• In the case of Re St Andrew’s Allotment Association [1969] 1 W.L.R. 229, it was held that the general principle for dissolution of a ‘member’s club’ (which is not a friendly or mutual benefit society) is that the club’s assets are distributed equally among all the members at the time of dissolution.

Facts of the Case

  • In 1923, land was conveyed to trustees of an allotment association for the use and benefit of the association and its members, which consisted of allotment holders and general shareholders (C).
  • The rules provided that if rent was one month in arrears membership should lapse unless there were significant extenuating circumstances.
  • The capital of the association was £210, divided into shares of £1, with no member holding more than 20 shares. The rules provided for paying interest on the fund advanced by the shareholders.
  • From 1944, 201 shares were in issue, and payment of £1s per share per annum were made to the shareholders until 1961 and filed as dividends.
  • After 1961 the association became inactive with no further dividends being paid, no rent paid by plot holders and no meetings held, although some plot holders continued to cultivate their allotments.
  • In 1967 the land was sold for £70,000.

Issues

  • How should the money be distributed among allotment holders and shareholders?
  • Who retained membership after the association became inactive?
  • Did the advancement of interest entitle C to a greater distribution?

Held by the Chancery Division

  • Allotment members who had ceased to be members before 1961, though not in rent arrears, were not entitled to participate in the distribution.
  • Allotment members who had paid no rent since 1961 were now in arrears, had forfeited their membership because, in absence of a specified due date, it automatically became due at the end of the year.
  • No distinction could be made between C and allotment holders and the funds should be distributed between all members per capita, regardless of the individual contributions of each shareholder.
  • However, C also represented the fund’s creditors in respect of the amounts they had advanced and the 5% interest rate. Accordingly, this capital should be refunded to them with arrears of interest at 5%.
  • As in the circumstances no allotment holders eligible to participate in the distribution, the balance should be distributed among C.

Ungoed-Thomas J.

  • All the rents were collected annually, and since the rules specify non-payment puts a member in arrears, then all allotment holders are in arrears.
  • “It is argued that if the secretary, whose duty it is to collect rents, does not demand the rents there can be no arrears of rent. I cannot, however, read more into rule 5 than provision for collection and not a provision that the demand for payment is a prerequisite of liability to pay. In my view rule 5 does not take this case out of the general rule that when no specific provision to the contrary is made, the obligation lies upon the tenant to pay the rent, in the case of an annual tenancy, at the end of the year of the tenancy” [235H].
  • The language of C’s certificates, particularly ‘advanced’ and ‘interest,’ indicates that they are not only members but creditors in respect of the amounts advanced, and are additionally members. As such, the advanced funds and interest are on loan for C.
  • The cases cited in support of an uneven distribution do not relate to a member’s club; they relate to friendly and mutual benefit societies, which provide greater advantages based on contributions.
  • Any funds held on loan must first be repaid to determine the surplus assets of the association. Once that has done, the funds must be distributed equally among C as all allotment holders have fallen into arrears or since ceased membership.

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