PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.
When an organisation fails to follow its own rules, the result can be the nullification of decisions taken and, in appropriate circumstances, those who have transgressed the rules can be liable for their mistakes.
Recently, the Court of Appeal was called upon to decide a case involving a sports club which was governed by a written constitution.
The club included a bowling club, and when proposals were put forward to sell the club’s bowling green, the ‘bowling’ members opposed them vociferously.
A meeting was held in 2009 which had to be abandoned due to rowdy behaviour. This was followed by a ‘special general meeting’ a month later, the validity of which was challenged by the bowling members.
This led to the first court hearing, at which the judge ruled that there had been a number of failures to comply with the club’s rules. The judge ordered the parties to consider ‘whether it would be in the interest of the parties and in particular the interests of the club’ to hold an annual general meeting (AGM) in order to elect officers.
That meeting was held in July 2011 and itself became the subject of a court challenge regarding numerous procedural irregularities, including those dealing with giving notice of meetings and the conduct of elections. Despite these transgressions, the judge accepted that the AGM did validly elect the committee and officers of the club.
The objectors amended their pleadings for the new circumstances and the matter then proceeded to the Court of Appeal.
Lord Justice Lewison, one of the judges who heard the appeal, commented, “One might have thought that in this febrile atmosphere, with one meeting already under challenge for non-compliance with the rules and an order of the court recommending a further meeting, care would have been taken to ensure that the rules of the club were scrupulously complied with. Unfortunately that did not happen.”
The Court of Appeal concluded that the committee and officers had not been validly elected and ordered the convening of a new AGM, commenting that it is of the utmost importance that this be conducted strictly in accordance with the rules, and the paper trail scrupulously kept, ‘otherwise this unhappy saga will have no end’.
The costs of having taken the case to the Court of Appeal will be very considerable, and it is probable that there will be a further argument over who should pay them and in what proportions. It is likely that those responsible for the breaches of the club’s internal rules will end up bearing the bulk of the costs.
This case shows clearly that if you are involved in a club or society as a trustee or officer, you may suffer financially if decisions are made without the correct procedures being followed.
If you are concerned about your responsibilities or potential liability as a trustee or club officer or you have misgivings about how an organisation of which you are a member is being run, we can advise you.