W2 - Purpose Trusts

Question 1

Definition of Beneficiary Principle

Answer 1

You need identifiable human beneficiaries who can enforce the trust (Morice v Bishop of Durham).

Therefore, purpose trusts will be void and unenforceable if there is a lack of ascertainable beneficiaries.

Question 2

Trusts of ‘imperfect obligation’

Answer 2

1) Care or maintenance of animals (Re Dean)

2) Care or maintenance of graves/monuments (Re Hooper)

Question 3

Re Denley Trusts - Facts

Answer 3

Land was conveyed to trustees for 21 years after death of X.

The land was to be ‘maintained and used as and for the purpose of recreation or sports ground primarily for the benefit of the employees of the company’.

Question 4

Re Denley Trusts - Reasoning

Answer 4

The trust was valid because the trust is directly for the benefit of individuals (‘employees’ = ascertainable).

Also confirms that a trust is valid provided that the capital will vest in ascertainable beneficiaries within the perpetuity period.

Question 5

Re Denley Trusts - Saunders v Vautier

Answer 5

Theoretically, if all of the individuals were sui juris, they could collectively bring the trust to an end and thereby defeat the testator’s intention.

Question 6

“The Charitable Exception”

Answer 6

Charitable trusts will not violate the beneficiary principle because they are enforced by the Crown (exercised by the Attorney-General).

Question 7

Three criteria needed for the Charitable Exception

Answer 7

1) It must have a charitable purpose
2) It must have sufficient public benefit
3) It must be exclusively charitable.

Question 8

(1) It must have charitable purpose(s)

Answer 8

s2(1) Charities Act - A charitable purpose is a purpose which falls within s3(1) Charities Act 2011.

s3(1) Charities Act - contains a huge list of purposes.

Question 9

(2) It must have sufficient public benefit

Answer 9

1) The benefit aspect

2) The public aspect

Question 10

The benefit aspect (sufficient public benefit)

Answer 10

The purpose(s) must be beneficial and any detriment/harm must not outweigh the benefit.

s4(2) CA 2011 - There is no presumption of benefit, it must be proved where it is not obvious as the Charity Commission will require evidence.

Question 11

The public aspect (sufficient public benefit)

Answer 11

Purpose(s) must benefit the public in general or a sufficient section of the public and must not give rise to more than incidental personal benefit.

(a) If restricted to a section of the public, it must be legitimate, proportionate, rational and justifiable given the nature of the organisation’s aims.
(b) The benefit must not be restricted to those who have a personal nexus.

Question 12

IRC v Baddeley

Answer 12

A benefit aimed towards a class within a class was not a sufficient section of the public to satisfy the public benefit aspect.

A trust for the promotion of religious, social and physical training of residents of West Ham who were/were likely to become Methodists was held not charitable.

Question 13

Re Scarisbrick

Answer 13

Trusts of relief of poverty (eg settlor’s poor relatives) are charitable even if the benefit is limited to a small class of objects as it is altruistic in character, inferring the public benefit element.

Note: Trust to relieve poverty among named individuals is not charitable

Question 14

Oppenheim v Tobacco Securities

Answer 14

An employment contract is a personal nexus.

Question 15

Re Compton

Answer 15

A relationship with the settlor is a personal nexus.

Question 16

HM Attorney-General v Charity Commission

Answer 16

Trusts to relieve poverty do not apply to the personal nexus test

Question 17

Trusts for the advancement of religion

Answer 17

Does not apply to the personal nexus test.

Question 18

Independent Schools Council v Charity Commission

Answer 18

Schools whose sole object was the education of children whose families could afford to pay the fees would not be charitable.

Unless the school makes more than a de minimis provision for the less well-off, ie focusing on direct benefits which include scholarships/bursaries, sharing of teachers/facilities, etc.

Question 19

(3) It must be exclusively charitable

Answer 19

s1 CA 2011

General rule: A political purpose is NOT charitable

Question 20

(Amnesty Case)

Answer 20

Amnesty could not get charitable status because it served a political purpose.

Question 21

McGovern (Amnesty Case)

Answer 21

If the non-charitable purpose is merely incidental to the central charitable purpose of the trust, then this would be acceptable.

Question 22

Definition of Non-Charitable Unincorporated Association

Answer 22

A group bound together for a common purpose that is not a business purpose (Burrell).

Question 23

Principle of Non-Charitable Unincorporated Association

Answer 23

Unincorporated associations are not legal persons capable of holding property so they have no identifiable human beneficiaries who can enforce the trust.

Question 24

How do you give effect to a non-charitable unincorporated association?

Answer 24

There are two possible routes to give effect to the disposition by registering the property in the name of trustees, on bare trust for its members.

(1) Re Recher route - Treat it as an outright gift
(2) Re Lipinski route - Treat it as a trust for purpose

Question 25

Non-Charitable Unincorporated Association - Re Recher Route

Answer 25

Treat it as an outright gift.

It can be effected as an accretion to the association’s funds, to be dealt with according to the rules of the association.

Question 26

Re Grant

Answer 26

(Re Recher route)

If such the if the club’s rules of constitution prevent members from dissolving the association and divine the funds/spending it all at once, the gift will be void - assets must be freely available so that the rule against perpetuities is satisfies.

Question 27

Non-Charitable Unincorporated Association - Re Lipinski

Answer 27

Treat it as a trust for purpose. Only applies when the gift is for a purpose.

Two ways in approaching this:

1) Re Recher
2) Re Denley

Question 28

Re Recher route (Re Lipinski)

Answer 28

Treat it as an outright gift.

Certainty of object = club members
Beneficiary principle = members can enforce
Rule against perpetuity = members can dissolve club at any time and assets will be divided at that date (Re Grant)

The purpose given by the donor will be treated as a ‘motive’; members can do whatever they want with the money.

Question 29

Re Denley route (Re Lipinski)

Answer 29

Treat it as a non-charitable purpose gift.

Certainty of object = club members
Beneficiary principle = members can enforce
Rule against perpetuity = Capital can be applied all at once

The purpose given by the donor is ignored and is treated as a non-binding motive for making the gift.