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Beneficiary Principle Notes

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This is an extract of our Beneficiary Principle document, which we sell as part of our Trusts and Equity Notes collection written by the top tier of Oxford students.

The following is a more accessble plain text extract of the PDF sample above, taken from our Trusts and Equity Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Beneficiary Principle BENEFICIARY PRINCIPLE

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Beneficiary Principle - in every other than charitable trust there must be someone (human) in whose favour court can decree performance, in order for the trust to be valid b/c no trust over which court can't assume control is valid (Morice v Bishop of Durham)

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Rests on 2 propositions: a.a) a trust which can't be enforced must fail ? mostly accepted a.b) only Bs can enforce trusts ? heavily criticised: Bs aren't the only people best placed to enforce BENEFICIARY PRINCIPLE

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Beneficiary Principle - in every other than charitable trust there must be someone (human) in whose favour court can decree performance - no trust over which court can't assume control is valid (Morice v Bishop of Durham)

1. Fixed Trusts
? Largest beneficiary right is found in bare trust - A holds for B + B's right is fixed/he has equitable ownership (Baker v Archer Shee)
? Adult beneficiary of full age & sound mind, and entitled to the whole of beneficial interest can direct trustees to transfer property to him & put an end to the trust (also applies to cases of 2 or more beneficiaries, even if entitled in succession, but must be unanimous in their decision) (Saunders v Vautier) ? allows beneficiaries to collapse the trust but not to micromanage it (Re Brockbank)
? In a bare trust, beneficiary entitled to the "trust income" has a claim to the income arising from trust assets & is taxed as though he was the absolute owner of property (Baker v Archer Shee - US citizen's husband in UK; Commissioners of Stamp Duties v Livingston)

2. Discretionary Trusts
? Traditionally, if trustee in DT failed to exercise their discretion, money was divided equally b/w the objects (IRC v Broadway Cottages) ? objects had no joint ownership of trust property (Gartside v IRC); b/ftrustees decided in their favour, objects had no "interest" in trust property (Sainsbury v IRC);
? Where DT has large number of objects, as permitted in McPhail v Doulton: i. Saunders v Vautier - theoretically applicable; practical problems of getting trustees to agree etc. ? doubtful that the rule can be invoked in practice; ii. If trustees fail to exercise discretion, last resort remedy will be the judicial exercise of discretion; iii. Principle in DT - treat all people put together as though they formed one person, for whose benefit trustees were directed to apply the whole of particular fund (Romer J in Re Smith) ? rejected by Lord Reid in Gartside v IRC - no group interest in the fund -2 or more persons can't have a single right unless they hold it jointly/in common - since objects in DT have individual rights, they are in competition w/each other and what trustees give to one is his alone. NON-CHARITABLE PURPOSE TRUSTS

1. General rule: purpose trusts aren't normally valid

2. Ways to circumvent a.b.1.i.i. Interpretation as a Beneficial Trust
- The root question is whether: a.i. trustee is under obligation to benefit some personor a group w/the manner of such benefit being secondary = can interpret as trust for Bs a.ii. or whether his obligation is to apply the fund for stipulated purpose, irrespective of benefit individuals may derive = purpose trust
- a matter of interpreting the trust deed & words used by settlor in order to find his true intent = courts have occasionally adopted strained interpretations of trusts to avoid treating them as purpose trusts

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