⇒ An unincorporated association is an association that has not been incorporated (i.e. registered as a company)
⇒ An unincorporated association has been judicially defined as: “[T]wo or more persons bound together for one or more common purposes…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. The bond of union between the members of an unincorporated association has to be contractual.” (Conservative Central Office v Burrell , Lawton LJ)
⇒ So an unincorporated association is a group of people bound together by a contractual agreement but it is not a separate legal person (like a company)
⇒ Unincorporated associations have no legal personality and so cannot own property in their own right (cf. incorporated companies → they do have legal personality)
⇒ It is thus impossible for someone to transfer money “to” an unincorporated association
⇒ In some cases, judges have let transfers to an unincorporated association fail (Leahy v A-G for New South Wales ; Bacon v Pianta )
⇒ More often, judges, when faced with a transfer of property to an unincorporated association, have given legal effect to the transfer via a proxy property-ownership mechanism
⇒ There are four possibilities (there are 4 proxies that could in theory be used as a substitute for a transfer to an unincorporated association, which the law tells us cannot be valid):
⇒ The purported transfer to the association operates instead as a gift to the association’s members in their personal capacity
⇒ This gift to the members in their personal capacity can take effect as:
⇒ Under this proxy then, let’s imagine a transfer is made to the university dramatics society (an unincorporated association), the judge will treat this transfer NOT as one to the society in its own right (as this would be invalid), but instead as a transfer to the present members of the society absolutely or on trust
⇒ The purported transfer to the association operates instead as a gift to the association’s members, not in their personal capacity but in their capacity as members of the association subject to its contractual rules
⇒ The association’s rules in turn require that any property transferred be added to the association’s funds, to be spent on the association’s various purposes
⇒ This property-owning mechanism is known as the “contract-holding theory”
⇒ So under this proxy then, a transfer made to the university dramatics society (an unincorporated association) will be treated as a transfer to the present members of the society, but this time subject to the society’s contractual rules
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⇒ Under this proxy, the purported transfer to the association operates instead as a transfer to the association’s treasurer to hold on a charitable trust
⇒ The proxy is available only where the association’s purposes are “charitable” under the definition in the Charities Act s.2
⇒ E.g. let’s say property is transferred to the local Cricket Club (an unincorporated association), which aims to provide facilities for and encourage participation in cricket. Again the court would not be able to treat this transfer to the association in its own right because this would be invalid, but here the transfer could be interpreted as the establishment of a charitable trust
⇒ The fourth proxy is the Re Denley trust → under this proxy the purported transfer to the unincorporated association operates instead as the establishment of a Re Denley trust for the association’s non charitable purpose(s)
⇒ The association’s members are directly and tangibly benefited by performance of its non-charitable purposes
⇒ The courts’ approach differs depending on whether a transfer is: (i) made by way of performance of a contractual obligation; or (ii) voluntary
⇒ Contractual transfers include money transferred in exchange for a raffle ticket; association membership; entry to an association fundraiser etc.
⇒ Voluntary transfers to unincorporated associations comprise collection box donations; inter vivos gifts; legacies
⇒ Where money is transferred by way of performance of a contractual obligation, it is invariably treated as a gift to the association’s members subject to the association’s contract (i.e. it will be the second proxy the court will follow i.e. contract-holding theory)
⇒ Why is this?
⇒ When money is transferred voluntarily (e.g. my residuary estate to the local Social Club) all four proxies are in principle available → although this should be caveated by saying that if the local Social Club is not operating for exclusively charitable purposes then, of course, proxy three is unavailable
⇒ A judge will select the proxy which best reflects the transferor’s intention
⇒ The case-law reveals a strong judicial preference for the contract-holding theory as a proxy for voluntary transfer.
⇒ There are a number of reasons for this:
⇒ Where property is transferred for a stipulated purpose – e.g. to the local Social Club to paint their clubroom – recourse to proxy seems unnecessary
⇒ The proxy selected is invariably the contract-holding theory
⇒ The “basic principle” stipulates that association funds are to be applied in accordance with the terms on which they are held:
⇒ An unincorporated association can be/is dissolved in the following ways:
⇒ When an Unincorporated Association is dissolved, it may have surplus funds: what happens to these funds?
⇒ The “basic principle” applies equally on dissolution: surplus funds are dealt with in accordance with the terms on which they were held pre-dissolution
CONTRACT HOLDING ON DISSOLUTION:
⇒ Surplus funds are applied in accordance with the association’s contractual rules
⇒ If the rules contain an express term determining how surplus is to be divided on dissolution, this term is binding on the association members
⇒ Absent an express term the law implies a term, ordinarily for equal division between members at dissolution (Re Bucks Constabulary Fund (No 2) )
⇒ When the number of association members falls below two, the association’s contract is discharged
⇒ As a matter of logic, any surplus then rests where the contract-holding theory’s underlying principles leave it (Hanchett-Stamford v A-G )
PURPOSE TRUST ON DISSOLUTION:
⇒ Surplus funds are applied in accordance with the law of trusts
⇒ So on the association’s dissolution, any trust for its purposes will fail:
⇒ In principle, the beneficial interest under the resulting trust which arises on failure of a Re Denley trust can be disclaimed, leaving the property which reverts ownerless (bona vacantia)
⇒ A transferor disclaims their beneficial interest if they intend that their money not be returned in any circumstance (Re West Sussex Constabulary Trusts )
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