Sports club committee/directors acting contrary to Articles

[prophet01]

Backstory: Appointment of Committee Members

Following their succeful, hostile ousting (via EGM) of the previous board of directors the new board, four in number, have just pronounced a radical reduction in club opening hours. And I mean radical.
The club "rules" state:

"The Company's premises shall be open for the use of members and their guests on each
day of the week between the hours of 7.15am and 11.30pm."​

That's a total of 114 hours per week.

The pronouncement effectively reduces the total opening hours to 37 per week including being closed on Sundays. This is wholly unacceptable. I've emailed the committe expressing the same and querying under what authority they have changed the opening hours. No explanation has yet been forthcoming.

Now, the Articles state that

"The members of the Company may from time to time adopt rules for the purposes of regulating the membership, management and operation of the Company. Any such rules shall be adopted, varied, amended or added to by ordinary resolution. Rules, when adopted, shall bind members of the Company and Committee Members to the same extent as if they had been signed by each member of the Company and Committee Member and contained covenants on the part of each member of the Company and Committee Member to observe and be bound by all the rules. No rules may conflict with these articles."​

As far as I can see the committee has no authority to unilateraly declare and implement any amended opening hours. The Articles appear to clearly require member aproval.

Additionally members have paid an annual subscription (April to April) on the basis of the opening hours set out in the rules. My view is that implementation of these reduced openign hours would be a deliberate breach of contract by the club (committee).

Is my analysis there or thereabouts correct? If so what legal recourse do we have in the event that the committee simply continue down this path and implement the reduced opening hours from 4 January.

 

[Mr D]

Sounds like another 'get the rascals out' vote needed.
Perhaps better rascals be put in place next time?

 

[prophet01]

Unfortunately the EGM proved that the sheeple members are in the majority.
Perhaps this issue might jolt a sufficient number of them out of their torpor. Unfortunately that can't be relied upon so we have to use the legislative tools available.

 

[Mr D]

Unfortunately the EGM proved that the sheeple members are in the majority.
Perhaps this issue might jolt a sufficient number of them out of their torpor. Unfortunately that can't be relied upon so we have to use the legislative tools available.

Legislative - that's where things get expensive. And there aren't as I'm sure you are aware, any guarantees.

 

[prophet01]

If that's the only way then that's the only way. Doesn't necessarily have to be prohibitively expensive and the board will have to explain and justify their position to the membership.

For example, without explanation and despite there now being no lawful impedement (Covid closure up to Dec 2) to opening as usual they announced that the club will be closed from 21 Dec to 4 Jan when historically the club has only ever closed on christmas day, boxing day and new years day.

So until 4 Jan I'll have to pay to use facilities elsewhere to get my excercise. I intend to demand reimbursement of those costs. If rejected then I'll commence small claims proceedings. They won't want to explain that to members nor will they wish to attend a hearing. They will blink first.

That said I'm fully prepared to, head on, fund a challenge to their actions which I believe are contrary to the Articles and, I believe, company law. Hence my initial post requesting confirmation, or otherwise, of my summation.

 

[eteb3]

Is this a member-owned club? ie, is every member of the company also a user of the club, and vice versa?

Assuming yes:

I imagine you have a claim for the fees for the service you haven't received, but as you are also a member of the company, you may also have a remedy for specific performance as they've acted in breach of the rules - can you see anything in the Rules that would put the directors in breach of their duty to the company if they don't follow those, or are the Articles and the Rules more independent? If they are in breach of duty to the company, you'd need to go for a derivative action on behalf of the company, which is complex (=££) and gives a lot of discretion to the court, iirc.

The rules appear to bind the committee personally (not the company that they direct), so you could try suing them personally. But you'd need to know your cause of action and the remedy you want, first.

There's a bunch of cases on unincorporated associations that would (I think) be relevant (ie, bc the Rules bind the members personally; the company as a person in its own right isn't involved). If I can find some I'll PM you.

Is there provision in the Articles or the Rules for arbitration, or do you have to go to court?

 

[prophet01]

@eteb3 Thanks for the input again.
Yes, it's a member owned club and there is no reference to arbitration.

We're not really interested in financial claims. The majority of members agreed back in April, for the benefit of the club, not to claim for the loss of facilities during the many months the club had to close due to covid lockdown legislation. My consideration to make a "small claim" was simply to use it as a vehicle to put pressure on the directors.

Ultimately we want to force the directors to comply with the rules and reinstate the normal opening hours.

To summarise: in reducing the opening hours the directors, in my view;

• Have caused breach of the clubs contract with every member, each member having paid the years membership fee on the understanding that the club would be available for their use at the times stated in the rules.

• Have deliberately contravened the Articles of Association by implementing reduced opening hours without having amended the rules by obtaining the consent of members via ordinary resolution as is required by the Articles.

• Have contravened Clause 171 of the Companies Act which requires directors to act in accordance with the company's constitution.

My question really concerns what recourse we might have in connection with the directors' contravention of the Articles and the Companies Act to force them to reinstate the opening hours stated in the rules.

With reference to your query pertaining to directors' breach of duty the Articles state:

"The Committee Members, auditors, Secretary and other officers for the time being of the Company acting in relation to any of the affairs of the Company and their respective executors or administrators shall, to the extent permitted by law, be indemnified and secured harmless out of the assets of the Company from and against any liability incurred by them. Further, the Committee Members may purchase and maintain insurance at the expense of the Company for the benefit of any such Committee Member, officer, auditor or trustee to the extent permitted by law."​

 

[OGgy21]

is there anything in the club rules that allows them to be changed without approval? i do not think the club rule would be considered asa contract?

 

[OGgy21]

It's my understanding that any contravention of the articles would render that action void/invalid. Not that helpful in the circumstances as you'd still want access to the club! Just thinking outside the box, perhaps they could counteract that argument by stating they have acted in the best interests of the company and its members, and in accordance with their fiduciary duties, by reducing hours for health and safety reasons (i..e because of covid). In any event, it is standard form for a 'letter before action' to be sent before any formal proceedings.. may be worth a shout so that they k ow you're serious?

 

[prophet01]

"Is there anything in the club rules that allows them to be changed without approval?"
No

"I do not think the club rule would be considered as a contract?"
Of course the rules form the basis of a contract between club and member i.e. for payment in the sum of £XX/month the clubs facilities will be available for your use for a minimum of 114 hours per week.

 

[eteb3]

Is there an objects clause in the Articles? If so, directors have a duty (inter alia) to promote those objects. If not, they must promote the success of the company for the benefit of its members. See s. 172.

https://www.legislation.gov.uk/ukpga/2006/46/section/172

172(f) would suggest that the duty to act for the benefit of the members may possibly include abiding by the Rules as if they formed part of the Articles (although that appears not to be explicitly stated), bc the Rules may be understood as expressing the members' view of what 'fair' means.

@OGgy21, the reason I think the club rules are a contract that bind them personally is the wording in the Articles,

Rules, when adopted, shall bind members of the Company and Committee Members to the same extent as if they had been signed by each member of the Company and Committee Member and contained covenants on the part of each member of the Company and Committee Member to observe and be bound by all the rules.

But I agree they may be able to mount a defence of acting 'in our good-faith best judgment'.

PS All I've read suggests getting them through a plain vanilla action for breach of contract will be much easier than an action for breach of duty.

 

[prophet01]

Just thinking outside the box, perhaps they could counteract that argument by stating they have acted in the best interests of the company and its members, and in accordance with their fiduciary duties, by reducing hours for health and safety reasons (i..e because of covid).

They could say that but it wouldn't stand up to scrutiny.
The club is operating fully in accordance with our sports federation covid guidance, and in compliance with the relevant tier restrictions. Just as it did after the first lockdown ended, in August (I think).

 

[prophet01]

@eteb3

"3.1 The objects for which the Company is established are:
(a) to provide facilities for members to play squash rackets and for fitness training and to provide opportunity for social intercourse amongst the members and for games, recreation and refreshments
(b) to do all such other things as, in the opinion of the board of directors of the Company, are or may be incidental or conducive to the attainment of the above objects or any of them."​

Reducing the club's weekly opening hours from 114 down to 37 is clearly contrary to the object.

 

[OGgy21]

If you aren't looking to bring an action for break of contract, which on the face of it, looks strong (apologies for my post last night, i was half asleep reading the thread!!), there isn't a great deal you can do. A contravention of the articles would render the action invalid and you should thus proceed as normal. However in the circumstances this is not possible as you do not have access to the facilities.

I would suggest calling a EGM (but this takes time) or alternatively a strong LBA explaining the position, legal position etc and if the club is not reopened then you will bring a claim for breach of contract in which they will be liable for your costs. I would also throw in there that you will be making an app to the court to remove those in question from their position of directors and members of the company, which of course can be done through court action, for failing to act in the company's best interests and contravening the constitution - i don't think the action would be bad enough to warrant this, but certainly worth 'putting the cat amongst the pigeons' in the LBA

 

[eteb3]

Ok, so next time you have a 75% majority of members on your side, change the objects to add, '(c) to pursue the objects in accordance with such rules as may from time to time be adopted under Clause X'
;-)

This is how things seem to my dim lights. (My usual caveat that the person you actually need here is The Resolver):

Your club seems to be a hybrid of a company that is the legal person (for the convenience of property holding and for the limited liability, presumably), and the Rules, which serve to overlay an old-fashioned sports association over the top. So you have two things in play: one is your rights as a member of the company under the Articles: that is a matter of company law. The other is your rights as a party to the the Rules: that is a matter of ordinary contract, because though it's the Articles that make those Rules a contract between all the members inter se, the Rules are not themselves expressed to be part of the Articles - in fact I'd argue the provision I quoted to OGgy21 provides for exactly the opposite.

Articles & company law:
The wrongs you allege to have been done are wrongs done by the directors to the company. The company is therefore the proper plaintiff (Foss & Harbottle rule). A company must act by its directors. Those directors are, of course, unlikely to consent to the company suing the directors. Therefore in this situation there is protection for members in the form of a 'derived claim', governed by Part 11 CA 2006.

Such a claim can be pursued only with the consent of the Court, which must take into account 'whether the act or omission could be, and in the circumstances would be likely to be, ratified by the company'. What that means in practice is, could a simple majority of members vote to say they were ok with it?(Note could do, not have done so.) So it may be sensible to call a meeting of members and get a simple majority to censure the directors and require them to open the club as per the Rules - you'd be invoking the 'members reserve power'. If you think the majority would not be with you, then nor would the Court support you.

In any case, I'm not at all sure that under the Articles there is any wrong done. Courts don't like going behind the words of others' agreements: the Articles require only that the company (through its directors) provide facilities for members to play squash, etc. Is the company providing facilities to play squash? Yes. Therefore as directors, they are not in breach of their duty to the company. Relying on the Rules where they state the hours would probably do you no good, because they don't form part of the Articles, and even if they did, the hours rule could (I assume) be amended by a simple majority.

Rules and contract law
My best understanding is that as a contract inter se, the law on unincorporated associations applies: as I've noted above, I can't see that the company (the legal person) is party to the Rules at all.

I'm going to summarise Warburton (1992) here: things may well have moved on, although cases on unincorporated associations are rare, and contract law changes only slowly. On wrongs by the committee, she says, 'Foss and Harbottle probably does not apply to unincorporated associations because they cannot sue in their own name'. So it seems you could bring an action against the Committee for acting ultra vires (outside the Rules), and seek a declaration by the Court that they must put the wrong right. But I imagine the Court is likely to give you a hard time if you could have called a meeting to achieve the same effect? And anyway, if the committee could call a meeting and have the members change that rule and ratify the breach, your fox is shot.

That's before we bring in notions of frustration of contract: there's no actionable breach if the other party (the committee) actually couldn't, for reasons outside of its control, perform their obligations. Fine, they're not following your federation's Covid guidance. But if they could show on the balance of probabilities that there are other good reasons that they can't perform their obligations, they're home and dry.

Finally, you may have a personal action against the Committee for damages.
£AnnualFee x (37/114) x (months denied rights/12) = worth it?

After writing all of that (you can see I get my own kicks from something less active than squash), I think you may well be better off finding common cause with other members, or leaving town shaking the dust off your feet.

 

[GraemeL]

The club "rules" state:

"The Company's premises shall be open for the use of members and their guests on each
day of the week between the hours of 7.15am and 11.30pm."​

The Articles state that

"The members of the Company may from time to time adopt rules for the purposes of regulating the membership, management and operation of the Company. Any such rules shall be adopted, varied, amended or added to by ordinary resolution. Rules, when adopted, shall bind members of the Company and Committee Members to the same extent as if they had been signed by each member of the Company and Committee Member and contained covenants on the part of each member of the Company and Committee Member to observe and be bound by all the rules. No rules may conflict with these articles."​

Can you prove that the 'rule' quote above was adopted by ordinary resolution at a general meeting?

 

[eteb3]

@GraemeL good question. Assuming yes, I realise it's clear that as those were ordinary resolutions of the members (as members of the company), the directors are indeed in breach of their duties to the company - albeit the 'ratification by simple majority' rule in 263(3)(d) will still apply.

 

[prophet01]

If you aren't looking to bring an action for break of contract, which on the face of it, looks strong (apologies for my post last night, i was half asleep reading the thread!!), there isn't a great deal you can do. A contravention of the articles would render the action invalid and you should thus proceed as normal. However in the circumstances this is not possible as you do not have access to the facilities.

I would suggest calling a EGM (but this takes time) or alternatively a strong LBA explaining the position, legal position etc and if the club is not reopened then you will bring a claim for breach of contract in which they will be liable for your costs. I would also throw in there that you will be making an app to the court to remove those in question from their position of directors and members of the company, which of course can be done through court action, for failing to act in the company's best interests and contravening the constitution - i don't think the action would be bad enough to warrant this, but certainly worth 'putting the cat amongst the pigeons' in the LBA

As I said earlier "My consideration to make a "small claim" was simply to use it as a vehicle to put pressure on the directors." I intend to go down this route solely in connection with being prevented from using the facilities as per my "contract" with the club. In parallel I'm here querying options to hold the committee to account in respect of breaches of company law.

EGM is not becessary as the AGM will be held on 13 January. Along with several other "troublemakers" are standing for committee positions.

 

[prophet01]

@eteb3
Really appreciate the time you've taken with the post #16. I'll take my time to digest and understand.

 

[prophet01]

Can you prove that the 'rule' quote above was adopted by ordinary resolution at a general meeting?

Short answer: No, but I will request a full set of records of historical ordinary resolutions.

Long answer:
I believe I know why you're asking the question as I did consider that the requirement for rule amendment by ordinary resolution only could be challenged on the basis that the rule might not have been adopted by ordinary resolution.

I've just consulted with a past chairman who has no recollection of any amendment to the opening hours rule in his 40+ year history at the club. Without access to records I think it wholly reasonable to assume that the rules were all adopted via ordinary resolution as there appears to be no other vehicle for rule adoption set out in the Articles.

 

[eteb3]

Without access to records I think it wholly reasonable to assume that the rules were all adopted via ordinary resolution as there appears to be no other vehicle for rule adoption set out in the Articles.

I agree, particularly as it's been in the rules without comment for many, many AGMs, so the members could have challenged it if they wanted to.

 

[prophet01]

Serious developmemts:
After due consideration me and another "troublemaker" came to the conclusion that the best way to fight this "gang of 4" board of directors was from the inside.

Last Sunday, having garnered proposers and seconders we submitted our applications to stand at the forthcoming AGM (13 January), me to challenge the incumbent director for the position of Premises Committee Chair and my associate to challenge the incumbent direcor for the position of Treasurer.

On 29 December the notice of AGM was issued to members indicating that we two were the only members challenging any of the four current directors. The other eight members standing for election were for the 8 vacant committee member positions.

That evening we seperately received communications from the "gang of four" board requesting us to attend a disciplinary hearing to answer to allegations, made by them, against both of us of;

"taking actions which are not consistent with the spirit and ethos of the squash club and its membership."

"We therefore request that you alone appear before the Committee at 4.30 pm on Tuesday 12th January 2021 to explain your actions in regards to the above matters. The meeting will be a Zoom meeting."

"Following the meeting the committee will consider your oral or written submissions and take whatever action it considers appropriate, under provision 3.6 of the Articles of
Association, which, if deemed of sufficient seriousness, could result in your expulsion from the club."
​

This "gang of four" directors appear to have bizarrely concluded that a legitimate tactic to prevent our challenge to their positions is to use their powers to expel us from the club the day before the AGM.

 

[eteb3]

*yawn. What a saga.

What is the text of art 3.6?

Out of interest, suppose they were on here explaining why they've reduced the opening hours, what would their answer be? (- whether that answer is reasonable or not or in good faith or not)

 

[prophet01]

Saga indeed.

Well, well. The farce continues. They appear to have quoted from superseded articles. The clause now resides at 4.7.

4.7 The Committee shall have power to expel a member when, in its opinion, it would not be in the interests of the Company for him/her to remain a member. A member shall not be expelled unless the member is given 14 days’ written notice to attend a meeting of the Committee and written details of the complaint made against the member. The member shall be given an opportunity to appear before the Committee to answer any complaints made against the member and shall not be expelled unless at least two thirds of the Committee then present vote in favour of his/her expulsion. Any member expelled shall be given the reason for their expulsion in writing. An expelled member shall not be entitled to a refund of any subscription paid prior to his/her expulsion.
​

As to your question, obviously I can only guess what their explanation would be as they have yet to provide one to the members. I suspect the reality is that its down to their earlier decision to permanently get rid of the casual staff, who were necessary to cover the extensive hours, and only retain on furlough the two permanent staff. So they've actually manufactured this situation whereby there are insufficient personnel to cover the normal hours of opening.

 

[eteb3]

"taking actions which are not consistent with the spirit and ethos of the squash club and its membership."

Is that the whole charge sheet? You need to know what those actions are, so that you can answer the allegation that the actions are not consistent, etc. How is it signed at the bottom? DM me if it's not appropriate for a public forum.

They haven't given you 14 days' written notice of the meeting - or is this news late to us here? The rules must be followed meticulously or you have a claim against them.

You'd certainly be better off getting legal advice if you can afford it. You need to use all your rights as a member of the company. If there's still time under the rules to get motions before the AGM, there's probably things you could do by that route. Plus how they conduct themselves at the 'trial' will be important.

One question I'd be asking a lawyer is whether the directors have to act reasonably in coming to their judgement. It would appear not, as it's not stated in the articles, and the courts (if you ever got there, which would be expensive), will not go behind the agreements members mak between themselves. If this were an unincorporated association, they would need to act in good faith, and it rather looks like they're trying to remove you before you can go against them at the meeting. Idk what difference it makes that its a company - probably not a lot, as it would still be a 'domestic tribunal', and the rules of natural justice must be followed.

 

[prophet01]

Fortunately we are more than able to fund the appontment of a solicitor experienced in such matters and will do so on Monday. That said your input, along with others', is and will continue to be invaluable in furthering my understanding in preparation of discussions.

Charge sheet:

"We have received a complaint from the Chairman of the club that on the 29th December 2020 you sent an email to him in which you stated:

“If I don’t receive an adequate and full response today I will take whatever action with or without further reference to you as I see fit.”

The complaint is that your above words are an attempt to threaten the Chairman of the club, such actions which are not consistent with the spirit and ethos of the squash club and its membership."
​

The context of my statement (coloured blue) being a short sequence of polite emails between me and the chairman, cc'd to the 3 other directors, initiated by my questioning and challenging the committee's authority to vary the opening hours of the club and culminating in my above statement (coloured blue) following his inadequate response.

The disciplinary notice was sent 29 December 2020 at 21:23

Article 23.4: ...A notice or other document which is given by e-mail is deemed to be given at the expiration of 24 hours after the e-mail was sent.
​

My interpretation of the above Article, in combination with Article 4.7 requiring 14 days' notice, renders the earliest date and time I can be compelled to attend a disciplinary meeting, were the notice actually issued legitimately, is 13 January 2021 at 21:23. That would be after the AGM starting on the same day at 7:00pm.

Additionally:

Article 23.2: A notice or other document may be given or delivered to a member by the Company either personally or by sending it through the post by first class mail or airmail, in a prepaid envelope or cover, addressed to the member at his/her address as appearing in the register of members, or by leaving it at that address, addressed to the member, or by sending it to the e-mail address of the member previously notified in writing by the member to the Secretary or by any other means authorised in writing by the member. In the case of joint members, the giving or delivery of a notice or other document to one of the joint holders shall be deemed to be giving or delivery to all the joint holders.​

The notice wasn't sent to my email address as previously notified to the secretary. It was sent to an alternative email address which I was simply using to converse with the chairman. Indeed the notification arrived in the junk mailbox so I wasn't even aware of it for several days.
My view is that this Article renders the notification both undelivered and non-compliant with article requirements.

Additionally:
The notice refers to the board's powers to expel members under Article 3.6. The Articles were actually amended in 2013 resulting in Article 3.7 becoming Article 4.7.

So this board of directors appear to be making decisions and acting (or not) on Articles which have been superseded. How incompetent is that.

This would all be hilarious if it weren't so serious. Ours might be just a squash club but it is an incorporated company and the value of our grounds and premises, which the club owns, runs into the £millions.

 

[prophet01]

UPDATE

Predictably, at the illegitimate disciplinary hearings held in our absence on 12 January, we were found guilty of the trumped up charges and expelled from the club - the day before the AGM at which we would have automtically become company directors.

So, yesterday, we pressed the button and our solicitor issued our Letter of claim along with our "without prejudice" offer of early adjudication

"As you know, we act on behalf of the above. This is our clients’ letter of claim sent in accordance
with the Practice Direction Pre-Action Conduct and Protocols of the Civil Procedure
Rules (the “Practice Direction”)."

​

We've given notification of our intention to:
Sue for Breach of contract
Pursue a Derivative claim
Pursue a claim of Unfair Prejudice

Remedies sought:

• Quashing of the existing disciplinary decisions and undertake to pursue no further discipline regarding the same points.
• Extend directorships to our clients in line with their nominations to become committee members.
• Agree to pay damages (to be assessed by the court, if not agreed) in relation to the
  pecuniary loss, loss of amenity and enjoyment, and loss of reputation, suffered by our
  clients.
• Negotiate, and publish to the members, an agreed statement explaining the changes.
• That the four directors responsible namely AA, BB, CC and DD terminate their directorships and agree to never stand for office in future.
• Reimburse our clients’ legal fees to date.

 

[KAC]

UPDATE

Predictably, at the illegitimate disciplinary hearings held in our absence on 12 January, we were found guilty of the trumped up charges and expelled from the club - the day before the AGM at which we would have automtically become company directors.

So, yesterday, we pressed the button and our solicitor issued our Letter of claim along with our "without prejudice" offer of early adjudication

"As you know, we act on behalf of the above. This is our clients’ letter of claim sent in accordance
with the Practice Direction Pre-Action Conduct and Protocols of the Civil Procedure
Rules (the “Practice Direction”)."

​

We've given notification of our intention to:
Sue for Breach of contract
Pursue a Derivative claim
Pursue a claim of Unfair Prejudice

Remedies sought:

• Quashing of the existing disciplinary decisions and undertake to pursue no further discipline regarding the same points.
• Extend directorships to our clients in line with their nominations to become committee members.
• Agree to pay damages (to be assessed by the court, if not agreed) in relation to the
  pecuniary loss, loss of amenity and enjoyment, and loss of reputation, suffered by our
  clients.
• Negotiate, and publish to the members, an agreed statement explaining the changes.
• That the four directors responsible namely AA, BB, CC and DD terminate their directorships and agree to never stand for office in future.
• Reimburse our clients’ legal fees to date.

Good luck with your case. It is unusual for people to put up the cash for cases like this. Thanks for continuing to update us.

 

[prophet01]

Good luck with your case. It is unusual for people to put up the cash for cases like this. Thanks for continuing to update us.

@KAC
I'm relatively risk averse so would only go down this road if I had a reasonable expectation of winning. In this instance these boys have done so much wrong and we've done nothing wrong. The personal consequences to us of their wrongdoing are so great that we were left with little option in any case..

Happy to continue to update. It's actually quite theraputic. This is a Legal forum and this is clearly a legal matter; which might help members toward making their choices in similar future circumstances.

Watch this space.

 

[prophet01]

This thread was initiated following our directors' notification to members of their intention to significantly reduce our sports club's opening hours once the current Covid imposed closure is lifted; from 114 hours/week down to 37 hours/week.

Having been informed of the content of a communication from one of the "gang of four", "controlling" directors to the new directors (additional six since AGM) I suspect that they're being deliberately misled to pevent any questioning of the implementation of the illegal opening hours reduction on the basis that staffing costs would render opening for the full hours prohibitively expensive. They'd previously made redundant four, much cheaper, part-time staff.
The communication states:

"We are not covered in terms of liability unless we have a keyholder (this can be staff or a director of the club) in charge and on the premises, whilst it is open. That person will be required to exercise all the rules that the Government applies regarding Covid restrictions, and they warn that councils have started to send ‘No-win-no-fee’ legal persons into the business community to ensure that there is compliance. Insurance companies have circulated this as a warning that this could invalidate cover."
​

I personally find this wholly implausible on several grounds:

• The insurer surely cannot simply alter the terms of the contract by simply saying so. As it stands the policy just requires the attendance of a "responsible person". That can be any person so appointed e.g. any member.
• I simply don't believe such action, as highlighted in bold, would or could be taken by Local Authorities

I'd be grateful for the views of anyone with particular knowledge in the insurance field. Perhaps @Frank the Insurance guy might offer a professional view.

 

[Frank the Insurance guy]

Hi @prophet01

With the caveat that I have no knowledge of your specific insurance policy terms and conditions, I can provide my thoughts as follows:

We are not covered in terms of liability unless we have a keyholder (this can be staff or a director of the club) in charge and on the premises, whilst it is open

Insurers will usually require a duly authorised individual to be present, suitably trained and responsible. This could be a committee member or even a "volunteer" (ie. not a director or member of staff, if duly authorised and trained).

that person will be required to exercise all the rules that the Government applies regarding Covid restrictions,

The individual and the club both have a duty to follow government rules. For the avoidance of doubt you should keep documentary evidence of measures you are taking to ensure compliance with the rules and their enforcement.

Insurance companies have circulated this as a warning that this could invalidate cover.

Should you not follow the terms and conditions of the policy &/or government rules, this could indeed invalidate the cover.


The crux of this post however seems to surround the reduction of opening hours, which is not an insurance matter, but a legal one - if the club was one of my clients, I would refer the club to legal advisers - many club insurance policies include access to free telephone legal advice where they will be allocated a lawyer familiar with this area, who will be able to provide telephone advice on the clubs legal position.

 

[prophet01]

@Frank the Insurance guy
Once again, thanks for the input.

The only policy requirement in respect of 'Keyholders' is solely in respect of the alarm. That being for a "keyholder" to be available to attend at the premises should the alarm activate. Completely unrelated to the club's operation.

The only policy reqirement for a permanent presence during club opening hours is that of a "responsible person". Again, that is only in connection with security and can be anyone so appointed. So yes, could be volunteer members.

‘Responsible Person’ shall mean a person authorised by You to be responsible for the security of the Premises.
​

The crux of the post is, indeed, related to the opening hours which is not, per se, an insurance matter. However the rogue directors are, deceitfully, attempting to demonstrate a necesstity for the attendance of an expensive staff member to justify this significant reduction in opening hours to save costs. This is clearly not the case.

You're quite correct with respect to the policy's provision of a legal helpline specifically, in this instance, in respect of Commercial Legal Expenses indemnity. Indeed, this section specifically states:

"There will be no cover under this Policy unless You have sought and followed the advice of the Legal Helpline as to the procedure to be adopted and have received specific authorisation from the Legal Helpline:"​

By miraculous coincidence the first named scenario is

1) Before carrying out any disciplinary procedure or action
​

Which is precisely the scenario which has led to our commencement of litigation action as detailed throughout this thread. Further we have good reason to believe that the rogue directors did, indeed, commence the disciplinary procedures without obtaining authrisation under this policy. Consequently we believe that their cover under the policy has been invalidated and that they have been refused cover.

This will have to be revealed soon either way.

 

[Frank the Insurance guy]

The Legal Expenses cover is usually as an extension of the main insurance contract and is usually with a third party specialist legal insurance provider (DAS and ARAG are the most popular).

Invalidating of the legal expenses insurance, will not usually have any bearing on the main policy cover, which will remain in force.

The requirement to seek advice in advance of any Disciplinary procedures referred to may only apply to employment related matters and not wider "business issues".

 

[prophet01]

@Frank the Insurance guy
Fully appreciate that you don't have sight of the policy.
For anyone who might be interested here she is: Sport & Leisure Policy

The Legal Expenses cover is usually as an extension of the main insurance contract and is usually with a third party specialist legal insurance provider (DAS and ARAG are the most popular).

Indeed, the policy's Section 11 Commercial Legal Expenses cover is separately insured, by Inter Partner Assistance, owned by AXA.

The requirement to seek advice in advance of any Disciplinary procedures referred to may only apply to employment related matters and not wider "business issues".

Hmm, interesting, in strictly contractual terms. There appears to be no allusion whatsoever to any part of Section 11 Commercial Legal Expenses being restricted to employment matters. The precise wording at the head of the section is:

"There will be no cover under this Policy unless You have sought and followed the advice of the Legal Helpline as to the procedure to be adopted and have received specific authorisation from the Legal Helpline:
1) Before carrying out any disciplinary procedure or action"
​

The word 'any' being the clincher for me.
Further, the section confirms that indemnity is provided not only in respect of employment disputes but also in many other areas e.g. bodily injury, contract, debt recovery , property protection etc.

Of course, my interpretation might be wildly inaccurate though I do administer high value construction contracts.

 

[Frank the Insurance guy]

Hi @prophet01 ,

Thanks for sharing the wording.

You're right - the wording does show that the club must take the advice of helpline on any disciplinary procedure or action for the Legal Expenses policy to operate. If they haven't done so, Insurers could walk away from any claim, leaving the club to fund any defence and legal costs themselves.

 

[prophet01]

@Frank the Insurance guy
Appreciate the input.

Further we have good reason to believe that the rogue directors did, indeed, commence the disciplinary procedures without obtaining authrisation under this policy. Consequently we believe that their cover under the policy has been invalidated and that they have been refused cover.

Our "good reason to believe" being:

• The insurers' representative solicitor, having acknowledged receipt of our letter of claim and WP letter, wrote requesting an extension of time for response and stated "policy indemnity in respect of this matter has not yet been determined"
• Following our subsequent correspondence requesting confirmation of whether or not they will cover the club the insurers' representative solicitor's response stated "we are instructed by the liability insurance provider albeit that policy coverage has not yet been determined. There is no requirement for us to disclose the details of that Insurer at this time."

Curiouser and curiouser.

 

[prophet01]

UPDATE:
As a direct consequence of her several requests to be provided with the club's insurance documentation and questioning the controlling group of directors' insurance related justification for their illegal reduction of the the club opening hours so significantly, the only remaining "independant" director (newly appointed in January) has effectively been prevented by the chairman from taking part in the club's management

At the board neeeting of two weeks ago the chairman, with the clearly deliberate intention of sidelining the three ("independants") of the six recently appointed directors, tabled a motion of confidence in him knowing that he would win the vote having three of the six new directors as loyalists plus the original three others.

Immediately on winning the vote the chairman demanded the resignation of the two independant's who voted against him. Cowardly, in my view, the two males duly obliged and left the Zoom meeting leaving the female alone to face the now hostile group of seven directors.

She'd challenged the legitimacy of the vote of confidence on the basis that it had been politically motivated folllowing her submission of formal complaint against the chairman's bullying behaviour in a recent email exchange surrounding the above mentioned insurance matter. Also on the basis that this was not an appropriate mechanism for addressing a formal complaint.

Following her continuing refusal to resign at the hostile behest of the chairman and one of the new loyalist directors the chairman tabled a motion to transfer, in my view abusing the Articles, all the business of the club to a new "Management Committee" consisting of only the supporting directors. Of course all of the other directors voted for the motion. She refused to participate.

On winning the motion the chairman duly closed the board meeting stating that the first meeting of the newly formed "Management Committee" would be convened via Zoom in the next 5 minutes leaving her out.

Of course all this was planned in advance by the chairman knowing that he would have the support of the majority loyalist directors. Propaganda minutes announcing the two directors' resignations and the setting up of the new "Management Committee" were published to members a few days later.

 

[WaveJumper]

This really has become a major saga who would have ever thought being a member of a sports club could be so complicated ...... best of luck with it all and keep the updates coming

 

[prophet01]

@WaveJumper
Saga indeed, and continuing. Rest assured that matters are far more complicated than I've revealed. I don't wish to overload.

Appreciate the expression of support and of your wish to be informed of developments, as others have both publicly and privately. As I've stated above it's quite theraputic and I believe the information provided will be a valuable resource to UKBF members in future.

 

[prophet01]

Since issuing to the club's directors in February our letter of claim and without prejudice letter of ADR, in accordance with the Practice Direction, requesting a substantive response within two weeks all we've received is a letter from a Casualty Adjustor working for a claims management company who has thus far confirmed;

• that they've been instructed by the liability insurance provider to undertake enquiries into the alleged claims against the club, without prejudice to policy indemnity.
  
• that policy coverage has not yet been determined.
• refused to tell us who is the insurer, though we've established that regardless.
• that they reserve their position wrt to our without prejudice offer of ADR on the basis that legal liability has not yet been determined.
  
• they consider the matter complex therefore require the full 3 months allowed by Practice Direction for response to the letter of claim.

As mentioned earlier the above suggests that the actions of the directors might have invalidated the club's legal indemnity insurance provision.

Additionally seperate, but ultimately linked, litigation commenced earlier by another party in respect of extraordinary actions by the same directors appears to be being handled by the directors themselves without any insurance representative involvement. Considering that this seperate action has now so advanced as to have had an Employment Tribunal hearing date set, again, strongly suggests that they've, by their unreasonable actions, invalidated the club's legal indemnity insurance provision in this instance too.

Told you this was far more complicated than previously revealed.

Anyway, regardless of the directors' (club's) insurance representative's delaying tactics, we've pressed on by issuing instructions to councel (Barrister) requesting advice and conference in respect of the merits of our proposed litigation.