A more recent version of these Private Purpose Trusts notes – written by Cambridge/Bpp/College Of Law students – is available here.
The following is a more accessble plain text extract of the PDF sample above, taken from our GDL Equity and Trusts Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
Equity & Trusts: Private Purpose Trusts??In normal trusts, the beneficiary in a trust is a legal person. But in a private purpose trust, there is no legal person as the beneficiary. 2 crucial principles o (1) The Beneficiary Principle: there must be someone who can enforce a trust. o (2): Perpetuity rules: a trust must not last indefinitely. As a matter of policy, it is important that property is available for use, rather than tied up on trust in perpetuity with no person having a vested interest. Purpose trusts are an exception to beneficiary principle, and will only be recognised in v limited circumstances. Private purpose trusts have stricter rules than charitable trusts.
'Beneficiary principle'--- (there must be someone who can enforce a trust).
? A private trust must have ascertainable beneficiaries, who have personal interests in the terms being carried out properly---they have power ('standing') to take the trustees to court to enforce performance of their obligations.
? Charitable trust, exception to beneficiary principle, does not require ascertainable beneficiaries: Attorney General has power to enforce the terms, ensuring the trustees are held to account.
? Beneficiary principle comes from Morice v Bishop of Durham ((1804)), Grant MR: o Case involved an attempt trust for 'such objects of benevolence and liberality as the Bishop of Durham in his own discretion shall most approve of'. o Trust failed because: (1) as a matter of construction, it was not a gift to the Bishop himself (Bishop disclaimed any beneficial interest; (2) was not a charitable trust, because words were too wide; (3) not valid as a private purpose trust because no ascertainable beneficiaries to enforce the trust, and it was too uncertain. o Sir William Grant MR held at pp. 404 -405: o "There can be no trust over the exercise of which the court will not assume control; for an uncontrollable power of disposition would be ownership and not trust...Every [noncharitable] trust must have a definite object. There must be somebody in whose favour the court can decree performance." (my emphasis) o So this mixed discussion of (1) certainty; (2) need for beneficiaries: initially not certain as to whether certainty of objects and the beneficiary principle are separate or the same-now clear they are separate requirements. 1
o So he's referring to certainty of object, which is closely linked. Lord Eldon, in HL in same case, focussed on enforceability. But it amounts to same thing: the beneficiary of a trust must be a legal person, because you need certainty of object. And there are no equitable rights, because there is no legal person to which the trustee can have obligations, there is no legal person to enforce it. Rights on one side; obligations on the other. Cannot have obligations on a trustee, if there is no one who has rights on the other side.
? So no trust if no legal person is beneficiary---you might as well gift the trust property to the trustee, as there is no one to hold them to account.
? So if no legal person as beneficiary = no trust, since nobody can enforce it.
? So you need certainty of object and beneficiary principle: trust must have a beneficiary (whether an actual person or a legal person, eg a company); that beneficiary ill be 'ascertainable' if the appropriate test for certainty of objects is satisfied.
?????Purpose of the beneficiary principle:
? Re Astor's Settlement Trust: o Roxburgh J explained the need for a beneficiary arose from the obligatory nature of a trust. A trustee cannot be subject to an obligation unless there was somebody who could enforce an equivalent right. The trust obligation, and need for a beneficiary, are two sides of same coin.
? Policy reasons: undesirable to have funds held on trust which are not subject to supervision by the court.
? Thus PPTs (i.e. non-charitable purpose trusts) are generally invalid for lack of an ascertainable beneficiary. A purpose cannot sue a trustee to enforce a trust obligation; and the AG has no power to enforce a private purpose trust (as with charitable trusts). Private purpose trusts---violate beneficiary principle
? After Morice, the beneficiary principle was not consistently applied: courts often upheld trusts for purposes notwithstanding lack of an ascertainable beneficiary.
? Re Endacott (1960), HL: o A testator gave North Tawton Parish Council money on trust for purpose of 'providing some useful memorial to myself'. o Came to Court, because the trustees didn't know what they were supposed to do. Were they bound to do this?
o HL had a dilemma. o The beneficiary principle was well-established and enforced by this point. o But, between Morice to Endacott, about 150 years of case law, the beneficiary principle had not been that 2
o o o o o o
well-enforced by courts, lots of cases where trusts which violated the beneficiary principle had been upheld. In this case, HL decided to be pragmatic. The courts intensely dislike private purpose trusts, because they control them. A poor way of disposing of property, and courts are very protective of property rights. But due to case law, they decided not to overturn the case law. But made it clear they would never be extended, we have these anomalous exceptions to the beneficiary principle, but they are to be tightly controlled and never extended. In this case: Lord Evershed: Memorial not within category of anomolous cases, to do so "would go far beyond any fair analogy to any of those decisions." So, in Endacott, the trust failed
So what are the exceptions, where Private Purpose Trusts are valid despite violating beneficiary principle?--> Re Endacott exceptions
?????In Re Endacott, HL surveyed 150 years of case law, and grouped them into categories.
1. Construction/maintenance of monuments and graves: o Note that 'memorial' was too wide to fall within this, in Re Endacott. o Mussett v Bingle: monument/grave o Re Hooper
2. Saying of Private masses a. Private masses, which public are not allowed to enter (for family/friends). b. If a public mass, it will probably be 'charitable'. c. Eg Bourne v Keane
3. (by far the most popular) The maintenance of specific animals a. Specific, often named animals. (if wider groups of animals, likely to be 'charitable'). b. Pettingall v Pettingall; Re Dean c. But note Re Kelly.
4. Miscellaneous cases (can basically forget this category) a. Re Thompson
5. Unincorporated Associations [next week's lec]. These categories will not be extended---to be an exception, must fall within one of these.
1. Construction or Maintenance of Monuments and Graves
? ?? ? Mussett v Bingle (1876): of a funerary nature, very traditional. Eg headstones. o In this case, testator established a trust of PS300 to be used for erection of a monument to his wife's first husband. Court 3
upheld this. A further trust of PS200 for the maintenance of the monument would have been recognized, but ultimately failed on grounds of perpetuity (see below).
? ?? ? Re Endacott: left PS20,000 to local parish council 'for the purpose of providing some useful memorial to myself'---this was invalid---
didn't fall into 'monuments and graves' exception.
? ?? ? Re Hooper: testator gave sum of money for upkeep of a tablet and a window in a church and for maintain certain family graves & monuments outside the church. o The trust for family graves and monument outside the church was upheld as a valid PPT. o CF the tablet and the window in the church were held on 'charitable' trust---as part of 'fabric' of church building, they were for the 'advantage of religion' o This will only apply to graves or monuments in a churchyard if the trust is for the churchyard in general (Re Douglas, 1905).
? ?? ? CHARITABLE trusts, is one of best ways to get around the rule
? ?? ? Charitable trusts not on GDL syllabus. But key thing to remember: o Charities---not only have to demonstrate that the trust has a charitable purpose; but also have to satisfy public benefit. Have to show a section of public is benefitted by this particular trust. o Public figure monuments and graves: o Earl Mountbatten of Burma Statute Appeal Trust (1981): because his statute provided public benefit, to those who walked by, was considered a charitable trust, not a private purpose trust. Charitable trusts are enforceable by the Attorney General, so don't fall foul of the beneficiary principle.
? ?? ? So monuments and grave trusts: could be charitable, if satisfy 'public benefit' test; if not, very tightly controlled.
2. Private Masses
? A private mass (or other religious ceremonies), public excluded. Then a private purpose trusts.
? "holy, believing, persevering prayer whereby someone pleads with God on behalf of another or others who desperately need God's intervention."
? Bourne v Keane (1919): private masses upheld as a valid PPT.
? If public is admitted, then it is considered charitable, would not have to comply with anything we talk about today: Re Hetherington (1990). CF, if masses are said in private, behind closed doors, they will not satisy 'public benefit' test and will not be charitable (Re Hetherington). o Gilmour v Coats (1949): group of cloistered nuns were denied charitable status, emphasising the need for a public benefit to be charitable.
3. Particular animals 4
Buy the full version of these notes or essay plans and more in our GDL Equity and Trusts Notes.