Tuesday, 29 January 2019

UK: England and Wales: terminating membership and an implied term

Judgment was given lat week in Dymoke v Association for Dance Movement Pyschotherapy UK Ltd [2019] EWHC 94 (QB) by Mr Justice Popplewell. The case concerned a company limited by guarantee and, in the context of a decision to terminate a member's membership, an argument based on the existence of an implied term concerning the manner of the termination. The trial judge held that an implied term existed and in doing so stated (paras. [60], [61] and [65]):
.... generally an implied term must not be inconsistent with any express term. The duty to act fairly in relation to decisions to terminate membership of a company must be consistent with the articles of association and with the fiduciary duties of the directors. However, I see no difficulty in the content of the duty of fairness in any given circumstance being fashioned to ensure such consistency. It is common ground in this case that the contract included the terms of the Ethics Code and Complaints procedure which confer powers to impose sanctions ranging from reprimand through suspension to withdrawal of registration and termination of membership. In the context of an organisation such as ADMP, there is every reason to treat those decision-making powers as subject to an obligation of procedural fairness in just the same way as would apply to decisions of a public body. Indeed one would only have the now out of fashion officious bystander ask, "Can the Council act unfairly in deciding to terminate membership?" for the testy suppression "of course not" to be forthcoming.

Expressed in this way, there is no inconsistency between implying a duty of procedural fairness and the fiduciary duties of a director, which include now those now statutorily defined in s. 172 of the Companies Act 2006.

I conclude that it was an implied term of the contract between ADMP and Ms Dymoke that she would be treated fairly in relation to her termination; and in particular that she would be informed of the complaints or concerns in sufficient detail to enable her to respond to them and would be given a reasonable opportunity to respond. That applies not only to the substance of the complaints or concerns, but also to the question whether they justified the sanction of termination of membership. Such a term satisfies the test in Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72; [2016] AC 742, and accords with public law principles and those which govern the exercise of a contractual discretion"

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