1. ) CHEAH SHU BOON 2. ) SHAMSUDIN BIN ISMAIL v 1. ) KUALA LUMPUR GOLF & COUNTRY CLUB BERHAD 2. ) MY PREMIER TRUSTEE (MALAYSIA) BERHAD

Case Significance

Illustrates the limits on a recreation club's discretion to raise membership and transfer fees, the court granting members declaratory relief where the increases failed the Wednesbury test and the requirements of reasonableness and good faith, while declining representative-action status and damages absent proof of authorisation and actual loss.

This High Court decision concerns a challenge by members of a recreation club to increases in the club's membership and transfer fees, and a related claim against the club's trustee for breach of fiduciary duty. The plaintiffs, individual members, sued the first defendant club, which had ceased issuing individual memberships and had substantially raised both the membership prices and the transfer fees, contending that the increases were arbitrary and burdened the members and impaired the transferability of their memberships; they also claimed against the second defendant trustee for failing to safeguard the members' interests. It was undisputed that under the governing trust deed, conditions of membership and deed of mutual covenant, the members had no proprietary rights over the club and were mere licensees, and that the club had a discretion to vary the fees, which it said it had exercised after a study by an independent consultant in the face of financial pressure to upgrade facilities. The sole issue was whether that discretion had been exercised lawfully. The court held that the increases failed the Wednesbury test and the requirements of reasonableness and good faith, so that the members' grievances were well founded and they were entitled to some of the declaratory relief claimed. However, it ruled that, although an earlier objection to the action proceeding as a representative action had been dismissed at case management, the plaintiffs had ultimately not proved that they were authorised to sue on behalf of the other members, so they had standing only on their own behalf. Against the trustee, the court found a breach of fiduciary duty in failing to protect the members from the indiscriminate increases, but declined to award damages because no actual loss had been proved. It allowed the plaintiffs the declaratory relief sought under two paragraphs of the statement of claim, with costs of RM100,000 against the club and RM30,000 against the trustee. The judgment illustrates the limits on a club's discretion to raise fees.