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Defining an association
30/09/2003 The Star Articles of Law with Bhag Singh
The word "association" is commonly
used to refer to a variety of concepts. In some cases, the word is used independently,
while in other cases, it is used as part of a phrase. Thus a company has been
described as an association of people who come together with a common objective
to achieve economic gain.
In other cases, the word refers to
an organisation of the non-government type. Thus when one refers to the
Football Association of Malaysia or an Old Boys' of Old Girls' Association,
what is involved is an organisation registered by the laws of the country.
Even though the word "association"
is often linked to a body that is a voluntary organisation, it is not a word
that is always used in this sense, or even defined in the Societies Act 1966.
In the Act, it is used in the definition of a society which is said to "include
any club, company, partnership or association of seven or more people.
The use of the word again comes up
for consideration involving joint ventures . The Oxford Dictionary of Current
English gives the meaning as "a group organised for a joint purpose, society".
This is the sense of it being a grouping of people.
In the context of joint ventures,
the word "incorporated associations" is often used where two or more parties
propose to be engaged in a business activity . Where such coming together takes
the form of a company under the Companies Act 1965, then the arrangement is
clear and the Act will govern the entity.
In other cases, a company may not
be used and the activity may be carried out through unincorporated associations
which may not even be partnerships.
One definition commonly cited is
that found in the Court of Appeal decision of Conservation and Unionist Central
Office vs Burrel (Inspector of Taxes) where Lawton LJ thought that in the context
of Section 526 of the then Income and Corporation Taxes act 1970, an association
meant: "Two or more persons bound together for one or more common purposes,
not being business purposes, by mutual undertakings, each having mutual
duties and obligations, in an organisation which has rules which identify in
whom control of it and its funds rests and upon what terms, and which can be
joined and left at will."
When used in relation to joint ventures,
two elements of this definition are inconsistent with the characteristics of
unincorporated joint ventures which do not constitute partnerships. The suggestion
that an association can only exist other than for business purposes is incorrect.
This is because joint ventures are very much creatures of commerce.
Secondly the notion that an association
can be joined and left at will is also inconsistent with its use in the commercial
context. The personality of a joint venture is important and it would be common
to impose severe limitations on the ability of any one participant to leave
the joint venture as he/she wishes.
Activities as diverse as sports clubs,
political parties, housing associations, trade associations, theatre clubs,
campaigning groups, community associations and working men's and social clubs,
as well as non-partnership trading, ventures, are commonly carried on through
the medium of an incorporated association.
There are few decisions that relate
specifically to those joint ventures for business purposes which do not fulfil
the statutory definition of a partnership and, in practice, the legal principles
applying to such joint ventures have to be viewed with caution.
A better description of the characteristics
of these joint ventures can perhaps be derived from a decision of the Court
of Session concerning the meaning of the term "association" in another context.
In Re Caledonian Employees Benevolent
Society, a case concerning the winding up of an unregistered company under the
forerunner of what is now Part V of the Insolvency Act 1986, the Lord President
considered the meaning of the expression "any association" in the following
terms: " No doubt the word "association" is by itself capable pf including
capable of including a wide variety of much more loosely and irregular constituted
bodies of persons; but looking to the context in which it appears, I see no
reason to doubt that what is meant is a society (whatever its object) based
on consensual contract among is constituent members whereby their mutual relations
with regard to some common object are regulated and enforced."
Although this is a definition limited
to its particular context, nonetheless it contains the essentials of the relationship
created between joint venturers who are not partners in the strict sense.
As far as the law is concerned, the
creation of an unincorporated association rests on the agreement between its
members and depends on the law of contract. In the same way the constitution
of an unincorporated joint venture which does not amount to a partnership will
only be enforceable insofar as it amounts to a binding agreement between the
participants. Thus in some case, an association may neither be a society or
a partnership.
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