4. Charitable and Non-Charitable Purpose Trusts

Question 1

What requirements must the declaration of a purpose trust comply with to be valid?

Answer 1

The three certainties - the ‘object’ certainty is the purpose
- Must be clear what this purpose is

Question 2

Generally, are purpose trusts valid?

Answer 2

No, but there are exceptions

Question 3

Rule against perpetuities: Purpose Trust

Answer 3

Rule against inalienability of capital: Cannot ‘lock capital away’ for a period of more than 21 years
- So trusts must state ‘for as long as the law allows’ OR
- trustees spend all trust capital on the purpose and can therefore end the trust

Question 4

What rules do charitable trusts NOT need to comply with that other express trusts do?

Answer 4

(1) Beneficiary principle
(2) rule against inalienability of capital

Question 5

What conditions must be satisfied for a trust to be able to be registered as a charity?

Answer 5

(a) trust must have charitable purpose
(b) trust must have sufficient public benefit
(c) trust must be exclusively charitable

Question 6

What is the test used to check if charitable trusts have sufficient public benefit:

Answer 6

(1) the trust purpose must have an identifiable benefit or benefits AND
(2) the benefit must accrue to the public or a sufficiently large section of the public

Question 7

What are examples of charitable purposes:

Answer 7

(1) Poverty or relief from Poverty
(2) The advancement of education
(3) the advancement of religion

Question 8

Restricting the ‘benefit’ to a restricted group: considerations

Answer 8

Sufficient public interest will depend on which charitable purpose
- Relief of poverty: among relatives is fine
- Advancement of religion: if place of worship is open to all, if not, members of the congregation mix with their fellow citizens

Question 9

Three tests to determine public benefit

Answer 9

(1) Personal nexus test
(2) ‘class within a class’ test
(3) Must not exclude the poor

Question 10

Personal Nexus Test

Answer 10

If people are linked by a relationship to a certain individual or company, this is not a sufficient section of the public

Question 11

Class within a class test

Answer 11

The class of people that benefit can be limited IFF these limits are:
- legitimate
- proportionate
- rational or justifiable given the nature of the trust
(ie. geographical limitations if object is building)

Question 12

Can a charitable purpose trust give money to an institution which is not accessible to the public due to fees for entry?

Answer 12

• This is fine if institution uses profits to put back into the charitable purpose (ie. school)
• but institutions with high fees are likely not allowed (higher the fees, more proof needed that there is benefit to the public through bursaries etc.)

Question 13

Two limbs of the ‘exclusively’ charitable test

Answer 13

(1) trust must not have political purposes
(2) if charitable org. charges fees, profits from those fees must be put back into the trust rather than paid to private individuals (ie. owners of org.)

Question 14

DEF: Political Purposes

Answer 14

i. Supporting a political party and / or
ii. Campaigning for a change in the law (here or abroad) or a change in gov policy/decisions

Question 15

Two types of purpose trusts which can be valid:

Answer 15

1. Re Denley trust
2. trust of imperfect obligation

Question 16

Validity Requirements for Re Denley Trust

Answer 16

1. purpose of trust must be clear and give rise to tangible benefit
2. persons who benefit from purpose must be ascertainable (given postulant test)
3. trust must not offend rule against inalienability of capital (21 years)

Question 17

Examples of Trusts of Imperfect Obligation

Answer 17

1. Trusts to care for specific animals (ie. favourite pet)
2. Trusts to maintain graves and tombs

Question 18

Are trusts of imperfect obligation enforceable?

Answer 18

No - if the trustees do not honour them, no one can compel them to
- the settlor (or residuary beneficiary of estate) can go to court to claim trust property for themselves

Question 19

Are trusts of imperfect obligation subject to the rule against inalienability of capital?

Answer 19

Yes