Dear Susan

As an active blogger on the succession to Peter Watt and the competences needed, I am obviously pleased that the NEC voted in favour of a candidate with financial planning skills, rather than a trade union fixer.

Sifting through reports here and elsewhere, a number of issues have resurfaced which Andy Howell and I wrote about in Chartist #230, namely:

1) NEC members liabilities, and
2) solvency

members have an absolute right to know what is going on, on both counts. Watch this space!

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I see that the Guardian has said:

One source ... said Pitt-Watson, a personally wealthy man, had become worried that as chief accounting officer for Labour he might be personally liable for any debts facing the party.

which backs up my suspicions above.

It would be great if a lawyer, perhaps Mark McDonald, would post here explaining the personal financial and legal risks for the General Secretary (and NEC members).

My amateur understanding is that as the Labour Party is an unincorporated association, it has a very limited legal existance, and the bulk of assets and debts are in law owned by trustees for the Labour Party. An unincorporated association cannot own land or buildings or have debts - the trustees hold those in law, but with the equitable benefit for the Labour Party. Maybe even the biros at HQ are in law owned by the trustees; I'm not sure exactly what an unincorporated association can own in its own legal name - maybe the borderline is when a non-trivial contract has to be made.

eg A legal action taken against the party was with "Watt (formerly Carter) (sued on his own on behalf of the other members of the Labour Party) (Respondent)". Not "Labour Party v. Ahsan" which would have been the case if the party was a body corporate.

So the party debts are currently possibly still in a contract with Peter Watt as trustee (or maybe a group of NEC members). When the new GenSec takes up his post he may have to sign paperwork assigning the debts across to himself as trustee, or that takes place automatically as an implied acceptance. [It is possible that the debts are in law with Labour Party Nominees Limited or Labour Party Properties Limited, in which case maybe there isn't such a serious risk to the GenSec.]

A possible difficulty is that maybe trustee law only really envisages trustees holding assets on behalf of others, I have a suspicion maybe trustees cannot take up debts beyond the value of assets. So perhaps the new GenSec might have to accept the debts not as a trustee, but in his own private name.

If you have compete confidence the Labour Party will be able to reorganise the debts without being sued, or you have few personal assets and don't much mind a small risk of going bankrupt, maybe there is no impediment to becoming GenSec - no-one is likely to sue you that far anyway. But if you are wealthy, and want zero risk of losing some of that, maybe the legal situation of being GenSec is very troubling, as you are a worthwhile target in an expensive legal action.

It is also possible that the exact legal situation has become confused through sloppiness in trustee transactions over the years, and there is uncertainty in the prospective GenSec's mind about the exact legal situation he is entering. And maybe only a horribly difficult legal action could establish exactly who is strictly liable for what.

Would a lawyer like to comment if my understanding of the law is in the right ballpark? Or am I off the wall and this is rubbish?

I would not be at all surprised if at next Conference there is a resolution to reform the party as a limited company of some form, as Tribune claimed was under consideration back in January.

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