Hunt & Anor v McLaren & Ors

A gift to a non-charitable unincorporated association may take effect as a contract-holding gift to its members, subject to their contractual rights and liabilities under the association’s rules. Such a gift is not rendered void by the perpetuity rule where the members’ interests vest immediately. The members must remain able, under the rules, to alter the purposes or distribute the assets among themselves. On dissolution, surplus assets are ordinarily distributed among the relevant members on a per capita basis, subject to the rules and the proper classification of membership. Temporary or nominal categories of membership do not necessarily acquire proprietary rights merely because the rules describe them as members.

The trustees of Horley Town Football Club sought directions concerning land settled in 1948 for the Club and the proceeds of its later sale. The Club was an unincorporated association. The principal issues were whether the settlement created a valid trust or gift, whether subsequent changes to the Club’s rules invalidated or altered the beneficial ownership, and which categories of members were entitled to the Club’s assets.

The court also had to determine whether the current full, associate and temporary members had proprietary interests and how any surplus would be distributed on dissolution.

1. Validity and construction. The settlement was construed as a gift to the Club and its members for the time being, subject to their contractual rights and liabilities, within the second category identified in Neville Estates Ltd v Madden [1962] Ch 832. The members’ interests vested immediately, so the rule against perpetuities did not invalidate the gift.
2. The validity of a contract-holding gift depends on the members’ ability, under the rules, to direct that the funds be applied to a new purpose or distributed among themselves. The fact that associate clubs had a limited voting right did not make the gift analogous to the defective arrangement in Re Grant’s Will Trusts [1980] 1 WLR 360.
3. Beneficial ownership. The beneficial ownership was held on bare trust for the current full members. Temporary and associate members did not acquire proprietary interests. It would be wholly unrealistic to treat the introduction of associate membership as a transfer of the Club’s property to those members.
4. Dissolution. The members could amend the rules, dissolve the Club and distribute the assets, or the association could be wound up by the court. In the absence of a contrary rule, the surplus was to be divided among the relevant members, normally on a per capita basis. On the facts, the persons entitled were the adult and senior members.
5. The court did not need to decide whether the settlement could alternatively be upheld as a Re Denley’s Trust Deed [1969] 1 Ch 373-type trust. That construction raised difficulties concerning termination and was an unsafe basis for decision. The question of the powers of the committee and trustees was adjourned for further hearing.

First-instance judgment. The judgment itself does not state any prior appellate history.