Trusts for purposes PDF

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Trusts for purposes The beneficiary principle • A trust is not valid if there if it not for the benefit of ascertainable individuals, someone has to be able to enforce it (beneficiaries)" • Trust for purposes are NOT valid, because a purpose does not have standing (there is no identifiable beneficiary to enforce it)" • Morice v Bishop of Durham [1805] EWHC Ch J80 Dir William Grant MR ‘Every other trust must have a definite object. There must be somebody, in whose favour the Court can decree performance’ " • A corollary of the beneficiary principle is the requirement for certainty of objects" Rule against perpetuities • Property in an asset must vest in somebody at some point " • I cannot determine the fate of my assets forever " • The rule developed by common law is the so called ‘lives and being plus 21 years’- this idea is that property must vest absolutely after my death in someone and the period after which it must vest absolutely is some lives and being plus 21 years " • This is the longest period that you can determine your property for- therefore it is 21 years on top of the death of the person they chose " • Example “…such trusts to expire 21 years after the death of the last surviving descendant of Queen Elizabeth II alive at my death.”" • You can pick any person for the trust to expire after your death and their death and the trust must end after this " • Re Hooper [1932] 1 Ch. 38- for the upkeep of a grave, this creates a perpetuity problem, was held to be valid for 21 years after the testators death " Key case showing that you cannot have a trust for a purpose " Re Astor’s Settlement [1952] Ch. 534- it does not have standing" - Roxburgh J stated There must be something in whose favour the court can decree performance, there must be someone with a correlative right. (A claim right must have a correlative duty- Hohfield)" - Penner illustrating this issue further- ‘there must be someone other than the trustee who has the real beneficial ownership of the trust property. If there is no such person, then not only is there no person to enforce obligations against the trustee, but more fundamentally, there are no obligations to enforce’ " The first exception to the general (that you cannot have a trust for a purpose) Re Denley [1969] 1 Ch. 373- land maintained for the purpose of a sports ground for this the benefit of the employees. This a trust for a purpose. " - It doesn’t fail because it is a trust for purpose for particular people (identifiable group of people which have a legitimate interest in enforcing that prose be carried out) (Goff J)" Is this actually an absolute gift? And the beneficiaries can collapse the trust under Saunders and use the money for something else?" - Re Grant’s Will Trusts [1980] 1 W.L.R. 360 Vinelott J says that this is not a purpose trust but actually an absolute gift " - Re Lipinski’s Will Trusts [1976] Ch. 235- A gift of a quarter of Lipinski’s estate to go to Hull Hebrew Board of Guardians solely to finance the construction of new buildings. This also suggests that this is an absolute gift with a supper added direction. Oliver J said that this is merely a gift to the Hull Hebrew Board of Guardians " (Difficulty is whether does Re Denley survive this)" The 2 anomalous exceptions for purpose trusts 1. Trusts for the maintenance of animals" 2. Trusts for the construction and maintenance of graves and monuments" Trust for animals- a purpose trust for the maintenance of animals " • Pettingall v Pettingall (1842) LJ Ch 176- A trust for the benefit of the testator’s favourite black mare. £50 for the upkeep of the horse – never to be ridden again. This was held to work because it has the ‘Pettingall order’ "

• Pettinghal order is where you must have someone in a position to sue or enforce the trust (these will usually be residual class, as they are perfectly placed) " • Regardless that this is an exception you still need an enforcer and the residual legatees are usually the best enforcers" • Re Dean (1889) 41 Ch D 552 – legatees interested in the surplus could enforce the trust – residual class" Trusts for the construction and maintenance of graves and monuments " • Mussett v Bingle [1876] W N 170- A man gave £300 for the erection of a monument of his wife’s first husband. He also gave £200 for its maintenance. Second disposition invalid for perpetuity, because you cannot maintain it forever there needs to be a time period " • Re Hooper- however the perpetuity problem can be saved as it was in Re Hooper by simply saying using money for maintenance ‘for so long as the law will allow” this works " • Re Endacott [1960] Ch. 232- Testator gave his residuary estate to the North Tawton Parish Council "for the purpose of providing some useful memorial to myself.” This did not work (compare with Mussett)" • Re Thompson [1934] Ch. 342- A testamentary disposition to trustees to promote fox huntingnot an anomalous exception. There is a residual class capable of enforcing it and so the Pettingal order is made and the trust was held to be valid. HOWEVER most commentators disagree and this isn’t a case which should be followed, a misuse of the Pettingall order " • Barclays v Quistclose [1968] UKHL 4- Rolls Razor in financial difficulties, Quistlclsoe then lends money into a different account to Rolls under the condition that the money be used to pay dividend to shareholders of Rolls Razor to make it seem that they are doing better than they are. Rolls Razor then goes into liquidation and Quistclsoe argues to have beneficial ownership of the money lent (which means they would get the full amount). However Barclays argue that Quistclose is merely an unsecured creditor (meaning they will only receive 12 per cent of the debt). HOL held that there was a trust held by RR on trust for Quistclose " The enforcer principle- D. Hayton Developing the obligation characteristic of the trust [2001] LQR 96 • David Hayton introduces something called the Enforcer Principle, he says we need to re evaluate the beneficiary principle and replace with the enforcer principle " • Therefore a trust can exist, but so long as there is person enforcing the trust " • Re Denley- there wasn’t a proper beneficiary under the interpretation of Lord Goff, and so there was an enforcer which were the employees of the company therefore it was an enforceable trust " • The autonomous exceptions (Pettingal order) support thus " Penner disagrees " • This is not properly speaking a trust, because the enforcer and the trustee could effectively decide to split the money and walk away and there is no one to enforce the enforcers" • A trust really requires the split between the legal and equitable in trust, and each held by identifiable people " The Sanderson’s type trust (valid trusts limited by purpose)" • Where you have a purpose but the purpose limits the amount that is to be paid out to the beneficiary " • Re Sanderson’s Trust (1857) 3 K&J 497- A gift to ‘pay and apply the whole or any part of the income for and towards the maintenance, attendance and comfort’ of disabled brother. Brother died when there was still income left. Does it go to residual legatees or brother’s estate? It goes to the residual legatees " • Example “£100,000 to be paid to my daughter Bettie in such instalments so as to cover her tuition fee liability to her university. The remainder to my son Alfred.” " • Purpose is only used to calculate how much is to go to the beneficiary " Unincorporated associations • In order to have a property right, the property holder must have legal personality" • It is possible to make a gift to UA and it is a way to get around the impossibility go having a private purpose trust " • UA will not have legal personality and this is what causes the problems "

• Conservative and Unionist Central Office v Burrell [1982] 1 W.L.R. 522- Lawton LJ says that an UA ‘is two or more persons bound together for one or more common purposes, not being business purposes, by mutual undertakings, each having mutual duties and obligations, in an organisation which has rules which identify in whom control of it and its funds rests and upon what terms and which can be joined or left at will.’" • Clubs for non business purposes " What does Vicount Simmonds say?" • Leahy v AG for New South Wales [1959] A.C. 457" • a UA is “artificial and anomalous conception of an unincorporated society which, though it is not a separate entity in law, is yet for many purposes regarded as a continuing entity and, however inaccurately, as something other than an aggregate of its members.” Viscount Simonds if you not have incorporation, we do not have legal personality, which causes problems " • ViS continues to say that a gift to a group is really just a gift to all the members of that group at the time " • VS suggests that because trusts for purposes are invalid he suggests that you can only make a gift to an UA workable if we ignore or disregard the other words for the general purposes of the association (he is trying to make this work)" • According to VS you will give a gift to them as joint tenants and ignore the language for the general purposes " • This is the only way for it to work " • We have now moved away from this interpretation " Contract holding theory " • Neville Estates v Madden [1962] Ch. 832 Cross J (gives 3 interpretations of a gift of an UA)" • The first interpretation- same as what VS proposed (they have the power to severe their share)" • Second interpretation (contract holding theory)- ‘it may be a gift to the existing members not as joint tenants, but subject to their respective contractual rights and liabilities towards one another as members of the association’ " - He cannot sever his share " - Re Recher’s Will Trusts [1972] Ch. 526 per Brightman J not a situation of joint tenancy, therefore cannot sever their share" • Third interpretation- you cannot have a purpose trusts, it will fail unless it is a charity " Can contract holding theory work?" • No it cannot " • You cannot have a situation of co ownership which isn’t either tenancy in common or a joint tenancy- there is no such thing as a situation of ownership which doesn't fall under either of those two unless we can have a statutory creation, but at common law that’s it. " • Just because there is a contract which prevents the severance of one share that doesn't change the fact that one holds the property as a joint tenant or a tenant in common. Contractual rights do not have the power to limit the nature of out property rights " • There are no perpetuity problems (Penner)- not if property revests with every change of ownership" • Can they get together and collapse the trust under Saunders?- Re Lipinski’s Will Trust [1976] Ch. 235 this says yes they can (Oliver J) if they get together and do this " Inward and outward looking purposes?" - In Re Bucks Constabulary Widows' and Orphans' Fund Friendly Society (No. 2) [1979] 1 W.L.R. 936 per Walton J he says that it does not matter one bit which type of purpose it is, if it is a gift to a UA it will work even if stated for a purpose " Charitable trusts • Another exception for a trust for purpose " • Attorney General (the enforcer) and charity commission enforces the charitable trusts " • Charity commission- registers charities, investigates running of charities, monitors their accounts, advises charities " Conditions for charitable status " 1. The character of the purpose must be charitable"

2. 3. 4. 5.

Must be beneficial, not detrimental" Public Benefit" Exclusively charitable" Must be non profit – no distribution to shareholders"

Charitable character " - Commissioners for Special Purposes of the Income Tax Appellants v Pemsel [1891] A.C. 531Lord Macnaghten defines charity education, religion, poverty and other " - The Charities Act 2011 lists the things that count as a charitable purpose (refer to lecture notes for list)" - Lord Reid in Scottish Burial Reform & Cremation Society Ltd v Glasgow Corp [1968] A.C. 138 confirms that we can expand the list of existing charitable purposes if they are analogous to the existing ones " - Vaancouver Regional Freenet Association v Minister of National Revenue (1996) 137 DLR (4th) 406 an example to extend the list of charities " Public benefit " - Charities Act 2011 s4 sets out the public benefit requirement " - A logical consequence of this proposition is the proposition that the purpose cannot be detrimental " - Political purposes invalid " - National Anti-Vivisection Society v IRC [1948] A.C. 31 is activism against vivisection beneficial or detrimental? HL sighed the interests of science against the interests of the animals. The anti vivisection movement was found to be detrimental (because vivisection benefits society) therefore the society itself is not beneficial to society " - Independent Schools Council v Charity Commission [2011] UKUT 421 (TCC) whether fee charging schools are detrimental to social mobility. They held it to be beneficial (allow controversial, why should already wealthy students be getting a tax break)" Scientology " - Lord Denning in Hubbard v Vosper (1972) – Hubbard wrote a factual book about our souls coming from another planet and the church charged for membership and hard to leave the church also Lord Denning called it ’dangerous material’. Lord Goff in Church of Scientology v Kaufman (1973) – ‘pernicious nonsense’" - The charity commission denied their charity status in 1999" - R v Registrar General, ex p Segerdal (1970) – a dubious philosophy of existence, not a religion" - Hodkin v Registrar General of Births, Deaths and Marriages [2013] UKSC 77 – expands the understanding of religion for the purposes of the Places of Worship Registration Act 1855" Must be for a section of the public- personal nexus problem " - It must the benefit the public " - Oppenhein v Tobacco Securities Trust [1951] A.C. 297- A trust for the education of kids of former and current employees of the British-American Tobacco Company. More than 100,000 employees. Not charitable because of the personal nexus – defined by a personal connection to somebody" - Its not charitable because its not for the public, it for the friends of the person in connection " - However Lord MacDermott’s dissent – such a high number of potential beneficiaries, he would of preferred this be regarded as public benefit because it was for a lot of people " - Neville Estates v Madden Cross J ‘As between different religions the law stands neutral, but it assumes that any religion is at least likely to be better than none.’ However shouldn’t atheist organisations be entitled to charitable status? According to this view no" " Purpose must be exclusively charitable " - Morice v Bishop of Durham (1805) A trust for ‘charitable and benevolent’ purposes failed because its not fully charitable " Not be political " - Tyssen on Charitable Bequests, 1st ed., p. 177 he is saying that any political movement will try to change the law and the court cannot accept that a change in the law would be for the public (however this is not a good argument, has no regard for human history and previous oppression in law for example law against homosexuals. The idea that the law is perfect as it is is ignorant)" - Lord Parker in Bowman v Secular Society [1917] AC 406 It is not for the courts to decided whether a new law will be for the public benefit—> this is not their place "

- Lord Simonds in Anti-Vivisection “the court has no means of judging whether a proposed change in the law will or will not be for the public benefit. It is not for the court to judge and the court has no means of judging.”" - AG is charged with enforcing charitable trust, award to make him enforce a charity whose purpose to change the law he represents (awkward position)" What about foreign law?" - McGovern v A-G [1982] Ch. 321 But still invalid because court has A) no means of judging desirability of such a change in the foreign law B) cannot predict what effect such activity will have on relations with the UK. " - Slade J – the court is not going to stultify itself by both applying the law as well as recognising the need for it to change" - We shouldnt give chargeable status to organisations which campaigned for the change in the law in other countries " The cy-près doctrine " • The ‘as near as possible’ doctrine- it allows the court to redirect finds to a different charitable purpose if the original one fails " • Funds be directed to a purpose that resembles the original purpose as closely as possible" • Enables the court to redirect funds only in relation to purposes that are already charitable" • Cannot be used to turn a non-charitable trust into a charitable one" • The court must be satisfied that there is a general or paramount intention to do charity" • Re Lysaght [1966] Ch. 191 a gift to the RCS, gift failed because it was discriminatory. The court gave it to the RCS but without the offensive exceptions " 63 Application cy-près: donor unknown or disclaiming" (1)Property given for specific charitable purposes which fail is applicable cy-près as if given for charitable purposes generally, if it belongs—(a)to a donor who after—" (i)the prescribed advertisements and inquiries have been published and made, and" (ii)the prescribed period beginning with the publication of those advertisements has ended, cannot be identified or cannot be found, or(b)to a donor who has executed a disclaimer in the prescribed form of the right to have the property returned."...