Charitable Purpose Trusts - Trusts and Equity

Table of Contents

The beneficiary principle 2

Gardner, Introduction to the Law of Trusts 3

Non-charitable purpose trusts 4

Hayton, ‘Developing the Obligation Characteristic of the Trust’ (2001) 117 LQR 96 4

Charitable purpose trusts 4

Charities Act 2011 ss 1-5 7

Charity Commission, Analysis of the Law relating to Public Benefit (September 2013) 7

I - THE STRUCTURE OF ‘CHARITY’ 8

Independent Schools Council v Charity Commission [2012] 1 All ER 127, [41]-[92] (Upper Tribunal) 8

II – Heads of Charity (section 3 CA 2011) 9

A - ‘RELIEF OF Poverty’ 9

1 – Charitable purpose 9

Independent Schools Council [2012] 1 All ER 127 (meaning of “poverty”) 9

Re Coulthurst [1951] Ch. 661 9

Re Niyazi [1978] 1 W.L.R. 910 (Megarry VC) 9

2 – Public Benefit 9

Re Segelman [1995] 3 All E.R. 676, 687-694 (poor relations – open class upon testator’s death) 9

Dingle v. Turner [1972] A.C. 601; [1972] 1 All ER 878 (poor employees – indistinguishable from poor relations) 10

Independent Schools Council [2012] 1 All ER 127 (meaning of “poverty”) 10

B - ‘ADVANCEMENT OF Education’ 10

1 – Charitable Purpose 10

*Incorporated Council of Law Reporting v. A-G [1972] Ch. 73 (research) 10

*Re Hopkin’s Will Trusts [1965] Ch. 669; [1964] 3 All ER 46 (research) 10

2 – Public Benefit 11

*Oppenheim v. Tobacco Securities Trusts Ltd [1951] A.C. 297; [1951] 1 All ER 31 (applies the personal nexus test) 11

III – The Public Benefit Requirement (section 4 CA 2011) 11

Independent Schools Council [2012] 1 All ER 127 (pre-2006 state of the law regarding public benefit test) 12

A - ‘BENEFIT’ 12

National Anti-Vivisection Society v IRC [1948] AC 31 12

Independent Schools Council [2012] 1 All ER 127 (indirect and wider benefit can be relevant to public benefit test) 13

Gilmour v Coats [1949] AC 426 13

B – Not political objectives 14

Stevens and Feldman (1997) 14

I. Maxims of Equity

1. Equity is discretionary

   1. Though now governed by principles, they are not set in stone and remedies are awarded at the discretion of the court, emphasizing fairness

   2. Schmidt v Rosewood – beneficiaries of a trust have no right to inspect trust documents but court has discretion to allow them to do so

2. Equity is triggered by unconscionability

3. Those who seek equity must do equity

   1. Equitable remedies won’t be granted if C doesn’t intend to treat D fairly

   2. Chappell v Times – employees denied remedy because they refused to sign an undertaking not to strike in the future

4. Those who come to equity must come with clean hands

   1. Remedies will not be granted to C who has acted improperly

   2. Dering v Earl of Winchelsea – legal impropriety only (not moral); conduct must relate to relief sought

5. Equity treats as done that which ought to be done

   1. If A has a specifically enforceable contractual obligation to transfer property to B, Equity will regard it as transferred

6. Equity protects the weak and vulnerable

7. Equity is cynical

   1. In certain cases Equity will mistrust gifts and hold that donee is holding them on a trust on behalf of donor

8. Equity is imaginative

9. Equity follows the law

   1. Equity recognizes Common Law principles but doesn’t apply them slavishly or always

10. Equity looks to substance rather than form

11. Equity will not assist a volunteer

12. Equity assists the diligent

    1. C may be denied a remedy due to lapse in time

13. Equity is equality

    1. If there are multiple equitable interests, they are treated equally

14. Equity acts in personam

    1. Rights destroyed when bona fide acquirer acquires the property (no rights in rem)

II. Rule against perpetuities

Purpose trusts and gifts to unincorporated associations can infringe the perpetuity period and the latter may also raise problems of future vesting. The rule against perpetuities was reformed by the Perpetuities and Accumulations Act 2009 (a product of the 1998 LRC report). It still applies to trusts but abolishes the rule against perpetuities in most real property contexts. The perpetuity period is now simply 125 years (s.5).

A - Rule against remoteness of vesting

• Property must be vested in individuals within a recognized period of time (the perpetuity period), so as to prevent wealth being locked away indefinitely.

B - Perpetuity Period

• Common Law: Life in being plus 25 years

• Reformed by Perpetuities and Accumulations Act 1964: possible to specify a period not exceeding 80 years

• Reformed by Perpetuities and Accumulations Act 2009: 125 years even if trust specifies a different period

C - Wait-and-See Rule

• Under common law: if at the outset property may not be vested within the perpetuity period it is considered void

• Under the Perpetuities and Accumulation Act 2009: if at any one time it possible that property will not vest during perpetuity period it is not to be treated as void until it is certain that it will not vest.

D - Duration of Purpose Trusts

• Charitable purpose-trusts: since these are vested in the public there is an interest in them lasting forever so Act does not apply

• Non-charitable purpose-trusts: Act still doesn’t apply but since no public interest these are caught by common law perpetuity rules

I. Principle

Property must be held on trust for identified beneficiaries or objects, or it is void, so that the court has people in whose favor it can decree performance. A trust for purposes will not be valid.

II. Example Cases

• Morice v Bishop of Durham – a trust bequeathing “such objects of benevolence and liberality as the Bishop of Durham in his own discretion shall most approve of” was invalid as there were no ascertainable beneficiaries

  • Sir William Grant: “There must be somebody, in whose favour the Court can decree performance”

III. Exceptions

• Charitable trusts – valid though trust for purposes (does not undermine rationale because Charity Commision and AG enforce them

• Express trusts – though appearing to be trusts for purposes people can benefit indirectly, satisfying the requirement

• Exceptionally non-charitable purpose trusts – old cases that are likely to be...