England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
LEEDS DISTRICT REGISTRY
COMPANIES COURT
IN THE MATTER OF THE ROWELLIAN FOOTBALL SOCIAL CLUB
AND IN THE MATTER OF THE INSOLVENCY ACT 1986

		The Court House Oxford Row Leeds LS1 3BG
		20 May 2011

Judge Behrens :

1 Introduction

1. This is an application by Keith Panter, ("the Petitioning Creditor") for an Administration Order in respect of the Rowellian Football Social Club ("the Club"). It is not in dispute that the Petitioning Creditor is an unsecured creditor of the Club in the sum of approximately £6,000. It is not in dispute that the Club is insolvent; a Statement of Affairs prepared by Mr Pettit one of the proposed Administrators shows a deficiency of the order of £150,000. Both of the proposed Administrators consent to act and consider that there is a realistic prospect that the objective set out in paragraph 3(1) of Schedule B1 of the Act can be achieved. Two offers have been made for the assets of the Club. If the higher offer is achieved the deficiency would only be of the order of £102,000 and would yield an estimated dividend of 41p/£ for the unsecured creditors. The application is supported by the Club's members who have considered other methods to resolve the Club's financial difficulties. The property of the Club is subject to a fixed charge in favour of Barclays Bank plc ("Barclays"). Although Barclays have the right to appoint a fixed charge receiver it has indicated that it does not wish to do so. In any event a fixed charge receiver could not sell the assets of the Club as a going concern. A proposal for a voluntary arrangement was rejected by creditors.
2. Subject to the question of jurisdiction I have little doubt that it would be appropriate to exercise my discretion in favour of making an Administration Order. However there is a real difficulty in relation to jurisdiction. Is there jurisdiction to make an Administration Order in relation to the Club? That turns on the provisions of Schedule B1 to the Act and the rules of the Club.

2 The Club

3. The Club operates a football business and "Top of the Town Social Club" activities from premises at Cecil Street, Rothwell, Northamptonshire, NN14 6EZ. Its property consists primarily of a football ground with an adjacent sports and social club. The revenue from the social club and its football activities are used to trade the business. Social functions are the main driver of the Club's income.
4. The football business – Rothwell Town Football Club – plays and operates within the United Counties Football League ("the UCL"). This represents level 4 in the semi professional game in the UK.
5. The Club's administrative headquarters and sole trading premises are at its premises. There is no registered office as such. There are approximately 103 members paying an annual subscription of £5 per annum.
6. The rules of the Club are dated 1^st November 1990 and include:

Rule 2 defines the objects of the Club as:

i) The provision of recreational and social facilities and refreshment for the benefit of its members

ii) The provision and maintenance of a Club House at …

iii) To support and help maintain Rothwell Town Football Club financially and by any other means possible within the financial scope of the social club.

Rules 5 and 8 which deal with Membership and Subscriptions. Candidates are elected by the Committee. Under rule 8(i) there is an annual subscription and under rule (iii) non payment is deemed to be a relinquishment of membership. Under rule 21 there is power to expel members.

There are provisions (Rule 6) as to the Management of the Club, to the holding of and procedure at Meetings (Rules 14 – 20). It is not necessary to refer to them in detail.

There are no provisions relating to insolvency or dissolution. Rule 12 however provides:

No money or profits of the Club or any gain arising from the carrying on of the Club shall be applied otherwise than for the benefit of the Club as a whole as laid down in Rule 2(iii)

3 The Law

3.1 The Insolvency Act 1986

7. As is well known the provisions relating to Administration are now contained in Schedule B1of the Insolvency Act 1986. Paragraphs 1 and 2 make it clear that an administrator of a company means a person appointed to manage the company's affairs, business and property. A person may be appointed as administrator of a company either by the court (under paragraph 10), by the holder of a floating charge (under paragraph 14) or by the Company or its directors (under paragraph 22).
8. It is to be noted that all of the provisions relate to "a company" and thus the crucial question to be asked is whether the Club is "a company" within the meaning of the Schedule^[1].
9. For the purpose of Schedule B1 company is defined in paragraph 111(1A) to mean:

(1A) In this Schedule, "company" means--

(a) a company registered under the Companies Act 2006 in England and Wales or Scotland,]

(b) a company incorporated in an EEA State other than the United Kingdom, or

(c) a company not incorporated in an EEA State but having its centre of main interests in a member State other than Denmark.

(1B) In sub-paragraph (1A), in relation to a company, "centre of main interests" has the same meaning as in the EC Regulation and, in the absence of proof to the contrary, is presumed to be the place of its registered office (within the meaning of that Regulation).

10. It is of course common ground that the Club is not within subparagraphs (a) or (b) of paragraph 111(1A). It was suggested by Mr Roberts that it was within subparagraph (c). He pointed out that the Club was not incorporated in an EEA state and had its COMI in the UK which was (of course) not Denmark.
11. The difficulty with that submission, as I see it, is that it ignores the words "a company". To my mind the natural interpretation of subparagraph (c) is that it applies to companies that are incorporated in states outside the EEA. It does not apply to entities that are not incorporated at all.

3.2 Authorities

12. In the course of his submissions Mr Roberts referred me to a number of authorities including In Re International Bulk Carriers [1993] Ch 77, Re Dairy Farmers of Britain Ltd [2009] EWHC 1389 and Re Witney Town Football and Social Club [1994] 2 BCLC 487. He accepted that none of these authorities were directly in point but he invited me to follow the approach of Mummery J (as he then was) in Re International Bulk Carriers and sought to distinguish the observations of Morritt J (as he then was) in Re Witney Town Football Club.
13. In Re International Bulk Carriers the issue was whether receivers appointed under a debenture in a standard English form given by an unregistered foreign company to its bankers were administrative receivers within the meaning of section 29(2) of the Insolvency Act 1986. If they were they would have had the additional powers under sections 234 to 236 of the Act. Mummery J held that for the purpose of section 29(2) an unregistered foreign company was "a company" with the result that the additional powers in the Act were available to the receivers. In his view it would have frustrated the purpose of the legislation which was to reinforce the position of contractual receivers.
14. There are obvious points of difference between that case and this. The considerations that influenced Mummery J are not present in this case. He was construing a different definition of "company" from section 111(1A). It is by no means obvious that Parliament intended that the administration procedure should be available to clubs.
15. Re Dairy Farmers of Britain Ltd concerned an Industrial and Provident Society ("IPS") registered under the Industrial and Provident Society Act 1965. The holder of a floating charge wished to appoint an administrative receiver and the question arose if there was jurisdiction. This turned on whether an IPS is a "company" within the meaning of that term in Part III (sections 28 to 72H) of the Insolvency Act 1986. If an IPS is "a company" the appointment of an administrative receiver is prohibited. Henderson J held that an IPS is not a company with the result that it was possible to appoint an administrative receiver. In paragraph 10 of the judgment Henderson J noted that it was not possible to appoint administrators as an IPS is not a company within the definition in Schedule B1.
16. Henderson J thus had to consider the meaning of "company" under Part III of the Act. By virtue of section 735 of the Companies Act 1985 a company means a company registered under this Act unless a contrary intention appears. Thus the question for Henderson J was whether a contrary intention appeared. For reasons set out in paragraphs 21 to 24 of his judgment Henderson J found a number of indications that no contrary intention was to be found. One of those (paragraph 21) was that it would be surprising if Parliament intended if the prohibition against the appointment of administrative receivers were to apply when the normal alternative of administration was not available.
17. Henderson J went on to consider two authorities including the decision of Mummery J in Re International Bulk Carriers. In paragraph 32 he pointed out that Mummery J's approach very much depended on his view that the administrative receivership regime was intended to build on and strengthen the non-statutory contractual system. He distinguished Re International Bulk Carriers on two grounds. First Mummery J was not considering the statutory scheme that applied to a registered IPS. Second in his view the effect of including an IPS within the definition of "a company" would frustrate the smooth and efficient working of the legislation. He made the point that a debenture holder would not be able either to appoint an administrative receiver or to apply for an administration order.
18. Re Witney Town Football and Social Club involved a social and recreational club. It had rules which in many respects were not dissimilar from the rules of the Rowellian Club. Thus it existed solely as a body for the purpose of professional football. It had power to elect honorary day members. Rule 17 was however different from rule 12 of the Club:

The club shall only be wound up by a resolution passed at a special general meeting called for that purpose and the assets of the club shall be disposed of after payment of all outstanding loans and dues … Upon dissolution of the club, all net assets shall be devoted to Association Football and not distributed between the members.

19. The question arose as to whether the Club could be the subject of a compulsory winding up order. This turned on whether the Club was within the definition of unregistered company within the meaning of section 220 of the Insolvency Act 1986:

…the expression "unregistered company" includes any association and any company with the following exceptions …

20. At first instance it was held that the Club was not "an association" within the meaning of the definition and thus not amenable to the winding up jurisdiction. On appeal Morritt J (as he then was) upheld the decision of the county court judge.
21. As Morritt J explained the words "any association" cannot be given their literal meaning. The question is whether Parliament could reasonably have intended a club of this sort to be subject to the statutory winding up procedure. He referred to the well known decision of Re St James Club (1852) 2 De GM at 387 where there is a discussion of the nature of a members' club and the Lord Chancellor held that such a club was not "an association" to enable it to be wound up.
22. Morritt J went on to consider whether the Witney Town Football Club was not a club in the ordinary acceptation of that term. He then considered the rules of the club concluding that none of the rules he had specifically referred to took it out of the ordinary acceptation of the term members club. The fact that the assets would not be distributed to the members on dissolution did not warrant the implication that Parliament intended it to be subject to the winding up procedure in the 1986 Act.
23. Mr Roberts sought to distinguish Re Witney Town Football Club on the basis that rule 12 of the Club's rules made no provision for dissolution and no provision for what would happen to the assets on dissolution. However in other respects the rules are very similar. There are familiar aspects of a members club including provisions for election, a management committee, subscriptions, expulsion and the like. In my view the Rowellian Club is just as much a members club as the Witney town Football Club. It is not an association within the meaning of section 220(1) of the Act.

4 Conclusion

24. As Mr Roberts points out there is no direct authority on the interpretation of section 111(1A) of the Act. Each of the cases to which I have been referred turned on the meaning of "company" under a different section or Part of the Act. To my mind, however, the cases lend little or no support for the proposition that the Club could be a company within section 111(1A)(c). If the Club is not "any association" within section 220(1) it is difficult to see how it can be a company within section 111(1A)(c). It has none of the normal attributes of a company. The membership rules; the provision for subscriptions and expulsion are those of a club and not a company. If, as it seems to me, the Club is not susceptible to compulsory winding up it is difficult to see why Parliament should have intended it to be subject to the administration regime. Thus this is not a case like Re International Bulk Carriers where Mummery J was able to say that his decision would facilitate the obvious intention of the legislation.
25. For all these reasons I have come to the relatively clear conclusion that there is no jurisdiction to appoint an administrator (either by the Court or otherwise) over an entity such as the Club. It follows that this application for an administration order falls to be dismissed.

Note 1   There is no suggestion that the members of the Club were a partnership. It is accordingly not necessary to consider section 420(1) of the Act and the Insolvent Partnership Order 1994 (which together extend the provisions of Schedule B1 to Insolvent Partnerships.     [Back]