Creation of Express Private Trusts

Question 1

FORMALITIES REQUIRED FOR THE TRASNFER OF ASSETS

Answer 1

(1) Land

Transfer of property must be by deed (s. 51(1) LPA 1925). Signed and dleivered (s. 1 LP (MP) A 1989).

Registration of trasnferee as the new propreitor of the land is now required in all cases (s. 19-22 Land Registration Act 1925)

(2) Company Shares

Delivery of the share certificate plus a signed Stock Transfer Form (s. 1 Stock Transfer Act 1963).

(3) Banknotes Chattels

Mere delviery is sufficent.

(4) Existing Equitable Interests

Disposition (equitable interest or trust) must be in writing signed by the person disposing of the same, or by his agent authorised in writing to do so.

(5) Will

The must be validly executed.

Wills Act s. 9 1837 - must be in writing, signed in the presnece of two witnesses who watch the testator sign it and sign themselves.

[Exam: state such but can assume it is validly exeucted].

Question 2

FORMALITIES FOR DECLARING A TRUST

Answer 2

(1) On death

Wills Act 1837, s.9

(2) Inter Vivos

(a) Personalty

Words or conduct are sufficent. No formaities required ‘equity looks to substance (intent) not form’.

Paul v Constance - Mr C died intestate; Mrs C next of kin. Joint account with Mrs P. Legal title of the money with Mr C, held on trust for Mrs P. Words ‘it is yours as much as it is mine’ and joint conduct of putting the money into the account = declaration of trust.

Re Kayford - customer despoits put in a seperate account upon insolvency. Trust created.

(b) Signed written evidence of declaration of trust (s. 51(1)(b) LPA 1925). [EXAM: anything].

Question 3

EFFECT OF A VALID DECLARATION OF TRUST

Answer 3

Incorrect formalities = nothing (incompletely constituted trust or imperfect gift).

Complied formalities = trust. Settlor cannot change his mind and get the property back.

Re Bowden - B declared trust property that was trasnfered. Later asked for it back. Held formlaities complied = no equtiable entitlement anymore.

Question 4

Issues with s. 53(1)(c) LPA 1925

Answer 4

The formality for the transfer for an existing equitable interest requirement of signed writing.

Re Paradise Motor Co Ltd

Stepdad trasnferred equtiable interest in shares to the stepson that claimed to not want them. Later changed his mind. Held statement was a disclaimer and not a disposotion thus entitled to the shares.

Vandervell v. IRC [1967]

Tried to make a large gift to charity by telling the bank that some of the shares that they own on bare trusts for him were to be trasnferred to the charity. Taxman claimed that the trasnfer was void. Held: section was not applicable as it was not the disposition of an existing interest.

[EXAM: more than one formality. E.g. transfer of land and attempt to set up a trust for land. Such case note s. 53(1)(b)).]

Question 5

METHODS OF TRANSFER OF OWNERSHIP

MUTUALLY EXCLUSIVE. COMPLY WITH ONE OF THREE.

IF THE CORRECT METHOD IS NOT USED IT WILL BE VOID.

Answer 5

(1) Outright Gift

Needs valid trasnfer of property to donee.

Valid transfer

Needs

• Correct method of trasnfer depending on type of property
• If imperfect consider whether saved by; Re Rose or Pennington v Waine.

(2) Settlor Declares Self as Trustee

Needs valid declaration of trust.

Valid Declaration of Trust

Needs

• Formalities (if land, s. 53 (1)(b) LPA 1925).
• Three certainties

(3) Transfer to Trustee for Them to Hold on Trust

Needs:

• Valid declaration of trust and Valid trasnfer of property.

Jones v Lock - Mr J gave £900 cheque to his son stating that it was his before putting it in a safe. Had been intention to make a gift but he had not declared himself a trustee of cheque. Intended outright gift could not be an effective declaration of trust.

Pagarani - P wanted to give shares and wealth to charity. Not sign anything. Held: if he had not died it would have been unconciousable to have the shares back thus a valid gift.

Question 6

IMPERFECT TRASNFER OF PROPERTY:

‘EVERY EFFORT TEST’

Answer 6

(1) Re Rose

TEST: if the settlor had made ‘every effort’ to trasnfer the property, complete in equity.

R signed Stock Transfer Form. New one issued. Five years later died and tax laws required survival > 5 years to avoid tax. Held equitable title passed sending stock form as he done all he need to do.

(2) Pennington v Waine [controverisal]

A wanted give shares H. Signed STF but not sent. A told H that had trasnferred the shares. H got himself director. Held ‘every effort test’ not passed but ownership passed in equity because it would have been unconscionable (no definition) for A to change her mind.

[EXAM: apply Re Rose then throw in Pennington.]

Question 7

THREE CERTAINTIES

Answer 7

Three elements must be expressed with certainty

(1) Intention to create a trust

(2) Subject matter (the property in it)

(3) Objects (the beneficaries)

Not established = trust void.

Question 8

CERTAINITY OF INTENTION

Answer 8

Example: Bill says to Bert “I am giving this money to you for you to hold on trust for any children you may have”. Trust.

Bill says to Bert “I am giving this money to you and you can spend it as you see fit on yourself or your children”. Outright gift.

IMPERATIVE WORDS versus PRECATORY WORDS

Former – commanding words – ‘I direct’, ‘I require’, ‘I command’, ‘it is a duty’, you must hold on trust’. No doubt of an obligation thus intention to create a trust.

Latter – vague words – ‘I hope’, ‘I desire’ – not show intention sufficient to create a trust.

Question 9

CERTAINITY OF INTENTION CASES = TRUST OR NO TRUST

[EXAM: essay – use the cases, as authority for precatory words will not have sufficient certainty of intention to create a trust].

Answer 9

Lambe v Eames- A gift by Will to a wife “to be at her disposal in any way she may think best, for the benefit of herself and her family? No Trust.

Le Marchant v Le Marchant: A gift by Will to a wife “for her sole use and benefit, in the full confidence that she will so bestow it on her decease to my children. Trust.

Re Adams -A gift by Will to a wife in full confidence that she will do what is right as to the disposal thereof between my children.No Trust. Case introduced change in attitude.

Re Diggles- A gift by Will to daughter, adding “And it is my desire” that she pays some money each year to someone else. No Trust.

Gold v Hill: A man had a life insurance policy that arranged that the proceeds of it when he died would go to his friend. This guy had a wife (A), a mistress (C) and children. Over dinner he said to his friend:instruction to friend (who would receive some insurance moneys on death of client) “If anything happens to me you will have to sort things out. You know what to do. Look after Carol and the kids. Don’t let that (bitch) get anything”. Trust. The asset here is money therefore we do not need any particularly formality in writing to declare a trust therefore a valid trust was created.

Shah v Shah:

A letter written in the following terms:

“Dear Mahendra

Re Mister Dee International PLC

This letter is to confirm that out of my shareholding of current 12,500 in the above company I am as from today holding 4,000 shares in the above company for you subject to you being responsible for all tax consequences and liabilities [arising] from this declaration and letter.

Yours faithfully, Dinesh”

He changed his mind later and decided that he wanted to keep the shares. Remember Re Rose every effort test he argued that because he had not handed over the share certificate and signed stock transfer form, this was an imperfect gift and he had not made every effort to do it properly therefore he had not given the shares away. The question was had his words showed enough certainty of intention to create a trust over his shares? Trust. Enough certainty to create a trust over the shares even if no attempt had been made to validly transfer the shares.

But note:-

Comiskey v Bowring-Hanbury- A gift by Will to wife “absolutely in full confidence that she will make such use of it as I should have done myself and that at her death she will devise it to such one or more of my nieces as she may think fit and in default to be divided equally between the nieces. Trust. The court said that looking at all of those words they impose such an obligation on her. This is a borderline decision.

Question 10

Section 2(1) Administration of Justice Act 1982

Evidence is admitted for trusts created in wills if it is ambigious or meaningless.

CASELAW.

Answer 10

Paul v Constance - if there is no written evidence one must look at the words used to decide if there is certainity of intention.

Jones v Lock - putting cheque in baby’s hand did not make effective gift or show intention.

Lowe v Prance - P promised L divorce wife buy yatch together. L purchased the yacht in his name but referred to as ‘our’. Use of word ‘our’ sufficent to amount to certainty of intention.

Question 11

SHAME TRUSTS

COURTS WILL LOOK THROUGH SHAME TRUSTS

Answer 11

Midland Bank Plc - W had a trust that he was trustee for his wife and daughter (unaware). Used to defraud creditors. Held shame trust. No certaitny of intention.

Question 12

OBJECTIVE ASSESSMENT OF CERTAINTY OF INTENTION

Answer 12

Twinsectra - solicitor undertaking regarding creation of a trust. Held entering into arranagements, which have effect of creating trust not necessary to aprpeciate that they do so.

Effect:

Method 1 - outright gift.

Method 2/3 - nothing happened and property remains with the settlor.

Question 13

CERTAINITY OF INTENTION IN COMMERCIAL CONTEXT

Answer 13

• Re Kayford* - company’s act of putting the deposits into a seperate account was enough certainty of intention. No writing is necessary to decalre a trust of moeny.
• Re Lewis’s of Leicester* - concessionaries put their money into the tills. LL would sort their undertaking and give it to them minus their commission. Held money on trust for the concessionaries.

Question 14

CERTAINTY OF SUBJECT MATTER

&

CASELAW

Answer 14

Not have to state exact amount but must be capable of being clearly defined. Relevant in a Will.

Palmer v Simmonds - ‘the bulk of my residuary estate’. No trust. ‘Bulk’ makes it too uncertain. ‘My residuary estate’ = ok.

Anthony v Donges - gift ‘such minimal part of my estate as she enetitled under law for maintaince purposes’. No trust - no law exists.

Re Kolb’s Will Trusts - ‘First class stocks and shares in the blue chip catergory’ - void. No agreement to the catergory.

In the Estate of Last - propery left to brother ‘at his death anything that is left that came from me’ with pass to others. Trust. Life interest that will pass.

Boyce v Boyce -‘My four houses to my trustees to allow my daughter Maria to choose whichever one she wants and then to give all the other houses to my other daughter Charlotte’. Void - unclear which would go to C as M had not choosen.

Re Golay’s - father said ‘I direct my executors to let Tossey enjoy one of my flats during her lifetime and to recieve a reasonable income from my other properties’. Trust. Enough background information to objectively establish income for Tossey thus ‘reasonable’ was certain.

Question 15

PROBLEMS POSED BY A BULK OF UNSEGREGATED ASSETS

Answer 15

Goods must be clear and identified.

Re London Wine - D sold wine from a warehouse. No certainty unless actual bottles had been segreated.

Re Flecter - bottles had been segreated recorded therefore certainty.

Re Goldcorp - gold bullion. Only those that had been seperated = certain.

Hunter v Moss - M said give 5% shares to H. Sale H did not recieve shares. Shares had not been segregared. Not necessary (controverisal decision). Creates uncertainties if shares not identifical. Martin argues that it is a ‘fair, sensible and workable solution’.

Difference - needs segreation for tanginles but no intangibles.

‘Co- ownership’

Pearson v Lehman Brothers - trust works by creating benefical co-ownership share in the identified fund. Allows trust for unsegregated shares where trust is a percentage of the whole.

Question 16

CAN FUTURE PROPERTY BE SUBJECT MATTER OF A TRUST?

NO.

Answer 16

Re Ellenborough - creation of a trust for whatever she might inherent. No certainty as she might not get anything.

Re Lewis’s of Leicester - segregation -can declare trust of money out of an account as long as it does not have more than that fixed amount.

Question 17

CERTAINTY OF OBJECTS

= beneficiaries.

Not established - resulting trust if the trust property to the settlor, or if he has died, his estate.

Answer 17

Re Endacott - only left for one’s memorial. Trust must be left to human beneficaries (he was dead).

Question 18

FIXED TRUST V DISCRETIONARY TRUSTS

Answer 18

Fixed

Trustee is holding the amount under an obligation to distribute into those fixed shares. No flexibility and no discretion.
Equal division or successive interests.
Beneficiaries over 18 and with a sound mind can together rearrange the interests if they are all in agreement (Saunders v Vautier).

Discretionary

T has obligation to distribute the trust property but has to exercise discretion in doing so as to how much and when the beneficiaries can receive income of capital out of that trust.
Advantage: flexibility
No individual beneficial interest in the trust property until a beneficiary’s share is allocated to him.

Question 19

TEST FOR CERTAINTY OF OBJECTS

Answer 19

Fixed Trust

• Test: the complete list.

IRC v Broadway Cottages [QUOTE AS AUTHOIRTY] – trust of £80,000 as a fixed trust. Persons included: everyone that had been employed by him, his father, wife and mother. Held not possible to come up with a list of them all therefore void for uncertainty.

OT Computers– trust for customers made by a company going in insolvent was fine as records exists and you could draw up a list of them but the trust for urgent supplier was void as the term ‘urgent’ was uncertain.

Discretionary Trusts

• Note the test for powers. Power – selection amongst a class of beneficiaries.

Re Gestetner Settlement – G created a fund with a power to distribute money amongst wide class of beneficiaries. Held he did not have to who all the beneficiaries were if it was a power before payment could be made to one of them. Only have to be able to say with certainty of any given person that he is or is not within the scope of the power.

• Is or is not test.
• Requires conceptual certainty (linguistic or semantic).

CONFIRMED: Re Gulbenkian’s - power to make payment for anyone that had lived with him at anytime during his lifetime. Could determine on the is or is not test.

Test for certainty of objectives for a power was the ‘is or is not test’ but at the time the broad test for discretionary trusts was the ‘complete list’ test.

McPhail v Doulton – B signed a trust for 1300 employees. Not possible to draw up a list. HL changed the test of certainty of objects for discretionary trusts. They took the test from Re Gulbenkian in powers, the ‘is or is not’ test and applied it to discretionary trusts as well as it seems appropriate to have the same test for both. Important as it allowed discretionary trusts to be used in different contexts.

A discretionary trust might still be invalid however, for reasons of

1. Administrative Unworkability

If the class of beneficiaries was so hopelessly wide and has not to form anything like a trust.

West Yorkshire Metropolitan County Council – transfer of funds on trust for all inhabitants of W. Yorkshire. Potential 2.5 million beneficiaries held to be administratively unworkable – too large.

Could be issue with conceptual certainty – what does ‘inhabitants’ mean?

1. Capriciousness (stupid)

Re Manisty Settlement – terms negative any sensible intention on the part of the settlor. A class of beneficiaries, which were only an accidental conglomeration of persons who has no link with the settlor, would be regarded as capricious and not upheld.

[EXAM: add ‘there might be administrative unworkability or it might be capricious’ and consider it].

Question 20

‘IS OR IS NOT TEST’ APPLICATION

CASELAW

Answer 20

Re Baden’s Deed Trusts –T for employees and their relatives. Is ‘relatives’ conceptually certain? May be able to say with certainty that you is one of my relatives but you cannot say with certainty that you is not one of my relatives.

Argument – you have to be in one category or another or else the test is not passed and the trust is void. All three judges held that the trust for relative did pass the test but on different terms.

[EXAM: apply the different approaches]

• Stamp L.J.

You have to be able to put a person either in an ‘is’ box or an ‘is not’ box for the test to be cast.If relatives meant common ancestor then it would have to be void for certainty, as they could not say they are not with certainty.Thought that relatives meant ‘next of kin’ – whom you would know therefore certain.Criticised as going back to the complete list test.

• Sachs L.J

Relative = descendants. Person must come within the ‘is’ part and if they cannot then they fall within the ‘is not’ part. A group of ‘don’t know’ will not cause the trust to fail.

• Megaw L.J.

Substantial number of people that would be in the ‘is’ class is sufficient + conceptual certainty.

[EXAM: Identify disposition, state and explain the relevant test and apply it. Conclusion. Analysis of how it might be conceptually certain or not. Arguments for and against. Remedy (outcome)].

Question 21

CASELAW

APPLICATION

Answer 21

Re Baden - “Upon trust for such of those to whom I am under a moral obligation as my trustees think fit”No.

Re Bose’s Will Trusts

“To grant scholarships for education to my promising relatives and/or to help the deserving material hardship cases amongst my relatives” What is ‘promising relatives’ and ‘deserving material hardship’? In their analysis the court seemed to assume that promising could be conceptually certain but deserving was the thing that they could not ascertain as conceptually certain therefore

there was no trust.

Re Allen - “Pure blooded Englishmen”. No. This is not conceptually certain, as there is probably no such thing.

Question 22

CURING CONCEPTUAL UNCERTAINTY

Opinion of a third party

Answer 22

• Opinion of trustees

Re Jones - father wanted his daughter to lose her income on trust if she ‘in the uncontrolled opinion of the trustees had a social or other relationship with a certain named person’. Conceptually uncertain and trying to give the role to the trustees did not help, as they could not resolve it, as it was so uncertain.

• Opinion of a third part

Re Tuck’s - gift subject to a condition precedent. Wanted his hereditary title and his money to continue to pass on in his line of descendants and for that to remain Jewish. Appointed Chief Rabbi to determine. Held: ‘it is not that the third party is being asked to resolve uncertainty in the definition of the class but the third parties opinion forms part of the definition of the class’.

Question 23

GIFT SUBJECT TO A CONDITON PRECEDENT

Answer 23

A less strict test of certainty of objects applies:

Re Barlow’s Will Trusts – B directed executor to allow any members of her family and friends to acquire one of her paintings. Class beneficiaries in discretionary trust ‘friends’ would have issues of conceptual certainty. Held ‘one person’ test applies. Said ‘it is not that the third party is being asked to resolve uncertainty in the definition of the class but the third parties opinion forms part of the definition of the class’.

The ‘one person’ test: Re Allen.

Question 24

POWERS

Answer 24

Donor - gives the money.

Donee - given the right to exercise the power. If power not exercised = gift over in default.

Words like ‘must’ mean that it is a trust but words like ‘may’ mean it is a power.

Range of beneficiaries depends on the power:

1. Special power

Choose between, a specified group of people (‘anyone in this room’).

1. General power

Exercisable amongst anyone in the world and the donee of the power can even include him.

1. Intermediate power

Exercised amongst anyone in the world except for a specific person/s.

Question 25

DIFFERENCE BETWEEN TRUSTS AND POWERS

Answer 25

• Trusts imperative (mandatory). Powers Discretionary.
• Duties of Trustee/Donee of a Power
• Trustee – under strict fiduciary duties (McPhail v Doulton).
• Donee of a Power – Double discretion whether to do something about it and who to choose.

Intention of the Settlor

Re Mills - not happy about tax payments. The presence of a gift over in default of appointment is pretty much conclusive of a power.

• Failure to exercise – distinction is difficult to draw

Philcox - gift over in default of appointment to certain members of a class equally saying that ‘it is a sort of fixed trust for you all subject to the person who has been given the power having the power of deselection’.

Re Weeks’ – life interest to husband with power to appoint disposal of capital and residue to a son. Not gift over in default. He did not appoint disposal therefore the express trust failed and went back on resulting trust principles.

• Administrative Unworkability – unlikely to invalidate a power

Potential objects of a power - whole world. Administrative unworkability will not invalid a power but capriciousness still can.

Question 26

FIDUICARY POWERS

AND

DIFFERENCE

Answer 26

• Power, discretionary, not have to be exercised therefore it has the characteristics of a power but underneath those characteristics lie a trust.
• Given to someone who’s already in a fiduciary position because of that job (fiduciary duty).

Intention of Settlor and duties of Donee

Re Hay’s Settlement Trusts –

• Ensure the proposed appointment is within the power
• Consider periodically whether to exercise it (otherwise it will be fraud)
• Consider the range of objects
• Consider the appropriateness of individual appointments

Turner v Turner – S set up a trust for the benefit of family members and chooses trustees that had no clue about trust powers. Trustees doing as they were told. Held the appointment under fiduciary power was void.

Evans - company itself was a donee of a fiduciary power as part of a pension scheme of the company but as the company had gone into liquidation it could not exercise the power. Held the court could step in and deal with the distribution - ordered for a scheme to be drawn up for which the pensioners could receive the money and not the liquidators. Possible erosion of the difference.

DIFFERENCE

Both:

Have the same test for certainty of objects.
Have the trustee’s discretion.
The court is wiling to intervene in both types of disposition.

Can amount to the same thing (end result). Trustee exercises discretion decides to keep the funds in the trust as a non-exercise of fiducary power.

Question 27

SCALE: MAX DISCRETION BUT MAX ACTUAL DISTRIBUTIVE ACTIVITY

TO

MAX DISCRETION BUT MIN DISTRIBUTIVE ACTIVITY

IN ORDER.

Answer 27

FIXED TRUST: Trustee under an obligation to distribute according to the terms of the trust – no discretion at all

DISCRETIONARY TRUST: Trustee under an obligation to distribute at some point, but has discretion as to how and when. Trustee also under an obligation periodically to consider whether to distribute

FIDUCIARY POWER: Donee of the power under no obligation to distribute at all – but is under an obligation periodically to consider whether to distribute

MERE POWER: Donee of a power under no obligation to distribute – and under no obligation even to consider whether to distribute

Question 28

BENEFICIARY PRINCIPLE

Why must we have human beneficaries?

Answer 28

1. Enforcability

Morice - necessary to have somone that can enfroce the trust in court agains the trustee.

1. Control

Equitable obligations which cannot be enforced.

Re Astors - trust for maintance of good understanding, sympathy and good cooperation and intergrity of the news appers.

1. Certainity

‘intergity of the newspapers’ - unclear what this means.

1. Capriciousness

Brown - house of trust but had to keep four doors closed for 20 years. Found capricious.

1. Perpetuity

Two rules:

(a) The rule against remoteness of vesting

Applies to trusts which create contingent interests. Beneficiaries interest is conditional. Void unless the interest vests in some beneficary(ies) within 125 years (rule for all trusts after 6 April 2010). If it is not clear if it will vest: ‘wait and see’ rule.

(b) The rule against inalienability of trust capaital

Stops money being tied in the trust for too long. A non-charitable purpose trust is void if it stops the captial from being alienated (ie spent) for a period longer than 21 years.

Re Denley - Land given ‘maintained and used as a sports ground for 21 years’. VALID. Capital = land and limited 21 years.

Re Hooper - ‘I give £10,000 to my trustees on trust to maintain my grave for as long as the law allows” - VALID. Construed not longer than period.

If there is a maintance provision for a building then trust may be void as all capital money could not be spent.

Question 29

BENEFICARY PRINCIPLE

CASELAW

Answer 29

Re Endacott - ‘providing a useful memorial to myself’. Void. Not allow a unspecified and unidentified memorial.

Re Astor - Void (‘good understanding , sympathy..).

Re Shaw - creation of a new alphabet. Void. People could not be enforcers.

EXCEPTIONS:

Re Dean - trust to provide £750 p/y for 50 years to feed testator’s horses and hounds. Valid.

Re Hooper - care and upkept of grave until legally possible. Valid.

No one is the enforcer of these trusts (exceptions - animals and tombstones) thus they are ‘trusts of imperfect obligation’. Valid. Binding in honour only. Cannot be enforced against trustees.

Benefical owner?

Re Bowes - trust for planting of trees upheld. People owned estate were benefical owners could decide where the trees would be planted.

Therefore if youleave pet to somone in a will the maintaince find belongs to them. Imperfect system as they could use the money. Trust for purpose - some animals live past 21 years. Other jurdictions - alternative- ‘protectors’ or ‘enfrocers’.

Question 30

Can we identify people benefiting from a trust?

Directly or indirectly

Answer 30

Benefiting people directly

Abbot Fund -fund raised for maintenance and support of two deaf and dumb old ladies. Both died; money left over. Money not held on their estate (not benefical owners) but treated as a purpose trust for their lifetime (although not charitable).

Re Osoba - trust for ‘training of my daughter to university grade’. Regarded as the beneficary entitled to surplus (trust for people not purposes).

_*Re Denley -* IMPORTANT! TRUSTS THAT BENEFIT INDIRECTLY_

Land given on trust to be maintained and used as a recreation and sports ground primarily for the benefit of employees of a company for 21 years.

Upheld trust. If stated purpose brought direct or indirect tangible benefit on some people we can say that those people have the standing to enforce the trust (around beneficary principle).

Direct benefit but expressed as a trust for purpose (charitable only!). For Re Denley trusts, considered discretionary for certainty of objects.

[EXAM: question deal with club and its members. Deal with appraoch in Re Lipinski also.]

Question 31

PROBLEMS WITH

GIFTS TO UNINCORPORATED ASSOCIATIONS

Unincorporated association = club or society.

Issue: no seperate legal identiy. How can it own property or accept gifts if it has no legal identity?

Answer 31

Leahy - left estate to nuns. Expressed to be for relgious orders not individuals. Failed beneficary principle.

Constructions may validate the gift:

• A gift to the relevant members as joint tenants so each member can sver his share and take it (equally).
• A gift for the present members subject to their contractual rights and duties to each other (i.e. the club’s constitution/rules) - the ‘contract holding theory’.

Re Recher - capital has to be capable of being spent. Rule against inalienability not infringed if the rules of the club allow members to disolve and divide assets. Not possible = void.

Appraoch: beneficary principle satisfied is satisfied provided. Preferable constuction although there are some flaws, such as when members leave, s. 53(1)(c) LPA 1925 (not have to be in writing); or incapable or minor members.

• Gift on trust for present and future members of the association. Satisfies beneficary principlr but will be void unless confined to the perpetuity period. Members retain share when they leave.
• Gift on trust for a purpose which would indirectly benefit members

Valid under Re Denley principle (21 years + members must benefit). Subject to inalienability considerations,

Re Lipinksi - money left for the construction of a builiding for the assoication and improvements. Valid under either appraoch. Re Recher - accretion of finds for a sugegsted purpose. Re Denley - members benefit from purpose therefore can implement it.

Want to use the money for another purpose - Re Lipinksi. Only have to spend the money were it had the power.

Question 32

GIFTS TO OR LEGACIES TO NON-CHARTIABLE UNINCOPORATED ASSOCAITIONS

Answer 32

Is a purpose specified?

No - gift may be valid under Re Recher (contract holding theory). Remember Re Grants.

Yes - does purpose benefit members?

• Yes - Re Lipinski: may be valid under Re Recher or Re Denley.
• No - void.

REMEMBER: rule against inalienability.

Re Grants - Legacy to constitutency party. Not have complete autonomy. Could not dipose of branch’s funds as they saw fit. Gift - void.

Not all external control is a problem if the rules can be changed to comply with the rule against inalienability.

New Group Newspapers - rules allowed the local branch to secede from the national organisation and dissolve itself. Valid.

Horley Town Football Club - ‘temporary’ and ‘associate’ members entitled to attend AGM and vote. Not prevent contract holding theory between full members on dissolution.

Question 33

ALTERNATIVE APPRAOCH TO GIFTS TO UNINCOPORATED ASSOCIATION

Answer 33

Agency

• Gift made to the recipiet (e.g. treasurer) as agent for the door, and with his permission to use the gift in a particular way (purpose must be followed).
• Not a trust
• Useful if contract theory wont work because club not satisfy definition of an ‘unincoporated association’ (no contractual link between members).
• No use if agent dies/bankrupt
• Applies only when donor is living.