Hardy & Anor v Hoade & Ors, Re North Harrow Tennis Club

On the dissolution of an unincorporated members’ tennis club, distribution is governed first by the club’s contractual rules. In the absence of a contrary provision, the ordinary implied term is likely to require equal distribution per capita among qualifying members at dissolution, rather than distribution according to contributions or length of membership.

Clear contractual language cannot be displaced by general notions of fairness or commercial common sense. Where the rules leave a lacuna, the court may imply a term only after construing the express provisions and applying the requirements of necessity, obviousness and coherence. A rule providing for distribution following a formal resolution may be extended by implication to an informal dissolution where the rules demonstrate a comprehensive scheme and otherwise produce an unintended distinction.

The claimants were trustees and longstanding members of the North Harrow Tennis Club. The club had ceased operating, and its land was sold pursuant to an earlier order. The claimants sought directions concerning distribution of the net sale proceeds among members and former members.

The club’s rules provided for distribution according to length of playing membership if the club resolved at a general meeting not to continue its activities. No such resolution had been passed because the members had gradually left and the club could not convene an effective meeting. The principal issues were whether rule 18 applied, or should be extended by implication, to that dissolution; the qualifying period; the meaning of playing membership; and the effect of rule 19.

1. Default basis of distribution. The ordinary position for a tennis club, absent contrary contractual provision, was equal per capita distribution among members at the date of dissolution. Membership was primarily contractual. The authorities did not establish an immutable rule of equity or resulting trust.
2. Construction of rule 18. The natural and ordinary meaning of rule 18 confined it to a dissolution preceded by a resolution at a general meeting. The court could not use commercial common sense to depart from that clear language, although the informality of club rules could be relevant within the proper principles of contractual construction.
3. Implied term. After construing the express rules, the court considered implication. Rules 18 and 19 showed an intention to provide a comprehensive scheme based on length of playing membership. It would be irrational for distribution to depend on the chance of whether dissolution was preceded by a formal resolution. A term was therefore implied extending the rule 18 regime to dissolution without such a resolution.
4. Qualifying period and membership. The final rules provided for a three-year qualifying period. The manuscript alteration to five years did not establish an approved amendment. Rule 19 did not exclude members merely because they failed to renew; default required an act to renew followed by non-payment. Playing membership included qualifying years as both a junior and an adult.
5. Orders. The claims were determined by reference to the established membership records and findings set out in the judgment. The two claims based only on 2012/13 membership failed. The trustees were entitled to an indemnity from the sale proceeds for costs and expenses properly incurred in relation to the property, sale and proceedings.

This was a first-instance decision. The judgment records earlier directions and a declaration by District Judge Goldberg that the claimants held the land on trust for sale and could sell it without further reference to members or former members.