#4635 - Private Purpose Trusts - GDL Equity and Trusts

The Beneficiary principle

“Certainty of Object” – one of the three certainties, requires that the object be human or have a legal identity: the “beneficiary principle”
Morice v Bishop of Durham: ‘there must be someone in whose favour the court can decree performance’
- Here the trust failed, as there were no ascertainable beneficiaries to enforce the trust
Re Astor’s Settlement: The need for a beneficiary is due to the obligatory nature of the trust – if trustees are to be obligated, then there must be someone who can enforce their equitable right

Trusts without an ascertainable beneficiary

Re Astor’s Settlement: Settlor established a discretionary trust for a variety of purposes – e.g. ‘sympathy and co-operation between nations’ – the court was unhappy with the concept of large sums of money being used for purposes over which the court had no control
Leahy v AG for New South Wales: trust for general religious purposes (abstract purpose – outside beneficiary principle)

Exceptions to the beneficiary principle for testamentary trusts

Instances where the beneficiary principle doesn’t seem to exist and where a trust is permitted without a human beneficiary

The Re Endacott exceptions:

Pettinghall v Pettinghall: trust of 50 a year for the upkeep of the testator’s favourite black mare
Re Dean: ‘Maintenance of (my) horses and hounds’
Springfield: to ensure ‘My Cat, Nicholas lives in the style of which he has become accustomed; his bed lined with my nightgown
Requirements:
- Detail the standard of living
- Clearly identify the pet
- Designate a remainder beneficiary
- Don’t make the animal too wealthy: e.g. $12 million to dog – family challenged it and the court agreed – reducing it from $12 million to $1 million
Money for animals generally as opposed to for a particular one will be seen as charitable (e.g. Re Moss – cat charity)

Musset v Bingle: to erect and maintain a statue of his wife’s first husband!?
Re Hooper: trust for family graves and monuments outside church was valid
The graves/monuments must be of a “funerary nature”
Money given to the entire graveyard, without specifying individual family tombs was charitable instead of a private purpose trust (East Mountbatte of Burma Statue)

If the mass is private then there may be a private purpose trust : Bourne v Keane
But if it is public so that everyone can come to watch, then the trust will be charitable: Re Hetherington

E.g. Money for ‘the promotion and furthering of fox hunting’: Re Thompson (although N.B this was before The Hunting Act 2004

Certainty

Private purpose trusts must comply with the three certainties
- E.g. Re Endacott was void for uncertainty – trust for ‘some useful memorial to myself’
- Re Astor: terms of the trust were too wide
The ‘categories’ of private purpose trusts are now closed

Perpetuities

Where capital is to remain intact as endowment capital (so only the income is distributed) – there is a limit on the duration of the trust
- Ensures that someone will at some future time become absolute legal beneficial owner
- Ensures that a settlor cannot have excessive control over the trust property from beyond the grave
Perpetuities and Accumulations Act 1964: placed the law on statutory footing – although doesn’t replace the common law – so apply common law first
Rules are there to ensure a trust comes to a natural end
Two rules:

Remoteness of vesting
Excessive duration (inalienability): property should be freely alienable (should be able to move it around for the economy’s sake)
- Idea that money shouldn’t be tied down too long
- To determine validity of purpose trust – must know:

The perpetuity period

Usually settlor can specify a period of time up to 21 years
- Can nominate human life(s) in being + 21 years
  - Life in being: alive or in the womb as ascertainable at the date of grant
“Royal lives clause”: one could set up a trust for the length of the lives of the descendants of Queen Elizabeth II living at the date of the trust’s creation (it is widely publicised when they die so no dispute over the date of death
50 years permitted in Re Dean: this was an incorrect judgement, but has never been overruled
Re Kelly: period must be based on human lives, not animals - as animals can be ‘unpleasantly long lives’
Maintenance of monuments and graves:
- Musset v Bingle - 300 to build and 200 to maintain. The initial injection of capital was allowed but the 200 was void as no duration was specified
- But note s1 Parish Councils and Burial Authorities (Miscellaneous Provisions ) Act 1970: burial authority may agree, for the payment of a sum, to maintain a grave or monument for a period not exceeding 99 years

Trust of imperfect obligation

Re Endacott: exceptions sometimes collectively referred to as ‘trusts of imperfect obligation’
- Trusts will only work if the trustees are willing to carry them out as there is no one to initiate proceedings vs. an unwilling trustee to force them to perform their duties (Roxburgh J in Re Astor)

Re Denley

Re Denley: Trust for land ‘to be maintained and used…for the purpose of a recreation or sports ground primarily for the benefit of employees’
- Sounds like a purpose trust – ‘maintenance of sports ground’ – problem of squaring trust with the beneficiary principle
- Goff J sidestepped problem – he said that trusts which are ‘abstract or impersonal’ are defeated y the beneficiary principle – but the Re Denley style is not of this type – it can be enforced by human beings
- Not beneficiaries in the usual sense – cannot collapse the trust and claim their interest
- Individuals have the right ‘to execute the trust both negatively by restraining improper…use of the land, and positively’
- Not a full purpose trust nor a full people trust
Status of Re Denley:
- Vinelott in Re Grant’s Will Trust thinks Denley was simply an ordinary discretionary trust for the employees as a class of beneficiaries (supported in Re Horley Town)
- But this doesn’t seem to accord with Goff in the case itself
- Grender v Dresden: trust for the purpose of maintaining and funding private roads on a housing estate for the benefit of its residents – upheld as a valid Re Denley: clear purpose and definable members and specified a perpetuity period

Trusts limited by a purpose but not for a purpose

Re Bowes: purpose dismissed as a mere ‘motive’ – trust viewed as an outright gift rather than a purpose trust
Re Sanderson: Where the “whole sum” or gross sum (the whole income)...

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