Omar A.

Ranjha
LLB Year III

‘There is no compelling justification for the prohibition, in English law, of non-

charitable purpose trusts.’

Critically discuss.

As per the general rule, any private purpose trust which exists is void unless the
purpose is charitable due to non-compliance with the beneficiary principle as
expounded by the case of Morice v. Bishop of Durham, which entails that a trust can
only have ‘ascertainable persons’ as beneficiaries and cannot have purposes as their
beneficiaries. At the same time, as expressed by Justice Hayton, as long as there is
someone who can enforce the trustee’s duties, the trust should be enforced despite
holding a private purpose. This essay will attempt to address whether the rule for
prohibition of non-charitable purposes is absolute or the courts have departed from
this principle. Repeated references will be made to the beneficiary and enforcer
principle coupled with the application of relevant case law.

At the outset, it is prudent to note that a private trust is essentially for ascertainable
individuals. The seminal case of Morice v. Bishop of Durham, lays down the
beneficiary principle under which the courts will not normally enforce a trust to carry
out a private purpose since the benefit of carrying it out are not owed to any specific
individuals. In the words of Sir William Grant MR:

“There can be no Trust, over the exercise of which this Court will not assume a control; for an
uncontrollable power of disposition would be ownership, and not Trust…There must be
somebody, in whose favour the court can decree performance.”

In this case, the trust failed due to no ascertainable beneficiaries. That being said,
exceptions do exist as seen in trusts for charitable purposes which are governed under
the Charities Act 2011 and unincorporated associations which deal mainly with gifts
to associations to give effect to the settlor’s intentions.

Despite this prohibition, one has witnessed a plethora of precedents where courts
have departed from the beneficiary principle and held non-charitable purpose trusts
to be valid in their entirety. This is evident in Re Denley’s Trust Deed, whereby a plot
of land was conveyed for recreational purposes for the benefit of the employees of the
company. The courts held that the trust was valid on the basis that it was an express
private trust in favour of ascertainable human beneficiaries however, the purpose of
the trust could still not be determined by the court. The employees had wide discretion
by exercising their rights to give effect to the settlor’s intention to enforce the trust as
it was purposeful to them. The court’s reliance on Re Bowes also stands misplaced as
it failed to explain the nature of the employee’s entitlement of the trust departing from
the purpose being fulfilled. On the face of it, this does not reconcile with the
 Omar A. Ranjha
LLB Year III

beneficiary principle, thus a prohibition on such trusts would foster certainty as it

would prevent the intentions of the settlor from being misconstrued.

Re Denley’s Trust Deed was followed in Re Lipinkski’s Will Trust where the testator
left half of his estate to be solely used in the work of constructing the new buildings
for the association. Finding the gift valid, Oliver J stated:

“It seems to me that whether one treats the gift as ‘purpose’ trust or as an absolute gift with a
superadded direction or … as a gift where the trustees and the beneficiaries are the same
persons, all roads lead to the same conclusion.”

Therefore, one can safely assume that treating the purpose of a trust is immaterial is
detrimental to the settlor’s intention. However, the aforementioned cases do posit that
private purpose trusts may be enforced regardless of their compliance with the rules
laid under Morice, there may be instances where prohibition on such trusts may do
harm than good. This is illustrated through Re Sanderson’s Trust where a testator left
his property to pay for the maintenance, attendance and comfort of his brother for the
remainder of his life. The courts held that the brother was only entitled to such part of
the fund as was necessary for the maintenance, attendance and comfort of the brother.
The enforcement of such a trust does comply with the intention of the settlor and
ensures. Similarly, Re Osoba is an authority which entails non-compliance with
settlor’s intent meant that the beneficiaries could take the gift even after the intended
purpose was accomplished. One can argue such benefit should not extend beyond the
purpose stipulated by the settlor however this line of reasoning should simply not
form the basis for a prohibition on purpose trusts.

In various instances, the purpose trusts have seemed to benefit a wider general public
despite having no stipulated beneficiaries as seen in Re Endacott where the courts’
accepted that certain testamentary trusts infringing the beneficiary principle would be
held valid. For instance, in Pettingall v. Pettingall, an annuit of GBP 50 was to be
applied in maintaining the testator’s favourite black mare and it was held valid. There
seems no logical justification in prohibiting trusts which confer benefit to someone in
situations where someone can ensure its compliance with the beneficiary principle
and pave way for its enforcement.

To take Justice Hayton’s argument of ‘benefit’ forward which entails that if there is
someone who can enforce a trust, purpose trusts should not be rendered void. He
further places reliance on the obligation placed by the settlor which needs to enforced
by the trustee in order to comply with his duties. Penner, on the contrary disagrees
and claims that the beneficial interest shall simply go to the purpose rather than the
property, therefore asserting that the estate should go those who were benefiting from
it from the very outset. This may be countered by the rights based approached put
 Omar A. Ranjha
LLB Year III

forth by Mathews which states that where the trustees have failed to carry out their
required duties, there must be someone present to complain or a right holder
however, what is overlooked here is that it is difficult to presume where such rights
come from.

On the basis of the above discussion, it can be asserted that a prohibition on non-
charitable trusts is unjustified. Based on the enforcer principle, where there is someone
to enforce the trust, a presumption arises as to its compliance with the beneficiary
principle which should give way to what the settlor intended. As elaborated earlier,
trusts for beneficial purposes may be beneficial for the general public, a prohibition
on them will not only breed adverse outcomes but also undermine the purpose for
which it was originally set.