Unincorporated Associations and Common Laws - Essay Example

Unincorporated Associations Unincorporated associations Introduction In the wake of the increase in litigation and legal suits on property transfer and ownership, unincorporated associations remain disregarded as legal entities in the United Kingdom. Although the membership of unincorporated associations may identify themselves as an independent organization, the legal stand remains adamant in allowing these bodies a privilege to own property. Many unincorporated associations continue to own property despite the legal requirement that only incorporated associations have the right to do so. In addition, members of these associations are subject to the associations constitution that allows them to enter into agreements and contracts for the benefits of the organizations. The legal precedents and England legal traditions continue to be an impediment to these organizations rights to own property or engage in the transfer of an asset. Background of Unincorporated According to the first definition of Charitable Uses Act 1601, charity was recognized as the undertaking geared towards public good1. Additionally, IRC v Pemsl identified charity as four-tire principally driven facets. Firstly was the trust for poverty relief, trust for education advancement, religion, development and any other area of community good. The advent of the unincorporated association stems from this historic legal definition. However, in 2006, the Charity Act expanded the definition of the charitable purpose2. In addition, during Oppenhelm v Tobacco Securities Trust, a trust for the public benefit dominated the ruling3. The House of Lords identified the need to revamp unincorporated associations to develop into a vibrant non-profitable organization saw the many legal provisions guiding their operations. 4 However, in the wake of increased economic and political developments, the legal hurdles have been navigated over time. Currently, unincorporated associations through provision of legal trustees and owners have enormous wealth that remains under the custody of the trustee. However, the legal battles on the trusts and principle of beneficiary continues to elicit heated legal debates in the United Kingdoms courts and beyond. The English laws have a number of features that continue to shape the existence of the unincorporated associations. According to the law, an incorporated association consists of more than two members bound by the rules that a society founded at some point. One of the basic laws regarding the relationship of the transfer in these associations that any transfer is considered legal if the association members transfer as tenants in common or joint tenants. Any transfer of funds is, usually, given huge consideration and is subject to the terms stipulated by the Private Purpose Trust (PPT)5. Formation of Unincorporated Association A number of legal documents should be provided in order to form an unincorporated association. More often, the legal hurdle is the easiest step since it allows for fewer materials. Firstly, one should present a Club rules and the constitution that will guide membership, officials and operations of the association. In addition, the club rules must be licensed. On providing the list of its members and projected benefits to the target group, the association can duly embark on setting up structures and commence its operations. Initially, membership to these associations was largely voluntary; today this is no longer the case. The common interest that drives its formation is not voluntary but circumstantial. Today, the term common-interest group is commonly used to cater for these groups. Some of the unincorporated association includes environmental groups, professional associations and trade unions. In addition, the law requires that any person making a transaction on behalf of the association take responsibility repercussion thereafter. Arguably, unincorporated association faces huge legal restriction when it comes to the undertaking transaction. Additionally, in legal jurisdiction few formalities are needed to start these associations. Legal restrictions are seen to matter when it comes to the operations and running of these institutions. In England and many other jurisdictions, only registered association is referred to as a juristic person whose membership is immune to financial assets of the overall association. Some legal jurisdiction requires that the association be registered with the police, in England there is a body responsible for its registration and functioning of these bodies. According to English trust law, in the case of Conservative and Union Central Office v Burrell, it identifies that two or more people bound together by a common purpose. Besides, it recognizes mutual undertaking and the fact that each member of the association has mutual interest, duties and obligation to each other6. In most countries, including England, unincorporated associations have no separate legal personality. In addition, others provide for a few members of the association to have limited liability. However, the lack legal personality, legacies to unincorporated associations is significantly regulated by the general common laws, precedence and English legal traditions. In addition, the common law prohibitions against purpose trust regulation. Unincorporated Associations and Common Laws The English laws provide for registration of these associations with more than two members with a clear area of interest. A transfer of assets or a property is strictly based on joint tenants or tenants in common association. In addition, the purpose trust establishes significant legal relationships that dictate legal and purpose definition of these associations. Management and transfer of funds, perhaps, is the most critical legal cases that often arise. The terms of the Private Purpose Trust stipulate the manner in which any transfers are held and controlled. The transfer is often considered to have been made directly on the joint tenants if it is made on behalf of the association7. Alternatively, transfer of funds may be considered to have been made as per the terms of private purpose trust. In some circumstances, these unincorporated associations fail for the want of beneficiary, in such circumstances, it is considered as failed gift. However, some purpose trust remains valid and many at times it requires that that the rights association of some unincorporated associations remains held on this basis. Accordingly, on the dissolution the rights of these associations are distributed according to how they were held. In practice, the private purpose trust may survive the dissolution or at times, it may not depend on the terms of dissolution8. In case the purpose trust fails to survive the dissolution, the rights are then transferred to the resulting trust for the contributors. However, in cases where the contributors have renounced their rights to the trust, the rights become a subject to the contract. On the dissolution, the righteous will be subdivided according to the existing members. The terms of dividing rights according to surviving members further depend on the terms of the contract interest or the contribution becomes the criterion. The English laws further provide for a comprehensive and precise stipulation on the transfer of the rights. According to the law, if there is no member to claim a particular right, the right is presented to the Crown as bona vacantia. There has been heated scholarly arguments on the unique circumstance where only one member remains after dissolution. Some school of thought believes that in the circumstances the last man should be entitled to the rights. Others believe that the rights should be transferred to the crown. In addition to these legal stipulations on the transfer of rights, the law prohibits these associations from owning any asset on its name. This is primarily because they have no legal entity to enter into agreements and contracts of property and asset transfer and ownership9. In this circumstance, the associations have continually crafted means to access and own property. One of the approaches used to own property is through appointing individuals or trustees. In such circumstances, the trustees are under the Trustee Act 1936 (SA)10. Whichever the case, the legal requirements remain navigated through legal although dubious approach. Although, the members of these associations remain under the powers of the association, they are capable of entering into owning property on behalf of the association or enter into contracts. In addition, it is an offence for a person to falsely claim that he or she represents a body that is an incorporated association according to Association Incorporation Act 1985 (SA). Members Duties and Responsibilities Members of unincorporated associations are personally regulated by the powers of the association constitution. In addition, members are required to put the interest of the association ahead of competing personal goals. The members are expected to be personally and individually responsible for the debts or liabilities incurred in the name of the association. In circumstances where a contract is signed on behalf of the association, individual members are culpable to the manner of execution or violation of terms and as such, there is a legal provision to commence a legal suit11. Surprisingly, where an individual is injured during the execution of duty and the association lacks an insurance cover, the individual members can be sued on the ground of negligence. The association lack of legal entity presents a burden of duty and obligation to individual members. It is, therefore, required that each task performed on behalf of these associations should be thought through and thoroughly examined in order to avoid legal suits. Advantages of Unincorporated Associations in England As charity organizations, the unincorporated associations are not expected to execute profitable ventures by law. With English trust laws, there are numerous advantages of registering association under the charity status. In cases of conflicts, the Attorney General of Wales and England sues on behalf of beneficiaries since the members are not beneficiaries. Unlike incorporated association, there is no association between trustees and beneficiaries. This ensures that trustees remain compliant to the rights laws or else face the Attorney General suit. In addition, beneficiaries have no direct control of the association this poses an advantage of preventing multiple legal suits in cases of conflict, thus allows for systematic legal conflict resolution. In addition, charity organizations are exempted from many legal requirements. For instance, the laws exempt them from income tax since they are non-profit organization. However, they are required to file tax returns despite being exempted from paying tax. In addition, the law exempt charitable trusts from capital and council gains tax as per the English laws although they remain obliged to pay VAT. Furthermore, the tax liability applies to those who offer donation through Gift Aid. Despite precise legal stipulations, there have been a number of legal suits that sadly, have ended in litigation. Legal Suits and Unincorporated Association Historically, precedence and English traditions have continued to raise legal debates with courts giving conflicting ruling. There have been incidences of the legal verdict being overthrown on the grounds of lack of substantial grounds of principle of beneficiary. In England and the world, the principle of the beneficiary has continued to elicit mixed legal interpretation. It has culminated in the creation of a weaker and a stronger version of the beneficiary principle. The weak version stated that a non-charitable trust do not exist unless in circumstances that there is a person who can enforce the trustees obligation. The source of the beneficiary principle in the case of the Morice v Bishop of Durham (1804) seems to agree with this original version12. During the case, it was ruled that there cannot be a trust in circumstances that the court cannot assume a control over uncontrollable power in disposition. In addition, the court ruled that the disposition would be the equivalent of ownership, but not trust13. Besides, the stronger version stipulates that a non-charitable trust will not exist unless in circumstances that one or more individuals are identified as the interested beneficiaries in a particular property. A good example given in the stronger version of Beneficiary Principle is the Bowman V Secular Society Limited (1917). In the ruling, the court, it highlighted that for trust to be accepted and valid, there should be an overt benefit to individuals. Besides, the gift must fall under the category of public good. In addition, the trust is allowed only if the courts within the country recognize it as a charitable organization14. Under this interpretation, it envisions public and individual good as the sole determinants of the validity of the trust. Besides, it recognizes unincorporated charitable organizations as an important on the contrary, the stronger version Neville Estates Limited v Madden (1962). The case presented legal suits between charitable trusts that were primarily founded to benefit the members of Catford Synagogue. The legal conflict during the suit was on whether the trust to benefit directly the members of the synagogue amounted to a charitable purpose. In the ruling, the courts stated that the religious functions in the synagogue were free and open for the members of the public. Consequently, the requirement of that defines charitable association of public good was satisfied. The ruling paved way for the set precedence on trust and principle of beneficiary in English Common Laws to date15. In addition, the ruling on Gilmour v Coates (1949) pointed out a new perspective of public good. While the public good means mutual benefit, the ruling excluded group-specific benefit and emphasized on the concept of" benefit for all." In denying the existence of public good, the judge ruled that the trust established purposely meant to benefit Carmelite nuns and was, therefore, it was specific in its purpose but excluded members of the community16. In similar case Dunne v Byrne (1912), the nun activities were allowed by law as religious but not charitable in any legal definition since it was nuns, benefit, but not public. In addition, Re Lipinski (1976) applied Denley principle in upholding a gift to the unincorporated association; in the ruling, Oliver J upheld that the construction of the building was a charitable gift to the organization. Leahy v Attorney General for South Wales (1959) The case presented an Australian and English trust law in relation to a charitable organization. The main conflict arose from the validity of a gift advanced by an unincorporated association. During this case, the High Court of Australia upheld that the gift was valid. However, this triggered a legal debate after the claimant appealed at the Privy Council. In their verdict, the council found out that as an unincorporated association, the trust was not valid. Certainly, this interesting trust case proved inconsistencies of laws as interpreted by two legal bodies. Today, Leahy V Attorney General case has been incorporated in Australian laws concerning gifts, bequest and contracts of the unincorporated association. During this case, it seems to recognize the views of stronger and weaker beneficiary principle. In determining validity of the gift to the charitable organization, the ruling argued that if the "general purpose" of the association were meant to import trust. It provided for the definition of the trust and the beneficiaries as identified17. This was a statement given by Viscount Simonds on the ruling of the case. The view of the law pertaining trust and beneficiary in case of Leahy v AG for New South Wales (1972) brought into light the fact that the AG could only sue on behalf of charitable trust. In addition, it suggested that the view on beneficiary principle can be satisfied only if there is a sue from someone against trustee. The courts are required to force the trustee to comply with the duties as per the trust in the charitable organizations stipulations. The decision in the Re Denley case affirmed the difference in the interpretation of strong and weak principles of the beneficiary18. This perhaps was the most complicated of all cases involving trust in and beneficiary principle interpretation. In summary, the case was about whether the company had a valid trust when it decided the land on trustees to be used as recreational of the companys employees. It was a case between trustees and the company. The principle application and the fundamental of public good purpose played well during the case. In the ruling, the judges had difficulties in determining the purpose and the object trust. In addition, the term benefit to individual stirred a heated legal debate during the hearing. However, the ruling denied the trustee locus standi because the asset had indirect benefit to the organization. It was argued that the definition of purpose and object trust was largely impersonal and abstract to the degree of posing difficulty in interpretation and framing legality. It served to endorse the principle of the weak version of the beneficiary principle. The case recognized that non-charitable benefits trust is valid and allowable by law as long as there is existing substantial interest by the party involved. The verdict ruled that the Re Denley land be on the employees, trust that had a direct benefits interest. In interpreting the benefits, the judge identified the right to use the land in line with the rules put forward by the trustee. In addition, Re Denley trust was interpreted as. A similar view on the purpose versus personal trust case was upheld during the Horley Town Club (2006). During the land ruling, it was seen as a trust for the benefits of individual but not a purpose trust. Irrespective of conflicting views on trust and beneficiary principle, there are outstanding features of some trusts and beneficiary principles and subsequent exceptions. For instance, there are some trusts that exist as exceptions to the beneficiary principle as identified in Re Endacott (1960). Firstly, trust for the setting up a building or maintenance. In addition, trust for the masses and trust for maintaining particular animals. Under this provision, the circumstances supersede basic legal provision and as such, they have an exception in the application of Basic English laws of trust and beneficiary principles. There are two primary reasons or existence of the beneficiary principle concerning the operations of unincorporated associations and charity organizations. Firstly is the fact the court erred when they recognized trust as valid. According to Harman Lin Re Endacott, by recognizing these trusts, the courts had simply resorted to a nap and the straight thinking had been greatly jeopardized. In describing cases that had upheld trust, Harman considered them troublesome, aberrant and anomalous19. Secondly, Roxburgh J in Re Astor (1952) expressed serious concern about the way these trusts were erroneously upheld. In disagreeing with upholding trust, Roxburgh criticized the courts for violation of the weak principle of the beneficiary. He believed that there was no person to challenge in the court the misappropriation of the trust by the trustee20. In the light to the unincorporated associations, there is more satisfactory explanation on the reasons for these exceptions often termed as concessions to sentiments and human weakness. The exception originates from the fact that people cannot be stopped from creating any forms of trust in their wills. In such circumstances, the Re Endacott case offered a slightly flexible approach that would see purpose trust upheld if this statute was to be adopted. The English Common Laws have certainly said no to the validity of trusts of non-charitable purpose trust. In fact, the law offers immunity to the trust even if they existed many people willing to compel the trustee of the property to enforce the principle of the property for the purpose21. Limitations Facing Unincorporated Association in England Numerous legal and logistics limitations have derailed legal and operational capacities of the majority of the unincorporated associations in England and the globe. Firstly, is the fact that they have no legal entity; this means they cannot initiate a legal action when it faces violations from within or outside the country. It is only AG who can come to the rescue of these associations. Secondly, these associations cannot borrow money using its name; instead, a registered member of the association does the borrowing. In such circumstances, the debt liability lies squarely on the borrower. Over many years, this provision has derailed financial adventure. Thirdly, these associations face legal hurdle in entering into contracts and agreements with individuals or on the organization. Being a charitable and non-profitable venture, the interest of its members under the principle of beneficiary comes first. Besides, these associations by law are not allowed to hold or even own a property. Certainly, this poses a greater challenge on the operational practicalities of these associations. For instance, in order to own a van or a bus, they are supposed to set a trust or, allow some members to have legal title to the ownership of the property. Personal Risks and Available Options Because the legal provisions do not allow these associations to have a legal existence, individual members are forced to sign loan documents and terms of relevant contracts. Sadly, the liability of these documents lies squarely on the shoulders of these members. In the wake of fraudulent operations in organizations, any misuse of funds and losses incurred during operations leads to personal losses. The expansion of these associations has been limited by the fears of liability to the property borrowed by the organizations22. Following these areas of challenges, raising meaningful financial resources or applying for grants are almost impractical, and most majority of the members remains skeptical about it. In addition, any attempts to enter into huge contracts and agreements poses financial risks to the owners since any money lost in the process will be recovered from personal finances and assets. In addition, lease or buying freehold property into association has similar risks. Issuing of shares poses personal conflict of interest, and thus, the growth of these associations has been significantly impaired. Conclusion Unincorporated associations continue to elicit legal debates and argument in the English law courts and worldwide jurisdiction. The definition and application of trust and the practicability of the principle of beneficiary be the primary areas of contention. However, these associations continue to grow at unprecedented rates despite the legal restrictions on their operations. The legal provision that denies these associations legal entity has significantly limited the scope of their operation. As charitable organizations, this association continues to create organizational precedence and legal traditions in English common laws v Read More