Qureshi v Association Of Conservative Clubs Ltd (On Refusal of Permission to Appeal)

Permission to appeal should be refused where the proposed grounds have no real prospect of success under CPR r 52.6(1). On a members’ voluntary winding up, Insolvency Act 1986, section 107 applies unless the articles otherwise provide. A rule which gives a committee a discretion to apply surplus funds while a club is a going concern does not create a mandatory duty to transfer the surplus to a particular association on winding up, where the rule does not otherwise provide for that result. In assessing whether procedural defects prevented a winding up from taking effect, the relevant counterfactual is whether the same decision to enter into a members’ voluntary winding up would inevitably have been reached if the prescribed procedures had been followed.

The claimant liquidator sought declarations concerning distributions of the assets of Edgware Constitutional Club Limited during its members’ voluntary winding up. The defendant argued that the club had not been validly placed into liquidation and that, in any event, its rules required surplus assets to be paid to the defendant.

The court rejected both arguments in its substantive judgment and made the orders sought by the claimant. The defendant then applied for permission to appeal, challenging the construction of Rule 74 and the treatment of procedural irregularities affecting the winding up.

1. Permission refused. The proposed grounds did not have a real prospect of success within CPR r 52.6(1).
2. Rule 74 gave the committee a discretion between applying surplus in the interests of the club or assisting the defendant while the club remained a going concern. It did not impose a mandatory duty to apply surplus to the defendant merely because an application under one limb was unavailable or winding up was in prospect.
3. On winding up, Insolvency Act 1986, section 107 applied unless the articles otherwise provided. Rule 74 did not otherwise provide, because its restriction on distribution to members operated except on dissolution or winding up. The surplus was therefore distributable to members after payment of proper expenses and liabilities. The court relied in particular on Re Merchant Navy Supply Association [1947] 1 All ER 894.
4. The club was in liquidation despite procedural irregularities. Applying Browne v La Trinidad (1887) 37 ChD 1, the relevant counterfactual was whether the same decision to place the club into a members’ voluntary winding up would inevitably have been made if the required procedures had been properly followed.
5. The defendant’s proposed alternative argument concerned a possible earlier failure by the committee to exercise its discretion properly. That issue had not been argued at trial, was not material to the conclusions reached, and did not provide an arguable ground of appeal.

The court had previously determined the substantive dispute in favour of the claimant, rejecting the defendant’s arguments concerning the validity of the winding up and entitlement to surplus assets. The defendant’s subsequent application for permission to appeal from that judgment was refused.