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Possible Objects Of Trusts Purpose Quistclose Trusts Notes

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Possible Objects of Trusts
What are the justifications for trusts?
Facilitative? - people have the power to transfer and contract in relation to their possessions, and trusts allow settlors to do things that they otherwise would not be able to do by assigning property or using a contract:

1. The requirements for contractual certainty are stricter than those for trusts. Trust rules are more flexible.
a. BUT: Williams: Not sure that trusts are really more flexible. Contractual powers can also be quite vague. Need to look up the certainty requirements there.

2. Contracts require consideration, whereas trusts do not.
a. BUT: Williams: The fact that there is no minimum requirement on the adequacy of consideration means that this is not really an obstacle to settlors, who can just use a contract instead of a trust.
Key Q: Why is it good to facilitate settlors in this way?
Charity? - It is possible that the existence of charitable trusts makes more people donate money to charity (though it is very difficult to measure the counterfactual).

1. BUT: It could be argued that this is greatly outweighed by the tax avoidance that trusts enable. Unless there are better rules on tax avoidance, trusts may not be justifiable on the basis of encouraging charity (NB: this is a bold view).
There must be a positive justification for trusts, otherwise they should not exist.
The beneficiary principle

1. The beneficiary principle = trusts must have beneficiaries a. Therefore, purpose trusts cannot exist.
i. Lord Evershed MR in Re Endacott: "a trust by English law, not being a charitable trust, in order to effective, must have ascertained or ascertainable beneficiaries".
ii. BUT: There are exceptions, e.g. charitable trusts.
b. The rule does NOT apply to powers, since there is no requirement of an object (Twinsectra)
i. BUT: The court will NOT usually validate a non-charitable purposes trust which fails by treating it as a power (CoA in IRC v Broadway
Cottages: "A valid power is not to be spelled out of an invalid trust")

2. Rationale: enforceability a. Sir William Grant in Morice v Bishop of Durham: "there must be somebody,
in whose favour the Court can decree performance".
b. Roxburgh J in Re Astor asserted there were both theoretical and practical difficulties for non-charitable purpose trusts: "In theory, because having regard to the historical origins of equity it is difficult to visualise the growth of equitable obligations which nobody can enforce, and in practice, because it is not possible to contemplate with equanimity the creation of large funds devoted to non-charitable purposes which no court and no department of state can control, or in the case of maladministration reform."
c. The reasons given by Roxburgh J and Sir William Grant essentially amount to the following idea:
i. For a trust to be valid it must be capable of being supervised by the courts, in order to ensure the Ts' duties are enforced and S's intentions respected.
ii. For the court to do this, there must be someone who will take the Ts to court if he thinks that they are failing to administer the trust properly.

1. Trusts for charitable purposes are enforceable as this is done by the AG and the Charity Commission.
d. Two premises to this argument:
i. A trust which cannot be enforced must fail (generally accepted)
ii. Only beneficiaries can enforce trusts (focus of criticism)

3. Rationale: the nature of a trust a. Some argue that beneficiaries are essential to the nature of the 'trust':
b. 'Duties cannot exist without rights'
i. As asserted by Matthews, all trusts involve duties on the part of the
Ts  only possible if we can identify someone to whom those duties are owed.

1. BUT: Webb: This is not true - criminal law duties not to kill or steal are not owed to any particular person; charitable purpose trusts have no identified beneficiary, and it is not like these duties are owed to the AG or Charity Commission.

2. BUT: We can perhaps explain a purpose trust by saying that T
owes a duty to S to dispose of the trust property according to the terms of the trust. This could be a chose in action similar
This is my to that recognised by the UKPC in Commissioner of Stamp big idea
Duties (Queensland) v Livingston (below), though that was in relation to the beneficiary of an estate.

3. Williams: Environmental restrictions place duties on oil companies not to pollute the oceans, but no one person has a right that Shell do not pollute the ocean. There is a collective interest, which is different to an individual interest.
a. BUT: It could simply be argued that the 'collective interest' is simply a grouping/accumulation of individual interests.
c. 'Property must have a beneficial owner'
i. The beneficial interest in property cannot 'disappear' or be 'in suspense'  purpose trusts are necessarily impossible (Lord Millett in
Twinsectra v Yardley) 1. BUT: There are plenty of resources in the world not held by anybody, so why can't the law accommodate property not being beneficially owned by anyone, at least for a period of time?

2. BUT: There are a number of situations in which the beneficial interest in an asset is temporarily in abeyance, e.g. charitable trusts, and see Commissioner of Stamp Duties (Queensland) v
Livingston (1965), which was a UKPC case on appeal from the
High Court of Australia  not binding but persuasive  was summarised by Buckley J in In re Leigh's Will Trusts which was then cited with approval in the HoL by Lord Templeman in
Marshall v Kerr (1995)  it was then applied by the EWHC in
Re Bernstein (2008).
a. These cases hold that when a testator dies but the will has not yet been administered, the executor or personal representative holds both the legal and equitable title to the property, and the beneficiary or legatee under the will simply has a chose in action - a right to require the deceased's estate to be duly administered - and no beneficial equitable interest in the assets under the estate. The beneficiary or legatee's right consists of "the chose in action in question with such rights and interests as it carries in gremio [in abeyance]" (Buckley in In re Leigh's Will
Trusts). Suggesting that their beneficial interest is carried in abeyance.
b. Could we say that the settlor of a purpose trust has a similar chose in action such that it is enforceable? I.e.
without having any legal or equitable title in the estate.
Then the purpose trust would be enforceable. Note that in these cases the executor was a fiduciary but a trustee in the sense that he was personally liable in equity for all breaches of the trusts which arise from his office.
c. In Commissioner of Stamp Duties (Queensland) v
Livingston (UKPC), the testator had died leaving 1/3 of his real and personal estate to his widow, Mrs Coulson,
absolutely. But Mrs Coulson died before the estate was administered by the personal representatives. The estate was held to have passed to the personal representatives "in full ownership, without distinction between legal and equitable interests" but they hold the estate "for the purpose of carrying out the functions and duties of administration, not for [their] own benefit". The court held that a beneficiary under an estate has no interest in the property to be administered, but only a right to require the estate to be duly administered. "Mrs Coulson was not entitled to any beneficial interest in any property … at the date of her death. What she was entitled too in respect of her rights under her deceased husband's will was a chose in action, capable of being invoked for any purpose connected with the proper administration of his estate" (Viscount Radcliffe). The executor was in a
"fiduciary position" but a trustee in the sense that he is personally liable in equity for all breaches of the trusts which arise from his office - "[e]ssentially, they are trusts that preserve the assets, to deal properly with them, and to apply them in the due course of administration for the benefit of those interested according to that course … They might just as well have been termed 'duties in respect of the assets' as trusts."
d. This chose in action was explained by Buckley J in In re
Leigh's Will Trusts as a "transmissible interest in the estate, notwithstanding that it remains unadministered. This transmissible or disposable interest can, I think, only consist of the chose in action in question with such rights and interests as it carries in gremio [in abeyance] … If a person entitled to such a chose in action can transmit or assign it, such transmission or assignment must carry with it the right to receive the fruits of the chose in action when they mature." This passage was cited with approval by Lord
Templeman in the HoL in Marshall v Kerr.
e. Mr Justice Blackburne in Re Bernstein: "during the period of administration of an estate the beneficiaries,
whether legatees or otherwise, have no legal or equitable interest in the assets comprised in the estate,
but have no more than a right to require the deceased's estate to be duly administered".
d. 'Trusts are beneficial transfers'
i. Trusts are like gifts, S transferring an interest in his property to B. You cannot make a transfer to a purpose  explains impossibility of purpose trusts and why only B can enforce the trust.

1. BUT: The law does recognise exceptions to the beneficiary principle - most notably charitable trusts. This argument applies to all arguments that purpose trusts are somehow conceptually impossible. 2. Even if the law did not recognise any purpose trusts, it would not follow that the law should not recognise purpose trusts.
We need to be able to justify the conceptual structures we are using, otherwise the nature of a 'trust' should be changed.
NB: Twinsectra v Yardley is thus authority for the fact that powers do not have to comply with the beneficiary principle (no object requirement)  there is nothing to stop settlors using non-charitable purpose powers instead of non-charitable purpose trusts.

The fact that non-charitable purpose powers can exist but non-charitable purpose trusts cannot exist is down to the beneficiary principle  can the justification for the beneficiary principle also justify this differential treatment?
o As above, it seems the only

Enforceability
Who can enforce trusts?

1. The general rule: only beneficiaries can enforce trusts. Bs have an obvious incentive to supervise T's running of the trust and to take T to court if he breaches the trust.

2. Can other people enforce the trust?
a. Settlors?
i. Well-established rule that Ss have no standing to enforce trusts

1. Justification 1: S might not be around when distribution is necessary a. BUT: there is no reason why should not be able to enforce it when he is alive (Webb).

2. Justification 2: It is in the nature of trusts that once S creates a trust, he gives away his interest in the property and has no further right to dictate its use a. BUT: He would only be able to enforce the trust - not change its terms. And there could be other people who could also enforce the trust (Webb).
ii. Why can't we give S a chose in action similar to that in Commissions of Stamp Duties (Queensland) v Livingston? A right to require the trust property to be duly administered. (SEE ANALYSIS ABOVE)
b. Independent enforcer appointed by S? (Hayton)
i. BUT: If the enforcer is independent and has no personal interest in performance of the trust, he might not do his job or he might collude with the Ts (Parkinson).

1. This argument suggests that only someone who both has incentive to enforce the trust and stands to gain under it should be able to enforce it  supports beneficiary principle.
c. Other interested parties? i. For example, with regards to purpose trusts, some people who are not Bs might still stand to gain from the trust's performance

1. BUT: We should not be giving rights of enforcement to anyone who would like to see the Ts' obligations performed (much like how third parties to a contract should not be able to enforce it
(or only if the parties intend them to under the CRTPA 1999))
(Webb).

3. Why must trusts be enforceable?
a. Intentions of the settlor. Non-performance of a trust by T thwarts S's intentions. Therefore, trusts performance of which cannot be enforced are deemed ineffective, to prevent Ts from misappropriating the trust property.
The beneficial interest in the property reverts to S or his estate.
i. BUT: Webb: Rendering a trust ineffective simply ensures it is not performed, thus thwarting S's intentions. By contrast, had the trust been deemed valid, the Ts might have performed their obligations perfectly in line with S's intentions. Rendering unenforceable trusts ineffective simply ensures S's intentions are thwarted. By contrast,
holding that unenforceable trusts are nonetheless valid would mean there is at least a chance of effect being given to S's intentions by the
Ts.

1. Moreover, S is likely to choose Ts who are trustworthy, honest and competent, so would strive to give effect to his intentions.

2. Thus, lifting the prohibition on unenforceable trusts would actually better give effect to S's intentions, if that is our main concern.

Purpose trusts and 'persons' trusts
NB: A 'purpose trust' is not a trust for a purpose (as express trusts all exist for a purpose)
but rather a trust without beneficiaries.
An apparent purpose trust can be saved from invalidity if it is in fact a 'persons' trust.

1. Key Q: Is T's obligation:
a. to benefit some person and that benefit is secondary (persons trust),
OR
b. to apply the fund for the stipulated purpose, irrespective of whether anyone is benefitted by this (purpose trust)
i. Therefore, people who would derive benefits under a purpose trust have no Saunders v Vautier right to call for the trust to be brought to an end and legal title to the property to be transferred to them.

2. This is a question of interpreting the trust deed and/or S's words to find his true intentions.

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