Joyce Irene Hardy and Another v David John Hoade and Others
| Jurisdiction | England & Wales |
| Judge | Mr Edward Pepperall QC |
| Judgment Date | 06 October 2017 |
| Neutral Citation | [2017] EWHC 2476 (Ch) |
| Docket Number | Case No: C30LS503 |
| Court | Chancery Division |
| Date | 06 October 2017 |
[2017] EWHC 2476 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LEEDS
PROPERTY, TRUSTS & PROBATE LIST (ChD)
RE. NORTH HARROW TENNIS CLUB
Mr Edward Pepperall QC
SITTING AS A DEPUTY HIGH COURT JUDGE
Case No: C30LS503
Mr Bruce Walker (instructed by Irwin Mitchell LLP) for the Claimants
Hearing dates: 4–5 October 2017 Judgment: 6 October 2017
Approved Judgment
I direct that pursuant to CPR PD39A 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.
Between 1927 and 2012, the North Harrow Tennis Club ["the Club"] operated a small tennis club in Cumberland Road, Harrow in Middlesex. The Club's premises consisted of a 17,500 sq ft plot of land on which there were three tarmacadam tennis courts, a pavilion and two huts. Unlike other local clubs, the Club did not boast either floodlights (thereby limiting its use during the winter) or parking facilities. The lack of parking became more of an issue over the years as the streets around the Club became increasingly congested with residents' own cars. In recent years, membership dwindled until the Club eventually ceased operating in 2013.
The claimants were longstanding members and officers of the Club. For many years, they were the backbone of the Club, tirelessly striving to make a success of this small club for the benefit of all members. Joyce Hardy joined in 1968. She was, for some 27 years, the Club's Secretary and thereafter its Chairman. Diane Owen joined in 1967. She became the Club's Treasurer in about 1970. Although not formally appointed Secretary, she latterly acted in that role for want of any other volunteers. The two women are now the sole trustees of the Club. Furthermore, they hold the title to the Club's freehold property as trustees.
Membership in 2012 was at an all-time low. Mrs Hardy and Mrs Owen told me that efforts to attract new members had failed and indeed the last regular tennis four stopped playing during 2012 as further members left for other clubs. No members came forward to renew their membership in 2013 and the claimants concluded that the Club could no longer continue to operate. As a result, they did not call an AGM in the spring of 2013. As they put it to me, there were no members to convene a meeting.
By this claim, the claimants sought the Court's directions as to the proper winding up of the Club's affairs. Specifically, they sought a declaration that they might sell the Club's land and directions as to the distribution of the net proceeds of sale.
The question of sale has been dealt with. On 4 May 2017, District Judge Goldberg granted a declaration that the claimants held the freehold land on trust for sale and that they might sell the land without further reference to the Club's members and former members. The land was sold by auction on 14 September 2017 for £460,000. The sale is due to complete by 14 October 2017. From that sum, the trustees will have to pay the auctioneer's fees, their legal costs incurred in dealing with objections to the proposed sale and the legal costs of these proceedings. I am told that the net funds available for distribution are likely to be in the region of £260,000.
In order to ensure that all potential claimants might be identified, on 30 November 2016, District Judge Goldberg ordered that the claimants should place advertisements in newspapers and display a notice on the property seeking a response from any members or former members who might seek to claim a share of the proceeds of sale. The claimants complied with such directions and twenty former members came forward. They were duly added as defendants.
At the hearing on 4 May 2017, District Judge Goldberg ordered both the claimants and the defendants to file witness statements supporting their own claims for a share of the net assets. The claimants and fifteen of the defendants filed statements. Finally, on 14 July 2017, the judge ordered that the claimants should give specific disclosure of the Club's records to any defendant so requesting. He also gave permission for the defendants to serve replacement statements although, in the event, none did.
The issue before me is to determine how the trustees should distribute the Club's assets. Mr Walker argues that:
8.1 The general principle upon the dissolution of a members' club is that its net assets should be divided equally between the members, excluding honorary members, at dissolution on a per capita basis.
8.2 Since, however, membership of an unincorporated association is governed by contract, such position only arises in the absence of contrary provision. In this case, Mr Walker argues, the Club's rules do make contrary provision in that, upon its true construction, rule 18 applies to any dissolution irrespective of whether it was preceded by a resolution at a general meeting.
8.3 Alternatively, he argues the Court should imply a term extending the rule 18 regime to all cases of dissolution.
While four defendants have filed skeleton arguments, only the Eleventh (Amit Ruparelia) and the Twentieth (Anish Ruparelia) Defendants have made submissions as to the proper construction of the rules. Both of their skeleton arguments assume that rule 18 applies but make helpful submissions as to the proper construction of the terms "Members" and "playing membership", and as to the qualifying period under rule 18. I shall consider these arguments in due course, but first I must determine the general basis for distribution.
THE DISSOLUTION OF CLUBS
In support of the general principle, Mr Walker cites the following passage from Halsbury's Laws of England (Vol. 13), at para. 291:
"On the dissolution of a members' club the property and assets are sold and realised, and after the discharge of the debts and liabilities of the club the surplus is divisible equally amongst the members for the time being, other than the honorary members, subject to any provisions in the rules to the contrary."
There is some conflict in the authorities as to the true default position. In a number of cases, the Courts have ordered the division of the net assets in proportion to the amounts contributed by the members:
11.1 In Re. Printers and Transferrers Amalgamated Trades Protection Society [1899] 2 Ch. 184, Byrne J. ordered the net assets of a trade union to be distributed among its members at the time of dissolution in accordance with the sums contributed on the basis that there was a resulting trust.
11.2 This approach was followed by Warrington J. in Re. Lead Company Workmen's Fund Society [1904] 2 Ch. 196 upon the dissolution of an unregistered friendly society.
11.3 O'Connor M.R. was critical of the application of the law of resulting trusts to such cases in Tierney v. Tough [1914] 1 I.R. 142. Tierney also concerned the dissolution of a friendly society. Although the Court preferred to analyse the case in contract, it nevertheless directed distribution pro rata to the members' contributions.
Yet in other cases, the Courts have preferred a simple per capita approach:
12.1 In Brown v. Dale (1878) 9 Ch.D. 78, the court ordered a per capita distribution on the dissolution of a club.
12.2 In Feeney & Shannon v. MacManus [1937] I.R. 23, the Court found that it was impossible to determine the members' proportionate contributions. Accordingly, it ordered equal division on a per capita basis.
12.3 In Re. Blue Albion Cattle Society [1966] C.L.Y. 1274, Cross J. ordered a per capita distribution upon the dissolution of a cattle-breeding society.
12.4 In St Andrew's Allotment Association [1969] 1 W.L.R. 229, Ungoed-Thomas J. applied the per capita approach to the dissolution of an allotment association.
12.5 In Re. Sick & Funeral Society St John's Sunday School, Golcar [1973] Ch. 51, Megarry J. applied the per capita approach to the dissolution of a scheme to provide sickness and death benefits to the members of a Sunday school.
In St Andrew's (supra), Ungoed-Thomas J. sought to reconcile the two lines of authorities, at p.238, when preferring the per capita approach:
"It is conceivable that a basis for distinguishing the friendly and mutual benefit society cases may be that, whereas in the club cases enjoyment ab initio and equality are contemplated, yet in the friendly and mutual benefit society cases what are contemplated are advantages related to contributions."
In Re. Sick & Funeral Society (supra), Megarry J. suggested, at p.59, that much of the difficulty had arisen from confusing the property-law concept of resulting trusts with the essentially contractual questions of the payment of subscriptions and receipt of benefits through the membership of a club. While not being entirely persuaded by the tentative reasons given by Ungoed-Thomas J. for distinguishing the friendly society cases, Megarry J. preferred the per capita approach. He said, at pp.59–60:
"… membership of a club or association is primarily a matter of contract. The members make their payments, and in return they become entitled to the benefits of membership in accordance with the rules. The sums they pay cease to be their individual property, and so cease to be subject to any concept of resulting trust. Instead, they become the...
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