Private Purpose Trusts Notes

Topic 6 – Private Purpose Trusts

• Trust is generally created for the benefit of ascertainable beneficiaries. These must be sufficiently certain so that the trust can be enforced in their favour by the court (Morice v Bishop of Durham).

• Trusts for purposes = rather than individuals, are generally void because without a human beneficiary there is no one in whose favour a court can decree performance and therefore theoretically no means of controlling the trustees.

• Exception to general principle = Trusts created for charitable purposes. Few cases where private purpose trusts will be valid. Comply with rules/conditions to be valid:

  • Rules on perpetuity and certainty.

• NB – Private purpose trusts cannot be enforced in court since there is no beneficiary who can enforce them. Hence, they are known as trusts of imperfect obligation and will only work so long as the trustees are willing to carry them out.

• Gifts to unincorporated associations (i.e. sports clubs) = Often dealt with in conjunction with trusts of imperfect obligation, but raise particularly difficult issues so dealt with separately in the next topic.

Beneficiary Principle:

• Trust expressly created for a purpose – 3 reasons why it may fail:

  • 1. Must be someone who can enforce the trust, so court can control it (‘Beneficiary Principle’)

  • 2. Trust must be sufficiently certain (so court in position to control it)

  • 3. Trust must comply with Perpetuity Rule (Rule Against Inalienability)

    • = If the purpose trust is to be valid, must be clear at outset that trust will not last longer than Perpetuity period.

• Beneficiary Principle = For trust to be valid, must be someone to enforce it. (ascertainable beneficiaries). Beneficiary either Actual Person or Legal Person (i.e. a Company).

  • NB – Charitable Trust = no need for ‘ascertainable beneficiary’ as trust carried out by Attorney-General.

• Case = Morice v Bishop of Durham

  • Principle = every non-charitable trust must have a definite object; someone in whose favour the court can decree performance

    • (otherwise not a trust, and just a gift in favour of the trustee. If no one can hold them to account, as with no discernible beneficiary, then that person can do whatever they like)

  • Certainty of Objects is a separate requirement to Beneficiary Principle = both needed for validity for court to enforce the trust.

    • Rights and obligations are two sides of the same coin (academic argument) – give power to trustee but also need someone to have rights, so need beneficiary.

• (Re Astor’s Settlement Trusts)= Need for beneficiary/trustee subject to a trust obligation = required for enforcement – Trusts fail for lack of ascertainable beneficiary.

• Private purpose trusts (i.e. purpose trusts not charitable) = not valid if they lack ascertainable beneficiary (always problematic as violate beneficiary principle); a purpose cannot sue absent trustee to enforce trust obligation.

• Trusts without ‘ascertainable beneficiary (invalid private purpose trust (Leahy v AG for New South Wales.

• Exceptions to ‘Beneficiary principle’ for Testamentary Trusts:

• Testamentary trusts for private purposes with ascertainable beneficiary were upheld in Morice v Bishop of Durham.

• As beneficiary principle violated number of times but decisions upheld…

  • Lord Evershed MR (providing useful memorial to myself = i.e. no certainty and memorial purpose was abstract) in Re Endacott classified exceptions:

    • A. Construction and maintenance of monuments and graves

    • B. Saying of private masses

    • C. Maintenance of particular animals

    • D. Miscellaneous cases

    • ALSO – Unincorporated Associations

  • NB – also referred to gifts to unincorporated associations as 5^th exception to beneficiary principle (view gifts, as only valid if they can be interpreted as complying with beneficiary principle).

  • NB – Re Endacott – courts dislike private purpose trusts immensely as no real way to enforce them. Also tie up property for long period of time for little value.

• Trust of Imperfect Obligation = exceptions to beneficiary principle are collectively called this (i.e. trust will only work if trustees are willing to carry them out as if they were simple fiduciary powers as there is no one else to enforce the trust).

• Also mentioned exceptions - Roxburgh J in Re Astor = willing trustee needed because in absence of ascertainable beneficiaries there is no one to initiate proceedings against an unwilling trustee to make him positively perform the relevant purposes (not beneficiary entitled to the property as part of testator’s residuary estate, if it is not used for intended purpose, can claim property beneficially).

  • Need for a willing trustee (confirmed Re Thompson) = trustee agreed to give an undertaking to the court to carry out terms of the trust, with residuary legatee being given liberty to apply to court if trustee broke undertaking (negative enforceability allowed for purpose trust, when positive enforceability usually required).

1. Trusts for Monuments and Graves (testamentary monuments – headstones, gravestones, tombstones, tombs, mausoleums)

• Case = Mussett v Bingle [construction and maintenance]

• Testator established ‘erection of monument to first husband of testator’s wife’ upheld as valid private purpose trust. Further trust of 200 for maintenance held void on grounds of perpetuity.

• Trusts for monuments/graves may be charitable = on religious grounds, if monument located inside/attached to fabric of Church or if grave in churchyard in general (Re Douglas)

• Re Hooper = testator money for upkeep of tablet/window in a church and maintaining family grave outside church. Trust for tablet upheld as charitable trust (part of fabric of church). Trust for family graves outside church also upheld (but as private purpose trust).

• Maintenance of graveyard – can be charitable or private purpose:

  • Re Douglas = Maintenance of particular grave within graveyard (wont work).

    • If attached to religious building (church or whatever) wall, inside crypt then its seen as...

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