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Steven White appears successfully in the Court of Appeal in long running club dispute

13/03/2014

On 25th February 2014 Steven White of our Commercial/Chancery Team appeared before Lord Justices Sullivan, McFarlane and Lewison to respond to a multi issue appeal which marks the culmination of a four year dispute over the control of a financially troubled unincorporated members association.

In Speechley & Ors v Allott & Ors [2014] EWCA Civ 230 (10 March 2014) Mr White appeared on behalf of the Defendants, who are a mix of former and current members of the club”s committee. The appeal stemmed from the judgment of a specialist Chancery Recorder sitting atLeeds County Court following a four day trial of the action in December 2012. The issues in the original claim were whether the Claimants had successfully pulled off a “palace coup” by seeking to remove the club”s exisitng officers and committee members, who therefore were the properly elected officials as two warring committees continued in existence, whether the Claimants were still members, whether the Defendants had withdrawn money in breach of club rules and whether the Court had the jurisdiction to (and if so whether it should) order a mandatory injunction for the calling of an AGM and further elections.

On appeal, the Court made an important clarification of the correct approach to be taken to the interpretation and application of contractual rules in club cases. This is likely to have a wide ranging effect as Speechley is the first substantive case to deal with these issues in a club context since the very broad formulation proposed by Megarry VC in GKN Bolts & Nuts Ltd [1982] 1 WLR 774. In the lead Judgment, Lewison LJ identified two separate questions:

  1. What do the rules require? (a question of interpretation); and
  2. What is the effect of non-compliance with those requirements? (a question of identifying whether strict compliance is required, and if not whether non compliance is fatal in the light of the particular subject matter, the background, the purpose of the requirement, and the actual or possible effect of non-compliance on the parties).

The decision also confirms the fiduciary status of committee members and that the proper exercise of the equitable remedy of accounting can result in the refusal of relief where there has been a breach of the rules, and where accordingly a prima facie duty to account has arisen, but no actual dishonesty.

While the Court allowed the appeal only to the extent that there had been a voting irregularity in the July 2011 elections (a difficult issue where the Recorder had also given permission to appeal in view of the uncertain application of the law), the majority of the Appellants” grounds were dismissed as lacking in merit. Further, the narrow issue of the election was also noted to have become academic by the date of the appeal. The ultimate result was that the Defendants succeeded in defeating the appeal on the three substantive grounds which would have had any practical effect on who controlled the club, whether an account should be ordered and whether an injunction should be granted.

The full Judgment can be found here.

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