Non-Charitable Purpose Trusts and Unincorportated Associations

INTRODUCTION
1. Tension between the wish to give effect to settlor's intention and the need for trusts to be subject to the court's control.
2. Unincorporated associations (e.g. clubs and societies) present a difficulty because they do not have separate legal personality and cannot, therefore, hold property.
3. At the heart of problems is the 'beneficiary principle'; 'there must be somebody, in whose favour the Court can decree performance'.
  1. Morice v Bishop of Durham [1805]
  2. Ownership
    1. Law wants to make sure property always has an owner
  3. Obligation
    1. Law doesn't like imposing duties on trustees where benefits do not go to specified beneficiaries
  4. Enforceability
  5. Control
    1. If a trust is performed, court will make sure that it is - but how do they do that for PURPOSES?
      1. McPhail and Doulton
  6. Has the principle been reinterpreted?
    1. Re Dean (1889)
      1. Trust for benefit of testator's horses and hounds. Not a general charitable intention due to being just HIS, instead of general animal welfare.
    2. Re Drummond [1914]
      1. Holidays for workers; residuary request. Old Bradfordian club (uninc. assoc) - NCPT.
    3. Bowman v Secular Society Ltd [1917]
      1. Outlawing religion. What if it had been on trust? Would have been regarded under politics.
    4. Re Astor's Settlement Trusts [1952]
      1. Promoting the integrity of newspapers.
NCPTs
1. General rule - ts for purposes which are not 'charitable' in law are VOID.
  1. They offend the 'ben principle'.
    1. Not for charities, not for specified bens etc.
2. Other problems
  1. Lack of certainty
    1. Morice v Bishop of Durham (1805)
    2. Re Astor's Settlement Trusts [1952]
  2. Perpetuity - the rule against inalienability of capital
  3. Public policy
    1. Brown v Burdett (1882)
      1. Sealing up windows and doors for 20 years - capricious.
    2. McCaig v University of Glasgow [1907]
      1. Bankers wanting to erect statues in memory of themselves.
  4. Consequence? Resulting trust.
    1. Re Trusts of the Abbott Fund [1900]
      1. Money raised for elderly deaf/dumb sisters - money held to have been given on trust.
    2. Re Gillingham Bus Disaster Fund [1959]
      1. Not saved by the Validation Act. Money festered in court. :(
3. However - NCPs which are incidental or subsidiary to charitable purposes will NOT invalidate a charitable trust,
4. 'Testamentary Purpose Trusts of Imperfect Obligation' - Exceptions!
  1. Four categories recognised - not a logical set, just seem to have happened!
  2. Erection or maintenance of tombs, graves, or monuments
    1. Re Hooper [1932]
      1. £1000 left to erect various monuments of his family who were buried in various places around the country. Held after 21 years money left over would go on resulting trust. Private. If had been part of church = charitable.
  3. Care and maintenance of specific animals
    1. Pettingall v Pettingall (1842)
      1. General care of animals = charitable. Trust for favourite black mare - valid trust.
  4. Saying of masses in private
    1. Bourne v Keane [1919]
      1. In public = charitable.
  5. Fox hunting
    1. Re Thompson [1934]
      1. NB Hunting Act 2004
  6. These are not to be extended. Courts are very restricted.
    1. Re Endacott [1960]
      1. Testator gave residuary to North Taunton Parish Council for providing 'useful memorial to myself'
  7. Are subject to the rule against inalienability of capital
    1. 21 years? (or common law lives in being/CLLIB plus 21 years?)
    2. s.15(4) PAA 1964 and 2009 Act
    3. Re Dean (1889)
5. Problems of construction
  1. Distinguish between
    1. A trust for persons, the stated purpose merely describing the motive (GOOD)
    2. A trust for purposes, the persons being identified as those likely to benefit (VOID)
    3. Re Abbott Fund Trusts [1900]
      1. Trust for sisters. Resulting trust - money goes back to donors.
    4. Re Andrews Trust [1905]
      1. Education of boys. Money left over. Held money given to boys absolutely. If purposes - money go to RT once education finished. Trusts for persons.
    5. Re Bowes [1896]
      1. £5000 upon trust for planting trees for shelter on estate. T for purposes? Court held not for purpose - for two tenants.
    6. Re Denley's Trust Deed [1969]
      1. Land given on trust for use as a sports ground for employees of company. Not charitable (personal nexus). Looked at ben principle. Judge said it was outside. ONly affected abstract and impersonal purposes, said Judge.
        '...the objection to NCPTs is not that the trust is for an object or purpose per se, but that there is no beneficiary or cestui que trust...' Goff J.
    7. Re Sanderson's Trust (1857)
      1. 'There are two classes of cases between which the general distinction is sufficiently clear...but difficult to ascertain. If a gross sum be given, or if the whole income of the property be given, and a special purpose be assigned for that gift, this Court always regards this gift as absolute, and the purpose merely as the motive of the gift, and therefore holds that the gift takes effect as to the whole sum or the whole income, as the case may be.'
  2. Distinguish between trust and contract
    1. Conservative and Unionist Central Office v Burrell [1982]
  3. Barclays Bank Ltd v Quistclose [1968] - problematic questions also raised
6. Are there alternatives?
  1. Power
    1. 'A valid power is not to be spelt out of an invalid trust'
      1. BUT can set up express power. However, is permissive only.
      2. IRC v Broadway Cottages Trust [1955]
    2. Re Douglas (1887)
  2. Mandate (inter vivos only)
    1. Conservative and Unionist Central Office v Burrell [1982]
  3. Company
    1. Can change its objects
  4. Unincorporated associations
  5. Gift to Charity 1 upon the purpose not being carried out, thereafter to Charity 2
    1. Re Tyler [1891]
    2. Re Dalziel [1943]
  6. Off-shore trusts
7. Scope for reform?
  1. Limited without legislation
  2. See articles if you can be bothered.
UAs
1. What is a UA?
  1. It is not a legal entity, nor is it a partnership.
  2. Defined as having: 2 or more persons bound together for (non-business) common purposes; mutual rights and duties arising from a contract between them; rules to determine who controls the organisation and its funds and on what terms; members are able to join and leave at will (i.e. voluntarily)
    1. Conservative and Unionist Central Office v Burrell [1982]
  3. Some refer to 'inward-turning' (i.e. all about the members) and 'outward-turning' (fulfilling purposes for people other than the members) assocs.
2. How does a UA hold property?
  1. Since a UA has no separate legal personality, it cannot hold property as such - it only has an assoc of its members.
  2. Ts will hold the legal title of the land, shares etc. on trust - this is an administrative arrangement (not a trust in the full blown sense) - usually at the direction of the committee, unless the assoc is charitable or unless valid trusts are otherwise declared.
    1. Re Bucks Constabulary Widows' and Orphans' Fund (No 2) [1979]
  3. Inter vivos gifts to UAs rarely cause a problem.
  4. Testamentary bequests raise difficult questions
    1. The UA cannot claim to be a ben
    2. The suggestion that the members, particularly of OT assoc, are the intended bens is problematic and likely to be at odds with the settlor's intention
    3. Often challenged by residuary legatees or next of kin
      1. Non-charitable and so money should go to NoK
    4. If the purposes are charitable, these problems do not arise.
  5. Difficulties may also be encountered when UA is dissolved or becomes moribund. What is to happen to the funds? The property has to go somewhere...
3. Bequests to UAs
  1. How are we to construe a bequest to a UA? There are three or four generally accepted theories as to how property might be held...
    1. 1. As a gift to existing members, as joint tenants or tenants in common
      1. Leahy v Attorney General for New South Wales [1950]
        Land holdings left to various groups of nuns. Some were in cloistered communities (so not charitable). Intended for individual benefits/beneficiaries. Actually spread all over the world and tried to divide up. Clearly intended for endowment.
    2. 2. As a (class) gift to be held on trust for present and future members. (Unlikely to reflect intention?)
      1. Note rule against remoteness of vesting (void at common law, but note effects of the PAA 1964 and 2009 - wait and see provisions)
      2. Usually left out now due to statute
      3. Re Grant's Will Trusts [1979]
    3. 3. As a gift to members, subject to their respective contractual rights and liabilities towards each other as members. How coherent is this theory? (What about s.53(1)(c) LPA 1925?) (A bit of trust, a bit of contract) More modern and pragmatic.
      1. Re Recher's Will Trusts [1972]
        Bequest to the London Provisional Anti-Viv Society. Ceased to exist before testator died. BUT property would have been held subject to contracts.
      2. Re Horley Town Football Club [2006]
        On trust for securing permanent football ground. Land sold in 2002 for £4m. £850k spent and £2m on new facilities. Property was to provide for purposes of the club - but not charitable. Contract holding theory.
      3. Re Grant's Will Trusts [1980]
        Judge went against contract holding theory - matter of construction. Clearly made as a trust and method bequest was made - subject to control of outside party.
    4. 4. On trust for the purposes of the assoc. (Going to be close to what the testator meant.)
      1. Charitable purposes - no problems!
        Neville Estates v Madden [1962]
      2. NC purposes
        Re Lipinski's Will Trusts [1976]
        Half of the residue left on T to HJM assoc to be used solely for the completion of the new buildings for the assoc. and/or improving the old ones. Particular purpose. Denley or CH theory? Either way, judge would uphold it. Contract and trusts got confused and mixed.
        Re Grant's Will Trusts [1980]
4. Dissolution of UAs
  1. What happens to any funds held by a UA immediately before it is wound up?
    1. Charitable - cy pres
    2. Otherwise; 1. bona vacantia; 2. resulting trust; 3. divided between the members.
    3. Cunnack v Edwards [1896] - 1. BV
      1. Fund for members' widows. All members dead and last widow died - £1200+ left in 'pot'. Friendly soc - led by legislation. Held not charity - no room for RT. Went to crown. No T. No ben. int. remaining at time of dissolution.
      2. Friendly Society Act - on dissolution, money NOT to be distributed between members.
    4. Re Gillingham Bus Disaster Fund [1958] - 2. RT
      1. Courts don't like BV. Then divided between 17 surviving people after money sat in Treasury until 90s.
    5. Re West Sussex Constabulary's Benevolent Fund Trusts [1971] 1. BV AND 2. RT
      1. Fund for dependants of members of police force. Joined another force - money? For benefit of 3rd parties. Subscriptions, raffles etc., collecting boxes - BV. Donations and legacies - RT.
    6. Re Bucks Constabulary Fund Friendly Society (No 2) [1979] 3. M
      1. Another police fund. Amalgamated with other force. Judge clearly didn't like Sussex case. Distinguished by using FS Act. No trust at all. Decided to belonged to members. Nature of assoc not important in this case!
    7. Re Horley Town Football Club [2006] 3. M
      1. Not dissolution case. CH theory applies - division between members. What shares? Bucks judge - any division should be equal as a matter of contract and law, NOT equity and trusts. Full/associate members. Not fair to give ass. mems. as much as full.
    8. Hanchett-Stamford v AG [2008] 3. M
      1. Performing animals. Not charitable. Money held according to terms of assoc. contract while assoc. exists - when assoc. ends, any surplus funds go to member of assoc.
    9. Influencing factors - how property has been held; source of funds; nature of assoc; amount of money.

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Non-Charitable Purpose Trusts and Unincorportated Associations

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	Created by Laura Phillips almost 10 years ago