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Unincorporated Associations and Their Dissolution

Published online by Cambridge University Press:  16 January 2009

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The Bucks. Constabulary Widows' and Orphans' Fund Friendly Society was set up primarily to provide for the relief of the widows and orphans of deceased members of the Bucks. Constabulary. It was financed by voluntary contributions from the members. There was nothing in the rules about the destination of the society's property on its dissolution. In April 1968 the Thames Valley Constabulary came into being, an amalgamation of the Bucks. Constabulary and other forces. An effective instrument of dissolution of the society was signed on 14 October 1969; and Walton J. found himself facing in Re Bucks. Constabulary (No. 2) the question of “the destination of the assets of the friendly society …” Walton J. took the view that most past decisions “in relation to the destination of the funds of unincorporated associations” had “lost sight of” the “quite elementary … question of the property of unincorporated associations in the round.” He therefore proceeded to outline the general law on the holding of property by unincorporated associations as a necessary prelude to his decision on the destination of the funds. This was unquestionably the correct course to follow. It is suggested, however, that Walton J.'s view “in the round” on the holding of property by unincorporated associations is too simple, and that circumstances will arise in which a more complex problem on the destination of funds might arise, and which will surely call for a more complex answer. It must also be noted that Walton J. did not have to deal with the question of funds accruing to a society from outside sources, i.e., other than from the members themselves.

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Copyright © Cambridge Law Journal and Contributors 1980

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References

1 [1979] 1 All E.R. 623.

2 The fact of the Society's being a registered Friendly Society “does not have any effect at all on the unincorporated nature of the society, or … on the way in which its property is held” (per Walton J. at p. 628). See Friendly Societies Act 1896, s. 49 (1).

3 Ibid., at pp. 626 and 628.

4 Ibid., at p. 635.

5 See, for example, Re West Sussex Constabulary's Widows, Children and Benevolent (1930) Fund Trusts [1971]Google Scholar Ch. 1. Such cases will probably be quite rare.

6 [1900] 2 Ch. 326.

7 [1958] Ch. 300; affd. [1959] Ch. 62.

8 [1971] 1 W.L.R. 973.

9 [1962] Ch. 832, 849–850.

10 [1979] 1 All E.R. 623, 626.

11 See also Re Roberts [1963] 1 W.L.R. 406, 414Google Scholar (per Wilberforce J.); but distinguished in Re Finger's Will Trusts [1972]Google Scholar Ch. 286.

12 [1972] Ch. 300n.

13 Ibid., at p. 303.

14 (1967) 111 S.J. 758.

15 [1972] Ch. 286.

16 Ibid., at p. 295. The point also seems to have been accepted in Re Edis's Declaration of Trust [1972] 1 W.L.R. 1135, 1145Google Scholar (per Goulding J.).

17 Ibid., at p. 294 (emphasis supplied).

18 See general discussion in Pettit, P. H., Equity and the Law of Trusts, 4th ed. (1979), at pp. 228229.Google Scholar Also Cotterrell, R. B. M., “Gifts to Charitable Institutions: A Note on Recent Developments” (1972)Google Scholar 36 Conv.(n.s.) 198; and Martin, Jill, “The Construction of Charitable Gifts” (1974)Google Scholar 38 Conv.(n.s.) 187.

19 J. D. Davies (1972) A.S.C.L. at p. 260.

20 (1871) L.R. 12 Eq. 574.

21 Ibid., at pp. 584–585.

22 Ibid.

23 (1860) 2 De G.F. & J. 75.

24 [1969] 1 A.C. 514.

25 Ibid., at p. 541.

26 Charities Act 1960, s. 14, reads:

“(1) Property given for specific charitable purposes which fail shall be applicable cy-près as if given for charitable purposes generally, where it belongs—

(a) to a donor who, after such advertisement and inquiries as are reasonable, cannot be identified or cannot be found, …

(2) For the purposes of this section property shall be conclusively presumed (without any advertisement or inquiry) to belong to donors who cannot be identified, in so far as it consists—

(a) of the proceeds of cash collections made by means of collecting boxes or by other means not adapted for distinguishing one gift from another; or

(b) of the proceeds of any lottery, competition, entertainment, sale or similar money-raising activity, after allowing for property given to provide prizes or articles for sale or otherwise to enable the activity to be undertaken.”

27 See, particularly, the hospital cases: Re Welsh Hospital (Netley) Fund [1921] 1 Ch. 655Google Scholar; Re Hillier's Trusts [1954] 1 W.L.R. 9, 700Google Scholar (C.A.); Re Ulverston and District New Hospital Building Trusts [1956]Google Scholar Ch. 622.

28 [1979] 1 All E.R. 623.

29 Ibid., at p. 626.

30 Ibid., at p. 626.

31 [1969] 1 Ch. 373.

32 [1979] 1 All E.R. 623, 626–627.

33 [1972] Ch. 526.

34 [1979] 1 All E.R. 623, 628.

35 Ibid., at p. 628.

36 Ibid., at p. 629.

37 See Neville Estates Ltd. v. Madden [1962]Google Scholar Ch. 832; and Re Recher's Will Trusts [1972]Google Scholar Ch. 526.

38 [1979] 3 All E.R. 359. For a full discussion of this decision see the text at n. 95 below.

39 [1972] Ch. 526. See also Abbatt v. Treasury Solicitor [1969] 1 W.L.R. 561Google Scholar (reversed on appeal on a point of construction [1969] 1 W.L.R. 1575), per Pennycuick J. at p. 567.

40 Ibid., at p. 539.

41 Re Recher's Will Trusts [1972] Ch. 526, 535Google Scholar (perBrightman J.). In Re Grant's Will Trusts [1979] 3 All E.R. 359, 366–367Google Scholar, Vinelott J. pointed out that if a gift which falls within this class is confined within an appropriate period, and the members for the time being within the perpetuity period are free to alter the purposes of the association and distribute the income among themselves, it will be valid. It cannot fail on any other ground.

42 Neville Estates Ltd. v. Madden [1962] Ch. 832, 849Google Scholar (per Cross J.); Re Recher's Will Trusts [1972] Ch. 526, 535Google Scholar (per Brightman J.); Re Grant's Will Trusts [1979] 3 All E.R. 359Google Scholar, 364( per Vinelott J.).

43 [1959] A.C. 457.

44 Ibid., at p. 477.

45 [1933] Ch. 678.

46 [1917] A.C. 406.

47 [1979] 3 All E.R. 359, 364.

48 [1972] Ch. 526, 539–540.

49 In Re Recher, Brightman, J. cited Re Clarke [1901] 2 Ch. 110Google Scholar, Re Ray's Will Trusts [1936]Google Scholar Ch. 520 and Neville Estates to support this thesis. There are also strong hints in Re Smith [1914] 1 Ch. 937Google Scholar and Re Turkington [1937] 4 All E.R. 501.Google Scholar

50 [1962] Ch. 832.

51 [1972] Ch. 526, especially per Brightman J. at p. 539.

52 [1976] Ch. 235.

53 [1979] 3 All E.R. 359.

54 (1966) 114 C.L.R. 634. See, generally, Keeler, J. F., “Devises and Bequests to Unincorporated Bodies” (1966)Google Scholar 2 Adelaide L.R. 336; and Hogg, P. W., “Testamentary Dispositions to Unincorporated Associations” (1971)Google Scholar 8 Melbourne Univ. L.R. 2.

55 [1972] Ch. 526, 542. See also Re Bucks. Constabulary (No. 2) [1979] 1 All E.R. 623.Google Scholar Most recently, in Re Grant's Will Trusts [1979] 3 All E.R. 359, Vinelott, J. said (at p. 365)Google Scholar: “[I]t is immaterial in considering whether a gift falls within this category [the contract-holding theory] that the members of an association have not joined together for a social or recreational purpose, or to secure some personal advantage, but in pursuit of some altruistic purpose. The motive which led the testator to make the gift may have been, indeed most frequently will have been, a desire to further that purpose. It may be said that in that sense the gift is made for the furtherance of the purpose. But the testator has chosen as the means of furthering the purpose to make a gift to an association formed for the pursuit of that purpose in the expectation that the subject-matter of the gift will be so used, without imposing or attempting to impose any trust or obligation on the members, or the trustees, or the committee of the association. Indeed, there are cases where the gift has been expressed as a gift for the purposes, or one of the purposes, of the association, and nonetheless has been held not to impose any purported trust.” He cited as examples Re Turkington [1937] 4 All E.R. 501Google Scholar, and Re Lipinski's Will Trusts [1976]Google Scholar Ch. 235.

56 [1979] 3 All E.R. 359, 366. See for a discussion on a related issue, Rickett, C. E. F., “Charitable Giving in English and Roman Law—A Comparison of Method” (1979) 38 C.L.J. 118.Google Scholar

57 See Viscount Simonds in Leahy's case [1959] A.C. 457, 478.

58 Neville Estates Ltd. v. Madden [1962]Google Scholar Ch. 832, 849 (per Cross J.); Re Recher's Will Trusts [1972]Google Scholar Ch. 526, 535 (per Brightman J.); Re Grant's Will Trusts [1979] 3 All E.R. 359, 366–367Google Scholar (per Vinelott J.).

59 (1860) 2 De G.F. & J. 75.

60 See Cocks v. Manners (1871) L.R. 12 Eq. 574, 585–586(per Sir John Wickens V.-C).

61 [1901] 2 Ch. 110.

62 Ibid., at p. 114.

63 Ibid., at p. 121.

64 It is of some importance to look at the cases chronologically. (1) Re Drummond [1914] 2 Ch. 90.Google Scholar Eve J. held that a gift of residue to the Old Bradfordians' Club was not to the members individually, but was on trust which did not fail for perpetuity, because it was within Clarke. Nothing in the gift would prevent the Club's committee from spending capital or income as they deemed fit. (2) Re Prevost [1930] 2 Ch. 383.Google Scholar A gift to the trustees of the London Library—a mutual benefit society—upon trust to be spent in carrying out the society's objects under the rules was upheld because it was not perpetuitous. Eve J. found nothing in the gift's terms or the society's rules to prevent expenditure of the corpus of the property. (3) Re Macaulay's Estate [1943]Google Scholar Ch. 435n. The intention of the gift was to benefit “the society” rather than the individual members. Lord Buck-master said no question of perpetuity would arise if the terms of the gift allowed the society to spend capital and income as they thought fit; but if the gift was to be held as an endowment and the society according to its form was perpetual, the gift was bad. The House of Lords held the gift void, because it was on trust for the stated purposes, “the maintenance and improvement of the Lodge,” and the trust could be perpetual. The existence of a trust excluded a class iii contract-holding gift. If there had been no trust, the gift may have been upheld under class iii, providing there was nothing inconsistent with such a view in the society's rules (any consistency would not, however, be a question of perpetuity, cf. Lord Buckmaster). (4) Re Turkington [1937] 4 All E.R. 501.Google Scholar Luxmoore J. upheld a gift to the Staffordshire Knot Masonic Lodge No. 726, as being for the general purposes of the lodge. The members were at liberty to deal with the gift in any way they thought fit in accordance with their constitution in the ordinary way, because they had complete domination over the fund. This seems to have been an inarticulated class iii gift, because there was no binding trust.

65 [1959] A.C. 457. In Re Smith [1914] 1 Ch. 937Google Scholar, Joyce J. said that a gift to an unincorporated body not charitable might be good because it was treated as a gift to the several members who could spend it as they pleased—but any contract between the members was a matter for themselves (at p. 948). See also, in similar vein, Re Turkington [1937] 4 All E.R. 501.Google Scholar

66 This confusion has been discussed by Widdows, Kelvin, “Trusts in Favour of Associations and Societies, Re Lipinski's Will” (1977) 41 Conv.(n.s.) 179.Google Scholar

67 [1937] 4 AH E.R. 501.

68 [1940] Ch. 481, 488. Farwell J. said that Clarke “shows that a gift to a fund or to a voluntary body of persons may be a perfectly good gift unless the fund or the purposes for which the institution was created prevent the persons who are members of the institution from dealing with it, both as to capital and income, in any way they please.” A class iii gift cannot be valid if there is anything in the rules inconsistent with the retention by the members of some beneficial interest.

69 [1943] Ch. 422.

70 See Re Drummond [1914] 2 Ch. 90Google Scholar; Re Prevost [1930] 2 Ch. 383.Google Scholar

71 [1943] Ch. 422, 430.

72 Cf. Re Denley's Trust Deed [1969] 1 Ch. 373Google Scholar; and Re Lipinski's Will Trusts [1976]Google Scholar Ch. 235.

73 (1833) 1 Cl. & Fin. 372.

74 [1895] 2 Ch. 649.

75 See generally Hanbury and Maudsley, Modern Equity, 10th. ed. (1976), at pp. 358–361.

75 [1943] Ch. 422.

76 [1943] Ch. 422.

77 [1959] A.C. 457, 484.

78 [1969] 1 Ch. 373.

79 [1914] 2 Ch. 90. In Re Grant's Will Trusts [1979] 3 All E.R. 359, 367–368Google Scholar, Vinelott J. suggested that in both Re Drummond and Re Price [1943]Google Scholar Ch. 422 there ought to have been discussion of the enforceability of the non-charitable purpose trust there in question. Both trusts might have failed for lack of a human beneficiary, even though they could not be faulted on the grounds of perpetuity.

80 See n. 55 above.

81 [1979] 3 All E.R. 359, 368.

82 [1952] Ch. 534.

83 Ibid., at p. 547.

84 [1940] Ch. 481.

85 [1943] Ch. 422.

86 [1976] Ch. 235. See McKay, L., “Re Lipinski and Gifts to Unincorporated Associations” (1977–78)Google Scholar 9 Victoria Univ. of Wellington L.R. 1; Insall, H. K., “Gifts to Unincorporated Associations” (1977)Google Scholar N.Z.L.J. 289.

87 Ibid., at p. 243.

88 Ibid., at p. 246 (emphasis supplied).

89 Ibid., at pp. 246–247 (emphasis supplied).

90 Ibid., at p. 247.

91 Ibid., at p. 247.

92 [1969] 1 Ch. 373.

93 [1976] Ch. 235, 250.

94 Ibid., at p. 250.

95 [1979] 3 All E.R. 359.

96 Ibid., at p. 371.

97 Ibid., at pp. 371–372.

98 Ibid., at p. 372.

99 [1895] 1 Ch. 489; on appeal [1896] 2 Ch. 679.

1 [1979] 1 All E.R. 623, 636.

2 Ibid., at pp. 636–637 (emphasis supplied). See also, most clearly, Re The Sick and Funeral Society of St. John's Sunday School, Golcar [1973]Google Scholar Ch. 51, 59–60 (per Megarry J.).

3 Some early cases appear to support the class iii holding and equal division on dissolution, e.g. Brown v. Dale (1878) 9 Ch.D. 78 and Feeney and Shannon v. MacManus [1937]Google Scholar I.R. 23.

4 [1895] 1 Ch. 489; on appeal [1896] 2 Ch. 679.

5 [1895] 1 Ch. 489, 497.

6 [1896] 2 Ch. 679, 688.

7 Ibid., per Lord Halsbury L.C. at p. 681.

8 The report of the case indicates that no attempt was ever made to wind up or dissolve the society, and that it simply became extinct as the members died off.

9 [1899] 2 Ch. 184.

10 In Re Trusts of Hobourn Aero Components Ltd.'s Air Raid Distress Fund [1946]Google Scholar Ch. 86, there was no claim from the Crown, and so a resulting trust was imposed, on the ground that “the basis on which the contributions are returned is that each donor retained an interest in the amount of his contributions except so far as they are applied for the purposes for which they were subscribed” (at p. 97, per Cohen J.). Cohen J. went on to say that each subscriber who received a benefit from the fund should bring the amount of that benefit into hotchpot for the purposes of distribution. The case differed from Re Printers in that there would be no real difficulty—apart from its being laborious—in ascertaining members' benefits, since adequate records and accounts had been kept. It is rather odd that results should differ according to the state of the society's accounts!

11 Byrne, J. pointed out that in Cunnack v. EdwardsGoogle Scholar there were no existing members, and thus the argument was between the Crown and the past contributors; whereas in Re Printers there were existing members: see [1899] 2 Ch. 184, 188.

12 In Cunnack v. Edwards, on the other hand, Chitty J. appears to have thought that the funds were impressed with a trust for the provision of annuities for members' widows: see [1895] 1 Ch. 489, 495–496.

13 [1973] Ch. 51, 59. See also Tierney v. Tough [1914] 1 I.R. 142, 155Google Scholar (per O'Connor M.R.).

14 [1899] 2 Ch. 184. Also to be included are Re Lead Company's Workmen's Fund Society [1904] 2 Ch. 196Google Scholar, and Re Customs and Excise Officers Mutual Guarantee Fund [1917] 2 Ch. 18.Google Scholar

15 Cf. Re The Trusts of the Abbott Fund [1900] 2 Ch. 326Google Scholar, where there was an ordinary resulting trust, presumably for dead and living subscribers, and in proportion to their contributions. See also Re British Red Cross Balkan Fund [1914] 2 Ch. 419.Google Scholar

16 [1909] 1 Ch. 510.

17 [1979] 1 All E.R. 623, 632.

18 [1914] 1 I.R. 142.

19 Ibid., at p. 155.

20 [1969] 1 W.L.R. 229.

21 (1878) 9 Ch.D. 78.

22 [1937] I.R. 23.

23 [1966] C.L.Y. 1274.

24 [1969] 1 W.L.R. 229, 238.

25 [1979] 1 All E.R. 623, 637.

26 See also Re William Denby and Sons Ltd. Sick and Benevolent Fund [1971] 1 W.L.R. 973Google Scholar, per Brightman J. at p. 978.

27 [1973] Ch. 51.

28 Ibid., at p. 60.

29 Megarry J. went on to hold that on a per capita basis, the child members of the society in question should receive a half share each and the adult members a full share. The rules had written into them the basis of inequality among different classes of members in relation to the principal contractual burdens and benefits of membership, and it followed that this inequality should also be applied to the division of property on dissolution. There were really two different types of contract, and the parties to each would accordingly be treated differently.

30 See generally Atkin, W. R., “Unincorporated Associations—Distribution of Surplus Assets on Dissolution” (1979) 8 New Zealand Univ.L.Rev. 217.Google Scholar Atkin concludes his useful discussion thus (at pp. 233–234): “There is a prima facie presumption that the property of an unincorporated association is held equally by all current members (although it may be formally held by trustees). A necessary corollary of this is that, as equal owners, those same members are entitled to equal shares in the balance of the property after the association has been dissolved and liabilities satisfied. On the other hand, division of assets will be on a proportionate basis if this is provided for in the rules. Otherwise, there will be proportionate division only where the association's property is held, contrary to the usual presumption, in shares proportionate to contribution. Such differential ownership may be provided for in the rules or may follow by implication from the fact that members in a particular association obtain something equivalent to a shareholding in a company.” In my view, Atkin's discussion is defective in three important respects: (a) he makes no real distinction between members' contributions and gifts from outside sources; (b) there is no discussion of property holding on the basis of non-charitable purpose trusts, except a quick dismissal of any such possibility (at p. 232): “The trustees must hold the property for someone, since, unless the association is charitable, it will not be possible to argue that they hold it for the purposes of the association.” This is clearly wrong, and indeed Atkin cites only Leahy's case in support; (c) as a result of his view on purpose trusts, Atkin is forced to dismiss any possibility of members contributing on trust, and thus retaining a resulting interest in proportion to their contributions in the event of the trusts coming to an end on the dissolution of the society (at p. 227).

31 [1971] Ch. 1.

32 [1969] 1 W.L.R. 229.

33 [1979] 1 All E.R. 623, 635–636.

34 Michael Albery suggests in his note in (1971) 87 L.Q.R. 464, that Goff J. held as a matter of construction that there must have been a trust to provide for the relatives of the deceased members. When that trust expired there would be bona vacantia. But Albery thinks that such a trust is void for perpetuity ab initio, and that there can thus be no question of bona vacantia, but only of resulting trust to those who had contributed funds to be held on a void trust. There seems to be, however, no need to assert that Goff J. actually held there to be a trust. He thought that there was simply an enforceable contractual right for each member against the fund, which was otherwise ownerless—this was his reason for reserving the possibility of future contractual claims against the fund. His mistake was that the fund was not ownerless—there was a class iii holding, and so no question of perpetuity arises because there is no trust.

35 [1962] Ch. 832.

36 [1972] Ch. 526.

37 [1958] Ch. 300; affd. [1959] Ch. 62. In Re Hobourn Aero Components Ltd.'s Air Raid Distress Fund [1946]Google Scholar Ch. 86, Cohen J. held that moneys contributed to a war emergency fund for the benefit of serving members and their dependents, and for the relief of air raid distress, should be held on resulting trust for the subscribers in proportionate shares.

38 Harman J. mentioned contributions “anonymously as a result of street collections, and so forth” [1958]Google Scholar Ch. 300, 304; and there was some argument about money from whist drives and concerts, Ibid., at p. 309. Apart from this there was no more detailed specification of the property's source.

39 Ibid., at p. 310.

40 [1958] Ch. 300, 314.

41 The facts of Re Gillingham Bus Disaster Fund do not give rise to an unincorporated association within the definition assumed at the start of the article. However, the principles applied must be the same as those to be applied to the ending of all non-charitable purpose trusts.

42 See the comments made by Albery at (1971) 87 L.Q.R. 464.

43 [1971] Ch. 1.

44 Ibid., at p. 11. Note, however, that the Charities Act 1960, s. 14 (2) (b), implies a different construction.

45 [1921] 1 Ch. 655, 660.

46 [1971] Ch. 1, 14.

47 Such trust must be within the perpetuity period and enforceable.

48 See the comments made by Albery at (1971) 87 L.Q.R. 464.

49 [1900] 2 Ch. 326.

50 There is an argument that in cases of “inward-looking associations,” the gifts could be construed as Recher/Neville Estates class iii gifts.