Equity and Trusts- Charities - Free Essay Example

Introduction The first issue that needs to be considered is whether Holmfirth Wheeltappersà ¢Ã¢â€š ¬Ã¢â€ž ¢ and Shunterà ¢Ã¢â€š ¬Ã¢â€ž ¢s Benefit Society is charitable. On the facts of the scenario it is evident that the association has not been established for charitable purposes as defined by section 3(1) of the Charities Act 2011. The next issue arising is that the association is obviously not a company and so it is an unincorporated association. Lawton LJ set out the definition of an unincorporated association in Conservative Unionist Central Office v Burrell [1982] 2 All ER 1 CA as: two or more members bound together for one or more common purposes, mutual rights and duties between the members, and rules governing who controls the association and how its funds are used; the members must be able to join and leave the association at will. These groups are not covered by the Companies Act 1996. Hence, they have no legal personality, existing in their own right and cannot own property. Therefore, as the nature of the current association is of an unincorporated one, any distributions of the associationsà ¢Ã¢â€š ¬Ã¢â€ž ¢ funds will be governed by trust law. In order to discuss the issues arising, I will examine in turn each of the facts considering the case law on the distribution of the surplus funds of unincorporated non-charitable associations. In Neville Estates Ltd v Madden [1962] Ch 832 HC it was decided that the fu nds of an association are held by the members and not by the association as a whole. Alternatively, they are held on trust only if the trust is charitable, which is unlikely to apply on the present scenario. Instead, the scenario is concerned with a claim to the surplus assets of the association when it is dissolved. [1] A legacy of 20,000 from Cyril The issue arising here is that an unincorporated association as it is not a legal person it cannot own property or be the beneficiary of a trust. A gift can therefore be treated as an attempted trust for the purposes of the association as in Leahy v AG for NSW (1959). The general rule is that trusts for non-charitable purposes are void, as well as transfers for abstract purposes[2] something which is not permitted under the beneficiary principle stating that for a trust to be valid it requires that there be some individual or corporate entity in whose favour the court would be able to exercise the trust.[3] A problem arises in respect of the legacy left from Cyril as Nora, the widow and executrix of Cyrilà ¢Ã¢â€š ¬Ã¢â€ž ¢s will seems to challenge the validity of the legacy on the winding up of the association. The courts have been prevented by precedent and English legal tradition from saying that an unincorporated association is capable of owning property yet various alternative ways have been constructed by the courts in an attempt to save the transfers made to unincorporated associations.[4] One interpretation would be to follow the approach in Re West Sussex[5] and hold the legacy on resulting trust to existing subscribers or members, in proportion to contributions made less any fines and payouts. The property is held on resulting trust if those subscribers can be identified. Therefore, under the authority of Re West Sussex where the makers of the donations were identifiable, the donations could be returned. It was held that where a legacy was made to an unincorporated association, which subsequen tly became moribund, then the legacy would be held on resulting trust for the donorà ¢Ã¢â€š ¬Ã¢â€ž ¢s estate. In relation to legacies, Goff J considered that they were separately identifiable for the other property and therefore capable of being returned to their donors. Under this approach, the  £20000 would result back to Cyrilà ¢Ã¢â€š ¬Ã¢â€ž ¢s estate, Nora. Alternatively, under Re Recherà ¢Ã¢â€š ¬Ã¢â€ž ¢s Will Trusts [1972] Ch 5265 the legacy may be construed as an absolute gift to present members as an accretion to the funds and subject to the contractual agreements Albert and Bertram had made between them. Even if it is the preferred analysis and the one which the courts would more likely adopt to save the legacy, the contractual analysis will not be available if the association lacks identifiable rules. It is more likely the case that Albert and Bertram have sufficient control so that they can choose to wind up the association and divide the funds between them. A profit of  £500 from an à ¢Ã¢â€š ¬Ã…“Olde Tyme Music Hallà ¢Ã¢â€š ¬Ã‚  recently held in aid of funds The problem which arises in such cases is that the identity of the donors may not be possible to be traced. The wording of the problem is quite vague as it is not clear where the profit comes from. From one point of view, the fact that it is from an à ¢Ã¢â€š ¬Ã…“Olde Tyme Music Hallà ¢Ã¢â€š ¬Ã‚  may suggest that David, who had been a member of the society for 70 years and has definitely contributed in a great extent to the association, would have some rights over the profit. In that case, the profit would result back to his estate- Thora as a resulting trust. However, this interpretation seems too speculative based on the given facts of the scenario and it has been argued that neither former members nor the estates of deceased members could have an interest in the surplus funds of an association on its dissolution[6]. Accretion on death was inherent in the beneficial interest in any asset being held by joint tenants[7]. From another point of view, the profit may be deriving from tickets paid as entertainment for a concert at the music hall and it should therefore be interpreted following Re West Sussex Constabularyà ¢Ã¢â€š ¬Ã¢â€ž ¢s Benevolent Fund Trust [1970] 1 All ER 544 HC. Under this approach, the profit would not be a trust but a contract as the people got everything they paid for and there was no intention on their part to make a direct contribution to the fund at all.[8] If the profit is construed based on the contract theory, then the rules of the members inter se will succeed. Where there are no rules, a term can be implied under the authority of Re Bucks[9], which will normally divide the rights up equally among those who were members at the time of the dissolution[10] Albert and Bertram, although it is less likely to be the case. It is my view that the most reasonable approach to follow is for the profit to go to th e Crown as bona vacantia as in Re West Sussex because if it was to be distributed among the members, it could be unjust enrichment as the reasons the profit should go to the association are unclear. The sum of  £500 raised from special collections The sum of  £500 raised from special collections suggests that the source of the money is unidentifiable. The most suitable approach is that followed in Re West Sussex Constabularyà ¢Ã¢â€š ¬Ã¢â€ž ¢s Benevolent Fund Trust [1970] 1 All ER 544 HC in which it was held that the relationship was one of contract rather than trusts and in addition, a collection from boxes is impossible to be returned on the basis that their transfers of property were both outright gifts and made anonymously. As the donors were anonymous, the intention was to part with their money à ¢Ã¢â€š ¬Ã‹Å"out and outà ¢Ã¢â€š ¬Ã¢â€ž ¢ and therefore, the sum would go to the Crown as bona vacantia[11]. However, under a more recent authority[12], Lewison J considered that for the Crown to seize property would offend against Article 1 of the First Protocol of the European Convention on Human Rights which provides that no one is to be deprived of their possessions except in the public interest and subject to the conditions provided by law. Another approach, would be to follow the contract holding theory as in Re Bucks Constabulary Widowsà ¢Ã¢â€š ¬Ã¢â€ž ¢ and Orphansà ¢Ã¢â€š ¬Ã¢â€ž ¢ Fund Friendly Society (No 2) [1979] 1 WLR 936 HC. It was held that where there is a contract between the members of the association or between other people participating in entertainments organised by the association for fund-raising purposes, then the modern approach is to look to the enforcement of the terms of that contract in distributing the associationà ¢Ã¢â€š ¬Ã¢â€ž ¢s property. The rationale behind this approach is that the claimant has already received all that he was contractually entitled to. Under this interpretation, the  £500 shoul d be distributed ratably between Albert and Bertram, according to their respective contributions. Arguably, even if there is no authority to support this, Albert would get a larger sum on the dissolution if the years of membership into the association are taken into consideration to distribute the funds upon the winding up of the association. Criticism Simon Gardner has argued that the courts lean towards an à ¢Ã¢â€š ¬Ã‹Å"eclecticà ¢Ã¢â€š ¬Ã¢â€ž ¢ approach in each case, which was previously favoured by the courts.[13] This has the positive effect of allowing for flexibility and privacy but a significant drawback is the exposure of the memberà ¢Ã¢â€š ¬Ã¢â€ž ¢s association, because of this uncertainty, and the potential risk of their assets. Bibliography Books A Hudson, à ¢Ã¢â€š ¬Ã‹Å"Equity and Trusts, 6th edn., (Oxon: Routledge-Cavendish, 2010) C Harpum, S Bridge and M Dixon à ¢Ã¢â€š ¬Ã‹Å"Megarry Wade: The Law of Real Propertyà ¢Ã¢â€š ¬Ã¢â€ž ¢, 6th edn., (Lon don: Sweet Maxwell, 2000) R Edwards N Stockwell, Trusts and Equity, 11th edn., (Harlow: Pearson, 2013) J Warburton, à ¢Ã¢â€š ¬Ã‹Å"Unincorporated Associations: Law and Practiceà ¢Ã¢â€š ¬Ã¢â€ž ¢, 2nd edn (London: Sweet Maxwell, 1992), p.51. Cases Artistic Upholstery Ltd v Art Forma (Furniture) Ltd [1999] 4 All E.R. 277 Buckinghamshire Constabulary Widows and Orphans Fund Friendly Society (No.2), Re[1979] 1 All E.R. 623 Cunnack v Edwards[1895] 1 Ch. 489 Ch D Denleys Trust Deed, Re[1969] 1 Ch. 373; [1968] 3 W.L.R. 457 Grants Will Trusts, Re[1980] 1 W.L.R. 360; [1979] 3 All E.R. 359 Ch D Hanchett-Stamford[2008] EWHC 330 (Ch) Horley Town Football Club, Re[2006] EWHC 2386 (Ch) Leahy v Attorney General of New South Wales[1959] A.C. 457; [1959] 2 W.L.R. 722 PC Morice v Bishop of Durham32 E.R. 656 Printers and Transferrers Amalgamated Trades Protection Society, Re[1899] 2 Ch. 184 Ch D Rechers Will Trusts, Re[1971] 3 W.L.R. 321; [1972] Ch. 526 Ch D West Sussex Constabularys Widows, Children and Benevolent (1930) Fund Trusts, Re[1971] Ch. 1 Articles and Journals B. Green (1980) à ¢Ã¢â€š ¬Ã‹Å"The Dissolution of Unincorporated Non-Profit Associationsà ¢Ã¢â€š ¬Ã¢â€ž ¢, Modern Law Review 43. Gerwyn Ll. H. Griffiths (2009) Hatchett-Stemford v Attorney General: another twist in the tale unincorporated associations and the distribution of surplus funds, Conveyancer and Property Lawyer M. Ashdown (2012) à ¢Ã¢â€š ¬Ã…“The Law of Unincorporated Associationsà ¢Ã¢â€š ¬Ã‚ , Law Quarterly Review 128. P. Matthews à ¢Ã¢â€š ¬Ã…“A problem in the construction of gifts tounincorporatedassociationsà ¢Ã¢â€š ¬Ã‚  [1995] 59 Conv. 302. P. Pettit (2009) à ¢Ã¢â€š ¬Ã‹Å"Equity and the Law of Trustsà ¢Ã¢â€š ¬Ã¢â€ž ¢, Oxford University Press S. Baughen (2010) Performing animals and the dissolution of unincorporated associations: the contract-holding theory vindicated,Conveyancer and Property Lawyer S. Gardner (1992) à ¢Ã¢â€š ¬Ã‹Å"New angles on unincorporated associationsà ¢Ã¢â€š ¬Ã¢â€ž ¢, Conveyancer and Property Lawyer 1 [1] Neville Estates v Madden [1961] 3 All ER 769 per Cross J [2] Re Grantà ¢Ã¢â€š ¬Ã¢â€ž ¢s Will Trusts [1979] 3 All ER 359; [1980] 1 WLR 360 [3] Morice v Bishop of Durham (1805) 9 Ves 399, 405 per Lord Grant MR as expressed in Bowman v Secular Society Ltd [1917] AC 406, 441 per Lord Parker [4] Neville Estates v Madden (1962) [5] [1971] Ch 1 [6] Simon Baughen (2010) Performing animals and the dissolution of unincorporated associations: the contract-holding theory vindicated *CONVPL, pp. 3. [7] Hanchett-Stamford v Attorney General [2008] EWHC 330 (Ch); [2009] 2 W.L.R. 405. [8] Gardner (1992), p.43. [9] Constabulary Widowsà ¢Ã¢â€š ¬Ã¢â€ž ¢ and Orphansà ¢Ã¢â€š ¬Ã¢â€ž ¢ Fund Friendly Society (No 2) [1979] 1 WLR 936 HC [10] Gardner (1992), p.42 [11] Re West Sussex Constabulary; Westdeutsche v Islington LBC; Davis v Richards and Wallington Industries (1990) [12] Hanchett-Stamford v Attorney General [2008] EWHC 30 (Ch) HC [13] Gardner (1992) p.49