This is an extract of our Purpose Trusts 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:
Equity - Introduction
I. Maxims of Equity
1. Equity is discretionary a.
Though now governed by principles, they are not set in stone and remedies are awarded at the discretion of the court, emphasizing fairness
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 a.
Equitable remedies won't be granted if C doesn't intend to treat D
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 a.
Remedies will not be granted to C who has acted improperly
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 a.
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 a.
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 a.
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 a.
C may be denied a remedy due to lapse in time
13. Equity is equality a.
If there are multiple equitable interests, they are treated equally
14. Equity acts in personam a.
Rights destroyed when bona fide acquirer acquires the property (no rights in rem) The Beneficiary 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"
-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 followed on facts but unlikely extended
Gardner, An Introduction to the Law of Trusts
I. Trustee's Duties
Traditionally duties are in personam but increasing recognition of rights in rem attached to the trust property:
1. Trust property cannot be taken on bankruptcy because the duties owed are attached to it, whereas borrower can have the money taken away because duties are in personam.
2. When trust property is transferred from trustees, obligations stay with it and affect other people a.
Except when trustee is authorized to make the transfer (eg. to pay beneficiary from trust assets)
Bona fide purchaser for value (someone who pays what the property is worth without knowing/reasonably knowing it is trust property)
II. Beneficiaries' Rights
Beneficiaries' rights mirror trustee's duties; interest thesis holds that a beneficiary holds interest in the trust property and trustee must provide, rather than the other way around.
Two (three?) categories of NCP trusts being valid:
1. Re Denley's Trust Deed - two interpretations:
Trust is for the employees as beneficiaries (where employees could claim sports field's monetary value and not just use)
Judge opted for view that trust is for purpose of providing employees with a sports field so the NCP trust was still valid because employees were benefited and could enforce the trust
2. Quistclose trusts:
Money transferred with understanding that payee would spend it in a particular way failing which it would return to transferer (trustee is not beneficiary as strings are attached to spending)
3. Graves/monuments, masses, particular animals etc.:
Other jurisdictions introduced statutes holding NCP trusts valid as long as there is someone to enforce them
III. Arguments of Principle
Technically all trusts are "purpose trust" because trusts with beneficiaries are simply purpose trusts to transfer money to them.
Distinction on this basis is purely for policy. Policy concerns include 1)
rights to enjoy property and 2) property be exposed to market influence (thus owned by someone with liberty to dispose). Thus trusts benefiting certain people (eg. sports field for employees) prevents those benefitted from spending the money as they wish, and those of erecting monuments (benefiting no-one) channels money away from enjoyment altogether.
IV: Is Enforceability Necessary?
Examples of enforceable PTs:-
CPTs enforced by AG and Charity Commission
Re Denley enforced by individuals benefitted by purpose (but only they can enforce - thus if employees didn't want sports field and trustees did something else with money, nobody else can enforce)
"Remaindermen" of anomalous cases: they can enforce but have no incentive
(underspending on monument/purpose gives them more)
If person with right to enforce chooses not to enforce, the choice prevails over settler's wishes (this upholds interest theory as beneficiary has a choice to exercise his ownership)
Lack of information, energy, resources etc. often impede enforcement
Arguments against requirement of enforceability:
1. Against facilitative policy: while the requirement is supposed to prevent frustration of settlers by subversion of their intentions
(eg. trustees keeping money for self) it simultaneously itself frustrates them by denying validity (abolishing requirement allows trust to exist but at the risk of subversion - both only partially vindicate settler's wishes)
2. Purpose of enforcement is not to secure trustee's performance of duties as established by settlor but only to the extent that suits the beneficiary
Arguments for requirement:
1. Availability of enforcement is intrinsic to concept of legal duty
(or trustee will have full ownership)
However enforcement is not the only factor that ensures trustees use the property for intended purpose.
- No need to worry about enforceability because trustees are mostly solicitors liable to professional authorities so are "self enforced"
I. 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.
II. 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
III. 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.
IV. 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 Law Commission Report on Perpetuities (1998)
Non-Charitable Purpose Trusts
- Rule against perpetuities restricts duration of non-charitable
I. Testamentary Trusts of Imperfect Obligation
A type of non-charitable purpose trust where trustee is entitled to carry out the purpose of the trust but is not obliged to do so. They must fall into a recognized category and are bound by common law perpetuity rules.purpose trusts
These are usually void because no beneficiaries can enforce them, but also objectionable because they can be perpetual
Rule is one method of keeping these trusts in check, so any consideration of it belongs to the law of non-charitable purpose trusts
Thus made no recommendation of reform to rule
- Trust for a particular animal (trusts for the welfare of animals are charitable)
o Re Dean - trust to maintain the testator's horses for fifty years as long as they lived that long was enforced
- Trust to erect and maintain monument and graves
Pirbright v Salwey - trust to maintain a grave and decorate it with flowers was valid
Re Hooper - trust for care and upkeep of family graves and monuments valid for 21 years
- Trust for the saying of private masses (trusts for public masses are charitable)
- Other cases:
o Re Endacott - these categories should not be extended
(here trust to provide "some useful memorial" was void despite comparison to monuments and graves)
III. Other Methods for Non-Charitable Purposes
- Fiduciary power
- Power attached to gift (donee would not be obliged to use the property for purpose stipulated but if he doesn't the gift would elapse)
- Mandate (donee can act as agent to apply a gift to a purpose; if he doesn't then he is in breach of fiduciary duty)
- Appointment of an enforcer Hayton, Obligation Characteristic of the Trust
I. Requirement of Beneficiary
- Trusts are obligations so there must be a beneficiary to enforce it; settlor drops out of the picture as soon as property is transferred as he retains no beneficiary interest
- However, if settlor designates an enforcer (eg. Conservative
Party case where settlor designates Party Leader to enforce and at perpetuity deadline enforceability passes onto a new person),
submitted that English law will hold it valid because BP should be regarded as "enforcement principle"
- If settlor designates himself as enforcer of trusts for the benefit of minors, his rights must be additional to (not to the exclusion of) beneficiaries or there wouldn't be a trust
- Status of beneficiary automatically confers rights as enforcer
- No reason why enforcer shouldn't be allowed to confer additional enforcement rights on others (including himself)
- In case of purpose trusts settlor should be allowed to confer original primary enforcement rights on an enforcer whom he believes can be relied upon to affect his purpose
Useless or Capricious Purpose
Even when purpose trusts are valid, there may be exceptions for illegal,
immoral, wasteful or useless purposes
Brown v Burdett
Testator made a trust to block up all the rooms of the house - Bacon VC held that this was void.
M'Caig v University of Glasgow
Testator made a will for his whole estate to be used to build statues of himself. Testator's heir successfully had the trust set aside on the ground that under Scots law an heir can only be disinherited by a beneficial gift to someone else.
Lord Kyllachy considered whether the trust could also be set aside for policy - If it is not unlawful, then it ought to be unlawful to dedicate the whole of a large estate to "objects of no utility" that benefit nobody and serve no purpose than perpetuate at great cost "the idiosyncracies of an eccentric testator."
NB subsequent case of M'Caig's Trustees (similar facts) declared trust void on grounds of public policy.
Thrupp v Collett
Trusts to commit legal wrongs are void for illegality - trust to pay the fines of convicted poachers is void. Re Dean
A trust for the benefit of particular animals is a valid non-charitable purpose trust, (dictum) as is a trust for erecting a monument or grave for the testator
A trust for the benefit of particular animals is a valid non-charitable purpose trust, as is a trust for erecting a monument or grave
Testator charged a sum to his trustees for the maintenance of his horses for up to 50 years (provided they lived that long).
Trust was valid despite there being nobody to enforce it.
- Just because nobody can actively enforce a trust does not make it invalid: there is no doubt that someone can give a trust to build a monument for himself, though nobody would be able to enforce that either
Testator gave a trust for the care and upkeep of family graves and monuments, and for the care and upkeep of a church window
Trust for family graves was valid for 21 years; trust for church window was charitable and therefore no limit. Re Thompson
Despite not fitting into any recognizable categories of non-charitable purpose trusts, it was nevertheless held that a trust for the purpose of furthering fox-hunting was acceptable.
NCP trusts are not enforceable because courts cannot control them.
Trusts' purpose must be ascertainable so that a court could carry it out without eliminating uncertain parts.
Testator made a will for the purpose of fox-hunting.
Trust was valid.
Testator made trusts for non-charitable purposes including 1.
Maintaining good understanding between nations, 2. Preserving independence of newspapers etc. subject expressly to the perpetuity period.
Trust was invalid because i) they were non-charitable purpose trusts and ii) they were uncertain.
Lord Roxburgh on NCP trusts being unenforceable
- Non-charitable purpose trusts present difficulties: theoretical -
difficult to visualize the growth of equitable obligations that nobody can enforce; practical - impossible to contemplate creating large funds for purposes that no court can control
- In no case of NCP trusts has the court ever directly enforced the trust and no agent analogous to AG in case of charitable trusts
- The cases concerning horses, monuments etc. should be regarded as "anomalous and exceptional", perhaps "concessions to human weakness or sentiment" but not authority for recognizing the enforceability of NCP trusts
- Applying the Morrice test, this trust is too uncertain: to be valid,
the purpose must be so defined that "if the trustees surrendered their discretion, the court could carry out the purposes declared,
not a selection" after eliminating those too uncertain
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