#15556 - Unincorporated Associations - GDL Equity and Trusts

Equity & Trusts: Unincorporated Associations (UA)

[Goes together with ‘PPTs’]

Definition of a UA

• Eg: sports clubs, members’ social clubs.

• Definition from: Conservative & Unionist Central Office v Burrell, per Lawton LJ (CA)

  • 2+ people

  • BOUND together for a common purpose, that is not a business purpose.

  • A contractual relationship: These ppl have mutual duties and obligations arising from a contract between them.

  • The organisation has rules identifying who controls the assets/has the funds, and the terms on which this control can be exercised (i.e. how they are to be applied).

  • Can be joined/left at will. It’s about the voluntary nature of the contract—you have volunteered to accept the contract/constitution between the members when you join; and you give it up when you leave.

• In that case, Conservative Central Office held not to met definition: it lacked the mutual duties & obligations required.

NOT a legal entity—no separate legal personality:

• They are nothing more than an ‘aggregate of its members’—not a collective personality.

• No personality distinct from its individual members

• Viscount Simonds, Leahy v AG for New South Wales (1959): a UA is nothing more than an ‘artificial and anomalous conception’.

• Therefore, cannot sue/be sued in that own name.

• They cannot hold property, or be a trustee or beneficiary. They cannot enter contracts or hold property (though particular members can conclude contracts or hold property as trustees for the members).

• Fluid membership

• Perpetual existence

• Continues until dissolution (dissolved by members, or falls to less than 2 members); or moribund (all members have passed away).

UA—the problems of property

• Problem of trying to make a gift to a UA—(1) risk of being void for non-compliance with beneficiary principle (since they have no legal personality); and risk being void for (2) perpetuity, the rule against inalienability; and (3) for uncertainty; or for any combination

• They do, in practice, hold property.

• Property usually vested in the names of specific persons (which is why the contract needs to tell you who controls the assets).

• ‘Bare trust’ in mandate: Effectively, that property is held on bare trust for the current members of the UA.

• Hanchett-Stamford v AG (2009): UA holds property as a ‘sub-species of joint tenancy’.

  • Right of survivorship is one of key facets of joint tenancy—if one dies, the others take over ownership.

  • Same thing happens in a UA—if a member dies, their share is absorbed by rest of the members. So it’s a kind of joint tenancy in some ways.

• Individual members can’t sever their interests: they can’t take away their own share, because it’s a system of joint tenancy—each member doesn’t have their own stake, they all share the whole together.

• Purposes: UAs offer a good way around the perpetuity requirement of purpose trusts. If doesn’t fall in a Re Endecott exception, you can instead give the property to a club/organisation which will continue that purpose.

• So it’s a back door to get around the problems of purpose trusts—give the property to a UA to carry on that purpose.

4 interpretations of UA. Interpretation to allow UA’s to hold property/take gifts.

• Ultimately, courts will decide which interpretation is the best reflection of the testator’s intention (see Brightman J in Re Recher’s Will Trusts (1972)).

• If a disposition for a UA is challenged, the courts will look at the facts and then likely to consider the different constructions in turn (as in, for eg, Re Grant (1980) and Philippe v Cameron (2012)).

• Each interpretation finds a way to (1) comply with the beneficiary principle; and (2) avoid offending the rules against perpetuities

• NB: the case law is evolving—liberalisation of the perpetuity rule since 1964.

• NB: the below could apply to a testator (making a testamentary disposition to a UA); or to a lifetime disposition (a donor for gifts, or a settlor for trusts)

Interpretation of UA (1)—Immediate Gift or trust to Present Members [members each ‘pocket a share’]

• Gift: Although testator/donor looks like attempted to make gift to a UA, on closer inspection may be apparent then intended to make a series of gifts to the individual members of the UA—in which case the property can be divided, each member can ‘pocket a share’ for themselves.

• Trust: if testator has indicate clearly the property is to be held on trust, a similar analysis may apply: the trustee is to hold the property on trust for the members of the club, rather than the club itself. Members could then use Saunders v Vautier rights to collapse the trust and pocket their share.

• Though this will not be case if trust only allows the members to benefit from the income of the property, with the capital remaining and unavailable for distribution to the current members.

• According to this interpretation, there are no issues with the beneficiary principle or perpetuity rules, as the property vests immediately in ascertainable individuals.

• Has long been held that a gift to a UA, with no direction or qualification about how that gift is to be used, can take effect in this way:

  • Cocks v Manners (1871): a gift to a particular convent was upheld in favour of the individual nuns.

• Was this the Testator’s Intention?

• The individual members each ‘pocket their share’, so they have free choice over what to do with it-no obligation to use the property for the UA’s purpose—often this is unlikely to reflect testator’s intention.

• Leahy v AGNSW (1959), Privy Council: key case, always cited when UAs arise.

  • Demonstrates lengths to which courts try to help UAs. Privy Council tries very hard to get the disposition through. But fails.

  • An individual in Australia has a large piece of land. He decides to leave it on non-charitable trusts for the nuns & brothers of various (non-charitable) religious orders. Court decides this non-charitable religious group is a UA.

  • Privy Council sets out problem: the UA has no legal personality, how can you give them property.

  • Rather than seeing it as a gift to the UA (you can’t do that); instead, you see it as a number of individual gifts to the individual members, who are legal persons. As if you had listed every individual member by name in your will.

  • BUT, Privy Council says you can’t do this without very specific facts.

  • You cannot have a gift without intention to give—if this is not what testator intended, you cannot uphold it. Clearly the testator did not intend to give individual shares to every member—he wanted to give it to the group as a whole, which you can’t do.

  • Assessing intention, Viscount Simonds:

  • (1) So courts looked at how legacy is worded/wording of the gift—In this case, was expressed to be held ‘on trust’ for the selected orders, the capital apparently intended to be kept intact so that the income or use of the property would always be available for the benefit of members of the orders.

  • (2) Secondly, courts looked at type of property/subject matter of gift: here, it was land, a 730 acre farm. Two options: (1) sell land and divide profit into equal shares; (2) give every individual their own plot of land which they can take and keep. Clearly neither was intended—no intention for each member to have their own small plot of land on this farm.

  • (3) Thirdly, number/nature of beneficiaries: Here, the members were numerous and spread all over the world. Suggests that a legacy to each one was not intended. Basic rule = more beneficiaries, less likely to work.

  • Said, obiter: this type of gift could possibly work if you have a small number of people.

  • In Leahy, it was only saved by using an archaic Australian statute.

• Re Recher’s WT (1972), Brigthman J: declined to apply this interpretation as a means of upholding a legacy to an anti-vivisection society that had ceased to exist. Held that the testatrix would not have intended the members of society to divide the ‘bounty’ amongst themselves.

• Using the Club name as a convenient label:

  • In Re Grant’s WT (1980): Vinelott J acknowledged that cases in this category were ‘relatively uncommon’. However, he suggested that this construction might still apply where the name of the association is used as a convenient label or a definition to describe a class or group of persons. Eg dining, social or book clubs (of which tend to be small, informal groups). In these cases, the testator may be using the club name as a shorthand for the individuals.

• Apart from that--this interpretation is EXTREMELY RARE—hard to show this intention. Best regarded as the old & unsophisticated way of upholding gifts to UAs, an approach now largely superseded by the below.

Interpretation (2)—Trust for Present and Future Members

• Don’t worry too much about this—wouldn’t expect to talk about it in exam.

• Ascertained or Ascertainable beneficiaries:

  • Simonds in Leahy: if a gift was made to individuals, in their name or in society’s name, but they were not intended to take beneficially, they must take as trustees.

  • Provided the class of beneficiaries is ‘ascertained or ascertainable’, at the date of testator’s death it would be permissible to have a valid trust for the present and future members of the association.

• But use of this construction is very rare/very unlikely to be valid:

• For it to work, it requires a clear intention to benefit present and future members—which is unlikely:

• Problems with fluctuating membership:

  • Difficulty: the membership of UA is likely to fluctuate over time—when members leave, they will not cease to be beneficiaries of the trust. Unlikely hat testator intends former members to continue to benefit from the trust...