The recent decision in the unreported case of Davies v Barnes Webster & Sons Ltd serves as an important reminder of the liability of committee members of unincorporated associations.
Barnes Webster & Sons Ltd, a firm of builders, had been contracted to carry out works for a rugby club. Mr Davies was the club’s president and a member of the management committee. The contract, which was signed by the club’s treasurer and witnessed by Mr Davies, provided for payment by the club of an agreed sum plus other sums which might become payable under the contract.
The building work was completed and the agreed sum paid by the club. However an additional £147,000 for agreed variations was not paid by the club.
Barnes Webster & Sons Ltd served a statutory demand on Mr Davies in respect of the additional sum. Mr Davies applied to have the statutory demand set aside on the basis that he was not personally liable for the debt.
The district judge refused Mr Davies’ application and held that he was liable as he had been kept informed about the progress of the contract and had raised no objections; he had voted at the club meeting in favour of entering into the contract; he had witnessed the signing of the contract; and he was a trustee of the club.
Mr Davies appealed against the district judge’s decision. However, his appeal was dismissed by the Chancery Division.
The court held that, on the face of it, a member of an unincorporated association is not personally liable for the acts of those who entered into contracts on behalf of the association. Instead, liability is to be determined on who had authority under the rules of the club.
In this particular instance, it was the management committee who had been entrusted with the affairs of the rugby club and, without evidence to the contrary, the court inferred that the club’s treasurer was acting on the authority of the committee when entering into the building contract.
As a result, the members of the club’s committee were personally liable under the contract and the builder had the right to seek payment from Mr Davies as a member of the committee. The court did have some sympathy for Mr Davies however and granted him extra time to arrange for payment of the debt before the builder was entitled to commence bankruptcy proceedings against him.
It may come as a surprise to many committee members of unincorporated sports clubs that they could be held personally liable for their club’s debts. Whilst they will be only too aware that by accepting office they are expected to invest time and effort into helping to run their club, it is unlikely that they will appreciate the extent to which they are also accepting personal responsibility for meeting any debts which the club is unable to pay.
A creditor of a club which is an unincorporated association can “cherry pick” whether to seek payment from all of the club’s committee members or from the ostensibly better off committee members.