• In the case of Re Buckinghamshire Constabulary Fund (No. 2) [1979] 1 W.L.R. 936, it was held that, if no provision has been made by the rules of a friendly society to distribute the surplus funds on the society’s termination, normally such funds will be divided in equal shares among the existing members and will not go to the Crown as ownerless goods.

Facts of the Case

  • A county constabulary created a friendly society of serving members to use voluntary contributions to provide relief for the widows and orphans of deceased members, as well as sick serving members.
  • Under rule 31 the society could be dissolved by an instrument of dissolution.
  • In April 1968, C was amalgamated with a number of others.
  • On 31st October 1968, the members resolved to wind up the society, to continue until its dissolution to pay benefits to all existing beneficiaries, and to transfer some assets to a similar fund run by their future constabulary.
  • By paragraph 5 of the instrument, the society’s net funds were proposed to be divided and appropriated to purchase annuities, to grant £40,000 to the new fund, and to donate the balance to another benevolent fund.
  • The society was legally dissolved in 1969. After the purchase of annuities and payment of the £40,000, C, as sole trustee of the society, had the balance in his hands.
  • On 14th June 1973, C asked the court, inter alia, to determine whether he was authorised to dispose of the funds in accordance with paragraph 5.

Issues

  • In the absence of relevant provisions, should the surplus funds be transferred to the new fund or given to the Crown?

Held by the Chancery Division

  • Finding for C, that the surplus would be held on trust to be distributed amongst the society’s existing members at the time of dissolution in equal shares and to the total exclusion of the Crown.

Walton J

  • If a number of persons associate together for a purpose which involves the acquisition of cash or property of any magnitude, then they will require a treasurer or holder of the property. In any sophisticated association there will be one or more trustees in whom the property will be vested.
  • These trustees do not hold such property on their own behalf. The normal course of events will be that the trustee will declare that he holds the association’s property in his hands upon trust to deal with it as directed by its members (usually be committee).
  • It appears quite clear that, unless under the rules governing the association the property has been wholly devoted to charity, the only persons interested therein are the members.
  • “I can see no reason for thinking that this analysis is any different whether the purpose for which the members of the association associate are a social club, a sporting club, to establish a widows’ and orphans’ fund, to obtain a separate parliament for Cornwall, or to further the advance of alchemy…All the assets of the association are held in trust for its members-of course subject to the contractual claims of anybody having a valid contract with the association-save and except to the extent to which valid trusts have otherwise been declared of its property…” [940C].
  • There can be no doubt, therefore, that in the present case the whole of the property of the society is vested in the trustees for the use and benefit of the society and the members thereof. There is no trust in the widows or orphans’ favour, even if they benefited from the society’s operations.
  • There can be no doubt at all that the distribution is on the basis of equality, because, as between a number of people contractually interested in the fund, there is no other method of distribution if no other method is provided by the terms of the contract. We are dealing here with a friendly society, but that makes no difference to the principle.

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