Blog article

Dealing with disputes in co-operative societies

When a disagreement occurs in a co‑operative, it’s always best to have procedures in place to help resolve the dispute so the co‑op can move forward. Anthony Collins Solicitors have provided an outline of the considerations societies should make when they find themselves in this situation.

Internal procedures
It’s important to remember that the main registrars for co‑operatives, namely the FCA and Companies House don’t deal with disputes between societies and their members. It’s for the co‑operative to provide its own processes to deal initially with disputes with its members. These include:

  • Speaking to staff or management
  • A formal complaints system
  • Mediation or negotiation
  • Arbitration
  • Court action

Direct discussion without a mediator
Staff should be trained to deal politely and effectively with complaints, queries or problems at the earliest stage, so that the members are clear that the complaint has been taken seriously and properly considered.

Formal complaints system
The objective is for members to have their concerns dealt with properly, even if the complaint is not upheld. The scale of a formal complaints system will depend on the size of the co-op. Key elements are:

  • A well-publicised complaints system – in person, by phone, by email, on a website or by letter
  • Clarity about whose job it is to deal with the complaint at each stage
  • Escalation of complaints that have not been resolved to another level of the system

Mediation and negotiation
A form of mediation or negotiation may be helpful as a next step if no resolution has been possible using less formal methods. Mediation is guided by a mediator and seeks agreement to resolve the dispute.

Co‑operatives UK can help lead a confidential and independent process to support co‑operatives, assisting communications and helping parties negotiate compromises and reach binding resolutions. For more information on how we can support your co-operative contact Co‑operatives UK’s advice team on email or by phone 0161 214 1772.

If the case gets to court, mediation will be strongly encouraged at that point. If a co‑op (or member) refuses to try mediation, they may have to pay both sides’ legal costs.

Arbitration
For societies, a dispute between a co‑op or an officer of the  co‑op and one of its members can be resolved by using arbitration under a provision of the society’s rules. This is a time-honoured approach and has been used throughout co‑op history. Under section 140(1) of the Co‑operative and Community Benefit Societies Act 2014 (CCBSA 2014) a decision made under the society’s rules is binding on the member and the society, can be enforced in court and cannot be appealed.

Arbitration is by an independent person with or without earlier mediation between the parties. A society using Co‑operatives UK’s model rules will use an arbitrator agreed by the parties or, if they do not agree an arbitrator, one nominated by the Secretary General of Co‑operatives UK. A member bringing a dispute may be required to deposit an amount up to £100 set by the society’s board. The arbitrator will decide what happens to this deposit and how the arbitration costs are to be paid on deciding the dispute.

Some society rules that have not been updated in recent years may still name the Financial Conduct Authority (FCA) or, in the case of a credit unions, the Prudential Regulation Authority (PRA) as the arbitrator. Neither the FCA nor the PRA will take on this role. If that happens, the dispute goes to the County Court – or the Financial Ombudsman Scheme if it applies, for example, in the case of a credit union.

The process of conducting an arbitration under the society’s rules is governed by either the Arbitration Act 1996 (AA1996) or, the Arbitration (Scotland) Act 2010 (A(S)A 2010). In each case, the CCBSA 2014 or the rules of the society can make different provisions about how the arbitration is conducted. In England and Wales and Scotland, the Arbitration Act sets up a broad framework within which the arbitrator decides on procedure, awards costs and regulates the process.

Arbitration is also widely used to resolve contractual disputes about the society’s external business or consumer contracts. The contract between the parties will then, together with the arbitration legislation, govern the conduct of the arbitration.

The legislation gives many powers to the arbitrator – including making procedural orders, for example, to insist on sworn evidence or documents. If a party doesn’t comply with the arbitrator’s order straight away, he or she can set a deadline and then either decide on the information available or enforce the order in court. A party that disobeys the arbitrator’s order may have to pay higher costs.

An arbitrator appointed under the society’s rules must either say they are willing to or just start acting. At this stage the arbitrator’s fees will be agreed and a statement about who the parties are, what the dispute is, and what has to be decided is made so that the arbitrator can check their power to act.

The arbitrator decides on the process, subject to what the society’s rules say. In every arbitration, each party must be able to present their case, with both evidence and arguments, and be told the case against them so that they can answer it. That can be done through a hearing, exchanging of documents or a mixture of the two. The arbitrator then makes an “award”. That is binding on the parties, cannot be appealed and is enforceable in the courts under CCBSA 2014 s140.

In general, arbitrators are paid by the parties. Sometimes that will be at an hourly rate. That may make going to court a more attractive option. Only a court fee has to be paid to start a claim there.

Using the courts
Societies can deal with disputes, particularly with outside parties, by going to court. That might also be available for a dispute between a society and a member. The County Court is used in England and Wales. Similar procedures apply in the Sheriff Court in Scotland for claims under £5,000.

In England and Wales claims can be made either online or on paper if the amount claimed is less than £100,000. Claims above that limit (or for an unknown amount) must always be made through the paper form and the court fee is slightly higher. The fee levels are:

Claim amount Paper form fee Online claim fee
Up to £300 £35 £25
£300.01 to £500 £50 £35
£500.01 to £1,000 £70 £60
£1,000.01 to £1,500 £80 £70
£1,500.01 to £3,000 £115 £105
£3,000.01 to £5,000 £205 £185
£5,000.01 to £10,000 £455 £410
£10,000.01 to £100,000 5% of the claim  4.5% of the claim
£100,000.01 to £200,000 5% of the claim  You can't make a claim online
More than £200,000 £10,000 You can't make a claim online

 

 

 

 

 

 

 

 

 

 

Those amounts are charged for starting the court claim. Further court fees will be payable if, for example, a judgement needs to be enforced after it has been given.

If a claim is for a late commercial payment by another business, interest at the rate of 8% plus the Bank of England base rate can be added. For other debts, interest is only 8% per annum. In both cases, daily interest can be charged at one 365th of a year’s interest.

After the claim has been launched in the court, the society will be told by the court (by letter or email) the date by which the other party must respond. If they pay at that stage, the society must inform the court. In the case of an online claim, it can either email [email protected] or update the file on the money claim online service. In the case of a paper claim, it must inform the court where the claim was issued. In each case, the information should include the date on which the society was paid and its court reference number.

If the society gets no response to its claim, it can ask the court to order the defendant to pay. That is done by requesting a judgement. For an online claim, use request form N225. For a hard copy claim, use form N227.

If the response disputes the claim, this may result in a court hearing. Initially, the court will send a questionnaire seeking more information about the claim. At that stage, if the claim is for less than £10,000, the society will be invited to use the court’s mediation service – see civilmediation.justice.gov.uk. At this stage, a further fee will have to be paid. It’s important to engage with the mediation process as costs will be refused if no effort has been made to settle the case.

If the case is heard in court, a society (or company) will have to be represented by a solicitor or barrister because, as a corporate body, the society cannot represent itself. An individual can appear in person on their own behalf, with or without a friend to advise them.

If the society wins the case, it gets a court judgement ordering the other party to pay the amount stated. If they fail to do so, it may be necessary to pay further costs to enforce payment, for example, by using bailiffs or getting an order directly over the debtor’s bank account or land.

Conclusion
Whilst the above outlines the dispute resolution processes available to a society, advice should be sought, preferably earlier in a potential dispute situation rather than later. If a society has any questions in relation to disputes, contact Co-operatives UK's advice team – contact details are below. 

We have worked with our lawyers Anthony Collins Solicitors to produce this blog, to keep our members up to date with legal matters that affect co-operatives. Co‑operatives UK’s advice team are on hand to provide support to our members. Contact the team by email at [email protected] or by phone on 0161 214 1772. 

Written by Anthony Collins Solicitors
Updated: 03/07/2019