Whiting v Halverson & Ors

An arbitration agreement in a club constitution may govern a challenge to the validity of a membership-termination decision, not merely the merits of whether there was good cause. Where the constitution gives a member a choice between arbitration and an internal appeal, a member who elects arbitration becomes bound to refer the dispute to arbitration under section 9(1) of the Arbitration Act 1996. The member cannot then unilaterally withdraw from arbitration and pursue court proceedings. The court need not resolve competing classifications under separate arbitration provisions where the election is binding under either analysis.

The claimant’s membership of Wallsend Rotary Club was terminated by persons purporting to act as the club council. He challenged the legal validity of the decision on the ground that those persons did not constitute the council, rather than relying on the absence of good cause. The constitution provided for arbitration and, in some circumstances, an internal appeal.

The claimant initially gave notice of his wish to arbitrate, later purported to withdraw that request, and commenced court proceedings. District Judge Alderson stayed the proceedings under section 9 of the Arbitration Act 1996. Judge Behrens dismissed the appeal, taking a different view of the relevant constitutional provision. The central issues were whether court proceedings were barred and whether the arbitration election had been effectively withdrawn.

Lord Justice Brooke delivered the leading judgment, and Lord Justice Schiemann agreed. The appeal was dismissed.

1. Scope of the constitutional remedies. Article XI section 6 conferred a right to appeal or arbitrate in every case in which the council terminated a member’s membership. This included termination for unpaid dues, poor attendance and good cause. Nothing in the provision prevented the validity of the council’s decision, including the validity of its constitution, from being raised in the appeal or arbitration.
2. Effect of the election to arbitrate. It was unnecessary to decide whether the dispute fell under the compulsory arbitration mechanism in Article XV or the alternative remedies in Article XI section 6. The claimant had expressly elected arbitration. On either analysis, the constitution constituted an agreement to arbitrate, and he was bound by that election. He could not unilaterally pursue litigation instead.
3. Withdrawal. The constitution gave no right to resile unilaterally from an arbitration for which the member had opted. The club officers’ letter of 31 January 2002 acknowledged the practical effect of the claimant’s purported withdrawal; it did not accept an offer to terminate the arbitration agreement.
4. Statutory stay. Once the claimant elected arbitration, the dispute became a matter that was to be referred to arbitration for the purposes of section 9(1) of the Arbitration Act 1996. The provision therefore applied despite the earlier optional character of arbitration under Article XI section 6.

The appeal was dismissed with costs, to be assessed by a costs judge. £6,000 was to be paid on account within 28 days.

1. Court of Appeal (Civil Division). In [2003] EWCA Civ 403, the court dismissed the second appeal and upheld the stay of proceedings.
2. Newcastle-upon-Tyne County Court. Judge Behrens dismissed the claimant’s appeal against the stay order on 19 July 2002.
3. Newcastle-upon-Tyne County Court. District Judge Alderson ordered a stay of the proceedings on 29 April 2002 under section 9 of the Arbitration Act 1996.