Co-Operative Group (CWS) Ltd v Stansell Ltd & Anor

A transfer of engagements between registered industrial and provident societies under section 51(1) of the Industrial and Provident Societies Act 1965 transfers the undertaking’s contractual rights and liabilities. It may therefore vest the benefit of a contract in the transferee despite a contractual prohibition on assignment and the absence of the counterparty’s consent.

The provision is substantive legislation designed to facilitate transfers of undertakings with minimal formality. It differs from procedural company-reconstruction provisions which preserve the common law rule against transferring personal or contractually inalienable rights. A society’s voluntary resolution to transfer its undertaking nevertheless constitutes an assignment within an ordinary contractual non-assignment clause; its effectiveness follows from the statute overriding that restriction.

Co-operative Retail Services Ltd contracted with Stansell Ltd to construct a distribution centre. The contract prohibited either party from assigning it without the other’s written consent. Co-operative Retail Services later transferred its entire undertaking to Co-operative Group (CWS) Ltd by resolutions under section 51(1) of the Industrial and Provident Societies Act 1965. Stansell neither consented to nor received advance notice of the transfer.

After CWS commenced arbitration concerning alleged design breaches, the arbitrator held that CWS could pursue the claim. On an appeal under section 69 of the Arbitration Act 1996, Blackburne J reversed that determination. He held that section 51(1) did not override the non-assignment clause and that the transfer fell within the clause’s meaning of assignment.

The central issues were whether the statutory transfer overrode the contractual restriction and, alternatively, whether the statutory vesting was an assignment within that restriction.

1. Appeal allowed unanimously. Section 51(1) of the Industrial and Provident Societies Act 1965 vested the benefit of the building contract in CWS despite the contractual prohibition on assignment and the absence of Stansell’s consent. Mummery LJ delivered the leading judgment. Longmore and Jacob LJJ agreed.

2. The natural and ordinary meaning of section 51(1) was sufficiently wide to transfer a society’s business undertaking, including its rights and liabilities under contracts with third parties. Its statutory purpose was to permit transfers between registered societies with minimal formality. The provision consequently dispensed with consent that would otherwise be required for a transfer of contractual rights or liabilities.

3. The statutory scheme supported that construction. Leaving non-assignable contractual benefits with a transferor whose registration was then cancelled would require its continued existence or could leave its property to vest in the Crown as bona vacantia. Neither result was likely to have been intended. Section 54 did not prevent creditors from looking to the transferee, although the court reached no final view on that section’s precise effect.

4. Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014 was authoritative concerning the common law non-transferability of personal and contractually inalienable rights, but was distinguishable. It concerned procedural company-reconstruction provisions, whereas section 51(1) was a substantive provision directed specifically to the transfer of undertakings between industrial and provident societies.

5. The contractual construction issue was unnecessary to the result. The court nevertheless agreed with Blackburne J that the statutory transfer was an assignment within clause 18.1.1. The transfer resulted from the societies’ voluntary resolutions; the statutory mechanism that perfected it did not make it involuntary. Its effectiveness arose because section 51(1) overrode the contractual restriction, not because the transaction fell outside the clause.

1. Court of Appeal (Civil Division): Allowed CWS’s appeal unanimously. It held that section 51(1) of the Industrial and Provident Societies Act 1965 overrode the contractual restriction on assignment.

2. High Court, Chancery Division: Blackburne J allowed Stansell’s appeal under section 69 of the Arbitration Act 1996. He held that the statutory provision did not override the non-assignment clause and that the transfer was an assignment within that clause.

3. Arbitration: The arbitrator determined as a preliminary issue that the non-assignment clause did not prevent CWS from pursuing its contractual claim. He found that the transfer was not an assignment caught by the clause and, alternatively, that section 51(1) overrode the restriction.