1. See Pt 2 (ss 26–63). Community-interest company is often abbreviated to CIC.

2. Community Interest Company Regulations 2005, SI 2005/1788 (the Regulations).

3. Section 26(3)(a) specifically provides that a community-interest company established for charitable purposes ‘is not a charity’.

4. See the Explanatory Memorandum to the Regulations, para 7.1, setting out the policy background.

5. See para 6 of the Guidance Notes to the Regulations. The Regulations and Guidance Notes etc are to be found on the Community Interests Companies Website, available at http://www.dti.gov.uk/cics, and the Office of the Regulator, available at http://www.cicregulator.gov.uk.

6. Albeit following the precedents of some earlier statutes.

7. The phrase ‘rule against inalienability’ is here used in the sense sometimes portrayed by the expression ‘rule against perpetual trusts’. Under this rule, property must not be inalienable for longer than the perpetuity period. See, for example, Megarry, R and Wade, W The Law of Real Property (London: Sweet & Maxwell, 6th edn, 2000 Google Scholar) paras 7-137ff.

8. There are further regulations, like regs 17–22, dealing with dividends and interest etc, which follow through the philosophy that these companies exist primarily to benefit communities, not the companies’ members. These are not material in the present context.

9. Defined in reg 23(4) as those left after liabilities have been discharged and members paid.

10. The detail of how the asset-locked bodies are selected is not material to this paper. In essence, the asset-locked body will be specified in the community-interest company’s memorandum, but the regulator may (in designated circumstances) override this, and he/she, in any case, has residual powers to ensure distribution only among asset-locked companies.

11. Since it is settled that the rule does not apply to charities.

12. The law of mortmain, discussed below, might have been seen as one such mechanism prior to its repeal in 1960.

13. Re Dutton (1878) 4 Ex D 54 (Kelly CB and Huddleston B).

14. Ibid.

15. See the quotation set out below. By this phrase, as the context shows, the court clearly intended to refer to the rule against inalienability: there was no question of the vesting of the gift being postponed to some future date or event, and the language of the court refers to the property being taken out of commerce and becoming inalienable.

16. (1860) 2 D F & J 75.

17. (1860) 1 D F & J 399. Kelly CB referred also to ‘among others’ without further identifying them.

18. (1878) 4 Ex D 54 at 58.

19. Ibid, at 57–58.

20. It also casts doubt on the legal position with the society’s then assets, since with the coming into force of that Act the capital assets of the society would be held on void provisions.

21. The importance of this is examined further below: text to n 29ff.

22. Registered housing associations will be subject to housing corporation regulation and this problem would not then arise, but it would remain with unregistered housing associations.

23. By imposing the trust obligation.

24. [1943] Ch 435.

25. [1931] 2 Ch 383.

26. In line with the lead given by the Lord Chancellor in the extract from Carne v Long quoted above in the text to n 16.

27. In other words he assumed what, as shown above, has been held to be the law.

28. (1878) 4 Ex D 54 at 59.

29. Such as Re Recher’s WT [1972] Ch 526; [1971] 3 All ER 401; Re Lipinski’s WT [1976] Ch 235; Re Buckinghamshire Constabulary Fund Trusts (No 2) [1979] 1 All ER 623. See further text to n 150ff.

30. Referred to above, text to n 8.

31. The precise status of repugnancy in this context is, per De Smith, SA De Smith’s Judicial Review of Administrative Action (London: Stevens & Sons, 4th edn, 1980) p 356 Google Scholar, ‘elusive’. The 5th edn, para 13-052, summarises the principle: ‘A byelaw or statutory instrument may be invalidated for “repugnancy” when it is either in direct conflict with a statute or where it deviates materially from the general law of the land in imposing “burdensome prohibitions”. It must be arguable that to impose an asset lock running counter to the long established policy of the common law is a burdensome prohibition on free alienability. In contrast s.30 could, of course, more readily have been interpreted as ousting the rule against inalienability’.

32. See below text to n 123ff. And the rule against perpetuities affords another example.

33. Ie seemingly just to avoid a result that is thought inconvenient.

34. Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694 at 707 per Viscount Radcliffe.

35. If that correctly summarises the beneficial ownership argument.

36. [1981] Ch 193. The Canadian courts have accepted Slade J’s analysis; see Re Christian Brothers of Ireland in Canada (2000), 47 OR (3rd) 674.

37. (1875) LR 20 Eq 474 at 479.

38. [2002] 1 BCLC 162 at 173.

39. Eg Megarry and Wade, above n 7, p 291ff.

40. For example, McGhee, J Snell’s Equity (London: Sweet & Maxwell, 31st edn, 2005 Google Scholar) devotes two paragraphs (21-27) exclusively to it, and ) one (8-27).

41. No 251, ordered to be printed on 30 March 1998.

42. Ibid, p 1, para 9.38.

43. See ibid, p 7, para 1.14.

44. See ibid, p 7, para 1.14.

45. Namely a ‘society, body of trustees or company a) which is established for the purpose of, or amongst whose objects or powers are included those of, providing, constructing, improving, or managing, or facilitating or encouraging the construction or improvement of, housing accommodation and, b) which does not trade for profit or whose constitution or rules prohibit the issue of capital with interest or dividend exceeding such rate as may be determined by the Treasury, whether with or without distinction between share and loan capital’, which is now enshrined in the consolidating legislation: Housing Associations Act 1985, s 1(1); Housing Act 1996, s 230.

46. The registrar is likely to insist on this if the association puts forward as its justification for incorporation as an industrial and provident society that it is to serve purposes beneficial to the community.

47. See the standard work, Alder, J and Handy, C Housing Associations: The Law of Social Landlords (London: Sweet & Maxwell, 4th edn, 2003 Google Scholar) para 2-011 suggesting the majority of housing association are registered under the Industrial and Provident Societies Act 1965.

48. See Industrial and Provident Societies Act 1965, s 1(2).

49. See Snaith, I The Handbook of Industrial & Provident Society Law (Manchester: Holyoake Books, 1993 Google Scholar) para 3.3.

50. See ibid, para 3.3.

51. Of friendly societies who then had overall responsibility for societies registered under the Industrial and Provident Societies Act 1965; this function is now carried out by the Financial Services Authority (see the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001, SI 2001/2617).

52. As societies within s 1(2)(b) are colloquially known.

53. Set out in Snaith, above n 49, para 3.3.

54. A key issue here is how the bencom may change its rules. If this requires the registrar’s consent, then his or her powers to ensure that the members do not, in effect, side-step any conditions imposed in return for the consent are important.

55. Ie the applicable period for the rule against inalienability.

56. Ford, H and Arthur, J Unincorporated Non-Profit Associations: Their Property and Their Liability (Oxford: Clarendon Press, 1959) p 27.Google Scholar

57. But the precise concept of ‘trust’ is elusive and there is no need to take Ford as confining himself to the narrowest interpretation of the trust concept.

58. T Jarman A Treatise on Wills vol 2 (1st edn, 1844) p 219 in the passage, ‘…consider, for a moment, what would be the state of a community in which a considerable portion of the land and capital was locked up. That free and active circulation of property, which is one of the springs as well as the consequences of commerce, would be obstructed; the improvement of land checked; its acquisition rendered difficult; the capital of the country gradually withdrawn from trade; and the incentives to exertion in every branch of industry diminished. Indeed, such a state of things would be utterly inconsistent with national prosperity…’.

59. Which provide a further expression of the policy underpinning the rule against inalienability. See below text to n 130ff. And the rule against perpetuities affords another example.

60. See the dicta of Kelly CB in the text to n 19 above. And it may arise indirectly, as to which see the heading Indirect Restraints on Alienation, below, text to n 119.

61. Assuming the prohibition is valid, it will specify that, in a given situation, a precise consequence must follow.

62. See Yeap Cheah Neo v Ong Cheng Neo (1875) LR 6 PC 381, in fact holding the devise there void.

63. Of the common law, there being of course a statutory wait and see (not applicable to the rule against inalienability – see s 15(4)) under the Perpetuities and Accumulations Act 1964.

64. Martin, J Hanbury and Martin (London: Sweet & Maxwell, 17th edn, 2005 Google Scholar) para 14-022, p 387.

65. See, eg, ibid, para 14-019.

66. Particularly if no relevant lives in being are specified so that the period is only 21 years.

67. Which some have already done.

68. See the discussion of Quinn and Axtens Ltd v Salmon below, text to n 156 for an exception.

69. Although counsel in Carne v Long, above n 16, at 78, Mr Malins and Mr Eddis ‘admitted that the society could not take the benefit of this devise if it were a body in the nature of a corporation aggregate’.

70. ‘[A]n individual member would be entitled to take proceedings in the courts to compel observance of the rules’ per Brightman J in Re Recher’s WT, above n 29, at 407.

71. But this cannot be regarded as a foregone conclusion. For if there is a contract for value between the members, and that contract contains a negative stipulation – the rule not to sell – ordinarily the courts will enforce a negative stipulation by injunction as a matter of course; and if the court looks to the broader intent behind the rule it will quite possibly discern an intention that the rule be honoured.

72. [1980] 1 WLR 360.

73. [1962] Ch 832 at 849: ‘it will not be open to objection on the score of perpetuity or uncertainty unless there is something in its terms or circumstances or in the rules of the association which precludes the members at any given time from dividing the subject of the gift between them on the footing that they are solely entitled to it in equity’.

74. Ie in n 72.

75. As recently as 1942, Holdsworth opined of mortmain that ‘The law is now maintained because to give land to a corporation is to render it wholly, or almost wholly inalienable. Though a restriction of the freedom of alienation, it is a restriction in name only; for, like the modern rule against perpetuities, it is maintained in order to promote the freedom of alienation’: Sir Holdsworth, WS A History of English Law, 1903–1952 (London: Methuan, 5th edn, 1942 Google Scholar) (hereafter HEL) iii, p 87. Mortmain was only abolished in 1960, see below text to n 102.

76. See Yeap Cheah Neo, above n 62.

77. See, as to land, Litt, s 360; Co Litt 223a; Shepp Touch 129ff; as to chattels, Co Litt 223a. These are collected in Sweet, C Restraints on alienation’ (1917) 33 LQR 236 Google Scholar. I have drawn freely on this article in the present analysis.

78. One may notice in passing that these rules are concerned with alienability, but the orderly development of land for the common good may easily be impeded by restrictive covenants or easements. Equity has declined to intervene by way of the grant of an injunction where the purpose of a restrictive covenant has gone; see, for example, Duke of Bedford v Trustees of the British Museum (1822) 2 My & K 552. Yet the common law developed no similar doctrine in relation to easements of scant value. Thus, the owner of a legal easement to a privy could prevent that privy being demolished and the land incorporated into a large development for the good of many: the law’s view was that he had a legal right that could not be taken from him.

79. In the sense used in the Law Commission report, above n 41; see para 1.6ff.

80. Thellusson v Woodford (1805) 11 Ves 112 at 147. Under this rule the income derived from a fund can only be accumulated as an accretion to the capital of the fund for the periods set out by statute; see, generally, Law of Property Act 1925, s 164, as amended by Perpetuities and Accumulations Act 1964, s 13 (these periods are basically 21 years, minorities or the life of the settlor).

81. (11th year of William III) 12 Mod 278 at 287.

82. Three matters in this quotation may be unfamiliar to some readers, namely executory devise, which is ‘a limitation by will of a future estate or interest in land, which cannot, consistently with the rules of law, take effect as a remainder’; see Greenberg, D and Millbook, A Stroud’s Judicial Dictionary of Words and Phrases (London: Sweet & Maxwell, 6th edn, 2000 Google Scholar) quoting ; common recoveries, which were a means of barring entailed estates; and the statute De Donis Conditiabilis a consequence (if not an aim) of which were fees tail.

83. ‘have obtained with much ado’ (sic).

84. Lord Ellenborough, Grose, Le Blanc, Heath-Rooke; Chambre: Thompson and Graham BB. Lord Alvanley died and Hotham B resigned after the argument, being replaced respectively by Sir James Mansfield and Sir TM Sutton.

85. (1805) 11 Ves 112 at 137.

86. Of which Morris, JHC and Leach, WB The Rule Against Perpetuities (London: Sweet & Maxwell, 2nd edn, 1986 Google Scholar) and the Law Commission report, above n 41, are two outstanding examples.

87. Morris and Leach, ibid, pp 15–18, drawing on Simes, LM Is the rule against perpetuities doomed? the wait and see doctrine’ (1953) 52 Mich L Rev 179 CrossRefGoogle Scholar at 190–192;

88. Quoting here Simes, LM Public Policy and the Dead Hand (University of Michigan Law School, 1955) p 58.Google Scholar

89. As in Vane v Lord Barnard (1716) 2 Vern 728. Lord Barnard (who had set 200 men to the task) was restrained, but by the doctrine of equitable waste.

90. [1978] Ch 14.

91. A position that Parliament has felt compelled to intervene to prevent; see, for example, Settled Land Act 1925, s 41 (replacing earlier legislation) by giving extensive powers to tenants for life under strict settlements.

92. Referred to herein as ‘Conditions Rules’.

93. In addition to those mentioned in n 78.

94. For example, the absence of a cross-London main line is attributable to opposition from powerful owners of the land needed for such rail links. And see, generally, Stuart Anderson, J Lawyers and the Making of English Land Law 1832–1940 (Oxford: Clarendon Press, 1992 Google Scholar) p 119 referring to ); );

95. See Lord Kenyon CJ in Ball v Herbert (1789) 3 TR 253 at 261 (which held that there is no public right of towing along a tow path alongside a public, navigable river).

96. See eg, Law of Property Act 1925, s 34(2).

97. A problem solved by the introduction, in Conveyancing and Law of Property Act 1881, s 5, of payment into court of an amount necessary to protect the encumbrancer.

98. Remedied, in part, by Settled Land Act 1882, s 3ff.

99. See an extract of a letter from Schuster to Brickdale LCO2/443, 9 March 1920 quoted in Stuart Anderson, above n 94, p 290: ‘the difficulty of managing the property and dealing with the tenant is immense. It is almost a commercial impossibility to effect necessary improvement, and the lawyers’ bill year on year swallows up an enormous proportion of the gross rents’.

100. Blackstone summarised it as follows: ‘Alienation in mortmain, in mortua manu, is an alienation of lands or tenements to any corporation, sole or aggregate, ecclesiastical or temporal’: 2 Bl Comm 268.

101. C 43.

102. By Charities Act 1960, s 38.

103. Cf the dicta of Holdsworth quoted above, n 75.

104. Cf mortgage, a ‘dead pledge’. Blackstone gave a different explanation, after having referred in general terms to Coke’s ‘conjectures’: ‘…these purchases being usually made by ecclesiastical bodies, the members of which (being professed) were reckoned dead persons in law, land therefore, holden by them, might with great propriety be said to be held in mortua manu’; 1 Bl Comm 480.

105. See Megarry and Wade The Law of Real Property (3rd edn) p 994. For the details (not relevant to this paper) see the earlier editions of Megarry and Wade.

106. Grant, J A Practical Treatise on the Law of Corporations in General, as well Aggregate as Sole (London: Butterworths, 1850 Google Scholar) devoted some space to this; see especially pp 99, 129, 133 and 134. But at p 140 Grant concluded that the Municipal Corporations Act 1835 ‘for ever set at rest the above questions as to them’. And Megarry and Wade, above n 105, p 994 stated (citing Smith v Barratt (1663) 1 Sid 161 at 162 and Mayor & Commonalty of Colchester v Lowten (1813) 1 V & B 226) that ‘In general, a corporation which has power to hold land has also the power to dispose of it’.

107. For details, see Grant, above n 106, p 101, citing 2 Hawk Pl Cor 390, cap 37, s 29.

108. Examples were land for a public park (Mortmain and Charitable Uses Act 1888, s 6(1) and (3)); a public museum (s 6(1) and (4)); a schoolhouse for an elementary school (Education Act 1902, s 23(5)). But see also the Companies Act 1862 referred to immediately below.

109. It is interesting to note that s 18 of the Companies Act 1862 merely referred to ‘with power to hold lands’, a phrase repeated in Companies (Consolidation) Act 1908, s 16(2), but that in the next consolidation, the Companies Act 1929, the wording (in s 14(1)) was ‘A company incorporated under this Act shall have power to hold lands, and as regards lands in any part of the United Kingdom without licence in mortmain’, which was repeated in Companies Act 1948, s 14(1). The Mortmain and Charitable Uses Acts 1888 and 1891 prohibited corporations from holding land except under a licence from the Crown or by the authority of a statute. Certain not-for-profit companies required Board of Trade consent to hold more than two acres of land – see Companies (Consolidation) Act 1908, s 19; Companies Act 1929, s 14(1) proviso; Companies Act 1948, s 14(1) proviso.

110. Companies Act 1929, s 14(1) proviso.

111. HEL, above n 75, vol iii, p 76.

112. Ibid, p 346.

113. Sir Pollock, F and Maitland, FW The History of English Law (Cambridge: Cambridge University Press, 2nd edn, 1968 Google Scholar) pp 345–346. And Lord Mansfield CJ said in Burgess v Wheate (1759) 1 WBa 123 at 163: ‘…originally, by feodal law, tenant could not alien in any case without the lord’s concurrence’.

114. See Sweet, above n 77.

115. See ibid, at 237 and 352. Protective trusts (ie those set out in Trustee Act 1925, s 33, or similar trusts) do not fit easily into the above classification: Morris and Leach, above n 86, p 2, regard them as restraints on alienation, which in one sense they clearly are, since upon an attempted alienation the estate ceases to exist.

116. That originating in the Duke of Norfolk’s Case (1681) 2 Swans 454 and settled in Cadell v Palmer (1833) 1 Cl & F 372.

117. And further confusion may be engendered by the period permitted under the rule against inalienability being modelled on that applicable under the rule against perpetuities.

118. Although Sweet dealt with it under the indirect heading.

119. But, of course, the Settled Land Act 1882 and the 1925 property legislation provided overreaching machinery dealing with this (and related problems).

120. But the mischief of that might be exaggerated in today’s world when many buildings are erected with a deliberately short lifespan. In contrast, cases such as Saunders v Vautier (1841) 4 Beav 115, holding that a beneficiary absolutely entitled cannot be made to await a future event, in that case attaining 25 years of age, before enjoying what he had been given, and Re Bowes[1896] 1 Ch 507, holding that a testator could not dictate that £5000 should be expended on the planting of trees, when the beneficiaries of the trust wished to use it for other purposes, provide other examples of the courts’ readiness to cut down what it sees as unjustifiable constraints. See further Hudson, A Equity & Trusts (London: Cavendish, 4th edn, 2001 Google Scholar) pp 128ff.

121. And the reasoning of Lord Eldon LC quoted in the text to n 80 above resonates here also.

122. See s 3.

123. (1884) 26 Ch D 801 at 813.

124. Ibid, at 813.

125. Ie in favour of one person.

126. (1884) 26 Ch D 801 at 813–814.

127. Ibid, at 819.

128. Only finally abolished by the Married Women (Restraint upon Anticipation) Act 1949.

129. Referred to by Sweet, above n 77, at 242. The restrictions on railway companies would arise from the terms of the statutes that established them and hence are not relevant in the present context.

130. As opposed to the policy considerations that impelled Lord Thurlow to want to give effect to them. The lawfulness of such restraints, even in relation to fee simple interests, was firmly established by Lord Lyndhurst LC in 1846 in Baggett v Meux (1846) 1 Ph 627, affirming Knight Bruce V-C (1844) 1 Coll 138.

131. At these times the courts were sometimes more willing to give weight to the settlor’s intention than subsequently: compare the refusal of the House of Lords in Feoffees of Heriot’s Hospital v Ross (1846) 12 Cl & Fin 507, following Duncan v Findlater (1839) 6 Cl & Fin 894 and Holliday v St Leonard’s, Shoreditch (1861) 11 CB (NS) 192 to allow trust funds to be used to discharge tortious liabilities incurred in the carrying out of the trust on the basis that it was not the settlor’s intention to allow this, with the reversal of this position by the House of Lords in Mersey Docks & Harbour Board Trustees v Gibbs (1846) LR 1 HL 93.

132. Per Lord Eldon LC in Jackson v Hobhouse (1817) 2 Mer 483 at 488.

133. As was expressly recognised by Lord Cottenham in Tullett v Armstrong (1839) 4 Myl & C 393 at 405: ‘When this Court first established the separate estate, it violated the laws of property as between husband and wife; but it was thought beneficial and it prevailed. It being once settled that a wife might enjoy separate estate as to a feme sole, the laws of property attached to this new estate, and it was found, as part of such law, that the power of alienation belonged to the wife, and was destructive of the security intended for it. Equity again interfered, and by another violation of the laws of property supported the validity of the prohibition against alienation’. This was quoted by Knight Bruce V-C in Baggett v Meux (1844) Coll 138.

134. The list is Sweet’s: exceptions (vi)–(viii) are in pt II of the article, above n 77, starting at 342.

135. Ibid, at 246.

136. Referring for support to Davids Conv vol 3, p 111 and Gray, JG Restraints in the Alienation of Property (Boston: Soule & Bugbee, 1883 Google Scholar) p 35.

137. Sweet, above n 77, at 246.

138. Ibid, at 360.

139. Eg options and rights of pre-emption – see, ibid, at 247ff.

140. Ibid, at 342.

141. See above n 115.

142. ‘little short of disgraceful to our jurisprudence’ per Porter MR in Re King’s Trusts 29 LR Ir 401 at 410 (cited in Megarry and Wade, above n 106, p 76).

143. See especially Re Leach [1912] 2 Ch 422, which upheld protective trusts, and E Jenks ‘An inalienable fee simple? 33 LQR 11.

144. See above text to n 123.

145. The Human Rights Act 1998 does not at present impinge on this: see Hanbury and Martin, above n 64, p 351, n 49.

146. Within the limits of the rule against perpetuities.

147. There will, obviously, be trustees who hold on trust for the members from time to time, but upon trust to carry out the members’ wishes as expressed to them from time to time, not upon independent, free-standing trusts.

148. The position where this is not true (as in Re Grant’s WT referred to above) is dealt with below.

149. [1979] 1 WLR 936.

150. [1914] IR 142 at 155.

151. The capital will be at the disposal of any sound investment decision permitted by law, and therefore will not be removed from purposes beneficial to society at large, even if the investment clause permits only very ‘conservative’ investments. And if the purpose really is especially beneficial, then compulsory purchase powers may well exist, in any event.

152. See text in relation to Carne v Long under the heading Registrar or of the Regulations’ interplay with this rule, above, and thereafter.

153. See above, text to n 107 and thereafter.

154. In short, the law did not concern itself that the land may not be sold if sale was possible.

155. As in Quinn and Axtens Ltd v Salmon [1909] AC 442.

156. See, for example, Jarman, above n 58, n 59 and Simes ‘The policy against perpetuities’, above n 87, at 710.

157. See above nn 86 and 87.

158. Indeed, it is not necessary for the state to purchase the land. For example, during World War II the Minister or the War Agricultural Executive Committee had powers under the Emergency Powers (Defence) Act 1939 to remove bad farmers from their land and install other farmers who would farm the land in line with Ministry guidelines; see Agriculture (Miscellaneous War Provisions) Act 1940, s 23.

159. Which have been used variously, for example to encourage particular types of food production, or, as with the incoming Single Payments Scheme, to encourage stewardship of the countryside.

160. As, for example, the Literary and Scientific Institutions Act 1854.

161. Law Commission report, above n 41, p 1, para 9.38.

162. See the third paragraph of the Introduction above.