Enforceability & Termination

Beneficiary principle

A trust without a beneficiary is generally void — related to the requirement of certainty of object.

- you cannot have a trust for an abstract purpose

What is the exception for trusts for abstract purposes

the law of charities - A trust can be made for an abstract purpose if it is in the public interest.

Reasons for the beneficiary principle

1. Enforceability

2. uncertainty - do not know what the settlor intended

3. perpetuity - abstract trusts could last forever

4. capriciousness - no sensible intention in setting up the trust

enforceability

for the trustee to have a meaningful obligation there must be at least one person who is capable of bringing proceedings to enforce the terms of the trust against the trustee.

Morice v Bishop of Durham - beneficiary

"Every other [i.e. non-charitable] trust must have a definite object. There must be somebody in whose favour the court can decree performance."

Re Astor

facts: trust was created to pursue "cooperation between nations, the independence of newspapers and freedom of press"

decision: trust was invalid as there was no one who could enforce a correlative right

Re Endacott

facts: trust was created to make a memorial of himself after his death

decision: no one would benefit from this so there is no beneficiary and therefore no trust

Uncertainty

Trusts without a beneficiary have broad language, which makes it difficult to tell what the settlor actually intended.

Morice v Bishop of Durham

facts: trust created for beneficence and liberality (construed the meaning as drinking

decision: The court was held to be invalid because it was too uncertain — the trustee and courts could not determine what the settlor had intended

Perpetuity

Non-charitable purpose Trusts cannot run for an "excessive duration" (more than 21 years)

Trusts to take care of an animal/pet have been held to be valid for 21 years.

Musset v Bingle

facts: trust for £300 for the erection of a monument and £200 for the maintenance of the monument

decision: The second component of the trust was void for perpetuity because it could potentially last forever

Re Hooper

facts: The testator created a trust to maintain a monument for as long as the trustees can legally do so

decision: trust valid for 21 years

Brown v Burdett

facts: A testator left in her will that her house should be boarded up and left undisturbed for 20 years after her death

decision: The trust was void for capriciousness

How do courts save trusts which appear to be non-charitable purpose trusts

They interpret them as

1. absolute gifts of property with a motive

2. trusts with indirect beneficiaries

Re Bowes

facts: testator left £500 to his trustees to plant trees on his estate

decision: the trust was for the benefit of the persons entitled to the state, although it looks like a trust for purposes, it can be upheld by viewing it as a trust for persons

This was an absolute gift of property with a motive

Re Osba

facts: Testator left property on trust for the training of his daughter up to University age

decision: not a trust for purpose, daughter was the beneficiary and training up to Uni age was the motive

an absolute gift with a motive

Re Lipinski Will Trust

facts: testator created trust for an Association to construct new buildings in memory of his wife

decision: the beneficiaries were the members of the association, not a trust for purpose

Why is Lipinski not an exception

the courts did not say that trusts can exist without beneficiaries but rather found people who could be deemed to be beneficiaries

what are the exceptions to the beneficiary principle? (anomalous trusts)

1. Trusts for the creation and maintenance of tombs/monuments

2. Testamentary trusts for the care of specific animals

3. testamentary trusts for saying masses in private

4. testamentary trusts for the promotion of fox-hunting

Sir Arthur Underhill

allowing testamentary trusts for religious or sentimental reasons are "concessions to human weakness or sentinent"

Pettingall v Pettingall

facts: testator bequeathed £50 a year to look after his favourite black mare

decision: trust was valid and trustee was forced to make an undertaking before the court to abide by the terms of the trust

reform

Criticism - there is a lack of a mechanism for the enforcement of the trust

debate - whether the settlor should be able to appoint someone who is not the beneficiary to enforce the trust (Hayton is in favour of this)

What does Hayton argue about the beneficiary principle

We lose trust business to overseas jurisdictions (Cayman Islands) by not having the same advantageous rules on trusts in England and Wales

- immoral argument — the island is known for tax avoidance

In discretionary trusts, objects can sue for breach even though they do not have a vested beneficial interest in the trust property — we should allow the same for non-charitable trusts

What does Matthews aruge

If you remove this requirement for the enforcer to be a beneficiary, you collapse a trust into a contract — the two areas of law ought to be kept separate

How does Mathews argue against Hayton?

objects of discretionary trust can be considered to be beneficially entitled because they do receive the benefit from the trust property

Arguements against an enforcer

1. An enforcer does not solve the problems of uncertainty, capriciousness and perpetuity

2. Why should we have enforcers when all they seem to do is permit the avoidance of tax?

3. There are other ways to set up an arrangement where you've got trustees who can use the money to advance some abstract purpose — e.g, contracts

What does the rule in Saunder v Vautier allow?

beneficiaries can jointly agree to bring a trust to an end and instruct the trustee to transfer the legal title to them

vested interest

an immediate right which the beneficiary takes under a trust

- do not have to meet any conditions for their interest to take effect

contingent interest

The right depends on the occurrence of some future event

The beneficiary receives no rights unless that future event occurs

Saunders v Vautier

facts: Settlor placed a stock on trust until B was 25, when B was 21 he claimed he had reached maturity and was entitled to the property

decision: The beneficiary had a vested interest in the shares — the trust was not drafted to say "you can only receive the shares if you reach the age of 25"

There was no contingency, so the beneficiary had the right to collapse the trust

scope of the Saunder v Vautier rule

applies to:

- fixed trusts

- discretionary trusts

Stephenson v Barclays Bank [1975]

The Saunders rule only applies to several beneficiaries in a fixed trusts when severance is possible without there being any harm to the remainder of the beneficiaries in the trust

HMRC v Thorpe

if the class is open (trustee has power to add objects to class) the rule in Saunders cannot apply because the appellant may not be entitled to the whole beneficial interest under a trust

What are the limits of the rule in Saunders?

1. cannot be used as a threat to make the trustee do whatever you want to avoid bringing the trust to an end

2. Cannot be used to vary or override the terms of the existing trust Stephenson v Barclays Bank [1975]

3. Cannot be used to control the exercise of the trustee's powers (Lewis v Tamplin)

why does Matthews argue we need this rule

policy of free alienation — if you have property, you should be able to deal with it as you please

What does Langebin argue

free alienation is not a requirement

The settlor should be free to decide how the property is used in the future, not the beneficiaries

Why place a limit on how long a trust can run for?

It is undesirable for property to be taken out of the market and tied up in a trust for a long time.

Why are the anomalous trusts known as trusts of imperfect obligation

obligation is not perfect because the trustee does not owe the duty to any particular person

- This does not mean the trustee can do whatever they want with the money

Re Dean

facts: testator bequeathed £750 a year to look after his horses and dogs

decision: lifetime trust was created for 50 years (in modern times this would be limited to 21)

Bourne v Keen

trust for saying mass in private was held to be valid even though it had no public benefit since it was private

Re Thompson

trust for the promotion of foxhunting was held to be valid

What is the requirement for Saunders v Vautier

1. B is of full age

2. has capacity

3. has a vested interest in the property

what ways can an interest be vested

in possession (immediate right to enjoy the property) or in remainder (right to enjoy the property in the future)