England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY

		Birmingham Civil Justice Centre 33 Bull Street Birmingham B4 6DS
		27th June 2014

27^th June 2014

JUDGMENT

MR JUSTICE MORGAN:

1. This is an appeal by the defendants against an order of District Judge Musgrave made on 6^th January 2014. The application before the District Judge was an application by the defendants to strike out the claim or to give the defendants summary judgment in relation to the claim.
2. The essential ground on which the application was made was that the defendants submitted that the claimants did not have the contractual rights which they asserted in the claim; putting it another way, they had no locus standi to assert those contractual rights.
3. The particular relief sought in the defendants' application notice was an order that the claim form and particulars of claim be struck out and the claim dismissed because the statements of case disclosed no reasonable grounds for bringing the claim and/or were an abuse of the court process and were likely to obstruct the just disposal of the proceedings. Further, or alternatively, an order for summary judgment against the claimants on the ground that they had no real prospect of success and there was no other compelling reason why the claim should be disposed of at a trial.
4. The District Judge dismissed the defendants' application and ordered the defendants to pay the claimant's costs of the application, which he summarily assessed. The District Judge himself gave the defendants permission to appeal against his order. Mr Gallagher of counsel appeared on behalf of the defendants, both before the District Judge and before me, and Mr Gomer of counsel appeared for the claimants, both before the District Judge and before me.
5. The claimants are five named individuals who say they are suing on behalf of the members of the Hunloke Allotment Association. The defendants are Hi Peak Property Limited and a Mr Williamson.
6. The claim is said to arise out of three contracts dated 23^rd March 2005, 16^th May 2006 and 15^th January 2007. Those three contracts were made between a party named as Hunloke Allotments Association Limited and Hi Peak Property Limited. The accurate name of the relevant association at the dates of those contracts was Hunloke Allotment Association Limited, i.e. "Allotment" without an 's', but nothing turns on the presence of the 's' in the name of the party to the contracts. The contracts were in law effectively made by the body then known as Hunloke Allotment Association Limited.
7. At the time of those contracts, Hunloke Allotment Association Limited was the owner of an area of land which had been used as allotments. Pursuant to the contracts, that land was sold to Hi Peak. Hi Peak became the registered proprietor of the land under title number DY388735. Hi Peak remained the registered proprietor of that land until around the 21^st September 2011, when it transferred the land to a director of Hi Peak, the second defendant Mr Williamson.
8. The three contracts contained certain terms which I need not refer to in any detail for today's purposes, but which provided for Hi Peak in due course to sell the land and in certain circumstances to share a part of the proceeds of sale with the other party to the contract.
9. In order to explain the point which arises in this appeal, it is now necessary to say more about Hunloke Allotment Association Limited. It is important to stress at the outset that that body was not at any time a company incorporated under the Companies Acts. The evidence is that it was formed in 1919 and on formation it had the name "Hunloke Allotment Association Limited". It was governed by a set of rules dealing with relatively obvious matters such as its name, its objects and its membership. Rule 56 dealt with the dissolution of the Association and was in these terms:

"The society may at any time be dissolved by the consent of three-fourths of the members testified by their signature to an instrument of dissolution in the form provided by the Treasury Regulations or by winding up in manner provided by the Industrial and Provident Societies Act."

10. On the 8^th July 1919, the body was registered under the Industrial and Provident Societies Act 1893. The 1893 Act was repealed and in due course replaced by the Industrial and Provident Societies Act 1965. Section 4 of the 1965 Act states that a society which was immediately before the commencement of the 1965 Act registered under the 1893 Act was deemed to be registered under the 1965 Act. The consequence of registration under the 1965 Act is described in section 3 of that Act. Section 3 provides 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."

That section makes plain the important consequences which follow from the fact of registration.

11. The 1965 Act also deals with the possibility of cancellation of the registration of the society. That is dealt with by section 16 of the 1965 Act. It may be that section 16 does not spell out the consequences of the cancellation of registration, but I will refer in a moment to what those consequences have been held to be. The 1965 Act also deals with the topic of dissolution of a registered society. That is dealt with in section 55, but nothing today turns upon the precise effect of section 55.
12. I have referred to the possibility of a cancellation of a registration under the 1965 Act because the registration of Hunloke Allotment Association Limited was indeed cancelled on the 28^th March 2011. It is not necessary to explain how that came about. It is accepted that cancellation did occur. As I have indicated, the Act does not spell out what is the effect of cancellation of a registration. It is perhaps implicit in section 3 of the 1965 Act that cancellation of registration will take away from the society the things which section 3 states are the consequence of registration. So on that basis the society ceases to be a body corporate, it ceases to be able to sue and be sued in the name of the body corporate, it ceases to have limited liability and the property ceases to be vested in the body corporate.
13. Happily, there is authority as to the effect of cancellation of a registration under this legislation or its predecessor. I refer to the statements of Lord Tomlin in his speech in the House of Lords in Hole v Garnsey [1930] AC 472 at 499. What he said was:

"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 section 1(2) of the Companies Consolidation Act 1908."

So as section 3 itself impliedly suggests, the cancellation of registration means that the corporate status and the limited liability of the society goes but the 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 Association was dissolved. It is not suggested that there was a dissolution in accordance with section 55 of the 1965 Act nor that there was a dissolution in accordance with rule 56 of the Association's rules, but it is said that it is possible as a matter of law to have something which is called "spontaneous dissolution". It might be called "informal dissolution".
15. The authority that spontaneous dissolution is in some circumstances possible is the judgment to which I have referred, Boyle v Collins. In that case, Lewison J reviewed earlier authorities which contemplated the possibility of spontaneous or informal dissolution. However, Lewison J imposed a significant qualification on the circumstances in which there can be this kind of informal dissolution. He held that where one was dealing with a corporate body (i.e. a registered society under the 1965 Act) one did not have informal dissolution of the corporate body.
16. Effectively, the law as to informal dissolution could apply to unincorporated associations but could not apply in the same way during the period that the association was a corporate body. That seems to me to make perfect sense. Where one has an unincorporated body, one has a group of members who are bound by contract between themselves and one might find that informally the contract of association has been brought to an end. Where a statute says that a body has a corporate status, that corporate status (one would think) would continue until the corporate status had been brought to an end in a way recognised by the statute.
17. If that is right (and I believe it is) then there can be no question of this Association having been dissolved before the cancellation of its registration on 28^th March 2011. That was indeed the result reached in Boyle v Collins itself, where although the society in that case had done a great deal to discontinue its activities, the judge held that it had not been dissolved informally prior to the cancellation of the registration in that case. In any event, Mr Gallagher, who promotes the suggestion that there has been a dissolution, does not submit that there was a dissolution prior to the cancellation of the registration in the case before me.
18. Accordingly, when the registration was cancelled on 28^th March 2011, it seems to me there are only two possibilities as to what happened next. One possibility is as described by Lord Tomlin; the Association continued to exist but it no longer had corporate status, it was an unincorporated association of its members. The other legal possibility is that the Association did not exist following cancellation of the registration. That was because, as in Boyle v Collins, all the activities of the Association had been wound up prior to the cancellation of the registration so there was no unincorporated body ready to take over from the body with corporate status.
19. As it happens, it is not necessary in order to dispose of this appeal to decide whether the Association continued as an unincorporated body after the 28^th March 2011 or whether it did not continue as an unincorporated Association after that date. The reason I say that is that whichever of these two possibilities is the correct one, it does not mean that the contractual rights which could be asserted by someone against the defendant simply disappeared or vested in someone other than a group of members. Let me explain what the situation in the two alternative cases to indicate that a group of members have the benefit of the contractual rights and are able to litigate to pursue remedies in relation to those rights.
20. If the Association continued as an unincorporated association after 28^th March 2011, then the assets of the corporate body are held by the members of the unincorporated association. The position in such a case is described by Lewison J in a later case, Hanchett-Stamford v The Attorney General [2008] 4 All E R 323, in particular at paragraph 47. Lewison J explains there that the assets of an unincorporated association are the property of its members, but the members have by their contract of association precluded themselves from severing their share in those assets and taking that share for their own independent benefit. The idea is that while the association continues, the members contribute their property rights for common use by the association.
21. So if the Association in this case has continued since March 2011, today it is the present members who have the contractual rights conferred by the three contracts to which I referred. What then, if the right analysis is that the unincorporated association did not spring into life on 28^th March 2011? The position then would be that the assets, which had been held by the corporate body on the basis of the rules between the members, meaning that the members could not take out or claim to take out property in those assets, would no longer be governed by those rules, the contract of association would no longer govern and the members as at 28^th March 2011 would own the assets formerly owned by the corporate body. That too is explained in the Hanchett-Stamford case in the later part of paragraph 47. What is said there is:

"The cases are united in saying that on a dissolution the members of a dissolved association have a beneficial interest in its assets, and Lord Denning goes as far as to say that it is a 'beneficial equitable joint tenancy'."

So if there had been an informal dissolution coincident with the cancellation of the registration on 28^th March 2011, then the members of the corporate body at that point in time would be the equitable joint owners of the assets (in this case the choses in action represented by the rights under the three contracts).

22. Those conclusions mean that the question whether there was a dissolution on 28^th March 2011, or no subsequent dissolution, will affect the identity of the persons, the identity of the relevant members, on whose behalf these proceedings can be brought. But that is not the problem which the defendants wish to raise. They have not so far expressed concern as to precisely which members can enforce the contractual rights. The defendants' case is there is no group of members who can enforce the contractual rights.
23. I asked Mr Gallagher where the contractual rights had gone. He submitted that they must have gone somewhere and the candidate he identified was the Financial Services Authority, which was the body which to an extent regulated industrial and provident societies at the time of the cancellation of the registration in 2011. He was not able to point to any statutory provision which had that effect nor to any case which identified that as being the effect. I consider that that is not the legal effect of a dissolution, if there ever had been a dissolution.
24. The consequence of my reasoning is that the defendants are not entitled to have this claim struck out nor are they entitled to have judgment in their favour dismissing the claim against them. The claim is a properly constituted claim. There is room for argument as to which members are the members with the benefit of the claim. That is a matter no doubt of principal concern to the members, but not a reason for dismissing the claim altogether and allowing the defendants to be free of the contractual obligations in question.
25. The result is that the District Judge essentially reached the right conclusion and for the right reasons, although he perhaps went into the question of whether there had been a dissolution more than I consider it necessary to do. It appears that there will be other issues arising in this claim, but I have not been addressed on them and I have no views on them and I will say nothing about them.
26. The result of my judgment is that the appeal will be dismissed.