Legal difficulties arise from the fact that, while an association has no independent
personality in law, it most certainly does have an independent existence for all practical purposes: members join it, leave it, and complain about how their association treats them; it probably has its own website, premises and bank account, and (in the UK) is liable to pay its own tax. Most significantly, people give it money as if it were an entity in its own right. In short, the legal underpinning is at odds with how people actually think and behave, and judges (and occasionally Parliament) have at various times tried to square the law with the social reality. Whilst an unincorporated association cannot hold property itself, in the strict legal sense, there are mechanisms that are used to achieve the same effect.
Nature of held rights There have been several theories proposed as to how rights, such as ownership of assets, are held by voluntary associations. There is also the possibility that the gift is to the current and future members of the society, which, by operation of the
Perpetuities and Accumulations Act 1964, will operate for the benefit of those members within the
perpetuity period.
On trust for the purposes of the association The second alternative is that the gift is to the trustees, or those officers who might properly be considered trustees, to be held on trust for the purposes of the association in a private
purpose trust. Purpose trusts are not permitted in English law (with the exception of charitable trusts, which exempts charitable unincorporated associations from many of these difficulties), so any such gifts will fail for want of a beneficiary capable of enforcing the terms of the trust. Reform to purpose trusts, such as making such a trust enforceable by a named individual (the chairman or treasurer, for example) rather than by a beneficiary (of which there may be none), would impact the role of the purpose trust in the voluntary association context.
Contract-holding The third alternative is that members hold the property as
beneficial owners, but are bound by their contracts
inter se as to their ability to take out their share. That share is considered to pass to the other members of the association upon the death or resignation of the member. One statement of when such an absolute gift will be considered to have been made was given in ''
Re Lipinski's Will Trusts'': Another statement of the principle came in , where
Lewison J stated: This "contract-holding" theory is now considered the dominant theory in the field.
In practice The question of which construction applies to a particular transfer must be ascertained in any particular case. A donor could decide on what basis he or she was transferring the rights to the association; however, this is rarely considered by donors and thus which construction applies is often affected by the judge's own beliefs as to common practice. Sometimes the situation is clear: monies paid pursuant to a contract, such as
raffle tickets and members' subscriptions, are normally taken to fall inside the third (contract-holding) category. As
Goff J explained in the
West Sussex case: Simon Gardner has argued that the principle behind such a conclusion is that the ticket purchaser was not at liberty to choose to transfer the money to be held on a purpose trust. There are situations where a contract enforced a payment on trust, such as
Quistclose trusts and
marriage settlements, that might be relevant to unincorporated associations. In particular, he suggests that an employer's obligation to pay into a pension pot, as occurred in
Davis v Richards and Wallington, for example, might fall into this category.
Distribution of rights upon dissolution An unincorporated association may dissolve for many reasons, including a decision by the members to wind it up or a court order. In addition, an association may sometimes dissolve spontaneously. One such case is where the purpose of the association becomes impossible to fulfil (e.g., if it was to raise funds for a school that goes out of existence). A second is when only one member remains: this follows from the association being a matter of contract, which by definition must be between at least two parties. The distribution of rights in such a case depends upon how those rights are determined to be held. If the purpose trust construction is preferred, then the dissolution of the association will not necessarily bring an end to the purpose trust, dependent upon whether the association is the "essential mechanism" of the purpose. If the purpose trust survives the winding up of the association, then new trustees may need to be appointed. The
West Sussex case considered the effect of the association's dissolution on the rights held by the trust where the trust did indeed fail. In such a case, the monies paid to the association will ordinarily be held on
resulting trust for the contributors. However, there may be situations (including money collected through collection boxes) where the contributor can be said to have "disclaimed" the resulting trust and it will be considered
bona vacantia. That conclusion, however, was contested by those who believed beneficial ownership by the last surviving member would be more appropriate.) In the
Bucks case it was suggested that a term indicating some method of distribution would be implied as a matter of course; in particular, Walton J attempted to bring
Cunnack v Edwards and
West Sussex within the proposed model of implied terms, rather than by distinguishing them. This approach was not taken in
Davis v Richards and Wallington where Scott J did not discuss implied terms directly when holding that the rights were now
bona vacantia. This, Simon Gardner has noted, hints at a return to the 'eclectic', case by case, approach previously favoured by the courts. Instead, he says, judges should pursue a set of implied terms that differ according to the nature of the society (
social club or
pension fund, for example). Lewison J's ruling in Hanchett Stamford's case would appear to have decided this question for the time being: he held that the assets do not become
bona vacantia as long as one member of the association remains. This followed from his conclusion that the correct construction of the ownership was the “contract-holding” theory: as above, that the members own the association property “as joint tenants, subject to the [contractual] rules if the association”. When by death or otherwise only one member of the association remains, there is no longer any contractual restriction on her ownership, and she becomes absolutely entitled per the general law of joint tenancy. Indeed, from Lewis J’s reasoning it seems likely that even if this one survivor dies, their heirs will inherit what was previously association property.
Libel Lack of legal personality means an unincorporated association ordinarily has no standing to sue for libel. ==Unincorporated nonprofit associations in the United States==