Challenges to the beneficiary principle Flashcards
Beneficiary principle ?
Laid down in Morice v Bishop of Durham (1804) :
- there can’t be a trust which the court can’t control bcs an ‘uncontrollable power of disposition’ would be ownership, not a trust
- a beneficiary / someone who can claim and in whose favour the court can decree performance is needed for the court to be able to control the trust
- therefore there can be no (non-charitable) trust without a beneficiary / object
List of exceptions / ways of getting around it
- anomalous private purpose trusts
- absolute gifts with a motive
- Re Denley-type trusts
- Gifts to UA
- Quistclose trusts
Anomalous private purpose trusts - a few (3) exceptions :
- Trust for the maintenance of horses and dogs : Re Dean (1889)
- Trust for the upkeep of graves and monuments : Re Hooper (1932)
- maybe trust for furtherance of fox hunting : Re Thomson (1934) (although could have been enforced by residual B)
Anomalous private purpose trusts - dismissed as ‘anomalous exceptions’
in Re Astor + Re Edacott : reaffirmed BP + insisted that list of anomalous exceptions should not be extended
Absolute gifts with a motive - def
= a way of giving effect to what appears to be a pv purpose trust: interpret it as a gift, purpose of the trust being merely the motive of the gift
not an exception to BP bcs there is a beneficiary (person who benefits from the purpose), said purpose is taken to be merely the (non-binding) motive of the gift
Absolute gifts with a motive - cases
- Re Bowes (1896): trust for purpose of planting trees on estate held to be for benefit estate O, who was allowed to use the money for smth else
- Re Andrew (1905): trust for the education of children => for the benefit of children, entitled to money absolutely (in equal shares) once grown up
- Re Osoba (1979) : trust for maintenance of mother and widow + education of daughter => for benefit of dependants, daughter entitled to remaining money once grown up + mother and widow deceased
/!\ contrast: Re Abbott fund (1900): fund for maintenance two dumb and deaf ladies: never entitled to it absolutely (bcs incapacity?), so remainder reverted to subscribers after their deaths
Re Denley type trusts
= trusts which are expressed for a purpose but ‘directly or indirectly’ for the benefit of individuals
Re-Denley (1969)
Ts held land on trust for use and enjoyment of employees of a company + w/ power to allow facilities to be used by other ppl
HC (Goff J) held that trust was valid :
- Rule against enforcement of pv purpose trusts confined to trusts w/ no B
- BUT a trust which “although expressed as a purpose, is directly or indirectly for the benefit of […] individuals” is valid (provided those indivs are ascertainable + trust not otherwise void for uncertainty)
Quistclose trust
= trust that arises in situation where L lends money to B to be applied for a particular agreed purpose, and not taken beneficially
Quistclose - the case :
Q lent money to R, who was in financial difficulties, so that R could pay a dividend to shareholders (and pretend it was fine), but R became insolvent before the dividend was paid
=> HL held that R held the money on trust for Q
Lord Wilberforce :
- common intention that money was not to become pt of R’s assets => gives rise to ‘a relationship of a fiduciary character’ = money is held on trust for the shareholders
- Purpose of paying the dividend failed when R went insolvent => money held on (resulting?) trust for Q
QTs - Twinsectra ltd v Yardley (main point)
Lord Millet analyses QT as a species of RT which responds to the intention that B should not take money loaned by A beneficially, but only be permitted to apply it to purpose it was lent for
QTs - Twinsectra ltd v Yardley (the case)
Situation :
- T agreed to lend money to Y for the purpose of buying land if loan was secured by solicitors undertaking
- S1 = Y’s solicitor refused but S2 gave the undertaking
- T transferred money to S2 on condition that it would only be used for the purpose
- S2 transferred to S1 who transferred to Y who used for another purpose, then defaulted => T sued S1
HL : money was impressed w/ QT -> S2 in breach of trust but S1 not lb in dishonest assistance bcs not dishonest
QTs - Twinsectra ltd v Yardley (Lord Millet)
Lord Millet :
- loan money normally becomes property of borrower (incl beneficially) – but ≠ where loan is for a specific purpose, L gets right in equity to prevent misapplication of the money
- where A lends money to B, QT responds to intention that B should be under duty to use the money only for the specified purpose, and not at B’s free disposal : B does not take the money beneficially, the BI remains w/ A until money is applied for the purpose
=> QT is a ‘perfectly orthodox’ species of RT, B holds on trust for A subject to power to apply money for the specified purpose
QTs - evidencing the intention & Bellis v Chalinor
Bellis v Chalinor, per Briggs LJ :
- QT = a species of RT which arises where property “is transferred on terms which do not leave it at the free disposal of the transferee” => usually arrangement that money should be used for a specific purpose
- Intention must be objective / objectively ascertainable : “A person creates a trust by his words or conduct, not by his innermost thoughts”
- ≠ normal RTs : need proof of intention, rather than evidence of contrary intention to rebut presumption of RT
- lgg of BI being ‘retained’ not great – trust arises in response to intention and creates BI which goes to L, while B gets legal titl
QTs - the conflicting analysis (list) (5)
- Lord Wilberforce in Quistclose : primary and secondary trust (if purpose fails)
- Penner & Lord Millet’s original view : express trust
- Chambers : contractual right, RT if purpose fails
- Lord Millet in Twinsectra : RT from the moment of transfer, subject to power to apply to purpose
- Swadling : give up the whole thing, Quistclose wrongly decided
