Decision Date: May 2, 2012
Link: Case Summary Document
Citation: [2012] EWHC 1040 (Ch) (High Court of Justice, Chancery Division, Arnold J)

Summary:

This English case concerned an unincorporated association, the St Andrew’s (Cheam) Lawn Tennis Club (the club) and a trust for land. The club was originally, and to some extent has remained, associated with the church of St Andrew’s Cheam (the church).

At question was the beneficial ownership of land at Sandy Lane, Cheam (the land) which had been occupied by the club since 1938. The trustees of the land sought guidance from the court. It had been thought by all concerned that the land was held on trust on the terms of a Declaration of Trust dated 11 July 1938 (the Trust Deed). The club claimed in this case that the Trust Deed had always been invalid, and that the land was thus held on a resulting trust for the current members of the club. The trustees of the church’s charitable trust disputed that the Trust Deed was invalid, and wanted the land to be sold and the money applied for the purposes of the church. The trustees of the land were doubtful that either side was correct.

The church was founded as the St Andrew’s Presbyterian Church of England Cheam in the 1920s. In 1972 the Presbyterian and Congregational Churches merged to form the United Reformed Church. Since then, the Church had been known as St Andrew’s United Reformed Church Cheam. With the exception of properties held under the trusts declared in Schedule 2 of the United Reformed Church Act 1972 (as amended), all assets and funds were held on behalf of the Church by the St Andrew’s Cheam United Reformed Church Charity, a registered charity (the Charity). Its governing document was dated 2009. According to this document, the trustees of the Charity were ‘those members of the Elders’ Meeting of St Andrew’s Cheam United Reformed Church who are qualified to serve as charity trustees … and [who] are appointed … in accordance with the procedures for the time being laid down by the Church Meeting of St Andrew’s Cheam United Reformed Church’. The Charity had as its sole object ‘the advancement of the Christian faith for the benefit of the public in accordance with the Scheme of Union of the United Reformed Church’.

The St Andrew’s Tennis and Social Club was first formed in 1930, and the club had the opportunity to purchase the land in Sandy Lane Cheam during 1937–38. However, the money for this purchase could not be raised. The land was therefore purchased by Mr Tweddle, the Secretary of the church (who was a club committee member), in 1938. The land was then leased to the club for a period of ten years (expiring June 1948) with an option to purchase during that period. The lease was put into the form of a Trust Deed.

In 1948, Mr Tweddle proposed a sale scheme in instalments for the land, which was recorded in what was referred to as ‘the 1948 Agreement’. This Agreement made no mention of the Trust Deed. The purchase price was £525, all of which was eventually paid to Mr Tweddle and (after he died in 1953) his personal representatives. On 16 May 1955, Mr Tweddle’s personal representatives executed a transfer of the land to the then trustees. The Transfer made no reference to the Trust Deed or to the 1948 Agreement. The land is now valued at more than £1.2 million.

On 28 May 2006 one of the defendants wrote on behalf of the Elders of the church to the trustees asking the trustees to consider whether the time had come to sell the land and make the proceeds available to the church. The church wished to use the money to extend and refurbish its own buildings, so as to enable the church to improve the parochial services it provides to its members and the local community. Having carefully considered the position, the trustees concluded in September 2006 that they should request the church’s consent to sell the land. The club then took legal advice, as a result of which it challenged the validity of the Trust Deed. Subsequently, on 20 October 2008 the Charity Commission advised the trustees that the Trust Deed had not created a charitable trust.

In this case, His Honour first considered whether the land was subject to the trust in the Trust Deed. He concluded that the 1948 Agreement was a variation of the clause in the lease relating to the option to purchase the land. He then went on to consider if the Trust Deed itself was valid. On this point, His Honour said (at [45], [51]):

It is trite law that a valid trust must either vest the trust property absolutely in ascertainable persons within the perpetuity period or be for exclusively charitable purposes. It is, regrettably, fairly plain that the Trust Deed is an attempt to achieve the legally impossible: a perpetual trust for a non-charitable purpose, namely to enable the members of the Club to play tennis….

The validity of the trusts falls to be tested at the date of the Trust Deed. The fact that nobody realised that there might be a problem until nearly 70 years later does not affect the issue.

His Honour went on to hold that the Trust Deed was not validated by the Charitable Trusts (Validation) Act 1954 because the trust had no charitable objects. In addition, His Honour held that:

1.       There was no implied trust on different terms arising in favour of the church – this could not be so when the express trust had failed.

2.       There was no resulting trust arising in favour of the members of the club.

The latter point gave rise to the difficult legal problem of gifts to an unincorporated association. The purchase of the land was funded by gifts – from Mr Tweddle (who sold the land at a loss to the club), from the club’s lenders who forgave interest owing, from donations, and from club members’ subscriptions. Gifts to unincorporated associations can be argued to take effect in three ways:

1.       a gift to the members of the association at the relevant date as joint tenants;

2.       a gift to the existing members not as joint tenants, but subject to their respective contractual rights and liabilities towards one another as members of the association;

3.       a gift held in trust for, or applied for the purposes of, the association as a quasi-corporate entity. In this case the gift will fail unless the association is a charitable body.

His Honour held that the gifts in question were gifts in the third category, and as the club was not a charitable body, all the gifts failed.

Thus, the Trust Deed was invalid, so the trust had failed. There was no implied trust for the church, nor a resulting trust for the members of the unincorporated club. Was there any other resulting trust? His Honour found that the resulting trust was back to the estate of Mr Tweddle. The executors of Mr Tweddle’s estate had already said that if that was the finding of the court, they would renounce their beneficial interest in favour of the church. However, His Honour said that they could not renounce their beneficial interest, nor was their attempt to do so a valid assignment of the land to the church. The land could be gifted to the church subsequently, but there were taxation implications in this course of action.

The case may be viewed at: http://www.bailii.org/ew/cases/EWHC/Ch/2012/1040.html

Implications of this case

The law relating to unincorporated associations in England, Wales and Northern Ireland is similar to that in Australia. Unincorporated associations do not possess any legal personality separate from their members. However, they are treated as entities for tax purposes, as in Australia. However, it has been argued that unincorporated associations, apart from the tax law, have a legal identity by implication. This is because some eminent jurists have regarded collectives of members as having a separate identity from the members as individuals and case law has sometimes followed this lead. The UK has no form of incorporated association such as that found in all jurisdictions in Australia.

Although the Charity Commission of England and Wales has proposed ways of dealing with small unincorporated charities, there have been no propositions for separate entity status or limited liability in those jurisdictions for unincorporated associations which are not also charities. The new legal form for charities, the Charitable Incorporated Organisation (CIO), will allow charities to incorporate without reference to the Companies Act 2006 (UK). However, this will only apply to those existing charities registered as companies which wish to convert to CIO status, or to newly formed or currently unincorporated charities which wish to take advantage of the limited liability offered by the new form. If an unincorporated association is not also a charity, the CIO form will not be available to it.