Beneficiaries and the Beneficiary Principle

Beneficiaries And The
Beneficiary Principle
Table of Contents
BENEFICIARY RIGHTS.................................................................1
BENEFICIARY PRINCIPLE.............................................................2
GENERAL APPLICATION.................................................................................. 3
TRUSTS OF IMPERFECT OBLIGATIONS.................................................................3
Care of animals.................................................................................... 4
Maintenance of specific graves and monuments.................................4
Saying masses for the dead.................................................................4
Capriciousness..................................................................................... 4
TRUSTS BENEFITTING AN IDENTIFIABLE CLASS OF PERSONS...................................4
Distinction. Person vs Purpose?...........................................................4
Purpose v Motive.................................................................................. 5
UNINCORPORATED ASSOCIATIONS..............................................6
WHAT........................................................................................................ 6
LAW........................................................................................................... 6
DISSOLUTION............................................................................................... 7
Bona Vacantia...................................................................................... 7
Proportions........................................................................................... 8

General rule that there should always be a beneficiary capable of
enforcing the trust.
 Morice v Bishop of Durham. “there must be someone in whose
favour the court can order performance”
 Lord Evershed MR a trust “must have ascertained or
ascertainable beneficiaries”

Beneficiary Rights
Morice v Durham doesn’t explain what the beneficiary’s rights are.
This is to be found in Suanders v Vautier. Effectively means that
each beneficiary has an equitable proprietary right in the trust
property. But
 Rights in personam (aka like a debt)
o Trustees personally liable for the trust: Target Holdings v
Fedferns.
o Lord Eldon. Earl of oxford. The courts of erquity “correct
men’s consciences for breach of trusts”
 Rights in rem (proprietary)
o HOWEVER, as LBW in Westdeutsche makes it clear, the
beneficiaries right’s are not limited to personal claims
against the trustee themselves. Also extends to

assertable rights over traceable substitutes for the trust
propert, unless the purchaser is equity’s darling.
o Saunders v Vautier.
Saunders v Vautier.
The beneficiaries, together and sui juris, can compel the trustees to
dispose of the property how they see fit. I.e.
 On the facts, the beneficiary could require the trustees to
transfer the trust property to him, notwithstanding he had not
reached the requisite 25 years of age tha thte settlor had
stipulated.
 Has been described per Mummery LJ in Goulding v James as
being the right to “overbear and defeat” settlor’s intentions.
Megarry in Re Holt.
 An outright gift cannto be fettered by prescribing a mode of
enjoyment: Re Nelson. Where allt eh equitable interest is
settle for the benefit of a group of beneficiaries solely, this is
tantamount to transferring title outright to them by measn of
an assiagnment.
 Gosling v Gosling per Page Wood. Effectively means that the
law recognizes that the ultimate title is vested in the
beneficiary.
 Beneficiary can also withdraw his divisible share in the whole
of the trust fund as long as the property was capable of such
division. Stephenson v Barclay’s Bank. Applied strictly
o Lloyds Bank v Ducker couldn’t withdraw his share as it
would rob the others of
 a majority shareholding
 in a private company.
 Contrary to American approach, as evidence by Claflin v
Claflin Supreme Court of Massachusetts.
In relation to discretionary trusts.
Emerges from Romer J in Re Smith if the trust
The beneficiaries can collectively claim their Saunders right to
compel the trustees to act as they see fit. Aka. NOT
 When there are potential future members (e.g. trust for the
settlor’s children when settlor was still alive Re Trafford per
Peter Gibson.)
 No duty to exhaust. how could the beneficiaries claim the
whole if trustees may give it to others. Federal Court of
Australia: Richstar Enterprises Pty Ltd v Carey. (No 6).
However, they do not individually have a right to the property.
Gartside v IRC per Lords Reid and Wilberforce. UNTIL power has
been excercised in their favour. Their rights are competitive.
Fiduciary Mere Powers

Re Brooks’ Settlement trust. Only have a hope, or spes, that the
property will be transferred to them
The rights they have are Gulbenkian and Schmidt v Rosewood Trust.
1. To the property when and if given to them
2. Right to have the power properly exercised.

Beneficiary Principle
Rationales
1. Without beneficiaries there is no owner
2. The trust cannot be enforced by the court
a. Harman J in Re Wood.
b. Morice v Bishop of Durham. There must be somebody in
whose favour the court can order performance. Lrod
Grant MR.
3. The trust will violate the rule against perpetuity. Viscount
Simmonds. They “tend to perpetuity” in Leahy.
Note change from Leahy, whereby the courts were more ready to
strike down trusts as being void for falling foul of the beneficiary
principle, to Denley where a more indulgent court attitude is willing
to find that a group of people can sensibly enforce the trust.
The fuck is perpetuity?
Magic gravel pit case: Re Wood. Trust for the purpose of working
gravel pits was struck down on the basis that it tended to perpetuity.
Clearly illogical because at some time the gravel pit would run out.
No desire to keep money out of the economy, tied down in abstract
purposes.
Have a specific perpetuity period within the Perpetuities and
Accumulations Act. Normally there are two options
1. A fixed period of 80 years (s1)
2. A life in being plus 21 years.
If they don’t, then before 1964, they would have been void. After
s3(3) of the Act, the law treats such trusts as being valid as until or
when they transgress the relevant limitation period.
If it goes over, then s4(4) comes into operation. It prevents future
beneficiraies from becoming entitled to the fiund. Then winds down
the trust and distributes it amongst the beneficiaries so currently
entitled.

Usually, you can simply say “this trust shall continue in full force
and effect as far as the law allows” re Hooper. That way the perp. Is
read into the trust.

General Application
Re Astor’s Settlement Trusts the trust was invalidated as it fell foul
of the rule. With respect to a trust for
 Maintenance of good understanding between nations
 Preservation of independence and integrity of newspapers
 Protection of newspapers from becoming absorbed by
combines
Held not to be charitable purposes. Roxburgh then held that it was
void due to the following
1. Violation of principle
2. Purposes were uncertain
Examined Harman J in Re Wood “gift on trust must have a cestui qui
trust”
Re Shaw. George Bernard Shaw couldn’t leave his estate to be put
towards research into a 40 letter alphabet and transliterate his plays
into such a language. Fell foul of the principle.
Re Endacott. Gift to a Parish Council to erect a suitable memorial.
Failed.
Remember that “if a gross sum be given and a special
purpose be assigned to this gift the court regards the gift as
absolute and the purpose as merely the motive for the gift”
Re Sanderson
 Re Bowes the grant of 5000 pounds to spend planting trees on
the deceased’s estate was held to amount to a trust for the
estate owners absolutely with the motive of spending on
trees. But they were free to spend it how they wished.
Confirmed by the rule in Saunders v Vautier.

Trusts of imperfect obligations
Roxburgh in Astor “Anomalous and exceptional”.
In Endacott Harman LJ “ought not be increased” and only be
followed in cases “where the one is exactly like the other”
Must not be capricious or pointless
Must not violate the rule against perpetuities
Valid unenforceable trusts (trusts of imperfect obligation)
 Trustee cannot be compelled by the court to carry out the
trust
 Court can simply intervene in cases of maladministration

Care of animals
A trust for animals generally will held to be charitable
However, a trust for a specific animal can be a valid unenforceable
trust as long as it doesn’t’ violate the period for perpetuity.
 Pettingall v Pettingall favorite black mare.
Maintenance of specific graves and monuments
Pirbirght v Salwey gift of 800 pounds for the upkeep of the burial
enclosure of a child in a churchyard for “as long as the law
permitted” was held to be valid until 21 years after the testator’s
death. (i.e.subject to rule against inalienability and restricted to
perpetuity period)
Musset v Bingle Provided sum for erection of moneument and a sum
for its upkeep. The latter was held void for violation of rule against
perpetutities.
However, must be a precise monument. Not simple a “some useful
memorial” Re Endacott.
Saying masses for the dead.
Re Hetherington Held that the saying of masses in public can be a
charitable activity for the enhancement of religion.
However, if said in private it seems as though it would give rise to a
trust of imperfect obligation: Bourne v Keane. And may extend to
other rites: Re Khoo Cheng Teow.
Capriciousness
Brown v Burdett a trust to block up all rooms of a house for 21 years
was held to be void.
Scotland has been more ready to set aside blatantly pointless trusts
 Erection of artistic towers round estate M’Caig v University of
Glasgow.
 Erection of bronze statutes of testatrix and her children
M’Caig v United Free Church of Lismore

Trusts Benefitting an identifiable class of persons.
Distinction. Person vs Purpose?
What are trusts for persons vs trusts for purpose? The judicial
approach has shifted.
 Leahy. Simmonds. A trust could not be made for the benefit of
an order of Nuns as it was a purpose trus

o Trust did not name individual nuns. Couldn’t be
construed as a series of gifts to specific Carmelite nuns.
o Would tend to perpetuity as a trust for the furtherance
of Carmelite nuns would necessarily have to include
later converts.
o The thousands of Carmelite nuns worldwide could not be
said to be benefitted through the dozen that would
directly benefit as alleged beneficiaries of the trust.
o To be contrasted with Cocks v Manners. Trust for nuns
was held as valid as the Mother Superior was clearly
identified as a beneficiary.
Just because a trust has envisages a specific purpose does not
render it de facto void as long as there is an ascertainable class of
persons who would possess the locus standi to enforce the trust by
virtue of their direct or indirect benefit from the trust. (Re Denley).
Distinguishing Leahy on the basis that it was an abstract purpose
trust and not a trust for the benefit of indefinable persons.
Oliver developed this in Lipinski. Stated that there’s a difference
between
 a purpose intended to benefit ascertained/able beneficiaries
 cases where no beneficiary at all is intended.
Contrast with Viscount Simmonds who would have drawn a
distinction between
 trust for the immediate and direct benefit of individuals taking
immediate possession
 trust for present and future beneficiaries of a class (void)
Real difference attributed to a shift in attitude. Viscount Simmonds
was at the height of his career. Oliver (Lipinski) and Goff (Denley)
just started out.
BUT
Construction is still very important. Re Grant’s Will Trusts. Made a
bequest of his estate to the Labour Party to be held on trust for the
benefit of a smaller Labour party in his constituency. Failed because
 Smaller constituency did not control the property given to the
Labour Party, unlike the class in Lipinski.
 Clearly a gift to trustees (the LPC), and not to an
unincorporated organization.
However, it is difficult to see why it could not have been seen as
being a bequest for the benefit of individual members with a superadded direction that it be used for the purposes of the local labour
party. Vinelott sinply was not supportive of the Denley approach.

A way around this approach is to adopt the analysis of Oliver J in
Lipinski by structing the disposition of property as an outright
transfer rather than a trust. Here he drew a distinction between
1. Situations where the purpose is intended for the benefit of
ascertained or ascertainable beneficiaries
2. No beneficiary is intended at all (i.e. outright transfer)
This is in contrast to the approach in Leahy which distinguishes
1. Trusts for the immediate benefit of individuals taking
immediate passion of their rights (valid)
2. Trusts for the present and future beneficiaries of a class (void)
Purpose v Motive
Both a trust for the benefit of people (e.g. children to study for A
levels) with the obligation of a particular purpose (build a library).
Re Bowes. Trust for the purpose of planting trees on the settlor’s
Estate. This would fall foul of beneficiary principle BUT
 Only two beneficiaries
 To whom the trustees had to transfer the funds outright
 Therefore, under Saunders v Vautier, they could exercise the
trust.
 Trust was upheld, but not the purpose.
Part of “if a gross sum be given and a special purpose be assigned
to this gift the court regards the gift as absolute and the purpose as
merely the motive for the gift” Re Sanderson
 Re Osoba.

Unincorporated Associations
What
Conservative and Unionist Central Office v Burrell
1. Two or more persons
2. Bound together for common non-business purposes
3. Mutual rights and duties arising from a contract between them
4. In an organization with rules to determine who controls it
5. Which members must be able to join or leave at will
Cannot speak of property being owned by such a society, or on their
behalf. This creates difficult problems for trusts. They cannot claim
that “they” own the money bequeathed to them since “they:” have
no separate legal existence.

Law
How to get around as per Lawrence Collins J in Re Horley Town FC.
1. Outright gift to present members

a. Oliver J in Lipinksi. This was possible because the
transfer granted the transferee complete control over
the use of capital and the members were ascertainable.
Outright transfer.
b. “Whether a gift was treated as a purpose trust or an
absolute gift to an unincorporated non-charitable body
with a superadded direction, the gift was valid if the
beneficiaries were ascertainable”
c. Not always possible though. Grant’s WT. gift to LPC as
trustees, not to the relevant Labour Party of the
Chertsey and Walton Constituency.
2. Trust for present members
a. A valid people trust. Re Denley.
b. Collectively the people can exercise their collective
saunders right. Simple, no problem! Accepted in Re
Grants’WT.
c. The restriction to present members removes the
perpetuities problem.
d. Good because it means that the usual remedies for
breach of trust would apply.
3. Endowment capital (trust for present and future
members)
a. As long as there is a clear perpetuities provision
indicating at which point the future members cease to
be entitled to the trust property, this should be fine AND
clearly for the members themselves.
b. BUT it does run the risk of being simply construed as a
trust for the furtherance of the purpose of the society,
as voided by Leahy.
c. How could it be interpreted
i. Trust for people capable of interpretation as
lasting for a maximum perpetuity period (either
ewithin the provision or statutory)
ii. Trust for people that offends the rule against the
remoteness of vesting.
iii. Trust for the purposes of the association. NO NO
NO.
4. Transfer to members as an accretion to the club’s
capital
a. Brightman J in Re Recher’s WT. He treated the legacy to
the association as being a legacy to the members as an
accretion to the funds subject to the contract they had
made inter se. BUT explicitly transfer purported to so
be.
b. Essentially renders the transfer governable by contract
law (the constitution binding the society) and not trust
law. Held by the association’s officers on the terms of
the association’s constitution as the agents of the
association’s membership (NOT as trustees)

c. Universe Tankships of Monrovia v ITWF. Accepted this
analysis, concluding that payments made under duress
to trade unions as per Lawrence Collins in Artistic
Upholsteries.
5. Transfer subject to a mandate
a. Cross J in Neville Estates v Madden. Brightman in Burell
b. Treasurer is simply an agent of the donor under contract
law principles. Controlled by fiduciary duties, not the
constitution, as above.
c. Involves a contractual instruction which renders the
instructee compelled to act in accordance with its terms
as an agent of the instructor. This means that there are
fiduciary duties which is great because it means
that the transferor retains control of the money.
d. Not open to objection on the score of perpetuity unless
there is something within the terms or cirucmstances of
the rules of the association that preclude the member at
any given time from dividing the subejcct of the gift
inter se.
6. Trust for an abstract purpose
a. NO YOU’RE FUCKED
b. Re Grant’s WT
c. Leahy v AG of NSW. Nuns only entitled to the settlor’s
donation as statute allowed them to.
7. Trust for a Charitable purpose

Dissolution
Difficult as arguments in favour of
1. Property passing to Crown as bona vacantia when no one can
establish title (I.e. to the Duchy of Cornwall, who pays the
income to the Prince of Wales)
2. Reverting back to external donors under resulting trust.
Bona Vacantia
Goff J in Re West Sussex Constabulary’s Benevolent Fund
1. Contributions of members past and present
a. Passed to crown as the dead members had already
reaped the benefits of their contractual association with
the club, or, simply didn’t have any relatives who could
benefit
b. Held on resulting trust for the donor’s estate.
2. Anonymous contributions to collecting boxes
a. Presumed intention that donors wouldn’t want money
back
b. Outright gift.
3. Contributions
a. Presumed intention. Distributed according to the rules of
the association.

b. Also contractual terms. You pay you get what you paid
for. Extinct contractual liability.
c. Passed to the crown.
4. Raffles and entertainment
a. Interaction was based on contract, and not on trusts.
They had already received the contractual performance
for which they provided consideration.
In circumstances where the contract provides for the division of
assets, this is a purely contractual matter and does not hinge on the
invoking of equitable doctrines: Re Bucks as per Walton J (no 2), as
followed per Lawrence Collins in Upholstery Ltd. The membership of
the association voluntarily subjugates its poroperty rights to the
terms of the association’s constitution.
Re Buck’s Constabulary Widows’ and Orphans’ Fund Friendly
Society.
Stated that upon dissolution “its assets are held on trust for such
members to the total exclusion of any claim on behalf of the Crown”.
 Can be reconciled with Re West on the grounds that this case
concerned an unincorporated body governed by the Friendly
Societies Act 1896.
 BUT. View expounds the wider approach that the contractholding approach applies irrespective of pre or prior
dissolution and irrespective of the nature of society. Very
clearly a rejection of the resulting trust approach.
 Only ever goes to crown when the society becomes moribund.
However, this was not applied in Hanchett-Stamford v
Attorney General. Lewison J
o saw no basis for restricting principle that members are
beneficially entitled to “the society’s assets” subject to
the contract to cases where there are two or more
members.
o Also held that it would be an infringement of Human
Rights to deprive her of funds.
o Assets didn’t go to Crown. Absolutely vested in her free
from any of the society’s rules.
BUT: Davis v Richard and Wallington Industries Ltd Scott J. Resulting
trust would be implied in favour of the funds unless it is absolutely
clear that a resulting trust was to be excluded. :S WAAAAAAAAAA.
 Pension fund. Inland Revenue rules deal with member
entitlement to surplus
 Seems to have considered that the only possibility with regard
to surplus was a resulting trust or to the Crown. Omitted the
vital contractual entitlement to surplus.




Also, pensions fund isn’t analogous to an Unincorporated
association. Members do not sole control of scheme and
cannot decide to wind it up themselves.
Air Jamaice v Charlton. PC doubt.

Proportions
Clear that the funds will be divided equally amongst members at
date of dissolution. No question of equity varying the proportions as
it clearly was a question of entitlement at law by virtue of the core
contractual heart of the society. Re Bucks.
Re Sick and Funeral Society. Surplus distributed in proportion to
contributions. Megarry. Some members paid full rate some members
paid half.
 Illustrates the difficult of trust law in that it is at odds with
human understanding of possession. Whilst the members see
their ownership as attaching to specific items, the law sees it
as relating to amount of value in communal property and
rights against individuals members.
GKN Blots and Nuts. Megarry VC
“broad sword” and regard to “common sense” therefore allowed the
distribution of the proceeds of the sale of the sports grounds equally
amongst the full members who had the right to vote in the winding
up of the association. only
Re Horley three levels of members. Those temporary
members. Associate members. And full members. Although
full and associate memebrs could vote, only full members
were beficially absolutely entitled to property on their winding
up. This was because they had no “effective rights”
 some members were introduced (amending the Rules in the
process) simply to conform with Licensing laws. Therefore held
that the assets of the club were not to be partionned among
these additional members but as a bare trust for full
members. Lawrence J.
Lastly, submitted that equity should not interfere with a resulting
trust. Simpler to treat equity as requiring the parties to carry out
contractual duties (i.e. give preference to the constitution).
 Walsh v Lonsdale. Equity treats as done what ought have been
done
 Westdeutsche. Imposition of constructive trust where the legal
title holder’s conscience is so affected.
That way, the issue of resulting trust does not arise. The transferor
loses title in the property as original owner and acquires property
right only under contract. Far simpler.