Purpose Trusts

Question 1

What are the two exceptions to the beneficiary principle?

I.e. there must be Bs who can enforce the terms of the trust

Answer 1

1. Charitable purpose trusts
2. Non-charitable purpose trusts (specific, exceptional cases; the ‘Endacott’ exceptions)

Both can be trusts without having Bs

Question 2

What are the benefits of trusts having charitable status?

Answer 2

• No requirement to comply with B principle
• More flexible re certainty of objects
• No limit on duration (can exist in perpetuity)
• Cy-pres doctrine
• Tax benefits

Question 3

How does the rule against remoteness of vesting (125 years) apply to charitable trusts?

Indetfinite?

Answer 3

• The property held on charitable trust must vest in the charity within that period
• But capital which vests in charity Ts will continue to be held by Ts and used for purpose unless property runs out; can exist indefinitely (if well managed)

Cf usual trusts which are extinguished once capital distributed to Bs

Question 4

How does the rule against alienability apply to non-charitable purpose trusts? Is there wait-and-see?

Answer 4

• Assets cannot be tied up on trust for longer than (period of a life plus) 21 years
• No wait and see rule; must be clear from outset trust must end within perpetuity period

Question 5

How are the rules on certainty more flexible for charitable purpose trusts than private trusts? What can C do if there is an uncertainty as to how intention should be carried out?

Re intention

Answer 5

• Sufficient there is an intention to apply property for charitable purpose
• If uncertainty as to how intention is to be carried out = T can direct that property be applied for such charitable purposes as they select
• Court will strive to resolve any uncertainty and hold trust valid once charitable intent established

I.e. 3 certainties more flexible

Question 6

For non-charitable purpose trusts, how must purposes be so defined? And how is uncertainty of objects treated?

Answer 6

• Purposes must be so defined that if Ts surrendered their discretion, the court could carry out the purposes declared
• Will be void for uncertainty of objects if (means of achieving) purpose is unclear

Normal rules of certainty of objects apply to non-charitable purpose tru

Question 7

What are the three requirements for a charitable purpose trust?

First being for charitable purpose

Answer 7

1. For charitable purpose
2. Satisfy public benefit test
3. Wholly and exclusively charitable

Question 8

What is a ‘charitable purpose’?

1st requirement for a CPT

Answer 8

One of the 12 heads of charity or under the further head

Question 9

What are the 12 heads of charity?

Answer 9

1. The prevention or relief of poverty
2. The advancement of education
3. The advancement of religion
4. The advancement of health or the saving of lives
5. The advancement of citizenship or community development
6. The advancement of the arts, culture, heritage or science
7. The advancement of amateur sport
8. The advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
9. The advancement of environmental protection or improvement
10. The relief of those in need because of youth, age, ill-health, disability, financial hardship or other disadvantage
11. The advancement of animal welfare
12. The promotion of the efficiency of the armed forces of the Crown or of the efficiency of the police, fire and rescue services or ambulance services

Question 10

What is the further head?

Answer 10

The extra head of charity allowing the recognition of further charitable purposes by reference to previous case law and analogy to recognised charitable purposes

Question 11

What is covered by the prevention or relief of poverty? Destitution? Temporary?

1/12

Answer 11

• ‘Going short’; does not mean destitution (can be lesser poverty but still poverty)
• Can be temporary (financial hardship) or inferred (‘provision of soup kitchen’)
• Must not benefit rich

Question 12

What is covered by the advancement of education? Will it always cover an ‘increase in knowledge’?

2/12

Answer 12

• Not confined to formal instruction in educational institution; can include training, research or broader education in development of individual capabilities
• Wide range of organisations: museums, galleries, libraries, pre-schools, summer schools, teacher-training organisations, exam boards, DofE
• Ancillary organisations e.g. SU (provided they further educational purposes)
• Dissemination of knowledge (publication of law reports)
• Will not cover increase in knowledge without element of educational value e.g. development of 40-letter phonetic alphabet or researching tiny details of Shakespeare plays

Question 13

What is covered by the advancement of religion? What counts as a religious belief ? What must it be specifically for?

3/12

Answer 13

Religious belief =
1. belief in god(s) or supreme being(s) which is focus of religion (or no god at all)
2. relationship between believer and entity
3. degree of cohesion, seriousness and importance
4. identifiable positive, beneficial, moral framework

• Must be for its advancement: promotion and spreading message among mankind (religious services and missionary work)
• Also covers public masses celebrating dead; repair of churchyards;

Question 14

What is covered by the advancement of health/saving lives? Will it always cover unconventional methods?

4/12

Answer 14

• Prevention/relief of sickness, disease or human suffering and the promotion of health
• Covers unconventional methods but must have sufficient evidence for claimed benefits
• Lifeboat associations and mountain/cave rescue missions

Question 15

What is covered by citizenship/community development?

5/12

Answer 15

Rural and urban regeneration and the promotion of civic responsibility, volunteering, and effectiveness of charities

Focused on community rather than individual

Question 16

What is covered by arts, culture, heritage or science? What must art be of? Will preservation of historic traditions always be covered?

6/12

Answer 16

• Art needs to be of ‘merit’ which may require expert evidence
• S’s art collection has been considered ‘junk’, whereas promotion of music of famous composer was valid
• Monuments of cultural/historical significance (to private individuals unlikely to be charitable)
• Preservation of historic land and tradition provided benefit can be shown (e.g. trust to foster study of Welsh language was held not charitable)

Question 17

What is covered by the advancement of amateur sport? Must it be physical?

7/12

Answer 17

Sports/games that promote health by involving physical or mental skill or exertion e.g. football and chess

Question 18

What is covered by the advancement of human rights? What objectives will this not cover?

8/12

Answer 18

• Raising awareness of human rights issues, relieving victims and securing enforcement of human rights laws
• Promotion of restorative justice and conflict resolution
• Not political objectives like seeking to change law

Question 19

What is covered by environmental protection? Will everything be worthy of conservation?

9/12

Answer 19

Both protection and improvement of environment - preservation and conservation of natural environment and sustainable development
* May need to produce expert evidence to show why something is worthy of conservation

Question 20

What is covered by the relief of those in need?

10/12

Answer 20

Those in need because of youth, age, ill-health, disability, financial hardshup or other disadvantage - inc provision of accomodation or care (do not need to be in poverty!)

Question 21

What is covered by the advancement of animal welfare? Any animal? What can this not be?

11/12

Answer 21

• Providing for welfare of particular types of animals as well as animals generally (not particular animals e.g. S’s pet dog)
• Also improving methods for slaughtering animals
• Cannot be political e.g. pursuing abolition of vivisection (this would be a change in the law)

Question 22

What is covered by the efficiency of public services?

12/12

Answer 22

• Armed forces, police, fire and rescue, ambulance
• Provision of educational resources and competitions for members of services
• Provision of opportunities for services personnel to gain additional experience relevant for their jobs

Question 23

What is the ‘general purpose’ category?

Answer 23

Recognises some purposes may not be captured in 12 heads; covers purposes which. are e analogous to/within spirt of statutory heads of charity and earlier case law

Ensures flexibility

Question 24

What are the the two elements to the public benefit requirement? Is there a presumption of public benefit?

2nd requirement for CPT

Answer 24

1. Whether there is an identifiable benefit; and
2. What constitutes (a section of) the public

There is no presumption of public benefit

Question 25

What is an identifiable benefit? Must it be quantifiable? Will S's belief count for anything?

Answer 25

Benefit must be capable of being identified and described even if it cannot be quantified or measured * Charity Commission may require evidence if benefit not obvious * S's belief to benefit irrelevant

Question 26

What will the identifiable benefit be weighed against?

Answer 26

Any detriment or harm arising from purpose e.g. adverse effect on medical research might outweigh the benefit arising to welfare of animals by abolishing vivisection

Question 27

What is the 2-part test for (section of) the public?

Answer 27

1. Possible Bs must **not be negligible** in number; and 2. Quality which distinguishes them from other members of community must be quality which **does not depend on their relationship to particular individual** (e.g. personal relationship with employer)

Question 28

What are the three conditions under which charities can focus on certain Bs?

Answer 28

Yes, provided that.. 1. They have proper reasons for doing so 2. The poor are not excluded from benefit 3. The people focused on are a sufficient section of the public for the charity’s purpose.

Question 29

Can charities charge for the facilities they offer? What are the constraints re the benefit?

Answer 29

* Yes - can even make a profit * But must not **unreasonably restrict** the benefit e.g. only to those who can afford fees

Question 30

What must Ts do if the charity charges a level for the identifiable benefit which the poor cannot afford? | E.g. private school

Answer 30

Must make sure the poor can otherwise benefit

Question 31

What distinction can be drawn in terms of political objectives in charitable trust and which can be charitable? ## Footnote Charities cannot pursue political objectives; politically neutral for public benefit

Answer 31

1. Political purpose = **not charitable on public benefit grounds** *e.g. trust set up by Amnesty included objective of securing release of prisoners by procuring reversal of GOV policy* 2. Use of political means to achieve a non-political objective = **charitable** *e.g. organisation set up to protect environment carries out range of activities inc political activity aimed at changing GOV policy re airports*

Question 32

For what charitable purpose will the public benefit requirement be relaxed and how?

Answer 32

The prevention or relief of poverty - trusts for such purposes can: * have pools of Bs where there is a family or other personal connection to S or * be restricted to smaller geographical area But must still be for benefit of particular description of poor persons (rather than particular poor persons)

Question 33

How do fee paying schools meet the public benefit requirement?

Answer 33

1. **Identifiable benefit**: providing education not outweighed by social mobility implications of requirement to pay fees 2. **Section of public**: as fees are at a level which poor cannot afford, Ts must make provision so poor can otherwise benefit which is more than a de minimis/token benefit e.g. scholarships or facilities (swimming pool/sports grounds)

Question 34

How is the public benefit requirement satisfied for the advancement of religion head?

Answer 34

The benefit to the public derives from mixing with others in a place of worship ## Footnote Cf gift to community of cloistered nuns who did not mix with community

Question 35

What is meant by 'wholly and exclusively' charitable? | 3rd requirement of CPT

Answer 35

All purposes must be charitable

Question 36

If a trust has a mixture of charitable and non-charitable purposes, what must the non-charitable purpose be for trust to **not** be void?

Answer 36

If non-charitable purpose... 1. falls within recognised category of non-charitable purpose trusts 2. can be construed as 'incidental or subsidiary' to main charitable purpose 3. can be separated from charitable purpose and a portion of fund allocated to each; court severs trust and recognises charitable part

Question 37

What does the cy-pres doctrine do?

Answer 37

Provides for the **surplus funds of a failed charitable trust to be applied to another charitable purpose** by way of a scheme established by Charity Commission or court ## Footnote This avoids same consequence of a private trust failing: resulting trust to S (which would defeat intention of person who dedicated property to charitable purpose)

Question 38

What are five grounds on which the original purpose of a charitable gift be altered?

Answer 38

1. Original purpose has been fulfilled/cannot be carried out 2. Original purpose still workable but there are surplus funds 3. Property from similar trusts is combined to be used more effectively 4. Original purpose referred to an area or class of persons which is no longer relevant or suitable 5. The purpose has: 5a: Been adequately provided for by other means 5b: Ceased to be charitable in law; or 5c: Ceased to provide a suitable and effective method of using property

Question 39

What are the different results of a subsequent and initial failure (property cannot be applied to specific purpose from beginning) of a charitable trust/gift? Will both be applied cy-pres?

Answer 39

* Subsequent failure = will be applied cy-pres as gift cannot go back on RT * Initial failure = it will only be applied cy-pres if S has shown **general charitable intention**

Question 40

How is a general charitable intention ascertained?

Answer 40

Court decides whether there was: 1. a specific intention to benefit particular object *e.g. trust to provide rest homes where T created detailed plans for management of homes which was found to be **inconsistent** with general charitable intention* **or** 2. a specific intention to give effect to a **general mode of charity** *e.g. provision of a soup kitchen and cottage hospital for the parish of Shoredtich* (charitable intention = benefit sick and poor of parish [so cypres will apply!) | Only in latter case can cy pres be applied for initial failure

Question 41

What intention would the court give to a gift expressed as being dedicated to a charitable purpose but which fails to specify mode of application? | *£5,00 for the relief of poverty*

Answer 41

Charitable intent!

Question 42

To be valid, what must a non-charitable purpose trust be and created by? | 2 requirements

Answer 42

1. Is a **recognised exception** of the B principle; and 2. **Created by will**

Question 43

What are the 3 exceptions and what must they comply with? | From Re Endacott

Answer 43

Trusts for... 1. The maintenance of particular animals 2. The erection and maintenance of monuments and graves 3. The saying of private masses Which must comply with the certainty and perpetuity requirements ## Footnote Would all usually fail the public benefit test!

Question 44

Can the exceptions be extended by analogy?

Answer 44

No! The intended purpose must fall squarely within recognised exception to be valid

Question 45

Why are non-charitable purpose trusts falling within an exception referred to as trusts of imperfect obligation?

Answer 45

Because although court recognises their validity (so will not fail if included in will) they are **not enforceable**

Question 46

As non-charitable purpose trusts which fall within the exceptions are not enforceable, what must be done and what order will court make?

Answer 46

* Check with appointed T that they are willing to carry out terms of trust * If so, court will make a Pettingall order = requires T to give undertaking to comply with trust

Question 47

What happens if a T does not comply with a Pettingall order?

Answer 47

Testator's residuary legatees (who would otherwise receive the property) can sue to enforce undertaking and prevent misapplication of fund

Question 48

How does the rule against inalienability apply to non-charitable purpose trusts? * When must it come to an end and can it be extended? * Does the wait and see rule apply?

Answer 48

* Trust must come to an end within 21 years unless extended by reference to a human life in being (in which case the 21 year period does not start until their death) *e.g. £5,000 to my Ts on trust to maintain my grave for a period not exceeding 21 years following the death of the last surviving descendant of Queen Elizabeth II who is alive at the date of my death* * The wait and see rule does not apply; must be certain at the time the trust is created that it will come to an end within the perpetuity period (otherwise trust will be void)

Question 49

Instead of a human life (in life + 21 years), can an animal's life be used? Or can an express clause be ommitted if the trust should finish its purpose under 21 years e.g. building monumnet? ## Footnote *Trust to maintain an animal for the rest of its life*

Answer 49

* Human lives should be used - it cannot be said (although likely) that animal will definitely die and that trust will come to an end * Express clause should be included as it cannot be absolutely certain purpose will cease within 21 years

Question 50

Can more ambiguous perpetuity clauses be used that have been upheld in case law? | *For so long as the Ts can legally do so*

Answer 50

No guarantee these would still be upheld - drafter should always include an express perpetuity clause limiting duration of non-charitable purpose trust to ensure its validity