.

118.  The principles of natural justice have been held to be applicable in the case of companies of this nature: see Coleg Elidyr (Camphill Communities Wales) Ltd v Koeller [2005] EWCA Civ 856, [2005] 2 BCLC 379.

119.  In applying the principles of natural justice, it is trite to say that a person who holds a discretion must exercise that discretion only when required to do so, and only upon the basis of relevant factors in existence at the time that person is required to exercise the discretion.

120.  At the time the Council of the HKSA met on 24 August 2006, no application had been made by the HKRA for reinstatement of its membership.  Whilst it had referred to a number of matters upon which it intended to justify its decision, at that time the Council had no knowledge at all of the circumstances that might exist at any time in the future when an application for reinstatement might be made.

121.  The fact alone that the Council of the HKSA had pre-judged the question of reinstatement is sufficient to justify a declaration that in so doing the Council of the HKSA wrongly exercised the discretion it held.

122.  That that is so becomes more obvious when it is noted that in its letter of 9 September 2006, the HKRA imposed no conditions whatsoever on its reinstatement of membership.  It follows that, upon reinstatement of membership, the restrictions that the HKRA had previously sought to place in effect, such as that in the Armoury Notice and the circular letter would no longer apply.

The role of the HKSA in shooting in Hong Kong:

123.  In weighing whether or not any of these five matters relied upon by the Council of the HKSA, whether individually or collectively, might justify refusal to reinstate membership, I have had particular regard to the role of the HKSA as the governing body of shooting in Hong Kong.  Again, it is particularly relevant that the members of the HKSA are not private individuals, but the shooting clubs in Hong Kong.

124.  Through its relationship with the UIT, its involvement with the IOC, and the CGF and the SF&OC, the HKSA achieves the power to act as the governing body of shooting in Hong Kong.  It is the only body in Hong Kong which has that power, and realistically there is no possibility that it might ever face any competition for that role.

125.  It is right that the Memorandum of Association, Article 3 (b), enables the HKSA to select teams to represent Hong Kong, from the “public”.  But I have no doubt at all that in order for a shooter to compete internationally, or nationally, in any shooting competition under the rules of the UIT, the IOC, or the CGF, that shooter would have to be a member of a recognised gun club in Hong Kong, which was itself a member of the HKSA.

126.  That would be a perfectly proper restriction for the HKSA to impose upon prospective participants in competitions.  It would only be by requiring that membership, that the HKSA would be in a position to achieve proper governance of the shooting discipline.  Indeed, I would expect that competition rules would require that participants be a member of a recognised gun club, whether that club is established in Hong Kong, or outside Hong Kong.

127.  In exercising any discretion it has to admit a body to membership, or reinstate a lapsed membership consequent upon non-payment of the subscription, it is necessary for the HKSA to take into account the consequences of a refusal to admit or reinstate.  The likely consequence would be the inability of that body, and its members, to fully participate in shooting in Hong Kong or internationally.  The special responsibility, and right held by the HKSA, to govern the sport of shooting in Hong Kong, imposes upon it an obligation to administer its affairs in such a way as not to unfairly impinge upon the rights of shooters in Hong Kong to take part in the sport, both locally and internationally.

128.  Had the HKRA demonstrated an un-fitness to be admitted or reinstated to membership, through matters such as improper armoury control, improper range control, or persistent disregard of proper UIT, HKSA, or other proper rules governing shooting, the HKSA might be justified in denying reinstatement of membership. 

129.  But an internal dispute as to administration and governance, which is what the various matters of justification relied upon to by the HKSA, amount to, are not sufficient to justify the denial of reinstatement.

Conclusion:

130.  For the foregoing reasons I am satisfied that the various matters relied upon by the Council at its meeting on 24 August 2006, would not be, either individually or collectively, a justifiable basis upon which the Council could exercise its discretion to refuse the reinstatement of the membership of the HKRA to the HKSA consequent upon the payment of subscription.  In acting upon those matters, I find that the Council of the HKSA has acted capriciously and unreasonably, and that it is appropriate for the Court to intervene to protect the rights of the HKRA and its members.

131.  I accordingly hold the Council was not justified in refusing the reinstatement of the membership of the HKRA to the HKSA, upon the grounds it did.  In those circumstances are I would make a declaration, supported by an appropriate injunction, that the Council must reconsider the application, weighing only matters that may be properly taken into account in the exercise of the discretion.

The position of the individual Council members:

132.  The members of the Council, in effect the directors of the company limited by guarantee, were joined as defendants to the proceedings.  Mr Lau informed me that the Council members were joined in order that they might be bound by any declaration or injunction requiring the Council to deal with the matter on a proper basis.

133.  Ms Lam, who represented all the defendants submitted that the HKRA was not entitled to seek declaratory relief against the individual Council members, as well as the Council itself.  A summons to strike out the proceedings against the 2^nd-6^th Defendants was before me at the same time as the Originating Summons.

134.  From foregoing decision it can be seen that I have found that the Council collectively, and through its individual members, the 2^nd-6^th Defendants, has not exercised its discretion in good faith, or upon proper grounds, in the interests of the HKSA as a whole, or to achieve a proper purpose.

135.  It has been shown that the members of the Council took into account irrelevant factors, (the five factors in Para 93), and failed to take into account a relevant factor, (its responsibility as the body governing shooting in Hong Kong, see paras 123-129).  On Ms Lam’s own submissions these matters are sufficient to justify the involvement of the Council members in the proceedings.  To this must be added the fact that the Council members prejudged the issue.

136.  In any event, I see the issue as being largely academic and primarily an issue of costs.  The only affidavits filed on behalf of the defendants were those of the 2^nd defendant, Mr Chow, who at the same time as being a Council member, is a partner in the firm of solicitors representing both the HKSA, and the individual Council members.  In reality the individual Council members’ interests have been fully represented by the HKSA itself.

137.  I note that pursuant to Article 73 of the Articles of Association of the HKSA, the Council members are entitled to be indemnified out of the assets of the HKSA against any liability incurred in relation to the HKSA in defending in the proceedings.

138.  Whether or not the Council members individually ought to have been joined, it appears to me that they have in reality taken no step in the proceedings, other than those they would have in the course of the proper defence of the proceedings by the HKSA.  That defence has failed.  This is a matter that will need to be taken into account on costs, which are reserved.

Terms of relief:

139.  A number of declarations, and injunctive relief were sought by the HKRA.  Rather than formulate those decorations and make any other orders I would prefer to hear counsel as to the form orders ought to take bearing in mind the findings that have been made in this judgment.

140.  Accordingly leave is reserved to apply both in relation to the terms of relief and costs. 

141.  It is now time for those involved in the management of these two sporting associations in Hong Kong to bury their differences and go about the business of participation in and the proper organisation and administration of the sport of shooting.  I would hope that the parties will now be able to resolve matters, return to their sport, and that I should not hear further on this case.

[1] Now the Sports Federation & Olympic Committee; (SF&OC).