Unincorporated associations in English law

Unincorporated associations in English law have a series of features that demarcate them from other areas of English law. An unincorporated association consists of two or more members bound by the rules of a society which has at some point in time, been founded.

Several theories have been proposed as to the way that such associations hold rights. A transfer may be considered to have been made to the association's members directly as joint tenants or tenants in common. Alternatively, the funds transferred may be considered to have been under the terms of a private purpose trust. Many purpose trusts fail for want of a beneficiary and this may therefore result in the gift failing. However, some purpose trusts are valid, and, accordingly, some cases have decided that the rights associated with unincorporated associations are held on this basis. The dominant theory, however, is that the rights are transferred to the members or officers absolutely, perhaps on trust for the members, but are importantly bound by contracts inter se.

Accordingly, on dissolution, the distribution of these rights depends on how they were held. A purpose trust may by its nature survive the dissolution of the association, or it may not. If it fails as a result of the dissolution, then the rights will be held on resulting trust for the contributors, unless they can be shown to have renounced their right to such a trust in their favour. If the rights are held subject to contract, then they will be divided among the surviving membership upon dissolution, according to the terms of the contracts inter se or an implied term according to contribution. If, as a result of this contract or statute, no member can claim, the rights will pass to the Crown as bona vacantia. This conclusion has also been suggested where the association dissolves because only one members remains, although this has been doubted by some commentators who believe the last members should be entitled to the rights.

Definition

One definition of an unincorporated association was given by Lord Justice Lawton in Conservative and Unionist Central Office v Burrell: "'unincorporated association' [means] 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."[1] The essential elements are that there exist members of the association; that there is a contract binding them inter se; that they have a common purpose which is not business; and that there must have been a moment in time when a number of persons came together to form the association.[2]

Nature of held rights

There have been several theories proposed as to how rights, such as assets, are held by voluntary associations.[2] Unlike legal persons, voluntary associations are incapable of holding rights themselves.[3]

The first, and oldest, is that rights transferred to a voluntary association are held by the current members of the association as joint tenants or tenants in common. This has the result that the member can receive his or her own share (allowing for severance in the case of joint tenants) irrespective of the other members.[2] In Bowman v Secular Society this construction was even applied to a gift given to be applied for the general purposes of the association. It is difficult to imagine, however, that this construction would be correctly applied in the case of a philanthropic society where construing the gift as one to the members would contradict its stated purpose.[4] There is also the possibility that the gift is to the current and future members of the society, which, by operation of the Perpetuities and Accumulations Act 1964 will operate for the benefit of those members within the perpetuity period.[5]

The second alternative is that the gift is to the trustees, or those officers who might properly be considered trustees, to be held on trust for the purposes of the association in a private purpose trust. As a result, many such gifts will fail for want of a beneficiary capable of enforcing the terms of the trust, as with private purposes trusts generally.[5] However, the decision in Re Denley's Trust Deed allows for some trusts of this type to be held valid, and, accordingly, the case of Re West Sussex Constabulary's Widows, Children and Benevolent (1930) Fund Trusts applied this construction to the rights held by an unincorporated association.[6] Reform to purpose trusts, such as making such a trust enforceable by a named individual (the chairman or treasurer, for example) rather than by a beneficiary (of which there may be none) would impact the role of the purpose trust in the voluntary association context.[7]

The third alternative is that members hold beneficially, but are bound by contracts inter se as to their ability to receive their own share. That share is considered to pass to the other members of the association upon the death or resignation of the member.[5] The holding may then either be considered absolute, or on trust for the membership as a whole, but it is the role of contract in each case to determine the rights of members, including the officers, to apply the money.[6] This approach was favoured in Re Recher’s Will Trusts in relation to a gift to the Anti-Vivisection Society, although, on the facts, that society was considered no longer in existence and the gift failed for this reason.[8] One statement of when such an absolute gift will be considered to have been made was given in Re Lipinski’s Will Trusts: "Where the donee association is itself the beneficiary of the prescribed purpose... the gift should be construed as an absolute one... the more so where, if the purpose is carried out, the members can by appropriate action vest the resulting property in themselves, for here the trustees and the beneficiaries are the same persons." Another statement of the principle came in Hancett-Stamford v Attorney General, where Lewison J stated: "the property of an unincorporated association is the property of its members, but that they are contractually precluded from severing their share except in accordance with the rules of the association... this kind of collective ownership must, in my judgment, be a sub-species of joint tenancy, albeit taking effect subject to any contractual restrictions applicable as between members."[9] It is now considered the dominant theory in the field.[10]

The question of which construction applies to a particular transfer must be ascertained in any particular case. A donor could decide on what basis he or she was transferring the rights to the association; however, this is rarely considered by donors and thus which construction applies is often affected by the judge's own beliefs as to common practice.[11] In some situations the situation is clearer: monies paid pursuant to a contract, such as raffle tickets and members' subscriptions, are normally taken to fall inside the third category; as Goff J explained in the West Sussex case: "First, the relationship is one of contract and not of trust. The purchaser of a ticket may have the motive of aiding the cause or he may not... Secondly, there is in such cases no direct contribution to the fund at all. It is only the profit, if any, which is ultimately received, and there may even be none."[11] Simon Gardner has argued that the principle behind such a conclusion is that the ticket purchaser was not at liberty to choose to transfer the money to be held on a purpose trust. There are situations where a contract enforced a payment on trust, such as Quistclose trusts and marriage settlements, that might be relevant to unincorporated associations. In particular, he suggests that an employer's obligation to pay into a pension pot, as occurred in Davis v Richards and Wallington, for example, might fall into this category.[12]

Distribution of rights upon dissolution

It follows from the definition of a voluntary association that when only one member remains the association must dissolve.[13] The distribution of rights in such a case depends upon the nature of the holding of the rights.[14] In addition, in the case of the contract holding theory, such a contract cannot exist between only one party. The association may dissolve for reasons other than there being only one member.[13]

If the purpose trust construction is preferred, then the dissolution of the association will not necessarily bring an end to the purpose trust, dependent upon whether the association is the "essential mechanism" of the purpose. If the purpose trust survives the winding up of the association, then new trustees may need to be appointed. The West Sussex case considered the effect of the association's dissolution on the rights held by the trust where the trust did indeed fail. In such a case, the monies paid to the association will ordinarily be held on resulting trust for the contributors. However, there may be situations (including money collected through collection boxes) where the contributor can be said to have "disclaimed" the resulting trust and it will be considered bona vacantia.[6]

If the contract theory is preferred, then the rules of the association will govern the distribution of the rights held by the association.[6] These rules may contain an express term relating to the dissolution of the society, in which case it is considered operative. If not, a term can be implied as to the arrangements, as happened, for example, in Re Bucks Constabulary Widows and Orphans Fund Friendly Society (no 2). This will normally divide the rights up equally among those who were members at the time of dissolution. In the case of dissolution for lack of members, obiter comments in the case indicate that the rights will pass to the Crown as bona vacantia, because, at the time of dissolution, there are no remaining members.[11] That conclusion, however, has been contested by those who believe beneficial ownership by the last surviving member is more appropriate.[13] There may be cases where, as a result of the contractual obligations of the members, no member can claim the assets of the association upon dissolution and the Crown will therefore be entitled to them as bona vacantia.[15]

In the Bucks case it was suggested that a term indicating some method of distribution would be implied as a matter of course; in particular, Walton J attempted to bring Cunnack v Edwards and West Sussex within the proposed model of implied terms, rather than by distinguishing them.[16] This approach was not taken in Davis v Richards and Wallington where Scott J did not discuss implied terms directly when holding that the rights were now bona vacantia. This, Simon Gardner has noted, hints at a return to the case by case, 'eclectic', approach previously favoured by the courts. Instead, he says, they should pursue a set of implied terms that differ according to the nature of the society (social club or pension fund, for example).[17]

References

  1. ↑ Conservative and Unionist Central Office v Burrell [1982] 1 WLR 522
  2. 1 2 3 Pettit (2008). p. 62.
  3. ↑ Green (1980). p. 627.
  4. ↑ Pettit (2008). pp. 62–63.
  5. 1 2 3 Pettit (2008). p. 63.
  6. 1 2 3 4 Gardner (1992). p. 42.
  7. ↑ Hayton (2001). pp. 99–100.
  8. ↑ Pettit (2008). pp. 63–64.
  9. ↑ Pettit (2008). p. 64.
  10. ↑ Ashdown (2012). p. 617.
  11. 1 2 3 Gardner (1992). p. 43.
  12. ↑ Gardner (1992). pp. 44–45.
  13. 1 2 3 Pettit (2008). pp. 64–65.
  14. ↑ Gardner (1992). p. 41.
  15. ↑ Pettit (2008). p. 65.
  16. ↑ Gardner (1992). pp. 47–48.
  17. ↑ Gardner (1992). p. 49.

Bibliography

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