Unit 3 Flashcards
the rule against inalienability of capital
A non-charitable trust is void unless from the outset it is certain that the rule in Saunders v Vautier must be capable of being applied to it by the end of the perpetuity period.
The perpetuity period
The perpetuity period is the maximum length of time a trust can last before it must vest in beneficiaries or come to an end.
section 5(2), Perpetuities and Accumulations Act (PAA) 2009
The period was extended to no more than 125 years, even if the trust document specifies a different period. This change allows trusts to last for up to 125 years, regardless of the trust’s terms.
PAA 2009, s.18
the common law perpetuity rule still applies for non-charitable purpose trusts (NCPTs), limiting them to a life in being plus 21 years, ensuring that the trust is not indefinite.
Trusts of Imperfect Obligation
These are exceptional trusts where the trustee has the discretion to carry out the trust’s purpose but is not legally required to do so. They are sometimes recognised in cases where the purpose is sentimental or difficult to justify, and the trustee is allowed, but not obligated, to perform the trust.
Virgo on the Beneficiary Principle
If the purpose is clear and trustees are willing to carry it out, enforceability should not be an issue. Virgo argues that the strictness of the BP lacks a clear rationale.
Matthews (P. Matthews, ‘Trends in Contemporary Trust Law’)
The “enforcer” principle allows trust enforcement by a third party, separating it from equitable title.
Criticism: While it broadens the scope of trusts, it weakens the certainty required for trust creation.
Pawlowski & Summers, ‘Private Purpose Trusts – A Reform Proposal’
There is no clear policy reason why non-charitable purpose trusts (NCPTs) shouldn’t be recognised under English law.
They suggest that new legislation could validate NCPTs, making them enforceable and legitimate.
Hayton (D. Hayton, ‘Developing the Obligation Characteristic of the Trust’)
English trust law should allow more flexibility by appointing enforcers for non-charitable purpose trusts (NCPTs) to ensure the settlor’s purposes are fulfilled.
Morice v Bishop of Durham (1805)
The court established the beneficiary principle, ruling that non-charitable trusts must have identifiable beneficiaries.
A trust for “objects of benevolence and liberality” was deemed void due to uncertainty. The court stressed that trustees must be accountable to definite beneficiaries.
Re Wood [1949]
A trust must have a cestui que trust (beneficiary).
Bowman v Secular Society [1917]
A trust must benefit individuals or be charitable in the legal sense.
Re Denley’s [1969]
A trust must benefit persons (or a corporation), not just a purpose or object, unless charitable. Only charitable trusts can be enforced by the Attorney-General.
Re Astor’s Settlement Trusts [1952]
The trust deed established non-charitable purposes like maintaining good relations between nations and protecting newspapers but had no human beneficiaries.
Roxburgh J ruled the trusts invalid on two grounds:
1. No Beneficiary: A trustee must have an enforceable obligation to a person, but here, no one could enforce the trust, making it unenforceable.
- Uncertainty: The purposes were too vague and lacked clear, definite concepts, similar to the invalid trust in Morice v Bishop of Durham.
Roxburgh J concluded that equity does not recognise trusts that cannot be enforced or controlled.
Re St Andrew’s Lawn Tennis Club [2012]
A 1938 trust deed allowed land to be used for tennis by people associated with a local church.
The Charity Commission advised the trust was non-charitable under new legislation. Arnold J ruled the trust invalid as it was a perpetual non-charitable purpose trust, violating the rule against inalienability.
The trust failed because it tied up property indefinitely without a clear beneficiary or legitimate charitable purpose.
Re Thompson [1906]
The perpetuity period limits how long a trust can last before it must vest in beneficiaries or end.
At common law, the period is “a life in being” (a living person or persons) plus 21 years.
Brown v Burdett (1882)
a trust to block the windows and doors of a house for 20 years was deemed capricious and invalid.
M’Caig v University of Glasgow (1907)
a trust to erect monuments to a wealthy banker was held to serve no practical purpose and was also invalid.
Re Shaw’s Will Trusts [1957]
George Bernard Shaw’s residuary estate was left to create a 40-letter alphabet. The court ruled that it was not a charitable purpose trust and declared it void as a non-charitable purpose trust (NCPT). The trust was also arguably capricious due to its impractical nature.
Pettingall v Pettingall [1842] 11 LJ Ch 176
The testator left £50 per year for the upkeep of his horse. The court upheld this as a valid trust of imperfect obligation (TIO).
The legatee was required to comply, and failure could be enforced. This case established the “Pettingall Order”, allowing TIOs for specific purposes like animal care.
Re Dean (1889)
The testator left £750 annually for the maintenance of his horses and hounds for up to 50 years.
the court upheld a non-charitable purpose trust for the maintenance of specific animals for a period exceeding 21 years, taking a common-sense approach regarding the animal’s lifespan.
* Application:
The trust to maintain Shadowfax could be upheld under Re Dean, assuming the horse’s lifespan would not exceed 21 years.
Re Hooper [1932] (Parker v Ward)
The testator left £1000 for the upkeep of graves and monuments. The court ruled the trust valid for 21 years after death, in line with Pirbright v Salwey.
Maugham J confirmed the trust complied with the perpetuity rule, as it would end within 21 years. Unspent funds would revert to the residuary estate after that period.
Bourne v Keane [1919]
The testator left money for masses to be said for the dead. The court ruled such bequests were valid under English law, despite previous views that they were “superstitious uses”.
The court affirmed that masses for the dead serve a religious purpose and are legally supported, overruling earlier decisions that deemed them invalid.
Re Hetherington [1890]
The court distinguished public masses from private masses.
Public masses were ruled valid charitable trusts as they serve a broader religious purpose, benefiting the public. In contrast, private masses were viewed as personal bequests and potentially superstitious, though upheld in Bourne v Keane. The key distinction is that public masses benefit the community.
Re Khoo Cheng Teow [1932]
The court upheld a gift for religious ceremonies (Sin Chew) to perpetuate the testator’s memory within a specified perpetuity period.
This ruling extended Bourne v Keane by allowing trusts for non-Christian ceremonies, confirming that religious trusts are valid across different faiths
Re Thompson [1934]
A legacy was left for promoting fox-hunting, to be used at the discretion of GW Lloyd. The court upheld it as a valid trust, recognising it as an exception to the beneficiary principle, allowing a purpose trust without identifiable beneficiaries.
Re Endacott [1960]
The testator left his residuary estate to the North Tawton Parish Council to provide a memorial to himself. The court ruled the bequest void as a non-charitable purpose trust.
* Lord Evershed MR: The bequest imposed an obligation rather than a gift and could not be confined to charitable purposes.
* Harman LJ: Rejected non-charitable purpose trusts as anomalies and argued the beneficiary principle should remain strictly applied.
He used the phrase “Homer has nodded”, suggesting that past exceptions to the beneficiary principle were mistakes and should not be expanded.
Leahy v A-G for New South Wales [1959]
The testator left his property in trust for an order of nuns, raising the issue of whether the gift was for individual nuns or an abstract purpose.
Viscount Simmonds ruled the trust invalid, stating it was for an abstract purpose rather than identifiable individuals. He found the gift was intended as an endowment for the order, which would fail if the order was non-charitable.
Principle: A gift or trust must benefit identifiable persons, unless it qualifies as charitable.
Re Denley [1969]
Charles Denley created a trust for land to be used as a recreation ground for company employees. The court ruled the trust valid as it directly benefited identifiable individuals (employees), making it outside the beneficiary principle.
Goff J stated that employees had the right to enforce the trust, and the provision for “other persons” was a power, not a trust. He suggested that modern courts might view it as a charitable trust due to its public benefit.
Principle: A trust is valid if it directly benefits identifiable individuals, giving them locus standi to enforce it.
Re Bowes [1896]
John Bowes left £5000 to plant trees on his Wemmergill estate. The issue was whether the gift was for the estate’s owners or simply to beautify the land.
North J ruled that the bequest was for the benefit of the estate’s owners, as planting trees benefited those in possession at the time. The court held that it was a valid trust, requiring the money to be used for that purpose, not merely a discretionary power.
Principle: A bequest with a purpose can be interpreted as a trust for the beneficiaries’ benefit, not just a land improvement.
Re Andrew’s [1905]
A fund raised for the education of the late Bishop’s children was held to be a gift, with the children entitled to equal shares.
Kekewich J ruled it was not a resulting trust, distinguishing it from Re Abbott Fund, as the fund was intended to benefit all the children equally for their education.
Re Osoba [1979]
The testator left property rents for the maintenance of his wife, daughter, and mother, but they all predeceased him.
The court held this was not a purpose trust but a gift with moral motivation. Upon the mother’s death, the daughter became absolutely entitled to the fund.
Conservative and Unionist Central Office v Burrell [1982]
An unincorporated association is a group of people with a common non-business purpose, bound by mutual duties and obligations.
Lawton LJ defined it as having rules for funds and membership, with members free to join or leave, and the bond between members is contractual.
Neville Estates v Madden [1962]
Justice Cross outlined three ways a gift to an unincorporated association (UA) can be made:
1. Gift to current members as joint tenants – Excludes future members.
2. Trust for present and future members – Fails due to perpetuity rules.
3. Contract holding theory – Gift held according to the association’s rules.
Leahy v A-G for NSW
a property bequest held on trust for an unincorporated association (UA), specifically an order of nuns. The trust was deemed void because it was for the abstract purpose of the association, not for identifiable beneficiaries.
Re Denley
allows trusts that benefit individuals indirectly (such as through purposes serving identifiable groups) to be valid, even if the beneficiaries are not directly named.
Re Grant
questioned Re Denley’s application to certain types of trusts, especially non-discretionary ones.
Re Lipinski
reaffirmed Re Denley, demonstrating that trusts benefiting individuals, even indirectly, can be valid, particularly in unincorporated associations or where the purpose aligns with benefiting a specific group
Neville Estates v Madden [1962]
A gift to a UA can be treated as a gift to current members as joint tenants, not for the association’s purposes.
The property can be an absolute gift or held on trust. Members can sever their share, and new members have no claim to the property.
Neville Estates Ltd v Madden [1961]
Cross J explained that a gift to a UA is treated as a gift subject to members’ contractual rights and obligations, not as joint tenants.
Members cannot sever their share, and shares accrue to remaining members when someone leaves or dies. This approach avoids perpetuity and uncertainty issues, unless the association’s rules prevent members from dividing the property freely.
A Trust for “Present and Future Members”
A trust for present and future members of a UA avoids benefiting only current members, but was traditionally void due to perpetuity rules.
Under the Perpetuities and Accumulations Act 2009, it can now last up to 125 years due to the “wait and see” rule. However, members can sever their interest, which may conflict with the transferor’s intention.
Hanchett-Stamford v Attorney General [2008]
Lewison J described the contract-holding theory as a modified joint tenancy model, where collective ownership is treated as a subspecies of joint tenancy, but with contractual restrictions governing the rights of members.
Re Recher [1970]
The testatrix left a gift to a society that had ceased to exist. Brightman J ruled the legacy was a gift to the members as an accretion to their funds, subject to their contractual rights, not a trust for the society’s purposes.
This applied the contract-holding theory (CHT), which allows gifts to members of unincorporated associations.
Re Lipinski [1976]
Harry Lipinski left his residuary estate to a non-charitable association for building new premises. The court upheld the gift as valid under the contract-holding theory (CHT).
Oliver J ruled that the gift was an accretion to the association’s funds, and members could enforce or terminate the trust for their own benefit. The purpose (building premises) was non-binding, as members were only bound by their contractual rights.
The case expanded Re Denley, confirming that purpose statements do not invalidate a gift to members.
Re Sanderson’s Trust
a trust was created to provide the maintenance and support of a beneficiary.
The surplus funds are considered an absolute gift to the beneficiary, and the specified purpose is merely the motive for the gift.
Re Horley Town FC [2006] (Hunt v McLaren)
The court applied the contract-holding theory (CHT) to an unincorporated association (UA) with different member classes.
Horley Town FC sold land it received in 1948, and the court held that the proceeds belonged to current full members (who could vote), not temporary or associate members.
The ruling followed Neville Estates and was consistent with Re Sick and Funeral Society of St John’s Sunday School [1973].
Re Bucks Widows’ Fund (No 2) [1979]
Walton J ruled that a person, such as the treasurer of an unincorporated association (UA), can be appointed to represent the members of the association in legal matters.
Re Grant [1980]
A residuary bequest was left to the Chertsey and Walton Constituency Labour Party (C.L.P.).
Vinelott J ruled the bequest invalid because the C.L.P. members could not alter their rules or control the property, as the National Executive Committee (NEC) had ultimate control.
The court held that a valid contract-holding gift requires the members to have control over the association’s constitution and funds.
Conservative & Unionist Central Office v Burrell [1982]
The court held that the Conservative Party was not an unincorporated association (UA) as its components were not contractually linked.
Brightman LJ ruled that the contract-holding theory (CHT) from Re Recher did not apply. Instead, a mandate or agency relationship was created, with the recipient using funds according to the contributor’s directions, not as a trust.
Re William Denby & Sons Ltd Sick and Benevolent Fund [1971]
The court outlined four ways an unincorporated association (UA) can be dissolved:
1. By the rules of the association when a prescribed event occurs (e.g., Printers and Transferrers [1899]).
2. By mutual agreement of all interested parties.
3. By court order under its inherent jurisdiction (e.g., Blake v Smither [1906]).
4. When the substratum (purpose) of the association no longer exists (e.g., Tierney v Tough [1914]).
Re GKN Bolts & Nuts Ltd Work and Social Club [1982]
The court dealt with the dissolution of a moribund UA after its activities ceased, and its sports ground was sold.
Sir Robert Megarry VC emphasized that courts can take a broad approach to UA dissolutions without requiring a detailed examination of the rules or resolutions, showing flexibility in handling such cases.
Re Printers and Transferrers Society [1899]
A trade union dissolved with £1000 unexpended funds, and its rules did not specify how to distribute them.
Bryne J applied a resulting trust, holding that the funds should be distributed proportionally to the members’ contributions. The case was distinguished from Cunnack v Edwards, where members had fully given up their rights to contributions, with no expectation of return or bona vacantia claim by the Attorney General.
Re Hobourn Aero Components Air Raid Distress Fund [1946]
A fund created from employee contributions to help air raid victims was not a charitable trust as the beneficiaries were a fluctuating group with a personal connection to the company.
The court ruled the surplus should be distributed to the contributors proportionally, excluding any benefits they had already received.
Cunnack v Edwards [1893]
A society raised funds for widows’ annuities, but by 1892, all members and widows had died, leaving a £1,250 surplus.
Chitty J initially applied a resulting trust for the contributors’ representatives, but Lord Halsbury ruled that all benefits were exhausted, leaving no residual interest. The surplus was treated as bona vacantia and reverted to the Crown.
Re West Sussex [1970]
The West Sussex Constabulary fund, raised for widows and dependants, had £35,000 remaining after the amalgamation of the force. Goff J ruled on the distribution:
* Contributions from members: Treated as bona vacantia. Members had received the expected benefits, so no further claim.
* Proceeds from entertainments/raffles: Treated as outright gifts, with no claim for return — went to the Crown.
* Donations/legacies: Resulting trust applied. Funds were returned to donors or their estates due to the failure of the intended purpose.
Re Bucks (No 2) [1979]
A society for Buckinghamshire Constabulary members was dissolved after amalgamation. Walton J ruled that the assets should be equally distributed among current members, based on contractual entitlement.
He distinguished the case from Re West Sussex, noting that members controlled the funds. He also criticised reliance on Cunnack v Edwards, calling it outdated.
Walton J stated that a society with only one member becomes moribund, and its assets become ownerless. The distribution followed the equity maxim: “equality is equity”.
Hanchett-Stamford v A-G [2008]
The Performing and Captive Animals Defence League dissolved after the claimant became its sole surviving member. She sought to transfer the assets to a charity.
Lewison J agreed with Walton J that members’ rights are contractual, not equitable, but found it problematic that a member’s beneficial interest could vanish upon another’s death.
Applying a human rights perspective, he ruled that seizing assets as bona vacantia would violate property rights under the European Convention on Human Rights.
