Keene (Trustees of the Graphic Reproduction Federation) v Wellcom London Ltd & Ors

The trustees issued a Part 8 claim seeking a declaration that the un-incorporated association known as the Graphic Reproduction Federation had spontaneously dissolved sometime after 1987, alternatively an order that the Court exercise its inherent jurisdiction to dissolve the Federation and directions for distribution of its assets. The Court held that mere inactivity did not amount to spontaneous dissolution and refused the declaration. The judge concluded that membership was personal, that companies dissolved before the Court order ceased to be members and lose any entitlement to the funds, and that rights which terminate on dissolution cannot vest in the Crown under section 1012 of the Companies Act 2006 because there is nothing to vest. Exercising the Court's inherent jurisdiction, the Court ordered dissolution as at the date of judgment and directed distribution of the net assets to the members in existence at that date in accordance with clause 51 of the Federation's Rules, with an inquiry as to any arrears of subscriptions.

This was a Part 8 application brought by the Trustees of the Graphic Reproduction Federation. The Trustees sought (i) a declaration that the Federation had spontaneously dissolved at some stage between 1987 and the present, (ii) alternatively an order dissolving the Federation under the Court's inherent jurisdiction, and (iii) directions for distribution of the Federation's assets.

Background facts: the Federation was an un-incorporated association governed by Rules last amended in 1985. Activity and administration had been largely dormant since about 1987: no annual general meetings since 1985, Management Committee not meeting since 1987, subscriptions not called or paid since 1986. The Federation retained investment assets and accountants prepared annual accounts. Some corporate members had subsequently gone into liquidation and been dissolved; one company (Tomlinson Engraving Ltd) transferred its business and shares to Tomlinson Ltd prior to dissolution.

Issues framed by the Court included:

• whether inactivity amounted to spontaneous dissolution;
• the effect of the Rules (notably clause 17 on trusteeship, clause 45 on expulsion and clause 51 on voluntary dissolution and distribution of assets);
• whether corporate members who later dissolved retained any interest and whether section 1012 of the Companies Act 2006 operated to vest rights in the Crown;
• whether the Court should exercise its inherent jurisdiction to dissolve the Federation and on what terms.

Reasoning and outcome: the Court found inactivity alone insufficient to establish spontaneous dissolution, relying on the principle that sleeping associations may still subsist. Membership was held to be personal; when a corporate member is dissolved it ceases to exist and so its membership and any direct entitlement to distribution under clause 51 do not survive. The judge accepted that if the Federation had already been dissolved, rights crystallised at that date and, where appropriate, could pass as bona vacantia under section 1012; but on the evidence no ascertainable dissolution date could safely be fixed. For these reasons the Court refused the declaration of prior dissolution but exercised its inherent jurisdiction to dissolve the Federation as at the date of judgment. The Court directed distribution of net assets to the undissolved members existing at the date of the order (including Tomlinson Ltd as successor), pro rata according to contributions as if clause 51 applied, and ordered an inquiry into any arrears of subscriptions necessary to determine entitlement. The Court also noted the absence of representation for some interested members and recorded related observations about costs and the usual practice of representing significant members.

This first instance Part 8 claim was allowed in part: the Court refused the claim for a declaration that the Federation had spontaneously dissolved but exercised its inherent jurisdiction to dissolve the Federation as at the date of judgment and directed that the net assets, after payment of liabilities, be distributed to the members in existence at the date of the order in accordance with clause 51 of the Rules. The rationale was that inactivity did not amount to dissolution, membership rights are personal and cease on a member's dissolution, and it was fair to give effect to the contractual dissolution scheme in the Rules by exercising the Court's power.