Gibbons and another v Woolley

Trust – Unincorporated association – Sale of land – Trustees of social club acquiring land held on trust – Club activities lapsing over years – Trustees and representatives agreeing that club effectively dissolved – Claimants seeking directions for sale of property and distribution of proceeds – Whether club dissolved – Whether land to be sold – Whether members entitled to share of proceeds – Orders accordingly Two adjacent plots of land by Station Road, Hollingwood, near Chesterfield, Derbyshire, comprising some 8.3 hectares, were owned by the trustees of a social club for railway workers and their families. The club had acquired one of the plots in 1986 for £7,500 and an adjoining plot in 1990 for £19,125. The land was held on trust. The club wished to secure charitable status and for that purpose the three trustees executed an association deed. The club ceased to function in about March 2013 and the land was currently in a poor condition. Multiple break-ins to the clubhouse resulted in serious internal damage. A professional valuation of the land was carried out in December 2019 which valued it at around £380,000. The trustees of the land had all died and there was no indication of what was to happen if the club was wound up. Following an advertisement in the local press, around 30 people attended a meeting, at which it was agreed that the club had been dissolved at some point during March 2013, when the members stopped paying membership fees and the club’s steward ceased to be employed. As there was a lack of clarity regarding the identity and nature of the trust, the claimants, as the personal representative of the final living trustee of the first plot and a beneficial object of the trust, brought a part 8 claim seeking directions in the administration of the trusts pursuant to CPR rule 64.2(a)(ii), orders for the sale of the land, directions for the distribution of the proceeds of sale and consequential directions and relief. Held: Orders were made accordingly. (1) The court was satisfied that the claimants had followed all appropriate and reasonable steps to bring the matter to the attention of potential beneficiaries and others who might have an interest, in accordance with paragraph 7.7 of Practice Direction 64B; and that the claim complied with CPR rule 64.4(1). Accordingly, it was appropriate for the court to hear the application. Paragraph 7.1 provided that the trustees’ evidence should ensure full disclosure of relevant matters. If trustees sought the approval of the court to an exercise of their discretion and surrendered their discretion to the court, it was important that they should supply the court with all the material necessary to enable that discretion to be exercised. In the present case, both claimants had acknowledged that they had to comply with that duty and had sought to do so. As no-one had appeared to oppose the application, the claimants owed a duty to bring to the court’s attention any relevant legal proposition or argument affecting the position of unrepresented beneficiaries or parties: Marley v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198 and State Street Bank and Trust Company v Sompo Japan Insurance Inc [2010] EWHC 1461 (Ch) followed. (2) The association deed was clearly intended to create a charitable trust. In order to constitute a charitable trust, the objects of a trust had to be exclusively charitable. In this case, the trust was not charitable as its facilities were not available to the public at large under section 1(2)(b)(ii) of the Recreational Charities Act 1958. If the club was not a charity under the 1958 Act, it could not be a charity under the general provisions of charity law outside that statute. (3) The members, as defined in the association deed, were entitled to the use and enjoyment of the association’s premises and facilities, including specifically the land. There were beneficiaries capable of seeking to enforce the trust and, as the association was effectively run for the benefit of the members for the time being, the beneficiaries at any one time were ascertainable. It was not an abstract or impersonal trust. It followed that the trust was effective on the terms of the association deed. Although the deed did not address what should happen if the club was wound up, the members were entitled to vary the rules, and thus the contractual arrangements between them, to provide that the assets of the association could be divided between the members at the time. Accordingly, perpetuity was not a problem: Re Horley Town Football Club [2006] EWHC 3286 (Ch); [2006] PLSCS 205 considered. (4) There was no evidence of any formal dissolution of the club, although all activities of the club had lapsed many years ago. As a matter of principle, it was possible for a club to be dissolved spontaneously but mere inactivity was not enough. However, inactivity might be so prolonged or so circumstanced that the only reasonable inference was that the club had become dissolved. The less activity there was, the greater the difficulty of finding the moment of dissolution. In such cases the court had to do its best by picking a reasonable date somewhere between the time when the club could still be said to exist and when its existence had clearly come to an end. In the present case, in all the circumstances, the only reasonable inference was that the club had been dissolved in March 2013: In re GKN Bolts & Nuts Ltd (Automotive Division) v Birmingham Works Sports and Social Club [1982] 1 WLR 774 followed. (5) The only real asset of the club was the land, and it seemed clear that the land should now be sold. There was no conceivable benefit to anyone in it being retained, and the court would direct the claimants’ solicitors to conduct the sale pursuant to section 50 of the Trustee Act 1925. As there was nothing to indicate a different basis, the distribution should be on a basis of equality, irrespective of the length of membership or the amount of the subscriptions paid. When sold, the net proceeds of sale should be divided equally between members as at March 2013, or their estates. A mechanism was to be set up, to be approved by the court, for members to come forward with any supporting evidence by a stipulated date, with an independent figure to resolve any disputed or doubtful claims. Timothy Sherwin (instructed by Taylor & Emmet LLP) appeared for the claimants. The defendants did not appear and were not represented. Eileen O’Grady, barrister Click here to read a transcript of Gibbons and another v Woolley