Compulsory transfer of an RSL’s stock

In 2000 the Housing Corporation directed an inquiry into Clays Lane Housing Cooperative. It received a report of mismanagement in March 2001. The corporation proposed its stock be transferred to the Peabody Trust (see opposite). After a legal challenge, the corporation agreed to look at the matter again. Clays Lane suggested that its stock be transferred to Tenants First, the UK’s largest mutual housing co-op, which is based in Scotland.

The corporation’s board rejected that and again directed transfer to Peabody. Clays Lane sought a judicial review claiming that the decision interfered with its human right to peaceful enjoyment of its possessions and its members’ human rights to freedom of association with each other. It said that by the date of decision, the corporation should have been aware of Peabody’s financial difficulties and not directed a transfer to that trust.

The judge rejected the challenge. He decided the board had acted lawfully in concluding that the public interest in a transfer to Peabody outweighed the co-op’s right to dispose of its property as it wished. Members’ rights to free association would end because the co-op would cease to exist, not because of any interference by the corporation with their rights. There was no rational basis for the claim that the corporation’s officials knew of Peabody’s financial difficulties when the decision was made in July 2003.