PRIVATE PURPOSE TRUSTS

Question 1

The Beneficiary Principle

Answer 1

• Morice v Bishop of Durham: “every other trust [which is not charitable] must have a definite object. There must be somebody in whose favour the court can decree performance”
  
  • If you leave property to be held on trust for the pursuit of an abstract purpose (instead of an object), an abstract purpose cannot enforce a trust
  • With charitable trusts, the AG and Charity Comm have powers to enforce these trusts
• Bowman v Secular Society: “A trust to be valid must be for the benefit of individuals … or must be in that class of gifts for the benefit of the public which the courts in this country recognise as charitable in the legal as opposed to the popular sense of that term”

Question 2

General rule for private purpose trusts

Answer 2

• A trust for a purpose that is not charitable and not part of the exceptions will fail

Question 3

Re Astor

FACTS

Answer 3

• A trust was created for various purposes, including “the maintenance of good relations between nations [and] the preservation of the independence of the newspapers”
  
  • The question was in whose favour can the courts decree performance

Question 4

Re Astor

HELD

Answer 4

• “A trustee would not be expected to be subject to an equitable obligation unless there was somebody who could enforce a correlative equitable right, and the nature and extent of that obligation would be worked out in proceedings for enforcement”
  
  • You must owe duties to somebody
• If there is no object for the obligation, there is no point to it
• As a matter of policy, it is undesirable – if we permitted trusts for abstract non-charitable purpose, that will tie up funds to be held in pursuit in principle for activities but it cannot be monitored because no one has an equitable right by the creation of the trust

Question 5

Re Shaw

Answer 5

• Shaw wanted to leave money to the research of a 40 letter British alphabet and the translation of his play into this alphabet
• The trustees were willing to go through with this
• You cannot permit a trust to be created for the pursuit of abstract purposes
  
  • Unless you can show that the purpose is charitable or that it falls within an exception, it will fail because of the beneficiary principle and the concerns about the need for enforcement

Question 6

Re Endacott

Answer 6

• “No principle perhaps has greater sanction or authority behind it than 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”
• If there are no beneficiaries, there is no scope for the rule in Saunders v Vautier to come into play

Question 7

The rule in Saunders v Vautier

Answer 7

• This rule provides that a beneficiary of a full age (now 18) and capacity (sui iuris in Latin) may direct the trustee to wind up the trust and convey the property to them.
  
  • An abstract purpose cannot do this because it has no identity

Question 8

Objections to private purpose trusts

Answer 8

• Enforcement
• Practicality
• Intellectual incoherence
• Alienation (Tying up property)
• Certainty
• Capriciousness
• Out of Date

Question 9

Construction

Purpose or gift with motive

Answer 9

• We must start with the terms of the document in question of construction
• Even if it at first sight looks like a trust for a purpose, it might be an outright gift with a motive as to what is to be done with the property

Question 10

Re Osaba

Answer 10

• Settlor left all his property to his 2^nd wife provided she lived in Nigeria and continued to be known as Mrs Osoba. He left the rent of his properties on trust for the maintenance of his wife, the maintenance of his mother and his daughter’s education
• Look at whether the testator has left the money for the specific purpose and to be disposed of when the purpose has been achieved, or if it is a gift with a specific motive attached to it
  
  • If it is a gift, the recipient gets to keep the money when the purposes have been achieved

Question 11

Exceptions for private purpose trusts

Answer 11

• Trusts for charitable purposes are not void because they are for the benefit of society
• If it is not a charitable trust, the only way to save it is to fall within one of the historical exceptions that are tolerated as longstanding authority
• Does it fall squarely within an existing exception?
  
  • ​Tombs and memorials
  • Maintenance of specific animals
  • Indirect benefit
  • Saying masses
  • Fox hunting
  • Sports clubs

Question 12

Re Endacott exception

Answer 12

• We must be able to say with certainty that the disposition falls within an existing exception, unless the trust will fail [Re Endacott]

Question 13

Tombs and memorials

Answer 13

• The care and upkeep of family graves and monuments is charitable [Re Hooper]
  
  • This is limited to a period of 21 years
• “Some useful memorial to myself” is not specific enough [Re Endacott]

Question 14

Indirect benefit

Re Denley

Answer 14

• There was a trust which held land to be held on trust for it to be used as a sports ground
• The justification for ruling out the private purpose trust is the problem of enforcement; on these facts, the problem of enforcement can be solved, and thus the general rule can be set aside
• “Where, then, the trust, though expressed as a purpose, is directly or indirectly for the benefit of an individual or individuals, it seems to me that it is in general outside the mischief of the beneficiary principle”
  
  • Where you can identify the people, who would benefit indirectly from the carrying out of the purpose, they can come to the court and enforce the trust, even though they are not ‘beneficiaries’ of a trust (they are people who will benefit from the trust being carried out)
• To be read narrowly, applies only where the trust, through expressed as a purpose, is indirectly or directly for the purpose of individuals
  
  • Taking the problem of enforcement, and letting the people who would indirectly benefit from the

Question 15

Maintaining specified animals

Answer 15

• Pettinghall v Pettinghall: case concerning horses. An annuity of £50 was left in a will to maintain the testator’s favourite horse. This was held to be valid
  
  • Is valid provided they do not offend perpetuity
• Re Dean: trust for the maintenance for particular horses and dogs, an annuity of £750 a year for 50 years
• Specified animals

Question 16

Miscellaneous exceptions

Answer 16

• Re Thompson: all the parties were willing to carry out the purpose (a trust for the promotion of fox hunting). The court endorsed this trust
  
  • You cannot have a trust for illegal purposes, but in this case, hounds are not involved
• Bourne v Keane: the saying of masses in private is a recognised non-charitable purpose trust
  
  • The saying of masses in public would be charitable [Re Hetherington]
• Re St Andrew’s Cheam Lawn Tennis Club Trust: you cannot leave money for the perpetual advancement of a purpose; it is legally impossible
  
  • Amateur sports club may be charitable

Question 17

Unincorporated associations

Answer 17

• Where a group of people agree to hold property contractually, which may be applied in certain circumstances
• These do not have separate legal personality [Hanchett-Stamford v AG]
  
  • An incorporated association can have one – a group of people can hold property (pursuant to a contract) that might be used to achieve particular purposes, but this is not a trust
  • There cannot be only one member of an unincorporated association
• “An unincorporated association involves ‘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 organisation which has rules which identify in whom control of it and its funds rests and upon 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” [Conservative and Unionist Central Office v Burrell]
• A way of achieving purposes in a legal way

Question 18

Leahy v AG for South Wales

Answer 18

• Testator left land to be held on trust for the catholic church. A question of whether this could be a gift on trust for the individual members for each of the orders and organisations to apply to the purposes in question
• You cannot rewrite the terms of a trust
• Ask, what actually has been created
  
  • If it has been to an unincorporated association for the purposes to be carried out, it does not succeed as a trust

Question 19

Neville Estates v Madden

Answer 19

• It was held that it was possible to carry out a particular gift by construing it as a gift to members for the purposes of the association

Question 20

Re Recher’s Will Trust

Answer 20

• A gift in trust for an unincorporated association, a society which ceased to exist by the time the testator died. On the facts, it was held that it failed because the organisation no longer existed

Question 21

Re Lipinski’s Will Trust

Answer 21

• Gifts to an association “in memory of my late wife to be used solely in the work of constructing or improving the new buildings for the association”
• Oliver J: you must make a distinction between “the case where a purpose is prescribed which is clearly intended for the benefit of ascertained or ascertainable beneficiaries … and the case where no beneficiary at all is intended …or where the beneficiaries are unascertainable”
• On the facts, the relevant purpose was within the power of the association, and its members were the people intended to benefit

Question 22

Hanchett-Stamford v AG

Answer 22

• “The property of an unincorporated association is the property of its members, but that they are contractually precluded from severing their share except in accordance with the rules of the association; and that, on its dissolution, those who are members at the time are entitled to the assets free from any such contractual restrictions”
• As long as the association exists, its funds are held by the members for its purposes

Question 23

Perpetuity

Answer 23

• If you have a trust for beneficiaries or a class of people, you are limited by their lifetime

Question 24

Common law rule of perpetuity

Answer 24

• At common law, a trust will be void if it is at all possible for a person to acquire a vested interest outside the ‘perpetuity period’
  
  • Perpetuity period – a life in being +21 years, unless some other period is specified
• We are worried about trusts being used to tie up property indefinitely
• “So long as the law permits” [Re Hooper] – this language is fine, because without specifying law you are tying it to what common law or the statute permits
  
  • This is sticking to the rules
• This is why charitable trusts are important because they can last forever
  
  • If a trust looks like it is perpetual, it will fail unless it can be shown that it is a charitable trust
• Somebody must be entitled within a lifetime +21 years

Question 25

Perpetuities and Accumulations Act 2009 s5

Answer 25

Perpetuity period

1. The perpetuity period is 125 years (and no other period)
2. Subsection (1) applies whether or not the instrument referred to in section 1(2) to (6) specifies a perpetuity period; and a specification of a perpetuity period in that instrument is ineffective

Question 26

The rule against inalienability

Answer 26

• When it comes to private purpose trusts, the common law continues to apply
  
  • The rule of duration, with respect to how long the trust can last for
• s18 Perpetuities and Accumulations Act 2009 – “this act does not affect the rule of law which limits the duration of non-charitable purpose trusts”
  
  • They are still limited to the common law rule
• Because private purpose trusts could in principle last forever, their duration is limited to the common law rule