Trusts - Purpose Trusts (2) Flashcards
What are purpose trusts?
Purpose Trusts: A trust applied to achieve a purpose, rather than merely benefit an individual. They are generally void, subject to charitable trusts, imperfect obligation trusts, and Re Denley trusts.
How is a purpose trust validly declared?
Valid Declaration: Valid purpose trusts must still satisfy the rules of valid declaration, but in places these differ.
The Three Certainties
Three Certainties: Declaration must be certain in intention, subject matter and objects.
(1) Intention: It must be clear that the settlor intends to convey a trust.
(2) Subject Matter: The property held on trust must be clear.
(3) Objects: The ‘purpose’ of the trust must be clear.
Exception: Valid charitable trusts will be enforced regardless of how vague they are, i.e. ‘to local young people’ will be enforced and determined by the Charities Commission.
Re Denley: Benefiting parties must be identifiable by the ‘Given Postulant’ Test.
Beneficiary Principle
Beneficiary Principle: Purpose trusts do not generally exist for the direct benefit of individuals, which means there is no one to enforce the trust. This is why purpose trusts are generally void (Re Shaw).
Perpetuities
Perpetuities: The rule against perpetuities differs for valid purpose trusts.
(1) Charitable: There is no limit for charitable trusts.
(2) Non-Charitable: The trust must be exhaustible within 21 years, achieved in two ways.
Express: Trust limits itself to ‘as long as the law allows’.
Implied: Trust permits trustees to fully exhaust the funds within the timeframe, i.e. ‘use all the money on building a shed for my son’.
Formalities
Formalities: For purpose trusts over land, the ordinary written formalities exist.
What are charitable trusts?
Charitable Trusts: Charitable trusts are purpose trusts with: a) a charitable purpose; b) sufficient public benefit; and c) exclusive charitability (CA 2011).
Charitable Purpose
Charitable Purpose: A charitable purpose is any listed under s3 CA 2011. It includes:
(1) Poverty: Preventing or relief of poverty, including ensuring people do not ‘go without’ (Re Cohen).
(2) Religion: Advancing religion and beliefs, including lack of beliefs (Neville v Madden).
(3) Education: Advancing education, including research and museums, unless intended to ‘persuade’ (Re Shaw).
Public Benefit
Public Benefit: Charitable trusts must have sufficient public benefit.
(1) Benefit: The charity must be beneficial on balance, meaning outweighing any detriment (s4(2)).
(2) Public: The charity must benefit a sufficient section of the public, and give rise to no more than an incidental personal benefit to the settlor (s4(3)).
Personal Nexus: Charity cannot be restricted to those with a personal nexus to a named individual, such as family relations or employees of a common employer (Oppenheim v Tobacco).
Exception: Trusts to prevent poverty of one’s family generally is permitted (Dingle v Turner).
Restricted Access: Restrictions may be imposed if ‘proportionate, rational and justifiable’. ‘Old people in the local village’ is okay, ‘43 year olds who like football in the local pub’ is not.
Excluding the Poor: Trusts cannot exclude the poor by design, i.e. prohibiting a private school from offering public benefits (Independent Schools v Charity Commission).
Cloistered Religions: Trusts for cloistered/antisocial religious sects are prohibited (Gilmour v Coats).
Exclusive Charitability
Exclusive Charitability: The trust must be of ‘exclusive’ charitability, meaning the entire purpose is charitable (s1).
(1) Lobbying: Charitable trusts cannot support political parties or campaign to change the law (McGovern v AG).
(2) Profits: Charities that charge for services may do so, provided they do not exclude the poor and any profits are reinvested into the charitable purpose.
Private Schools: Private schools with charitable status are permitted, provided they give more than minimal assistance to the poor, such as bursaries or free summer schools.
(3) Mixed Aims: Trusts for ‘charitable and other purposes’ are not exclusively charitable.
What are trusts of imperfect obligation?
Trusts of Imperfect Obligation: Two types of purpose trust may be valid, albeit imperfectly (Re Astor).
(1) Maintenance of Animals: Trusts to care or provide for a pet (Re Dean).
(2) Maintenance of Graves: Trusts to maintain a grave or sepulchral monument (Re Hooper).
Enforceability
Enforceability: Trusts are legally valid, but trustees cannot be compelled to enforce them, making them imperfect. They must also comply with the rule against perpetuities.
What are re-denley trusts?
Re Denley Trusts: Purpose trusts for the benefit of a class of given postulants are valid (Re Denley’s Trust).
(1) Example: A trust to ‘maintain a sports field for my current employees for as long as the law allows’.
