Margate Partner Matt Champ was instructed by the trustees of a long standing unincorporated social club on the Isle of Sheppey after concerns were discovered relating to the dealings of the club’s secretary (“the Secretary”).

Upon perusing the documentation, it was discovered that the Secretary had stopped paying HMRC any tax years before and had not told the committee running the club. As a result, the members of the club had potentially incurred a six figure liability which could be doubled by HMRC as a penalty. To make matters worse, when the Secretary was dismissed, it was discovered that there were no accounts, receipts or even an up to date membership list for the social club.

Matt was instrumental in applying for an injunction against the Secretary compelling her to account for her actions and dealings with club’s funds and to produce the documentation that she had taken with her. Matt was then able to negotiate a settlement that led to the Secretary selling property to pay back the members of the club a large proportion of the funds that had been lost due to the Secretary’s actions.

Unfortunately, in trying economic times for such establishments, the social club in question had to close. However, this was a problem due to the rules of the club not having been followed in any degree for many years and also the fact that there was no accurate membership list. The problem was magnified because, as a result of the Secretary’s actions, the social club had been de-registered as a friendly society by the Financial Conduct Authority (which was unknown to anyone at the club) and so the club could not utilise the usual statutory procedure which was only available to registered friendly societies. The social club appeared to have assets of significant value but was in a legal limbo.

Matt was instructed to wind the club down and arrange the legalities so as to protect the Trustees and also the members of the club from further claims.

Due to the uncertainty concerning the legalities of how the club had operated as a matter of law, this meant that Matt had to apply to the High Court’s Chancery Division to utilise the High Court’s inherent jurisdiction to ratify the actions of the club and to layout the requirements for the club to be wound up and the surplus funds distributed.

Matt, with the assistance of Francis Ng of Selborne Chambers, represented the club before Deputy Master Henderson in the High Court on 31 January 2020 and was successful in having the actions of the club ratified, a liquidator appointed and a plan to distribute the funds to the uncertain membership approved.

Matt commented:

I am pleased that, despite what has gone on in the past, it has been possible to resolve the significant uncertainty relating to the social club. The fact that it has closed is very sad but it was always important to me not to make a bad situation worse. Clubs such as this need to be run in strict accordance with the rules but, understandably, that does not always happen. This is a rare example of the significant and potentially life-changing problems that can arise when things are not done in the correct manner.