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OUTER HOUSE, COURT OF SESSION
[2006] CSOH 69
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OPINION OF LORD CARLOWAY
in the cause
JOHN CHRISTLIEB and
OTHERS
Pursuers;
against
THE MELFORT CLUB
and OTHERS
Defenders:
ญญญญญญญญญญญญญญญญญ________________
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Pursuers: O'Brien: Burness LLP
Defenders: Barnes:
Morisons
24 April 2006
1. Facts
[1] The first pursuer is resident in the United
States of America. He is involved in the management of Melfort
Pier Holidays Limited, a company which operates a holiday resort near the village
of Melfort, Argyllshire. The defenders are the managers of the rival Melfort
Village resort, a timeshare complex
comprising 32 cottages. The first
pursuer's company is already engaged in litigation with the defenders in
respect of an alleged right of way. The
first pursuer and the defenders' management are not on good terms. The
defenders are an unincorporated association with some 1200 members, each having
a timeshare interest in the complex. They are sued in the name of the club with
the addition of the names of their chairman and three office bearers as
representing the club and as individuals.
[2] The defenders' affairs are regulated by a constitution (no.
6/1 of process). According to its terms,
the cottages are owned by a trustee elected by the defenders' members. The
defenders' objects are:
"2. ...to secure for its Members joint rights of ownership of
specific cottages at Loch Melfort Estate and exclusive rights of occupation of
these specific cottages for specific periods in each year in perpetuity and to
provide additional amenities and sporting and other facilities for the Members
from time to time..."
The members need not be
individuals but may be corporate bodies (see paragraph 19). For each cottage there are fifty "Holiday
Certificates", each for a period of a week, which entitle the holder to occupy
the cottage and enjoy the additional amenities for that week. All holders of certificates are automatically
members of the defenders and are bound by the terms of the constitution
(paragraph 6). These terms include a
requirement for members to pay maintenance fees.
[3] The business and affairs of the defenders are managed by an
elected committee of six members. This
committee has the power to make bye-laws (paragraph 11.iv.b):
"for the proper regulation of the Club and such bye-laws
shall be binding on all Members of the Club. Such bye-laws shall not conflict
with the Constitution".
The committee also have the
power to suspend or cancel the membership of a member who commits a "serious
breach" of the "Rules of Membership" or whose conduct is "derogatory or
injurious to the good name or interests of the" defenders. The rules relate to matters such as the creation
of a nuisance, the causing of damage and payment of fees. If membership is
cancelled, the former member's certificate is to be sold by the committee and
the proceeds sent to him.
[4] A member is entitled "to let or cede" the right of occupancy
to a third party if the committee is given a week's notice of this (paragraph
14, rule i). In addition, a member may
wish to transfer his certificate to a third party on a permanent basis. In that
regard it is provided that:
"15. Any Member...may at any time sell, gift,
bequeath or otherwise transfer a Holiday Certificate to a third party...No person
who is not a Member of the Club may hold a Holiday Certificate...All Transfers by
way of sale or otherwise relating to Holiday Certificates shall be in a style
approved by the Committee.
16. Immediately
upon a transfer of a Holiday Certificate the Certificate, together with a
properly signed Deed of Transfer in the style approved by the Committee shall
be delivered by the transferee to the Committee...and the Committee...will then
endorse the Certificate to disclose the name and address of the new holder and
shall register the new holder as a Member of the Club. A transfer shall not be registered and
treated as valid unless and until all sums due and owing to the Club by the
transferor have been fully paid up."
The defenders can alter the constitution at a general
meeting of the members upon a "three quarters majority of all votes cast"
(paragraph 19).
[5] At a
meeting of the committee on 26
October 2005, there was a discussion about the powers of the
committee: "to control and maintain the integrity of the Membership". Perhaps the committee anticipated the problem
which has now arisen. The minute records that the committee:
"agreed to
introduce a Bye Law with immediate effect to clarify the position. The content of the Bye Law and any other
Constitutional changes would be the subject of ratification at an EGM
immediately prior to the AGM in April 2006, The Bye Law to read:
'The
Committee of the Club shall be entitled to withhold consent to the issue or
transfer of a Holiday Certificate to any person or organisation which, in the
opinion of the Committee, they consider to be unsuitable to become and/or
fulfil the responsibilities of a Member of the Club or whose admission to
Membership would be contrary to the interests of the Club.'"
In a members' newsletter dated December 2005 (no. 6/6),
the date of the AGM was provisionally set at 26 April. The newsletter also highlighted the prospect
of altering the constitution to stop the sale of any week to someone
unsuitable, "for instance in the event of criminal or antisocial
activities". It stated that there would
be an Extraordinary General Meeting before the AGM to deal with this, the details
of which were to be sent out with the formal notice of the AGM.
[6] The
second pursuer holds a certificate in respect of week number nine, issued by
the defenders on 31 January 2006
(no. 6/2). By a deed of transfer dated 28 February and 2 March, she assigned
her certificate to the first pursuer for ฃ250.
The deed is in the style approved by the committee. It states that the second
pursuer has sold and, by executing the deed, assigns and transfers the
certificate by which she is entitled to occupy the cottage in terms of the
constitution of the defenders. The deed (no. 6/3) continues:
"And the
Transferee(s) by his, or her or their signature hereof, hereby accepts the
responsibilities of the holder of a Holiday Certificate in terms of the said
Constitution and...undertakes to comply with the rules of membership...
And we The Melfort Club hereby
consent to the foregoing transfer and acknowledge that we have no outstanding
claims against the Transferor(s)".
[7] The
deed is signed by the pursuers. It was sent to the defenders by letter from the
first pursuer's law agents dated 8 March.
This letter (no. 6/4) requested the registration of the first pursuer as
a member and the issue of a new certificate.
There was no response to this letter or to a reminder sent by recorded
delivery post on 23 March (no. 6/5).
[8] According
to the pursuers, neither of them has received notice of the proposed meetings,
although such notice is a requirement of the constitution (paragraph 17). However, it transpires that notice has been
given, at least to some members, in terms of a letter dated 26 March. This gives notice of a Special General
Meeting on 26 April 2006
to consider a number of constitutional changes.
These include an additional paragraph 11.iv.m as follows:
"m. The Committee of the Club shall be entitled to withhold
consent to the issue or transfer of a Holiday Certificate to any person who or
organisation which, in the opinion of the Committee, they consider to be
unsuitable to become and/or fulfil the responsibilities of a Member of the Club
or whose admission to Membership would be contrary to the interests of the
Club".
Paragraph 16 is to be amended by reference to the
potential bar upon a transfer in terms of the paragraph 11.iv.m. Proxy votes so far collected are
overwhelmingly in favour of the changes by a margin of 199 to 4.
[9] The
pursuers are apprehensive that the defenders will use this new rule to block
their transfer. It was not disputed that
the defenders' committee would, in all probability, withhold consent to the
transfer if it were possible to do so.
2. Submissions
[10] The pursuers moved for interim interdict, before calling,
prohibiting the defenders:
" from
passing or proposing at any meeting of the members of the first defenders any
resolution having the effect of amending the constitution on the first
defenders so as to frustrate, prevent or obstruct, or to permit or authorise
any committee, office bearer or other person to frustrate, prevent or obstruct,
the transfer by the second pursuer to the first pursuer of her interests in the
first defenders...".
The motion triggered the caveats lodged by the defenders
and the case called on the motion roll on 21 April.
[11] The
pursuers submitted that they had a prima facie
case that the defenders were bound to register the transfer in terms of the
constitution. The pursuers were
reasonably apprehensive that the committee were taking steps to thwart that
registration by changing those terms. The committee had no power to delay or
refuse to consent to the transfer. The
first pursuer would have been a member some time ago had the constitution been
complied with. The balance of
convenience favoured the grant of interim
interdict since it would preserve the status
quo, that is to say the constitution in its present form. The bye law contradicted
the terms of the constitution and could not provide the committee with the
power to refuse a transfer.
Alternatively, if it did not contradict the constitution, the committee
had that power and no change to the constitution was necessary.
[12] The
defenders presented three technical and two substantial submissions. First, the proceedings were incompetent
because this was an area of law where the appropriate remedy was a petition for
judicial review. What the pursuers were
seeking to do was to review the actions of the committee not to register the
transfer. Their relationship with the
club and the committee was a tripartite one (Crocket v Tantallon Golf Club
2005 SCLR 657, Lord Reed at paras. 28 et seq. under reference to West v Secretary of State for Scotland 1992 SC 385; Gorman v Aberdeen Trades
Council Social Club, unreported, 10 October 2005, Sheriff Cowan). Secondly, the application was premature since
no resolution had as yet been passed.
The members were entitled to pass resolutions although these resolutions
could be challenged by judicial review, if unlawful. The substance of the resolution complained of
had been intimated in the newsletter prior to the second pursuer becoming a
member. Either the assignation from the second to the first pursuer was
effective or it was not. Either way, the
passing of a resolution could not effect the issue of whether the right of
ownership had crystallised. Thirdly, it was the defenders as a whole that the
pursuers sought to interdict. However,
only members of the defenders could rely upon the constitution and only the
committee could be interdicted in respect of the obligation to register membership
under the constitution. There was an
element of the pursuers, or whichever one was a member, suing themselves (Harrison v
West of Scotland Kart Club 2004 SC 615, Lord Marnoch at
para 25).
[13] Turning to
the substance of the application, the committee did have power under the
constitution to withhold consent. This
came from the terms of paragraph 15, which required any transfer to be in
a style approved by the committee. The style did contain a provision whereby
the defenders gave their consent to a transfer. Furthermore, the bye law passed
by the committee remained effective until reduced. The pursuers became involved
after the bye law had been passed and they must be assumed to have accepted it.
It amounted to a variation of the contract created by the constitution.
Secondly, if the pursuers did have a substantive right, it had already
crystallised and could not be altered by a resolution. The balance of
convenience favoured the defenders since the resolutions had already been
intimated and, to some extent, voted upon. The resolutions covered ground wider
than the issue of consent. They did not
specifically affect the position of the pursuers. It was the committee's intention to meet on
the date of the AGM to consider the first pursuer's application.
3. Decision
[14] The
procedure of judicial review was introduced in order to provide a more
efficient method of challenging decisions of administrative and other bodies
than the cumbersome ordinary action of reduction and associated petition for
suspension and/or interdict. The
relevant rule of court (58.3) is in mandatory terms, but it was not intended to
provoke technical arguments about whether a litigant ought to have selected the
petition route as distinct from an ordinary action. Here, the pursuers might
have tried to gain the advantages of the review procedure. Had they done so,
they may well have been met with the opposite argument from that advanced at
the bar. The pursuers are seeking to
vindicate contractual rights concerning what is effectively an assignation of
the second pursuer's rights under the constitution to the first pursuer. This
type of application does not invoke the supervisory jurisdiction of the
court. In these circumstances, the route
chosen by the pursuers appears to be the, or at least an, appropriate one. It is worth adding that even if, at this
early stage of the case, the form of action had been deemed potentially
incompetent, the remedy of interim interdict may still have been open to
prevent illegality until the correct form was selected.
[15] The
application is not premature. Given the relations between the first pursuer and
the defenders' committee, coupled with the delay that has followed the first
pursuer's application, the pursuers are entitled to be reasonably apprehensive
that the constitutional moves of the defenders, which appear not to have been
intimated to either of them, are designed to block the first pursuer's
membership. The form of the resolution
produced at the bar would have done little to alleviate that apprehension. If
refusal of consent is the aim of the committee, which seems not an unreasonable
supposition, and that refusal is unlawful under the contractual provisions
currently prevailing, the pursuers are entitled to prevent such unlawful
activity in advance rather than seeking to reduce any subsequent illegal action
taken. It is now said that the committee plan to take a decision on the day of
the AGM. If the apprehended decision is
unlawful then the appropriate course for the pursuers is to attempt to stop it
now.
[16] As at 31 January 2006, the second pursuer
was in contractual relations with the other members of the defenders; these
relations being, as stated on the certificate, governed by the constitution. In
terms of paragraph 15, the second pursuer has a contractual right to transfer
(i.e. assign) her rights and obligations under the constitution to a third
party. That right is one which has significant economic consequences since, for
example, once the transfer is endorsed, the pursuer is thereby no longer liable
to pay the maintenance fees. The second pursuer is entitled to vindicate that
right against the defenders, even although she herself is one of their members. She has correctly sued the defenders in the
correct manner; that is to say by pursuing
them in the name of the unincorporated association and a representative group
of office bearers. Of course, an unincorporated association has no legal
personality separate from its members, but it is still a recognised entity in
the law (i.e. an unincorporated association). The court has long since
entertained actions against such associations when brought in the manner
described. It is not normally appropriate,
where rights under such an association's constitution are sought to be
vindicated, to bring an action solely against an organ of its management or
that management's personnel, as distinct from the association itself.
Accordingly, this action is brought against the correct defenders. The first pursuer is the potential recipient
of the rights and obligations sought to be assigned. By virtue of that, he has title and interest
to conjoin in an action with the cedent against the defenders.
[17] The
contention of the pursuers is that the defenders, through their committee, are
obliged to endorse the certificate in the first pursuer's favour
"immediately". They cannot refuse or
delay to do so. The defenders contend
that they do have such power both under the constitution and in terms of the
bye law. At this stage, what I require
to do is determine first whether the pursuers have averred a prima facie
case. It is important to note that the
association of the defenders is not the same as a club where the objects
include the promotion of congenial social intercourse between individual members. Rather, looking at the objects as presently
expressed, it is primarily an economic entity whereby the timeshare rights of
the members are preserved. There is nothing in the constitution about
exclusivity of membership and, in particular, no process whereby a person,
whether natural or not, seeking membership can be prevented from achieving that
goal. The only basis upon which a
transfer of a certificate can be stopped is the financial one of failure to pay
sums due to the club. No delectus personae is evident from the
contractual terms. It is true that the style of transfer involves the defenders
consenting to the transfer, but that is simply the defenders accepting that
there is no basis for refusal, i.e. that the sums due have been paid to
date. In terms of the constitution, the
second pursuer, who remains in contractual relations with the defenders until
completion of the transfer process, is entitled to have her transfer processed
and the endorsed certificate sent to the transferee. As already noted above, the transferee is
entitled to conjoin with the second pursuer's application to enforce her contractual
rights and thus have himself registered as a member. The defenders are obliged under the
constitution to carry out this process "immediately". The pursuers have a prima facie case that the defenders have failed to do so.
[18] The power
of the committee to make bye laws cannot, of course, supersede the terms of the
constitution in so far as these terms regulate the relations of the members inter se. As the constitution itself states, a bye law
can only be made "for the proper regulation of the Club". Such a provision does not give the committee
power to regulate the admission of new members beyond that in the constitution. Again, prima
facie, the committee's attempt, to give itself power to refuse consent to
transfers on the basis that it considers a potential member's admission would
be contrary to the interests of the defenders, is a step which cannot effect
the members' contractual relations since it goes far beyond the terms of the
constitution. A bye law cannot amend or
vary these relations.
[19] The
pursuers have a prima facie case for
the declarator and implement sought in the first and second conclusions. The next issue is whether they have the same
case for interim interdict. It is
relatively clear that the defenders' committee do not wish to extend membership
to the first pursuer. It is also clear
that the resolution in relation to transfers has been prompted, to some extent,
by the first pursuer's attempt to join the defenders. The pursuers are entitled to be apprehensive
that the defenders will take steps, which are prima facie unlawful, to
thwart the completion of the assignation.
They are entitled to the view that the resolutions proposed in relation
to transfers are intended as steps in that direction. However, the resolutions
actually proposed are, of themselves, relatively innocuous and need not lead to
a refusal of consent. Passing the resolutions is not unlawful and cannot be
interdicted as such. On the other hand, what the pursuers are entitled to are
measures preventing any refusal of consent.
Since it would seem that the committee may attempt to use the new powers
to bring about such a refusal, and that refusal being prima facie
unlawful, I will grant an interim interdict which will preserve the status quo so far as the pursuers are
concerned, namely one which prohibits:
"the
defenders or any of them from passing or proposing any resolution or motion
having the effect of : (i) frustrating, preventing or obstructing the transfer
by the second pursuer of her interests in the Melfort Club, including the
property known as "Walled Garden - Mews Nine" in terms of the Deed of Transfer
dated 28 February and 2 March 2006; and (ii) withholding or authorising the
withholding of consent to (a) the endorsement of the second pursuer's Holiday
Certificate in the name of the first pursuer and (b) the registration of the
first pursuer as a member of the Melfort Club" .
Suffice it to say, the balance of convenience favours
preserving that position until the final determination of the action.
