Equity and Trust

Equity and Trust Order Description Question: ‘The beneficiary principle has hampered the development of trusts law in England and Wales for over two centuries; it is too rigid and enforced far too strictly. Until the rules surrounding it are relaxed then there cannot be any flexibility with respect to private purpose trusts in this jurisdiction.’ Discuss this statement. Beneficiary principal • A trust for private purpose must have ascertainable (certainty) beneficiaries (objects must be Legal Persons) • Morice v Bishop of Durham (1804) Sir William Grant MR held at 404-405: “There can be no trust over the exercise of which the court will not assume control; for an uncontrollable power of disposition would be ownership and not trust…Every other trust must have a definite object. There must be somebody in whose favour the court can decree performance.” (my emphasis) • Exceptions to the Beneficiary Principle • If the beneficiary or beneficiaries of a trust are not legal persons then this will clearly offend the Beneficiary Principle • There are, however, exceptions to the Beneficiary Principle, which may allow a trust for private purposes to succeed • Charitable Trusts are a clear example of this • Re Endacott[1959] • Testator gave North Tawton Parish Council money on trust for purpose of “providing some useful memorial to myself” • Lord Evershed cites Roxburgh J in Re Astor’s ST: ‘[Private Purpose Trusts] may, I think, properly be regarded as anomalous and exceptional and in no way destructive of the proposition which traces descent from or through Sir William Grant through Lord Parker to Harman J. Perhaps the late Sir Arthur Underhill was right in suggesting that they may be concessions to human weakness or sentiment.’ • Memorial not within this category of anomalous cases as to do so “would go far beyond any fair analogy to any of those decisions.” • Re Endecott Exception • Construction/maintenance of monuments and graves (Mussett v Bingle; Re Hooper) • Saying of private masses (Bourne v Keane) • Maintenance of particular animals (Re Dean; Pettingall v Pettingallbut N.B. Re Kelly) • Miscellaneous (Re Thompson) • Unincorporated Associations • Re Denley (1969)(1) Reginald Goff J held at 383: “[I]n my judgment the beneficiary principle of… Re Endacott, decd...is confined to purpose or object trusts which are abstract or impersonal. The objection is not that the trust is for a purpose or object per se, but that there is no beneficiary or cestuique trust… Where, then, 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.” • Re Denley (2) • So Reginald Goff J held that we have to distinguish between 2 types of case: Where the benefit was so INDIRECT/ INTANGIBLE that it would not give those who stand to benefit the right to apply to get the trust terms enforced, then this was an INVALID purpose trust. • However, if it DID allow those who were going to benefit from the trust the right to apply to the court to enforce the trust, then this would be valid. • BUT WHAT POWERS ARE SUFFICIENT?? • Trusts Limited by a Purpose (1/3) • Re Bowes (1896) North J held that the real aim of the trust was not for the purpose of planting trees, but to benefit the owners of the estate. All the planting of trees represented, therefore, was the motive through which the life tenant and remainderman were to benefit from the trust. Therefore they could use Saunders v Vautierrights. • Trusts Limited by a Purpose (2/3) • Re Sanderson’s Trusts (1857) Page-Wood VC held there were two different outcomes for what happens for trusts limited by purposes: “…if a gross sum be given, or if the WHOLE income of the property is given, and any special purpose assigned…this court ALWAYS regards this gift as ABSOLUTE, and the purpose merely as the motive…on the other hand, IF A PORTION ONLY of the fund is given for MAINTENANCE, then they are entitled to draw out SO MUCH ONLY as may be necessary.” • Trusts Limited by a Purpose (3/3) • Guidance on this issue was attempted by Megarry VC in HC decision of Re Osoba[1979] • Megarry J tried to make a DISTINCTION between cases where the purpose has been fulfilled when B is DEAD and where B is still alive. When B is dead, the purpose has been fulfilled and so the remaining property should go to S/S’s estate. Where B is still alive, “the major purpose of providing help and benefit… can STILL be carried out EVEN AFTER the stated means have all been accomplished,” and so the gift should be seen as an ABSOLUTE gift to B. • BUT still problematic • Perpetuities (1) • Remoteness of Vesting for trusts for people: • Perpetuities & Accumulations Act 2009 provides a specified time limit of up to 125 years • BUT cf. s18: • Rule as to duration not affected • This Act does not affect the rule of law which limits the duration of non-charitable purpose trusts • So this Act does not apply for private purpose trusts; Common Law Rules used instead • Perpetuities (2) • Remoteness of Inalienability for purpose trusts • Use old common law rules: • Specified time period of up to 21 years; or • Life in being plus 21 years; or • So far as the law allows Re Hooper, per Maugham J at 40: • “I do not think that is distinguishable from the phrase "so long as the law for the time being permits," and the conclusion at which I arrive, following the decision I have mentioned, is that this trust is valid for a period of twenty-one years from the testator's death so far as regards the three matters which involve the upkeep of graves or vaults or monuments in the churchyard or in the cemetery.” • Animal Purpose Trusts and Perpetuity (1) • Re Dean held perpetuity period of 50 years for horses and hounds if they should live that long was valid • So IGNORED perpetuity rules! But is this a problem? Re Haines Animals often won’t live for longer than 21 years anyway and so there is no perpetuity problem… • Animal Purpose Trusts and Perpetuity (2) • BUT can you guarantee animals will die within 21 years?? • Look at Irish case of Re Kelly • Judge stressed that animals’ lives are NOT lives in being. • Furthermore “neighbours’ cats and dogs can be unpleasantly long lived…” • Arguably this case has the right principles; need to use a valid perpetuity period with reference to HUMAN life • Mussett v Bingle • 2 trusts: £300 for building monument £200 for maintenance of monument But no specified perpetuity period Court held that building of monument would take place within 21 years, so no perpetuity issue BUT maintenance ongoing, so that trust VOID for perpetuity. • CfRe Kelly however – is Mussett v Binglea safe precedent regarding perpetuities? • Trusts of Imperfect Obligation • Even if Private Purpose Trusts have a valid exception to the Beneficiary Principle and comply with perpetuity rules they still depend upon a willing trustee to carry them out (Re Thompson) • As such they are known as trusts of imperfect obligation as the purpose stated is not able to enforce the trust in court • Valid Private Purpose Trusts • Essentially a Private Purpose Trust is valid if you have: • 1.) Valid exception to the Beneficiary Principle (Re Endacott) and • 2.) Valid perpetuity period (CL rules)