Leahy v AG for NSW [1959] AC 457

Key point

  • This case suggests that there only 2 mechanisms by which transfers can be made to unincorporated associations, purpose trust or joint tenancy (Note: this was rejected in subsequent cases, see commentary)

Facts

  • The testator left his property to be held on trust for an order of nuns, with the following provisions:
    • Clause 3: “As to my property known as ‘Elmslea’ … upon trust for such order of nuns of the Catholic Church or the Christian Brothers as my executors and trustees shall select …”
    • Clause 5: the residue of his estate is to be put on trust, the money resulting from the sale shall be used to build a new convent or to alter existing convents. The receipt of the Reverend mother of that particular order of nuns or convent shall be a sufficient discharge
  • s37D of the Conveyancing Act 1919 in New South Wales states: “(1) No trust shall be held invalid by reason that some non-charitable and invalid purpose as well as some charitable purpose is or could be deemed to be included in any of the purposes to or for which an application of the trust funds or any part thereof is by such trust directed or allowed.”
  • Trustees filed to determine the validity of gifts under clauses 3 and 5

Held (Privy Council)

  • Both gifts are valid by virtue of s37D Conveyancing Act 1919 (NSW)
  • If not for s37D, a gift to such charitable or other purposes as the trustees might think fit would be void

Viscount Simonds

Transfers to unincorporated association

  • There are two possible ways in which property can be transferred to unincorporated associations:
    1. Prima facie gift to joint tenants; or
    2. Purpose trust
  • Where a gift is made to an unincorporated association, even for the furthering the general purposes of the association, it is prima facie a gift to the individual members as joint tenants
  • However, certain considerations can displace the presumption and imply a purpose trust:
    1. Terms of the will;
    2. Nature of the society, its organisation and rules; and
    3. Subject matter of the gift
  • If the purpose is non-charitable the trust is void

Current case

  • There are sufficient indications to displace the prima facie assumptions:
    1. The gift is stated to be for a selected order
    2. The members of the order may be too numerous, it is not easy to believe that the testator intended an ‘immediate beneficial legacy ‘ to such a body of beneficiaries
    3. The subject matter is a farm estate, it is not possible to regard all the individual members or an order as intended to become beneficial owners
  • Therefore, it is not a trust for the benefit of existing members, but a non-charitable purpose trust for the benefit of the Order as a ‘continuing society and for the furtherance of its work’
  • Since the Orders are perpetual, the trust would be void by perpetuity rules but it is saved by s37D Conveyancing Act 1919

Commentary

  • In Neville Estates v Madden [1962] Ch 832, it was set out that there are 3 categories of transfer to unincorporated associations:
    1. Joint tenancy: A gift to existing members as joint tenants. Their share is severed once they leave;
    2. Contract holding theory: A gift to members subject to contractual restriction. It cannot be severed by leaving the association, the gift remains vested in the current members of the body at any time; and
    3. Trust: The gift is held on charitable trust; the gift will fail unless the unincorporated association is a charitable body.
  • In the absence of words that impose a trust, a gift to an unincorporated association is an accretion to funds, which are the subject matter of the contract between members: Re Recher [1972] Ch 526