Non Charitable Purpose Trusts

Question 1

What is the principle Difficulty with private, non charitable purpose trusts?

Answer 1

The absence of a beneficiary is the most significant objection.

Question 2

What cases uphold the beneficiary principle?

Answer 2

Leahy v Attorney General of New South Wales: a gift can be made to persons (including a corporations) but it cannot be made to a purpose or an object

Morice v Bishop: There must be somebody whose favour the court can decree performance. A trustee is under no obligation unless there is a correlative right in someone else, beneficiary, to enforce the trust.

Re Endacott: No principle has greater sanction or authority behind it that the general proposition that a trust by English law, not being a charitable trust, in order to be effective, must have ascertained or ascertainable beneficiaries.

Re Denley: court’s concern lies with problems of enforcement (practical need for someone with capacity to enforce the trust) rather than actual absence of beneficiaries

Question 3

What additional alternative reasons may a court hold a non charitable trust void?

Answer 3

Perpetuity
Uncertainty
Capricious Purposes

These are secondary to the primary obstacle to validity: lack of beneficiary. The purported purpose trust must first evade the invalidating reach of the beneficiary principle.

Question 4

What are the 2 major strands to the rule against perpetuities?

Answer 4

1) The rule against remoteness of future vesting, which deals with maximum length of time for which vesting of future interests can be postponed. Although the court can wait to see if there are beneficiaries in whom the trust property can be vested, if the gift does not do so it is void.
2) The rule against inalienability. The rule seeks to ensure that property is not tied up in a trust for longer than an acceptable perpetuity period or for an indefinite period. The concern here is duration. The common law period of a specified life or lives in being plus 21 years is applied.

Example
Where testator seeks property held in trust, the maximum duration of the maintenance period must be specified as otherwise the trust might continue indefinitely. Therefore a valid perpetuity period must be selected. If none are selected then the perpetuity period will be 21 years from the date when the instrument creating the gift takes place (case of a will: will takes effect on the date of the death of the testator)

Question 5

What is the perpetuity period at common law?

Answer 5

The perpetuity period is measured by human life or lives + 21 years (Re Kelly).

It must be calculable. Example, a trust to advance some purpose until the expiry for 21 years from death of the last survivor of the royal family (royal lives clause)

Question 6

What case illustrated a failed attempt to create a perpetuity period?

Answer 6

Re Moore: testator sought to create a perpetuity period of 21 years from the death of the last survivor of all persons who shall be living at my death. However as it was impossible to ascertain when the last person in that group would have died, gift was held to be void under the rule against perpetuties.

Question 7

How can a non charitable purpose trust therefore comply with common law rules?

Answer 7

1) Limit the duration of the trust to a period of 21 years
2) use clear wording indicating the intention to confine the duration of the trust to the common law perpetuity period. Words = “as long as the law allows” = 21 years
3) employees lives in being or royal lives clause

Question 8

What is the obstacle of uncertainty?

Answer 8

Uncertainty is clear where there is an intention to create a charitable trust, but the attempt ends in failure.

Vagueness of expression within a purported charitable trust may leave it open for the trustee to apply gift to both charitable and non charitable purposes. In such cases, gift will fail because it cannot be construed as exclusively charitable.

Question 9

What situations can uncertainty occur?

Answer 9

1) where purposes are not prescribed or clarified,
2) the means by which the trustee is to achieve or attain the specified purpose is ill defined or unacceptable broad

3) class of beneficiaries, or those people intended to benefit must be sufficiently certain. 
Morice v Bishop: gift upon trust to dispose of ultimate residue was so vague in its description of objects was impossible to determine how the residue should be applied. Where purposes are unclear, the court of equity will not will not valid a trust it cannot enforce and control.

Question 10

What is capriciousness?

Answer 10

Policy considerations from also purposes that are useless, wasteful, harmful or illegal. Capriciousness is not frequently encountered, but it does provide an additional obstacle to the acceptance of non charitable purposes.

Question 11

Give an example of an extreme case:

Answer 11

Brown v Burdett: request for trustees block up all rooms in a house for a period of 20 years = useless

M’Caig Trustees v Kirk Session of United Free Church of Lismore: gifts for the maintenance of monuments to the testator, the root of the criticism appears to lie in capriciousness and offence to public policy.

Question 12

What is the final obstacle?

Answer 12

Administrative workability: necessary for any trust. R v District Auditor Ex p West Yorkshire Metropolitan - a local authority in exercise of its statutory attempted to create a trust that would benefit 2.5 million comprised of class so large that the trust was deemed to be admimstratively unworkable.

Question 13

What are anomalous exceptions?

Answer 13

These are where trusts for non charitable purposes have been regarded by the court as valid

Question 14

Give some examples of trusts for election or maintenance or monuments or graves

Answer 14

Mussett v Bingle: testator provided money to erect monument in memory of the testator’ wife’s first husband, and further money to provide money for its upkeep. While there was no absence of the beneficiary, Latter held void for perpetuity because trust could last for an indefinite period.

Pirbright v Salway: gift of income to look after a family burial enclosure for as long as the law for the time being permitted was acceptable. Held for at least 21 years following restores death

Re Hooper: request to executors and trustees for the upkeep of a vault, arrangement of which left to the discretion of the executors = upheld for 21 years from date of the testator’s death

Re Endacott: settlor left his residuary to council for the purpose of providing some useful monument to myself. Clear that it imposed a specific obligation on the trustee that it was a useful function; therefore serving a public purpose. However court: not exclusively charitable, and use of money not confined to strictly charitable purposes. Moreover, large sum of money of would be available to the trustee.

Question 15

What is specific about graves?

Answer 15

Parish Councils and Burial Authorities (Miscellaneous Provisions) Act 1970 = permits a local authority or burial authority to enter into a contract to maintain monuments or memorials within its catchment areas

Question 16

What are the trusts for maintaining particular animals?

Answer 16

Gifts for the care or maintenance of particular animals are not charitable. Though there are cases where it has been held as valid.

Question 17

What cases validate gifts for animals?

Answer 17

Pettingall v Pentingall: testator provided money per animal for upkeep for favourite mare. Horse not to be ridden or put in harness and ensure it was provided for.

1) Gift upheld: bequest in favour of an animal was valid
2) There were persons interested in the residue that would be able to enforce the terms of the bequest. Executor provided assurance he would use money to look after mare and would be entitled to any surplus. Failure meant he could face action by any other party interested in the residue.

Re Dean: testator provided for sum of 750 per annum to be paid for period of 50 years for maintenance of horse and hounds if they live that long. It was clear from wording that trustee would have no entitlement to surplus. Here, even though there was no clear beneficiary who could actively enforce it and period of 50 years didn’t equate with an acceptable common law perpetuity period = still upheld because plaintiff can do so

Question 18

What are the trusts for saying of masses?

Answer 18

Trusts for the saying of masses for private individuals are treated as valid charitable trusts, provided the masses are said in public (are Hetherington)

Bourne v Keane = such a trust is a legitimate purpose trust.

Question 19

What other miscellaneous cases are there?

Answer 19

Re Thompson: testator bequeathed a legal or 1000K to his friend to be applied by him in such a manner as the thought fit towards the promotion and furtherance of fox hunting.

Held that legacy would be used specially towards the expressed object in the testators will

Question 20

What is difference between people trusts and purpose trusts?

Answer 20

Legit private express trusts (trusts with beneficiaries) are expressed in the form of purpose or appear limited by a purpose.

Purpose trusts on the other hand are prima facie void for a lack of beneficiary

Question 21

What first example is there?

Answer 21

Where the purpose provides the mechanism to determine the beneficial share. This is not a purpose trust

Re Sanderson Trust: to pay or apply the whole or any part of the income for and towards the maintenance, attendance and comfort of the testator’s brother who was not competent to manage his own affairs.

Question 22

What other example is there?

Answer 22

Where the purpose merely expresses the motive for the gift:

Re Sanderson’s Trust: If gross sum given or if whole income of property given and special purpose assigned for this gift Then court recognised this gift as absolute and purpose, merely as a motive of the gift = therefore gift takes effect as to the whole sum or the whole income.

Re Bowes: 5000k left on trust to estate owners for the purpose of planting trees on the estate for shelter. Lame would have benefited from $800 dollars worth, any more would have been to disadvantage of beneficiaries. However, purpose expressed motive of the gift so owners of the estate entitled to rest of sum

Re Osoba: a bequest to the testator’ widow on trust, for her maintenance and for the training of my daughter into university - when mother died, wife and daughter received gift of equal shares of residue

Question 23

What was the principle established in Re Denley?k

Answer 23

This case concerned a gift of land for use as a sports ground and was deemed valid in that person’s entitled to use it (mostly employees) benefitted sufficiently directly that they could apply to the court to enforce the trust.

Distinction drawn between trusts for purely abstract purposes and trusts that are the benefit to identifiable individuals.

Held:

• that beneficiary principle confined to purpose or object trust that are abstract or impersonal.
• The objection is not that the trust is for a purpose, but that there is no beneficiary.
• Where expressed as a purpose for the benefit of an individual or individuals, it is outside the beneficiary principle.
• The beneficiary principle should not invalidate cases where a person could be found to have sufficient standing to enforce the trust. This will occur where there is benefit to that persons is not too direct or intangible.
• Here it was clearly possible to identify easily with those employees at any given time, because they comprised as an ascertainable class = avoiding difficulty relating to certainty of objects.
• reference to the others = not a trust, but created a power to permit others to use the land.

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Question 24

What was it held in Re Lipinski?

Answer 24

A trust which though expressed as a purpose was directly or indirectly for the benefit of an individual or individuals was valid provided that they were ascertainable at any one time and that the trust was not otherwise void for uncertainty

Question 25

What happened in Re Grant?

Answer 25

I can see no distinction in principle between

1) a trust to permit a class define by reference to employment to use and enjoy land in accordance with rules made at discretion of trustees
2) trust to distribute income at the discretion of trustees among a class define by reference to relationship to the settlor.

In both cases, benefit is to be taken by any member of the class is at discretion of trustees. But any member of the class can apply to the court to compel the trustees to administer the trust in accordance with its terms

• re denley is not about purpose trusts, the trust is the same as a discretionary trust for individuals who had sufficient standing to enforce it on their own behalf