Equity & Trust: Charitable Trust (Problem Question) Sarah Anderson recently attempted to draft her will. Following the advice of her friend, she has come to you to ask whether the clauses contained within her will would be considered valid. Advise Sarah as to the validity of the provisions contained within her will, below. LAST WILL AND TESTAMENT I Sarah Anderson of 35 Newgrove Lane, Littletown, DH5 7LM hereby revoke all former wills and testamentary dispositions made by me and declare this to be my last will and testament. I appoint Jennifer Rainey of Dean & Co Solicitors, Low Street, Littletown and Archer Johnson of Dean & Co Solicitors, Low Street, Littletown to be the executors of this will. I make the following bequests: i) The gravel area in front of The Laurels to be used as a car park for the benefit of the employees of Hats and Stuff Ltd for as long as the law will allow. ii) £50,000 for the purpose of securing a permanent venue for meetings held by the Littletown Ladies Knitting Club. iii) £500,000 to look after my horse ‘Ned’ for as long as he shall live and any money remaining at his death shall be used to develop an animal sanctuary. iv) £40,000 shall be used to erect an extravagant statue in my name and thereafter to maintain that statue. v) Anything left shall be donated to Littletown Independent School. IN WITNESS of which I have set my hand to this my will this 12th day of October 2013 Signed by the above named testatrix in our presence and by us in hers Sarah Anderson Witness 1 Witness 2 Jonathan Steele Jessica Pescod Jonathan Steele Jessica Pescod 77 Fellgate 21 Drury Road Littletown Littletown DH5 7PQ DH5 6LZ

Answer:

Sarah Anderson has included a number of provisions in her will, all of which involved consideration of purpose trusts or related concepts. Purpose trusts are not normally valid unless the purpose is charitable[1]. Charitable trusts are public purpose trusts that may result in individuals or members of the public deriving direct benefits[2] and it’s enforceable by the Attorney General on behalf of the Crown. If any of the purposes, as stated in Sarah’s will, fail to satisfy the tests for charitable status, consideration is required to be given as to the validity of the purposes as private trusts. If the purposes fail on this score, the relevant property will be held on resulting trust for the residuary beneficiaries under the will. The validity of these provisions will be considered in turns.

1.The gravel area in front of the Laurels to be used as a car park for the benefit of the employees of Hats and Stuff Ltd for as long as the law will allow:

This appears to be a simple purpose trust: after all, the trustees will be under a mandatory duty to erect a car park in front of ‘The Laurels’. However, instead of being void for want of a beneficiary, this purpose trust appears to be valid under the Re Denley [1969][3] principle. According to this case, as held by Goff J, the rule against purpose trust is intended to invalidate only those trusts which are abstract and impersonal. If a purpose trust directly or indirectly benefits a class of ascertained or ascertainable individuals, it will be valid as the individuals may be given locus standi to apply to the court in the event that the trustees do not carry out the trust. The individuals directly or indirectly benefited have no equitable interest in the trust property itself, although they do provide the means of enforcement.

Indeed, with the exception of the perpetuity issue, our case is very similar to that in Re Denley itself, where the purpose was the provision of a sport ground for employees. Applying that case, this provision is presumptively valid.

2. £50,000 for the purpose of securing a permanent venue for meetings held by the Littletown Ladies Knitting Club:

The court was reluctant to allow trust to operate outside the accepted ‘gifts of imperfect obligation[4]. However, the courts have been asked to consider how gifts to a group of people should be interpreted. The policy underlying the anomalous exceptions is to encourage community benevolence, whereby; if a gift to a small community club is not charitable then it may fail, defeating the intention of the donor and the policy of the community benevolence[5]. This small group often take the form of unincorporated associations.

Littletown Ladies Knitting Club could not be seen as a charitable organization but could be interpreted as an unincorporated association[6]. The major problem with unincorporated associations is that they lack legal personality and subsequently cannot hold property.  Hence, a gift to unincorporated association cannot take effect as a gift on trust for the association's purposes as it offends the beneficiary principle which holds that a trust is only valid if at least one person is a beneficiary. In Morice v Bishop of Durham [1804][7] it was held that ‘every trust must have a definitive object’. The ‘definitive object’ referred to is a beneficiary, so for a trust to be valid there must be someone who will benefit from the trust. Therefore, Morice was void as ‘benevolence and liberality’ was not considered as a sufficient beneficiary object.

Turning to the gift in question, it must then be consider whether the Littletown Ladies Knitting Club is ‘somebody in whose favour the court can decree performance’[8]. Therefore, the beneficiary principle must be complied with in order for Sarah’s provision to create a valid trust otherwise the court will strike it down as a non-charitable purpose trust[9].

As Sarah’s gift cannot be construed in this manner, we will consider the approaches to validating an express trust by avoiding the beneficiary problem in relation to unincorporated association. First we will consider the unique method applied in Re Denley’s Trust Deed [1969][10]  and Re Lipinski’s Will Trusts [1976][11]  in which a trust for purposes was construed as a trust for the benefit of individuals. The facts of the case concerned a trust to provide a recreational ground for the benefit of employees of a company. This was held as a valid trust because the employees’ were viewed as a class of beneficiaries with sufficient standing to enforce the trust, in other words ‘somebody in whose favour the court can decree performance’ and so it could not be looked upon as a pure purpose trust. The latter case, Re Lipinski’s Will Trusts, also highlighted the effectiveness of interpreting a trust for the benefit of individuals as members of a ‘Hull Judeans (Maccabi) Association’ was construed as an ascertainable group of beneficiaries.

However as Re Denley and Re Lipinski are exceptional cases, they would not be applicable in relation to Sarah’s provision as it would be inconsistent with her intention to “securing a permanent venue for meetings held by the Littletown Ladies Knitting Club”. To read this in a manner which would be for the benefit of individuals would be incorrect and subsequently this solution cannot be entertained.

Another attempt to provide a solution to Sarah’s gift would be to construe it as a trust for present and future members. Although this potential solution would satisfy the beneficiary principle but, there is a possibility that it would conflict with the rule against perpetuities. The gift may exist for a period exceeding the perpetuity period and therefore would not be allowed. Here the cases of Leahy v Attorney General for New South Wales [1959][12]  must be addressed.

In Leahy, Williams and Webb JJ were of the view that the word ‘given to them for the benefit of the community’ was not construed as an ‘attempt to create perpetual endowment’. So taking into account the exact wording of Sarah’s provision, namely the implementation of the words ‘purposes’ and ‘to securing a permanent venue’ is where difficulty is encountered. The trust would potentially fail here either for failure to satisfy the beneficiary principle or on the ground that the rule against perpetuities would be at risk of being violated[13]. Sarah’s provision could not therefore be taken as an immediate gift as it intended to secure the society’s future and would consequently fail.

There could be other alternative measures of accepting it as a gift to members of an unincorporated association. Firstly, to construe it as a gift to present members who are entitled as co-owners to a particular share and secondly, to construe the gift as a gift to members subject to their contractual obligations. Regarding interpreting the £500,000 as a gift to present members of the association, the beneficiary principle would be satisfied but the main disadvantage is portrayed by the fact that members may seek their share of the assets. This in turn may not be suitable for Sarah, as her intention is clearly for the benefit of the club, not for the individual members.

Subsequently, the contract holding theory must be examined in order to determine if it would be a valid means of dealing with Sarah’s provision. In Re Recher’s Will Trusts[14], Brightman J held that a gift to The London and Provincial Anti-Vivisection Society was to be construed as a beneficial gift in favour of the members, not so as to entitle them to an immediate distributive share, but as an accretion to the funds of the society subject to the contract of the members as set out in the rules[15].

If this approach is applied in accordance with Sarah’s provision, there is a possibility of achieving a valid gift to the Littletown Ladies Knitting Club as an unincorporated association. By taking this route, not only is the problematic aspect of the beneficiary principle circumvented but Sarah’s intentions would most importantly be carried out. As the contractual rights that the members would adhere to, would be that of the Club’s rules. Therefore this could be viewed as a valid interpretation reading Sarah’s provision by disregarding the words ‘for the purposes of the Club’ and treating the gift as an ‘absolute gift to individuals’ subject to those rules and regulations of the club. By reading the gift in this light the validity will be sustained[16].

Moreover, when considering any disposition it is paramount to interpret it in such way that most effectively fulfils the testator’s intention and to ensure that the true intention is not exposed to any injustices that could alter the original meaning. Paul Matthews states that there can be problems by interpreting a gift subject to contractual rights. The ‘difference is a matter of construction of the rules themselves and has nothing to do with the donor’s intention[17]. Matthews underlines the fact that if the rules of the unincorporated association catch the gift, it will fall under the contract holding theory but if they do not they will fall under a gift to the current members of the association.

What is apparent here is the inconsistent nature of using this approach and that ultimately the gift is dependent on the rules of the association and not the intention of the testator. Therefore by applying this solution to Sarah’s provision, there is a possibility of it becoming vulnerable to such dangers and as a result not reflecting his original intentions. Although this is a possibility, interpreting Sarah’s gift as a gift to members subject to contractual terms would still appear to be the most appropriate way in which to interpret the gift. In other word, it will appear to be void and the money resulting back to the testator’s estate on resulting trust.

3. £500,000 to look after my horse ‘Ned’ for as long as he shall live and any money remaining at his dead shall be used to develop an animal sanctuary:

This is an attempt to establish two purpose trusts accurately: to look after Ned and to develop an animal sanctuary. Trusts for the benefit of single animals, are usually not charitable, and whilst apparently valid as non-charitable purpose trusts if restricted to the perpetuity period, should really fail for want of a human beneficiary[18]. In Pettinggall v Pettingall[19] a trust of £50 to look after the testator’s favourite mare for 50 years was upheld. Similarly, in Re Dean[20], a gift of £750 per annum for the period of 50 years to maintain the testator’s horses, “If they should so long live” was held valid.

Considering the perpetuity rule, In Re Dean, the period was for 5o years if they so long live and was held to be valid. Presumably, this was because the animals were unlikely to live that long, but perpetuity was not addressed in the case. It is clear from Re Kelly [1932][21] that the ‘life in being’ required by the perpetuity period must be a human life. Applying this rule to our case, Sarah’s provision to look after Ned could be upheld.    

The next issue to consider is whether to develop an animal sanctuary is charitable. Trusts for the welfare of animals generally, or of specific types of animals are accepted as charitable purposes[22] and enforceable, so long as the organisation or sanctuary operates in the public domain[23]. The Commissioners state that this head includes “any purpose directed towards the prevention or suppression of cruelty to animals or the prevention or relief of suffering by animals.”

In Re Wedgwood, Allen v Wedgwood [1915][24] A charitable trust was created for the benefit of animals on the ground that the gift promoted public morality by checking an inborn tendency towards cruelty. Applying this rule to the case, Sarah’s trust to develop an animal sanctuary could be seen as a valid purpose trust.

4. £40,000 shall be used to erect an extravagant statue in my name and thereafter to maintain that statue:

This is an attempt to establish a purpose trust with two different aims: the erection of an extravagant statue and the maintenance of that statue. Here, we will consider the case of Re Endacott[25], for not only does this firmly establish the beneficiary principle in English law, it was a case involving an unsuccessful attempt to establish a trust for the provision ‘a useful memorial to myself’. This was invalid as it was too broad. It was unclear what was meant by ‘useful memorial’. The bequest itself must be sufficiently certain in its purpose.

Endacott also accepted that there were a limited number of specific purpose trusts whose validity had been accepted by the court, albeit for reasons of sentiment or experience. They were also described as "troublesome, anomalous and aberrant". One of which, as demonstrated by Mussett v Bingle [1876][26] and Re Hooper [1932][27], is trusts for the erection and maintenance of monuments and graves, at least if the executors of the will are prepared to carry out the trust. Prima facie, this would seem to be authority for the validity of Sarah’s trust for the erection and maintenance of an extravagant statue to her name.

The next issue to consider is the perpetuity period. This was an issue in Musset v Bingle where a bequest to erect a monument to the testator’s first husband was valid but a second bequest for its upkeep was void. It did not fail for perpetuity in relation to the erection of the monument as it was assumed that the monument would be erected within the period. However, as no period was stipulated for the upkeep of the monument this part of the trust failed.

Consequently, questions of perpetuity aside, we seem to have one potential valid purpose trust and one that is certainly void. It then becomes a matter of construction whether the invalidity of one part of the gift invalidates the whole, for it may be possible to sever the presumptively valid purpose trust, especially if some discrete portion of the £40,000 can be set aside for its completion. The remainder or the whole amount (if there is no severance or if there were a general perpetuity problem) would result to the Testator’s estate.

5. Anything left shall be donated to Littletown Independent School:

The issue is whether the donation to Littletown Independent School is Charitable, does the gift advance education as declared in s. 2(2)(b) of the Charitable Act 2006? Littletown Independent School clearly could be seen as a charitable body that exists to advance education. The School is the trustee, if as possible, to promote the stated purpose of the trust. However, Sarah did not state any purpose for the trust. This raises the question as to whether the test for charitable object is satisfied.

Charitable trusts are subject to a unique test for certainty of object, whether the objects are exclusively charitable[28]. If the trust funds here may be used solely for charitable purposes the test will be satisfied. Indeed, it is unnecessary for the settler or testator to specify the charitable objects which are intended to acquire the trust property, provided that the trust instrument manifests a clear intention to devote the funds for ‘charitable purposes’ the test will be satisfied[29]. In the law of charities, education has been interpreted generously and is not restricted to the classroom mode of disseminating knowledge but requires some element of instruction or supervision[30].  The trust may not be charitable if the object was merely to increase the knowledge that is not itself a charitable objects unless it was combined with teaching or education[31].

Finally, the school being maintained perpetually should be considered. Would this infringe the perpetuity rule? Although charitable trusts, like private gifts, are subject to the rule against remote vesting, which means the subject-matter of the gift is required to vest in the charity within the perpetuity period[32]. Charitable trusts, as distinct from private trusts, are not subject to the rule against excessive duration. Indeed, many charities (schools and universities) continue indefinitely and rely heavily on perpetual donations. Accordingly, if the purposes are charitable the gift will not fail for infringing the perpetuity rule.

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[1] Re Astor’s Settlement Trust [1952]. Ch 534

[2] s 2 of the Charities Act [2006]

[3] [1969] 1 Ch 373 at 387

[4] Re Endacott [1960] Ch 232

[5] Lain McDonald, Anne Street; Concentrate Equity & Trust, 3^rd ed. Oxford University Press 2013, p. 100

[6] As defined by Lawton LJ in Unionist Central Office v Burrell [1982] 1 WLR 522

[7]  [1804] 9 Ves Jr 399

[8] Sir William Grant in Morice v Bishop of Durham [1804] 9 Ves Jr 399

[9] See for example, Re Shaw [1957] 1 WLR 729, concerning the will of George Bernard Shaw - a provision to develop a new 40 letter alphabet was struck down as not being charitable, as defined by law, and the provision failed as a non-charitable purpose trust.

[10]  [1969] 1 Ch 373 at 387

[11] [1976] Ch 235

[12] [1959] AC 457

[13] As demonstrated by Lord Buckmaster in Re Macaulay’s Estate [1943] 1 Ch 435

[14]  [1972] Ch 526

[15] As it happened, the Society had dissolved prior to Mr Recher's death, and the gift failed in any event. It has now been replaced by the National Anti-Vivisection Society

[16] an approach highlighted in Re Grant’s Will Trusts [1979] 3 All ER 359

[17] Matthews Paul ‘A problem in the construction of gifts to unincorporated associations’ (1995) Conveyencer 302

[18] Re Astors (Settlement Trust) [1952] Ch 534, Morice v Bishop of Durham [1804] 9 Ves 399

[19] [1842] 11 LJ Ch 176

[20] [1889] 41 Ch D 552

[21] IR 255

[22] S.3(1)(k) The Charities Act 2011 (The advancement of animal welfare)

[23] Re Moss [1949] 1 All ER 495

[24] I CH 113, CA

[25] [1960] Ch 232

[26] [1876] WN 170

[27]  [1932] 1 Ch 38

[28] This is affirmed in s. 1(1)(a) of the Charities Act 2006

[29] S. 2(5) of the Charities Act 2006 endorses the common law approach to charitable objects.

[30] Incorporated Council of Law Reporting for England And Wales v AG [1972] CH 73 (CA).

[31] Herman J in Re Shaw [1957] 1 All ER 748

[32] Mohamed Ramjohn, Unlocking Trust, 4^th edn, Routledge 2013,  p. 311

Bibliography

1. Edwards, Richard; Nigel Stockwell, Trusts and Equity (8^th edn 2007 Pearson Longman. ISBN 9781-4058-4684-4).
2. Lain McDonald, Anne Street; Concentrate Equity and Trust, (3^rd edn Oxford University Press 2013)
3. Mohamed Ramjohn, Unlocking Trust, (4^th edn Routledge 2013)
4.  Pawlowski, Mark; and Jo Summers “Private purpose trusts - a reform proposal” (2007) Conveyancer and Property Lawyer (Sept/Oct): 440-455.