Private purpose trusts

The requirement of ascertained beneficiaries fulfills one the certainty objects test and thus would go towards validating the trust. A private purpose trust fails to indicate an individual or individuals or a clear class of individuals who will benefit if it is carried out. For example re Astor a trust for inter alia the establishment, maintenance and improvement of good understanding, sympathy and co-operation between nations was held void. The rationale is that such trusts lack enforceability against the trustees and flouts the beneficiary principle inherent in all trusts. The beneficiary principle requires that all trusts be made for the benefit of human beneficiaries who will be able to apply to the court to enforce the trust : Morice v Bishop of Durham the court can neither reform maladministration nor direct a due administration. The principle is also framed as the no purpose trust rule and that with the exception of charitable trusts, nearly all trusts for a purpose are void : re Endacott a testamentary trust for the purpose of providing some good useful memorial to myself failed for want of a human beneficiary

The beneficiary principle can be viewed as a rights principle or an enforcer principle. If there are no persons with rights against the trustee then there is no trust. It also follows that if there is no one with the ability to enforce the trust then there is also no trust. The law of trusts are devices of private law and for a private law to have any legal effect it must actually confer rights or create enforceable duties. Dedicating rights to a purpose does neither. A number of purpose trusts have been upheld despite infringing the beneficiary principle, and also despite infringing the rule against perpetuities :1.Reasonable provision for tombs and monuments provided it was specifically to erect a physical structure 2.The upkeep of animals : re Dean with the rationale that the courts were sympathetic with the specific motive of the testator and it was unclear whether the trust was for the animal per se or to a person who helped to look after the animals : Pettingall v Pettingall under such situations the trustee or executor of the will undertakes to carry out the purpose of the trust Petingall order 3.Religious services to the extent that these are not charitable in advancement of religion :Bourne v Keane, re Hetherington the element of community benefit. The rationale to allow these private purpose trusts was that the purposes were beneficial and it was reasonably possible to execute through a Pettingall order which would be issued by the

courts under which the trustee or executor of the will undertakes to carry out the purpose.

MY NOTES ON PRIVATE PURPOSE TRUSTS

Beneficiary principle : for a trust to be valid it must be for the benefit of ascertainable beneficiaries. Morice Bishop case : there must be someone in whose favour the court can decree a performance So if a trust is expressed in terms of a purpose then it will be impossible to determine any definite objects for the court to benefit I. e to hane standing against the trustees. Re Astor : Mr Astor made a settlement of most of the shares of Observer limited. The purposes were for the good understanding of nations etc. These purposes were held not to be charitable. It was submitted in this case by Roxburry j that if the legal owner i.e the trustee has an equitable obligation , there must be someone who has corresponding rights i.e beneficiaries , or otherwise the trustee takes the property for himself. Where the settlor intends to create a trust , and it is usually the case in this line of cases , then upon failure of the trust the trustee does not take the property , but rather an ART arises because the settlor has failed to discharge himself of the interest.

In Re Denley the no purpose trust rule was narrowed by Goff J. The case concerned an inter vivos trust of land. According to Goff J the Re Astor principle was confined where the purpose or object trust were abstract or impersonal. He stated that where a trust is expressed as for a purpose but in essence there is a class of identifiable individuals who are to be benefited then the beneficiary principle is saved. His view was that the class was ascertainable on a complete list test.

In Re Denley the mere power of the trustees to make rules governing the enjoyment of land does not amount to a discretion over who and in what proportions may benefit. It is more like an administrative discretion to ensure that all employees may enjoy the sports ground as much as possible. Re Denley was considered in Re Grants and Re Lipinskis. In Re Grants Vinellot J submitted that he could not see the difference between the trusts. The difference is that in Re Grants there was a discretionary trust where the trustees had dispositive powers. In Re Denley the trustees had mere power. In Re Lipinski Oliver J considered Re Denley and submitted that whether one treats the gift as a purpose or as an absolute gift with superadded direction or as a gift where the trustees and the beneficiaries are the same persons the conclusion is the same. The vital point is that in the first two categories the words can be ignored or because the members being the same persons under Saunders principle could do whatever they wanted. Pettingal order : see above Re Endacott : see above In Re Thompson a testator left money to a friend for the purpose of promoting fox hunting. Clauson J decided to make a Pettingal order because there was an interested legatee who could enforce the trust by applying to the court. The problem is that if this motive was to be followed then any purpose trust with an interesting party could be valid under a Pettingal order. This is wrong because the Pettingal order is designed for the categories already known to be within the exceptions.

There is generally willingness from the courts to uphold powers to devote trust powers to purposes. Re Douglas. A problem which is raised is whether powers for purposes can be fiduciary powers. No! Only duty not to misuse the power.

A enforcer principle

Does the law allow private purpose trusts? Hayton argues for the enforcer principle. The enforcer principle would allow the settlor to create a purpose trust so long as the trust revealed a person or class of persons who could enforce the trust against the trustee. The crucial point to understand is that the extent of the trustees duty is the extent to which that duty will be enforced against him by the enforcer , and if the enforcer has no interest to the purpose then he could cut a deal with the trustee. The result is that the enforcer principle that Hayton describes while perhaps within the law does not create a true purpose trust but rather enables the settlor to give his trustee powers to appoint to purposes and a power to another to make him exercise the power. There is no basis in English law for a true private purpose trust. It can be argued that for true private purpose trusts to arise there must be law reform in order to give some public force to the purpose trust so that the trust is not governed merely by the private parties or individuals.

Re Sanderson type trusts

Certain trusts that are thought as purpose trusts have always been allowed by equity. This is a category of trusts under which the beneficiary is allowed to take certain amount for the completion solely of a purpose i.e for the education of my niece . This type trusts are called Sanderson type trusts after the Re Sanderson case. A testator left money to pay and apply the whole for the maintenance of his imbicile brother. At the death of the brother unexpended income remained and the question was whether they would go to the residuary estate or to his brothers estate. In other words the dilemma was whether the gift was limited or it was an absolute gift to the brother. Thus Page Wood VC argued that when the courts consider this kind of cases it is submitted that if a gross sum is given the Court regards the gift as absolute and the purpose only the motive. If an entire fund is given for the maintenance of the children then they take the whole fund absolutely. On the other hand if a portion only of the fund is given for maintenance then they are entitled to draw as much as the purpose specifies. Thus there has been created a line of cases where the courts try to find the intention of the testator of whether he intended to give the whole property as a gift or only he intended for a certain amount to be used. What this means is that settlors can create trusts where they devote funds for a well defined purpose for named beneficiaries and if surplus has remained it will result either to them or to the residuary legatees. It might be even regarded as a test for Sanderson trusts that only well defined costs will be certain enough. The is or is not applies. In Re Bowes the planting trees case the general intention was regarded to find that the 5000 $ was to benefit the beneficiaries.

Re Abott Funds case : Re Andrews case : subscription case for the children of Bishop of Jerusalem. In the absence of the requisite certainty as to the objects the only well defined was the purpose i.e education. Kekewich J construed education in the broader possible way. Both these cases were reviewd in Re Osoba where Megarry VC said that : if a trust is constituted for the assistance of certain persons by certain stated means there is a distinction whether the beneficiaries are dead or not. If they are dead the court is willing to hold that there is a resulting trust for the donors because the major purpose has come to an end. If beneficiaries are still alive the major purpose can be still carried out even after the stated means have been accomplished and so the court will treat the standard means as indicative and not restrictive. We could say that the stated means will be treated as the minimum and not the absolute. There are some problematic questions arising by Meggarys view: What happens if all beneficiaries die before the trustees distribute the property? Residuary estate or resulting trust? In Re Osoba the case concerned a testamentary trust for the maintenance of the widow and mother and for the training of the daughter abiola. The mother and the widow died and abiola finished university before the case came before the court. The question was whether after all purposes have been fulfilled what would happen to the surplus? Megarry leaned towards construing an absolute gift for Abiola because otherwise it would go on resulting trust on intestacy something that the testator would not normally want.

These cases are important because they are seen as a variation of purpose trusts who do not violate the beneficiary principle so long as they are interpreted as trusts which the subject matter is apportioned to beneficiaries in reference to the costs of a well defined purpose. Secondly it might be right to say that until the beneficiaries collapse the trust under Saunders then the individual beneficiaries can insist that the trustees should comply with the testators intentions.

Justin sandiago

The requirement of ascertained beneficiaries fulfills one the certainty objects test and thus would go towards validating the trust. A private purpose trust fails to indicate an individual or individuals or a clear class of individuals who will benefit if it is carried out. For example re Astor a trust for inter alia the establishment, maintenance and improvement of good understanding, sympathy and co-operation between nations was held void. The rationale is that such trusts lack enforceability against the trustees and flouts the beneficiary principle inherent in all trusts. The beneficiary principle requires that all trusts be made for the benefit of human beneficiaries who will be able to apply to the court to enforce the trust : Morice v Bishop of Durham the court can neither reform maladministration nor direct a due administration. The principle is also framed as the no purpose trust rule and that with the exception of charitable trusts, nearly all trusts for a purpose are void : re Endacott a testamentary trust for the purpose of providing some good useful memorial to myself failed for want of a human beneficiary

The beneficiary principle can be viewed as a rights principle or an enforcer principle. If there are no persons with rights against the trustee then there is no trust. It also follows that if there is no one with the ability to enforce the trust then there is also no trust. The law of trusts are devices of private law and for a private law to have any legal effect it must actually confer rights or create enforceable duties. Dedicating rights to a purpose does neither. A number of purpose trusts have been upheld despite infringing the beneficiary principle, and also despite infringing the rule against perpetuities :1.Reasonable provision for tombs and monuments provided it was specifically to erect a physical structure 2.The upkeep of animals : re Dean with the rationale that the courts were sympathetic with the specific motive of the testator and it was unclear whether the trust was for the animal per se or to a person who helped to look after the animals : Pettingall v Pettingall under such situations the trustee or executor of the will undertakes to carry out the purpose of the trust Petingall order 3.Religious services to the extent that these are not charitable in advancement of religion :Bourne v Keane, re Hetherington the element of community benefit. The rationale to allow these private purpose trusts was that the purposes were beneficial and it was reasonably possible to execute through a Pettingall order which would be issued by the

courts under which the trustee or executor of the will undertakes to carry out the purpose.