Purpose Trusts

Question 1

What are purpose trusts?

Answer 1

Trusts created for a purpose and not for a human beneficiary

Question 2

What is the general rule for purpose trusts?

Answer 2

That they are VOID

Question 3

What are the objections to Purpose Trusts? Why are purpose trusts usually void?

Answer 3

1. No human beneficiaries to enforce the trust
2. Uncertainty
3. Perpetuity (people die, purposes could go on forever)

Question 4

What are the key cases for lack of beneficiaries?

Answer 4

Morice v Bishop of Durham (1804)
Leahy v AG for NSW [1959]

Question 5

What are the two separate problems with lack of beneficiaries for a purpose trust?

Answer 5

1. If the court is required to order the trustees to distribute the trust property, they need to know to whom it should be distributed.
2. Who would have “locus standi” (the right or capacity to bring an action or to appear in a court) to request the court to order performance- there needs to be an identifiable human beneficiary

Question 6

What is a key case for Uncertainty?

Answer 6

Re Astor [1952]- void for uncertainty due to there being no identifiable beneficiary.

Question 7

What is the rules under perpetuity?

Answer 7

1. The Rule against Remoteness of Vesting
2. The rule against inalienability
3. Rule against endowments

Question 8

The Rule against Remoteness of Vesting?

Answer 8

Capital must be vested in someone within the perpetuity period.
This rule applies to fixed and discretionary trusts and to powers

Question 9

The rule against alienability?

Answer 9

Often called the rule against perpetual trusts
Rule restricts the time period within which future interests in property must vest- plus 21 years

Question 10

Rule against endowments?

Answer 10

Not in the public interest that money is tied up in a trust that is no longer useful.

Question 11

Do any of these rules apply to charitable trusts?

Answer 11

No.

Question 12

What is a perpetuity period?

Answer 12

A rule that sets a time limit within which future dealings with property (such as gifts to a particular child or a group of people who fulfil a particular condition) must occur

Question 13

What is the act that sets out perpetuity periods?

Answer 13

Perpetuities and Accumulation Act 2009

Question 14

What are the perpetuity periods?

Answer 14

For any trusts created after the 5th October 2010 the perpetuity period is 125 years (s5)

Under the 1964 version of the Act the usual period was 80 years

At common law the perpetuity period was 21 years if no identifiable life in being

But trusts for a purpose will not be applied to a person within the required time- void.

Question 15

How strict are the courts when a purpose trust can be held as valid?

Answer 15

The exceptions to the rule are “where Homer has nodded”
Some non-charitable purpose trusts have been permitted- trusts of “imperfect obligation”
They are held to be valid despite there being no one who can enforce the trust obligations

Question 16

Examples of exceptions to the rules that make a purpose trust valid?

Answer 16

1. Monuments (gravestones)- Re Hooper [1932]
2. Specific animals- Re Dean (1889)
3. Private masses- Re Hetherington [1990]
4. Promotion of fox hunting?- Re Thompson [1934]- must be regarded as no longer valid

Question 17

Why are there exceptions to the rules of purpose trusts? Key case?

Answer 17

Concessions to human frailty
Small, sentimental ‘oversights’ that do no real harm

Re Endacott [1960]- “for the purpose of providing some useful memorial to myself”
Held that categories are not to be extended- trust also involved a larger sum, the residuary of the estate- context is everything

Question 18

What is an unincorporated association?

Answer 18

An unincorporated body does not have its own legal personality like an incorporated body (a limited company)
It cannot hold property and it cannot receive gifts

Question 19

What are gifts to unincorporated at risk of?

Answer 19

They are at risk of being void as purpose trusts

Question 20

Why are prima facie (at first sight) purpose trusts sometimes saved?

Answer 20

They are sometimes by being interpreted as gifts to unincorporated associations via slightly different means (a gift to the members of the association)

Question 21

What case shows alternative interpretations of purpose trusts?

Answer 21

Re Denleys Trust Deed [1969]

Question 22

What are the alternative interpretations?

Answer 22

1. Truly abstract impersonal purpose trusts no-one can enforce= void
2. Purpose trusts with indirect human beneficiaries- someone can go to court/monitor trustees= no need for trust to be void

Question 23

Are there any other alternative interpretations?

Answer 23

Is it possible to re-interpret the purpose element as being simply a motive for the gift?
- Operated where there is a direct or indirect human beneficiary
- Enables the motive to be dismissed, leaving a simple gift to the beneficiary

Question 24

What are some example cases for alternative approaches and motive for the gift?

Answer 24

1. Re Bowes (1896)
2. Re Andrews (1905)
3. Re Osoba (1979)

Question 25

Does it matter for the motive to be carried out? Key case?

Answer 25

No Re Lipinski (1976) - It was held to be a trust for the present members of the association who can enforce the trust - The issue was that they can also terminate the trust and take the money for their own benefit- the purpose might not be carried out but the court considered the "purpose" simply as the motivation behind the gift.