Labour v Labour: The courts' resolution of political disputes

The summer of 2016 has seen the totemic vote to leave the EU, the replacement of a prime minister, and the proposal of sweeping educational reforms. However, these events were eclipsed by the dramatic descent of the Labour party from a plausible government-in-waiting to an institution teetering on the precipice.

Labour's turmoil became inevitable from the moment its members elected the outwardly amiable leftist activist Jeremy Corbyn as leader. Since his election followers of politics have been kept on the edge of their seats by a relentless series of confrontations as the hard-left tightened its grip on the party. Now Corbyn and his comrades have what they sought for over 30 years: the chance to transform Labour into a populist insurgency.

Levels of acrimony have been unprecedented, with Corbyn and his supporters accused of being terrorist sympathisers and anti-Semites. In return, Corbyn's chief lieutenant, John McDonnell, has labelled rebellious MPs as 'f***ing useless' and a 'narrow right-wing clique with far-right views'. Leading Labour figures now use the phrase 'internecine war' as a polite euphemism.

This political civil war reached the courts on two occasions over this summer. The judgments in those cases bear analysis from a legal perspective, as well as a political one, as they contain important guidance for solicitors advising unincorporated associations like the Labour party. They should also serve as a salutary warning for all groups seeking to organise their affairs in such a manner.

Many organisations, from football clubs to religious groups, are set up as unincorporated associations. These were defined by Lord Justice Lawton in Conservative and Unionist Central Office v Burrell [1981] EWCA Civ 2 as 'two or more persons bound together for one or more common purposes, not being business purposes, by mutual undertakings, each having mutual duties and obligations, in an organisation which has rules which identify in whom control of it and its funds rests and upon what terms and which can be joined or left at will'.

The key feature of an unincorporated association is that it has no separate legal personality from that of its individual members. The relationship between the members of an unincorporated association is governed by contract law, with the contract between all members found in the rules of the association. If a dispute occurs it is to be resolved by reference to the rules of the association. As a last resort any member can issue a claim against the other members for breach of contract. The courts will then interpret the contract in accordance with the well-established principles of contractual construction.

Foster v McNicol

In a deal struck with senior MPs in early 2016, Corbyn '“ until 2015 an arch-Eurosceptic '“ offered his support to Labour's campaign to remain in the European Union. He was, however, strongly criticised for his lacklustre performance during the campaign. It was evident to all that he was deeply uncomfortable offering personal endorsement to an institution he had long viewed as a capitalist cartel. The subsequent vote to leave was swiftly blamed, in part, on Labour's failure to persuade voters in their northern heartlands to vote remain.

Taking advantage of the disappointment of metropolitan Labour members, political moderates within the party decided the time was right to move against their leader. In an unprecedented series of events, 52 of Corbyn's shadow ministerial team resigned their positions and declared their leader unfit for office. The rebels subsequently received support from all living former party leaders. Soon afterwards 172 of the 232 Labour MPs joined the revolt in a declaration of no confidence. Corbyn, accused of displaying contempt for the judgement of his colleagues, combined with the sheer stubbornness of his movement, refused to stand down. A leadership challenge became inevitable.

The moderates' plan was to trigger a challenge under the party's rules, and for Corbyn to be forced to seek nominations from his parliamentary colleagues, to fail, and to then drop out of the race. The success or failure of this decapitation plan depended on the interpretation of the party's remarkably opaque rules. It was far from clear whether Corbyn required nominations or not. Both moderates and hard-left factions stressed that the party would be sued for breach of contract if their view was not upheld.

It fell to the party's National Executive Committee (NEC) to decide on the proper interpretation of the rules. Clause II.2B of the rulebook provided as follows:

i. In the case of a vacancy for leader or deputy leader, each nomination must be supported by 15 per cent of the combined commons members of the PLP and members of the [European Parliamentary Labour Party]. Nominations not attaining this threshold shall be null and void.

ii. Where there is no vacancy, nominations may be sought by potential challengers each year prior to the annual session of party conference. In this case any nomination must be supported by 20 per cent of the combined commons members of the PLP and members of the EPLP. Nominations not attaining this threshold shall be null and void.

On 12 July 2016, the NEC '“ including Corbyn and several of his close allies '“ met in a stuffy upstairs room in Westminster. After nearly ten hours of discussion and a bare majority vote, it was decided that the incumbent was not required to seek nominations. Corbyn and his most loyal allies left the meeting in triumph to shake hands and take selfies with supporters that had gathered outside. But that was not the end of the story.

Michael Foster, a wealthy Labour donor, activist, and parliamentary candidate, issued a claim against Ian McNicol the general secretary of the Labour party and head of the NEC. Foster alleged that the NEC had incorrectly interpreted the rule book and sought a declaration that Corbyn would need to seek nominations to stand for the leadership again. As Corbyn did not trust the centrist McNicol to represent his interests he successfully applied to be added to proceedings as a third party.

The case was heard on 26 July. Mr Justice Foskett endorsed the NEC's decision, declaring its interpretation correct. He ruled that: 'A fair reading of clause II.B.2 (i) and (ii) reveals a natural and ordinary meaning that seems to me to be entirely clear. My view of their combined effect can be summarised thus:

• Where there is a vacancy for Leader, anyone who wished to be considered for the position would require nominations from 15 per cent of the combined commons members of the PLP and EPLP in order to be a candidate in the election;

• Where there is no vacancy (because the leader is still in place), anyone who wishes to challenge the leader's right to continue as Leader would need nominations from 20 per cent of the combined commons members of the PLP and EPLP in order to mount such a challenge;

• The leader would not in that situation (where there is no vacancy) be someone who was a 'challenger' for the leadership and, accordingly, would require no nominations in order to compete in the ballot to retain his/her position as leader.'

• The judgment also provided clarity on several matters of broader relevance, including that:

• A clause in the rules of an unincorporated association purporting to oust the courts' jurisdiction to decide on the interpretation of the rules would have no effect;

• A key consideration when interpreting poorly drafted rules of an unincorporated association would be how they would be understood by an objective member of the readership to which they are addressed; and

• Historical precedents under previous incarnations of the rules would not be cogent evidence in support of any interpretation of the current rules.

Evangelou et al v McNicol

One High Court intervention into the workings of a political party may be unprecedented. Two has drawn claims by some of 'judicial activism'. After Corbyn left the 12 July NEC meeting in triumph, the remaining members of the committee imposed a rule that only those who had joined the party before 12 January 2016 would be permitted to vote in the upcoming leadership election.

The apparent rationale for this 'freeze date' was that members should not join the party simply to select a leader. Once the hard-left faction realised what had happened they cried foul, suspecting an underhand ploy to stop their supporters from voting.

Five Corbyn supporters, who had been denied the right to vote, issued a claim against McNicol for breach of contract. That claim was heard in the High Court on 4 August 2016. The applicants, with active support from Corbyn's team, argued that:

• The NEC was not entitled under the rules to limit the number of members who could vote;

• The rules only envisaged a 'freeze date' that was imposed prospectively; and that

• The rules should be interpreted in the context of a 2014 report by Lord Ray Collins that recommended widening the pool of voters.

Mr Justice Hickinbottom agreed with the claimants, granting declarations that a retrospective freeze date would be in breach of contract and that the NEC was not entitled to remove members' rights to vote.

McNicol, on behalf of the party, took the case to the Court of Appeal. The appeal was heard by a three-judge panel on 11 August 2016, with Lord Justice Beatson handing down a judgment overturning Hickinbottom's decision and noting that:

• Although the rules were poorly drafted, there was no reason to construe the phrase 'freeze date' as meaning 'prospective freeze date' when that was not expressly provided;

• The reasoning contained in the Collins review was irrelevant. It was not at all obvious that ordinary members of the Labour party would have been aware of the report. It did not form part of the admissible background used to construe the rules;

• Chapter 4, clause II (2) C (vi) of the rule book mandated the NEC to 'define' the 'precise eligibility criteria' for voting in leadership elections. The NEC was entitled to set out which members can vote and which can't '“ otherwise 'define' and 'eligibility criteria' would have no meaning; and

• Chapter 4(II) (1) of the rules '“ which empowered the NEC to vary any other rule for leadership elections '“ indicated that the committee's power to determine eligibility criteria was not intended to be limited.

Corbyn's allies were furious, declaring the decision wrong 'both legally and democratically'. McDonnell, shadow chancellor and fulcrum of far-left organisation in the party, accused the NEC of 'undermining the democracy of our own party' through a 'grubby little device'. Despite this, the claimants decided not to apply for permission to appeal to the Supreme Court.

Ultimately, Corbyn contested the leadership race over the summer against Owen Smith and won an overwhelming victory. McNicol, many members of the NEC, and the party's MPs may now consider their positions under threat as calls for deselections grow within the grass roots movement Momentum. In short, following a long summer of hatred, hustings, and court hearings, Labour finds itself in the same position '“ terminally divided and with the warring factions poised to re-engage in battle.

Key lessons

While they may not have advanced Labour's position, the two cases have provided welcome clarification for practitioners on the courts' approach to the construction of the rules of unincorporated associations. It is now clear that:

• An association's rules cannot oust the court's jurisdiction to construe them;

• The origins of the rules and previous versions will be of very limited relevance to how the court construes them;

• The court will consider the natural impression the rules would make on an ordinary objective member of the association;unincorporated associations

• Poorly drafted rules will have unintended consequences. Solicitors advising unincorporated associations should stress the importance of clear and precise rules. In particular, it is critical to include a comprehensive schedule of definitions;

• Time and money spent on professional drafting of an organisation's rules when it is being set up will save time and money on litigation when disputes arise; and finally

• The courts are neither an effective nor an appropriate venue to fight political battles.

Theo Barclay is a barrister practising at Hailsham Chambers and specialising in commercial litigation, professional negligence, and clinical negligence. His forthcoming 2017 book on politics and law is entitled Fighters and Quitters, published by Biteback Publishing

@Hailsham_Chamb