Registered industrial and provident society — Transfer of property, assets and engagements — Whether arbitrator correct that transfer including benefit of building contract where contract containing prohibition against assignment without consent of other party — Section 51(1) of Industrial and Provident Societies Act 1965 — Appeal allowed
The appellant was engaged as a contractor under a building contract in JCT standard form. The contract provided that neither the employer nor the contractor could assign the contract without the written consent of the other. The employer, a registered society, later transferred the whole of its property, assets and engagements to the respondent by special resolution, pursuant to section 51(1) of the Industrial and Provident Societies Act 1965. Section 51(1) provides that where such a resolution approved the transfer of property, that property would vest in the transferee society without any conveyance or assignment.
The respondent subsequently sought damages against the appellant for breach of its obligations under the building contract. In arbitration proceedings, a preliminary issue arose as to whether the transfer to the respondent had been effective to vest in it the employer’s rights under the building contract, in the light of the prohibition against assignment without written consent contained in that contract. The arbitrator concluded that the employer’s rights under the building contract had vested in the respondent pursuant to section 51(1) because: (i) the transfer did not constitute an assignment as envisaged by the building contract; and (ii) even if there had been an assignment, section 51(1) overrode the restriction on assignment contained in the contract. On appeal from that decision, the appellant contended that, inter alia, the property transferred under section 51(1) was only that property with which the employer had the right to deal without obtaining the consent of some third party.
Held: The appeal was allowed.
Section 51(1) did not override the prohibition on transfer contained in the building contract. It did not have the effect of overriding the contractual rights of third parties. There was no reason of policy why parliament would have intended an industrial and provident society to have the exceptional power, exercisable in the entirely unregulated circumstances of a transfer by special resolution, to render alienable a chose-in-action that it, and its contractual counterpart, had legitimately declared by their contract to be inalienable. The appellant’s contention was accepted, by analogy with the provisions of section 154 of the Companies Act 1929: Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014 applied.
The contractual prohibition against assignment was engaged by the transfer. The word “assignment” connoted an inter vivos disposition by one party in favour of another as an act of their joint volition: Marsh v Gilbert [1980] 2 EGLR 44; (1980) 256 EG 715 applied. It was precisely that result that the employer and the respondent had intended the special resolution to achieve in respect of, inter alia, the benefit of the building contract. It made no difference that the transfer would extend to obligations owed by the employer as well as to property and rights, or that the resolution would not be effective without registration.
John Ross QC (instructed by Squire & Co) appeared for the appellant; David Mabb QC (instructed by Tods Murray LLP, of Edinburgh) appeared for the respondent.
Sally Dobson, barrister
