Commercial Law

Abdul Rashid Abdul Majid v Island Golf Properties Sdn Bhd

In this case, the issues is whether the board was entitled to levy and collect fees known as development fees from members?

Principles

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The defendants owned, managed and operate a social golf club. Membership of the club is of the following types which are honorary membership, ordinary membership, ordinary transferable membership, subscribing membership, institutional corporate membership, expatriate transferable membership, ordinary social membership, term membership and visiting membership.

Under the Rule 3 of the club’s rules provided, inter alia, that the club was a proprietary club, of which the defendants were the proprietors with a board of directors responsible for the policies, management and operation of the club. Rule 5 of the rules provided, inter alia, that all members shall not, by reason of his membership, be under any financial liability except for payment of his annual subscription and any other sums due under or levied under the rules and by laws to the defendants. The plaintiff is an ordinary transferable membership.

The Plaintiff

The plaintiff applied to become a member of the club by submitting the necessary application form and duly executed a declaration contained therein which states, inter alia, that he accepted and agreed that the board of the defendants had sole responsible for the policies, management and operation of the club with the power to increase entrance fees and subscription and to levy and additional charges to meet expenditure and it also has the sole right to amend, vary, add to or formulate such rules, terms and conditions of the club including the withdrawal or addition of benefits and privileges of members as if may in its absolute discretion deem necessary. 1|Page The board sought to levy and collects the development fees pursuant to its power under the rules. Rule 33 of the club’s rules provided, inter alia, that the board shall be the sole authority for the interpretation of the rules and by laws made there under and that the decision of the board shall be final and binding on all members.

Contracts Act 1950

The principle that is under Section 2 (a) of the Contracts Act 1950, a proposal is made when one person signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence. Moreover, the proposal is invitation to treat which an invitation to make offer, negotiate or deal and has no legal consequence and cannot be accepted to bring a contract into existence. The communication of a proposal is complete when it comes to the knowledge of the person to whom it made which under Section 4(1) of the Contracts Act 1950. This means that an offer or proposal is effective once it is communicating to the offeree by the offeree.

Besides that, under Section 10 of the Contracts Act 1950 is already mention that all agreement are contract if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void. The situation is similar in the case of Bomanji Ardeshir Wadia & Ors v Secretary of State AIR (1929) PC 34 wherein it the decision of the Privy Council was said nothing is better settled than that when parties have entered into a formal contract that contract must be construed according to its own terms and be explained or interpreted by the antecedent communing which led up to it. Another related case is Baker v Jones & Ors (1954) 2 All ER Lynskey J said that the contract is contained in, or to be implied from the rules. The courts must consider such a contract as they would consider any other contract.

Although parties to a contract may in general, make any contract they like, there are certain limitations imposed by public policy and one of those limitations may be that parties cannot, by contract, oust the ordinary courts from jurisdiction.

Judgement

The court held that declaring that the defendants’ board was not entitled to levy and collects the fees because the plaintiff’s application for membership was merely a preliminary step. The offer for membership came from the defendants after they had considered the plaintiff’s application. The contract between the plaintiff accepted the offer by making the payment of the entrance fees and the first subscription. Therefore, the declaration in the application forms as not part of the contract. It is just an antecedent communication. The only contract between the plaintiff and the defendants was the rules of the club.

The authority to levy fees must clearly be given by the rules of the club and there was no such authority under the rules. Rule 33 clearly made the board the sole authority for the interpretation of the rules and as it purported to oust the court from their jurisdiction the rule was contrary to public policy and therefore void.

Conclusion

The conclusion for this case is the board was not entitled to levy and collect fees known as development fees from members. For the interpretation of the rules, this is contrary to public policy and therefore void. Thus, a declaration of intention or an invitation to treat, so, all fees collected as development fees are repaid to the plaintiff and costs to be paid by the defendants.

Otherwise, the offer must be communicated to the offeree which under Section 9 of the Contract Act 1950 is the exercise of power by the offeree indicating his assent to the transaction in response to the offer. The communication of an offer or a proposal is deemed to have been made by any act or omission of the party proposing by which he intends to communicate the proposal or which has the effect of communicating it. Therefore, the declaration in the application form was not part of the contract unless the plaintiff make pay sum of the fees which binding the rules of the club. It is normal for parties in the course of preliminary negotiation to make statements to each other but not all statement can be taken as an offer that can be accepted to bring about a contract.

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