QCAT has just reported a decision in the matter of Melissa Carmichael v South East Queensland Paint Horse Club Inc. This was an appeal by Ms Carmichael against the decision of QCAT and the appeal was heard by Justice Carmody who allowed the appeal.
The appeal was over $450 and one wonders why either party would be conducting a litigation over what is a trivial amount. No doubt, as happens in many association matters, there is a great deal of principle and reputation at stake and people believe matters of principle needed to be determined.
Justice Carmody wrote an eight page decision. The upshot of the decision is important for associations. In this case the constitution of the association said that “without prior approval or latter ratification committee members did not have the legal authority to bind the club”. His Honour said however “clubs cannot make internal financial arrangements and expenditure rules affecting third parties in commercial dealings or with the effect of displacing statutes or general principles regulating contract liability or the law of agency in favour of their own.”
The effect of this is that the committee member had “ostensible authority to make enforceable unconditional business promises on its behalf and the club cannot now disavow them as irregular just because she broke a club rule in doing so. The rule about expenditures being ratified before they are valid is not enforceable outside the club.”
What Justice Carmody said was that irrespective of what is contained in the rules of an association as to the authority that must be given by the Management Committee before a commercial arrangement is entered into, it is the case that committee people, holding themselves out to act for and on behalf of the association are indeed able to bind the association into commercial transactions. There are of course a range of factors which need to be considered before the final determination is made as to whether a contract is binding.
This case over this trifling amount is a timely reminder that clubs and associations need to exhibit good governance and controls over their management committee members to ensure that individuals are not entering into binding, contractual arrangements for and on behalf of the club/association.
But above all, this case reminds that common sense should apply and Clubs should not end up in court over insignificant amounts.
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