5 - THE BENEFICIARY PRINCIPLE AND NON-CHARITABLE PURPOSE TRUSTS

Objections to Non-Charitable Purpose Trusts

Non-charitable purpose trusts often fail because they don’t meet key trust law requirements.
A valid trust normally needs:

• Certain objects (clear beneficiaries),

• Someone to enforce it, and

• A limited duration.

Since purpose trusts focus on a purpose (not people), they usually break these rulesCertain objects (clear beneficiaries),

UNCERTAINTY OF OBJECTS

KEY CASES

• Re Astor’s Settlement Trusts [1952]

• Morice v Bishop of Durham (1804–05)

• Rule: Trusts must have a definite group of beneficiaries → non-charitable purpose trusts fail this test.

EXCESSIVE DURATION- PERPETUITY RULE

• what it is 

• key cases 

• A non-charitable purpose trust might go on indefinitely since “purposes” don’t have natural time limits.

• If it could last beyond the legal perpetuity period (usually 21 years), it’s void.

  • MacAulay v O'Donnell [1943]

  • Mussett v Bingle [1876] (allowed a monument trust that was likely to finish within time)

• Tip: A settlor can limit the trust’s duration to stay within the legal period — but that doesn’t fix other problems (like lack of beneficiaries).

Lack of Beneficiary (Enforcement Problem)

key cases

• Re Astor’s ST [1952]

• Re Shaw [1957]

• Re Endacott [1960]

• Leahy v A-G for NSW [1959]

Lack of Beneficiary (Enforcement Problem)

Exception debate: cases 

• Re Denley’s Trust Deed [1969] — said people who benefit in fact from the purpose can enforce it.

• Re Endacott — Court of Appeal said no, only actual beneficiaries with equitable interests can enforce.
  → The two cases are hard to reconcile.

Excessive testamentary delegation 

• what is it

• case

• If a will leaves property “for a purpose”, the testator may not be deciding how it’s actually used — they’re leaving that choice to the trustee.

• This is called “excessive delegation”.

• However, if there’s someone with legal standing to enforce the trust, this objection loses force.

• Leahy v A-G for NSW illustrates this issue.

The Beneficiary PrincipleDefinition

A valid trust must:

• Benefit identifiable individuals (beneficiaries), or

• Be charitable.

If a trust is just for a non-charitable purpose, it usually fails — because there’s no one for the court to enforce it for.

THE BENEFICIARY PRINCIPLE

• MORICE V BISHOP OF DURHAM quote 

“There must be somebody, in whose favour the court can decree performance.”

The Beneficiary Principle

Why It Matters

The courts can only supervise a trust if they know:

• Who benefits, and

• Who can hold the trustee accountable.

If there’s no one to enforce it, it’s not a trust — it’s just ownership by another name.

Rights Principle vs Enforcer Principle

(i) The Rights Principle

• Trusts exist to give rights in equity to specific people.

• If no one has rights against the trustee → there’s no trust.

• Non-charitable purpose trusts give no one any rights, so they fail.

The Enforcer Principle

• what is it 

• Some argue that what really matters isn’t ownership, but enforcement.

• Maybe a trust could still be valid if someone (not necessarily a beneficiary) is nominated to enforce it.

  • e.g. a named enforcer could sue trustees who fail to carry out the purpose.

The Enforcer Principle

• what legal systems allow this 

• Cayman Islands Trust Law s.101

• Guernsey Law 2007 s.12

• Jersey Law 1984 s.13

The Enforcer Principle

• however…

• In English law, there’s no official enforcer for private purpose trusts.

• The state has no interest in enforcing private trusts.

• So, if there’s no person with a private right, the trust cannot exist.

Powers for Purposes

• Trustees can be given a power (not a duty) to use funds for a purpose.

• Powers for purposes are valid because:

• There’s no obligation to act → no enforcement problem.

• Default beneficiaries (those who benefit if the power isn’t used) can hold trustees accountable for misuse.

Powers for Purposes

Re Shaw:

Courts won’t disguise invalid purpose trusts as powers to make them valid.

A trust is a trust; a power is a power.

SUMMARY

• The beneficiary principle says every valid trust must have someone who can enforce it.

• Non-charitable purpose trusts fail because:

  1. They don’t give rights to anyone.

  2. There’s no one bound to enforce them.

• Having an “enforcer” doesn’t fix the problem — they may not be legally obliged to act.

• Powers for purposes are fine because there’s no duty to enforce them.

Trusts for Persons Limited by a Purpose

What Are They?

These trusts look like purpose trusts but actually have beneficiaries.
They are not true purpose trusts.

Trusts for Persons Limited by a Purpose

Re Sanderson’s Trust (1857):

• money left for a brother’s maintenance and support.

• Similar 19th-century examples include trusts for the education, maintenance, or advancement of children.

Trusts for Persons Limited by a Purpose

Key Point:

These are trusts for individuals, where the amount they get depends on the cost of a benefit (e.g. school fees), not a fixed share of money.

Trusts for Persons Limited by a Purpose

What Happens to Any Leftover Funds?

If the trust fund isn’t fully used for the stated purpose:

• If it’s a true Re Sanderson-type trust, the leftover money goes elsewhere (gift over or resulting trust).

• If the “purpose” is just a motive (not a limit), the whole fund belongs to the beneficiary.

Valid Non-Charitable Purpose Trusts — The Anomalous Exceptions

Although most non-charitable purpose trusts are invalid, a few narrow exceptions exist.
These are called “trusts of imperfect obligation” because there are no beneficiaries, but courts still allow them.

Valid Non-Charitable Purpose Trusts

Main cases to know  

• Re Astor’s ST [1952]

• Leahy v A-G for NSW [1959]

• Re Endacott [1960] — confirms exceptions won’t be extended

• Re Denley’s Trust Deed [1969]

• Re Dean (1889)

Recognised Exceptions

Courts have allowed non-charitable purpose trusts for:

1. Tombs and Monuments

• Reasonable provision allowed (Mussett v Bingle, Re Hooper)

• But vague wishes like “some useful memorial to myself” → invalid (Re Endacott)

Recognised Exceptions

Courts have allowed non-charitable purpose trusts for:

Care of Specific Animals

Re Dean (1889): trust for upkeep of the testator’s horses and hounds allowed.

Recognised Exceptions

Courts have allowed non-charitable purpose trusts for:

Saying of Masses (Private Religious Services)

• Bourne v Keane (1919): private Catholic masses valid.

• Re Hetherington (1990): public masses valid as charitable (advancement of religion).

Recognised Exceptions

Courts have allowed non-charitable purpose trusts for:

Re Thompson (1934):

included fox-hunting — now invalid since fox-hunting is illegal (Hunting Act 2004).
Courts are unlikely to extend the list of exceptions beyond these.

The Pettingall Order

Pettingall v Pettingall 1842

When a valid “trust of imperfect obligation” is created, courts can use a Pettingall order to supervise it.

The Pettingall Order

How It Works

• The trustee or executor promises to carry out the purpose.

• The court allows those who would get the money if the trust failed (the “default takers”) to:

  • Go to court if the trustee misuses the funds or

  • Fails to carry out the purpose.

This is the court’s way of making sure the trustee acts properly, even though no real beneficiaries exist.

A Possible Departure from the Beneficiary Principle:

Re Denley’s Trust Deed (1969)Facts

• A company created a trust of land for use as a recreation ground for its employees.

• The question: was this a valid trust? It seemed to be a purpose trust (for recreation), but it directly benefited specific people (employees).

Goff J’s Decision

Goff J upheld the trust.
He said that:

• The purpose (recreation ground) was not abstract — it directly benefited identifiable people (employees).

• The employees were close enough to the benefit that they could enforce the trust.

Goff J’s Decision

Therefore, the trust did not breach the beneficiary principle because:

• There were ascertainable beneficiaries (employees).

• The trust could be enforced by them.

Why Re Denley Seems Different

Unlike true non-charitable purpose trusts:

• It wasn’t for a vague or general aim (like “world peace” or “improving journalism”).

• It was for a specific group of people who clearly benefited and could be identified.

So, it was effectively a trust for persons, even though it was described as being for a purpose.

Subsequent Commentary

Later judges and academics generally said Re Denley wasn’t a real exception to the beneficiary principle.

• Re Grant’s Will Trusts 1980 

Treated it as a discretionary trust (trustees choose how to benefit employees).

Subsequent Commentary

Later judges and academics generally said Re Denley wasn’t a real exception to the beneficiary principle.

Re Lipinski’s Will Trusts [1976]

Treated the “purpose” as just a motive for a gift to people (not a separate purpose trust).

Subsequent commentary

• in short…

Re Denley didn’t actually change the law — it just showed that a trust worded as a purpose trust might still be valid if identifiable people benefit directly.

Modern Use & Limits

• what case was Re Denley interpreted in 

Re Denley was applied (without much comment) in Gibbons v Smith [2020] to validate a trust of land for an unincorporated association.

• But the beneficiaries (like employees) must still satisfy the certainty of objects test from McPhail v Doulton [1971] — they must be clearly identifiable.

Modern Use & Limits

• CONTRAST CASE 

• R v District Auditor ex p West Yorkshire MCC [1986]:

  • Trust for the “benefit of all residents of West Yorkshire” was invalid because:

• The class was too wide and uncertain.

• It was a non-charitable purpose trust.

• It was also administratively unworkable.

RE DENLEY

Key Takeaway:

Re Denley looks like a purpose trust but is really a people-based trust with a purpose attached.
It’s not a true departure from the beneficiary principle — just a rare example where a “purpose” trust works because real beneficiaries exist.