Boyle and Others v Collins and Others
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Lewison,Mr Justice Lewison |
| Judgment Date | 18 February 2004 |
| Neutral Citation | [2004] EWHC 271 (Ch) |
| Docket Number | Case No: HC 03C01288 |
| Court | Chancery Division |
| Date | 18 February 2004 |
[2004] EWHC 271 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Lewison
Case No: HC 03C01288
Charles Holbech (instructed by Machins) for the Claimants
Marilyn Kennedy-McGregor (instructed by Machins) for the First Defendant
Sidney Ross (instructed by Machins) for the Second Defendant
Nigel Meares (instructed by Machins) for the Third Defendant
Hearing date : 12 th February 2004
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Approved Judgment
Introduction
The Luton Labour Club and Institute Limited ("the club") was formed as a club or society "to carry on the business of a club by providing for the use of its members the means of social intercourse, mutual helpfulness, mental and moral improvement, rational recreation and the other advantages of a club." These are objects typical of a working men's club (see Friendly Societies Act 1974 s. 7). I do not know when it was established but it acquired the property from which it carried on its activities at 27 Upper George Street Luton under a conveyance dated 29 September 1930.
At some stage (and again I do not know when) it was registered under the Industrial and Provident Societies Act 1965 ("the 1965 Act"). The latest version of its rules was registered on 20 August 1971. Under the rules the club was to have the following officers: a president, a vice president, a treasurer and a secretary (Rule 20). Control of the management of the club was given to a management committee, consisting of the president, vice president and treasurer, together with twelve committeemen (Rule 19 (1)). That committee was, in turn, required to appoint a sub-committee, called the Finance Committee (Rule 19 (4)). In addition the rules provided for a separate committee called the property committee, whose job was to manage and control the club's property (Rule 40). It was clear from the rules, however, that legal title to the club's property was vested in the club itself.
Under the rules there are three categories of member of the club: ordinary members (Rule 7); life members (Rule 38) and lady members (Rule 39). Ordinary members and lady members are required to pay an annual subscription on 1 January in each year. Life members are exempt from subscriptions. Rule 11 says:
"Any member who has not paid his subscription 28 days after it has become due shall cease to be a member.
The committee, on receiving information that any member is unable to pay his subscription owing to want of work or other good cause, may, at its discretion, excuse payment of such member's subscription for such period as they think fit and the member shall not forfeit the privileges of membership."
Rule 13 provides for cessation of membership by non-payment of subscription; expulsion; resignation or death. There are two other rules I should quote. Rule 28 says:
"Except by the dissolution of the club, no profits or funds of the club shall be distributed amongst the members."
Rule 31 says:
"The club may at any time be dissolved by the consent of three-fourths of the members, testified by their signatures on an instrument of dissolution in the form provided by Treasury Regulations, or by winding up in manner provided by the Industrial and Provident Societies Acts"
Life members were all issued with a permanent membership card. Ordinary members were issued with a membership card annually. The card was colour-coded so that its year could be easily ascertained. Cards were checked from time to time.
As early as 1993 the club began to get into financial difficulties, and concern about its solvency was expressed. In 1997 the club began to wind down its activities. Subscribing members last paid their annual subscriptions on 1 January 199Members who attempted to pay in 1998 had their cheques returned.
On 25 July 1997 the members of the management committee and the property committee held a special meeting. The meeting unanimously passed a proposal that "the club should suspend its activities with a view to seeking a valuation and possible sale of the property". The property in question was 27 Upper George Street, which was the club's most valuable asset. The minutes record an amendment (which I was told was carried) that the club would cease trading from the property on 27 July 1997 and that discussions took place regarding the sale and relocation of the Luton Labour Club. At the same meeting the management committee resigned en masse. The management committee has never been reconstituted. Mr Collins, who was the Secretary between 1994 and his resignation with the rest of the management committee, explained in his witness statement that the committee resigned because there was nothing left to manage.
Mr Collins also said:
"Of course, no one locally paid any subscriptions after 1997, because there was no one to send them to, and nowhere to take them. However, I know that several members no longer living in Luton sent in cheques in early 1998 to renew their subscriptions and they were returned."
In consequence no membership cards were issued for 1998 or later years.
The property committee met on 8 August 1997. It instructed a sub-committee, composed of three of its members, to take such action as they considered to be necessary to implement the decision to close, sell and relocate to smaller, more affordable premises. Later that month the property committee were told that the club could not afford to pay its debts, so three members of the committee lent the club £2,500 with which to pay its most pressing debts. On 5 September 1997 the property committee accepted an offer from another club for the sale of its stock of alcohol. The sale was subsequently completed. On 23 September 1997 the property committee authorised the release of a press statement saying that the club's activities had been suspended. This prompted a request from some members for further information, and a meeting of the full membership was held on 26 October 1997. At this meeting the membership authorised the use by the property committee of the club's seal in order to deal with the sale of the property. The property was then put on the market. The full meeting did not discuss the question of relocation.
The sub-committee of the property committee met again on 27 February 1998. It decided to recommend acceptance of an offer for the property of £300,000. The full property committee met on 1 March 1998, when the offer was accepted. Shortly afterwards two further offers were received, but they came to nothing. Finally on 26 June 1998 the property committee agreed that the property should be sold for £300,000. Contracts were exchanged on 31 July 1998 (although the contract price was £299,000) and the sale was completed on 28 August 1998. The contract was in the name of the Luton Labour Club and Institute Limited and I assume that the conveyance was in that name too.
The question then arose whether any tax was payable on the sale. After discussions with the Inland Revenue, it was agreed that no tax was payable. These discussions stretched into 1999. On 10 September 1999 the property committee met. It appears to have discussed the options of dissolution or relocation; and voted (by 7 to 1) in favour of a dissolution of the club.
On 31 March 2000 the Registrar of Friendly Societies, acting under section 16 (1) (a) (iii) of the 1965 Act, cancelled the club's registration on the ground that he was satisfied that it had ceased to exist. His decision has not been challenged.
The property committee hold a fund of £271,412.05 which represents the assets of the club. I have to decide how that is to be distributed.
The property committee, some of whose members have brought this application are, of course, neutral. Their concern is to achieve certainty and to minimise the administrative burdens of distribution. The life members contend that the distribution should take place as at 10 September 1999, when the property committee voted for dissolution and the prospect of relocation disappeared. They say that they alone are entitled to participate in the distribution, since ordinary members ceased to be members when they fell into arrear with their subscriptions by the end of January 1998. The ordinary members contend that the distribution should take place as at 26 October 1997 (when the membership authorised the sale of the club's premises) in which event the ordinary members would be entitled to participate in the distribution. If that is wrong, they say that ordinary members should still be entitled to participate in the distribution and should not be regarded as having ceased to be members merely because they failed to pay their subscriptions, in circumstances where there was no one to pay. There is a third category of persons who claim to have been members, but who have (so far) been unable to produce membership cards. The issue as regards this class is what further investigations of their claims to membership should be made.
I must set out the legislative framework of the 1965 Act. In so doing I have ignored amendments to the 1965 Act made after 2000.
Subject to immaterial exceptions, section 1 of the 1965 Act enables a society to be registered if it is a bona fide co-operative society; its rules make provision for prescribed matters, and its registered office is in Great Britain. It follows from this that the existence of a society must...
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...society may continue. That statement by Lord Tomlin has not since been doubted. Indeed, it was applied by Lewison J (as he then was) in Boyle v Collins [2004] EWHC 271 (Ch). 14 In the argument in this case, it has been suggested on behalf of the defendants that at some point in time the Ass......