Davies v Barnes Webster & Sons Ltd

Members of an unincorporated association are prima facie not personally liable for contracts made in the association’s affairs. Liability depends on the association’s constitution, the principles of agency, and the authority or ratification given for the transaction. Where management is entrusted to a committee, the committee members may be personally liable for contracts entered into by an officer acting with the committee’s actual or inferred authority. Holding property as a trustee, witnessing a contract, or participating in a general meeting does not alone establish personal liability. A statutory demand will stand where the evidence supports an inference that the management committee authorised the contract.

Mr Davies appealed against District Judge Crispin’s refusal on 20 December 2010 to set aside a statutory demand served by Barnes Webster & Sons Ltd. The demand sought approximately £148,000 said to be due for variations under a building contract made for Romford and Gidea Park Rugby Football Club, an unincorporated association.

Mr Davies was the club’s president, trustee and ex officio member of its management committee, but he had not signed the contract. The central issue was whether he was personally liable because the contract had been entered into by the treasurer, Mr Smith, with the authority of the club’s management committee.

1. Appeal dismissed. The statutory demand was not set aside because Mr Davies was personally liable on the building contract. The liability was shared with other persons who were properly liable, and did not arise merely from his status as trustee.
2. The governing analysis was one of agency. Members of an unincorporated association are prima facie not personally liable for contracts made in the course of the association’s affairs. The court must examine the constitution and determine who had authority to enter into the relevant contract, together with any subsequent authority or ratification.
3. The management committee was entrusted by the club’s constitution with management of its affairs. The contract itself showed that Mr Smith intended to contract on behalf of the club rather than solely on his own behalf. In the absence of minutes proving a formal authorisation, the court inferred from the evidence, including Mr Davies’s own witness statement, that Mr Smith was acting under authority delegated by the management committee.
4. The approach in Bradley Egg Farm Ltd v Clifford [1943] 2 All ER 378 provided a useful framework for identifying the persons responsible for contracts entered into for an unincorporated association. It supported treating the committee entrusted with management as liable on contracts authorised within that management.
5. The judge gave little or no independent weight to Mr Davies’s witnessing the signature or his participation in the general meeting. Those matters did not themselves establish authority for the particular contract. The inference of authority extended to the contract’s additional sums, which formed the basis of the statutory demand.
6. Under rule 6.5 of the Insolvency Rules, the creditor was permitted to commence bankruptcy proceedings based on the statutory demand only after three months from judgment, rather than the usual 21 or 28 days, to avoid undue oppression and allow Mr Davies and the club time to organise the relevant finances. The stay of costs below was removed.

• High Court (Chancery Division): Appeal from the decision of District Judge Crispin dated 20 December 2010. The appeal was dismissed and the refusal to set aside the statutory demand was upheld.