England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		18th February 2004

Mr Justice Lewison :

Introduction

1. 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.
2. 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.
3. 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."

4. 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."

5. 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"

6. 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.
7. 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 1997. Members who attempted to pay in 1998 had their cheques returned.
8. 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.
9. 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."

10. In consequence no membership cards were issued for 1998 or later years.
11. 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.
12. 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.
13. 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.
14. 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.
15. 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.
16. 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.

The Industrial and Provident Societies Act 1965

17. 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.
18. 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 pre-date the registration. This is reinforced by section 2 (1) (b) which says that an application for registration must be signed by the secretary of the society and three members. This necessarily presupposes that there is a secretary and a membership of the society before it is registered. Normally a society of this kind will be an unincorporated association and trustees will hold its property for the benefit of the members for the time being. Section 3 sets out the consequences of registration as follows:

"A registered society shall by virtue of its registration be a body corporate by its registered name, by which it may sue and be sued, with perpetual succession and a common seal and with limited liability; and that registration shall vest in the society all property for the time being vested in any person in trust for the society, and all legal proceedings pending by or against the trustees of the society may be brought or continued by or against the society in its registered name."

19. Thus once a society has been registered under the 1965 Act its legal status changes. It becomes a body corporate, and it no longer needs trustees to act on its behalf. It has legal personality. The rules of a registered society bind all its members, as if they had subscribed to them under seal: section 14. A registered society may hold land and engage in a variety of land transactions: section 30. Section 55 of the 1965 Act deals with the dissolution of a registered society. It provides:

"Subject to section 59 of this Act, a registered society may be dissolved—

(a) on its being wound up in pursuance of an order or resolution made as is directed in regard to companies by the Insolvency Act 1986, the provisions whereof shall apply to that order or resolution as if the society were a company, but subject to the following modifications, that is to say—

(i) any reference in those provisions to the registrar within the meaning of that Act shall for the purposes of the society's winding up be construed as a reference to the appropriate registrar within the meaning of this Act.; …

or

(b) in accordance with section 58 of this Act, by an instrument of dissolution to which not less than three-fourths of the members of the society have given their consent testified by their signatures to the instrument."

20. Section 58 deals with the contents of an instrument of dissolution. It must set out the liabilities and assets of the society; the number of members and the nature of their interests; the claims of creditors, and how it is intended to divide the funds and property of the society. The instrument must then be sent to the registrar. The registrar will then advertise the dissolution. After a delay to allow challenges to be made, the society will be "legally dissolved" from the date of the advertisement: section 58 (6). Thus dissolution is retrospective. Section 59 imposes a restriction on dissolution. It says:

"Where a registered society is to be dissolved in accordance with section 55 of this Act, … the society shall not be dissolved, and the registration of the society shall not be cancelled, until there has been lodged with the appropriate registrar a certificate signed by the liquidator or by the secretary or some other officer of the society approved by that registrar that all property vested in the society has been duly conveyed or transferred by the society to the persons entitled."

21. "Property" is defined as including both real and personal property: section 74. Section 59 seems to me to envisage that dissolution of a society and the cancellation of its registration are two separate events. This ties in with section 58 (6) which prescribes the date of legal dissolution.
22. The registrar has power to cancel the registration of a registered society. This power exists under section 16. It takes effect subject to section 59. As I have mentioned, one of the grounds on which the registrar may cancel the registration of a registered society is where it is proved to his satisfaction that "the society has ceased to exist". If the registrar cancels a registration, he must give notice of the cancellation both in the London Gazette and in a local newspaper. Section 16 (7) says:

"As from the date of the publication in the Gazette under subsection (6) of this section of notice of the cancellation of a society's registration, the society shall absolutely cease to be entitled to any of the privileges of this Act as a registered society, but without prejudice to any liability actually incurred by the society which may be enforced against it as if the cancellation had not taken place."

How is a registered industrial and provident society dissolved?

23. There is no doubt that, at least at this level in the judicial hierarchy, an unincorporated association may dissolve informally. In Re William Denby & Sons Ltd Sick and Benevolent Fund [1971] 1 W.L.R. 973 Brightman J said:

"In my judgment there are at least four categories of cases in which an unregistered friendly society or benevolent fund, of the sort which I am considering, is to be regarded as dissolved or terminated so as to render the unspent assets distributable in some direction. The most obvious case is the occurrence of an event upon the happening of which the rules prescribe dissolution or termination. … A second type of case is where all interested parties agree. A third case is where the court orders dissolution in the exercise of its inherent jurisdiction. … A fourth category of case, in my view, is where the substratum upon which the society or fund was founded has gone. In such a case the society or fund is treated as dissolved or terminated, without any order of the court, when it has no effective purpose, with the result that the surplus assets (if not bona vacantia) are divisible among the then members."

24. This was followed by Megarry V-C in Re GKN Bolts & Nuts Ltd (Automotive Division) Birmingham Works Sports and Social Club [1982] 1 W.L.R. 774. The Vice-Chancellor said:

"As a matter of principle I would hold that it is perfectly possible for a club to be dissolved spontaneously."

25. The case was argued before me on the basis that the same principle applied to a registered industrial and provident society. I respectfully question whether this assumption is correct. In strict law a club has no existence apart from its members. Property thought to be held on behalf of a club is, in law, held on behalf of its members. Legally it is their property. As O'Connor M.R. put it in Tierney v. Tough [1914] 1 I.R. 142:

"The society is only the aggregation of those individuals, and the property of the former is the property of the latter."

26. However, they will have bound themselves by the rules of the club which will normally deal with how the "club's" property is to be used and dealt with. See Re Recher's Will Trusts [1972] Ch. 526. The nature of the relationship between a defunct club and its members was considered by Pennycuick J in Abbatt v. Treasury Solicitor [1969] 1 W.L.R. 561. He said:

"It is an implied term of the contract of membership of a members' club that an individual member is precluded from obtaining the realisation and distribution of the club property so long as the club functions. But once the club ceases to function the reason for this disappears and the right of the existing members must, I think, crystallise once and for all."

27. (This point is not affected by the reversal of Pennycuick J's decision by the Court of Appeal). In other words the contractual fetter on the right of a club member to claim his share of the pooled assets is removed by the permanent cessation of the club's activities. Although it is convenient shorthand to speak of "the dissolution of a club" (or a fund), it is strictly inaccurate, since there is nothing to dissolve. All that has happened is that the members are no longer precluded from claiming their entitlement. Perhaps that is why in the Denby case Brightman J said that a club was "treated as dissolved". In the GKN case, having referred to the Denby case, the Vice-Chancellor observed:

"For myself, I would hesitate a little about the use of the phrase "substratum has gone" in this context. It has a beguiling sound; but it has strong overtones of the Companies Court. There, it may form the basis of a winding up order, but it does not by itself initiate or complete the termination of the existence of the company. It therefore seems not altogether appropriate for establishing that there has been a spontaneous dissolution."

28. The Vice-Chancellor thus draws a distinction between an unincorporated society (with which he was dealing) and a corporation. All the other cases which discuss this problem and to which my attention was drawn concern unincorporated associations. None (except for Re Wimbledon and Merton Democratic Club Society Ltd which I refer to below) dealt with a corporation.
29. Had the club been registered under the Friendly Societies Act 1974 (or its predecessors) its property would have vested in trustees for the use and benefit of the society and its members according to the society's rules: Friendly Societies Act 1974 s. 54. It would then have been in the same position as any other unincorporated association: Re Bucks Constabulary Widows and Orphans Fund Friendly Society (No 2) [1979] 1 W.L.R. 936. But it was not. Under the 1965 Act registration incorporated the club. As Dillon LJ pointed out in The Datchet Co-Partnership Housing and Allotment Society Ltd v. The Official Solicitor (unreported) 10 May 1990, a body incorporated under the 1965 Act is "the owner of its assets and not a mere trustee".
30. I do not consider that Re Luddington Land [1909] 1 Ch 701 compels any different conclusion. That case concerned a society incorporated under the Industrial and Provident Societies Act 1876. It owned a piece of freehold land. On 10 October 1898 the members agreed an instrument of dissolution, which provided for the distribution of the society's assets. The instrument was produced to the registrar and he advertised it. In accordance with section 61 (e) of the 1876 Act (which corresponds to section 58 (6) of the 1965 Act), following a period of delay, the society was retrospectively dissolved as at the date of the advertisement. However, by that date the land had not been sold. Since the society was now dissolved, no one could make title, and a Mr Wilson who had been appointed by the instrument of dissolution to auction the property applied to be appointed as trustee of the land. Parker J held that the property of a society dissolved under an instrument of dissolution is subject to a trust for appropriation and division in accordance with the instrument (or the award of the registrar). After the execution of the instrument of dissolution the society became a trustee. Consequently since there was now no trustee, a vesting order could be made. In my judgment the critical event which constituted the society a trustee was the execution of the instrument of dissolution, which provided for the destination of the society's assets. It was that which caused the society to cease to be the beneficial owner of its own assets. In the course of the argument Parker J asked what was the difference between an incorporated industrial and provident society and a corporation dissolved under the Companies Acts, and was told that the difference was that in the latter case the company is not dissolved until the winding up is complete, whereas in the former case the society was dissolved before the winding up was complete. No other distinction was suggested between the two forms of corporation. Parker J was not dealing with the position of a registered industrial and provident society before its formal dissolution.
31. In principle therefore it seems to me that the case-law saying that an unincorporated association may spontaneously dissolve (or be treated as having spontaneously dissolved) has no application to a registered industrial and provident society. However, there are two possible difficulties in adopting this approach. The first is the decision of Jonathan Parker J in Re Wimbledon and Merton Democratic Club Society Ltd (unreported) 4 December 1998. The second is the way in which section 16 of the 1965 Act is drafted. The two points are interlinked.
32. The Wimbledon case was an appeal against the decision of the registrar to cancel a registration under the 1965 Act. The registrar had cancelled the registration on the ground that he was satisfied that the society had ceased to exist. The facts are not easy to discern. It seems that the society had sold its premises in the early 1980s. Following the sale the society's committee continued to meet to discuss the possible dissolution of the society and the distribution of its remaining assets. Ultimately a committee meeting was convened on 15 June 1987 at which there was to be a proposal that the society be formally dissolved and its funds distributed. The judge said that history did not relate whether that proposal was carried, but subsequent events were consistent with that having been the case. Membership subscriptions had not been collected since at least 1987 and probably for some time before that. During the 1990s there was correspondence with the registrar which proceeded on the basis that the society had ceased to exist. In the light of that and in the light of further inactivity on the part of the society the registrar decided to cancel the registration. The judge upheld his decision. The argument for the society was based on the GKN case, and an attempt to argue that the society was only dormant and not dead. It was assumed that the principles applicable to unincorporated associations were the relevant principles and the contrary was not argued. Jonathan Parker J emphasised that the only question for him was whether the registrar was right. He was not concerned with the date on which the society ceased to exist; nor with the destination of its assets. He held that it was plain on the evidence that the society had ceased to exist, and that therefore the registrar was right to cancel its registration. Since the significance of the incorporation of the society was not discussed, and since the question of the destination of its assets was not material, I do not regard the Wimbledon case as preventing me from adopting the principle I prefer.
33. What, then, of section 16? The 1965 Act does not say that the cancellation of a registration dissolves the society. In Hole v. Garnsey [1930] AC 472 at 499 Lord Tomlin, speaking of a predecessor Act said:

"The registration of a society may be cancelled or suspended. Such cancellation or suspension does not destroy the society, but only deprives it of and relieves it from the privileges and obligations which follow from registration. It can continue its existence so long as it does not infringe the provisions of s. 1, sub-s. 2, of the Companies Consolidation Act, 1908."

34. One of the grounds on which the registrar may cancel a registration is where the society has fewer than three members: section 16 (1)(a)(i). In such a case the society would continue in existence as an unregistered society with (say) two members. The 1965 Act draws a linguistic distinction between a society and a registered society. As I have said, section 2 presupposes that there is a society in existence (with members and a secretary) before it is registered. What does section 16 mean when it speaks of the registrar being satisfied that "the society has ceased to exist"? Here, I think, one can go back to the analogy with unincorporated associations. In the GKN case Megarry V-C drew attention to the phrase: "the substratum has gone" and said that in the case of a corporation that would not itself terminate the existence of the corporation, but would be a sufficient ground for ordering it to be wound up. In my judgment that analogy applies to section 16. In other words, the registrar must be satisfied that the purposes for which the society was formed have permanently ceased. If he is so satisfied, he may then cancel the registration. One of the effects of cancellation is to cancel the effect of incorporation, since a society is only incorporated "by virtue of" registration. Thus as from the date of cancellation of the registration the society (if it still exists) becomes an unincorporated association, to which the principle of spontaneous dissolution may apply. If the substratum of the corporation has ceased to exist before the cancellation, then the cancellation will terminate the existence of the corporation and there will be no putative successor unincorporated association. What I do not think is possible is for the corporation to cease to exist unless either it has been dissolved by one of the methods prescribed by the 1965 Act or its registration has been cancelled.
35. I might add that I find it difficult to see how the corporation could have ceased to exist at any time before the dates of the contract and conveyance by which it contracted to convey and then conveyed the property.
36. In my judgment, therefore, the corporation continued to exist until 31 March 2000 when its registration was cancelled. Until that time I consider that it continued to own its own assets beneficially.
37. It follows, in my judgment, that the distribution should take place as at 31 March 2000.

When did the society cease to exist?

38. I may, of course be wrong, so I must consider when the society ceased to exist; or (to put it another way) when it would have spontaneously dissolved if it had been an unincorporated association.
39. The GKN case contains a discussion of how to identify the point at which an unincorporated association may be said to have spontaneously dissolved. Megarry V-C said:

"I do not think that mere inactivity is enough: a club may do little or nothing for a long period, and yet continue in existence. A cataleptic trance may look like death without being death. But inactivity may be so prolonged or so circumstanced that the only reasonable inference is that the club has become dissolved. In such cases there may be difficulty in determining the punctum temporis of dissolution: the less activity there is, the greater the difficulty of fastening upon one date rather than another as the moment of dissolution. In such cases the court must do the best it can by picking a reasonable date somewhere between the time when the club could still be said to exist, and the time when its existence had clearly come to an end."

40. He then proceeded to consider the application of that principle to the facts. Since the facts of that case bear a striking similarity to the facts of the present case, it is worth setting out Megarry J's conclusions. He said:

"On that date, the position was that the club had ceased to operate as a club for several months. The picture was not one of mere inactivity alone; there were positive acts towards the winding up of the club. The sale of the club's stock of drinks was one instance, and others were the ending of the registration for VAT, and the dismissal of the steward. The cessation of any club activities, the ending of the use of the sports ground and the abandonment of preparing accounts or issuing membership cards were all in one sense examples of inactivity; but I think that there was in all probability some element of deliberation in these matters, and not a mere inertia. In Mr. Sher's phrase, there was a systematic dismantling of the club and its activities.

However that may be, the resolution to sell the sports ground seems to me to conclude the matter. Having taken all steps, active or passive, required to terminate the activities of the club, short of passing a formal resolution to wind it up or dissolve it, the general meeting of the club resolved to sell the club's last asset. There are some questions about the validity or effectiveness of the resolutions passed at the meeting, and I shall consider these in a moment; but even if the resolutions were invalid, I would reach the same conclusion."

41. In the present case, many of the same elements are present. The club's activities in fact ceased in July 1997; its stock of drinks was sold in September 1997; the members resolved to sell the property in October 1997 and no attempt was made to collect membership fees or to issue membership cards in January 1998.
42. However, there are, in my judgment, three distinguishing features. First, the club's declared intention was not to cease its activities, but to suspend them. A suspension (at least initially) connotes a resumption of the suspended activity, although with the passage of time that may prove to be unrealistic. Second, at least at the meeting of October 1997 the relocation of the club was a live possibility. I do not consider that there would have been a spontaneous dissolution of the club in October 1997. Third, the corporation was still in existence when it contracted to convey and then conveyed the property (otherwise it would not have been able to make title). In the GKN case the "club's" property was held by trustees, so the difficulty of making title did not arise. I find it very difficult to pinpoint a moment between then and 10 September 1999 when suspension turned into permanent cessation. In my judgment it could not be said with certainty that the club had permanently ceased to carry on its activities until the latter date.

Who is entitled to participate in the distribution?

43. Before issuing the claim form the property committee, through its solicitors, approached the Treasury Solicitor to enquire whether the Crown wished to claim the fund as bona vacantia. The Treasury Solicitor replied that the Crown advanced no claim. I am content to proceed on that basis.
44. It is, I think, implicit in rule 28 that on a dissolution the assets of the club are to be distributed among its members. Who, then, are the members entitled to participate in the distribution?
45. Plainly the life members are entitled to participate, and no one suggests the contrary. What of the ordinary members? It was not suggested that there was a distinction to be drawn between those ordinary members who attempted to pay their subscriptions (but whose cheques were returned) and those who did not even attempt to pay.
46. The life members submitted that the rules are the rules. The rules say that a member who "has not paid" his subscription 28 days after it has become due ceases to be a member. Although there is provision for the management committee to excuse payment for good cause, the management committee did not do so (and after July 1997 could not do so because there was no management committee). The ordinary members say that I should infer that the requirement to pay a subscription (and the consequent loss of membership for non-payment) should be treated as having been suspended along with the club's activities or waived by conduct. There is no binding authority on this question although there is some discussion of it in the cases.
47. In the Abbatt case Pennycuick J said:

"I should have thought that where it becomes impossible for the time being to carry on the activities of a club, e.g., as a result of destruction of the club premises, the trustees or committee must have an implied power to suspend or reduce subscriptions; and that if they do so - whether by formal resolution or by conduct - it could not fairly be said that the full subscriptions become due for the purpose of an expulsive provision. I will not pursue the point, because, on the view that I have taken it does not arise in this present case."

48. Clearly this was obiter, but as Mr Ross for the ordinary members pointed out, the judge would not have made his remarks unless he thought that there was something in the point. In Re The Blue Albion Cattle Society [1966] C.L.Y. 1274 Cross J is reported to have held that an expulsive provision of this kind applies only while the society was a going concern, and that a distribution should include members who were in arrear with their subscriptions, subject to the arrears of subscription being brought into account. I do not find Re Sick and Funeral Society of St John Sunday School Golcar [1973] Ch. 51 helpful, because it was concerned with members who failed to pay their subscriptions to a society which continued to function.
49. On the other hand, in Re St Andrews Allotment Association [1969] 1 W.L.R. 229 Ungoed-Thomas J took a more uncompromising view. Rule 4 of the rules of the association said that any allotment holder who ceased to pay his rent would cease to be a member of the association, unless there were extenuating circumstances approved by the committee. The judge said:

"Then the second defendant calls in aid rule 4. It is said by reason of the last words of rule 4 that it is open to the committee to decide that there are extenuating circumstances, and that it will be so open to the committee until the dissolution of the association. It is not, however, suggested - nor do I see how it can be suggested in view of the explicit wording of the opening passage of rule 4 - that a member remains a member after the month in arrears, even though the committee had not in the meantime approved of extenuating circumstances within the meaning of the closing words of that rule. So the short and sufficient answer to this argument is that no extenuating circumstances have been approved by the committee under rule 4, and, therefore, the member in arrears has ceased to be a member. It may well be that the extenuating circumstances have to be approved within the month mentioned in rule 4, or within some other time limit, such as within a reasonable time: but there is no need in this case to express a view on that because the second defendant, in my view, was clearly not a member when the property was sold, nor is he a member now.

I may add that although the association was inactive from 1961, there is no suggestion at all that there were not appropriate means of rents being received on behalf of the association, and the contrary seems established by the evidence."

50. It seems to me that there are four distinctions between that and the present case. First, in that case there was still a committee which could approve the extenuating circumstances, whereas in the present case there is none. Second, in that case there was an appropriate means of receiving the rent, whereas in the present case there was none. Third, in that case the allotment holders continued to receive the benefit to which the rent would have entitled them, whereas in the present case the members received no benefits once the club had suspended its operations. Fourth, in the present case a positive decision was taken to suspend the club's "activities" which would have included the collection of subscriptions.
51. In my judgment the correct inference in the present case is that the club decided to suspend the requirement to pay subscriptions during the period of suspension of the club's activities, or that the requirement to pay subscriptions only applied while the club continued to trade. I hold therefore that those who were paid up ordinary members of the club at the end of December 1997 are in principle entitled to participate in the distribution. I say "in principle" because under rule 13 a member ceases to be a member on death. Since I have held that the corporation continued in existence until 31 March 2000 I consider that it follows that a member who died before that date is not entitled to participate in the distribution.
52. That brings me to those who claim to have been members, but who have not yet been able to produce a valid membership card. There are about 80 such people. The concern of the property committee (who are for the present the de facto trustees of the fund) is that any further investigation of the claims is likely to be time consuming and expensive. Once divided between the members, the fund will result in a payment of about £250 to each member. So it would be disproportionate to spend a lot of money in investigating claims. The committee accept that the claimants should be given one more chance to produce a valid membership card, but if they cannot, then the committee say that those claimants who cannot produce a card should be excluded from the distribution. The rules say nothing about a membership card. Although rule 12 required the club to keep a record of its members, it is accepted on all sides that the club's record keeping was not perfect. It does not seem to me that possession of a valid membership card is a precondition of membership, although no doubt it is the best evidence of membership. The difficulty with the committee's approach is that if a claimant was in fact a member on 31 March 2000 he or she enjoys a proprietary right. How can the court sanction the expropriation of that right?
53. I am, of course, concerned not to require unnecessary money to be spent in evaluating relatively modest claims. But it seems to me that those claimants whose claims to membership have not yet been admitted should be given another chance to establish their claims. The committee should therefore write to those claimants and invite them to put their claims in writing within, say, 21 days, supplying the best evidence of membership that they can. Even assuming that all 80 respond, there are four claimants, so that each will have to evaluate no more than 20 claims. I do not regard that as disproportionate. It will then be for the committee to decide which claims to accept and which to reject. Most, I suspect, will be obvious.

Administrative matters

54. The claimants ask for an order formally appointing them as trustees. By analogy with Re Luddington Land, I consider that I have jurisdiction to make such an order. Normally, however, the court will require an affidavit of fitness from a prospective trustee, and I think that such an affidavit should be supplied for each prospective trustee. I will therefore make an order appointing the claimants as trustees, subject to production of an affidavit of fitness.
55. One of the lists of members includes the names of those who have died since 1997. There are about 60 of them. I have decided that the relevant date of dissolution is 31 March 2000. The question arises: what investigations (if any) should be made into the dates of death of those members who have died since 1997? The committee's suggestion is that they write to the last-known address of each such member asking for information as to the date of death and the identity and addresses of the personal representatives. That seems to me to be sensible. If the letter produces no response, then further directions may need to be given.
56. In the case of some members, no address is known. However, three advertisements have been placed in local newspapers. In my judgment that amounted to the taking of adequate steps to ascertain the addresses of the members in question. The trustees will be entitled, under section 63 of the Trustee Act 1925, to pay into court such part of the fund as represents the entitlement of such members. I direct that they do so.
57. Finally there is the question of costs. Master Moncaster has already ordered that the costs of all parties be paid out of the fund on an indemnity basis. I do not need to make an order dealing with the costs of the hearing. But the trustees wish me to declare that they are also entitled to be indemnified against the cost of obtaining advice about entitlement to participate in the distribution, and the cost of processing claims. In my judgment they are entitled to such an indemnity, and I so declare.