Week 4 - Private Purpose Trusts
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LECTURE FIVE: FI VE: PRI PRIV VATE PURPOSE TRUSTS STARTS AT 23 MINUTES IN TRUSTS 4X1 General Rule Private Trusts for persons - valid Private Trusts for Purposes = invalid
Introduction Re Osoba [1979] 1 LR 247 ( 247 ( Testator Testator left his property to wife wife and family in Nigeria and was given to his wife for her maintenance and for the training of his daughter up to university grade and for the maintenance of his aging mother. mother. The testator had an earlier marriage marriage and had a son. This son argued argued that the will was invalid. The court held that the money money was a gift to the wife and the daughter. daughter. !uc"ley #$ concurred and said the following. %If a has whether given thedirectly whole of fund& whether of capital or income& to a testator 'eneciary& or athrough the medium of a trustee& he is regarded& in the a'sence of any contra indication& as having manifested an intention to 'enet that person to the full e)tent of the su'*ect matter& notwithstanding that he may have e)pr e)pressly essly stated that the gift is made for a particular purpose& which may prove to 'e impossi'le of performance or which may not e)haust the su'*ect matter.+
Re As!o"#s ST [19$2] C% $$2 , clear e)ample of purpose trust (stor (stor attempted to set up a trust for the maintenance of good understanding 'etween nations and the preservation of the independence and integrity of newspapers. e attempted to do this with money from from shares shares in a newspaper.. The trust failed 'ecause newspaper 'ecause there was a lac" of of 'eneciaries. This trust was a pure pure purpose purpose trust./ trust./ The The 'asic rule is that yo you u need a 'eneciary to enforce the trust. trust. Ro)'urgh Ro )'urgh $ %!ut if the purposes are not charita'le& great di0culties arise 'oth in theory and in practice. In theory& 'ecause having regard to the historical origins of e1uity it is di0cult to visuali2e the growth of e1uita'le o'ligations which no'ody can enforce& and in practice& 'ecause it is not possi'le to contemplate with e1uanimity the creation of large funds devoted to non-charita'le purposes which no court and no department of state can control& or in the case of maladministr maladministration ation reform....
... court of e1uity does not recognise as valid a trust which it cannot 'oth enforce and control...+
Re S%a& [19$7] 1 LR 279 ( 279 ( There gift& to research research There was a testamentary gift& into a new 34 letter alpha'et. alpha'et. The issue was whether whether this was a charity or a private purpose trust. The case held that this was not a charity charity..
T'ERE ARE FOUR REASONS '( PURPOSE TRUSTS ARE )ENERALL( UNENFORCEA*LE+ 5. The !eneciary Principle In other words there must 'e someone who can enforce the trust. Mo",-e . *,s%o/ o0 "%a (5643 "%a (5643 7 8s $r 977 (!ishop (!ishop of :urham was given money and he had complete free range of who to give the money to. lthough in theory someone someone could come forward& forward& 'ecause 'ecause he had an a'solute as wide. to who too vaguediscretion and far too wide. could 'enet& the court held that this was ;<very trust must have a denite o'*ect. There must 'e some'ody in whose favour the court can decree perform performance. ance.
>. #ac" of ?ertainty Re As!o"#s ST [19$2] C% $$2 ( $$2 (Purpose Purpose trusts have a lac" of certainty. In this case& stor was tal"ing a'out maintenance of good understanding 'etween nations and preserving and maintaining independence of newspaper was too wide and uncertain. uncertain. e had wished to create a trust for the %maintenance@ of good understanding@ 'etween nations+ and %the preservation of the independence and integrity of newspapers+ with money from the shares he owned in his newspaper The A'server.
Re E5a-o!! [196] C% 232 ( 232 (Gave Gave most of the money to his son and some money to the local council to set up a memorial memorial to himself himself.. ?ourt se08 memorial held that 'ecause he used the words %soe %soe se08 memorial to himself+& that was too uncertain. uncertain. %for the purpose of providing some useful memorial to myself+ unless his wife was still alive& in which case the interest should 'e paid to her.
9/ Perpetuities trusts is life B >5 years (>5 years years set out The rule in relation to purpose trusts under common law. law. Private purpose trusts are still governed 'y the common law on perpetuities. ee-% 191; L<R ( ee-% L<R ( %Necessary to stri"e stri"e a 'alance 'etween on the one hand the freedom of the present generations and on the other that of future generations to deal as they wish with the property in which they have interests. If a settlor has total li'erty to dispose of his property among future 'eneciaries& the recipients 'eing fettered 'y his wishes would never en*oy the same freedoms in turn.+
'a-o-= . a!so a!so [192] [192] ))))
3. Pu'lic Policy Re As!o" As!o" [19$2] 1 A88 ER 16 16 Ro)'urgh Ro )'urgh $ ;It is not possi'le to contemplate with e1uanimity the creation of large funds directed to non-charita'le purposes which no court and no department of state can control& or in the case of maladministratio maladministration n reform.
*"o& . *"5e!! 12; 21 C% 667 ( 667 ( Testator Testator was an old old lady who made a will and said the house was to 'e 'oarded up with good long nails& her cloc" was to remain inside the house for >4 years& she directed that her trustees visit the house every 9 months to ensure that the trust was 'eing upheld and that if the trustees didn+t chec" the house they would not receive what what they were entitled to under the will. The court held this was a useless trust and failed. failed.
EXCEPTIO EXCEP TIONS NS TO T'E P PRIVA RIVATE TE PUR PURPOSE POSE R RULE ULE 5. <rectionCm <rectionCmaintenance aintenance of monument monuments s and graves Msse! . *,>8e [176] N 17 (Dnder the will the testator gave 944 to consutruct a memorial for a relative and then another>44 for the maintenance of the memorial. memorial. The court held that in relation relation to constructing the memorial it was valid& however& the >44 for maintenance
was invalid 'ecause it was against the rules of perpetuities& 'eucase they didn+t speicify how long it was to go on for. for.
Re 'oo/e" [1932] 1 C% 3 ( Testator Testator left money money for trustees& trustees& for the care and up"eep up"eep for a grave and ta'let and and window. window. The issue was whether whether all those items were were valid or whether some some or none were. were. The court held that the up"eep of the ta'let and window were void 'ecause they are not within the class of e)ceptions& 'ut the fort and the monuments which had 'een stipulated at >5 years (came within the perpetuities rule were thus valid. valid.
P,"b",>%! . Sa8&e? [196] N 6 ( 6 (Eoney Eoney was given for the up"eep of a 'urial enclosure and the clause had a length of time satisfying the perpetuity rule. rule.
The gift will fail if to vague Re E5a-o!! [19$9] ECA C,. $ ( $ (:emonstrates :emonstrates that courts are not willing to e)tend e)tend the e)ception. , Prior to Re Endacott the the e)ception only included memorials for for other people. In this case it considered considered whether the class would 'e e)tended e)tended to memorials memorials to oneself. oneself. owever& the courts courts were not willing to e)tend the class. class.
>. Eaintenance of specic animalsCpets The courts are are willing to uphold trusts in favo favour ur of animals as the the following cases illustrate. Pe!!,>a88 . Pe!!,>a88 [142] 11 L@ C% 176 176 ( (It It was a trust for a horse for F4Cyear for the testators testators favourite horse. horse. The court held that it was was valid. valid. There was a valid trust for a horse. horse. The disposition in this c case ase was H4 per year for the maintenance of the testator+s favourite horse& which the e)ecutor of his estate had promised to honour. The court held that there was a trust 'ecause the residuary legatee could enforce the trust.
Re ea 19; 41 C% $$2 ( $$2 (It It was a trust for a horse. Testator gave F4 on trust for a period of 4 years to 'e used for loo"ing after his horses and hounds hounds for that period or for for as long as they shall shall live. The clause was held to 'e valid& despite 4 years& which oJended against the rule of perpetuities. ?ourt said that perpetuities only applies to people people and thus was not applica'le in this case (horses. (horses.
Re 'a,es 19$2; T%e T,es 7 No.ebe" ( Trust maintenance of Trust for maintenance cats was valid. t the time cats cats did not live over >5 years and and therefore therefore would not oJend the perpetuity rule. rule.
nimals and the perpetuity period T%e -o0s,o ,s %o& 5o ?o a//8? !%e /e"/e!,!? "8e , "e8a!,o !o a,a8s+ oes ,! " 0"o !%e 5a!es o0 !!%e %e !es!a!o" o" 5o 5oes es ,! " 0"o !%e 5a!e o0 !%e a,a8 The changes made made to the rules against per perpetuity petuity under the P Perpetuities erpetuities and ccumulations ct >447 do not apply to purpose trusts. This means that the the common law rrule ule against perpetuity is app applica'le lica'le in relation to animals. Re ea s/"a; (?auses several pro'lems pro'lems 'ecause it did not apply the perpetuity rule. Re Be88? IR 2$$ ( 2$$ Testator left F544 for maintenance dogs and then after[1932] was to 'e used ( Testator for the saying saying of masses. The *udgeofsaid that the masses is far far too remote. remote. !ut he then went on to say say that perpetuity rule does not apply to lives of animals. Dpheld this as a trust 'ecause dogs do not live >5 years. years. Re 'a,es 19$2; T%e T,es 7 No.ebe"
9/ 9/ Trust Trust for saying of of masses Re 'e!%e",>!o [199] 2 A88 ER 129 ( 129 ( The The saying of masses masses suggested that they were to 'e said in private. owever& the court held that 'ecause they could 'e held in pu'lic& even though that was not the real intention& it was valid. Prov Provided ided it was not a purely purely private saying of masses masses the trust will 'e valid. valid.
*o"e . Beae [1919] AC 1$ 1$ ( (
Re B%oo C%e> Teo& [1932] S!"a,!s se!!8ee!s LR 226 ( 226 ( This This was a commonwealth commonwealt h decision and therefore is purely o'iter. o'iter. Testator wanted a particular religious ceremony ceremony carried out during the perpetuity period. :emonstrates :emonstrat es that this does not only apply to ?hristian saying of masses& rather it applies to all religions. religions.
3/ Promotion of Ko)-hunting Re T%o/so [1934] C% 342 ( 342 ( Testator money to 'e Testator gave a legacy of money used for promoting promoting fo)-hunting fo)-hunting and it was found found to 'e valid. This would li"ely not 'e valid today 'ecause it would 'e contrary to pu'lic policy and it is illegal today. today.
No e)tension of the <)ceptions Re E5a-o!! [196] C% 232 ( 232 ( The The court too" a str strict ict view in relation to e)tending the restrictions. restrictions. e said that the e)ceptions e)ceptions were were di0cult to *ustify and they should should not 'e e)tended e)tended further. further. It was said that the e)ceptions are are out of sync with the general purpose. purpose. $ustifying the e)ceptions e)ceptions *ustify the e)ceptions. It is di0cult to *ustify e)ceptions. It has 'een suggested that they are an allowance for human sanctomant 'ecause they are in relation to human emotional emotional issues& such as pets. pets. Per Perhaps haps another way to to loo" at it would 'e to argue that it should 'e enforced in relation to memorials. th
Really the e)ceptions are here 'ecause the late nowadays 57 century the courts decided these e)ceptions e)ceptions should e)ist. in e)ist. owever& it is very di0cult to *ustify them. them.
?onditional Gift It is important to loo" at whether a conditional gift is a gift or a purpose Re T?8e" [191] 3 C% 232 ( 232 ( Testator money to a charity on the the Testator donated money condition that they they maintained the the family+s vault. vault. nd if the charity charity did not maintain the family vault& then the money was to go to a diJerent charity altogether. altogether. The di0culty was whether whether this was a conditional conditional gift or a purpose trust. The court held that this was a conditional gift gift 'ecause you had a 'enecia 'eneciary ry.. It also meant in relation to this particular case that it didn+t infringe the perpetuity rule. rule.
8alid Trusts which appear to 'e for a purpose Re e8e?#s T [1969] ( [1969] (Lettlor Lettlor owned company and gave land to trustees to 'e used for the recreational purposes for primarily the 'enet of the employees of the company company.. Dp to M of the people using the land had to 'e company employees. employees. The issue was whether whether that was a purpose trust or whether that was a trust 'ecause you had 'eneciaries. ?ourt held that there were 'eneciaries 'ecause they had the use of the land. lthough it had a purpose purpose (Recreational (Recreational facilities& facilities& 'ut 'ecause it was 1ualied 'y who could use the land it meant that it was a trust trust..
here there is a purpose however& there are people who can enforce that purpose& 'ecause there are 'eneciaries& 'eneciaries& it will 'e a trust. trust. The "ey issue was whether there was someone who could enforce the trust.
Re *o&es [196] 1 C% 37 37 ( as upheld 'ecause the people on the ( estate could enforce enforce the trust. The trees were were on the estate and had to 'e maintained& the people living on the estate were the 'eneciaries& and therefore therefor e it was not a purpose purpose trust. hat this means means is that where where you can nd a 'eneciary& it will not 'e a purpose trust& it will 'e a trust which is enforcea'le. enforcea'le.
Lea%? . A!!o"e? )ee"a8 0o" NS [19$9] AC 4$7 ( 4$7 ( Testator Testator died and left 4 acres on trust for such orders of nuns which the trustees would select. They decided to select a group group of nuns who did not have charita'le status (order (order or caramalide nuns. nuns. These nuns did not carry out charita'le wor"s. The issue was whether whether or not that could 'e upheld upheld as a trust in relation relation to 'eneciary principle. The issue was the pro'lem pro'lem of the wording and it was decided that 'ased on the wording 'ecause it did not have any 'eneciaries 'eneciaries it was a purpose trust. trust. ad they chosen chosen a charita'le group of nuns then it would 'een o"ay. @. There was a perpetuity issue 'ecause there was no )ed period period in it. Kurther issue is 'ecause of the wording you couldn+t say it was to the nuns as individuals& rather it was to the group of nuns 'oth now and in the future& so you didn+t "now who was in the group. !ecause of the wording wording it appeared to 'e for the purpose of the nuns and therefore therefore a purpose trust and void. This is a very strict interpretation interpretation of the the rule. rule.
