Singh & Ors v Brisbane Sikh Temple (Gurdwara) Inc

In this notable case, Kelly J considered the circumstances in which the management committee of an incorporated association could act bona fide but still commit a fraud on the power by exercising the power for an improper purpose. Ultimately, considering the respondent’s constitution as a whole, his Honour found that the management committee acted for an improper purpose by imposing a criterion to limit membership numbers.

Kelly J

25 February 2022

The applicants are ordinary members of the respondent, (“the Temple”), which is an incorporated association under the Associations Incorporation Act 1981. [1]. In March 2021, the Temple undertook a membership drive, in which it garnered a significant number of applications for membership, accepting 1,005 and rejecting 2,151. [1]. Prior to this, the Temple only had 235 members. [19]. The applicants commenced proceedings, seeking declarations that the Temple had breached its constitution in deciding to reject the applications. [2]. The core issue in the proceedings was whether the Temple’s management committee had exercised its power to reject applications for membership in breach of, or without regard to, the provisions of its constitution. [4].

As to this, the applicants contended that although the applications were individually considered, the management committee only considered them to see if the proposed applicant had been a member of the Temple within the last five years, and if not, the application was rejected. [26]. Kelly J, considering the application, found that the management committee had exercised its power in respect of all applications by reference to this criterion. [35]. However, his Honour also found that the management committee had acted bona fide and with the intention of having regard to the Temple’s constitution. [35].

Turning to the relationship between the members of the management committee and the Temple, Kelly J found that the management committee occupied a position of trust and confidence in relation to the Temple, such that its relationship with the Temple was fiduciary in nature. [43]. These fiduciary obligations circumscribed the management committee’s powers such that, in exercising the power to reject applicants for membership, it was obliged to act bona fide and for a proper purpose. [43]. Drawing an analogy to the power vested in company directors to issue new shares, his Honour considered that merely acting honestly and bona fide does not prevent an action from being a fraud on the power or for an improper purpose. [44]–[45]. In ascertaining the purpose for which a member of the management committee acted (particularly when there could be multiple purposes), Kelly J considered that it was necessary to ascertain the substantial purpose for which the power was exercised. [46].

Against this background, Kelly J assessed the nature of the power to reject membership applications. The Temple’s constitution expressly identified the requirements for ordinary membership. [54]. Any person satisfying the qualification requirements was entitled to apply for membership, with no other qualification on the right to apply for membership applying. [54]. His Honour did not consider that there was an automatic right to membership if an applicant met each of the qualification requirements. [55]. Rather, on a proper construction of the Temple’s constitution, it remained up to the management committee, acting in accordance with the constitution, to consider each application. [55].

Although the management committee retained the discretionary power to accept or reject each application, Kelly J considered that it had to be exercised in good faith and for a proper purpose. [56]. The Temple submitted that its discretion was largely unfettered, and could be exercised to cap membership numbers. [57]. Kelly J disagreed, noting that on reading the whole constitution, a number of provisions provided that there should be no cap on the number of members. [57]. Accordingly, the discretion could not “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”. [57]. Accordingly, the power to reject members was exercised for an improper purpose and was void. [58].

Kelly J noted that, while the decision to impose criteria to limit member numbers appeared to be motivated by promoting member safety during the pandemic (and member safety was a proper function of the management committee), “the management of visitation and occupancy is separate and distinct from any consideration as to whether a person should be rejected from membership of the Temple”. [59]. Accordingly, this was not a proper ground on which to limit member numbers in circumstances where the Temple’s constitution provided that member numbers would be unlimited. [59].

The applicants further contended that the decision to reject the membership applications denied the membership applicants natural justice by failing to give them reasons for their rejection. [60]. Kelly J considered that there was no common law requirement for natural justice in respect of such decisions. [61]. Similarly, there was no requirement for natural justice prior to the management committee making the decision to accept or reject a membership application under the Temple’s constitution. [61]. It did, however, contemplate a rejected member appealing the decision at which point they, and the management committee, would each be able to present their cases. [61]. Accordingly, the Temple’s constitution did not require natural justice in the form of reasons for each rejection. [61].

In the event, Kelly J made orders under ss 72 and 73 Associations Incorporation Act 1981 declaring that the decision to reject the membership applications was void and directing the management committee to reconsider their applications according to law. [62]–[63].

M Paterson