Evangelou & Ors v McNicol (Rev 1)

The rules of an unincorporated association form a contract between its members and are construed according to ordinary principles of contractual interpretation. Members possess the rights conferred by those rules, subject to any eligibility conditions which the rules authorise the association’s governing body to prescribe.

A power to define the precise eligibility criteria for an election may authorise restrictions based on a minimum period of membership. A power to set a freeze date is not, without limiting language, confined to prospective dates. Contractual discretions of this breadth remain constrained by honesty, good faith, proper purpose, relevance and the absence of arbitrariness, capriciousness, perversity and irrationality.

Five Labour Party members who had joined between 12 January and 12 July 2016 challenged a resolution of the Party’s National Executive Committee. The resolution restricted voting in the 2016 leadership election to members with six months’ continuous membership. Hickinbottom J held that implementing the resolution would breach the contractual rules of the Party and granted declaratory relief: [2016] EWHC 2058 (QB).

The General Secretary appealed. The central issue was whether the 2016 Rule Book empowered the National Executive Committee to define voting eligibility by reference to a period of continuous membership and to adopt a retrospective freeze date.

1. Appeal allowed. The Rule Book empowered the National Executive Committee to restrict voting in the leadership election to members who had joined by 12 January 2016. The declaration made below was set aside.
2. The Rule Book constituted the contract between the members of the unincorporated association. Its meaning was therefore a question of law governed by ordinary principles of contractual interpretation. The court had to ascertain the objective meaning of the language in its documentary and factual context. Clear contractual words carried particular weight, especially in a contract binding hundreds of thousands of members whose knowledge of external background material could not safely be assumed.
3. Chapter 2, clause I(2) did not give every member an unconditional right to vote. Members had equivalent rights except as prescribed by the rules. Chapter 4, clause II(2)(C)(vii), which required the National Executive Committee to define the precise eligibility criteria, was such a prescription. Its clear and general language authorised the Committee to determine substantive eligibility. It was not confined to identifying existing members or filling gaps concerning lapsed membership.
4. The Rule Book’s structure supported that construction. The National Executive Committee was the Party’s administrative authority and had responsibility for upholding and enforcing its rules. The provisions addressing entryism, improper recruitment and the packing of the Party demonstrated why the eligibility power could extend to a minimum period of membership.
5. The breadth of the power did not leave members without protection. Contractual discretions are constrained by necessary implications of honesty, good faith, genuineness and proper purpose. They must also be exercised without arbitrariness, capriciousness, perversity or irrationality, with relevant matters considered and irrelevant matters excluded. No challenge on those grounds had been advanced.
6. The Committee also had power to impose a retrospective freeze date. In ordinary language, a freeze date is the date by which the qualifying state of affairs must exist. Neither the expression itself nor the relevant rules confined it to the commencement of the election process or a later date. The distinction proposed between procedural and substantive matters did not limit powers which necessarily determined participation rights.

• Court of Appeal (Civil Division): Allowed the appeal and set aside the declaration made below: [2016] EWCA Civ 817.
• High Court, Queen’s Bench Division: Hickinbottom J held that implementing the National Executive Committee’s resolution would breach the Party’s contract with its members and granted declaratory relief: [2016] EWHC 2058 (QB).