Fletcher & Anor v Royal Automobile Club Ltd

The rules of a long-established social club should be construed practically and purposively, having regard to their overall scheme. Where membership is organised by calendar years, annual re-election and annual subscriptions, a rule change will generally operate within that structure. The lapse of a temporary rule change does not automatically restore every member to a former membership category. The consequences of the lapse must be assessed by reference to the next renewal and re-election process, including the member’s application and payment of the appropriate subscription.

The appellants were overseas members of the Royal Automobile Club who claimed that they had become full members, and therefore members of the respondent company, following amendments to the Club rules made in July 1996. Those amendments restricted overseas membership for members residing in the European Union. The amendments were temporary and lapsed when the 1997 annual general meeting did not approve them.

The respondent company had obtained approval for a scheme of arrangement under section 425 of the Companies Act 1985. The appellants sought to set aside that approval, contending that the lapse of the amendments automatically restored them to full membership. Mr Justice Neuberger dismissed the action under Order 14A. The central issue on appeal was whether the lapse of the amendments automatically changed members’ status or merely reopened the former qualifying conditions.

1. Appeal dismissed. The application to intervene was also dismissed. Costs were ordered against the appellants, the named interveners and those whom they represented, jointly and severally.
2. The proper approach to the construction of club rules is practical and purposive. The court should consider the rules as a whole and in the context of the institution’s changing membership. The approach was supported by Re Courage Pension Schemes [1987] 1 WLR 495, including the principle that alterations to the rules of a long-established club or pension scheme should be tested against the circumstances existing when the alteration was made.
3. Considerable significance attached to the Club’s structure of calendar-year membership, annual re-election under rule 23 and annual subscriptions. The July 1996 amendments were not expressly deferred until 1 January 1997, but their practical effect for existing overseas members arose when they were invited to renew for 1997.
4. When the amendments lapsed in 1997, the position was not retrospectively restored as if the amendments had never existed. The 1996 amendments had already produced consequences during 1997. Their lapse principally affected the renewal and re-election process for 1998.
5. An EU-resident member who did not apply for re-election as an overseas member and did not pay the appropriate overseas subscription could not obtain full-member status merely because the temporary restrictions had lapsed. The respondent’s analysis was preferred to the theory of automatic reversion adopted by the judge below.

• Court of Appeal (Civil Division): appeal from the order of Mr Justice Neuberger dismissed the appeal and the application to intervene.
• High Court (Chancery Division): on 19 February 1999, dismissed the appellants’ action under Order 14A. The action sought to set aside approval of the scheme of arrangement.
• Companies Court: on 8 July 1998, approved the scheme of arrangement after opposition by overseas members.