W2 - Purpose Trusts Flashcards
Definition of Beneficiary Principle
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.
Trusts of ‘imperfect obligation’
1) Care or maintenance of animals (Re Dean)
2) Care or maintenance of graves/monuments (Re Hooper)
Re Denley Trusts - Facts
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’.
Re Denley Trusts - Reasoning
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.
Re Denley Trusts - Saunders v Vautier
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.
“The Charitable Exception”
Charitable trusts will not violate the beneficiary principle because they are enforced by the Crown (exercised by the Attorney-General).
Three criteria needed for the Charitable Exception
1) It must have a charitable purpose
2) It must have sufficient public benefit
3) It must be exclusively charitable.
(1) It must have charitable purpose(s)
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.
(2) It must have sufficient public benefit
1) The benefit aspect
2) The public aspect
The benefit aspect (sufficient public benefit)
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.
The public aspect (sufficient public benefit)
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.
IRC v Baddeley
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.
Re Scarisbrick
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
Oppenheim v Tobacco Securities
An employment contract is a personal nexus.
Re Compton
A relationship with the settlor is a personal nexus.
HM Attorney-General v Charity Commission
Trusts to relieve poverty do not apply to the personal nexus test
Trusts for the advancement of religion
Does not apply to the personal nexus test.
Independent Schools Council v Charity Commission
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.
(3) It must be exclusively charitable
s1 CA 2011
General rule: A political purpose is NOT charitable
(Amnesty Case)
Amnesty could not get charitable status because it served a political purpose.
McGovern (Amnesty Case)
If the non-charitable purpose is merely incidental to the central charitable purpose of the trust, then this would be acceptable.
Definition of Non-Charitable Unincorporated Association
A group bound together for a common purpose that is not a business purpose (Burrell).
Principle of Non-Charitable Unincorporated Association
Unincorporated associations are not legal persons capable of holding property so they have no identifiable human beneficiaries who can enforce the trust.
How do you give effect to a non-charitable unincorporated association?
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
Non-Charitable Unincorporated Association - Re Recher Route
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.
Re Grant
(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.
Non-Charitable Unincorporated Association - Re Lipinski
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
Re Recher route (Re Lipinski)
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.
Re Denley route (Re Lipinski)
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.
