Purpose & Charity Trusts

Question 1

What is a purpose trust?

Answer 1

Where a settlor may want to set up a trust to further a particular cause or objective.

Question 2

Why, in general, does English law not allow for purpose trusts?

Answer 2

Trusts must have beneficiaries, and hence is not possible to create purpose trusts.

Question 3

What is the beneficiary principle?

Answer 3

Lord Evershed MR in Re Endacott (1960): ‘a trust by English law…must have ascertained or ascertainable beneficiaries.’

Question 4

What does Re Douglas (1887) tell us?

Answer 4

The beneficiary principles applies only to purpose trusts and exceptions are made to powers of trusts.

Question 5

What did Morice v Bishop of Durham (1804) say?

Answer 5

‘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].

Question 6

What is the justification for the beneficiary principle?

Answer 6

(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.

Question 7

What is an argument as to why we should not allow settlor’s to enforce trusts?

Answer 7

Analogous to gifts: once you’ve given away a gift you have no right of control.

Question 8

Should we allow settlor-appointed independent enforcers to oversee trust property?

Answer 8

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.

Question 9

What happens if the Courts find that the trust is unenforceable?

Answer 9

The beneficial interest in the property reverts back to the settlor.

Question 10

What do defendants of the beneficiary principle argue?

Answer 10

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.

Question 11

What happened in Re Shaw (1957)?

Answer 11

Shaw’s attempt to leave funds on trust to investigate the possibility of introducing a new 40-letter alphabet was found to be void.

Question 12

What is a ‘persons’ trust?

Answer 12

A straightforward trust with beneficiaries.

Question 13

Are Saunders right and purpose trusts compatible?

Answer 13

No, they have no Saunders right.

Question 14

What happened on Re Bowes (1896)?

Answer 14

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.

Question 15

What happened in Re Andrew’s Trust (1905)?

Answer 15

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.

Question 16

What are three specific exceptions of trusts having to fall under the beneficiary principle?

Answer 16

(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.

Question 17

What did Re Denley’s Trust Deed (1969) tell us?

Answer 17

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).

Question 18

How have courts tried to step back from Denley?

Answer 18

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.

Question 19

What is the definition of an ‘unincorporated association?’

Answer 19

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.’

Question 20

How does Webb and Akkouh otherwise describe unincorporated associations?

Answer 20

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.

Question 21

How do unincorporated associations and purposes trusts fit in together?

Answer 21

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.

Question 22

Is an unincorporated association a legal entity?

Answer 22

No. Property held ‘by’ the group must strictly be vested in one or more of its members.

Question 23

What is one way to view how unincorporated associations hold property? Problems?

Answer 23

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.

Question 24

What was shown in Neville Estates Ltd v Madden (1962)?

Answer 24

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.

Question 25

What did Leahy v AG for New South Wales (1959) tell us about making gifts to unincorporated associations?

Answer 25

The donor could transfer the property beneficially to the current members of the association. But this would suggest that you leave members free to deal with property as they see fit, and does not provide for shifting membership.

Question 26

What did Re Recher’s Will Trust (1972) tell us about making gifts to unincorporated associations?

Answer 26

The donor transfers the property to the members beneficially, but the property is received by the members as group property, meaning that its application falls to be governed by the contract between the members setting out how the property can be used.

Problem: suggests outright transfer to treasurer, but usually those who receive property outright can use it however they like.

Question 27

What is another problem involving unincorporated associations?

Answer 27

Problems arise where the property is not transferred beneficially, such as when I qualify my gift to a particular purpose or object in how I wish the money to be spent by the group (because my intention is not that the members take the property beneficially) - but this would fail unless it comes under one of the exceptions to the beneficiary principle.

Question 28

How do the courts try to get around the problem of qualified gifts to unincorporated associations?

Answer 28

Oliver J in Re Lipinksi’s Will Trusts (1976): trusts of this nature will not fail if we can find a way of disregarding the donor’s reference that the property should be used for a particular purpose, and instead view it as being an unqualified beneficial transfer to the group.

The donor’s intention in identifying a particular purpose for which the property is applied is to benefit the members of the association.

But it would then fail if the donor’s intention wasn’t to confer any particular benefit on anyone or a collection of people who cannot be ascertained.

Question 29

What happens when an unincorporated association winds up?

Answer 29

In Re West Sussex Constabulary’s Widows, Children and Benevolent (1930) Fund Trusts (1971): had to be determined what happened to the money after winding up.

Goff J regarded that most of the money was deemed ownerless and hence reverted back to the Crown as bona vacantia. But those who left money as donations or legacies could be regarded as intending the money to be retained by the donees only so long as the fund was operational, so anything left over would be returned by way of a resulting trust.

Question 30

What is contract holding theory?

Answer 30

The members of the group hold all the relevant property beneficially, but that a contract exists between the members which restricts them in their use of that property, requiring that they use it only for the group’s purposes.

Question 31

What are the basic requirements for a valid charitable trust?

Answer 31

(1) the purpose(s) of which the trust property is to be held and applied must be (exclusively) charitable;
(2) the trust must benefit (some section of) the public.

Question 32

Can charitable trusts exist in perpetuity?

Answer 32

Yes. Additionally, the impossibility of achieving the intended charitable purpose does not automatically lead to the failure of the trust.

Question 33

What assorted collection of purposes are brought under four headings?

Answer 33

Following Lord Macnaghten’s speech in Commissioners for Special Purposes of the Income Tax v Pemsel (1891): (1) the relief of poverty; (2) the advancement of education; (3) the advancement of religion; (4) other purposes beneficial to the community, not falling under any of the preceding heads. Now refer to Charities Act 2011.

Question 34

What is the relevance of the Charities Act 2011?

Answer 34

Section 2(1) provides that a charitable purpose is one which: 1. falls within one of the 13 purposes set out in section 3(1) of the Act; and 2. is for the public benefit.

Question 35

What case identified two senses of public benefit?

Answer 35

The Independent Schools Council v The Charity Commission for England and Wales (2011) identified two distinct senses of public benefit: (1) ‘must be such as to be a benefit to the community’; (2) ‘those who may benefit from the carrying out of the purpose must be sufficiently numerous…’

So (1) that it is beneficial; (2) that this benefit accrues to the public. This does not require everyone.

Question 36

What happened in Re Astor’s Settlement Trusts (1952)?

Answer 36

Trust was established for various purposes, including for the maintenance of good relations between nations. The trust was found void for non-charitable purposes and there was no one to enforce the trust.

Question 37

Who can enforce a Charitable trust?

Answer 37

The Attorney General.