Non-Charitable Purposes

Question 1

*Re Astor [1952] Ch 534

Answer 1

Case: Astor and son settled most of the shares of the Observer Newspaper Ltd; Fund to be applied for non-charitable purposes including: (i) the maintenance of good understanding between nations; (ii) the preservation of the independence and integrity of newspapers; and (iii) the protection of newspapers from being absorbed or controlled by combines

Decision: Not charitable as political and not for the public benefit; the Court must be able to enforce and control (Roxburgh J sees this as key importance that there must be someone to enforce the right)

Rule: If there is a non-charitable purpose trust it must have a certain purpose

Question 2

*Leahy v AG for New South Wales [1959] AC 457

Answer 2

Case: Testator left homestead on trust for such order of nuns of the Catholic Church or Christian Brothers as executors and trustees should select; Widow/testators’ children challenged validity

Decision: The gift was not charitable as advancement as religion as permitted the selection of purely cogitative orders (but validated by Australian Law); it was void as a non-charitable purpose and not an express gift to all members and therefore void (failed as endowment and failed for perpetuity)

Rule: Rejected the view that unincorporated associations are an exception to general rule that non-charitable purpose trusts are void as they are trusts of imperfect obligation: gift to existing members and joint tenants/tenants in common per Viscount Simmonds

Quote:

Question 3

*Re Endacott [1960] Ch 232

Answer 3

Case: Testator left estate to council to provide “some useful memorial to myself”

Decision: Non-charitable purpose trust so invalid

Rule: The cases where trusts of imperfect obligation are not a general rule and ought not to be increased in number

Question 4

*Neville Estates v Madden [1962] Ch 832

Answer 4

Case: Cross J tries to make sense of the case law to establish different contractions enabling the giving of effect to property transfers to the UA

Rule: Cross J identifies three constructions - gift for members at the time, gift on trust for present and future members and gift for members subject to contractual rights

Quote: “If for example, a number of persons formed themselves into an association with a charitable object – say the relief of poverty in some district – but it was part of the contract between them that, if a majority of the members so desired, the association should be dissolved and its property divided between the members at the date of dissolution, a gift to the association as part of its general funds would not, I conceive, be a charitable gift.” per Cross J on CHT

Question 5

*Re Denley [1969] 1 Ch 373

Answer 5

Case: Clause 2(c) land “to be maintained and used […] for the purpose of a recreation or sports ground primarily for the benefit of employees […] and secondarily for the benefit of such other […] persons (if any) as the trustees may allow to use the same […]”

Arguments of Counsel: Void on three principle grounds: construed as trust for individuals (because groups of individuals unascertainable class so void for uncertainty), secondly could be construed as a purpose trust to prove recreation (argued that purpose so should be void for failing to meet beneficiary principle), thirdly argued that hybrid in having the vices in both kinds

Decision: There may be a purpose/object of a trust which would benefit an individual or individuals, where that benefit is so indirect or intangible that the court would have no locus standi to apply to the court to enforce it but the present case is not one of this character as 2(d) expressly states that the employees of the company shall be entitled to use and enjoy the land (per Goff J); If there’s any issues with conflicting desired uses then the trustee may make rules/regs etc. (does not seem to make it void on this ground)

Rule: Where the trust, though expressed as purpose, is directly or indirectly for the benefit of an individual or individuals, it is valid and within the beneficiary principle… exceptional cases!

N.B.

• Must not offend the common law perpetuity rule (21 years from death of the last survivor of a group of named individuals)
• As a private trust, the individuals must be ascertained/ascertainable at any given time: IRC v Broadway Cottages Trust (fixed trusts certainty of objects)

Question 6

*Re Recher [1972] Ch 526

Answer 6

Case: R gave a share of her residuary estate to The London and Provincial Anti-Vivisection Society (which ceased to exist prior to R’s death)

Decision: Gift lapsed due to dissolution of the association, but none-the-less considered (hypothetical) constructions -
- Not a charitable gift as political purpose
- Not a gift to the members of the Society at the date of testator’s death as JT/TiC
- Not a gift to present and future members beneficially
- Not a gift in trust for the purposes of the society
However, Brightman J considers that even if property cannot be construed as being intended to be held on trust, it will typically be held by the treasurers in accordance with the contractual rules of the association

Quotes:
1. “In my judgment the legacy in the present case to the London and Provincial society ought to be construed as a legacy […] to the members beneficially as an accretion to the funds subject to the contract which they have made inter se [between themselves]. Of course, the testatrix did not intend the members of the society to divide her bounty between themselves, and doubtless she was ignorant of that remote but theoretical possibility. Her knowledge or absence of knowledge of the true legal analysis of the gift is irrelevant.” per Brightman J
2. On CHT - o “[…] it must follow that the life members, ordinary members and associate members of the London and Provincial society could, at any moment of time, by unanimous agreement (or by majority vote, if the rules so prescribe), vary or terminate their multi-partite contract. There is no private trust or trust for charitable purposes or other trust to hinder the process. It follows that if all members agreed, they could decide to wind up the London and Provincial society and divide the net assets among themselves beneficially […] Of course, the testratrix did not intend the members of the society to divide her bounty between themselves, and doubtless she was ignorant of that remote but theoretical possibility. Her knowledge or absence of knowledge of the true legal analysis of the gift is irrelevant […]”
o If members can require property to be applied for the objects of the association, it must also apply that they can at any time, by unanimous agreement, or a majority vote if the rules so apply, to terminate their contract
o A testator will generally not wish to have a position where the estate is divisible within members – the court do not think this; but for contract holding theory should be able to divide or change purpose (advice on for any such scenario in PQ)

Question 7

*Re Lipinski [1976] Ch 235

Answer 7

Case: Bequest on trust ‘…for the Hull Judea’s (Maccabi) Association in memory of my late wife to be used solely in the work of constructing the new buildings for the Association and/or improvements to the said buildings’

Decision: If solely for the stated purpose then invalid as a purpose trust, however, Oliver J discusses that if a valid gift is made to an unincorporated body as a simple accretion of the funds which are the subject matter of the contract then there is no reason for the gift to fail - the beneficiaries are able to enforce the trust by exercising their contractual rights; the gift should be construed as an absolute one - absolute gift along lines of Re Recher as accretion of the funds (seemed prepared to uphold Re Denley principles)

Question 8

*Re Grant [1980] 1 WLR 360

Answer 8

Case: Application of Re Denley to UA; Bequest of residuary estate to “the Labour Party Property Committee for the benefit of the Cherstey Headquarters of the Chertsey and Walton Constituency Labour Party”

Quotes:
Per Vinelott J: “[…] The members of the Chertsey and Walton CLP could not alter the rules so as to make the property bequeathed by the testator applicable for some purpose other than that provided by the rules; nor could they direct that property to be divided amongst themselves beneficially […]” - Rules could only be altered by outside body – members couldn’t alter the rules to distribute the money amongst themselves (key requirement of contract holding theory)

“That case on a proper analysis, in my judgment, falls altogether outside the categories of gifts to unincorporated association and purpose trusts. I can see no distinction in principle between a trust to permit a class defined by reference to employment to use and enjoy land in accordance with rules to be made at the discretion of trustees on the one hand, and, on the other hand, a trust to distribute income at the discretion of trustees amongst a class, defined by reference to, for example, relationship to the settlor. In both cases, the benefit to be taken by any member of the class is at the discretion of the 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.” per Vinelott J on Re Recher

Question 9

*Re West Sussex Constabulary Benevolent Fund [1971] Ch 1

Answer 9

Case: Fund established to provide for widows and children of deceased members of West Sussex police force; Funds derived from four principal sources (i) contributions of past and present members, (ii) proceeds of entertainments, raffles and sweepstakes, (iii) anonymous contributions to collecting boxes, (iv) other donations and legacies

Decision: per Goff J

(ii) , (iii) Proceeds of entertainments, raffles, sweepstakes and anonymous contributions would be impossible to apply doctrine of FT as relationship is of contract not trust (motive may be of aiding trust or for purchase of ticket for attendance/prize etc.) and no direct contribution to the fund but only the profit - passes bona vicantia
(iv) other donations and legacies could name donors and presumed that they would get their money back in the event of surplus - held on RT
(i) contributions of past and present members, RT had no role to play in the scenario, those still members until their deaths are excluded as they have had all that they contracted for (Cunnack v Edwards)

Question 10

*Re Bucks Constabulary Friendly Society (No 2) [1979] 1 WLR 936

Answer 10

Case: Society establishes to provide relief for widows and orphans of deceased members of the Bucks Constabulary; UA registered under the Friendly Societies Act 1896; Had no rules providing for distribution of surplus assets; Should the assets pass to Crown bona vacantia or be distributed amongst members of the society?

Decision: per Walton J
This contract theory applies to all the assets, both prior to and after dissolution – doesn’t go to Crown but divided between the members

Question 11

Morice v Bishop of Durham (1804) 9 Ves

Answer 11

Quote: “There must be somebody, in whose favour the court can decree performance” per Sir William Grant MR

Question 12

Perpetuities and Accumulations Act 2009, s.18

Answer 12

Act does not affect the rule of law which limits the duration of non-charitable purpose trusts - perpetuities applies

Question 13

Last time English case upheld non-charitable purpose trust

Answer 13

More than 21 Years ago

Question 14

Brown, ‘What are We to Do with Testamentary Trusts of Imperfect Obligation?’ [2007[ Conv 148 at 157

Answer 14

“If properly established within one of the relevant exceptions, such a trust is, by its nature an imperfect obligation trust. Prima facie the trustee cannot be compelled to perform the same as there is no one in whose favour the court can decree performance. Conversely, the trustee cannot be prevented from performing the trust and will be able to make unimpeachable use of the money in applying it for one of the accepted purposes.”

Question 15

Pettingall v Pettingall (1842) LJ Ch 176

Answer 15

Rule: Undertaking to note use property for an alternative purpose grants locus stand for any interested parties to come to the court if the trustees apply the fund for purposes other than the purpose stated

Question 16

Re Dean (1889) 41 Ch D 552

Answer 16

Decision: North J upheld a trust for the maintenance of horses and hounds, for 50 years should they live that long despite seemingly void for no one to enforce and perpetuity (assumption that will not live for 21 years?) (trust of imperfect obligation)

Question 17

Re Hooper [1932] 1 Ch 38

Answer 17

Rule: Trust for the care an upkeep of family graves and monuments upheld (trust of imperfect obligation)

N.B. Must satisfy the perpetuity rule

Question 18

Re Sanderson’s Trust (1857) 3 K & J 497

Answer 18

Case: Property left on trust “to pay or apply the whole or any part of” towards maintenance, attendance and comfort of testator’s brother; brother dies

Decision: Trust for purpose but brother considered to be beneficiary under fixed trust, purpose is a means to quantify distribution of share

Rule: Purpose as motive for the gift of trust valid

Question 19

Re Andrew’s Trust [1905] 2 Ch 48

Answer 19

Case: Fund for the education of the children of Bishop Barclay; Made expressly clear the fund was “by no means intended for the exclusive use of any one of them in particular, nor for equal division, but deemed as necessary to defray the expenses of all, and that solely in the matter of education”

Decision: Even construed in the narrow sense, this a purpose as motive for the gift and valid trust; Children were entitled to what remained in equal shares; Broadest possible meaning and reading to education

Question 20

Re Osoba [1979] 1 WLR 247

Answer 20

Case: Bequest to testator’s widow on trust “for her maintenance and for the training of my daughter Abiola up to university grade and for the maintenance of my aged mother”; Widow and mother had died and Abiola had been to university

Decision: Abiola succeed to entire fund

Quote: “The specified purpose is regarded as of less significance than the dispositive act of the testator, which sets the measure or the extent to which the testator intends to benefit the beneficiary” per Buckley LJ
“If a trust is constituted for the assistance of certain persons by certain stated means there is a sharp distinction between cases where the beneficiaries have died and cases where they are still living. If they are dead, the court is willing to hold that there is a resulting trust for the donors; for the major purpose of the trust, that of providing help and benefit for the beneficiaries, comes to an end when the beneficiaries are all dead and so are beyond earthly help whether by the stated means or otherwise. But if the beneficiaries are still living, the major purpose of providing help and benefit for the beneficiaries can still be carried out even after the stated means have all been accomplished, and so the court will be ready to treat the standard means as being indicative and not restrictive.” per Megarry VC

Question 21

Re Bowes [1896] 1 Ch 507

Answer 21

Case: Fund settled on trust to plant trees on a large estate (i.e. purpose trust)

Decision: The only 2 human beneficiaries under the trust were held to be entitled to direct the trustees to transfer the title in the money to the beneficiaries outright (in accordance with Saunders v Vautier)

cf Re Abbott Fund Trusts (inconsistent line of case law)

Question 22

Moffat, Trusts Law, p.262

Answer 22

“Whilst it may have been a useful case to pray in aid of the decision that Goff J wished to reach we would suggest that cases such as Re Bowes, on the face of it, for a purpose but where the purpose is construed as a motive for the gift, are of a different order to Re Denley. In Re Denley in our view there was no question of the employees having any right to call for the trust property, even if they were all agreed on this.”

Question 23

Re Abbott Fund Trusts [1958] Ch. 300

Answer 23

Case: Subscriptions constituting fund (collected from public) for relief of two ladies who were deaf and mute; no provision made as to disposal of surplus, argued that surplus went to survivors of the ladies as donors never intended that surplus go back to them

Decision: Subscriptions were never intended to be an absolute gift (Stirling J) and the ladies where never in a position to demand transfer of property to themselves as with usual beneficiaries; surplus funds held on resulting trust of remaining fund for subscribers

(contrast Re Andrews and Re Osoba: where beneficiaries are alive: tend to hold the expression of the purpose is an indicator of motive and they will take money absolutely; by contrast where beneficiaries are dead or complicated factor and surplus fund, a resulting trust is more likely)

cf Re Bowes (inconsistent line of case law)

Question 24

Conservative and Unionist Central Office v Burrell [1982] 1 WLR 522

Answer 24

Rule: Unincorporated Associations

Quote: “[…] two or more persons bound together for one or more common purposes, not being business purposes, by mutual undertakings each having mutual duties and obligations, in an organization which has rules which identify in whom control of it and its funds rests and on what terms and which can be joined or left at will. The bond of union between the members of an unincorporated association has to be contractual.” per Lawton LJ

Question 25

Gift for members at the time

Answer 25

Identified by Cross J in Neville Estates v Madden:

• Property belongs to members absolutely or held on trust (by treasurer/officer) for members
• Member can leave and retain interest / sever share
• New members (post acquisition) have no interest

Please note consequences:
• Members would retain interest even once they cease to be members of the club – they would be able to sever their share whenever they like
• New members would not obtain any interest in the property

Advantages:
o Beneficiary principle satisfied
o Perpetuity rule is not infringed (members free to dispose of income and capital)

Disadvantages:
o Donor likely intended the property to be used for the associations purposes not for individual members at time of transfer (did they really intend to intend the individuals?)
o Unlikely to what them to be able to sever there interest at any time
o New members do not acquire any interest – may effect continuation of the purpose of the UA in the future

Unlikely to be a mechanism to be adopted by transferors

Question 26

Gift on trust for present and future members

Answer 26

Identified by Cross J in Neville Estates v Madden:

• Transferor might provide for the property to be held on trust for ‘present and future members’
• Hasn’t been given significant consideration by the courts, generally not viable construction, just a theoretical example to consider

Advantages:
o Satisfies beneficiary principle

Disadvantages:
o Would infringe perpetuity rule (but NB Perpetuities and Accumulations Act 2009 – now 125 years) – future members’ interests may vest outside the perpetuity rule
o Members that leave still retain an interest
o Q: How is it possible for property to benefit both present and future members but also preclude enjoyment of benefit if a member leaves?

Question 27

Gift to members subject to contractual rights

Answer 27

Identified by Cross J in Neville Estates v Madden:

“Contract holding theory” given must consideration in the case law

Advantages:
o If the property is held on trust, beneficiary principle is satisfied
o A member who leaves extinguishes their contractual entitlement: property will belong beneficially to remaining members
o A member who joins (post acquisition) will obtain beneficial rights arising from the association’s rules
o The perpetuity rule will be satisfied – why?
• It must be possible to vary or terminate the contract, enabling disposal (see next slide).
• PPA 2009 125 year period applies and wait and see rule
• Class closing rule will apply: fact that future members might benefit after the 125 year period will not invalidate the trust because it is possible to exclude potential members whose interests might vest outside the perpetuity period.

Question 28

Conservative and Unionist Central Office v Burrell [1982] 1 WLR 522

Answer 28

Case: Conservative Part not an UA as no contractual link between components

Decision: Party treasurer is an agent with title to money acting for donors

Rule: A doner may be able to transfer money to donee, who then becomes and agent for the doner – typically not a trust relationship, donee receives money and subject to personal requirement to apply property for purpose, if failure to apply for the purpose, then it may constitute a breach of fiduciary duty – personally liable to the doner

• Agency theory has disadvantages: agency will lapse when transferor of property has died (look at the nature of the provision in terms of timing, if will scenario then relevant to type of property holding mechanism advising them to employ)
• Agency cannot survive the death of a principle
• Cannot be established at the time of death

Question 29

Dissolution of the association…

Answer 29

• By court order
• By resolution of the members (in accordance with constitution) or unanimous agreement if no such provision
• Membership falls below 2 (Re Bucks Constabulary)
• Association has become moribund (Re GKN Bolts & Nuts Ltd)

Question 30

Distribution of surplus

Answer 30

1. Assets may be returned to the people who provided them in the first place
2. Assets may be transferred to the Crown on the ground that nobody owns them – that is, they become bona vacantia
3. Assets may be transferred to the members at the time of the dissolution

Question 31

Cunnack v. Edwards [1896] 2 Ch 679

Answer 31

Case: Society to raise funds to prove annuities for widows of deceased members; Last widow and member died with surplus £1,250 remaining; Surplus of £1,250 claimed by personal representatives of last members

Decision: Moribund; had been terminated; Next of kin of members could not claim surplus assets on RT as subscription is parting outright with money (get what contractually bargaining for, cannot get money back on RT)

Rule: No possibility of RT where each member has paid contributions without reserving any beneficial interest to themselves

Quote: “As the member paid his money to the society, so he divested himself of all interest in this money for ever, with this one reservation, that if the member left a widow she was to be provided for during her widowhood. Except as to this he abandoned and gave up the money for ever.” per AL Smith LJ

Question 32

Hanchett-Stamford v Attorney-General [2008] EWHC 330 (Ch)

Answer 32

Case: Performing and Captive Animals Defence League membership reduced to 2 members, 1 member then dies; Remaining assets comprised of £675,000 property and stocks/shares at £1.7m

Decision: Purpose not exclusively charitable (so no cy-pres) and dissolution occurred on death of penultimate member

Rule: Where only one member left they cannot have beneficial interest and will pass bona vacantia, however, where two member of an association they may agree to divide before either dies

Quote: “It is true that this is not a joint tenancy according to the classical model; but since any collective ownership of property must be a species of joint tenancy or tenancy in common, this kind of collective ownership must, in my judgment, be a subspecies of joint tenancy, albeit taking effect subject to any contractual restrictions applicable as between members.”
“Accretion on death is inherent in the beneficial interest in any asset being held by joint tenants in equity. It, therefore, follows that the estate of a deceased member can have no claim to the assets. In Neville Estates Ltd v Madden [1962] Ch 832 Cross J applied the same principle to cessation of membership through resignation. That must be a facet of the contractual relations between members. Walton J also said that if there is only one member of an unincorporated association, it must cease to exist. That too, must I think be right for the reasons that Walton J gave; and also because if the members’ rights are based in contract, a contract must cease to bind once there is no other party who can enforce it.”
per Lewison J

Question 33

Re Horley Town Football Club [2006] EWHC 2386 (Ch)

Answer 33

Rule: Confirms Re Bucks that where there is no specification in contract as to how assets should be distributed they shall equaly

Question 34

Re Sick and Funeral Society of St. John’s Sunday School, Golcar [1973] Ch 51

Answer 34

Case: Sunday school society provided sickness and death benefits for members (including teachers and children); Junior members (under 13) paid 1/2 weekly subscription and sickness benefits at 1/2 rate; Society then dissolved

Decision: Effect of associations rules was that junior members only entitled to a 1/2 share of the assets, as compared to ordinary members; Court also clarified that members who had been excluded from association, such as for failing to pay subscriptions, not entitled to share (even if had paid arrears of subscriptions after association had dissolved)