Trusts: Charitable and non charitable purpose trusts

Question 1

Generally, are purpose trusts valid and why/not?

Answer 1

Generally purpose trusts are void because:
-they offfend the beneficiary principle
-lack of certainty
-offend rule against perpetuities
-capriciousness (no useful purpose)

Question 2

What are 3 types of purpose trust that will be valid?

Answer 2

1. charitable purpose trusts
2. Quistclose trusts
3. Non charitable purpose trusts (trusts of imperfect obligation and Re Denley trusts)

Question 3

3 requirements for a purpose trust to be charitable under s3(1) charities act

Answer 3

1. charitable purpsoe (s3(1))
2. exclusively charitable (s1)
3. public benefit (s4(3)

Question 4

s3(1) charities act names…?

Answer 4

13 heads of charitable purpose

Question 5

Heads of charitable purpose under s3(1) charities act 2011

Answer 5

1. prevention or relief of poverty
   2 The advancement of education
   3 Advancement of religion
   4 Advancement of health or the saving of lives
   Advancement of citizenship or community development
   Advancement of the arts, culture, heritage or science
   advancement of amateur sport
   Advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
   Advancement of environmental protection/improvement
   Relief of those in need by reason of youth, age, ill- health, disability, financial hardship or other disadvantage
   Advancement of animal welfare
   Promotion of the efficiency of the armed forces of the Crown, or of the efficiency of the police, fire and rescue services or ambulance services
   any other [charitable] purposes.

Question 6

Elements of ‘Exclusively charitable’

Answer 6

1. NO Political purpose
2. Profits must be ploughed back into charity (can pay salaries ect NOT commercial venture)

Question 7

What political purpose do/dont make a trust exclusively charitable?

Answer 7

NO:
Supporting a political party
Campaigning for a change in law/change in gov policy decisions

YES:
engage in political activities that are incidental to/means of achieving main charitable purpose as long as not main means of achieving purpose

Question 8

What are the 2 aspects of public benefit (as one of the 3 conditions for a trust to be charitable)

Answer 8

1. Benefit aspect (benefit must outweigh harm)
2. Public aspect (must benefit sufficient section of public)

Question 9

For what trusts will the public benefit test be satisfied so long as the purpose will accrue to a class of individuals

Answer 9

trust to prevent poverty

Question 10

Sufficient public benefit: What is the Class within a class test?

Answer 10

the class off ppl who can benefit from a charitable purpose can be limited so long as limits are legitimate, proportionate, rational or justifiable given the nature of the charitable trust (ie. Geographical restrictions

Question 11

Rules relating to personal nexus for the public aspect of public benefit aspect of charitable purpose trusts?

Answer 11

Must not be restricted to personal nexus.
1-numbers must not be numerically negligible
2-must not rely on personal connection like employment
UNLESS the charity is to relieve poverty.

Question 12

If a charitable trust charges fees, can it still be charitable under the public aspect?

Answer 12

yes BUT cant jeopardise their ability to meet the public benefit by excluding those who cant pay, but may be other ways to benefit less wealthy.

Question 13

What are the 2 types of non charitable purpose trusts

Answer 13

1. Trusts of imperfect obligation
2. Re Denley Trusts: Purposes which benefit an identifiable group of people

Question 14

What are trusts of imperfect obligation?

Answer 14

Where theres no one to enforce the trust but are the ONLY ‘concessions to human weakness’
Valid if end within 21y

Question 15

Examples of the 2 recognised trusts of imperfect obligation

Answer 15

1. trusts for the care or maintenance of specific animals
2. trusts for the maintenance of graves and funeral monuments

Question 16

What is a re: Denley trust?

Answer 16

Purposes which benefit an identifiable group of people

Question 17

Requirements for re denley trust to be valid?

Answer 17

a. Purpose of trust must be sufficiently clear and give rise to a sufficiently tangible benefit
b. People who stand to benefit must be ascertainable (thought have to satisfy any given postulant test)
c. Trust must offend rule against inalienability of capital

Question 18

How can purpose trusts satisfy the rule against perpetuities?

Answer 18

Must either:
a. Be limited in duration to 21y
b. OR allow trustees to spend all the trust capital on the purpose and thereby end the trust at any time

Question 19

What is a Quistclose trust used for ?

Answer 19

Created new circumstances where trust could be used to safeguard against corporate insolvency.

Question 20

What happened in Barclays Bank v Quistclose Investments Ltd 1970?

Answer 20

-F: Q lent over 200k to Rolls Razor ltd on condition they’d use the money to pay dividends to shareholders.
-Q couldn’t take security when loan was made
Before dividends paid, RR went into liquidation and loan remained in Barclays acc who argued the money formed part of RRs assets available to pay the unsecured creditors.
-Normally, ownership passes form lender to borrower but Q claimed money was on trust to pay dividends but if that couldn’t be carried out, it was held on trust for Q.
-HoL: 2 tier trust created. Settlor Q, trustee RR. RR held loan money for dividends and if failed, there was secondary trust to return money to settlor/lender Q.