WS 3 - The Beneficiary Principle and Rules Against Perpetuity Flashcards
Define “beneficiary principle”:
You need identifiable human beneficiaries who can enforce the trust (Morice v Bishop of Durham [1805])
In brief, what are the exceptions to the beneficiary principle?
1) Weird Exceptions (Re Astor, Re Dean, Re Hooper)
2) Re Denley Purpose Trusts
3) Charitable exception
Weird exceptions?
• Weird Exceptions (referred to in Re Astor: Trusts for improvement of good understanding between nations and independence of newspapers were void as offended beneficiary principle and uncertain) – TRUSTS OF IMPERFECT OBLIGATION
o Re Dean: care/maintenance of animals
o Re Hooper: care/maintenance of graves/monuments
• NB – nobody can compel the trustees in these cases to carry out the purpose. Dogs, cats and tombs are not legal persons who can go to court to enforce trusts.
Re Denley Purpose trusts?
• Re Denley [1968]: Purpose trusts (normally violate beneficiary principle) provided they have ascertainable beneficiaries, and are directly for the tangible benefit of individuals
o E.G. “I give $10k to be held on trust for education of my kids for 5 years.”
Facts of Re Denley?
o Facts: a plot of land transferred to trustees, to be held on trust to be maintained and used for the purpose of a sports and recreation ground for the benefit of employees of a particular company and for such other persons as the trustees might allow. Duration of the trust was limited to the perpetuity period
Charitable exception?
Association must have (s.2(5) previous case law used to interpret Act’s provisions):
i. A charitable purpose s.2(1) Charities Act 2011 provides that a charitable purpose is a purpose which falls within section 3(1)
ii. Sufficient public benefit (see s.4 Charities Act 2011):
iii. Exclusively charitable (McGovern v Attorney General (Amnesty case)) – a political purpose (e.g. abolition of torture) is NOT charitable, so Amnesty could not get charitable status)
a. EXCEPTION – if non-charitable purpose is merely incidental to the central charitable purpose of the trust, this is OK (McGovern)
What is s.4 Charities Act 2011 sufficient public benefit?
a. S.4(3) Charities Act 2011 states any reference to the public benefit is a reference to the public benefit as that term is understood for the purposes of the law relating to charities in England and Wales
b. Numbers can’t be negligible; can’t be a class within a class (although restriction according to charitable need is fine
c. Geographical restrictions are acceptable if they are related to the aims of charity. However, IRC v Baddeley [1955] – Trust for promotion of religious, social and physical training of residents of West Ham who were or were likely to become Methodists was not charitable.
d. People to benefit cannot be connected by a personal nexus e.g. employment contract (Oppenheim v Tobacco Securities Trust Co [1951]) or family (Re Compton [1945])
e. Independent Schools Council v Charity Commission for England and Wales [2011] – schools whose sole object was the education of children whose families could afford to pay the fees would not be charitable. A trust which excludes the poor from benefit cannot be a charity. In this context ‘poor’ did not mean destitute but included people from modest means.
What is a non-chartiable unincorporated association?
i. A group bound together for a common purpose,
ii. Not being a business purpose (Conservative and Unionist Central Office)
General principle on non-charitable unincorporated association?
General principle: “unincorporated associations have no legal personality and so cannot hold property in the name of the association” (Morice v Bishop of Durham) – have no identifiable human beneficiaries who can enforce the trust.
What are the two possible routes to give effect to the disposition to non-charitable unincorporated association? Register property in the name of trustees, on bare trust for members…
1) Treat as outright gift
2) Treat as a trust for purpose
Non-Charitable unincorporated trusts: Treat as outright gift…
Can be effected under Re Recher as a gift to the members, as an accretion to the association’s funds (to be dealt with according to the rules of the association)
EG “I give $10K to Finchley Cricket Club”
➢ Proviso: If such rules prevent members from dissolving the association and dividing the funds/spending it all at once, gift will be void (assets must be freely available).
Non-charitable unincorporated trust: Treat as a trust for purpose…
if a purpose is specified that benefits the members, consider whether, via Re Lipinski, the gift can be effected under Re Recher or Re Denley (however, the testator’s motive will not be binding).
EG “I give $10K to Finchley Cricket Club on trust to build a new pavilion”
Two rules against perpetuity for non-charitable purpose trusts?
non-charitable purpose trusts must either (1) allow the trustees to spend all the trust capital on the given purpose, hence ending the trust at any time; or, (2) be limited in duration to 21 years (Re Hooper)
Rule against remoteness of vesting?
a contingent interest may become a vested interest within 125 years for all trusts made after 6 April 2006 (under Perpetuities Act 2009)
Re Grant’s will [1979] - Facts
The testator wanted to give his estate to the Chertsey and Walton Constituency Labour Party (a non-charitable unincorporated association). His will duly contained a gift to the committee in charge of property for the benefit of the Chertsey and Walton Labour P. After the testator died, the court was asked to decide whether the legacy was valid. The local constituency labour party did not have complete autonomy (rules of NEC), so could not dispose of party’s property in any way they thought fit.
