Lax record-keeping puts the cat among the pigeons

If you’re ever tempted to take somebody to court, just remember that, as the fourth Earl of Chesterfield said about sex, “The pleasure is momentary, the position ridiculous, and the expense damnable”, only more so of everything.

In Diener v Rooty Hill and District Racing Pigeon Club Inc [2024] NSWSC 27, we have another one of those cases whose main interest is the question of how the judge was able to resist the temptation to leap out over the bench and belabour both parties impartially about the head and shoulders with his gavel. This one, however, does have a message for not-for-profits generally.

The Rooty Hill Racing Pigeon Club was founded in 1963 as an unincorporated association, so it didn’t have to have any particular rules or practices or records, and it didn’t. It was eventually incorporated (under the Model Rules) in 1991, at which time it assumed all the responsibilities of a fully formed entity – a constitution, an application form, that sort of thing – and observed absolutely none of them, carrying on with the same vague habits it had always had. It didn’t, for instance, have a list of members; if you turned up at the AGM and paid your sub that was good enough, and the members knew, more or less, who was who.

As the judge said:

So far as the evidence goes, the Club has always operated informally according to its own rules as understood by the members. At least in relation to the issue of membership, it has not conformed with the formal requirements of the Rules. The evidence was that [the committee members] had never read the Rules. It is likely that the Club has simply continued to operate in accordance with the informal rules that the members for the time being understood were in force during the period when the Club was an unincorporated association. The fact of incorporation under the 1984 Act, and the formal adoption of the “Model Rules” under that Act, do not appear to have impinged significantly on the way the Club has operated; at least in respect of the issue of membership. It is probable that no member of the Club has ever been accepted formally in compliance with the relevant rule in the Rules.

Don’t. Do. This.

And then came the blowup, in 2017. We needn’t go in to it, other than to note that it was connected with a new (but informal) rule that any new member had to be unanimously approved by the AGM (never do that, either). Anyway, Mr Deiner, one of the founding members, stormed out. The remaining members interpreted that as meaning he’d resigned.

Mr Deiner said that not only had he not resigned, a lot of other people – 16 of them, in fact – who had stopped racing their pigeons between 11 and 30 years ago hadn’t formally resigned either, and he sued to have them all brought back in, which would give him a voting majority. As the judge said:

There is a strong appearance that the purpose of these proceedings is for Mr Diener to acquire either voting control, or a blocking power, in the Club’s affairs.

High jinks ensued.

The thing was that both sides were standing in quicksand:

This approach by the parties gives rise to a logical problem in the determination by the Court of the principal issue in these proceedings. The plaintiffs say that they should be treated as members even though they did not join in compliance with the Rules, but they should not be treated as having resigned because they did not resign in accordance with the Rules. The defendants have admitted that most of the plaintiffs were members in the past, but that is only on the implicit basis that persons could become members in accordance with the informal practices adopted by the Club, but the defendants then submit that consistency requires that the plaintiffs have resigned or abandoned their memberships also on the basis of those informal practices.

The judge had to extract some comprehensible line of reasoning from this legal sewage tank. It wasn’t easy.

The judge began with the perfectly reasonable intuition that life could become quite difficult for incorporated associations if people who’d been members 30 years back were able to turn up out of the blue and say they’d never resigned. On the other hand, just looking at the black-letter law there didn’t seem to be that much to stop them.

After a long and learned consideration of the precedents, though, what came through was

a person who becomes a member of the Defendant Association can only lose that membership by resignation or by a sufficient display of lack of interest as to amount to an abandonment of membership ...

Not having communicated with the Rooty Hill Racing Pigeon Club for 30 years, or even 11, counted as a fairly eloquent display of lack of interest, and the club was entitled to regard it as a resignation even if it wasn’t in writing. Mr Deiner was a member, because he’d been a member at the start and had kept it up (and storming out didn’t count as resignation), but he couldn’t bring on his own majority, which presumably made the whole thing pretty pointless.

And to get to this stage the parties had been in court for eight whole days over nearly two years (four years, counting from the original blue in the meeting).

The best way to avoid getting into court, of course, is to observe your association’s rules in the first place, but it’s still a real flaw in our legal system that the judge doesn’t have the option of just saying “Go home and grow up” – or, at slightly more length, the wise words of Justice Jagose in the case of Auimatagi & Ors v Mangere Congregational Church of Jesus Trust Board [2023] in New Zealand’s High Court:

I urge the parties to consider a more constructive way forward involving mediation and resolution of these deeply felt antagonisms, short of involving the Court. This judgment is long and has taken some time. All the issues have been well ventilated by both sides. I hope it is now clear that most of the claims are futile. Also, I hope it is accepted that there is a better way forward.

How hard can it be?