Recent High Court Decision Confirms self-governing nature of Incorporated Societies
20 Dec 2024
A recent decision from the High Court provides helpful guidance on the management of an incorporated society and the situations in which a Court will intervene to prevent dysfunction.
At the centre of the case was a dispute about the management of an incorporated society which owns communal facilities in a residential estate and is tasked with maintaining those facilities and the roads. A handful of members of the Society were unhappy with the management of the Society and sought to appoint a receiver, in particular, so that a receiver and/or manager could facilitate roading repairs and maintenance work.
Issues involving the Society and the relevant members have been the subject of litigation in the High Court, Court of Appeal and Environment Court. The plaintiff members argued that, among other things, the presence of this litigation meant the Society was dysfunctional.
Darius Shahtahmasebi and Thomas Milne of Martelli McKegg represented the Society. They argued that the application was unnecessary and did not meet the high threshold to have a receiver appointed, especially in the context of mere disagreements between members. The High Court agreed.
The High Court also said the plaintiff members had overstated the risk of the roading work not being completed in time, noting that the road was mostly in serviceable condition and the Society still has sufficient time to complete the roading work to meet its legal obligations.
This is one of the first decisions to come out since the new Incorporated Societies Act 2022 and will be important when courts consider the Act in the future. The 2022 Act provides a specific process to enable prejudiced members to request that the Court appoint a receiver to an incorporated society.
Most importantly it shows that mere disagreements, and even unlawful decisions made by an incorporated society, will not on their own be enough to have a receiver appointed, and that the threshold to successfully have a receiver appointed is indeed a high one to meet.
More generally the decision appears to support an incorporated society’s right to be self-governing.
Full judgment below:
