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Cite as: [2022] ScotCS CSIH_35, 2022 SCLR 424, [2022] CSIH 35, 2022 GWD 26-366, 2022 SC 251, 2022 SLT 1165

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FIRST DIVISION, INNER HOUSE, COURT OF SESSION

[2022] CSIH 35

A281/17

Lord President

Lord Woolman

Lord Doherty

OPINION OF LORD CARLOWAY, THE LORD PRESIDENT

in the cause

CLUB LOS CLAVELES and ALBERT FLETCHER, ROGER LINDSAY, and NORMA ANN

BURSTON, three members of the Committee thereof as representing the Club and as

individuals

Pursuers and Respondents

against

FIRST NATIONAL TRUSTEE COMPANY LTD

Defenders and Reclaimers

Defenders and Reclaimers: O'Brien QC; Turcan Connell LLP

Pursuers and Respondents: Barne QC; BTO LLP

18 August 2022

Introduction

[1]

This is a long-running dispute concerning a trust which was set up to facilitate the

ownership and management of timeshare properties in the Los Claveles resort in Tenerife.

The quarrel centres on the defenders' status as trustee. It is, to say the least, unfortunate that

the parties have been unable to resolve their differences in light of the court's previous

opinion (2020 SC 504 at para [32]). The court attempted to make it clear that this litigation

should be concluded with the resignation of the defenders and the appointment of a new

trustee. The register of members should be handed over to the pursuers or the new trustees

(para [39]). The court explained that, although it had not been asked to pronounce decree de

plano, the pursuers "may well be entitled to a decree for implement" (para [38]). The import

of that must have been lost on the defenders.

[2]

The pursuers wish the defenders to demit office in order to make way for the

appointment of a new trustee. The defenders say that they are content to do so, but assert

that, in terms of the constitution of the Club, there is no validly constituted committee with

the authority to enter into the requisite deed of retirement. They say that the pursuers have

no title to sue. The Lord Ordinary held that there was a validly constituted club committee

in terms of the Club's constitution. Accordingly, the defenders must demit office on the

terms set out in a draft deed of retirement which has been lodged in process.

[3]

The primary question for the court is whether the Lord Ordinary's interpretation of

the Club's constitution is correct. The pursuers cross-appeal the Lord Ordinary's decision

that the defenders were entitled to challenge the validity of the appointment of the

committee members by pleading "no title to sue". They contend that the interpretation and

application of the constitution is a matter for the Club and is of no concern to the defenders.

The Constitution of the Club and the Trust Deed

[4]

The Club is an unincorporated association whose members are the proprietors of

timeshares in the properties at the resort. The properties are owned by five companies

which were set up for that purpose. It is a requirement of the Club's constitution that the

shares in those companies be held by an independent trustee. The relevant deed of trust

was entered into by the Club's Founder Members, who were originally Wimpey Homes

Holdings Ltd, Time Ownership Los Claveles (Management) Ltd and the Royal Bank of

Scotland plc.

[5]

Clause 11 of the constitution sets out how the Club is managed by a committee as

follows:

"11.1 The business and affairs of the Club shall (save insofar as the same may have

been delegated to a management company or the Annual General Meeting as

hereinafter provided) be managed by a Committee of not more than five persons,

three of whom shall be ordinary Members of the Club and two of whom shall be

nominated by the Company [ie WimPen Leisure Management SA] ... Decisions of

the Committee shall be on the basis of a majority of those present and in the event of

an equality of votes, the Chairman shall have the casting vote. Three members of the

Committee shall form a quorum...

11.2

... [A]t each ... Annual General Meeting one elected member of the

Committee shall retire and a new member thereof shall be elected. Retiring members,

may offer themselves for re-election for one further term of office ... with the

outcome decided by majority vote. The maximum period of service on the

Committee shall be six years after which the retiring member shall stand down for a

period of no less than four years. ... [R]etirement of elected Committee members

shall be by rotation each member retiring at the third Annual General meeting to be

held after their respective elections. The two Committee members nominated by the

Company shall cease to be such on written notice being given to them by the

Company and the Company shall then nominate a successor or successors to fill any

vacancy ... thereby created.

11.3 ... [E]lection or removal of members to an[d] from the Committee shall be

dealt with only at Annual General Meetings or Special General Meetings of the

Club...".

[6]

The committee is given power to do "all things ... that may be necessary for the

carrying out of the objects of the Club for its general management", except the approval of

the Club accounts and budget (cl 11.4). That power includes making contracts (cl 11.5.5),

appointing professional advisers (cl 11.5.6), and conducting litigation (cl 11.5.8). The

committee had delegated some of its management functions to WimPen Leisure

Management SA. Clause 11.4 also provided that:

"... Until such time as the Committee shall have been constituted the management of

the Club and all the powers of the Committee shall be vested in the Founder

Members who will ... enter into an Agreement with Time Ownership Los Claveles

(Management) Limited ...".

On 21 May 1991, the defenders were appointed as the trustee for the purpose of holding the

shares in the companies which own the properties.

[7]

Clause 1.3(a) of the Deed of Trust, in terms of which the defenders were appointed,

reads as follows:

"Where reference is made ... to directions of the Committee of the Club the Trustee

shall be entitled to rely on and accept decisions of the Committee which shall be

stated by the Chairman of the Committee Meeting at which the relevant decision was

reached to have been so reached in accordance with the relevant rules of the

Constitution and without prejudice to the generality of the foregoing the Trustee

shall not be concerned to enquire or satisfy itself in any way as to the election of

Committee Meeting [sic] or calling of Committee Meetings or the procedure adopted

or the reaching of decisions thereat."

Background

[8]

The pursuers have been attempting to terminate the defenders' appointment as

trustee for many years. On 23 May 2012, the committee wrote to the defenders purporting to

terminate that appointment. The following month the defenders responded that they would

appoint solicitors to draft the necessary deed of retirement, appointment and conveyance. A

sum of £9,500 was requested by, and paid to, the defenders. Various communings occurred

between then and August 2017, when the defenders' solicitors wrote to the pursuers stating

that they would expedite the transfer of the trusteeship and requesting details in order that

the deed could be finalised. The deed had not been finalised and the defenders continue to

be in receipt of substantial sums every year. On 27 August 2017 the committee passed a

resolution authorising litigation against the defenders.

[9]

The individuals named in the instance aver that they are three members of the

committee; the other two being WimPen's nominees. It is agreed by joint minute that

Mr Fletcher was elected at an AGM held in June 2014. Mr Lindsay was elected at an SGM in

January 2016 and re-elected at the AGM in September 2016. Mrs Burston was elected at the

2016 SGM. At an SGM in April 2017 and AGMs in September 2017 and April 2018, other

Club members, namely Terry Smith and Walter Farquhar were elected in place of

Mrs Burston, with the others being re-elected. An arbitral award of March 2020 determined

that the 2017 and 2018 general meetings had been invalidly convened. Thus the elections

and re-elections at these meetings were deemed null and void. An appeal against the

arbitrator's decision to this court was refused. Since it was held that retirements were not

effective until replacements were found, Messrs Smith and Farquhar were deemed not to

have been elected and Mrs Burston's resignation was not effective.

[10]

At a committee meeting on 23 March 2021, chaired by Mr Fletcher, he and Messrs

Lindsay and Burston were confirmed as duly elected members of the committee, alongside

WimPen's two nominees. The make-up of the committee was thus the same before and after

the invalid resolutions. A resolution to continue with the litigation was passed by three

votes to two.

[11]

The pursuers believe that there has been an improper allocation of timeshare

certificates by WimPen. This has led to a dispute on who is a member of the Club. The

pursuers aver that both WimPen and the defenders hold a copy of the register of members,

but the committee do not. Notwithstanding the previous Opinion of the Court (at para [39]),

the defenders' CEO gave evidence at the hearing before the Lord Ordinary that the register

had not been provided to the pursuers owing to the defenders' concern that the committee is

not a valid one.

The Lord Ordinary

[12]

The Lord Ordinary rejected the pursuers' contention that the defenders had no

standing to challenge the validity of the committee. If the defenders were to accept a

purported discharge of their trusteeship by persons who were not duly authorised to act for

the Club, that could leave the defenders in difficulty. Clause 1.3(a) of the Deed of Trust did

not support the pursuers' argument. That clause only applied to a trustee who was

complying with a direction of the committee. There was no basis for concluding that a

decision to terminate the appointment of the trustee fell into the category of a direction.

[13]

The Lord Ordinary rejected the defenders' challenge to the validity of the committee.

The individual pursuers (Messrs Fletcher, Lindsay and Burston) were committee members

with authority to bring the proceedings on behalf of the Club. Read together, clauses 11.2

and 11.3 of the constitution provided that retirement and re-election of committee members

did not take place until a valid AGM was held. A committee member must stand down after

a maximum period of 6 years, but this too must take place at an AGM. The arbitral decision

invalidated the 2017 and 2018 general meetings. In those circumstances, the last properly

elected members remained as committee members. This view, which formed part of the

contract between the Club members which required to be construed in accordance with

established principles of interpretation, accorded with the purpose of the constitution. Club

members could not themselves convene an AGM. That power rested with the committee.

The members must have intended there to be a committee in place at all times. It would

make no commercial sense if the constitution resulted in the Club not being able to function

or to protect its rights. A valid committee being in post, the defenders must demit office on

the terms in the draft deed of resignation.

[14]

For an AGM to be convened, the committee had to give notice to the members of the

Club. To require the committee to convene another AGM, when it did not have the register

of members, could well lead to further litigation. The current committee members needed to

call an AGM. They may need to convene an SGM, but they can only do so after having sight

of the register of members and been given a reasonable time to reach a view on the

correctness of the entries.

[15]

The Lord Ordinary would have accepted the pursuers' alternative argument that, if

there were no validly constituted committee, it was an implied term of the constitution that

the members could vindicate the Club's interests and take reasonable steps to give effect to

the settled will of the Club as expressed by the members at general meetings. Such a term

should be implied, subject to notification having been given to all known members of their

intention to act on the Club's behalf. It was the settled will of the Club that the defenders be

removed as trustee. The test for the implication of terms was met (Marks and Spencer v BNP

Paribas Securities Services [2016] AC 742 at [21]).

[16]

The pursuers' additional proposition, that if the individual pursuers did not have

title to sue as committee members, they had title to sue as Club members, would have failed.

The constitution made it clear that the business and affairs of the Club were managed by the

committee. There was nothing to support the view that individual members could bring

actions of their own in relation to collective rights.

Title to Sue Cross Appeal

Submissions

Pursuers

[17]

The Lord Ordinary erred in holding that the defenders had standing to challenge the

committee's validity. The interpretation and application of the Club's constitution was a

matter for the Club's membership. It was, in relation to the defenders, res inter alios acta

(Edinburgh Veterinary Medical Society v Dick's Trustees (1874) 1 R 1072 at 1079; Ward & Co v

Samyang Nav. Co 1975 SC (HL) 26 at 36 and 51). The word "direction" in clause 1.3(a) should

be taken to mean simply a decision of the committee. It was clear from the words "without

prejudice" that the trustee should not be concerned with matters that were internal to the

Club. The defenders were arguing for a construction, which they had no standing to pursue,

and in circumstances where there was no evidence to suggest that any member of the Club

supported that construction.

Defenders

[18]

It was for a pursuer to establish their title to sue. Any defender could plead no tile to

sue when members of an unincorporated association were the pursuers (Renton Football Club

v McDowall (1891) 18 R 670 at 675). None of the individual pursuers had a prima facie valid

appointment to the committee. They should be taken to have retired at the expiry of their

terms as set out in the rotation provisions (cl 11.2). The main purpose of the action was to

obtain a deed of retirement, which must contain a discharge in the defenders' favour. An

invalid committee cannot grant such a discharge. The natural meaning of clause 1.3(a) is

that the trustee is not obliged to enquire as to the committee's validity; not that the trustee

may not enquire.

Decision

[19]

The pursuers are an unincorporated association, namely Club Los Claveles. The

names of the three committee members are included in the instance primarily as

"representing the Club", albeit that by amendment on 10 September 2021 they also sue as

individuals. Their names are added as representing the Club because that is this Court's

practice (but not that of the sheriff court; see Sheriff Courts (Scotland) Act 1907 s 3(e)). The

principal reason for the practice, in the case of pursuers, is to facilitate the recovery of

expenses by the defenders in the event of an award being made against the association

(Renton Football Club v McDowall (1891) 18 R 670, Lord McLaren at 674).

[20]

It is correct to assert as a generality that any action brought by an association ought

to be properly instructed by the members or, as here, by a body such as a committee with

delegated powers to sue. The defenders maintain that the three individuals have not been

properly elected as members of the committee. That is not a challenge to the pursuers' (ie

Club Los Claveles') title to sue. The Club have a title as an unincorporated association to

vindicate their rights in relation to the defenders (Edinburgh Veterinary Medical Society v

Dick's Trustees (1874) 1 R 1072, Lord Ormidale at 1079). Further, it is not a matter which

need normally concern a defender unless, as in Renton FC, there is some real basis for an

averment that the action is not properly authorised by the membersh ip.

[21]

Any defect in the election of a committee member is res inter alios acta so far as third

parties are concerned, (ibid; Ward & Co v Samyang Nav. Co 1975 SC (HL) 26, Lord Fraser at 36,

Lord Kilbrandon at 51; see also the process of disclamation; Maclaren: Court of Session

Practice 440). The court is not in the habit of insisting that non-natural pursuers demonstrate

that an action has been properly authorised. In this case the defenders have no basis upon

which to assert that the membership have not authorised the litigation. The constitution

authorises the committee to institute legal proceedings (cl. 11.5.8). The only functioning

committee of the Club authorised litigation on 27 August 2017 and again on 23 March 2021.

[22]

In addition, the purpose of Clause 1.3(a) of the Deed of Trust is to avoid disputes of

this very nature. The word "directions" refers to statements by the committee chairman

(Mr Fletcher) that a particular decision has been reached by the committee. The minutes of

the committee make clear what has been decided. The defenders are entitled to rely on that

to the effect that both a transfer of the trusteeship and this litigation have been duly

authorised.

[23]

For these reasons, the court should allow the cross-appeal and repel the defenders'

first plea-in-law in so far as applying to the Club and the three individuals named as

representing it. For the reasons given later, the situation may be different in relation to those

persons "as individuals".

Validity of the Committee

Submissions

Defenders

[24]

The second to fourth pursuers were no longer members of the committee. It was

either the import of clause 11.4 of the constitution, which failing an implied term of the

constitution, that the powers of the committee vested in the Founder Members of the Club,

namely WimPen, and Time Ownership Los Claveles (Management) Ltd, in any scenario in

which the committee became inquorate. The pursuers accepted that no valid AGM had been

held since 2016.

[25]

The provisions within the constitution for the retirement of committee members by

rotation had parallels with the retirement of directors under the Articles of Association of

limited companies (Companies (Model Articles) Regulations 2008, Sch 3, art 21). A director

was deemed to have vacated office on the last day on which the meeting at which he ought

to have retired could validly have been held (In re Consolidated Nickel Mines [1914] 1 Ch 883

followed in Harman v BML Group [1994] 1 WLR 893). The members of a Club were only

bound by the actions of a committee when it acted in accordance with the constitution

(Crocket v Tantallon Golf Club 2005 SLT 663 at paras [29] 30]). Those principles applied

where the directors believed that the AGMs were valid at the time (Re New Cedos Engineering

Co [1994] 1 BCLC 797). The fact that the Club was an unincorporated association did not

affect the reasoning in the authorities on the management of companies. The court had no

statutory power to convene a general meeting of a club, as it did in relation to companies

(Companies Act 2006, s 303 to 306). This was not a sufficient reason to give the rotation

provisions a different meaning from that which they would otherwise bear.

[26]

Even if clause 11.4 did not have the effect of giving the Founder Members the

committee's powers in the event of a meeting being inquorate, and there was no such

implied term, the Lord Ordinary was not correct to say that that would leave the Club in

limbo. There would be a casus improvisus justifying an application to the nobile officium.

[27]

Mr Fletcher was ineligible to hold office as he was first appointed to the committee

over six years ago. Six years was the maximum period of service (cl. 11.2). If he had not

been a valid committee member at the meeting of 21 May 2021, the committee would have

been deadlocked on the resolution authorising the litigation. The other individual pursuers

would not have had the authority to pursue th e action without Mr Fletcher.

[28]

The Lord Ordinary erred in holding that, if there was no validly constituted

committee, it was an implied term of the constitution that Club members could vindicate the

Club's interests and take reasonable steps to give effect to the settled will of the Club. The

test for implication was not met (Marks and Spencer v BNP Paribas Securities Services

[2016] AC 742). First, since the constitution permitted the Founder Members to take over in the

event of an inquorate committee, there was no lacuna requiring to be filled. Secondly, co-

holders of rights generally had to act unanimously (Detrick and Webster v Laing's Patent

Overhead Handstitch Sewing Machine Co (1885) 12 R 416). Where they had appointed agents

to act in the form of a committee, and that mechanism had failed, there was no basis for

implying a further term. Thirdly, the implied term would be unworkable. Different

members might make competing claims to be acting under any implied provision. An

implied term could not provide a basis for the orders sought here, as both requir ed a

functioning committee.

Pursuers

[29]

As a result of the arbitrator's award declaring the 2017 and 2018 AGMs invalid, the

membership of the committee reverted to its previous state. That was confirmed in the first

arbitration with WimPen. The Lord Ordinary interpreted the Club's constitution correctly.

It was appropriate for a much more flexible approach to be taken to the interpretation of an

unincorporated association's constitution than to that of a limited company's articles of

association. When applying clauses 11.2 and 11.3, the usual canons of contractual

interpretation were to be used. "Play in the joints" was required (In re GKN Bolts & Nuts

Sports and Social Club [1982] 1 WLR 774 at 776). The membership of the committee had

reverted to its pre-2016 formation. The alternative would leave the Club without a

functioning committee. For those same reasons, Mr Fletcher was eligible for membership

notwithstanding the expiry of six years.

[30]

Clause 11.4 only applied at the inception of the Club and did not give the Founder

Members the committee's powers beyond that. The defenders were incorrect to argue that a

Founder Member could exercise the committee's powers if the committee became inquorate.

The Founder Members had not asserted such a right. WimPen had appointed two members

to the committee, both of whom voted at the meeting in March 2021 to confirm that the

committee had been validly constituted.

Decision

[31]

The proceedings of an unincorporated association can be wide and varied. They

should not be compared too closely with those of a limited company, which is governed by a

detailed statutory regime. In the case of a club, the court agrees with In re GKN Bolts & Nuts

Sports and Social Club (Megarry V-C at 776) that when tackling problems which arise with

rules and resolutions:

"[G]eneral concepts of reasonableness, fairness and common sense [should] be given

more than their usual weight ... In other words, allowances should be made for some

play in the joints."

[32]

The Club's rules provide for the periodic election and retirement of the three non

WimPen members on its management committee (cl 11.2). The structure, in broad terms, is

that at each AGM a member retires and another is, at the same meeting, elected. This

structure, including the six year maximum, has to be viewed in the context of the other

rules. They presume that there will always be a functioning committee of the Club which

can pursue any necessary litigation.

[33]

The AGMs of 2017 and 2018 have been declared invalid. There have been no AGMs

since then. The effect of this is not only that the election of committee members did not take

place but also that any scheduled retirements did not occur. The only pragmatic solution to

this problem is the one determined both in the arbitration and by the Lord Ordinary. The

committee members who were in place before the invalid AGMs remain in office until they

retire at a future AGM. That being so, the court agrees with the Lord Ordinary (at para [32]).

The three individual pursuers are the committee members who not only have the authority

to direct the litigation but also have the power to grant a valid discharge to the defenders.

On this basis, the reclaiming motion should be refused.

[34]

Had it required to determine the matter, the court may have been less enthusiastic

about the implication of a term which permitted a group of only three members to litigate on

behalf of the Club as a whole. The test for implying a new term into the constitution does

not appear to be met. For the reasons already given, there is no apparent lacuna. Any

attempt to pursue a derivative action, based upon the three individual pursuers' Club

membership, would, as the Lord Ordinary indicated, require intimation on the other

members and proof of the "settled will" of the Club, which would not be easily achieved.

There is force in the defenders' submission that an implied term would be difficult to

operate. As these matters do not now arise, the court should not express a concluded view.

FIRST DIVISION, INNER HOUSE, COURT OF SESSION

[2022] CSIH 35

A281/17

Lord President

Lord Woolman

Lord Doherty

OPINION OF LORD WOOLMAN

in the cause

CLUB LOS CLAVELES and ALBERT FLETCHER, ROGER LINDSAY, and NORMA ANN

BURSTON, three members of the Committee thereof as representing the Club and as

individuals

Pursuers and Respondents

against

FIRST NATIONAL TRUSTEE COMPANY LTD

Defenders and Reclaimers

Defenders and Reclaimers: O'Brien QC; Turcan Connell LLP

Pursuers and Respondents: Barne QC; BTO LLP

18 August 2022

[35]

I agree with the reasoning and conclusions of your Lordship in the chair. In

particular, I agree that the defenders were not entitled to advance a plea of no title to sue

and that the cross-appeal should be allowed.

FIRST DIVISION, INNER HOUSE, COURT OF SESSION

[2022] CSIH 35

A281/17

Lord President

Lord Woolman

Lord Doherty

OPINION OF LORD DOHERTY

in the cause

CLUB LOS CLAVELES and ALBERT FLETCHER, ROGER LINDSAY, and NORMA ANN

BURSTON, three members of the Committee thereof as representing the Club and as

individuals

Pursuers and Respondents

against

FIRST NATIONAL TRUSTEE COMPANY LTD

Defenders and Reclaimers

Defenders and Reclaimers: O'Brien QC; Turcan Connell LLP

Pursuers and Respondents: Barne QC; BTO LLP

18 August 2022

[36]

I agree with your Lordships that the reclaiming motion should be refused, for the

reasons which your Lordship in the chair has set out in paragraphs [31] to [33] of his

opinion.

[37]

However, I would not have allowed the pursuers' cross-appeal. In my opinion the

Lord Ordinary was correct to hold that the defenders were entitled to advance their plea of

no title to sue.

[38]

Questions of title to sue are not mere matters of practice. They are questions of

substantive law (Maxwell, Court of Session Practice, p 147; Macphail, Sheriff Court Practice

(4th ed), paragraph 4.35). Club Los Claveles is an unincorporated association. In Scots law it

has no separate legal personality distinct from that of its members. It is well established at

common law that an unincorporated association cannot sue or be sued alone. Generally at

least some of the members must also be pursuers or defenders (Pagan & Osborne v Haig 1910

SC 341, Lord Dundas at p 350; Stair Memorial Encyclopaedia, Associations and Clubs Reissue,

paragraph 20; Scottish Law Commission Report no. 217, Unincorporated Associations (2009),

paragraph 2.14). The common law position has been innovated upon to some extent by

statute in relation to certain actions brought in the sheriff court (Sheriff Courts (Scotland)

Act 1907, First Schedule (as substituted by Act of Sederunt (Sheriff Court Ordinary Couse

Rules) 1993), OCR 5.7(1), and section 3(e), (n), and (o); see Greengairs Rovers FC v Blades

(1910) 26 Sh Ct Rep 280 and Macphail, supra, paragraph 4.122); but there has been no

statutory innovation in respect of actions in the Court of Session.

[39]

Where, as here, the constitution of an unincorporated association empowers a

committee to litigate on behalf of the members, the law recognises that the committee has

title to sue on their behalf (cf. Whitecraigs Golf Club v Ker 1923 SLT (Sh Ct) 23). The defenders

maintain that Mr Fletcher, Mr Lindsay and Mrs Burston are no longer committee members.

If that contention had been correct then they would had ceased to have title to sue on behalf

of the members (Donaghy v Rollo 1964 SC 278). It would have been a point which the

defenders were entitled to take. Whether or not they continue to be committee members,

and therefore whether they continue to have title to sue, is not a matter which is of no

interest to the defenders, not least because they wish to know whether an indemnity granted

by Mr Fletcher, Mr Lindsay and Mrs Burston would bind all of the members of the club. In

my opinion it is not a matter which is res inter alios acta the defenders. Nor am I persuaded

that Clause 1.3(a) of the Deed of Trust precludes the defenders from taking the title to sue

point. In my opinion on a proper construction of that provision it confers rights on the

Trustee. It does not restrict or remove rights which the Trustee would otherwise have.

[40]

Accordingly, in my view the defenders were entitled to advance their title to sue

argument. However, in the result, that argument fails because its premise has not been

established - Mr Fletcher, Mr Lindsay and Mrs Burston have not ceased to be committee

members.