BIM24788 - Meaning of trade: mutual trading and members clubs: mutual associations: specific activities: bulk buying groups - two relationships
A person trading with a body of which they are a member and which acts as principal has two distinct relationships with that body:
- there is the buyer-seller (or similar) relationship as regards their trading transactions with the body, and
- a member-society (or similar) relationship as regards their right to a division of the society鈥檚 distributable surplus.
Any surplus arising to the body from buyer-seller transactions where it acts as principal are profits earned by the body itself. They do not represent the surplus of members鈥� funds not required for the realisation of the joint purpose. Such transactions are not mutual trading.
This follows from Lord Normand鈥檚 remarks in the English & Scottish Joint Co-operative Wholesale Societies Ltd v The Commissioners of Agricultural Income Tax, Assam [1948] 19 AC 405 (see BIM24786).
鈥樷€here was a dual relationship between the appellant and its members鈥 mutual creditor debtor relationship and鈥 buyer/seller relationship鈥︹€�
Rather than there being a common fund to which the members contributed and in which they participated. Lord Normand went on to say:
鈥楾he principles of the Styles (see BIM24035) case cannot apply to a body which grows produce on its land or manufactures goods in its own factories鈥nd sells its goods to its members exclusively.鈥�