The State Administrative Tribunal (Tribunal) has confirmed that when determining the proper construction of the rules of an incorporated association’s Constitution, the Tribunal may omit words contained within those rules if they are inconsistent or repugnant to the instrument as a whole.
The case was Kavanagh and Pine Valley Pistol Club Incorporated  WASAT 60 (Kavanagh).
The issue in Kavanagh
Kavanagh was a review by the Tribunal of the decision of the Committee of the Pine Valley Pistol Club Inc (Club) to refuse to renew the membership of the applicants under rule 5(6) of the Club’s Constitution.
Under rule 5(6):
“Membership is for 12 months and is renewable annually upon completion of a member’s form and payment of the applicable subscription.
The Management Committee reserves the right to not accept an application or renewal. The decision not to accept an application shall be communicated to the applicant within 10 days of the Committee’s decision.”
The rules operate as a contract
The Tribunal identified the issue to be determined as the proper construction of the Club’s Constitution, and in particular rule 5(6).
The starting point is to consider the provisions of the Associations Incorporations Act 2015 (WA) (AI Act). Pursuant to s.21 of the AI Act the rules of an incorporated association have statutory force and should be taken to operate as if they are the terms of a contract between the members of the association themselves, and between the members and the association.
The Tribunal considered the comments of Stanley J in Echunga Football Club Inc v Hills Football League Inc  SASC 201 and drew the following salient points:
- The rules of an incorporated association represent the terms of a statutory contract, firstly between the members of the association themselves and, secondly between the members and the association.
- The principles applicable to the construction of the rules of an incorporated association are an adaptation of the principles which govern the construction of commercial contracts.
- Those principles, however, must be modified, in the manner outlined below, when the Tribunal is construing the rules of an incorporated association, for two reasons. Firstly, the rules of an incorporated association have a public dimension. Secondly, an incorporated association is not a commercial operation established with a view to generating profits, but rather is what may be described as a non-profit making organisation.
- The Tribunal must approach the construction of a particular rule of an incorporated association, when read in the context of the rules as a whole, with a degree of flexibility. This means that the Tribunal should not make too much of infelicities of expression in the rules of an incorporated association, nor be too quick to identify absurdity, illogicality or apparent inconsistencies.
- The rules of an incorporated association are a deemed contract, created by statute, without the normal elements of a contract having to be established. The rules speak not only to the members of the incorporated association, but also to third parties who might consider becoming members. Accordingly, it is important that the rules are capable of being construed by third parties by reference to the text of the rules.
- Some ‘surrounding circumstances’, particularly those that are likely to be well-known, not just to the members of the incorporated association, but also to relevant third parties, are part of the contextual considerations which can be weighed by the Tribunal in construing the rules of an incorporated association, but restraint ought to be exercised in doing so.
The Tribunal also considered the following statements in Tokio Marine & Nichido Fire Insurance Co Ltd v Hans Bo Kristian Holgerson  WASCA 114 to be pertinent to the construction of the Club’s Constitution:
- In the process of the construction of a contract, the court will be justified in omitting words, or treating them as superfluous…if those words are inconsistent with, or repugnant to, the objective intention revealed by the contract as a whole.
- A general principle applicable to the construction of contracts is that the instrument should be construed as a whole. A construction that makes the various parts of an instrument harmonious is preferable. If possible, each part of an instrument should be construed so as to have some operation.
- Words, even entire provisions, can be rejected or treated as superfluous if they are inconsistent with, or repugnant to, the objective intention or primary purpose revealed by consideration of the instrument as a whole.
Objective intention of the Club’s rules
In the view of the Tribunal, when rules 5, 7, 8 and 9 of the Club’s Constitution are construed as a whole, the objective intention revealed by those rules regarding membership of the Club is that:
- If a person applies for membership of the Club and his or her application is rejected by the Committee, the person has a right of appeal against that decision, to a general meeting of the Club.
- If a person becomes a member of the Club, he or she is entitled to renew his or her membership annually by completing a ‘member record form’ and paying the applicable subscription by no later than one month after the payment date for the subscription.
- A person’s membership of the Club is terminated if he or she gives a written resignation to the Secretary, or if he or she does not pay the annual subscription within one month of the payment date, unless the Committee decides otherwise.
- A person can be suspended or expelled from membership of the Club by the Committee if it believes that the member’s conduct is detrimental to the interests of the Club. The member has a right of appeal against that decision, to a general meeting of the Club.
In the Tribunal’s view, the words ‘or renewal’ in the second sentence of rule 5(6) are inconsistent with, or repugnant to, the objective intention of the Club’s Constitution regarding the membership of the Club revealed by consideration of the Club’s Constitution as a whole.
The second sentence of rule 5(6) can be given a meaning which is consonant with the other rules if the words ‘or renewal’ are rejected.
The Tribunal decided that, properly construed, the second sentence of rule 5(6) should be read as if the words ‘or renewal’ are omitted. This construction of the second sentence of rule 5(6) makes the various rules which deal with membership harmonious.
If the Committee considers that the applicants should be expelled from membership of the Club because their conduct is detrimental to the interests of the Club, it is open to the Committee to follow the process in rule 9 (to suspend or expel from membership) in that regard.
The Tribunal made orders that the decision of the Committee to decline to renew the membership held by each of the applicants be held void and of no effect, and that the membership of the applicants be renewed subject to payment of the subscription fee.
The take away
The rules in the Constitution of an incorporated association need to be carefully drafted and consistent in order to be enforceable. When determining the proper construction of the Constitution, the Tribunal may omit words contained within the rules of the Constitution if they are inconsistent or repugnant to the instrument as a whole.
The information published in this paper is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.
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