Trust Law: The Beneficiary Principle

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Questions and Answers

What must a non-charitable trust have in order to be enforceable?

A definite object (correct)

A lasting duration

Multiple beneficiaries

A charitable purpose

Which case highlighted the issue of enforceability due to lack of human beneficiaries in a trust?

Brown v Burdett

Re Endacott

Re Astor's Settlement Trust (correct)

Morice v Bishop of Durham

What does the rule against the remoteness of vesting entail for trusts created after April 2010?

They have a maximum duration of 125 years. (correct)

They can only be void if not established by a charitable purpose.

They allow indefinite vesting without limitations.

They must vest in a beneficiary within 21 years.

Why was the trust in Brown v Burdett (1882) deemed void?

It was considered capricious. Signup and view all the answers

What is the primary concern of the rule against perpetual trusts?

To prevent capital from being tied up indefinitely. Signup and view all the answers

In Re Endacott, what was one of the proposed purposes of the trust that raised concerns?

Maintaining good understanding between nations. Signup and view all the answers

What does the term 'alienability' refer to in the context of trust capital?

The ability to dispose of capital. Signup and view all the answers

What is one of the outcomes if there are no human beneficiaries in a trust?

It may result in the trust being void. Signup and view all the answers

What characterizes the Quistclose trust?

It is used when funds provided have not all been used for their intended purpose. Signup and view all the answers

In the case of Carreras Rothmans Ltd v Freeman Matthews Treasure Ltd, what was held regarding the money in the bank account?

The money was subject to a trust favoring Rothmans. Signup and view all the answers

What determined whether the refund to the claimant in ReEVTR was subject to a Quistclose trust?

Whether the funds had been used for their designated purpose. Signup and view all the answers

In Re Kayford, what was significant about how customer deposits were handled?

They were placed in a distinct trust account. Signup and view all the answers

What was the court's decision regarding the funds in Re Farepak Food and Gifts Ltd?

No Quistclose trust applied as there was no clear usage clause. Signup and view all the answers

What was established in Twinsectra v Yardley (2002) regarding certainty of intention to create a trust?

An undertaking aids in exhibiting intention to create a trust. Signup and view all the answers

What kind of trust does a Quistclose trust include characteristics from?

All types of trusts. Signup and view all the answers

When is the decision made that a Quistclose trust exists?

When the company enters insolvency. Signup and view all the answers

What is a common concern regarding the distribution of assets in a Quistclose trust during insolvency?

Beneficiaries receiving full refunds may leave less for unsecured creditors. Signup and view all the answers

What is true regarding the registration of a Quistclose trust?

There is no need to register a Quistclose trust. Signup and view all the answers

What was the purpose of the trust established in Re Shaw?

To develop a new language for global communication Signup and view all the answers

Which of the following trusts was ruled as void due to its purpose?

Trust for the maintenance of an unspecified memorial Signup and view all the answers

In which case was a trust upheld for the benefit of a parrot?

Re Howard Signup and view all the answers

What is a key factor that validates trusts related to animals?

They are recognized as exceptions to the beneficiary principle Signup and view all the answers

What determined the validity of the trust in Bourne v Keane?

The specificity of the purpose of the trust Signup and view all the answers

Why was the trust in Re Abbots valid despite being a purpose trust?

It involved a named person Signup and view all the answers

What principle allows courts to adapt trust purposes to benefit individuals indirectly?

The beneficiary principle Signup and view all the answers

What was the ruling in Leahy v AG for New South Wales regarding the trust for nuns?

The trust was void because of lack of defined beneficiaries Signup and view all the answers

Which of these trusts was intended for the maintenance of a specific grave?

Pirbright v Salwey Signup and view all the answers

What concern arises regarding tombs and monuments in graveyards?

Lack of a clear enforcer Signup and view all the answers

Why was the trust for the freshco's cricket club's members void?

No specific beneficiaries could be identified Signup and view all the answers

In which of the following instances can a purpose trust be considered valid?

When it is charitable in nature Signup and view all the answers

What principle was highlighted concerning unincorporated associations?

They have no separate legal identity Signup and view all the answers

What principle dictates that members of an unincorporated association cannot dispose of their assets freely?

Rule against Inalienability Signup and view all the answers

In the case of Re Denley, what was a key consideration for the trust to be upheld?

The trust must not go against perpetuity laws Signup and view all the answers

What approach can be used in Re Lipinski when considering the purpose of a trust for a club?

Contract holding theory or the straight gift approach Signup and view all the answers

Which case distinguished the position of the local branch of a trade union from Re Grants?

New Group Newspapers v SOGAT Signup and view all the answers

What happens to the assets of an unincorporated association upon dissolution, according to Re GKN Bolts & Nuts Ltd?

The assets are sold and money is split among members present at dissolution Signup and view all the answers

Which of the following statements best characterizes an unincorporated association?

A group with a common purpose bound by mutual obligations, not for business Signup and view all the answers

What condition could invalidate a gift made to an unincorporated association based on the principle of inalienability?

Control of funds lies with external organizations Signup and view all the answers

In an agency relationship, what happens to the authority of the agent upon their death?

It is revoked automatically Signup and view all the answers

In Barclays Bank Ltd v Quistclose Investments Ltd, what was the purpose of the money lent to Rolls Razor Ltd?

To pay dividends to shareholders Signup and view all the answers

Which legal principle allows a settlor flexibility when funds cannot fulfill the original purpose in a trust?

Secondary Trust Principle Signup and view all the answers

What is the significant concern when establishing a trust to avoid creditors in business, as illustrated by the content?

The validity of the trust might be questioned by the courts Signup and view all the answers

What happens if the provisions of an unincorporated association's rules contradict the law?

The conflicting provisions are rendered void Signup and view all the answers

Which case demonstrated that not having a written declaration does not prevent the creation of a trust?

Barclays Bank Ltd v Quistclose Investments Ltd Signup and view all the answers

Study Notes

The Beneficiary Principle

Trusts must have human beneficiaries for enforceability. Non-charitable trusts require a definite object the court can enforce.
Morice v Bishop of Durham (1804) established the need for a defined beneficiary for trust enforcement.
Re Astor’s Settlement Trust (1952) highlighted the importance of beneficiary control and enforceability, emphasizing the need for human beneficiaries.
Trusts must show certainty of object. Vague terms like "objects of benevolence" are insufficient.
Brown v Burdett (1882) demonstrated that capricious trusts (like blocking rooms in a house) are void.
Trusts need to avoid perpetuities (lasting forever). The rule against remoteness of vesting limits trust duration to 125 years after April 2010. "Wait and see" periods are allowed, but the trust must vest within 125 years.
The rule against inalienability (perpetual trusts) requires trust capital to be alienated (used) within 21 years, otherwise the trust is void.

Purpose Trusts

A trust for a specific purpose (e.g., a memorial) without a human beneficiary is generally void. A trust is not valid if there's no clearly defined, human beneficiary to enforce it.
Examples of void purpose trusts are shown in the text.
Exceptions may exist for animal care or upkeep of tombs/monuments, but these are typically limited in scope.

Finding Beneficiaries

Courts may find beneficiaries indirectly, as illustrated by Re Endacott, where a trust for preserving newspapers was considered unenforceable. But beneficiaries are usually identifiable or found impliedly in purpose trusts in order for trusts to be valid.
Valid trusts exist if human beneficiaries can be found, even if the trustee's purpose seems to be for something else.
Unincorporated associations (groups without legal identity) typically cannot be beneficiaries, but exceptions can occur depending on the context.
Re Denley demonstrates how a trust for a purpose (e.g., a sports ground) can be valid if an indirect benefit exists for identifiable individuals (in this case, employees).
It's easier for courts to define beneficiaries in connection with purpose trusts than in cases where a clear purpose was not defined.

Unincorporated Associations as Beneficiaries

Unincorporated associations lack individual legal identity.
The Re Grant case showed that a trust to an unincorporated association can be void if ownership is not clear in the group's rules. Members might not own the funds if their rights of disposal are restricted.
Valid trusts for unincorporated associations must provide clear avenues for control and alienation of funds.
Re Lipinski, St Andrews Lawn Tennis Club, and New Group Newspapers v SOGAT illustrate varying legal outcomes depending on the organization's structure and rules.
The Horley Town FC case upheld contract-based control, demonstrating potential exceptions to the general rule against purpose trusts and for unincorporated associations.

Alternative Constructions

Agency: A settlor can give money to an agent for a specific purpose, which is not a trust. The agent is legally accountable to the settlor if they fail at the set purpose.
Quistclose Trusts: A special type of trust where a lender gives money to a borrower for a specific purpose. If the purpose fails, the money is returned to the lender. These are treated as trusts and contracts and are used to make sure the funds don't get used for other purposes, especially in insolvent companies.

Quistclose Trusts- in detail

Barclays Bank Ltd v Quistclose Investments Ltd (1970) established the principle of Quistclose trusts.
Quistclose trusts exist if the funds are not generally available to be used in the company’s debts.
In cases where Quistclose trusts did not exist or had been established poorly, the funds were generally returned to the person who provided the funds in insolvency cases, and the original lenders can get all of the money back, even if there is a debt owed to a larger number of unpaid creditors.

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Description

Explore the fundamental aspects of the beneficiary principle in trust law through key cases and legal principles. This quiz addresses the requirements for enforceability of non-charitable trusts and highlights important rulings such as Morice v Bishop of Durham and Re Astor’s Settlement Trust. Test your understanding of object certainty and the limitations imposed on trusts.