Tong Cun Ming v Cheung Sun Ling Sanny
Court of First Instance
Miscellaneous Proceedings Nos. 143, 1013 & 2477 of 2011
David Lok J
Company Law
2 September 2015

Religious institution incorporated as company – expulsion of members – whether rules of natural justice applied in terminating membership of religious charitable trust and incorporated company limited by guarantee

X was a religious institution, a religious charitable trust and an incorporated company. X was divided into two rival camps: the Traditionalists’ Camp, including Ds, on one side and the Reformists’ Camp, including Ps, on the other. On 15 October 2011, without giving prior notification of a proposal to expel Ps, the charges against them or an opportunity to present their respective cases, the Board passed a resolution terminating their membership of X (the “Termination Resolution”) for breach of charitable objects in art.3 of the memorandum of association (the “Memorandum”) and breach of the religious oath. On 11 November 2011, notices of the decision were issued to Ps, who brought proceedings against 15 councillors of the Board and X challenging the validity of the Termination Resolution, which was one of three actions between the parties. Article 9.2 of X’s articles of association stipulated that a member could be expelled only if the councillors were satisfied that a member had failed or refused to abide by any of the articles and/or rules or regulations made under art. 8.1; and he had a right to appeal against the decision. The present hearing was a trial of certain preliminary issues in the three actions, including whether the purported expulsion of Ps from X’s membership was invalid for breach of the rules of natural justice.

Held, that:

  • The principles of natural justice applied to the expulsion of members of an incorporated company unless the circumstances indicated the contrary. This was the case here. Article 9.2 did not provide for an absolute and unrestricted power to expel members from X, but one subject to conditions. Further, various factors, including that certain members of the Reformist Camp had donated substantial sums to X, suggested that Ps had substantial interests in its operation and future development. Accordingly, the Termination Resolution was unlawful.
  • An expelled member should be notified of disciplinary proceedings and charges against him. It was no answer that, given the circumstances leading to the dispute, the member should have known about such charges. Although an appeal procedure was provided for by the Articles, there would not have been a fair result reached by fair methods. The Traditionalists’ Camp wished to crush the opposition once and for all. Even if Ps had appealed, the board hearing it would not be a properly constituted one, much less a fair and impartial tribunal because the two other members of the appeal committee were not selected by the honorary legal adviser in accordance with art. 9.2, but by the Board. Moreover, under art. 17, the Termination Resolution stripped Ps’ of their right to stand for election as councillors even if they appealed against the decision and so natural justice demanded that they be given the right to be heard before it was passed.

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