Hunt & Anor v McLaren & Ors

In 1948 Major Jennings, the president of the Horley Football Club (“the Club”), settled some land known as “The Defence” on trust to secure a permanent ground for the Club.

In May 2002 The Defence was sold to a developer for almost £4 million. The sale took place with the appropriate approvals, and no issue arises as to its propriety. The trustees used the proceeds to buy another site for £850,000, and to construct a Club house and ancillary facilities. The costs of construction and furnishing amounted to approximately £2.2 million.

In the course of this purchase and development, the newly acquired land was subjected to certain restrictive covenants, which limit the use of the site to sports and leisure. As consequence it is likely to be difficult to sell the assets now held by the trust; and if they were sold, they would probably fetch significantly less than was paid for them.

The Claimants (“the Trustees”) are the present trustees of the Club, and seek the directions of the court with regard to certain questions concerning the basis on which they hold the assets vested in them as trustees. These questions relate primarily to the validity of the underlying trust and, on the assumption that the trust is valid, the proper construction of the Rules of the Club.

The Club is an unincorporated association. An unincorporated association is not a legal person and is not an entity capable of holding property. It has been defined as “two or more persons bound together for one or more common purposes, not being business purposes, by mutual undertakings each having mutual duties and obligations, in an organisation which has rules which identify in whom control of it and its funds rests and on what terms and which can be joined or left at will”: Conservative and Unionist Central Office v Burrell [1982] 1 WLR 522, 525, per Lawton LJ. But, as Underhill and Hayton, Law Relating to Trusts and Trustees, 16^th ed., pages 123-124, say:

The First Defendant represents the interests of the Committee and the present members of the Club other than “temporary members” and “Associate Members.” The Second Defendant represents the interests of all persons falling with the definition of “members other those represented by the First Defendant.” The Third Defendant represents the interests of the members of the Club (and their estates) who were members of the Club on September 1, 1948. The Fourth Defendant is the executor of the estate of Major Jennings, and represents the interests of those who would benefit if the original gift was void. He has not taken any part in the proceedings. The Fifth Defendant is a former trustee, who was a trustee at the date of the sale of The Defence and the purchase of the new grounds. He is interested in obtaining relief under section 61 of the Trustee Act 1925 if such relief is found to be necessary. The Sixth Defendant represents the interests of former members other than (a) those represented by the Third Defendant, and (b) “temporary members”, “temporary club members” and “Associate Members”. The purpose of this class of representation is to address the possibility that the gift as originally constituted was valid, but that a change in the Rules has resulted in a trust which cannot be recognised as a matter of law.

By a Declaration of Trust dated September 1, 1948 (“the Deed”) and by a Conveyance of the same date Major Jennings settled certain freehold land known as “The Defence” on trust “for the primary purpose of securing a permanent ground for The Horley Football Club of which Club he is president …” on the terms set out in the Deed (Recital 3). Notwithstanding the use of the word “permanent” in the recitals, clause 11 defines the “perpetuity period” for the purposes of the Deed as 21 years from the death of the last surviving descendant of King George VI living at the date of the Deed.

The Deed is supplemental to a conveyance of land to the original trustees on trust for sale. The trustees’ power of sale (the trustees’ power to postpone the application of the statutory trust for sale) is therefore the statutory power and is prima facie not limited by perpetuity, notwithstanding the royal lives clause at clause 11: Law of Property Act 1925, section 23.

By clause 1 of the Trust, Major Jennings directed the trustees to hold The Defence on trust for sale with power to postpone sale (provided that no sale shall be made during the perpetuity period as defined by clause 11 without the consent of the Club):

The “Committee” is defined in the Deed to mean the persons mentioned in the First Schedule of the Deed “or other the persons for the time being purporting to act as the Committee of the Club.”

Clause 3 provides:

Clause 4 provides:

Before sale, the trustees are to permit The Defence to be used for the purposes of the Club or other purposes of a recreational nature; after sale, the proceeds may be treated as an accretion to the funds of the Club, as income for its general purposes.

Clause 6 deals with eligibility to be or remain a trustee, and concludes with the following proviso

This is the only provision dealing explicitly with the possibility of the failure or termination of the Club. But it gives no guidance as to how the assets of the trust are to be dealt with in such an event, or who the beneficiaries would be.

The current Rules of the Club (“the Rules”) are dated June 25, 2004. The material provisions are as follows:

Rule 15 limits Associate Members to one vote per independently constituted Club, but Rule 16, which deals with special general meetings, does not contain any limitation on the voting rights of Associate Members.

The Rules do not contain any express provisions governing what should happen on the winding-up of the Club. However, Rule 29 clearly contemplates the possibility of a winding-up. The text of this Rule as it appears in the current Rules has had some words left out, as a comparison with the same rule in the previous rules (dated June 12, 2000) reveals. The full text of Rule 29 should read as follows, with the missing words in square brackets:

The present proceedings were issued on the assumption that the Rules of the Club as at the date of the gift were in substantially the same form as the current Rules. Since that date, however, a number of sets of earlier rules have come to light. The earliest available rules date from 1957. The 1957 rules did not contain the same provisions relating to temporary members or to Associate Members. The 1957 Rules make provision for the election of members of visiting teams as temporary Club members (Rule 24). But temporary Club members were not members under those Rules because Rule 4 provided that membership was to consist of those who paid an annual subscription of 5s.

Accordingly, until about 1990 the “members” of the Club comprised a clearly defined and narrow class. There was a formal process of election coupled with the payment of a subscription. Then, in about 1990, the definition of membership was extended to embrace not merely those who had been elected and paid their subscriptions, but also members of visiting teams, their friends, persons attending social functions (which might be unconnected with football or the affairs of the Club) and members of other associations or clubs attending functions.

Rule 4 in the 1990 Rules provided:

From 1997 Associate Members were described (Rule 7) as “Bona fide members of any independently constituted club invited to the use the facilities” but were to have no voting rights. In a further change to the Rules (apparently in June 2000) the current Rule was introduced, that independently constituted clubs enjoying Associate Membership would be entitled to attend the AGM and cast 1 vote.

It is likely that a form of membership for members of other Clubs was introduced with a view to meeting the requirements of the licensing laws.

It is not clear in whom the trust property is to vest on the expiry of the perpetuity period. There is no default beneficiary, and there is nothing to indicate in whose favour Major Jennings intended an absolute gift when the perpetuity period eventually came to an end. The words in the recitals (“for the primary purpose of securing a permanent ground”) suggest that, despite the use of the standard perpetuity clause, Major Jennings in fact envisaged a perpetual endowment.

The gift is not charitable, and it will fail if it does not fall within one of the recognised categories of valid non-charitable purpose trusts. There is a difficulty in the present case in bringing the gift within either categories (1) or (2) in Neville Estates Ltd v Madden [1962] Ch 832, namely (1) an absolute gift to members of the Club at the date of the gift, under which the members take as joint tenants, and any member can sever his share; or (2) a trust for the members at the date of the gift, subject to their contractual rights and liabilities towards one another as members of the Club.

So far as category (1) is concerned, the perpetuity clause is inconsistent with an immediate absolute gift to the then members of the Club. The expression “The Members” is defined in the Deed to mean “the general members of the Club for the time being” and Clause 4 refers to “the Rules of the Club for the time being in force.”

If the court were to construe this as a gift falling within category (1), there would be a practical problem in identifying those members (or their estates): despite enquiries, no membership list has been found.

As to category (2), the wide definition of “membership” in the current Rules is difficult to reconcile with an intention on the part of the settlor to create an absolute gift. One of the conditions that must be satisfied for category (2) to apply is that the members could, at any time, resolve to terminate the trust and distribute the fund to themselves: Re Grants’s Will Trusts [1980] 1 WLR 360.

Voting rights, limited to one vote per Club, are given to “Associate Members”. Associate Members also pay an annual fee. If such provisions had been contained in the rules of the Club in 1948, it would have been very difficult to attribute to Major Jennings an intention to confer a beneficial gift on all members including Associate Members. On the other hand, it is also difficult to exclude such members from the class of members who would be entitled to enforce their rights under the Rules of the Club, and who might be entitled to participate in a distribution of Club assets.

It is possible that the gift was valid in 1948, but a subsequent change in the Rules of the Club has resulted in a disposal, or attempted disposal, by the then members on terms that do not satisfy the requirements of a valid trust. In those circumstances, the “new'” gift is void, and there would be a resulting trust in favour of the members of the Club immediately before the relevant change in the Rules: Re Bucks Constabulary Widows' and Orphans’ Fund Friendly Society (No 2) [1979] 1 WLR 936.

Where a trust, though expressed as a purpose, is directly or indirectly for the benefit of an individual or individuals, it is outside the general mischief of the beneficiary principle: Re Denley's Trust Deed [1969] 1 Ch 373.

Like the gift in Re Denley, the present gift is an express trust for a defined perpetuity period. On the other hand, unlike the trust in Re Denley, there is no default beneficiary. Furthermore, in Re Denley there was a clear distinction between the “primary” beneficiaries and the “secondary” objects. In the present case, there is no such distinction, and the Rules place members and temporary members on the same footing. The trust in Re Denley also contained express provisions dealing with the situation that would arise if the purposes of the trust were to fail before the expiry of the perpetuity period. In the present case, the only reference to the possibility of failure is the proviso in clause 6 of the Deed preserving “the full powers” of the trustees and the Committee.

The earliest extant Rules contained no provisions dealing expressly with the winding-up of the Club. The current Rules recognise that such a resolution might be passed, requiring a 75 percent majority of the adult and senior citizen members. A vote to wind up the Club would not, however, necessarily terminate the trust. The trust could only be brought to an end (during the perpetuity period) if all the beneficiaries so decide in accordance with the rule in Saunders v Vautier (1841) 4 Beav. 115.

If, as a matter of construction, the members of the Club for the time being (or some limited class of its members) are beneficially entitled to the assets of the trust, the members (or the limited class of members) would have the power to bring the trust to an end. Equally, those same members could authorise the trustees to use whatever funds remain to try to save the Club from insolvency. If, on the other hand, the trust fails, the trustees would be under a duty to act in the best interests of the estate of Major Jennings.

If the problems of bringing the present trust within any of the established categories of valid trust are insuperable, the trust will fail, either ab initio or as from the date on which the Rules of the Club were changed in such a way as to create an invalid trust.

In either of those eventualities, the present trustees would be found to have been administering the trust on a mistaken footing. In particular, the use of the proceeds of sale of The Defence would have been highly uncommercial. In those circumstances, the trustees would ask to be relieved from personal responsibility under section 61 of the Trustee Act 1925, on the grounds that they acted “honestly and reasonably, and ought fairly to be excused for the breach of trust.”

If the trusts/gifts effected by clauses 1 and 4 (which apply prior to sale) are invalid, the proceeds of sale of the land are now held under clause 3. The clause can be construed: (a) as a power to pay the proceeds to the Club treasurer (implying from the word “may” a power); (b) as a beneficial gift to the Club; or (c) as a power and a beneficial gift.

The power to pay the proceeds to the Club is valid: (a) it should be construed as subject to the royal lives perpetuity period at clause 11, and the power therefore is not perpetuitous; (b) for the purposes of the validity of the power, it is not necessary to know who are the beneficiaries, merely that the beneficiaries satisfy the “any given postulant” test (Re Baden’s Deed Trusts, McPhail v Doulton [1971] AC 424, at 453), which is clearly satisfied.

In any event, clause 3 provides that payment to the treasurer gives the trustees a good discharge, and for the purposes of assessing the validity of the power, the power is therefore equivalent to a power to pay the assets to the treasurer, which is clearly valid.

The discharge provision means that it is not necessary to consider whether the trusts on which the treasurer holds the monies after payment are in some way void, but even if this view is incorrect, a payment to the treasurer under the power would take effect as an accretion to the assets held as assets of the Club. The current trusts of the assets of the Club are valid.

Alternatively, the payment by the trustees should be analysed as: (1) a payment by them as members of the Club and therefore treated in the same way as a lifetime payment by members, such as a subscription. The trustees are and must be (by clause 11 of the Deed) members of the Club. (2) A mandate to the treasurer to apply the assets in accordance with the property of the Club. The mandate will become irrevocable when the funds paid are mixed with the other funds of the Club: Conservative & Unionist Central Office v Burrell [1982] 1 WLR 522 at 529.

In any event, any uncertainty as to the validity of the beneficial ownership of the assets of the Club can be solved by an amendment to the current Rules.

Further or in the alternative, the clause can be construed as a gift to the members of the Club for the time being subject to the rules of the Club as a “contract-holding” gift within category (2) in the Neville Estates Ltd v Madden classification. The words “for the purposes of the Club” can be construed as a “contract-holding” gift to the members of the Club at the date of the Deed. On this construction, the word “may” in clause 3 is read as “shall”. The gift is construed as a gift of the proceeds of sale of the land to the members of the Club at the date of the Deed. If construed in this way, perpetuity is not a problem, because the gift to the members is not, on a true construction, contingent. Rather the trusts in clauses 1, 2 and 4 take priority to the trust at clause 3, but the interests of the members of the Club under clause 3 nevertheless vest immediately. Their interests as members devolve with the other Club property under the Club rules. This analysis is otiose if a “contract-holding” gift is effected by clauses 1 and 4, which apply before sale.

Under this construction, payment of the monies to the Club treasurer will provide a good discharge. If the 1957 Rules of the Club are taken as substantially the rules which were in force at the time of execution of the Deed on September 1, 1948, there can be no question of uncertainty as to the members of the Club (see Rule 4). Even if the gift was uncertain, Major Jennings was a member at the time of the gift (recital 3 to the Deed). Any gift made by him to the Club which took effect while he was a member must be treated, like a subscription, as an addition to the funds of the Club in accordance with the Rules. The assets passed under the gift are therefore now subject to the Rules of the Club.

Alternatively, it is possible to construe the clause as a combination of a gift and a power, under which the beneficial ownership in the property is vested in the members for the time being of the Club on a “contract-holding” basis. However, the trustees would only be obliged to pay the property over to the members when called to do so. In the meantime, the trustees have power to pay all or part of the property to the Treasurer of the Club.

There are a number of other possible constructions of the Deed. First, the trust takes effect as a gift to the members of the Club for the time being subject to the rules of the Club (as a “contract-holding” gift within category (2) in the Neville Estates ltd v Madden classification).

Second, the trust takes effect as a Re Denley trust (i.e. a discretionary trust for the benefit of the members for the time being of the Club).

Third, the powers conferred on the trustees by clauses 1 and 4 and by clause 3 might be viewed as mandates. Under this analysis, the beneficial interest in the property held by the trustees has throughout remained vested in Major Jennings and his estate, but the trustees have authority as a matter of agency to apply the assets for the purposes stated in the Deed: cf Conservative and Unionist Central Office v Burrell [1982] 1 WLR 522, 530; Twinsectra v Yardley [2002] UKHL 12, [2002] 2 AC 164, at [100]. The mandate was not revoked by the death of Major Jennings.

In the 2004 Rules, Rule 4 (reciting the members of the Club) and Rule 15, (dealing with voting) remain unchanged. No assignment was therefore effected by the change of Rules.

All the sets of Rules, including the 2004 Rules provide for amendment of the Rules by AGM. Any dissolution of the Club can therefore be effected by amendment of the rules or by order of the court: Re Lead Co.’s Workmen’s Fund Society, [1904] 2 CH 196.

For the reasons given by the First Defendant, the gift of the land made by the conveyance dated September 1, 1948 and by the Declaration ought properly to be construed as, and accordingly upheld as valid as: (a) a gift to the then members of the Club, not as joint tenants, but subject to their contractual rights and liabilities inter se as members of the Club i.e. as a gift within category (2) in Neville Estates Ltd v Madden; (b) alternatively, a gift in trust for the benefit of the members of the Club, analogous to the trust upheld as valid and enforceable in Re Denley’s Trust Deed.

The inclusion of “associate members” and “temporary members” within the membership of the Club as defined by the Rules does not of itself prevent the adoption of either of those constructions.

If it is construed as a valid gift to the then members of the Club, subject to their contractual rights and liabilities inter se as members of the Club, the beneficial ownership of the assets of the Club and the property that is the subject of the Declaration is currently held by the current full members and the current Associate Members (but not by the current temporary members).

In the circumstances, it would be the current full members and Associate Members of the Club who would be entitled to wind up the Club. Any distribution of assets following a winding-up ought to be on a per capita basis, with Associate Members (but not temporary members) being treated equally with full members.

If it is construed as a Re Denley-type gift in trust for the benefit of the members of the Club, the members for these purposes ought to comprise both the current full members and the current Associate Members.

Rule 4 should properly be construed as an exhaustive list of the categories of temporary members and, accordingly, Associate Members should be treated as “members” rather than as “temporary members” within the meaning of the first sentence of Rule 4. In other words, the Club consists of members (including Associate Members) and temporary members.

The Rules indicate that Associate Membership is to be of a more enduring nature than temporary membership: compare Rule 5 (which specifies an annual fee for Associate Membership within the context of the subscriptions for other categories of full membership) with Rule 22 (which discusses temporary membership within the context of visitors to the Club and which specifies only an ad hoc and nominal fee for temporary membership). Similarly, the Rules indicate that Associate Membership, but not temporary membership, shall carry with it certain rights and privileges. In particular, Rule 5 provides that “Associate Members will enjoy the same rights as full members except those relating to Voting rights at an AGM as detailed in Rule 15”. Rule 15 (in its present form) does in fact confer voting rights (albeit limited) on Associate Members. By contrast, the Rules do not appear to confer any voting or other rights (save for the right to use the Club premises) on temporary members.

Temporary members are not “members” of the Club for the purposes of a distribution on winding-up or for the purposes of a Re Denley-type trust for the benefit of the members: Re GKN Bolts & Nuts Ltd etc Works Sports and Social Club [1982] 1 WLR 774. But that decision is not determinative on the issue of Associate Members, because (a) the terms of the rules of the Club in Re GKN did not treat associates as members of the Club, whereas the reference to “members” in Rule 4 in the present case ought to be construed as including Associate Members; (b) the associates in Re GKN merely had to write their names in a book in order to obtain the rights and privileges of ordinary members, whereas Associate Membership in the present case is conferred only after agreement is reached between the committees of the two clubs; (c) unlike Associate Membership of this Club, which carries with it the obligation to pay an annual fee agreed between the two committees, nothing in the rules of the Club under consideration in Re GKN provided for the payment of subscriptions by the associates; (d) Associate Members of this Club have voting rights, albeit that these are limited to one vote per associated Club; the associates in Re GKN had no voting rights whatsoever.

The fact that the votes of one category of members carry less weight than the votes of another category of members in resolutions for the winding-up of an association does not mean that the general principle of a per capita division, in which both categories of members are treated equally, is ousted: Elvridge v Coulson [2003] EWHC 2089 (Ch). A fortiori, an inequality in voting weights ought not to mean that a category of members is excluded altogether from any entitlement to the surplus assets of the association upon its dissolution.

Accordingly, the Associate Members, unlike temporary members, should properly be treated as “members” of the Club for the purposes of the present case.

The status of temporary members under the Rules is such that their involvement in the Club can, effectively, be ignored for the purposes of this present case.

The subsequent inclusion of the Associate Members within the membership of the Club should not prevent the court from finding that the intention of the settlor in 1948 was to effect a gift to the then members of the Club, subject to their rights and liabilities as members. A finding that the intention was to make such a gift presupposes a finding that the members at the time of the gift were competent to dispose of the gifted property in any way they thought fit or to divide it beneficially amongst themselves: Re Grant [1980] 1 WLR 360. Therefore, the fact that the members subsequently decided to expand the scope of the membership of the Club to encompass associate (and, indeed, temporary) members, does not mean that the settlor did not intend to make a gift to the members in existence in 1948, subject to their contractual rights and liabilities as members. The fact that the subsequent acts of the members for the time being arguably did not accord with the settlor’s intentions is neither here nor there: in many, if not most, cases where a settlor gives property to the members of an unincorporated association, it could be said that the intention of the settlor must have been that the gifted property would continue to be applied for the purposes of that association, notwithstanding the fact that it is a necessary precondition for the validity of the gift that the members at any given time be entitled to distribute the gifted property amongst themselves in apparent frustration of the settlor’s intentions.

Similarly, any disposal that took place at the time of a subsequent Rule change, namely a disposal from the members as defined under the old rules to the members as defined under the new Rules, was not void.

The inclusion of Associate Members (or, at least, Associate Membership carrying with it voting rights) does not mean that there was not an intention to transfer the Club’s assets to the members (that is to say, the members under the new definition, including Associate Members), subject to their contractual rights and liabilities arising out of the amended rules. Even if the settlor did not envisage in 1948 the later inclusion of Associate Members, it cannot be said that the subsequent disponors (i.e. the members immediately prior to the rule change) did not intend to transfer the Club’s assets to the members under the new definition, including the Associate Members. Their intention is clear from the fact that the category of Associate Members was expressly envisaged in the amended rules agreed by the disponors.

If, prior to the relevant rule changes, the situation was properly analysed in terms of category (2) in Neville Estates Ltd v Madden, there is nothing to support the contention that the subsequent disposal ought to be analysed in terms of category (3), that is to say as a gift that is not to be at the disposal of the members for the time being, but is to be held in trust for or applied for the purposes of the Club as a quasi-corporate body. There is nothing in the rules, as amended, to indicate that the members (as therein defined) are unable to dispose of the Club’s assets. In the circumstances, therefore, the most appropriate analysis of the disposition would be that it too fell within category 2.

The inclusion of Associate Members within the membership of the Club does not offend against the requirement that the identity of the beneficiaries (in this case, the beneficiaries of the bare trust upon which the assets of the Club are held by the trustees i.e. the members of the Club) be certain. The appropriate test is whether or not it can be said with certainty that any given person is, or is not, a member of the Club (“the given-postulant test”): Re Baden’s Deed Trusts, McPhail v Doulton [1971] AC 424.

That test is satisfied in the present case. If the Associate Membership attaches to the independently-constituted Club with the management committee of which the committee of the Club reaches an agreement (as is suggested by the facts that (a) a single fee per Club is payable, (b) each Club is entitled to only one vote, and (c) Rule 15 refers to “[i]ndependently constituted clubs enjoying Associate Membership”), the question of whether any given Club is, or is not, an Associate Member can be determined simply by asking whether or not the committee of that Club has reached an agreement with the committee of this Club and paid the agreed fee. If the Associate Membership attaches to the individual members of the independently-constituted Club (as is suggested by the fact that Rule 5 states that “[a]n Associate Membership shall be available to Bona fide Members of any independently constituted club”), one need only go a step further and look at the rules of the relevant independently constituted Club to see if the given person is a member of that Club within the meaning of those rules. The reference to “Bona fide Members” simply means that the person must be a member of the Club within the rules of that Club.

Moreover, if, it is necessary to draw up a complete list of members, there is no difficulty in satisfying that test. In the circumstances of this case, it is in practical terms no more onerous than the given-postulant test.

If it is found that the possibility that the membership of other independently constituted clubs might be uncertain prima facie renders the membership of this Club uncertain, the difficulties can be overcome by the fact that it will always be possible, and sufficient for these purposes, to identify – and compile a complete list of – the management committees of the several independently constituted clubs with which the Club has reached agreement.

If it was not the intention of the settlor in 1948 to effect a gift to the then members of the Club, subject to their contractual rights and liabilities inter se as members, then the gift ought properly to be upheld as a gift upon trust for the members of the Club by analogy with Re Denley. The existence of the Associate Members and temporary members does not prevent the adoption of such a construction, nor does it mean that any subsequent change in the rules caused a previously valid gift to fail at that time.

If and insofar as the inclusion of the temporary members would prevent the adoption of a Re Denley construction, the existence of those temporary members can be properly overlooked: they are not within the class of persons for whose benefit the property is held upon trust.

Associate Members (or, at least, Associate Members with voting rights) are within the class of persons for whose benefit the property is held upon trust. No difficulty is caused by any subsequent changes in the definition of the membership of the Club: (1) The objects of the Re Denley-type trust must be the members of the Club for the time being: see the definitions section and clause 4 of the Declaration. This indicates that it was envisaged that the definition of members – and hence the definition of the persons for whose benefit the property is held upon trust – might change from time to time. (2) In any event, the members of the Club for the time being would be entitled to amend the purposes of the trust so as to include the benefiting of Associate Members of the Club within the scope of those purposes: Re Lipinski’s Will Trusts.

The validity of a Re Denley-type trust cannot be impugned on the grounds of uncertainty of objects. Given that such a trust is discretionary in nature, and not a fixed-interest trust, the appropriate test for certainty is the given-postulant test and not the complete-list test.

If the Club’s assets are found to have been provided by way of gifts or other contributions (e.g. subscriptions) falling within category (2) in Neville Estates Ltd v Madden: (1) Associate Members would be entitled to take part in any vote on a resolution for the winding-up the Club; and (2) any surplus assets would be distributed on a per capita basis under which Associate Members would be treated equally with full members.

The Rules provide (Rule 5) that Associate Members will enjoy the same rights and privileges as full members “except those relating to Voting rights at an AGM as detailed in Rule 15”. Rule 15 limits Associate Members to one vote per independently constituted Club. Rule 16, which deals with special general meetings, does not contain any limitation on the voting rights of Associate Members. Accordingly, Associate Members ought to be entitled to vote at special, or any other, general meetings of the Club. To deny them such a vote would be to contradict Rule 5. Rule 29 deals with the winding-up of the Club. It does not specify that Associate Members cannot vote; it merely provides that any resolution must obtain the approval of 75% of adult and senior members. This enhanced majority provision does not necessarily mean that Associate Members are not entitled to vote on such a resolution. Therefore, the Second Defendant submits that Associate Members ought to be entitled to vote on any resolution for the winding-up of the Club.

The Rules do not specify how the Club’s assets are to be distributed following dissolution. In the circumstances, therefore, the distribution must take place equally on a per capita basis. The fact that the votes of the Associate Members carry less weight in any resolution for dissolution does not oust the principle of equality for the purposes of distribution: Elvridge v Coulson, supra, para. [14].

The Third Defendant advances no positive argument that the original members have retained any interest in the subject of the gift, except that to the extent that members of the class represented by the Third Defendant were also members at the date of either or both of the Rule changes, the Third Defendant adopts the submissions made on behalf of the First Defendant.

The issue is whether because of a problem with the changes in the Rules the interests of the members at the time of the change still retain a proprietary interest in the Club’s assets. The issue only arises if on a true construction of the declaration it is a gift to the members of the Club but subject to their contractual obligations (category (2) in Neville Estates Ltd v Madden).

If the gift is made to the members but subject to their contractual obligations it follows that whilst someone continues to be a member he has a beneficial interest in the Club property. Therefore, it is a necessary characteristic of any gift within category (2) in Neville Estates Ltd v Madden that the members of the association can, in accordance with the rules, direct that the funds should be applied to some new purpose or distributed among the members for their own benefit: Re Grant’s Will Trusts, at 368.

Where the property is held by the members subject to their contractual obligations: (a) the members own the “Club property” beneficially and collectively have freedom of disposition over it; (b) they can call for it to be transferred to them or can make other dispositions of it; (c) a rule change is a disposition where it alters the identity of persons entitled to benefit from the Club property.

Such a disposition must comply with the same conditions as would have applied if the original gift had been in the same terms. The members at the time of the rule change cannot do more than the original donor. In particular the requirements of (a) certainty and (b) the beneficiary principle must be satisfied.

The 1957 rules make provision for the election of members of visiting teams as temporary Club members (Rule 24). However notwithstanding this temporary Club members are not members because Rule 4 provides that membership is to consist of those who pay an annual subscription of 5s.

On a proper construction does the change of rules purport to extend membership (and by implication the right to participate in a dissolution) to temporary members? The words “the club shall be a members club and shall consist of members and temporary members” suggest it does. Apparently similar wording was interpreted in Re GKN Sports Club where the opposite conclusion was reached. Nonetheless the construction of each set of rules will turn on its own wording and factual matrix. There are differences between that case and this. First, there were clear distinctions between “full” or “ordinary” members (neither of which terms appears in the present Rule 4) in Re GKN and other classes whose description included the word member. Unlike Re GKN there is no correlation between the obligation to pay subscriptions and voting on the one hand and being a “full” member on the other. So for example in the 1990 rules junior members must subscribe but do not have a vote. It is therefore more difficult to conclude that there is a basis for drawing a line between “full” members on the one hand and all other classes on the other.

Nor is the definition even of temporary members identical to that in Re GKN. For example the membership of temporary members here is not (at least not expressly) limited to the day of the event which they attend. This is perhaps why in that case, but not here, the Club consisted of temporary members (amongst others) only “in special cases”. The fact that temporary members are intended to be members in a true sense might also be deduced from the fact that together with other classes of member they comprise the “members club”.

However insofar as the change of rules purports to confer a proprietary interest on the temporary members it fails because (a) in the case of an absolute gift it is necessary to show that all the beneficiaries are ascertainable or will be ascertainable when the time comes to distribute: Underhill and Hayton, page 84; (b) it would in any event be difficult to construe the disposition purportedly effected by the change of rules as a gift to the members (including temporary members) subject to their respective contractual rights and liabilities towards one another as members of the association, since there is no contractual relationship between temporary members. If it is neither a gift in accordance with category (1) or (2) of Neville Estates Ltd v Madden it would appear to be a gift for the purposes of the Club, a gift which would offend the beneficiary principle; namely the requirement that there be someone to enforce the trust.

Purporting to make a gift to Associate Members creates difficulties. First, who is an associate member depends not (or not only) on the Rules of the Club but on the Rules of the associate Club. There is no knowing how wide the class of membership of the associate Club might be or how that membership might be defined. This is not saved by the use of the word “bona fide” which in any event itself introduces an objectionable level of uncertainty. Second, It is a requirement of a valid gift under Neville Estates Ltd v Madden that the members of the association should be free to dispose of it in any way they think fit including distributing it amongst themselves. But the change of Rules in 2000 is not consistent with this requirement as it relates to Associate Members. In particular Rule 15 confers a right to vote on a body which is not itself a member, namely the Club of which Associate Members are members. So the question of dissolution and division of assets is not determined only by members. In Re Grant’s Will Trusts Vinelott J held that the influence of a body (not itself a member) on the rules and the destination of Club property was fatal to the argument that a gift should be analysed as one within the second class identified in Neville Estates v Madden.

If either disposition fails then the interest in the property did not pass but remained with the members at the time of the rule change.

The former members do not hold the beneficial interest. The “old” rules which bound the members together are no longer in force. The rules implemented by the rule change are either wholly ineffective because of the invalid gift they contain or (even if that is wrong) have been superseded by the current rules. Nor can the current rules apply. Insofar as they derive from ineffective rules they themselves are ineffective. Or if this is wrong the current rules do not bind former members who ceased to be members before the rule change.

The general rule is that a gift on trust must have a cestui que trust and must be for the benefit of individuals, unless charitable. It must have a definite object, and there must be someone in whose favour the court can enforce it. In general, in order to be valid, a non-charitable trust must have an ascertainable beneficiary in whose favour performance of the trust may be decreed: Morice v Bishop of Durham (1804) 9 Ves 399, 404; Leahy v Attorney-General of New South Wales [1959] AC 457, 478; Re Denley’s Trust Deed [1969] 1 Ch 373. Consequently, trusts for purposes or objects are invalid, for a purpose or object cannot sue, but trusts for charitable purposes are valid because they are enforceable by the Attorney-General.

The law does not regard the promotion of any particular sport, for its own sake, as charitable: Re Nottage [1895] 2 Ch 649.

Consequently, gifts to unincorporated associations are subject to (a) the rule against remoteness of vesting, which requires that the interests of the beneficiaries must vest within the perpetuity period; (b) the rule that, for there to be a valid trust, there must be a beneficiary or cestui que trust in whose favour performance of the trust may be decreed (“the beneficiary principle”); and (c) the general principle of trust law that the objects of the trust must be sufficiently certain.

The rule against objects trusts, combined with the rule against perpetuities, creates technical difficulty when property is given on trust to a non-charitable unincorporated association.

The law has recognised non-charitable purpose trusts. In Re Endacott [1960] Ch 232, at 245-246 Lord Evershed MR said that such trusts were of a somewhat anomalous kind, which were classified in Morris and Leach, The Rule Against Perpetuities (1956), page 298 to include as “anomalous” exceptions “trusts for the benefit of unincorporated associations (though this group is more doubtful)”.

In Leahy v Attorney-General of New South Wales [1959] AC 457, 477, Viscount Simonds said that in law a gift to an unincorporated association simpliciter, i.e. where neither the circumstances of the gift nor the directions given nor the object expressed impose on the donee the character of a trustee, is nothing else than a gift to its members at the date of the gift as joint tenants or tenants in common. As the cases below show, this presumption can be (and in appropriate cases, will be) displaced on the basis that the subject-matter of the gift is to be dealt with in accordance with the rules of the association.

Neville Estates Ltd v Madden [1962] Ch 832 was a case of a charitable trust for the benefit of the members of Catford Synagogue. Cross J said (at 849) that a gift to or in trust for an unincorporated association might take effect in one or other of three different ways:

In Re Recher’s Will Trusts [1972] Ch 529, 540-541 Brightman J adopted Cross J’s analysis in Neville Estates Ltd v Madden [1962] Ch 832, 849.

In Re Denley's Trust Deed [1969] 1 Ch 373 the trustees of some land in Gloucestershire were directed to maintain the land for use as a sports ground primarily for the benefit of the employees of a company and secondarily for the benefit of “such other person or persons (if any) as the trustees may allow to use the same …”. The Deed contained a perpetuity clause. It provided that if (a) the number of employees subscribing 2d per week each should be less than 75% of the workforce, or (b) if the land was no longer required as a sports ground, or (c) if the company went into liquidation, then the trustees were to convey the land to the General Hospital Cheltenham or as it should direct. The question was whether the trust and the gift over were valid. The company argued that the trust was invalid because of the absence of certainty as to beneficiaries, and the fund was therefore held for the company. For the employees it was argued that the trust was valid, but the gift over was invalid. It was held that the trust and the gift over were valid. Goff J said (at 382-384):

It was conceded that the employees of the company were ascertained or ascertainable, and that the inclusion in the class of “other person or persons (if any) as the trustees may allow” was not a trust but a mere power operating in partial disfeasance of the trust in favour of employees, which did not make it uncertain, and also as it was a power, it was not necessary that the trustees should know all possible objects: Re Gulbenkian’s Settlements [1970] AC 508.

The trust in Re Denley was reinterpreted as a trust for the benefit of individuals, thereby satisfying the requirement of the beneficiary principle. Goff J appears to have equated the beneficiary principle with the question of enforceability and not with the issue of equitable ownership. The question of whether the employees of the company, together with those others who might be permitted to use the sports ground, could terminate the trust was not regarded as material: see Thomas and Hudson, The Law of Trusts (2004), paras 6.15 et seq.

In Re Recher’s Will Trusts [1972] Ch 529 the deceased gave a 1/6^th share of her residuary estate, subject to a life interest in favour of her husband, to “The Anti-Vivisection Society, 76 Victoria Street, London S.W.1.” She died in 1962 and her husband died in 1968. Until the end of 1956 a non-charitable unincorporated society, known as the “London and Provincial Anti-Vivisection Society” had carried on its activities at 76 Victoria Street, but in 1957 it was amalgamated with a larger non-charitable unincorporated society, known as “The National Anti-Vivisection Society” of 27 Palace Street, London S.W.1. and the Victoria Street premises were closed down. It changed its name to “The National Anti-Vivisection Society (incorporating the London and Provincial Antivivisection Society).” In 1963 the National Anti-Vivisection Society Ltd was incorporated and the assets were vested in it. It was not a charity. The gift failed.

It was held by Brightman J that the gift must be construed as a gift to the London and Provincial Anti-Vivisection Society, 76 Victoria Street, and not to the larger combined society. It was not to be construed as a gift in trust for the purposes of the Society. It could have taken effect as a legacy to the members of the society beneficially, as an accretion to the funds which constituted the subject matter of the contract by which the members had bound themselves inter se. But since the Society had been dissolved, the gift could not be construed as a gift to the members of a different association and they therefore failed.

Brightman J said (at 538) that a trust for non-charitable purposes, as a distinct from a trust for individuals, was clearly void because there is no beneficiary, but (at 538-539):

He went on to deal with the position of donations or legacies from non-contracting parties, and said (at 539) that in the absence of words which purport to impose a trust, the gift takes effect as an accretion to the funds which are the subject-matter of the contract. The gift in that case was of that type.

In Re Bucks Constabulary Widows’ and Orphans’ Fund Friendly Society (No.2) [1979] 1 WLR 936 Walton J adopted the analysis in Re Recher and held that there was a general principle applicable to all unincorporated societies, under a contract subsisting between all members, that the society’s funds should be held and applied in accordance with the rules of the society, and that in the absence of any rule to the contrary a term was to be implied into such contract that the society’s surplus funds should, on a dissolution, belong to the then existing members.

In Re Lipinski’s Will Trusts^. [1976] Ch 235 the deceased, Harry Lipinski, bequeathed his residuary estate to trustees on trust as to half for the Hull Judeans (Maccabi) Association to be used solely to construct and improve the new buildings for the association. On a summons by the executors for determination whether the bequest was valid, it was held by Oliver J that whether a gift was treated as a purpose trust or an absolute gift to a unincorporated non-charitable body with a superadded direction, the gift was valid if the beneficiaries were ascertainable; that the specified purpose of the gift to the Hull Judeans was within the power of that association and its members were the ascertained or ascertainable beneficiaries, and were therefore the persons who were entitled to enforce that purpose, or notwithstanding the use of “solely”, to vary that purpose.

The association was not a charity, and after reference to Neville Estates Ltd v Madden and Leahy v Attorney-General for New South Wales Oliver J said (at 246-248):

At 249 he said:

The conclusion was (at 250):

In Re Grant's Will Trusts^. [1980] 1 WLR 360 a gift to the Labour Party property committee failed. Vinelott J held that the gift could not be construed as a gift to existing members (i.e. it did not fall within category (1) of Neville Estates Ltd v Madden), and that in order to fall within category (2) it was essential that the members of the association for the time being should be free to dispose of it in any way they thought fit, including distributing it amongst themselves. He referred to Neville Estates Ltd v Madden and said (at 365-366):

After referring to Re Lipinski’s Will Trusts Vinelott J. went on:

With reference to Re Denley, Vinelott J said (at 370) that, on proper analysis, that case fell “altogether outside the categories of gifts to unincorporated association[s] and purpose trusts.” It was merely an instance of a discretionary trust in which the trustees had a discretion to distribute income at their discretion among a class defined by reference to, for example, relationship with the settlor. The benefit to be taken by any member of the class is at the discretion of the trustees, but any member of the class can apply to the court to compel the trustees to administer the trust in accordance with its terms.

In Re Bucks Constabulary Widows’ and Orphans’ Fund Friendly Society (No.2) [1979] 1 WLR 936 Walton J said that there may be “other trusts” validly declared of the property, such as, perhaps, a valid purpose trust, not charitable, but modelled on Re Denley (property held ostensibly for a purpose, but with determinable factual co- beneficiaries) and limited to last only for a specified period within the existing rules against perpetual duration. In all cases where the property is not held under a trust “the persons, and the only persons, interested [in the property] are the members … All the assets of the association are held in trust for its members -of course subject to the contractual claims of anybody having a valid contract with the association - save and except to the extent to which valid trusts have otherwise been declared of its property”: [1979] 1 WLR 936, at 940, citing Re Recher.

Since the members of an unincorporated association own its assets subject to the contractual obligations owed by them to each other, they can vary the contractual arrangements between each other. A change of the rules changes the contract between the members: Re Recher [1972] Ch 526, at 539-539. A change of rules need not simultaneously effect an assignment by the members beneficially entitled under the previous set of rules to the members beneficially entitled under the new set of rules. It is a question of construction of the rules.

I am satisfied that the Deed should be construed as a gift to the Club, as a “contract-holding” gift to the Club and its members for the time being within category (2) in Neville Estates v Madden.

If the gift is construed in this way, perpetuity is not a problem, because the gift to the members is not, on a true construction, contingent, under the rule in Boraston’s case: Hawkins and Ryder, Construction of Wills, paras 20-40 et seq. The interests of the members of the Club under clause 3 nevertheless vest immediately. Their interests as members devolve with the other Club property under the Club rules. Nor can the gift be characterised as uncertain.

As Vinelott J said in Re Grant’s Will Trusts (at 368), it is a necessary characteristic of any gift within the second class in Neville Estates v Madden that the members of the association can, in accordance with the rules, direct that the funds should be applied to some new purpose or distributed among the members for their own benefit.

I do not consider that it matters that the Rules were changed in 2000 to confer a right to vote on a body which is not itself a member, namely the club of which Associate Members are members. This is far from the case of Re Grant’s Will Trusts, where Vinelott J held that the influence of a body (not itself a member) on the rules and the destination of Club property was fatal to the argument that a gift should be analysed as one within the second class identified in Neville Estates v Madden.

The next question is the identity of the persons who hold the beneficial interest. I am satisfied that the beneficial ownership is in the current full members (and not the temporary or associate members), and is held on bare trust for them. The members hold subject to the current rules, and could unanimously or by AGM call for the assets to be transferred. Adult and senior members are entitled to share in distribution on per capita basis.

In Re GKN Bolts & Nuts Ltd etc Works Sports and Social Club [1982] 1 WLR 774 the question was whether a social club formed for the benefit of employees had ceased to exist in 1975 when, following financial difficulties, it resolved to sell the sports ground, and the basis on which there should be distribution of the assets.

Sir Robert Megarry V-C said (at 776):

He held that the club had ceased to exist. It was held that where, as in that case, there was nothing in the rules or anything else to indicate a different basis, distribution of the assets should be on the basis of equality among the members, irrespective of the length of membership or the amount of subscriptions paid. There was no possible nexus between the length of membership or the amount of subscriptions paid and the property rights of members on a dissolution. Each member was entitled to one equal share.

The club’s rules provided that the club would consist of “ordinary and honorary members and, in special cases, of temporary members as hereinafter provided.” The rules also referred to “full members” who were the same as “ordinary members, “associates”, “temporary members” and spouses and children who were “entitled to membership without voting rights”.

“Associates” were employees of a group company club having similar objects who, if they wrote their name in a book with the names of their clubs, would have the same rights as ordinary members, except that they could not vote at meetings or take away alcoholic drinks. “Temporary members” were those invited by the committee to participate in the amenities of the club on the day of a sporting or social event. Spouses and children of members were thought by Sir Robert Megarry to fall within the same category as associates and temporary members. The object in each case was to confer the right to use the club premises and facilities without imposing the powers and responsibilities of full members, for whom alone the rule provided for the payment of subscriptions.

Honorary members were a complex class: each employee was entitled to nominate an honorary member; honorary membership was also open to those whom the club wished to honour, to persons temporarily engaged in the company’s organisation to whom the club wished to extend its activities, and to other persons sponsored by employee members and who were to pay a subscription of 10 shillings per annum. But the rules provided that honorary members would have no voting rights or interest in the club’s property. It was not clear whether there were any such members, but if there were, Sir Robert Megarry said that he would have held that they were not entitled to share in the club’s assets.

The result was a holding that no members except those who were properly called “full members” or “ordinary members” were entitled to any interest in the assets of the club.

I accept that in certain respects the distinction between “full” members and other types of membership was somewhat clearer in Re GKN than it is in the present case. It appears that (with the exception of honorary members, some of whom paid a subscription but none of whom were entitled to vote or to an interest in the club’s assets) in Re GKN there was a correspondence between members who paid subscriptions and members who were entitled to vote. In the present case, the voting rights do not correspond with the obligation to subscribe. There is a subscription for Youth Membership (under 18) and for Junior Membership (under 16), but Junior and Youth Members are not entitled to vote: Rule 5 (although Adult Membership includes non-playing children under 18 and attracts one vote).

In my judgment I should adopt the same approach as Sir Robert Megarry in taking a “broad sword” and applying fairness and common sense. In my judgment it does not make a difference that in the present case the Rules say in Rule 4 that the Club shall consist of “members and temporary members”; or in Rule 5 provide that Associate Members will enjoy the same rights as full members except those relating to voting rights; or that Rule 15 gives a right to vote to “independently constituted clubs enjoying Associate Membership.” I would accept that a mere inequality in voting rights would not mean that a category of members is excluded altogether from any entitlement to the surplus assets of the association upon its dissolution. But the associate members in the present case have no effective rights and it would be wholly unrealistic to treat the introduction of associate members by amendment of the Rules as a transfer of the Club’s property to them.

The consequence would be that the beneficial ownership is held on bare trust for the members, who could either unanimously or at an AGM call for the assets to be transferred.

All the sets of Rules, including the 2004 Rules, provide for amendment of the Rules by AGM. The members may agree to dissolve the Club and to distribute the assets amongst themselves or the association may be wound up by the court: Re Lead Co.’s Workmen’s Fund Society [1904] 2 Ch 196; Neville Estates v Madden [1962] Ch 832, 849; Re Recher [1972] Ch 526, 538-539. The Rules do not specify how the Club’s assets are to be distributed following dissolution. In the absence of any rule to the contrary, there is to be implied into the rules of the Club a rule to the effect that the surplus funds of the Club should be divided on a dissolution amongst the members of the Club, and this distribution will normally be per capita among the members (irrespective of length of membership or the amount of subscriptions paid) but may reflect different classes of membership: Re Sick and Funeral Society of St John’s Sunday School, Golcar [1973] Ch 51, at 60; Re Bucks Constabulary Widows’ and Orphans’ Fund Friendly Society (No. 2) [1979] 1 W.L.R. 936, at 952; Re GKN Bolts & Nuts Ltd etc. Sports & Social Club [1982] 1 WLR 774, at 778.

In the light of these decisions and in the light of my conclusion on temporary and associate members, the persons entitled to share in a distribution would be the adult and senior members of the Club on a per capita basis.

It is not necessary to consider whether the gift took effect as a Re Denley trust for the benefit of the members for the time being of the Club. The existence of the Associate Members and temporary members would not in itself prevent the adoption of such a construction: the existence of those members could properly be overlooked on the basis that they are not within the class of persons for whose benefit the property is held upon trust. But there are difficulties with regard to termination of such a trust which make it an unsafe basis for decision: see Thomas and Hudson, The Law of Trusts (2004), para 6.21.

It has been agreed that the question of the powers of the committee and the trustees should be adjourned for further hearing.