Re Buckinghamshire Constabulary Fund (No 2) [1978] 1 WLR 641

The division or appropriation of assets within a society is essential for fairly allocating resources among members or beneficiaries. This process must be transparent and comply with governing rules to ensure that all members receive their rightful share, especially during dissolution or reorganization. Proper documentation is critical to prevent disputes and maintain operational integrity.

The primary objective of a friendly society is to provide mutual support to members in times of need, such as illness or the death of a member. This includes offering financial assistance to widows and orphans, ensuring that families are not left vulnerable. By facilitating payments upon death, societies uphold their commitment to mutual aid and community responsibility.

A resolution to wind up a society formally initiates its dissolution and the liquidation of its assets. This decision may result from declining membership or financial difficulties. The winding-up process must adhere to legal requirements to ensure debts are settled and remaining assets are distributed appropriately, protecting the interests of all stakeholders involved.

Section 79(4) of the Friendly Societies Act 1896 establishes legal guidelines for friendly societies in the UK. It emphasizes the need to adhere to society's objectives in managing assets, distributing benefits, and protecting the interests of members. The Act fosters transparency and trust in the management of friendly societies, ensuring they operate according to mutual aid principles.

A society, established under the Friendly Societies Act 1896, was formed to serve the members of a county constabulary. Its primary objectives included providing financial relief to the widows and orphans of deceased members, paying money upon a member's death, and offering support to members during sickness or infirmity, funded by voluntary contributions from its members.

According to Rule 31 of the society's governing documents, the society could be dissolved through an official instrument of dissolution.

In April 1968, the constabulary to which the society was affiliated amalgamated with several others.

On October 31, 1968, society passed a resolution to wind up its operations. The resolution included provisions to continue paying benefits to all existing beneficiaries until dissolution, to realize its assets for the purchase of annuities for current beneficiaries, and to transfer some assets to a designated benevolent fund to ensure the right of entry for all present and future beneficiaries.

Paragraph 5 of the instrument of dissolution outlined the distribution of the society's net funds. It proposed using these funds to purchase annuities, granting £40,000 to the benevolent fund, and donating the remaining balance to another fund.

Society was legally dissolved in 1969.

Following the purchase of the annuities and the payment of £40,000 into the benevolent fund, the Plaintiff, acting as the sole trustee of the society, held the remaining balance of the society's funds.

The Plaintiff sought a legal determination regarding his authority to dispose of the remaining funds in accordance with paragraph 5 of the instrument of dissolution, as per Section 79(4) of the Act.

The court held that Section 79(4) of the Act, while primarily negative in its construction—prohibiting an instrument of dissolution from providing for a "division or appropriation" of the funds except for purposes aligned with the society's objectives—implicitly conferred a positive power. This power allowed for the proper "division or appropriation" of the funds for purposes beyond merely carrying out society’s objectives, provided that the claims of all members and beneficiaries were satisfied or provided for.

The court further determined that the authority to make a "division or appropriation" of the funds was not dispositive. It only permitted the funds to be distributed to individuals or entities with a legitimate claim to them. Instead, this authority was administrative, allowing for the funds to be divided or appropriated among those who were entitled to them under the general law. Consequently, apart from the purchase of the annuities, the plaintiff, as trustee, was not authorized to dispose of the remaining assets in the manner proposed in the instrument of dissolution.

The court's approach to the "unless" clause in section 79(4) highlights the importance of reading restrictive language in conjunction with clauses that provide exceptions, allowing the statute to have a practical effect.

The court's insistence on distributing assets only to those with pre-existing claims ensures that the funds of dissolved societies are handled equitably and in accordance with general legal principles. The ruling maintains a balance between fulfilling the society's obligations to its members or beneficiaries and preventing arbitrary distribution of surplus funds.

The judgment provides valuable insight into the functioning of friendly societies—organizations that often operate for the mutual benefit of their members—and the legal mechanisms that govern their dissolution. It reinforces the need for clear statutory guidance in situations where surplus funds remain after the dissolution of such entities, ensuring that these funds are distributed fairly among rightful claimants.

In Re Bucks Widows' and Orphans' Fund is a seminal case for interpreting the statutory provisions governing the dissolution of friendly societies. It emphasizes that statutory provisions must be interpreted in their entirety, balancing prohibitive language with exceptions to ensure a positive operative function. This case also serves as a guide for ensuring that the distribution of surplus funds upon dissolution is limited to those with a legal claim, which is in line with general principles of law.