Trusts - Purpose Trusts

  1. What are Purpose Trusts?
    These exist when a settlor may desire to create a trust which not a trust for a specified group of people but is instead he may want to see his property used to further a particular cause or objective.
  2. What is the 'Beneficiary Principle'?
    This is the basic rule in the law of trusts that trusts must have beneficiaries, people for whose benefit the trust property is held and applied.
  3. What was said by Lord Evershed in the case of Re Endacott (1960) about the beneficiary principle?
    No principle has greater sanction or authority behind it than the general proposition that a trust in English law, not being a charitable trust, in order to be effective, must have ascertained or ascertainable beneficiaries'.
  4. What are the exceptions to the Beneficiary Principler rule and what are these exceptions also known as?
    The exceptions are known as the Trusts of Imperfect Obligation.

    • The exceptions are
    • 1.) The upkeep of specific animals. Established in the case of Dean (1889).
    • 2.) The promotion of Fox Hunting.
    • 3.) The saying of private Masses for the dead.
    • 4.) The construction and maintenance of tombs and monuments.
  5. Why as a general rule do the courts not allow purpose trusts?
    The most frequently cited explanations for the rule come from Morice v Bishop of Durham (1804). The rationale was expressed as 'there can be no trust, over the exercise of which this court will not assume control, for an uncontrollable power of disposition would be ownership, and not a trust...There must be somebody, in whose favour the Court can decree performance.'

    Roxburgh J in Re Astor (1952) also said that, ' In theory, because having regard to the historical origins of equity, it is difficult to visualise the growth of equitable obligations which nobody can enforce'. For a trust to be valid it must be capable of being supervised by the courts in order to ensure that the trustees duties are enforced and the settlor's intentions respected. There must be somebody who will take the trustees to court if he thinks that they may be failing to administer the trusts properly.
  6. What is the rule against perpetuity?
    This rule says that trusts must have a time limit, the aim being to ensure that sooner or later property ends up vested absolutely in some individual or group and hence can be dealt with without incumbances.
  7. What was established in the case of Re Denley's Trust Deed (1969)?
    The suggestion from this case is that a purpose trust will be upheld provided that there is an ascertained or ascertainable class of people who would benefit, directly or indirectly, from the property being applied for a stipulated purpose, provided that the benefit to such people is not too indirect or intangible. In Goff J's view, the beneficiary principle is concerned only with ensuring that trusts are enforceable, and, where there are people interested in the furtharance of the purpose, these people can enforce the trust.

    This case concerned a trust that stated that the transferred land, 'must be maintained and used as and for the purpose of a recreation or sports ground primarily for the benefit of the employees of the company and secondarily for the benefit of such other persons as the trustee may allow to use the same'.

    Goff J had this to say about the trust;

    there will be trusts, the carrying out of which would confer a benefit so indirect or intangible or which is otherwise framed as not to give those persons any locus standi to apply to court to enforce the which case the beneficiary principle would apply to invalidate the trust. The present is not of that my judgement the beneficiary principle is confined to purpose or object trusts which are abstract or impersonal...where the trust, though expressed as a purpose, is directly or indirectly for the benefit of an individual or individuals, it seems to me that it is in general outside the mischief of the beneficiary principle.'
Card Set
Trusts - Purpose Trusts
Purpose Trusts