Analysis
The Graphic Reproduction Federation (the federation) was formed in about 1916 as an unincorporated association to further the interests of employers engaged in the graphic reproduction trade. It was governed by a set of rules, the most recent of which was dated 1985 (the rules). After 1985 there were no annual general meetings and the management committee has not met since 29 November 1987. No administrative records were kept after that and since 1986 no subscriptions were called for or paid. However, the assets, currently valued at £590,683.98, were held by the claimant trustees and were managed by accountants on their behalf. The records were stored with the first respondent. Although most members of the federation had resigned or been expelled by 1987, five members had paid their 1986 subscriptions and were currently still in business. These were the five respondents, who were joined by the Treasury Solicitor as the sixth respondent in the case. Other corporate members had been dissolved since 1987 and the fourth respondent, Tomlinson Ltd (T Ltd) stood in the place of a member, Tomlinson Engraving Ltd (TEL), which some time prior to its dissolution had transferred its shares to the fourth respondent.
Clause 51 of the rules provided:
’51. The Federation may be dissolved whenever the Members in General Meeting assembled have passed a resolution in favour of the dissolution by a majority of not less than three-fourths of the Members present at a General Meeting of which seven days’ notice specifying the intention to propose such resolution has been given. If the number of Members is reduced to or below ten a majority of Members present at such General Meeting shall be sufficient to pass such a resolution for dissolution.
Upon the dissolution of the Federation the property of the Federation not consisting of moneys shall be applied in satisfaction of the debts and liabilities of the Federation and Subject thereto shall be distributed among the Members existing at the date of the passing of the resolution for dissolution in the proportion that the amount of subscription respectively paid by such Members to the Federation during the last three years of membership has to the total amount of subscriptions for such period.’
The federation applied to the court for a declaration (1) that it had been spontaneously dissolved at some time between 1987 and the present day. Alternatively, (2) for an order dissolving the federation pursuant to the court’s inherent jurisdiction and (3) for directions as to how and to whom the federation’s assets should be distributed. They argued that in keeping with the federation’s rules the funds should be distributed to a printing charity. The Treasury Solicitor argued that s1012 of the Companies Act was relevant. If member companies had been dissolved, their property was bona vacantia (unclaimed property). As such it became the property of the Crown, the Duchy of Lancaster or the Duke of Cornwall under s1012(1). If those companies could participate in any distribution from the assets of the federation, their share of that distribution would fall to the Crown.
Held:
- 1) The federation was not spontaneously dissolved [35]. It was true that its activity was minimal. However, it was quite clear that inactivity of itself was not enough. With the decline of the nature of the printing industry there had been very little for the federation to do but it still had assets and the trustees continued to manage these. While it slept, it was not dead [20].
- 2) The federation was to be dissolved as at the date of the judgment [33].
- 3) The net assets were to be distributed to the members existing at the date of the order after payment of the expenses and storage charges. Such members were those un-dissolved members who were joined as parties to the action, including the successor to TEL, T Ltd. There was no entitlement in respect of fallen members who had been dissolved before the order of the court. It would have been otherwise if those companies were to have the dissolution declared void so as to revive the companies for the purpose of membership. In that eventuality if it happened they would then spring fully armed as to being members. That could not now happen after the order of the court [35].
If the federation was not already dissolved it was open to the members to dissolve it at a general meeting. It was then provided expressly that upon such dissolution the assets were to be distributed upon ‘the Members existing at the date of the passing of the resolution for dissolution in proportion to the amount of subscriptions paid by such member during the last three years of membership’.
If the federation had not dissolved then when a limited company member went into liquidation under the rules it remained a member unless expelled. However, when it was dissolved, it ceased to exist. Once the member has ceased to exist as a corporate personality no membership right could survive. Such a right must plainly be personal to that member and terminate when that member ceased to exist. The same would happen if an individual member died. Upon that member’s death the member would cease to be a member because he no longer exists. Once the relevant company was dissolved there was nothing to vest and the statutory vesting could not revive something that ended with the dissolution [29]. No rights of the dissolved companies have vested in the Crown.
JUDGMENT PETER SMITH J: Introduction [1] This is a hearing of a Part 8 claim issued by the trustees of the Graphic Reproduction Federation (the federation). [2] By their application the trustees seek (1) a declaration that the federation was spontaneously dissolved at some stage between 1987 and now (2) alternatively an order dissolving the …Continue reading "Keene & anr v Wellcom London Ltd & ors [2014] EWHC 134 (Ch)"