Private Purpose Trusts Notes

• Trusts created for private purposes: anomalous exceptions

• There are also public purpose trusts (Charitable 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:

1. Trusts can be established for particular animals

• 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)

2. Trusts for private monuments and graves

• 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)

3. Trusts for private masses to pray for your soul

• 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

4. Miscellaneous cases

• 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:

1. Remoteness of vesting

2. 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:

1. What the relevant perpetuity period is

2. Whether the trust will definitely end before the period expires

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:...

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