Foo Jong Peng and others v Phua Kiah Mai and another

Andrew Phang Boon Leong JA (delivering the grounds of decision of the court):

[1] This was an appeal against a decision of the High Court judge (“the Judge”) in Phua Kiah Mai and another v Foo Jong Peng and others [2012] SGHC 14 (“the Judgment”) granting declarations, inter alia, that the Management Committee (“Management Committee”) of the Singapore Hainan Hwee Kuan (“the Association”) did not have the power to remove office bearers from their positions on the Executive Committee (“Executive Committee”). We dismissed the appeal and now set out the detailed grounds of our decision.

[2] All the parties to this appeal are members of the Management Committee of the Association. The Association was registered with the Registry of Societies on 18 December 1890. For purposes of clarity, the parties will be addressed by name and the positions held by the parties will be described as they were prior to the disputed Management Committee meeting held on 20 October 2011 (hereafter referred to as “the 20 October 2011 Meeting”).

[3] The First Respondent, Phua Kiah Mai, is the President of the Association and the Second Respondent, Hun Chin Guan, is the Honorary Secretary General.

[4] The First Appellant, Foo Jong Peng, was President for two consecutive terms from January 2006 to January 2010 and is presently the First Vice President. The Second Appellant, Lee Teck Hai, is the Head of the Public Relations Division and had proposed the motions for the removal of Phua Kiah Mai and Foo Jong Peng from their positions. The Third Appellant, Han Tan Juan, is Head of the Cultural & Education Division and had proposed the motion for the removal of Hun Chin Guan from his position. The Fourth Appellant, Foo Shick Thai, and Fifth Appellant, Pang Fui Nam, were elected as the new President and Honorary Secretary General respectively after resolutions to remove Phua Kiah Mai and Hun Chin Guan were passed at the 20 October 2011 Meeting.

[5] Under Rule 8 of the Rules of the Singapore Hainan Hwee Kuan (“the Rules”), Management Committee members will be elected by a vote of the general body of members at the Annual General Meeting (“AGM”). Rule 7 provides that the elected Management Committee members shall hold office for a term of two years. The Management Committee administers the affairs of the Association, and has the duties and powers to implement resolutions passed by the General Meeting, formulate the overall policy for the Association and control the budget and finances.

[6] The elected Management Committee members then elect from amongst themselves the office bearers (“office bearers”) of the Association – the President, three Vice-Presidents and the heads and deputy heads of ten committees each dealing with a specific aspect of the Association’s affairs – under Rule 9. The functions and duties of each office bearer are defined in the Rules. Pursuant to Rule 13, all the elected office bearers will then collectively form a smaller Executive Committee. Pursuant to Rule 16, the Executive Committee has the powers to, inter alia, implement resolutions passed by the Management Committee and to oversee the general administration of the Association.

[7] The parties were all voted in as members of the Management Committee by the general body of members at the AGM held in January 2010. The parties – save for Hun Chin Guan, who was only elected after the previous Honorary Secretary General resigned in May 2011 – were then elected to their respective positions by the members of the Management Committee.

[8] The Kheng Chiu Tin Hou Kong and Burial Ground (“Tin Hou Kong”) is a company incorporated in Singapore and limited by guarantee. It effectively operates as the financial arm of the Association and provides the funds needed to support the Association’s activities. Foo Jong Peng is the Chairman of Tin Hou Kong’s board of directors and Phua Kiah Mai is the Vice-Chairman. All the parties to this appeal except Hun Chin Guan also sit on the board.

[9] Sometime in March 2011, a dispute arose between Foo Jong Peng and Phua Kiah Mai over the management of the financial affairs of Tin Hou Kong. During a meeting of the Tin Hou Kong board of directors on 26 July 2011, Foo Jong Peng expressed the view that he was no longer able to work with Phua Kiah Mai and proposed to table a motion to remove Phua Kiah Mai as Vice-Chairman. The other directors objected to this motion as proper notice had not been given. At a subsequent meeting of the Management Committee of the Association held on the same day, Foo Jong Peng again attempted to table a motion to remove Phua Kiah Mai as President of the Association. Phua Kiah Mai – who was chairing the meeting – rejected the motion as it was not in accordance with the agenda. Foo Jong Peng proposed that a special Management Committee meeting be called to remove Phua Kiah Mai as President of the Association and Hun Chin Guan then requested Foo Jong Peng to provide a reason for removal and to send in an official proposal to table the motion.

[10] On 3 August 2011, Foo Jong Peng wrote to Hun Chin Guan in the latter’s capacity as the Honorary Secretary General, calling for a special meeting of the Management Committee on 16 August 2011 with the proposed agenda of “re-organising” the Management Committee. The letter was signed by 26 members of the Management Committee. An intervening Management Committee meeting was held on 5 August 2011, but the meeting was inquorate.

[11] Phua Kiah Mai then sought the advice of his solicitors M/s RHTLaw Taylor Wessing LLP (“RHTLaw”). RHTLaw replied to Foo Jong Peng, stating that the Honorary Secretary General was not in a position to convene a special Management Committee meeting for the sole purpose of removing the President as the Management Committee had no power to remove an office bearer under the Rules. Foo Jong Peng nonetheless proceeded to convene a meeting of the Management Committee on 16 August 2011, purportedly upon the request of 25 other Management Committee members. Phua Kiah Mai and Hun Chin Guan did not attend the meeting, and no resolutions were passed in their absence.

[12] On 12 September 2011, Lee Teck Hai wrote to Hun Chin Guan, proposing a motion to remove Phua Kiah Mai as the President of the Management Committee and to elect a new President, to be voted upon at the next Management Committee meeting. Lee Teck Hai sent a second letter on 15 September 2011 to table a further motion to remove Foo Jong Peng as the First Vice President of the Association and for the election of a new First Vice President. Hun Chin Guan replied on 19 September 2011, reiterating the alleged legal position that the Management Committee had no power to remove the President and First Vice President in the absence of express provisions in the Rules and that any resolution passed to this effect would be ultra vires and void; it would thus be meaningless for the two proposed motions to be placed on the agenda.

[13] Following an adjournment of a Management Committee meeting on 28 September 2011 due to a lack of quorum, Lee Teck Hai sent a letter on 7 October 2011 advising Hun Chin Guan that a meeting of the Management Committee should be convened on an urgent basis for the purpose of adopting and approving the accounts for the Financial Year 2010, and that the continued failure to do so would put the Management Committee in breach of the Association’s Rules and statutory requirements. This was followed by a letter from Tan Han Juan to Hun Chin Guan on 10 October 2011, proposing a third motion to remove Hun Chin Guan as the Honorary Secretary General and for an election to fill the vacancy.

[14] Hun Chin Guan did not respond to Lee Teck Hai or Tan Han Juan. Lee Teck Hai then requested Foo Jong Peng to convene a Management Committee meeting. On 12 October 2011, Foo Jong Peng issued a notice – in his capacity as First Vice President – convening the 20 October 2011 Meeting. The notice stated that the meeting had been convened upon the request of over half of the Management Committee members, and the listed agenda included the approval of the Association’s accounts for the Financial Year 2010 and the motions to remove Phua Kiah Mai, Foo Jong Peng and Hun Chin Guan from their respective positions. Notice of the meeting was duly served on all members of the Management Committee.

[15] On 17 October 2011, RHTLaw wrote to Foo Jong Peng, stating that the notice to convene the meeting was improper. The proposed meeting was nevertheless held on 20 October 2011 and was attended by a sufficient quorum of 27 Management Committee members. Phua Kiah Mai and Hun Chin Guan were both absent from the meeting. The members approved the Association’s accounts for the Financial Year 2010 and resolutions were passed removing Phua Kiah Mai and Hun Chin Guan from their positions. The motion to remove Foo Jong Peng as First Vice President was defeated, and Foo Shick Thai and Pang Fui Nam were elected as the new President and Honorary Secretary General, respectively, following a vote by the members present at the meeting.

[16] Phua Kiah Mai and Hun Chin Guan then filed Originating Summons No 975 of 2011 (“the Originating Summons”) in the High Court.

[17] The Respondents’ prayers in the Originating Summons were as follows:

[18] The Judge held that the Rules did not expressly provide for the removal of a member of the Executive Committee, ie, an office bearer, and declined to imply a term permitting the Management Committee to remove members of the committee (it was ambiguous which committee the Judge was referring to) apart from general expulsion from the Association for misconduct (see [5] of the Judgment).

[19] As the Management Committee members were appointed for a fixed two-year term, the Judge considered that a more reasonable interpretation of the Rules was that the members of the Association did not intend to have the membership of the committee rotated before the term had expired (ibid). The smooth functioning of the Association might otherwise be impeded by “constant election battles” (ibid). If the Rules provided for the members to hold office for two years, they were entitled to do so and the court would not imply a term for their removal (ibid). In the absence of an express provision in the Rules, the Management Committee could not remove Management Committee members before the expiry of their terms (ibid at [6]).

[20] No order of court was extracted prior to the filing of this appeal and it was not apparent from the Judgment whether the Judge had granted all nine prayers.

[21] The Appellants appealed against the entirety of the Judgment, raising two main issues:

(a) whether there was an implied term in the Rules giving the Management Committee the power to remove an office bearer in the Executive Committee; and

(b) whether the 20 October 2011 Meeting was properly convened.

The first issue was the key point of contention between the parties. However, before turning to analyse the two main issues, we will first address a preliminary issue that was raised.

[22] On the day of the oral hearing, a preliminary point was raised that we should decline to hear this appeal on the merits as there was no longer a live issue to be decided. The Respondents relied on this court’s decision in Attorney-General v Joo Yee Construction Pte Ltd (in liquidation) [1992] 2 SLR(R) 165 (“Joo Yee”) for the proposition that the Court of Appeal should exercise its inherent jurisdiction to decline to decide an issue which the Appellants retain no interest in, even if the decision would set a useful precedent for future cases. Counsel for the Respondents informed us that a new Management Committee had been elected at the AGM held on 20 May 2012 and that new office bearers had also been elected by the Management Committee; accordingly, even if the Appellants were to succeed in the present appeal, it would not affect their interests as the Respondents’ terms of office had lapsed.

[24] We now turn to briefly consider the decisions in Sun Life Assurance and Ainsbury. In Sun Life Assurance, the English Court of Appeal affirmed an order of the court below granting rectification of an endowment policy of life assurance and the consequent payment of additional sums due to the assured as a result of the rectification. Leave to appeal to the House of Lords was granted on the following specific terms:

Viscount Simon LC, delivering the judgment for the House of Lords, declined to hear the appeal and set out the relevant principles, as follows (at 113–114):

The House of Lords followed Sun Life Assurance in Ainsbury. An appeal was filed against the refusal to grant an injunction ordering the respondent to vacate a council house. By the time the appeal was before the House of Lords, the local authority had terminated the tenancy of the council house, and both the appellant and respondent were no longer in possession. Both parties were legally aided throughout the proceedings with nil contributions. The House of Lords held that “neither party can have any interest at all in the outcome of the appeal” and dismissed the appeal. Lord Bridge made the following important observation (at 381C-D):

[26] We thus rejected the Respondents’ preliminary objection and proceeded to hear the substantive merits of the appeal.

[27] The law relating to implied terms in fact was, until fairly recently, thought to be well-established, albeit not entirely certain in its precise ambit of application. A summary of the two traditional tests, viz, the “business efficacy” test and the “officious bystander” test, is found in the Singapore High Court’s decision of Forefront Medical Technology (Pte) Ltd v Modern-Pak Pte Ltd [2006] 1 SLR(R) 927 (“Forefront”) (at [29]–[31]) (subsequently approved by this court in Ng Giap Hon v Westcomb Securities Pte Ltd and others [2009] 3 SLR(R) 518 (“Ng Giap Hon”) at [36]):

[28] The relationship between the two tests is complementary, rather than alternative or cumulative: the officious bystander test is the practical mode by which the business efficacy test is implemented (see Forefront at [36], cited with approval by this court in Chua Choon Cheng and others v Allgreen Properties Ltd and another appeal [2009] 3 SLR(R) 724 at [63]).

[29] The conceptual basis of the implication of terms was reconsidered in the Privy Council decision (on appeal from the Court of Appeal of Belize) of Attorney General of Belize and others v Belize Telecom Ltd and another [2009] 1 WLR 1988 (“Belize”). Lord Hoffmann, delivering the advice of the Board, stated that “[t]he proposition that the implication of a term is an exercise in the construction of the instrument as a whole is... a matter of logic” [emphasis added] (at [19]) and reformulated the test for implied terms (hereafter referred to as “the Belize test”) in the following terms (at [21]):

The two traditional tests, in the learned law lord’s view, merely represented different ways in which the courts have expressed this key question, and Lord Hoffmann warned of the “dangers in treating these alternative formulations of the question as if they had a life of their own” (at [22]).

[30] There has, in fact, been a dearth of local authority considering the Belize test. Whilst the recent Singapore High Court decision of Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another [2012] 3 SLR 801 referred to the Belize test, we refrain from commenting on it as we understand that appeals are pending before this court. There was also an observation, by way of obiter dicta, by this court in MFM Restaurants Pte Ltd and another v Fish & Co Restaurants Pte Ltd and another appeal [2011] 1 SLR 150 (“MFM”), where it was stated as follows (at [98]; see also at [100], where there is a further reference in the context of terms “implied in law”):

[31] As we shall see, the observations in MFM, although rendered by way of obiter dicta, are significant inasmuch as they embody what is, with respect, the fundamental difficulty with the Belize test. And it is that whilst the process of implication (of terms) is, when viewed in a more general sense, also a process of interpretation, the process of implication itself is, in the final analysis, just one specific conception of the broader concept of “interpretation”. In particular, the process of implication is separate and distinct from the more general process relating to the interpretation of documents. Indeed, the process of implication of terms proceeds, ex hypothesi, on the absence of an express term of the contract. Hence, the implication of a term, whether in fact or in law (for the distinction between these two categories of implied terms, see generally Forefront (at [41]-[44]); reference may also be made to the decision of this court in Jet Holding Ltd v Cooper (Singapore) Pte Ltd [2006] 3 SLR(R) 769 at [90]-[91]), involves tests as well as techniques that are not only specific but also different from those which operate in relation to the interpretation of documents in general and the (express) terms contained therein in particular (see also the observation of Lord Steyn in the House of Lords decision of Equitable Life Assurance Society v Hyman [2002] 1 AC 408 at 458 as well as the perceptive observations by Prof Gerard McMeel in The Construction of Contracts – Interpretation, Implication, and Rectification (2nd ed, Oxford University Press, 2011) at para 10.04). The (general) concept of “interpretation” has much in common with the implication of terms inasmuch as both entail an objective approach. However, it is, in our view, incorrect to conflate the tests as well as techniques which accompany both the aforementioned processes. Before proceeding to elaborate further, it would be appropriate at this juncture – consistently with the views just expressed – to note the very pertinent observations by a learned author, as follows (see Paul S Davies, “Recent developments in the law of implied terms” [2010] LMCLQ 140 (“Davies”) at p 144):

[32] Returning to Belize, as is evident from Lord Hoffmann’s approach in that case (quoted above at [29]), the central focus or test is premised on – to use more general terminology – the concept of the reasonable person. As a learned author put it, “the approach to be derived from Belize seems to entail, in the context of contractual implied terms, the replacement of the officious bystander by another character from legal folklore, formerly referred to as the man on the Clapham omnibus” (see John McCaughran, “Implied Terms: The Journey of the Man on the Clapham Omnibus” [2011] CLJ 607 (“McCaughran”) at p 614). It is important to note that this particular concept of the reasonable person is to be viewed as a single (and, hence, objective) standard inasmuch as it is the court which stands in the shoes of “the reasonable person” in determining what the contractual instrument, read as a whole against the relevant background, would reasonably be understood to mean. Indeed, despite his more general misgivings on the concept of the reasonable person when it is in effect used in a subjective manner, the invocation of this particular (objective) concept of the reasonable person in the context of implied terms is one which appears to have been mooted by the learned law lord at least as far back as 1995 in the 24 Lord Upjohn Lecture which was delivered on 12 May 1995 at the Inns of Court School of Law (see Lord Hoffmann, “Anthropomorphic Justice: The Reasonable Man and His Friends” (1995) 29 The Law Teacher 127 (“Anthropomorphic Justice”) (especially at pp 138–140); see also, by the same author, “The Intolerable Wrestle with Words and Meanings” (1997) 114 South African LJ 656 at p 662 and, more recently, “A conversation with Lord Hoffmann” [2010] Law and Financial Markets Review 242 at p 243). Significantly, though, the following (and oft-cited) observations by Lord Radcliffe in the House of Lords decision of Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 (at 728), which were relied upon by Lord Hoffmann in Anthropomorphic Justice in support of the “reasonable man” approach in the context of the implication of terms, were made in the context of the doctrine of frustration (a point which the learned law lord himself noted (see Anthropomorphic Justice at pp 127-128) and which, very importantly in our view, is a doctrine that applies by operation of law and therefore does not concern the search for the presumed intention of the contracting parties (which is the case where the implication of terms is concerned)):

[33] As already alluded to above, inasmuch as the concept of the reasonable person implies an objective approach, that concept must surely be an integral part of the process of the implication of terms. However, the adoption of an objective approach does not, in and of itself, tell us how a particular term ought – or ought not – to be implied (ex hypothesi, on an objective basis). Put simply, a particular test (or tests) of implication are imperative. In so far as “terms implied in fact” are concerned, these would, in our view, take the form of the “business efficacy” and “officious bystander” tests. These tests constitute (in the manner set out above at [28]) specific as well as concrete guidance for the courts in a situation where the contracting parties have not, ex hypothesi, made express provision for the situation concerned in the first place by providing default background guidelines on when the parties may be presumed to have – or not have – a particular unexpressed intention. More importantly, underlying both the “business efficacy” and the “officious bystander” tests is a criterion that is not necessarily present when applying the broader concept of interpretation, viz (with no pun intended), that of necessity. In this regard, the following observations by Lord Clarke MR in the English Court of Appeal decision of Mediterranean Salvage and Towage Ltd v Seamar Trading and Commerce Inc, The Reborn [2010] 1 All ER (Comm) 1 (“Mediterranean Salvage and Towage”) (at [15]) are particularly significant (reference may also be made to the English Court of Appeal decision of Eastleigh B C v Town Quay Developments Ltd [2010] 2 P & CR 2 at [32] (per Arden LJ) as well as Lord Grabiner QC, “The Iterative Process of Contractual Interpretation” (2012) 28 LQR 41 at pp 58–61):

It should be noted that the threshold of necessity is of little guidance in isolation, and the “business efficacy” and “officious bystander” tests give practical meaning to this criterion. In contrast, a direct practical relationship with the presumed intentions of the contracting parties is absent from the threshold of “reasonable meaning” as a standalone concept.

[34] On a related (and no less important) note, the search under the rubric of implied terms is a search for the presumed intention of the contracting parties. In other words, the court ought not to – and, indeed, cannot – simply substitute its view as to that intention. Put simply, the intention may be presumed, but the court cannot be presumptuous. We accept that a sceptic might well argue that such a search by the court is a fiction. However, even if we accept that argument, not all legal fictions are necessarily fictitious in the pejorative sense that the turn of phrase is utilised by a layperson. Indeed, we would go further: We are of the view that there is no legal fiction involved inasmuch as the court concerned does indeed sift through the objective evidence before it in order to ascertain what the presumed intention of the contracting parties is. In doing this, the court is constantly cognisant of the cardinal (and guiding) principle that it will not re-write the contract for the contracting parties. It is true that the very nature of an implied term necessitates some investigation of sorts on the part of the court. However, it bears reiterating that the court does not substitute its own view of what the contracting parties should have intended had the gap in their contract been brought to their attention at the time they entered into the contract.

[35] Indeed, there are legal boundaries or parameters which the court will not transgress. One of these is an obvious one: Where there is already an express term covering the situation at hand, the court will not imply a term which contradicts that particular express term (see, for example, Pearlie Koh & Andrew Phang Boon Leong, “Express and Implied Terms” in ch 6 of The Law of Contract in Singapore (Andrew Phang Boon Leong gen ed) (Academy Publishing, 2012) (“The Law of Contract in Singapore”) at para 06.054). Another relates to a principle already emphasised above, viz, the criterion of necessity. The very nature of this criterion means that the court will imply terms “in fact” sparingly. In order to arrive at its decision whether or not to imply a term “in fact”, it will utilise the two tests mentioned above (viz, the “business efficacy” and “officious bystander” tests) which, by their very nature, are directly related to ascertaining how the contracting parties would (or would not) have filled the gap which ought not to have existed had it been covered by an express term in the first place. Again, one must, in our view, resist the approach of the sceptic merely because the court is involved in this exercise. To put it bluntly, this is the court’s task, regardless of the views of the sceptic. More importantly, the court strives, from its external vantage point, to ascertain (through the objective evidence available) the internal intention of the contracting parties had they been apprised of the situation concerned. This is why the search is for the presumed – as opposed to the actual and subjective – intention of the contracting parties. The concern of the sceptic is, with respect, a misplaced one. No one would seriously controvert the sceptic’s concerns if all that he or she is saying is that the process is an imperfect one. After all, it was indeed the imperfection of the contracting parties in leaving a gap in their contract in the first place that created the necessity for implying the term. Utilising the criterion of necessity as embodied within the two tests referred to above, the court attempts its level best to ascertain the presumed intention of the contracting parties in order to ascertain whether or not it will imply the term concerned. Indeed, on a more general level, the law of contract is not – owing to a variety of both theoretical as well as practical reasons – concerned with the actual subjective intentions of contracting parties per se but, rather, is (as already alluded to above) concerned with ascertaining such intentions via objective evidence (and on the concept of objectivity, see generally the analysis (as well as the literature cited therein) in Andrew Phang Boon Leong & Goh Yihan, “Offer and Acceptance” in ch 3 of The Law of Contract in Singapore at paras 03.006-03.020). What is clear, however, is that adopting the approach of the sceptic is to regress down a slippery slope into legal oblivion and disempowerment. In this regard, it would not, perhaps, be inappropriate to refer to some observations from a lecture delivered at the University of Hong Kong in 2009 which were also referred to in MFM (at [138]) (see Andrew Phang, “Doctrine and Fairness in the Law of Contract” in The Common Law Lecture Series 2008-2009 (Jessica Young & Rebecca Lee gen eds) (The University of Hong Kong, 2010) pp 17-100 at pp 18-24):

[36] In summary, although the process of the implication of terms does involve the concept of interpretation, it entails a specific form or conception of interpretation which is separate and distinct from the more general process of interpretation (in particular, interpretation of the express terms of a particular document). Indeed, the process of the implication of terms necessarily involves a situation where it is precisely because the express term(s) are missing that the court is compelled to ascertain the presumed intention of the parties via the “business efficacy” and the “officious bystander” tests (both of which are premised on the concept of necessity). In this context, terms will not be implied easily or lightly. Neither does the court imply terms based on its idea of what it thinks ought to be the contractual relationship between the contracting parties. The court is concerned only with the presumed intention of the contracting parties because it can ascertain the subjective intention of the contracting parties only through the objective evidence which is available before it in the case concerned. In our view, therefore, although the Belize test is helpful in reminding us of the importance of the general concept of interpretation (and its accompanying emphasis on the need for objective evidence), we would respectfully reject that test in so far as it suggests that the traditional “business efficacy” and “officious bystander” tests are not central to the implication of terms. On the contrary, both these tests (premised as they are on the concept of necessity) are an integral as well as indispensable part of the law relating to implied terms in Singapore (as noted above at [27]-[28]).

[37] Indeed, a survey of the English case law as well as academic literature since the Belize test was first promulgated will reveal what seems to us to be an overall ambiguity (particularly in the former) and no small measure of negative critique of that test (particularly in the latter).

[38] Turning, first, to the English case law, although Belize has been cited in a fair number of cases, it is by no means clear that both the “business efficacy” and the “officious bystander” tests have been relegated to the sidelines of the English law relating to terms implied “in fact”. Indeed, in the English Court of Appeal decision of Stena Line Limited v P & O Ferries Limited [2010] EWCA Civ 543 (“Stena Line”), Arden LJ (with whom both Toulson and Rimer LJJ agreed), whilst of the view (at [36]) that “[t]he Belize case constitutes an important and recent development in the principles of interpretation” also expressed the view that that decision was one “which the courts are probably still absorbing and ingesting”. More importantly, the learned judge also observed (at [44]) that “[t]he implications of Belize on the case law on implied terms, which puts forward the different formulae referred to above, is not wholly clear” [emphasis added]. Although the court in Stena Line did nevertheless appear to apply the Belize test, there did not seem to be any definitive pronouncement on the precise status of the “business efficacy” and “officious bystander” tests post-Belize. In a related vein, Davies was of the view that the court in Mediterranean Salvage and Towage was not at all enthusiastic with the Belize test (see Davies at p 147). The English High Court decision of Spencer and another v Secretary of State for Defence [2012] 2 All ER (Comm) 480 might also be usefully noted. In that case, although Vos J embarked on an comprehensive survey of the relevant precedents and purported to apply the Belize test, the learned judge did also observe as follows (at [52] and [96]):

[39] Whilst it might be argued that the reference to the reasonable person test in Belize in the case law suggests that the “business efficacy” and “officious bystander” tests are no longer central to the test for terms “implied in fact”, there does not appear to be any clear (and independent) statement in the case law itself as to how the reasonable person test is to be applied and/or what the precise statuses of the “business efficacy” and “officious bystander” tests are (see, for example, the English Court of Appeal decisions of Mediterranean Salvage and Towage (at [8]–[15]); Chantry Estates (Southeast) Ltd v Anderson and another (2010) 130 Con LR 11 (at [14]–[16]); Garratt v Mirror Group Newspapers Ltd [2011] ICR 880 (at [46]); Groveholt Limited v Alan Hughes and another [2010] EWCA Civ 538 (at [45]); Thomas Crema v Cenkos Securities Plc [2010] EWCA Civ 1444 (“Thomas Crema”) (especially the summary by Aikens LJ at [38]); K G Bominflot Bukergesellscharft für Mineral?le mbH & Co v Petroplus Marketing A G, The Mercini Lady [2011] 2 All ER (Comm) 522 (at 44]); and Makram Boarsoum Estafnous v London & Leeds Business Centres Limited [2011] EWCA Civ 1157 (at [28]), as well as the Privy Council decision (on appeal from the Court of Appeal of Jamaica) of Thompson and another v Goblin Hill Hotels Ltd [2011] 1 BCLC 587 (at [27]) and the English High Court decisions of Durham Tees Valley Airport Ltd v bmibaby Ltd and another [2009] 2 Lloyd’s Rep 246 (at [89]); Inta Navigation Ltd and another v Ranch Investments Ltd and another [2010] 1 Lloyd’s Rep 74 (at [42]–[44]); Alessandro Benedetti v Naguib Onsi Naguib Sawiris [2009] EWHC 1330 (Ch) (at [216]–[217]); Excelsior Group Productions Limited v Yorkshire Television Limited [2009] EWHC 1751 (Comm) (at [105]–[106]); A E T Inc Ltd v Arcadia Petroleum Ltd (The “Eagle Valencia”) [2010] 1 Lloyd’s Rep 593 (at [4]); C D V Softward Entertainment A G v Gamecock Media Europe Limited [2009] EWHC 2965 (Ch) (at [74] and [77]); E N E Kos 1 Ltd v Petroleo Brasileiro S A (No 2) [2010] 1 All ER (Comm) 669 (at [41]); Malcolm Rutherford v Seymour Pierce Ltd [2010] EWHC 375 (QB) (at [18]); The P N F Trust Company Ltd v Geoff Taylor and others [2010] EWHC 1573 (Ch) (at [130]–[132]); Re Agrimarche Ltd (In Creditors’ Voluntary Liquidation) [2010] BCC 775 (at [15]); Enterprise Inns Plc v Forest Hill Tavern Public House Ltd [2010] EWHC 2368 (at [23]–[25]); North Shore Ventures Ltd v Anstead Holdings Inc and others [2011] 1 All ER (Comm) 81 (at [242]); Lomas and others v J F B Firth Rixon Inc and others (International Swaps and Derivatives Association intervening) [2011] 2 BCLC 120 (at [57]); Miscela Limited v Coffee Republic Retail Limited [2011] EWHC 1637 (QB) (at [48]–[49]); F & C Alternative Investments (Holdings) Limited v Francois Barthelemy [2011] EWHC 1731 (Ch) (at [225] and [260]–[274]) and Ross River Limited v Waveley Commercial Limited [2012] EWHC 81 (Ch) (at [218]–[219], in which all parties in fact agreed (at [218]) that the principles set out in Belize should be applied and where the summary by Aikens LJ in Thomas Crema referred to above was cited (at [219])). If, indeed, the reasonable person test has (as we have noted above) been pitched at too general a level of abstraction and recourse must therefore be had to the more specific criteria embodied in both the “business efficacy” and “officious bystander” tests, then we would be back to “square one”, so to speak.

[40] We would add that in so far as the case law merely refers to Belize as encompassing the concept of interpretation or construction (see, for example, the English High Court decision of The Procter & Gamble Company v Svenska Cellulosa Aktiebolaget [2012] EWHC 498 (Ch) (at [8])), this is, with respect, also unhelpful. As we have noted above, the process of the implication of terms is neither incompatible nor inconsistent with the concept of interpretation or construction. However, this does not answer the more specific issue which we have raised and dealt with above, viz, the true nature of the process of the implication of terms and the centrality of the “business efficacy” and “officious bystander” tests in this process.

[41] Finally, turning to the academic literature, although Sir Kim Lewison has observed (in Kim Lewison, The Interpretation of Contracts (Sweet & Maxwell, 5th Ed, 2011) at para 6.03) that Belize “has now been referred to many times as the starting point for deciding whether a term should be implied into a contract” and that “[i]t may be taken to represent the current state of the law of England and Wales”, that decision has by no means been unequivocally and uniformly endorsed in the academic literature itself. In fairness, there are comments on Belize which are very favourable (see, for example, Kelvin F K Low & Kelry C F Loi, “The Many “Tests” for Terms Implied in Fact: Welcome Clarity” (2009) 125 LQR 561 (“Low & Loi”) and Chris Peters, “The Implication of Terms in Fact” [2009] CLJ 513 (“Peters”)). However, despite their endorsement of the Belize test, the learned authors of the first piece just cited do nevertheless point to the difficulty in effecting the gap-filling via implied terms (see Low & Loi at pp 566–567). The “business efficacy” and “officious bystander” tests do constitute the means by which such gap-filling is effected and are, as explained above, more specific and particular than (as well as different from) the broad concept of interpretation. As importantly, perhaps, it is significant to note that the author of the second piece has noted that the Belize test “also appears to represent something of a departure from the traditional focus on necessity” [emphasis added] (Peters at p 514) – a departure which, as already noted above (at [33]), is not an approach that ought to be adopted in the context of terms “implied in fact”.

[42] More importantly, there is also commentary that is in fact quite critical of the Belize test, as exemplified, for example, by an article to which we have already referred (see generally Davies as well as above at [31]). Another author also expresses the view that the Belize test might be too liberal, introducing (implied) terms which do not in fact fulfil the intentions of the contracting parties (see generally Elizabeth Mcdonald, “Casting Aside ‘Officious Bystanders’ and ‘Business Efficacy’?” (2009) 26 JCL 97). We would, finally, observe that there is yet other commentary which adopts a neutral stance as between the Belize test on the one hand and the traditional “business efficacy” and “officious bystander” tests on the other (see, for example, McCaughran; cf also Edwin Peel, Treitel: The Law of Contract (Sweet & Maxwell, 13th Ed, 2011), especially at paras 6-032–6-033 and Chitty on Contracts – Third Cumulative Supplement to the Thirtieth Edition (Sweet & Maxwell, 2011) at pp 150–151).

[43] In summary, therefore, neither the English case law nor the academic literature furnishes clear support for the Belize test. The entire picture is mixed at best and ambiguous at worst, and constitutes further support for the approach adopted by this court (set out above at [36]).

[44] We turn now to consider (applying both the “business efficacy” as well as “officious bystander” tests) whether a term conferring a power on the Management Committee to remove office bearers may be implied in the Rules. The Appellants’ case was simply that he who appoints an office bearer, ie, the Management Committee, must necessarily also have the power to remove this office bearer. It was also argued that the Rules did not specify the term of office for the office bearers in the Executive Committee; if a power of removal were not implied, it would mean that the office bearers could remain in office indefinitely.

[45] We were not persuaded by the Appellants’ argument, and considered that the overall context of the Rules pointed to a contrary conclusion. The purpose of the Rules is to set out the rights and obligations of the members inter se and to create an effective governance structure that would enable the Association to achieve its objectives, listed in Rule 3, of promoting the welfare of the Hainanese community and fostering interaction and a sense of identity amongst the community. Rules 12(1) and 15 vest the overall mandate to conduct and manage the affairs of the Association in the Management Committee as a whole, and the Executive Committee – which consists of all the office bearers – carries out the day to day running of the Association under the general instruction of the Management Committee. Rule 9 sets out the procedure for the election of office bearers, as follows:

The Rules are silent on the removal of office bearers. Rule 19, however, provides for the expulsion of members by the Management Committee for misconduct, and also prescribes certain procedural safeguards and voting majorities.

[46] It was clear to us that both the “business efficacy” and “officious bystander” tests were not satisfied, and that this implied power of removal could not therefore have been part of the presumed intentions of the members. We did not think it was necessary for the effective management of the Association’s affairs for the Management Committee to be given the power to remove particular office bearers. The Management Committee still retains the decisive power to supervise the conduct of the office bearers, manage finances and to formulate the general policy direction for the Association. We were cognisant of the fact that many clubs and unincorporated associations, unlike companies, are run on a non-profit basis and many office bearers take on positions of responsibility on a voluntary basis. While it is conceivable that a change in leadership may sometimes be desirable, we did not think that it was necessary for leadership change to be effected through a blunt power of removal wielded exclusively by the Management Committee, instead of through sensible compromise and consensus. It was also noted that the First Respondent averred that it was the first time in the 157-year history of the Association that a President had been removed before the expiry of his term of office. While we accept that there is always a first time when unanticipated problems arise and that this does not per se mean that a term conferring a power of removal is unnecessary, in this particular factual context, it did suggest that the Association is capable of governing itself within the existing framework set out in the Rules without an ad-hoc gap filling mechanism in the form of the implied term.

[47] Further, the power of removal was not, in our view, so obvious that it would go without saying that such a term ought to be implied under the “officious bystander” test. The Rules include specific rules governing the removal of trustees and expulsion of members for misconduct (see Rules 14 and 19, respectively) and therefore contemplate the possibility that individuals with certain positions of responsibility or members may need to be removed in the interests of the Association. It is thus difficult to believe that the members did not advert themselves to the possibility of removal of office bearers or did not expressly say so because they had considered it so obvious that it would go without saying. We also do not think that the members would have considered it obvious that the Management Committee itself should have free rein to remove an office bearer. The members could have preferred the power of removal to be vested in the General Meeting or for the power to be exercised only when stringent voting margins or procedural pre-conditions are met; alternatively, as the Judge observed, the members could equally have intended that this apparent “gap” in the Rules should mean precisely that office bearers cannot be removed and must be allowed to serve out their complete two-year term of office in order to ensure stability and continuity in the management of the Association. The Appellants submitted to us that the Judge’s reasoning on this point was flawed because the Rules did not expressly provide for a fixed term of office for an office bearer, but we were unable to agree with the Appellants’ – somewhat ironically – unduly literal interpretation of this aspect of the Rules. Rather, a purposive interpretation of Rule 9 in conjunction with Rule 7, which provides for a two-year term of office for Management Committee members, indicates that the term of office for an office bearer must logically also be two years. An office bearer elected from amongst the members of the Management Committee can only be an office bearer for as long as he is also a Management Committee member, and his term as an office bearer must therefore necessarily also be limited by his term as a Management Committee member. If an office bearer were to have an indefinite term of office, it would clearly contradict the express purpose of Rule 9(2), which places restrictions on office bearers occupying the same position for consecutive terms.

[48] Indeed, if the officious bystander had asked whether the Management Committee had the power to remove the office bearers at will, the members would not have unequivocally thought that the term was obviously necessary for the effective management of Association and unanimously suppressed him with a testy “Oh, of course!” The limited term of office – both for office bearers and members of the Management Committee – ensures that control of the Association will not always fall into the hands of a single individual, and a fixed period of office without the threat of removal encourages consensus and unity, instead of divisive power struggles and acrimony. If the Management Committee or general members have irreconcilable differences with a particular office bearer, the solution is to vote him out at the next election for a new Management Committee and/or office bearers. And, if an office bearer has behaved in a particularly egregious manner, the last resort would and should be expulsion.

[49] We hence declined to imply a term conferring a power on the Management Committee to remove office bearers in the Executive Committee.

[50] The Respondents submitted that the 20 October 2011 Meeting was invalid as Foo Jong Peng did not have power under the Rules to convene a Management Committee meeting. It was argued that only the President was vested with the authority to do so under Rule 17 and that this position was in line with the Association’s “customary practice”.

[51] Rule 17 provides as follows:

The Rules do not set out the procedures to be followed for convening a Management Committee meeting, apart from specifying who should chair the meeting and the required quorum.

[52] We disagreed with the Respondents that the effect of Rule 17 was to confer exclusive power on the President to convene a Management Committee meeting. Rule 17(1) is simply an enabling provision that gives the President authority to act on behalf of the Association on all matters, subject to a monetary limit for the authorisation of expenditure, and we could not construe this provision so broadly so as to give exclusive power to the President to decide on residual matters relating to the affairs of the Management Committee or the Association that are not explicitly provided for in the Rules.

[53] In our view, there were no discernable procedural limitations in the Rules mandating that Management Committee meetings could only be convened by the President. The internal administration procedures of unincorporated associations are usually conducted on an informal and flexible basis, and the Rules do not set out any decision-making hierarchy within the Management Committee. It may be that an office bearer such as the President or Honorary Secretary General will generally be responsible for convening a meeting as a matter of administrative convenience, but it is an entirely separate proposition altogether to state that other members of the Management Committee do not have the legal power to convene a meeting even with the requisite notice. The Management Committee is constitutionally entrusted with the general duties and powers to administer the affairs of the Association, and each elected Management Committee member has an equal responsibility to participate in meetings and contribute to the decision-making process of the Management Committee. The authors of David Ashton & Paul W. Reid, Ashton and Reid on Club Law (Jordan Publishing, 2005) observe, as follows (at para 6-36):

We thus considered that any member of the Management Committee may convene a meeting upon reasonable notice, and, accordingly, the 20 October 2011 Meeting was validly convened by Foo Jong Peng. We would add that this power is not a disruptive one that can be abused by an individual member to call needlessly frequent meetings for vexatious purposes, with other members being compelled to attend at the risk of careless decisions being made in their absence. The 50% quorum required for a Management Committee meeting under Rule 13 ensures that at least a majority of Management Committee members must be present, and if superfluous meetings are convened, they are likely to be inquorate and invalid.

[54] For completeness, we would note that the Respondents also advanced an argument that it was the “customary practice” of the Association that only the President had the power to convene a Management Committee meeting. This argument was only canvassed briefly in the court below and without the citation of authority. In Golden Harvest Films Distribution (Pte) Limited v Golden Village Multiplex Pte Ltd [2007] 1 SLR(R) 940, this court accepted (at [39]) that it was in principle possible to invoke past practice to fill in gaps in the articles of association of a company; however, concrete evidence must be adduced to show that this practice was “the unvarying course” of the company (In re Imperial Mercantile Credit Association (Marino’s Case) (1867) LR 2 Ch App 596 at 598 per Sir G J Turner LJ). The only evidence before us on such “past practice” was the correspondence included in the Respondents’ affidavits documenting an isolated incident in June 2009 where the then Honorary Secretary General and another Management Committee meeting had expressed the view that only the President, acting upon the advice of other key office bearers, had the power to convene a Management Committee meeting. This was insufficient for us to conclude that the Management Committee had, as a matter of course, always acted upon this convention.