Purpose & Charity Trusts Flashcards
What is a purpose trust?
Where a settlor may want to set up a trust to further a particular cause or objective.
Why, in general, does English law not allow for purpose trusts?
Trusts must have beneficiaries, and hence is not possible to create purpose trusts.
What is the beneficiary principle?
Lord Evershed MR in Re Endacott (1960): ‘a trust by English law…must have ascertained or ascertainable beneficiaries.’
What does Re Douglas (1887) tell us?
The beneficiary principles applies only to purpose trusts and exceptions are made to powers of trusts.
What did Morice v Bishop of Durham (1804) say?
‘Every other trust [except charitable ones] must have a definite object. There must be somebody, in whose favour the Court can decree performance.’ [The beneficiary principle].
What is the justification for the beneficiary principle?
(1) A trust which cannot be enforced must fail; and (2) only beneficiaries can enforce trusts. They have the incentive to make sure the trustees are doing their job properly.
What is an argument as to why we should not allow settlor’s to enforce trusts?
Analogous to gifts: once you’ve given away a gift you have no right of control.
Should we allow settlor-appointed independent enforcers to oversee trust property?
They can supervise the job of a trustee, but is there an incentive for them to do the job well? Hence, what’s worse, they may collude with the trustee.
What happens if the Courts find that the trust is unenforceable?
The beneficial interest in the property reverts back to the settlor.
What do defendants of the beneficiary principle argue?
That a trust needs someone with a right to its performance, someone to whose benefit the trustee’s duties are directed.
But this is arguably contrary to the evidence of charitable trusts, and the fact that there are plenty of resources in the world which are owned by nobody.
What happened in Re Shaw (1957)?
Shaw’s attempt to leave funds on trust to investigate the possibility of introducing a new 40-letter alphabet was found to be void.
What is a ‘persons’ trust?
A straightforward trust with beneficiaries.
Are Saunders right and purpose trusts compatible?
No, they have no Saunders right.
What happened on Re Bowes (1896)?
Strained effort to avoid a purpose trust, regardless of whether settlor’s intention is defeat. This case involved £5,000 for planting trees, and this was found to be for the owners of the estate, despite clear expression of settlor. See the purpose trust as a trust for individuals. Seen as just a suggestion.
What happened in Re Andrew’s Trust (1905)?
Money provided ‘solely’ for deceased clergyman’s children. What happened to the money left over after this had been paid for?
[Unsure what actually happened], but one option could be to follow Re Sandeson’s Trust (1857): trust was going towards ‘the maintenance, attendance and comfort’ of his brother. It was held that enough money would be given for the purpose, with the rest resulting back to the estate. Hence, the purpose identified the subject matter.
What are three specific exceptions of trusts having to fall under the beneficiary principle?
(1) Trusts to look after and provide for specific animals: Re Dean (1889) - trust for the maintenance of the testator’s horses and hounds and upkeep of stables and kennels.
(2) Trusts for the construction and/or maintenance of graves and funeral monuments. (Re Hooper (1932)).
(3) Trusts for the saying of private masses (Bourne v Keane (1919))
These are not to be extended: Re Endacott (1960) refused to extend exception (2) to create a trust to erect a memorial to himself.
‘Enforced’ by those who would take the trust property in the event of the trust failing or not exhausting the fund. Little guarantee trustee will do this however.
What did Re Denley’s Trust Deed (1969) tell us?
The purpose trust will be upheld provided there is an ascertained or ascertainable class of people who would benefit, directly or indirectly, from the property being applied for the stipulated purpose, provided the benefit to such people was not too indirect or intangible, and possible to ascertain the people who benefited. We could thus give effect to the trust without treating it as a persons trust.
This would suggest the majority of non-charitable purpose trusts would be valid vs. idea that the class of people would not be regarded as beneficiaries (so don’t have Saunders right).
How have courts tried to step back from Denley?
Tendency to deny its significance: Re Grant’s Will Trusts (1980): Denley was a discretionary trust for individuals, which denies the case’s significance with regard to purpose trusts.
But bear in mind distinction between distinction as to who receives benefit, and how they are entitled to enjoy property.
What is the definition of an ‘unincorporated association?’
Conservative & Unionist Central Office v Burrell (1982): ‘two or more persons bound together for one or more common purposes, not being business purposes…each having 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.’
How does Webb and Akkouh otherwise describe unincorporated associations?
Rules which determine how unincorporated associations acquire and hold property should apply whenever two or more people join together and pool property for a certain common purpose.
How do unincorporated associations and purposes trusts fit in together?
1) Members of those groups generally understand they are not free to treat the group property as if it were their own.
2) When you transfer property to the group, you expect it to be used for the purposes of that club.
But this would all seem to breach the beneficiary principle.
Is an unincorporated association a legal entity?
No. Property held ‘by’ the group must strictly be vested in one or more of its members.
What is one way to view how unincorporated associations hold property? Problems?
Property is vested in law in one or more of the members, usually the treasurer. So the property is held on trust and beneficially owned by the members as a whole. Members rights to deal with the property subject to their own contract with the club.
Comes into conflict with idea of shifting membership. Members will often come and go without formal steps for the effective transfer of proprietary interests.
What was shown in Neville Estates Ltd v Madden (1962)?
Orthodox analysis that unincorporated associations hold property: their assets are beneficially owned by the members under a trust of which the association treasurer is trustee, with a contract between all the members governing the application of property - stopping members from walking off with their proportionate share.
