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Incorporated Society Dispute Resolution – What options do you have?

We often have enquiries from clients or prospective clients relating to disputes within an incorporated society that they are affiliated with (e.g. as members or serving on society committees). People often ask us what they can do to resolve these disputes and how they can make claims when the society leaders are not acting in the best interests of the society. This article sets out the different options available when there are disputes within an incorporated society and highlights some deficiencies in our current law.

The current law in New Zealand dealing with Societies is the Incorporated Societies Act 1908 (Act).  No, that year number is not a typo, and yes, our current Act has been around for approximately 113 years.  Needless to say, when looking at any legislation that has been around for that long it is common to find gaps, especially where topics that we now consider important are not covered in the legislation.  There is currently an Incorporated Societies Bill 2021 (Bill) with the Select Committee, however, it is not clear at this stage when it will be enacted.

When dealing with a dispute within an incorporated society the options are currently limited.  These options will be discussed further below, but in summary you may:

  1. Check the society rules and follow the internal dispute resolution method set out there (if there is one); or
  2. Endeavour to get the parties to agree to a voluntary process; or
  3. File for judicial review in the High Court.

Internal Dispute Resolution

The current Act does not contain any provisions dealing with dispute resolution.  All the Act requires is that a society must have its own set of rules and follow its rules.  This is problematic because:

  1. The rules often fail to provide for any internal dispute resolution mechanism at all.
  2. If dispute resolution process is specified it may be arbitrary and provide limited detail so as to be largely unhelpful e.g. “To make a complaint about the President of the Society, please lodge it with the President and the President will decide whether to take this further, with no right of appeal”.
  3. Even if the rules are more specific and you can establish a clear breach of the rules, if the leaders of the society refuse to do anything about it, you will still be required to look at other options and likely commence judicial review proceedings to get anywhere.

Voluntary Process

As a starting point, we recommend always reviewing the rules and raising complaints/issues with the society in the manner prescribed.  If the rules do not have a dispute resolution process you may be able to get the parties to agree to a voluntary process such as a formal mediation with an appropriately qualified mediator.  Hopefully, that can be enough to resolve the issue – particularly when there is not a relationship breakdown involved and the society decision makers are generally reasonable.  However, unfortunately, that is often not the case.

Judicial Review

The Courts have held that judicial review is an option available to those who you want to call into question a decision made within an incorporated society.  Judicial review applications are heard in the High Court and, if the claim is successful, it can result in the decision being overturned.

The downside with judicial review is that it is usually very expensive.  Judicial review proceedings tend to cost in the tens of thousands of dollars.  Even if you are successful in your claim, you will most likely not recoup all of these costs and will instead receive scale costs.

Further, even if you succeed in getting the decision overturned, that will often be because of procedural grounds e.g. insufficient notice having been given by the decision-makers which resulted in the defective decision.  In those cases, even if you succeed in the High Court, the society can simply reimplement the original decision, this time by following the correct procedure.

As people are usually involved in incorporated societies as a hobby, it will often not be a viable option financially for an individual to commence such proceedings to protect the integrity of the society.  This is the case even if the society leaders are in the wrong and not acting in the best interests of the society.

Incorporated Societies Bill 2021

The Bill seeks to implement similar duties that you see with companies.  Relevant for present purposes are the proposals to introduce/codify:

  1. Officer’s duties – Modelled from the directors duties in the Companies Act 1993, society officers will have obligations to act in good faith, in the best interests of the society, and to exercise the care and diligence that a reasonable person would exercise in the circumstances. Society members will have the ability to apply to the Court to enforce these duties.
  2. Dispute Resolution – It will become mandatory for a Society to have a procedure for resolving disputes and grievances between members. All procedures implemented must be consistent with the rules of natural justice.

These will be very welcome changes to this area of law and for those who want to ensure the society that they are part of is fair and will be able to be enjoyed by others in the future.  It will be interesting to follow this Bill and to see how it will change things in practice once it is enacted.

If you are involved in a dispute within an incorporated society and would like advice on how best to proceed, please contact one of our experienced team members in the commercial or civil litigation teams.

This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.

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