Registered industrial and provident society — Transfer of property, assets and engagements — Whether transfer including benefit of building contract where contract prohibiting assignment without consent of other party — Section 51(1) of Industrial and Provident Societies Act 1965 — Judge holding benefit not transferred — Appeal allowed
The appellant was a society that was registered under the Industrial and Provident Societies Act 1965. The first respondent was a contractor employed by the appellant’s predecessor, also a registered society, to carry out a construction project under a JCT standard form building contract. The contract prohibited its assignment by either party without the written consent of the other. The employer society subsequently transferred its entire property, assets and engagements to the appellant by special resolution, pursuant to section 51(1) of the Act. Section 51(1) provided that property transferred under such a resolution would vest in the transferee society without any conveyance or assignment.
The appellant alleged breaches of the first respondent’s obligations under the building contract and sought to recover damages. The matter was referred to the second respondent arbitrator for arbitration. A preliminary issue arose as to whether the transfer to the appellant had been effective to vest in it the employer’s rights under the building contract, given the prohibition against assignment without written consent contained in that contract. The arbitrator concluded that it had, but that decision was overturned on an appeal by the first respondent: see [2005] EWHC 1601 (Ch); [2005] PLSCS 146. The judge held that the transfer had the effect of an assignment for the purposes of the contractual prohibition and that section 51(1) could not operate to override the contractual rights of third parties. The appellant appealed, contending that the statutory force of section 51(1) overcame the express restriction on assignment in the contract.
Held: The appeal was allowed.
Section 51(1) was framed in very wide terms, and, read in its ordinary and natural sense, it envisaged that there could be a statutory assignment of both the rights and the liabilities of the transferring society. The purpose of section 51(1) was to enable one registered society to transfer to another its engagements and property with the minimum of formality simply by passing a special resolution, which would have the stated consequence of vesting the transferor’s property without the need for a conveyance or assignment. The language of a “transfer of engagements” was broad enough to include a society’s liabilities to, and rights against, its members and third parties, and to cover contracts that would not ordinarily be transferable without the consent of the other party. Although the transfer by special resolution was an “assignment” within the meaning of the building contract, the force of section 51(1) vested the benefit of that contract in the appellant despite the prohibition against assignment, and dispensed with the need for the first respondent’s consent: Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014 distinguished.
David Mabb QC (instructed by Tods Murray LLP, of Edinburgh) appeared for the appellant; John Ross QC (instructed by Squire & Co) appeared for the first respondent; the second respondent did not appear and was not represented.
Sally Dobson, barrister
