Beneficiary Principle Flashcards
Morice v Bishop of Durham
General rule in English trusts law is that in order for a trust to be valid and enforceable by the courts, there must be a beneficiary under the trust. ‘Objects of benevolence and liberality’ in the testator’s will was deemed to be too vague as it did not identify who the beneficiaries under the trust would be - therefore court held that it was invalid.
Leahy v Attorney General for NSW
If a trust does not fall within the scope of a charitable trust, and there is no beneficiary, then the trust will be invalid and unenforceable - private purpose trusts are not allowed under English law.
Exceptions to the Beneficiary Principle
- Re Denley’s ST
- Anomalous testamentary private purpose trusts
- Absolute gift of property with motive
- Charitable trusts
Re Endacott
CA has held that in some circumstances, there are anomalous cases - NOT to be extended - where testamentary trusts infringing upon the beneficiary principle can be held as valid as concessions to human sentiment.
This includes the maintenance of statues, in addition to maintenance of animals under Re Dean.
Re Dean
Court held that the testamentary trust would have been valid if there was someone who was in a position to enforce it - purpose of the trust was for maintaining and looking after certain dogs. So the court accepted on principle that this could constitute an exception to the beneficiary principle, even though it was unenforceable here as nobody could enforce it.
Re Sanderson’s Trust
There is also an exception to the beneficiary principle whereby the court interprets what appears to be a private trust as actually a trust for beneficiaries, and thus is enforceable.
If a trust is set up for the benefit of beneficiaries in addition to a particular purpose, then the court will construe that to be an absolute gift to the beneficiaries, if the court can interpret the purpose as merely being the MOTIVE of the gift to the beneficiaries, which renders the purpose optional.
Re Bowes
Trust was created for £5000 for the purpose of planting trees on an estate. CA held that this was an application of Re Sanderson’s Trust and construed S’s words as an absolute gift to the beneficiaries, with a motive for planting the trees.
Case shows that where the group of construed beneficiaries is smaller in number, it is more likely that the court will be able to/willing to construe their words as an absolute gift to Bs with a motive being conveyed in the words, which is optional. Note however that under these types of case, Bs can simply wind up the trust under Saunders v Vautier
Re Osoba
Similarly, where the trust can be construed as being for the benefit of Bs, rather than just for the abstract purpose, then the courts can find a valid trust.
So court interpreted the trust money given by the testator to his widow and daughter for providing maintenance for them was construed as being for their benefit, rather than for the purpose.
This seems like a fairer construction than more controversial cases like Re Bowes.
Re Abbott
Various people contributed to a fund that was supposed to be held on trust for the benefit of deaf women - issue was what happened to the surplus money.
Court held that the surplus money was held on RT for the benefit of those who contributed - this shows that it was NOT an absolute gift with a motive, which suggests that there may be a potential exception to the beneficiary principle.
However, the case can be explained on the analysis that the trust was always an invalid private purpose trust, and so there was a RT from the start for the contributors, who granted a mere power to the owners of the property to help the deaf women.
Re Denley’s Trust Deed
Money held on trust for the purpose of maintaining a local sports ground - prima facie appeared to be a private purpose trust and thus invalid.
However, Goff J upheld the trust because the benefit for a particular group of individuals was sufficiently direct and tangible for the individuals to be able to enforce the trust by applying to the courts if necessary. So if the benefit is sufficiently direct and tangible such that it can be construed as a trust for a particular group of beneficiaries, then it is a valid trust.
But note that this case is problematic because it is unclear whether the beneficiaries here would be able to exercise their Saunders v Vautier rights. Goff J stated that the individuals only had locus standi, which potentially suggests that they would not be regarded as full beneficiaries (thus it is an exception to the beneficiary principle under this interpretation). However, he is not explicit or clear about this - if they could exercise their Saunders rights in this situation, then this would not be an exception to the beneficiary principle.
Re Grant’s WT
In applying the Re Denley’s ST rule, the court held that this type of situation did not constitute a private purpose trust, and instead where a trust is construed as being for the beneficiaries due to the trust conferring sufficiently direct and tangible benefits upon them to enforce it, the beneficiaries seem to be full beneficiaries. This suggests that they can still exercise their Saunders v Vautier rights and wind up the trust and ignore the purpose - although NOT explicitly stated, hence some confusion in the law.
Saunders v Vautier
For fixed trusts, provided that all of the beneficiaries absolutely entitled to the trust property consent (and are of legal age and sound mind), then they can wind up the trust and ignore its purpose.
However, it is clear that ALL of the beneficiaries must consent to winding up the trust - if one B dissents, then it cannot be wound up
Stephenson v Barclays Bank
For fixed trusts, however, a beneficiary can exercise their Saunders v Vautier rights and take their own share of the trust property regardless of whether the other Bs consent - the trust then continues for the other beneficiaries, unless they also choose to exercise such a right
Re Smith
For discretionary trusts, where all of the beneficiaries consent to winding up the trust then this is possible in principle. They can wind up the trust and become co-owners of the property - so JTs at common law and seem to hold equal shares as tenants in common in equity.
BUT all of the beneficiaries must consent to this - practically difficult to achieve since Re Baden’s No.1 changed the test for certainty of objects for discretionary trusts - now the ‘is or is not’ test, instead of complete list test.
Where all the Bs do NOT consent to winding up the discretionary trust, then per Saunders v Vautier this cannot occur and they cannot remove their own equal share.
ss.19-21 TOLATA 1996
Under these provisions, Bs can come together and all agree to force current trustees to retire, and get new trustees appointed.
So they can appoint new Ts without having to wind up the trust!
