Beneficiary Principle
Table of Contents
BENEFICIARY RIGHTS.................................................................1
BENEFICIARY PRINCIPLE.............................................................2
GENERAL APPLICATION.................................................................................. 3
TRUSTS OF IMPERFECT OBLIGATIONS.................................................................3
Care of animals.................................................................................... 4
Maintenance of specific graves and monuments.................................4
Saying masses for the dead.................................................................4
Capriciousness..................................................................................... 4
TRUSTS BENEFITTING AN IDENTIFIABLE CLASS OF PERSONS...................................4
Distinction. Person vs Purpose?...........................................................4
Purpose v Motive.................................................................................. 5
UNINCORPORATED ASSOCIATIONS..............................................6
WHAT........................................................................................................ 6
LAW........................................................................................................... 6
DISSOLUTION............................................................................................... 7
Bona Vacantia...................................................................................... 7
Proportions........................................................................................... 8
Beneficiary Rights
Morice v Durham doesnt explain what the beneficiarys rights are.
This is to be found in Suanders v Vautier. Effectively means that
each beneficiary has an equitable proprietary right in the trust
property. But
Rights in personam (aka like a debt)
o Trustees personally liable for the trust: Target Holdings v
Fedferns.
o Lord Eldon. Earl of oxford. The courts of erquity correct
mens consciences for breach of trusts
Rights in rem (proprietary)
o HOWEVER, as LBW in Westdeutsche makes it clear, the
beneficiaries rights are not limited to personal claims
against the trustee themselves. Also extends to
Beneficiary Principle
Rationales
1. Without beneficiaries there is no owner
2. The trust cannot be enforced by the court
a. Harman J in Re Wood.
b. Morice v Bishop of Durham. There must be somebody in
whose favour the court can order performance. Lrod
Grant MR.
3. The trust will violate the rule against perpetuity. Viscount
Simmonds. They tend to perpetuity in Leahy.
Note change from Leahy, whereby the courts were more ready to
strike down trusts as being void for falling foul of the beneficiary
principle, to Denley where a more indulgent court attitude is willing
to find that a group of people can sensibly enforce the trust.
The fuck is perpetuity?
Magic gravel pit case: Re Wood. Trust for the purpose of working
gravel pits was struck down on the basis that it tended to perpetuity.
Clearly illogical because at some time the gravel pit would run out.
No desire to keep money out of the economy, tied down in abstract
purposes.
Have a specific perpetuity period within the Perpetuities and
Accumulations Act. Normally there are two options
1. A fixed period of 80 years (s1)
2. A life in being plus 21 years.
If they dont, then before 1964, they would have been void. After
s3(3) of the Act, the law treats such trusts as being valid as until or
when they transgress the relevant limitation period.
If it goes over, then s4(4) comes into operation. It prevents future
beneficiraies from becoming entitled to the fiund. Then winds down
the trust and distributes it amongst the beneficiaries so currently
entitled.
Usually, you can simply say this trust shall continue in full force
and effect as far as the law allows re Hooper. That way the perp. Is
read into the trust.
General Application
Re Astors Settlement Trusts the trust was invalidated as it fell foul
of the rule. With respect to a trust for
Maintenance of good understanding between nations
Preservation of independence and integrity of newspapers
Protection of newspapers from becoming absorbed by
combines
Held not to be charitable purposes. Roxburgh then held that it was
void due to the following
1. Violation of principle
2. Purposes were uncertain
Examined Harman J in Re Wood gift on trust must have a cestui qui
trust
Re Shaw. George Bernard Shaw couldnt leave his estate to be put
towards research into a 40 letter alphabet and transliterate his plays
into such a language. Fell foul of the principle.
Re Endacott. Gift to a Parish Council to erect a suitable memorial.
Failed.
Remember that if a gross sum be given and a special
purpose be assigned to this gift the court regards the gift as
absolute and the purpose as merely the motive for the gift
Re Sanderson
Re Bowes the grant of 5000 pounds to spend planting trees on
the deceaseds estate was held to amount to a trust for the
estate owners absolutely with the motive of spending on
trees. But they were free to spend it how they wished.
Confirmed by the rule in Saunders v Vautier.
Care of animals
A trust for animals generally will held to be charitable
However, a trust for a specific animal can be a valid unenforceable
trust as long as it doesnt violate the period for perpetuity.
Pettingall v Pettingall favorite black mare.
Maintenance of specific graves and monuments
Pirbirght v Salwey gift of 800 pounds for the upkeep of the burial
enclosure of a child in a churchyard for as long as the law
permitted was held to be valid until 21 years after the testators
death. (i.e.subject to rule against inalienability and restricted to
perpetuity period)
Musset v Bingle Provided sum for erection of moneument and a sum
for its upkeep. The latter was held void for violation of rule against
perpetutities.
However, must be a precise monument. Not simple a some useful
memorial Re Endacott.
Saying masses for the dead.
Re Hetherington Held that the saying of masses in public can be a
charitable activity for the enhancement of religion.
However, if said in private it seems as though it would give rise to a
trust of imperfect obligation: Bourne v Keane. And may extend to
other rites: Re Khoo Cheng Teow.
Capriciousness
Brown v Burdett a trust to block up all rooms of a house for 21 years
was held to be void.
Scotland has been more ready to set aside blatantly pointless trusts
Erection of artistic towers round estate MCaig v University of
Glasgow.
Erection of bronze statutes of testatrix and her children
MCaig v United Free Church of Lismore
Unincorporated Associations
What
Conservative and Unionist Central Office v Burrell
1. Two or more persons
2. Bound together for common non-business purposes
3. Mutual rights and duties arising from a contract between them
4. In an organization with rules to determine who controls it
5. Which members must be able to join or leave at will
Cannot speak of property being owned by such a society, or on their
behalf. This creates difficult problems for trusts. They cannot claim
that they own the money bequeathed to them since they: have
no separate legal existence.
Law
How to get around as per Lawrence Collins J in Re Horley Town FC.
1. Outright gift to present members
Dissolution
Difficult as arguments in favour of
1. Property passing to Crown as bona vacantia when no one can
establish title (I.e. to the Duchy of Cornwall, who pays the
income to the Prince of Wales)
2. Reverting back to external donors under resulting trust.
Bona Vacantia
Goff J in Re West Sussex Constabularys Benevolent Fund
1. Contributions of members past and present
a. Passed to crown as the dead members had already
reaped the benefits of their contractual association with
the club, or, simply didnt have any relatives who could
benefit
b. Held on resulting trust for the donors estate.
2. Anonymous contributions to collecting boxes
a. Presumed intention that donors wouldnt want money
back
b. Outright gift.
3. Contributions
a. Presumed intention. Distributed according to the rules of
the association.
b. Also contractual terms. You pay you get what you paid
for. Extinct contractual liability.
c. Passed to the crown.
4. Raffles and entertainment
a. Interaction was based on contract, and not on trusts.
They had already received the contractual performance
for which they provided consideration.
In circumstances where the contract provides for the division of
assets, this is a purely contractual matter and does not hinge on the
invoking of equitable doctrines: Re Bucks as per Walton J (no 2), as
followed per Lawrence Collins in Upholstery Ltd. The membership of
the association voluntarily subjugates its poroperty rights to the
terms of the associations constitution.
Re Bucks Constabulary Widows and Orphans Fund Friendly
Society.
Stated that upon dissolution its assets are held on trust for such
members to the total exclusion of any claim on behalf of the Crown.
Can be reconciled with Re West on the grounds that this case
concerned an unincorporated body governed by the Friendly
Societies Act 1896.
BUT. View expounds the wider approach that the contractholding approach applies irrespective of pre or prior
dissolution and irrespective of the nature of society. Very
clearly a rejection of the resulting trust approach.
Only ever goes to crown when the society becomes moribund.
However, this was not applied in Hanchett-Stamford v
Attorney General. Lewison J
o saw no basis for restricting principle that members are
beneficially entitled to the societys assets subject to
the contract to cases where there are two or more
members.
o Also held that it would be an infringement of Human
Rights to deprive her of funds.
o Assets didnt go to Crown. Absolutely vested in her free
from any of the societys rules.
BUT: Davis v Richard and Wallington Industries Ltd Scott J. Resulting
trust would be implied in favour of the funds unless it is absolutely
clear that a resulting trust was to be excluded. :S WAAAAAAAAAA.
Pension fund. Inland Revenue rules deal with member
entitlement to surplus
Seems to have considered that the only possibility with regard
to surplus was a resulting trust or to the Crown. Omitted the
vital contractual entitlement to surplus.
Proportions
Clear that the funds will be divided equally amongst members at
date of dissolution. No question of equity varying the proportions as
it clearly was a question of entitlement at law by virtue of the core
contractual heart of the society. Re Bucks.
Re Sick and Funeral Society. Surplus distributed in proportion to
contributions. Megarry. Some members paid full rate some members
paid half.
Illustrates the difficult of trust law in that it is at odds with
human understanding of possession. Whilst the members see
their ownership as attaching to specific items, the law sees it
as relating to amount of value in communal property and
rights against individuals members.
GKN Blots and Nuts. Megarry VC
broad sword and regard to common sense therefore allowed the
distribution of the proceeds of the sale of the sports grounds equally
amongst the full members who had the right to vote in the winding
up of the association. only
Re Horley three levels of members. Those temporary
members. Associate members. And full members. Although
full and associate memebrs could vote, only full members
were beficially absolutely entitled to property on their winding
up. This was because they had no effective rights
some members were introduced (amending the Rules in the
process) simply to conform with Licensing laws. Therefore held
that the assets of the club were not to be partionned among
these additional members but as a bare trust for full
members. Lawrence J.
Lastly, submitted that equity should not interfere with a resulting
trust. Simpler to treat equity as requiring the parties to carry out
contractual duties (i.e. give preference to the constitution).
Walsh v Lonsdale. Equity treats as done what ought have been
done
Westdeutsche. Imposition of constructive trust where the legal
title holders conscience is so affected.
That way, the issue of resulting trust does not arise. The transferor
loses title in the property as original owner and acquires property
right only under contract. Far simpler.