RT3: Purpose Trusts

What is the beneficiary principle and what are the key cases establishing it?

Purpose trusts generally void — Morice v Bishop of Durham 1804; Re Endacott 1960; Re Shaw 1957

Two rationales for the beneficiary principle

(1) Enforceability: Bs needed to supervise T (Morice). (2) Deeper rationale: trust as disposition must have a recipient of beneficial interest — purpose trust = conceptual impossibility

Critiques of the enforceability rationale

Other enforcers exist (AG, Charity Commission) → Bs not uniquely essential; duties don't always require right-holders (cf. criminal law). Harder to defend given existing exceptions.

Essay hinge — Re Denley and the beneficiary principle

If enforceability only → Re Denley unproblematic (there are enforcers). If deeper rationale → need clearer account of what it is. Must commit to one side.

Three readings of purpose wording in a trust

(1) True purpose trust → void unless exception. (2) Persons trust (Re Bowes) → Bs take freely; purpose = motive. (3) Persons trust limited by purpose (Re Sanderson's Trust 1857) → Bs take only what needed for purpose; Saunders v Vautier right limited

Re Bowes 1896

£5k for planting trees → read as persons trust for estate owners who took beneficially; purpose = motive

Two requirements for a valid charitable trust (Charities Act 2011)

(1) Falls within s.3(1) — 13 categories including poverty, education, religion, health, environment, animal welfare. (2) For the public benefit (s.4) — no presumption; must be established on facts. Purposes must be exclusively charitable.

Public benefit — two senses (Independent Schools Council 2011)

(i) Nature of purpose is beneficial (weaker — sufficient for poverty). (ii) Benefits available to sufficient section of the public (stronger — required for all other heads)

Education — personal nexus rule

Class cannot be defined by connection to any particular person/organisation — Oppenheim v Tobacco Securities Trust 1951 (employees' children: failed despite large class)

Education — fees and exclusion of the poor

Fees permitted but cannot effectively exclude the poor; meaningful access (bursaries/partnerships) required — Independent Schools Council 2011 (£12k/yr fees excluded poor → failed)

Anomalous purpose trusts — three closed categories

(1) Specific animals of the settlor (Re Dean 1889). (2) Graves and funeral monuments (Re Hooper 1932). (3) Private masses (Bourne v Keane 1919). Closed after Re Endacott — not to be extended even by analogy.

Re Denley — facts, holding, two readings

Facts: land on trust as sports ground "primarily for benefit of employees." Held (Goff J): valid — beneficiary principle confined to abstract/impersonal purposes; ascertainable individuals with locus standi to enforce → outside the mischief. Reading 1: persons trust (purpose = motive). Reading 2: genuine purpose trust exception (valid because enforceable). Later courts resist reading 2 but do not overrule.

Re Grant's Will Trusts 1979 — and why its analogy is flawed

Treated Re Denley as persons trust; drew discretionary trust analogy — flawed because discretion over who benefits ≠ discretion over how beneficiaries enjoy property

Hayton (2001) — what does he argue and what does it resolve?

Real rule = trusts must have an enforcer, not necessarily a beneficiary. Settlor can appoint non-B enforcer → valid if: enforcer named + purpose certain/workable + within perpetuity. Resolves Re Denley if enforceability is the real rule — doctrinal shift courts have not yet made.

Additional requirements for valid non-charitable purpose trusts

(1) Certainty of purpose (Re Astor 1952 — "maintain understanding between nations" = too vague). (2) Not capricious. (3) Within perpetuity period.

What is an unincorporated association and what two problems does it create?

Group with no legal personality — cannot own property, sue, or be sued. Problems: (1) how does it hold property while running? (2) what happens on dissolution?

Contract holding theory — how does it work?

Re Recher 1972; Neville Estates 1962: property beneficially owned by members; treasurer holds as trustee; use governed by contract (constitution); contract prevents individuals taking their share; membership changes via implied power to add/remove Bs (avoids s.53(1)(c) problem)

Three possible constructions of gifts to UAs (Leahy)

(1) Gift to current members as beneficial gift → valid. (2) Gift to present + future members → perpetuity problems. (3) Trust for purposes → void purpose trust (unless exception). Re Recher: treat as (1); purpose wording = motive.

Re Lipinski 1976

Gift "solely for building works" → valid beneficial gift; "solely" = motive; members = ascertainable Bs who can enforce or vary

Dissolution — Re West Sussex (rejected) vs contract holding theory

Re West Sussex 1971 (rejected): subscriptions → bona vacantia; donations → resulting trust. Criticised: arbitrary; resulting trust reasoning contradicts beneficiary principle. Contract holding theory preferred: members = beneficial owners throughout; on dissolution property distributed equally (Re Bucks Constabulary 1979)

Re Bucks Constabulary 1979 vs Hanchett-Stamford 2008

Re Bucks: property distributed equally among members on dissolution. Hanchett-Stamford: if membership falls to one → sole member takes beneficially; overrules Re Bucks on this point.

PQ sequence for UAs

(1) Apply contract holding theory first. (2) Analyse each gift separately using Leahy constructions. (3) Purpose wording → treat as motive unless contrary intention (Re Recher; Re Lipinski). (4) Dissolution → Re Bucks preferred over Re West Sussex.

EQ thesis prompt — "Is the beneficiary principle justified?"

Two positions: (A) Yes — enforceability/conceptual impossibility rationale; exceptions are anomalies not the rule. (B) No — other enforcers exist; deeper rationale underspecified; Hayton's enforcer principle better explains the law. Commit to one; connect to Re Denley debate.

Why is the contract holding theory preferred over purpose trust analysis for UAs?

Purpose trust analysis would: (a) prevent members dividing property up (they have no beneficial interest); (b) on dissolution send property on resulting trust to contributors rather than to members. Contract holding theory gives members beneficial ownership throughout — more coherent and commercially sensible.

EQ angle — Re Denley and institutional coherence

If Re Denley is a genuine purpose trust exception, the beneficiary principle has a large hole in it — any purpose benefiting ascertainable individuals is valid. If it is just a persons trust, no hole exists but courts are engaged in strained construction. Neither reading is entirely satisfactory.

What is the relationship between Re Denley and Hayton's enforcer principle?

Re Denley works on Hayton's analysis because the employees are enforcers. But Re Denley does not go as far as Hayton — it does not allow a non-beneficiary enforcer; it still requires that ascertainable individuals benefit. Hayton's proposal would be a more radical extension.

Examiner warnings — purpose trusts

Always ask which construction of purpose wording applies before concluding void; Re Denley = do not treat as settled; charitable trusts — purposes must be exclusively charitable; education — personal nexus rule is a frequent PQ trap.