CONTRACT, PROPERTY AND UNINCORPORATED ASSOCIATIONS

• Author: TJIO HANS
• Published date: 01 December 1993
• Date: 01 December 1993
• Citation: (1993) 5 SAcLJ 112

I. INTRODUCTION

From our present learning, an unincorporated association lacks the necessary personality to hold property. This follows from “the artificial and anomalous conception of an unincorporated society which, though it is not a separate entity in law, is yet for many purposes regarded as a continuing entity and, however inaccurately, as something other than an aggregate of its members.”1 Yet it can be difficult to argue that the members of the association own its property beneficially, perhaps under some kind of an administrative or bare trust. The problems here are two-fold. First, the donor of the property does not normally intend for any individual member an aliquot share in the donation. The gift is really for a purpose.2 Second, if he does want to benefit the members, this normally includes future members, those that join subsequent to the donation. There may be problems here with remoteness of vesting. As a local High Court decision shows, the answer to the issue of property-holding can be crucial since most legal systems accord proprietary rights far greater protection than mere contractual rights.

Lee Chuen Li and Foong Leong Yein v. S.I.C.C.

The plaintiffs were members of the Singapore Island Country Club; the defendant, a member’s club offering recreational facilities. Their memberships were terminated by virtue of their failure to ensure that their subscriptions were not in arrears. The Club also refused the plaintiff’s request to refer the matter to an extraordinary general meeting. After a detailed perusal of the constitution of the Club at the relevant time,3 Hwang JC, quite rightly, held that there was no breach of contract by the defendants since by Rule 23(c), the defendants had their membership automatically terminated after 12 months of non payment.4 Neither bills nor notice of the overdue account were necessary despite Rule 47.5

However, encouraged by the JC, the plaintiffs arguments were not based merely on the contract governing their relationship with the Club. Were proprietary rights at issue, more earthly natural justice had to be satisfied if the plaintiffs had been expelled from the club. The JC found, though, that there was not an expulsion but a termination, an automatic event. Natural justice was thus not an issue.6 On the other hand, the same act of termination via clause 23(c) could activate the doctrine of relief against forfeiture. The JC accepted that the boundaries of this right was as yet uncertain although there was perhaps some authority that it extended to pure contractual rights.7 However, where possessory and proprietary rights are involved there is no question that the right to such relief exists, and Hwang JC makes it clear that the property of the Club vested in the defendants as “coowners”.

The existence of a proprietary interest establishing the requisite locus standi to ask for relief against forfeiture, is only the first hurdle. Adopting the principles laid out by Lord Wilberforce in Shiloh Spinners Ltd. v. Harding,8 the clause in question has further to be penal in nature or, alternatively, the defendant’s conduct unconscionable and unjust. Ultimately, Hwang JC held that, although clause 23(c) was a forfeiture and not merely a voluntary surrender, the provision was not only for the taking of security to ensure the payment of monies, which would allow for relief against forfeiture, but was a social code for the members of the club. Relief against forfeiture was not appropriate since all members had voluntarily accepted the conditions that were to govern themselves inter se.9 There was also neither fraud, accident, mistake nor surprise to bring the plaintiffs under the second of Lord

Wilberforce’s categories in Shiloh Spinners.10

Our present concern is with locus standi, whether the plaintiffs had the requisite proprietary interest in the assets of the Club which are administered by the Club committee. This ranged from tenancies at will to long term leasehold properties. From 1 Jan 1992, the Public Utilities Board (PUB) granted a 30 year lease to the Club in substitution for the then existing arrangements regarding property used largely for the golf course. The further quid pro quo was an amendment of the rules of the club. Rule 52(c) now provides that “In the event of the Club being dissolved .… All immovable properties, other than land not acquired from the Public Utilities Board, shall be surrendered to the Public Utilities Board. All other assets shall be distributed among approved charitable organisations in Singapore.” Defence counsel relied on this clause to argue that members of the Club have no proprietary or possessory interest in the assets held by the club.

II. DO MEMBERS OF UNINCORPORATED ASSOCIATIONS OWN PROPERTY?

The two viable ways to get round the problem concerning the legal status of gifts to unincorporated associations are the Neville Estates accretion to the funds of the club subject to the contract of the members inter se,11 and the purpose trust that exists under the Re Denley principle.12 The latter is inconsistent with Hwang JC’s assertion that “Like nature, the law abhors a vacuum of ownership” since there clearly are only factual beneficiaries under Re Denley, the better view being that it takes effect as a true exception to the beneficiary principle.13 With the purpose trust approach, it is unlikely that the members of the Club have anything more than a negative locus standi to ensure that the purposes are properly adhered to. Ownership of the assets is suspended.14

Hwang JC must therefore have been referring to the contractual solution. This is corroborated by his detailed analysis of the contract existing between the Club and its members in his judgment. The problem with this lies in two English cases. In Re Recher’s Will Trusts,15 Brightman J said that “In the absence of words which purport to impose a trust, the legacy is a gift to the members beneficially, not as joint tenants or as tenants in common so as to entitle each member to an immediate distributive share, but as an accretion to the funds which are the subject-matter of the contract which the members have made inter se.”16 This could be taken to mean that, analogous to the purpose trust approach, ownership of the property interest is suspended by the contract, since there are but two contemporary forms of coownership in English law; joint tenancy and the tenancy in common.

Yet Hwang JC says quite unequivocally that the members holds the property as “coowners”. He has to be referring to something else-some kind of a contractually modified joint tenancy or tenancy in common17 akin to the archaic concept of tenancy by entireties, which was really a joint tenancy without a right of severance.18 Still, what is so disagreeable about this? Property is a meaningless concept by itself. It is the qualifying conditions and consequences of qualification that matter.19 In an age where the value system that has evolved attributes greater economic value at times to intangibles, our ideas of property have correspondingly evolved. So long as we find most of the incidents of property it does not matter what the label is. The same argument will be made below regarding choses in action, that is, the memberships themselves.20

The second problem is less conceptual. In Re Grant’s Will Trusts,21 Vinelott J refused to uphold a gift to an unincorporated association as he held that it was an endowment that failed for perpetuity reasons and because it also

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