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381CLS Equity and Trusts
Topic 6: The Beneficiary Principle
1. Introduction
It is of utmost importance that a private trust is for the benefit of human
beneficiaries who can enforce the trust. If a trust has no human beneficiary, then
it is prima facie void and the property results back to the settlor. Trusts that have
no human beneficiary are often described as trusts of imperfect obligation or noncharitable
purpose trusts. The only types of trusts purpose trusts that are allowed
in law are called charitable trusts. These are an exception to the beneficiary
principle and are enforced by the Attorney General and Charity Commissioners.
Therefore, trusts for the maintenance of a monument; the provision of a trophy for
a sports club; the upkeep of the settlor’s animals are all prima facie void as having
no beneficiary who can enforce the trust obligation. This is often referred to as the
beneficiary principle.
2. Objections to Purpose Trusts
There are a number of objections to purpose trusts:
a) Enforceability
Morice v Bishop of Durham (1804) 32 ER 656.
b) Uncertainty
c) Conflict with the perpetuity rules:
There are two important rules:
i) The rule against inalienation;
ii) The rule against remoteness of vesting.
The old common law rules was a life in being plus 21 years. The rules were once
governed by the Perpetuities and Accumulations Act 1964 which provided that:
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The maximum period for which vesting may be postponed is either:
a) The period of life or lives in being, and a further period of 21 years;
b) Where there is no life in being, a period of 21 years; or
c) In the case of post 1964 gifts, a period not exceeding 80 years which is
specified in the instrument creating the gift as the perpetuity period.
The perpetuity rule was modified by the Perpetuities and Accumulations Act 2009
which provides for a single perpetuity period of 125 years.
3. The validity of Purpose Trusts today
The paramount rule is that there must be an individual or individuals in whose
favour the court can execute a trust. There are, however, circumstances where
purpose trusts may be enforced despite having no human beneficiary.
A. Situation outside the scope of the Beneficiary Principle
Re Denley’s Trust Deed [1969] 1 Ch 373.
This case is often cited as authority for the principle that a purpose trust can be
enforced providing that there are ascertainable beneficiaries at any given time who
are benefiting from the purpose trust.
It is questionable whether Re Denley is a case on purpose trusts. The facts indicate
that it was trust for ascertainable beneficiaries.
B. Exceptions to the Beneficiary Principle
There are certain exceptions to the beneficiary principle. These consist of cases
where the courts have regarded them as ‘concessions to human weakness or
sentiment’ Re Astor’s ST [1952] Ch 534 at 547.
In Re Endacott [1960] Ch 232 (Evershed MR) identified the following exceptions:
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(i) Trusts for building and maintaining graves and monuments:
Pirbright v. Salwey [1896] WN 86.
Re Hooper [1932] 1 Ch 38.
Re Endacott [1960] Ch 232.
(ii) Trusts involving the saying of prayers:
Gilmour v. Coates [1949] AC 426.
Re Hetherington [1989] 2 All ER 129.
(iii) Trusts for the maintenance of animals:
Re Dean (1889) 41 Ch D 552.
(iv) Miscellaneous purposes:
Re Thompson [1934] Ch 342.
The courts are reluctant to accept new categories of purpose trust, and where they
do not fall into the recognised exceptions, they will be void.
Re Astors ST [1952] Ch 534.
(v) Unincorporated Associations:
Perhaps the more contemporary application of the beneficiary principle has arisen
in the context of unincorporated associations. Such associations raise special
problems in law because they have no separate legal identity. The main problem
is that they cannot hold property. The trust has been a primary vehicle in allowing
unincorporated associations to meet a number of useful objectives. However, the
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employment of the trust has not been without difficulty. The following are some
methods employed in allowing property to be held for unincorporated associations:
a) trusts for purposes
b) trusts for members
c) joint tenants
d) contract holding theory
Solutions a-c have problems; a and b are restricted to the perpetuity period whilst
c does not meet the long-term needs of the association. In the modern law, method
D has been the most successful and does not conflict with the perpetuity rules.
Furthermore, it allows for the long-term survival of the association.
See:
Neville Estates Ltd v Madden [1962] Ch. 832.
Hunt v McLaren [2006] W.T.L.R. 1817.
Hanchett-Stamford v Attorney General [2008] E.W.H.C. 330 (Ch).
Re St Andrew’s (Cheam) Lawn Tennis Club Trust [2012] EWHC 1040 (Ch).