Large Group 4

Question 1

What is a purpose trust?

Answer 1

A purpose trust is a trust created to advance a cause or purpose, rather than to distribute property to identifiable beneficiaries.

Question 2

How is a purpose trust different from a people’s trust?

Answer 2

A people’s trust distributes property to identifiable beneficiaries, whereas a purpose trust is designed to further a cause, such as promoting good manners or campaigning for a ban on tobacco.

Question 3

3. What are the four main objections to purpose trusts?

Answer 3

Beneficiary principle: Purpose trusts typically lack identifiable beneficiaries who can enforce the trust.

Certainty: The purpose of the trust must be clearly defined.

Rule against inalienability: Non-charitable purpose trusts cannot tie up capital for more than 21 years unless the trust allows the capital to be fully spent.

Capriciousness: Purpose trusts must not be created for trivial or whimsical purposes.

Question 4

What is the beneficiary principle?

Answer 4

The beneficiary principle states that for a trust to be valid, there must be identifiable beneficiaries who can enforce the trust in court.

Question 5

Why was the trust in Re Astor’s Settlement Trusts held to be void?

Answer 5

The trust was void because it aimed to promote good understanding between nations and preserve the integrity of newspapers—goals that lacked identifiable beneficiaries who could enforce the trust.

Question 6

What is the rule against inalienability?

Answer 6

The rule against inalienability prevents non-charitable purpose trusts from tying up trust capital for more than 21 years unless the capital can be fully spent on the purpose within that time.

Question 7

How can the rule against inalienability be satisfied?

Answer 7

A purpose trust can satisfy this rule either by limiting its duration to 21 years or by allowing the trust capital to be fully spent on the purpose.

Question 8

What is an example of a capricious trust?

Answer 8

A capricious trust is one that serves no meaningful purpose, such as the trust in Brown v Burdett, where a house was left on trust with instructions to block up the windows and doors for 21 years. The court invalidated the trust because it served no useful purpose.

Question 9

What are charitable purpose trusts?

Answer 9

Charitable purpose trusts are trusts created for charitable purposes, such as the relief of poverty, education, or the advancement of religion. Unlike private purpose trusts, charitable trusts are exempt from the beneficiary principle and the rule against inalienability.

Question 10

What are the advantages of charitable status?

Answer 10

Charitable trusts enjoy several advantages:

• They are not subject to the beneficiary principle.
• They are not subject to the rule against inalienability.
• They are exempt from many tax obligations.
• They can last indefinitely.

Question 11

What is the public benefit requirement for charitable trusts?

Answer 11

Charitable trusts must benefit the public or a sufficient section of the public. The trust’s purposes must have an identifiable benefit, and the beneficiaries must represent a sufficient segment of the population.

Question 12

Can a trust that benefits only a restricted group be charitable?

Answer 12

No, a trust that benefits only a restricted group, such as employees of a particular company, would not meet the public benefit requirement and thus would not be charitable (Oppenheim v Tobacco Securities Trust).

Question 13

What is the rule against remoteness of vesting?

Answer 13

The rule against remoteness of vesting is part of the rules against perpetuities and ensures that interests in a trust must vest within 125 years. This rule is not relevant to purpose trusts because their goal is not to vest property in beneficiaries but to further a purpose.

Question 14

What are trusts of imperfect obligation?

Answer 14

Trusts of imperfect obligation are non-charitable purpose trusts that are valid even though they lack human beneficiaries. These include trusts to care for specific animals or maintain graves and tombs, as in Re Dean and Re Hooper.

Question 15

What is the significance of the case Re Denley’s Trust Deed?

Answer 15

Re Denley’s Trust Deed established that a purpose trust can be valid if it directly or indirectly benefits identifiable individuals, who can then enforce the trust. In this case, a sports ground was held on trust for the benefit of employees, which made it valid.

Question 16

What are the two types of non-charitable purpose trusts that can be valid?

Answer 16

Trusts of imperfect obligation: Such as trusts for the care of animals or the maintenance of graves.
Trusts expressed to benefit individuals: As in Re Denley, where a trust is expressed for a purpose but benefits identifiable individuals.

Question 17

What is the significance of charitable tax exemptions?

Answer 17

Charitable trusts are exempt from inheritance tax, income tax on donations (via Gift Aid), and tax on income generated by investing the trust fund. These exemptions significantly reduce the financial burden on charities.

Question 18

What is the role of the Charity Commission?

Answer 18

The Charity Commission monitors and regulates charities, ensuring they comply with the law. It can remove trustees, deregister charities, and help trustees apply trust funds effectively.

Question 19

What is the cy-près doctrine?

Answer 19

The cy-près doctrine allows a charitable gift to be applied to a similar purpose if the original charitable purpose is impossible to fulfill. For example, if a charity no longer exists, the funds may be redirected to a similar charity.

Question 20

Can a trust for religious purposes be charitable?

Answer 20

Yes, trusts for the advancement of religion are charitable as long as they take active steps to promote religious belief, such as holding services or providing places of worship. However, religious trusts must also satisfy the public benefit requirement.

Question 21

What is a political purpose trust, and why is it not charitable?

Answer 21

A political purpose trust is a trust created to promote political causes, such as campaigning for changes in the law. These trusts are not charitable because the law does not recognise political purposes as being beneficial to the public.

Question 22

What is the importance of the case Re Shaw in relation to purpose trusts?

Answer 22

In Re Shaw, the court held that a trust to develop a 40-letter alphabet was not valid as a charitable trust because it did not have any public benefit and was seen as a non-charitable purpose trust. This case highlights the need for a public benefit for charitable trusts.

Question 23

What is the significance of Re Endacott?

Answer 23

Re Endacott confirmed that non-charitable purpose trusts are generally not valid unless they fall into specific categories, such as trusts for the maintenance of graves or animals. The case also confirmed the rule that a purpose trust cannot be created for vague or general purposes, like a “useful memorial.”

Question 24

What are the specific categories of valid non-charitable purpose trusts?

Answer 24

Valid non-charitable purpose trusts are limited to:

• Trusts for the maintenance of specific animals (Re Dean).
• Trusts for the maintenance of graves or tombs (Re Hooper).
• Trusts that indirectly benefit individuals, as in Re Denley.

Question 25

What is the principle of public policy, and how does it affect purpose trusts?

Answer 25

The principle of public policy prevents the enforcement of trusts that promote illegal or immoral purposes.

Trusts that go against public policy, such as a trust to promote racial segregation, would be void. Public policy ensures that trusts serve beneficial or socially acceptable purposes.

Question 26

Why was the trust in Leahy v Attorney-General for New South Wales considered void?

Answer 26

The trust in Leahy v Attorney-General for New South Wales was void because it was created for the benefit of an unincorporated association (a religious order). The court found that the trust was not charitable because the beneficiaries were too uncertain, and it failed to satisfy the public benefit requirement.

Question 27

What are unincorporated associations, and why do they present issues in trust law?

Answer 27

An unincorporated association is a group of individuals bound by mutual agreement but without legal personality (such as a sports club or society). Trusts for unincorporated associations can be problematic because they lack identifiable beneficiaries, making it difficult for the court to enforce the trust.

Question 28

What is the difference between a gift to an unincorporated association and a gift to the members?

Answer 28

A gift to an unincorporated association is considered to be a gift to the group for a common purpose. A gift to the members is treated as an outright gift to the individual members, which they can divide among themselves. The distinction matters in determining how the property is distributed and whether the trust can be enforced.

Question 29

What is the rule in Re Grant’s Will Trusts?

Answer 29

In Re Grant’s Will Trusts, the court held that a gift to a political association was void because the association could alter its constitution, meaning the gift was not restricted to the original purpose. This case emphasizes the importance of certainty in trust purposes and the need for control over how the property is used.

Question 30

What is the importance of the case Re Lipinski’s Will Trusts?

Answer 30

Re Lipinski’s Will Trusts is significant because it allowed a gift to an unincorporated association to be valid if the gift benefits identifiable individuals, such as the members of the association. This case illustrates the Re Denley principle, where the trust’s purpose benefits specific individuals.

Question 31

How does the perpetuity rule apply to purpose trusts?

Answer 31

Non-charitable purpose trusts must comply with the rule against inalienability, meaning they cannot last more than 21 years unless the trust allows for the capital to be fully spent. This rule prevents trusts from tying up property indefinitely for non-charitable purposes.

Question 32

What are the key limitations on non-charitable purpose trusts?

Answer 32

Non-charitable purpose trusts are limited by:

• The beneficiary principle, which requires identifiable beneficiaries to enforce the trust.
• The rule against inalienability, which limits the trust’s duration to 21 years unless capital is spent.
• The rule against capriciousness, which prevents the creation of trivial or whimsical trusts.
• Public policy restrictions, which void trusts that promote illegal or immoral purposes.

Question 33

What is the difference between a charitable trust and a non-charitable purpose trust?

Answer 33

A charitable trust is created for a public benefit and enjoys several advantages, such as tax exemptions and being exempt from the rule against perpetuities.

A non-charitable purpose trust, on the other hand, lacks public benefit, is subject to the rule against inalienability, and can only be valid if it falls within limited exceptions.

Question 34

What is a memorial trust, and why are they often void?

Answer 34

A memorial trust is a trust created to honor the memory of a person (e.g., building a statue or monument).

These trusts are often void because they do not satisfy the public benefit requirement and are usually non-charitable purpose trusts, which are generally not valid unless they meet specific exceptions like those in Re Endacott.

Question 35

What is the rule against perpetual trusts, and how does it apply to charitable trusts?

Answer 35

The rule against perpetual trusts, also known as the rule against perpetuities, prevents trusts from lasting forever. However, charitable trusts are exempt from this rule and can exist indefinitely as long as they continue to serve a charitable purpose.