TABLE OF CONTENTS

QUESTION NINETEEN 1

1.0 Introduction 2

2.0 Concept of Charitable Trust 2

3.0 Types of Approved Charity 3

3.1 Trust for the relief of Poverty 3

3.2 Trust for advancement of Education 4

3.3 Trust for the advancement of Religion 4

3.4 Trust for other purposes Beneficial to the Community 5

4.0 Answer to Question 19(a) 6

5.0 Answer to Question 19(b) 8

6.0 Answer to Question 19(c) 10

7.0 Conclusion 12

QUESTION TWENTY 13

8.0 Introduction 14

9.0 Conferring Interests on Beneficiaries is Necessary in a Trust 15

10.0 Other Functions of Trust 16

10.1 Tax Advantages and Planning 16

10.2 Guaranteeing Succession of Property 17

10.3 Concealment of Beneficial Ownership 17

10.4 To Benefit the Public at large through Charitable Trusts 18

 10.5 To Protect Spendthrift Beneficiaries 18

10.6 To Enable Non-Corporate Bodies to hold Property 19

11.0 Is it considered to be a Contradiction to the Terms of Trust if its Primary function is

absent? 20

12.0 Conclusion 22

BIBLIOGRAPHY 23
 QUESTION NINETEEN

Advise Celia, who is considering including the following dispositions in her will:

(a) B$250,000.00 to my trustees for the promotion of spiritual well-being amongst children

in hospices in Kuala Belait.

(b) B$350,000.00 to my trustees for the protection of endangered species of parrots in the

Temburong Forest Reserve.

(c) B$450,000.00 to my trustees for the purpose of educating the residents of Kampung

Kiarong about vegetarianism and encouraging young people in Kampung Kiarong to

become vegetarian.

1
ANSWER

1.0 Introduction

A trust imposes a personal equitable obligation on a person (the trustee) to manage assets

for the benefit of another person or group of people (the beneficiary) or to achieve a specific

private or charitable goal. Private trust and charitable trust are two of the various categories

under trust. A trust in favour of identifiable individuals is known as private trust while charitable

trust is a public trust established for purposes that benefit the general public or a segment of the

general public. A trust can only be regarded as charitable if it was created with a charity goal in

mind. For the purpose of this assignment, only the discussion on charitable trust will be looked

into further.

2.0 Concept of Charitable Trust

A charitable trust is created to aid a cause or charitable objective with a few important

exceptions- the trust must be established for charitable purposes, the beneficiaries must be

indefinite and the trust is perpetual in nature. Every charitable trust must be made for a

benevolent cause that in some ways helps the general population. The advancement of education,

science, religion, community improvement, the environment, and the arts are only a few

examples of charitable causes. The beneficiaries in a charitable trust is the general public- it

cannot be to only one specific individual.1 When it comes to a charitable trust, the purpose must

further the public good in accordance with the Charities Act of 2011. This simply means the

1
David Christopher Giwa, (2022), The Difference Between Charitable Trust and Private Trust. Retrieved from,
https://www.researchgate.net/publication/365295020_THE_DIFFERENCE_BETWEEN_CHARITABLE_
TRUST_AND_PRIVATE_TRUST

2
objective of the charitable trust must be beneficial and that any harm or detriment it may cause

must be outweighed by the advantages.

It must be noted that, in the concept of trust, the general rule is that every trust must have

a specific beneficiary. Yet every rule has an exception, and in this instance, charitable trust is

excluded. A charitable trust must first have charitable purposes and must then have those

purposes be beneficial to the public at large. Although one of the main purposes of the certainty

of object is to allow for legal action to be taken against the trustee(s) if they fail to fulfil their

duty in managing the trust, there are distinct bodies that oversee the trust in the case of charities.

For instance, the Attorney general acts on behalf of the Crown to guarantee that charitable

property is properly managed.2

Hence, the goal of this trust must benefit the public in general or a section of the public

and the aim must not be for a personal profit.

3.0 Types of Approved Charity

3.1 Trust for the relief of Poverty

Relief of poverty is to provide aid to those who are in need. Those who lack the

fundamental necessities of existence or the most basic comforts accessible to the broader public

are said to be in poverty.3 These kinds of trusts frequently give the less fortunate members of the

2
Law Explores, (2015), Trust Formation: The beneficiary Principle. Retrieved from,
https://lawexplores.com/trust-formation-the-beneficiary-principle/
3
Scottish Charity Regulator, (n.d), The Prevention or relief of Poverty. Retrieved from,
https://www.oscr.org.uk/guidance-and-forms/meeting-the-charity-test-guidance/a-the-prevention-or-relief-o
f-poverty/

3
society access to food, clothing, housing, and other essentials of life. Thus, due to the charitable

nature of the trust, it is valid. But it must not, however, benefit the rich.

3.2 Trust for advancement of Education

The advancement of education is always a valid reason for a charitable trust. Generally

speaking, “advancing” education refers to the promotion, maintenance, and growth of both

individual and societal knowledge and understanding. This is not restricted to only

student-teacher relations, but it may extend to training or instructing someone, or by rearing

children or young people in a certain method, habit or way of life, imparting knowledge to or

developing abilities of someone.4 In some cases, research is also considered as a charitable cause

so long as it fulfils the conditions.

3.3 Trust for the advancement of Religion

The “advancement of religion” refers to the promotion of a religious group’s spiritual

teachings and the maintenance of the doctrines and spiritual practices upon which those

teachings are based.5 The spiritual beliefs or faith of a group must have an element of worship of

a personal God, gods, or deities in order for it to qualify as a charity organisation under this

classification. The element of ‘public benefit’ is also required to be classified under this trust. On

the one hand, promoting a relief in proper morals or ethics alone is not enough to qualify a group

as an eligible organisation in this classification.6 It must also include an element of public

4
Studocu. (n.d), Charitable Trust. Retrieved from,
https://www.studocu.com/en-gb/document/leeds-beckett-university/foundations-of-the-law-of-equity-trusts/
charitable-trusts/2078197
5
AGCO. 2.1.2. Overview: The Four Charitable Classifications. Retrieved from,
https://www.agco.ca/212-overview-four-charitable-classifications
6
Ibid

4
instruction and the promotion of spiritual teachings as well as serve religious purposes for the

public good.

3.4 Trust for other purposes Beneficial to the Community

A trust will not necessarily be charitable solely on the ground that it benefits the

community. To put it another way, there is no legal requirement that all community-serving

purposes must be benevolent. Such trust must be beneficial within the spirit and intendment of

the Preamble. It is important to take into account that trusts that fall under this category have

been divided into four which consists of :-

I. Trust for the sick and age

II. Hospitals as Charitable Institution

III. Animals

IV. Recreational Purposes

Hence, the phrase “other charitable purposes beneficial to the community” has been

interpreted to benefit the whole community as a whole so that the purposes have a truly public

character.

4.0 Answer to Question 19(a)

In order for a trust to be valid, it must meet the three certainties which consist of certainty

of object, subject matter, and intention. Although charitable trust does not require certainty of

object, the disposition has specified the three certainties which conveys no issue in terms of its

5
certainties. It is also important to note that in order for a trust or gift to be charitable it must: be

of a charitable nature; generally be of public benefit; and be wholly and exclusively charitable.

The first disposition that must be considered is that of “B$250,000.00 to my trustees for

the promotion of spiritual well-being amongst children in hospices in Kuala Belait.” The phrase

“for the promotion of spiritual well-being” could be interpreted as religion. Therefore, this may

come within the trust for advancement of religion. Trusts, in this case, require a ‘public benefit’

element and for this trust to qualify as advancement of religion, it must meet the necessary

criteria which essentially benefit the general public. It should be noted that a trust need not be

charitable just because it serves the community. Therefore, in order for it to be considered

charitable, as stated in Bowman v Secular Society7, religion requires a spiritual belief indicating

its relationship with god.8

Referring to the case of Re South Place Ethical Society9, where the court held that the

study of dissemination of ethical principles does not constitute religion but is concerned with

man’s relationship with man. Here, it highlights how religion is the relationship between human

beings and God. The court, on the one hand, concluded that the essential attributes of religion are

faith and worship. In regards to Celia’s case, it can be considered to be a valid charitable trust

because her purpose is solely to promote spiritual well-being amongst the children in which it

could be deduced to have a relationship with God. This can be seen by the phrase “promotion of

spiritual well-being” where it could be interpreted to have a connection with one’s religion.

7
[1917] A.C. 406
8
Anonymous. (n.d.). ‘Charitable Trusts’ [Powerpoint Presentation]. Sultan Sharif Ali Islamic University, Brunei
Darussalam. Lecture.
9
[1980] 1 WLR 1565

6
Generally, spiritual well-being connects one with his or her creator. Hence, it can be considered

to be charitable.

This also can be strengthened by the case of Re Banfield10, where the court held that an

organisation exists to further the work of God, in a practical sense, even if that religious body

engages in ancillary activities that are not purely religious, this will not necessarily defeat its

religious nature. In relation to Celia’s, she wants to promote the children’s spiritual well-being in

hospices in which this can be seen as a good charitable gift since she is encouraging their

spiritual growth and although she does not engage in the performance of such as practically, it

does not defeat the religious nature of her gift in addition to it being beneficial to the public.

To sum up, Celia's first bequest in her will can be viewed as a valid charitable trust,

which falls under trust in advancement of religion, because she wants to promote the spirituality

of the children in hospices, which conveys a connection to God.

5.0 Answer to Question 19(b)

The disposition has met the required certainties, highlighting that there is no problem

with its certainties just like in the preceding paragraph. It is crucial to note that in order for a trust

or gift to be charitable it must be of a charitable nature and it benefits the public at large.

The second disposition that must be considered is that of “B$350,000.00 to my trustees

for the protection of endangered species of parrots in the Temburong Forest Reserve.” The

10
Studocu. Topic 8 Charitable Trust. Retrieved from,
https://www.studocu.com/my/document/multimedia-university/equity-and-trust-i/topic-8-charitable-trust/17
144259

7
phrase “for the protection of endangered species” could be interpreted as for the purposes

beneficial to the community which falls under the category of animals. It should be noted that

just because a trust benefits the community, it does not mean it will necessarily be charitable.

Therefore, in order for it to be considered charitable, it has to be beneficial within the spirit and

intendment of the Preamble to the English Statute of Charitable Uses 1601.

It is crucial to refer to the case of AG v National Provincial Bank11,where the court ruled

that the trust must be charitable in accordance with the Preamble's spirit and intent and must be

for public purposes that benefit the community or the general welfare. This statement is further

supported by the case of Incorporated Council for Law Reporting v AG12 where the court ruled

that a purpose is presumed to be charitable if it can be demonstrated to be useful to the

community or to the general public; it is prima facie charitable.13 To apply to Celia’s case, it may

be argued to be beneficial to the community as well as the preservation of endangered species.

On the one hand, it must be taken into account that trusts in favour of animals in general or class

of animals are charitable on the ground that they promote morality by tending to discourage

cruelty. However, the kind of animals should not be specified for it to be charitable.

In regards to Celia’s disposition in her will, her gift’s purpose is directed towards

endangered animals, particularly parrots. Referring to the case of Re Wedgwood14, it was held

that offering protection and benefits for animals constituted as a good charity since it was

intended to advance public morality by reducing the propensity for cruelty and it can promote

11
AG v National Provincial Bank
12
[1972] Ch 73
13
Anonymous. (n.d.). ‘Charitable Trusts’ [Powerpoint Presentation]. Sultan Sharif Ali Islamic University, Brunei
Darussalam. Lecture.
14
[1915] 1 Ch 113

8
kindness in human beings to all the animals as a whole. Here, Celia’s act of offering protection

for the endangered species can be considered to be a good charitable trust as it upholds public

morals. However, Celia specifically mentioned “parrots” as the kind of animal she intends to

protect, despite the fact that, in order for it to be viewed as charitable, it should not specify what

kind of animals she wants to rescue unless she exclusively specifies endangered species. Thus, in

order to provide a valid charitable trust, the purposes must be made in general for a group of

animals.

Hence, Celia’s disposition in her will could be argued to come within the category of the

“trusts for other purposes beneficial to the community under animals” because its sole purpose is

purely to provide protection for endangered species. However, it is considered to be invalid to

constitute a charitable trust because Celia only guarantees protection to a specific animal which

is parrot, not to all animals.

6.0 Answer to Question 19(c)

Similar to the sentence above, the disposition possesses all the necessary certainties,

demonstrating that there is no issue with those certainties. The final disposition that must be

taken into account is that of “B$450,000.00 to my trustees for the purpose of educating the

residents of Kampung Kiarong about vegetarianism and encouraging young people in Kampung

Kiarong to become vegetarian.” The phrase “for the purpose of educating” could be interpreted

as for the advancement of education. Hence, this disposition may be argued to come within the

trust for education advancement.

9
 It is important to refer to the case of IRC v McMullen15 to apply to Celia’s disposition in

her will, where the Football Association sought to set up a trust “to organise or provide or assist

in the organisation or provision of facilities which will enable and encourage pupils at schools

and universities in any part of the United Kingdom to play association football or other games or

sports and thereby to assist in ensuring that due attention is given to the physical education and

development and occupation of their minds…”16 in which the court held that it was a charitable

trust for advancement of education. This highlights how education has a wide interpretation

including spiritual, moral, mental and physical education which indicates that education is not

only limited in the classroom.

Addressing the current issue, Celia wishes to dispose of B$450,000 to her trustee for the

purpose of educating the residents of Kampung Kiarong about vegetarianism as well as

encouraging young people in Kampung Kiarong to become vegetarian. Here, it could be seen

that her purpose is to educate the residents of Kampung Kiarong about vegetarianism. Her

attempts to develop a better understanding of vegetarianism for the residents could be argued to

fall under the category of advancement of education. In relation to this matter, it is solely focused

on bringing education not only in the classroom but rather for the residents, and in this case,

those in Kampong Kiarong. This is further strengthened by the case of Re Koeppler17 in which

money was placed in trust for a venue that hosted conferences on global issues, attended by

high-profile individuals. This clearly demonstrates how education is not only limited to teacher

15
[1981] AC 14
16
Lawprof Team. IRC v McMullen [1981] AC 14. Retrieved from,
https://lawprof.co/trust/charitable-purpose-trust-cases/irc-v-mcmullen-1981-ac-14/
17
[1984] CH 243

10
and student in the classroom but also outside of the classroom which is similar to Celia’s

disposition in her will.

On the one hand, it is also equally important to refer to the case of Re Shaw18 where the

purpose of the gift is mainly to show off his ideas on other people rather than educating the

public. It was held that the purpose was neither educational but instead it was political. In other

words, an object that aims to promote an increase of knowledge for personal interest is not

charitable unless involved with teaching or education.19 In regards to Celia’s, her aim is to

educate the residents on vegetarianism which could be deduced to be beneficial for the public.

Therefore, Celia’s disposition in her will can be claimed to fall under the category of the

advancement of education because its sole purpose is purely to educate people in Kampong

Kiarong about vegetarianism. Therefore, it is considered to be charitable emphasising its validity.

18
[1957] 1 WLR 729
19
Lawprof Team. Re Shaw [1957] 1 WLR 729. Retrieved from,
https://lawprof.co/trust/charitable-purpose-trust-cases/re-shaw-1957-1-wlr-729/

11
7.0 Conclusion

To conclude, Celia’s dispositions come under charitable trusts where a gift or trust is

made with charitable purposes. Moreover, in order for a charitable trust to be valid, it must fulfil

certain requirements including having its purpose to benefit the public or a segment of it. Celia’s

dispositions fall under three types of approved charity that are trust for the advancement of

education, religion and other purposes beneficial to the community under the category of

animals. Accordingly, only two of her dispositions can be held as valid for charitable trust; the

first and third disposition. As for the second one, that is the one that falls under the category of

animals, it cannot be constituted as a charitable trust due to her being specific on the selection of

animals.

12
 QUESTION TWENTY

“The necessary function of a trust is to confer interests on beneficiaries. A trust that does not do

that is a contradiction in terms”.

Discuss.

13
ANSWER

8.0 Introduction

The concept of trust often helps to distinguish between legal and beneficial ownership of

properties and also to protect the beneficial interests. It can be defined as a legal arrangement

where property is managed by a trustee for the benefit of a beneficiary. The trustee holds the

legal title to the property but has a fiduciary duty to act in the best interests of the beneficiary.

In trust, there are certain concepts that need to be highlighted such as the Trust Instrument

which is the document that creates trust, vesting the trust property in the trustees. However, it is

not often required for a trust to be created. Other concepts such as the Settlor, Trustee,

Beneficiary and the Trust Property are the necessary requirements or concepts that must exist

before a trust is legally created. The primary function of a trust is to confer interests on

beneficiaries, meaning that the trustee is required to act in the best interests of the beneficiaries

and distribute the assets according to the terms of the trust.20

Trust can be classified into two main categories which are, Express Trust and Implied

Trust. The main issue to be discussed within this question would be whether it would be

contradictory to the terms of trust if the main primary function of trust which is to confer benefit

to beneficiaries is absent.

20
Anonymous. (n.d.). Introduction to the Law of Trust. [PowerPoint slides]. Sultan Sharif Ali Islamic University.
Slide 4-5.

14
9.0 Conferring Interests on Beneficiaries is Necessary in a Trust

Aforementioned, one of the fundamental purposes of a trust is to confer interests on the

beneficiaries. The whole purpose of a trust is to benefit the beneficiaries with the reason that they

are entitled to benefit from a trust.21 Thus, the beneficiary principle will be raised here; without a

beneficiary, there will be no valid trust in the first place.22

This principle is established in the case of Morice v Bishop of Durham where in every

trust, aside from charitable trust, requires someone (beneficiary) in order for the trust to be

deemed legitimate because no trust over which a court cannot exercise control is valid.23 To

emphasise, it is also worth mentioning an academic support by James Penner where he stated

that in order for a trust to exist, there must be someone other than a trustee who has the actual

beneficial ownership of the asset, otherwise the arrangement cannot constitute a trust.24 If such a

person does not exist, then there are no trust duties to uphold, and the legal owner has beneficial

ownership.

Apart from highlighting the beneficiary principle, there are also some notable functions

of a trust that will benefit the beneficiaries. One of these functions is so that beneficiaries are

able to obtain protection of properties. A trust protects beneficiaries from creditors, lawsuits, as

well as other legal claims, which is to their advantage.25 Secondly, trust can benefit beneficiaries

21
‘The Beneficiaries in a trust: Who is the Beneficiary?’ (Sept. 2021). Zerafa Trustees. Retrieved from:
https://zerafatrustees.com/the-beneficiaries-in-a-trust-who-is-the-beneficiary/
22
‘The Beneficiary Principle.’ (2023). Digestible Notes. Retrieved from:
https://digestiblenotes.com/law/trusts/beneficiary_principle.php
23
(1804) Ves 399, 405.
24
Kamil Shah. (2017). ‘4. Beneficiary principle notes (9 pgs). Studocu. University of Southampton. Lecture notes.
Retrieved from:
https://www.studocu.com/en-ca/document/university-of-southampton/equity-and-trusts/4-beneficiary-princi
ple-notes-9-pgs/1747339
25
‘Protect & control your assets with a trust.’ (Nov., 2021). Thrivent. Retrieved from:

15
by avoiding probate. Having assets kept in a trust can spare the beneficiaries’ time, money, and

the stress of a complicated legal procedure. Thirdly, trust allows beneficiaries more flexibility

over their assets and how they are distributed.26 In the event of their incapacity or passing, they

can also leave instructions for the management of their assets. Fourthly, trust can help ensure

privacy.27 A trust, in contrast to a will, is a confidential document that is not made public. This

can assist in protecting beneficiaries’ privacy and preventing sensitive information to be

released. Not only that, a trust can also provide protection to younger beneficiaries.28 A minor is

unable to hold property. However, this is possible if a trust is created for the betterment of the

minor.

10.0 Other Functions of Trust

On the other hand, it should be highlighted that there are also other functions of a trust as

it can also benefit not only the beneficiaries, but also other parties.

10.1 Tax Advantages and Planning

Having tax advantages is one of the functions of creating a trust as this could benefit the

settlor.29 The impact of trust is one of the most significant contemporary purposes of trust. For

instance, the establishment of charitable trusts and the application of tax relief on parents’ yearly

https://www.thrivent.com/insights/estate-planning/protect-and-control-your-assets-with-a-trust
26
ibid.
27
ibid.
28
Anonymous (n.d.). Introduction to the Law of Trust. [PowerPoint slides]. Sultan Sharif Ali Islamic University.
Slide 14.
29
‘5 Potential Benefits of Setting Up A Trust.’ Wealth Management U.S. Bank. Retrieved from:
https://www.usbank.com/wealth-management/financial-perspectives/trust-and-estate-planning/benefits-of-s
etting-up-a-trust.html#:~:text=Trusts%20may%20provide%20tax%20benefits&text=Because%20you've%20transfer
red%20assets,tax%20requirements%20during%20your%20lifetime.

16
income with children who are regarded as under 18 or minors is shown to be beneficial for those

who created a trust.

10.2 Guaranteeing Succession of Property

A trust also allows the settlor to guarantee the succession of the property.30 By doing this,

the settlor is able to make sure that the assets given away will remain within his family. As an

example, a settlor could establish a trust for his wife and specify in the trust deed that upon her

passing, the assets would be distributed to the children or grandchildren. With the initial transfer

being an outright gift, his wife would have been free to dispose of the trust property to a

non-family member, but this arrangement prevents that. In simpler terms, the establishment of a

trust allows the successive enjoyment of property by two or more people.

10.3 Concealment of Beneficial Ownership

A trust is also created with a purpose to conceal the beneficial ownership of a particular

property.31 Therefore, it is to hide the identity of those who control a company through ownership

of its shares. To put it in another way, a trust allows the settlor to support beneficiaries discreetly

without attracting publicity. If property is left by will, secrecy will be thwarted because the will

is a public document once the person has passed away. If someone wanted to benefit the objects

of his indiscretion, then he could give the property away to a food friend who will put it in a

secret trust for the benefit of the secret beneficiaries.

30
Anonymous. (n.d.). Introduction to the Law of Trust. [PowerPoint slides]. Sultan Sharif Ali Islamic University.
Slide 15.
31
ibid., slide 16.

17
 10.4 To Benefit the Public at large through Charitable Trusts

This particular purpose or function is concerned with charitable trusts which are

irrevocable trusts established for charitable purposes. This trust often provides benefits for the

public at large or a certain group of individuals. A person can individually benefit the public by

creating such trusts for many purposes such as educational, religious and more. This act would

often benefit the poor or by financing other purposes beneficial to the community.

An example of charitable trust would be, when a trustor had intended to leave his house

to the local town for them to use it as a community centre. He might set up a charitable trust to

hold the house and oversee its use and caretaking even after his death.

10.5 To Protect Spendthrift Beneficiaries

The concept of ‘spendthrift beneficiaries’ refers to the prevention of a trust beneficiary

from using a future distribution to secure credit. It also prohibits payment to a creditor if it

extends credit to a beneficiary based on future distributions. This often involves a spendthrift

clause and this permanently designates the trust itself as the sole owner of the assets held within

it, rather than transferring ownership to the beneficiaries.

However, they will still receive assets but they are released from the trust over time that

was decided by the trustor and the trustee will determine when the trust is to be created. Hence,

this will protect your estate from any irresponsible spending.32 The main benefit of implementing

32
What is a Spendthrift Trust? Metlife. Retrieved from;
https://www.metlife.com/stories/legal/spendthrift-trust/

18
such trust would be the protection of assets from potentially unreliable beneficiaries and also

safeguards the estate without taking the beneficiaries shares from them.

Spendthrift trusts can help protect your beneficiaries from creditors. Because the assets

included in a spendthrift trust are owned by the trust and managed by the trustee, they aren’t

considered a part of your beneficiary’s assets.33

10.6 To Enable Non-Corporate Bodies to hold Property

Non-Corporate bodies or organisations are referring towards certain associations that are

unincorporated which means that they have no separate legal identity. Hence, due to this, these

associations could not hold properties. The only way that they could hold on properties would

be, by appointing members or officers who are able to hold onto the properties and assets on trust

for the members as long as it was declared in the association’s constitution.

11.0 Is it considered to be a Contradiction to the Terms of Trust if its Primary function is

absent?

It is very much common that once a trust is created, there will be the granting of interests

or benefits to the beneficiaries. However, in certain circumstances, there are instances in which

this does not occur. The main issue would be whether this is contradictory against the usual term

of trust. Firstly, to define the term ‘benefit’ in this sense, it can be referred to as a widely

construed word which goes beyond mere financial benefit, encompassing all sorts of ways a

33
Ibid

19
beneficiary’s position can be improved.34 It also involves the protection and preservation of your

assets.

The basic tenet of the laws of Trust is actually reflected in the statement of “the necessary

function of a trust is to confer interests on beneficiaries.” As mentioned, a trustee must always

put the interests of the beneficiaries above theirs due to them having a fiduciary duty to act in the

best interest of said beneficiaries. The main highlight would be whether it is contradictory

against the terms of trust if the granting of interest is absent, which will be discussed thoroughly

below.

A trust that does not grant beneficiaries interest is said to be illogical because it does not

serve the fundamental function of a trust. If it was absent, then the beneficiaries will not receive

any benefit from the trust and it will lose all its value if the trustee does not transfer the benefits

in accordance with the rules of trust. Therefore, it could be said that the trustee is not operating in

the beneficiaries’ best interests. Hence, the trust is said to be not accomplishing its goals.

The instance where the trustee had failed to confer the interest to the beneficiaries, it

assures that they are responsible for their conduct, the idea of imparting interests on the

beneficiaries is fundamental to trust law. The beneficiaries may file a lawsuit to hold the trustee

liable if they had failed to transfer the interest to them. There are consequences that can arise if

such interests or benefits were failed to be transferred.

34
‘When does a distribution to a beneficiary under a trust not confer a benefit?’. Retrieved from:
https://www.lexology.com/library/detail.aspx?g=b225c0d1-6842-44c5-8d0a-407abdb160e3

20
 Firstly, the beneficiaries might be unable to exercise their trust-related rights. They may

not have any recourse if the trustee is failing to transfer or grant the benefits in accordance with

the terms of the trust agreement and they may not have received anything to which they are

legally entitled to. Hence, this may cause the beneficiaries to seek legal actions against the

trustee because they could have seen this as a violation of their rights.

Secondly, as stated above, a trust that failed to grant interest or benefits to the

beneficiaries may be subject to legal action. It could be argued that the trust is invalid if it does

not carry out their primary purpose or function. This often resulted in the trust being annulled

and the property being given back to its original owner, which was the trustor in this case.

Thirdly, there could arise tax repercussions for a trust that does not grant beneficiaries interest. A

trust may occasionally be established for tax planning reasons, such as to avoid capital gains tax

or inheritance tax.

It could be claimed that the trust is not a true trust and is merely a tax avoidance scheme

if its main purpose is not to help the beneficiaries. If this occurs, the trustee or the settlor may

incur fines or the trust may become taxable.

In conclusion, granting beneficiaries interests is a trust’s essential purpose. This

fundamental rule of trust law ensures that trustees are accountable for their deeds. The trustee

must always act in the beneficiaries best interest and uphold their fiduciary obligation. As a trust

that does not grant any benefits to its beneficiaries are said to go against the fundamental purpose

of a trust.

21
12.0 Conclusion

Overall, the statement that the ‘necessary function of a trust is to confer interests on the

beneficiaries’ is agreeable. It is the primary purpose of a trust to confer benefits for the

beneficiaries. If this were not the case, it would distort the primary reasons for creating a trust.

For this reason, we also agree that a trust that does not confer the benefits on beneficiaries is a

‘contradiction’. On the other hand, we also agree that the creation of trust does not only benefit

the beneficiaries, but also to other parties such as the settlor.

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 BIBLIOGRAPHY

ARTICLE JOURNAL

David Christopher Giwa, (2022), The Difference Between Charitable Trust and Private Trust.

Retrieved from,

https://www.researchgate.net/publication/365295020_THE_DIFFERENCE_BETWEEN_

CHARITABLE_TRUST_AND_PRIVATE_TRUST

CASE LAWS

AG v National Provincial Bank

AG v Thirpooree Soonderee [1874] 1 Kyshe 377

Bowman v Secular Society [1917] A.C. 406

Incorporated Council for Law Reporting v AG [1972] Ch 73

IRC v McMullen [1981] AC 14

Morice v Bishop of Durham (1804) Ves 399, 405

Re Banfield

Re Koeppler [1984] CH 243

Re Shaw [1957] 1 WLR 729

Re South Place Ethical Society [1980] 1 WLR 1565

Re Wedgwood [1915] 1 Ch 113

WEBSITE

AGCO. 2.1.2. Overview: The Four Charitable Classifications. Retrieved from,

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 https://www.agco.ca/212-overview-four-charitable-classifications

‘The Beneficiaries in a trust: Who is the Beneficiary?’ (Sept. 2021). Zerafa Trustees. Retrieved

from:

https://zerafatrustees.com/the-beneficiaries-in-a-trust-who-is-the-beneficiary/

‘The Beneficiary Principle.’ (2023). Digestible Notes. Retrieved from:

https://digestiblenotes.com/law/trusts/beneficiary_principle.php

‘Protect & control your assets with a trust.’ (Nov., 2021). Thrivent. Retrieved from:

https://www.thrivent.com/insights/estate-planning/protect-and-control-your-assets-with-a

-trust

‘5 Potential Benefits of Setting Up A Trust.’ Wealth Management U.S. Bank. Retrieved from:

https://www.usbank.com/wealth-management/financial-perspectives/trust-and-estate-plan

ning/benefits-of-setting-up-a-trust.html#:~:text=Trusts%20may%20provide%20tax%20benefits

&text=Because%20you've%20transferred%20assets,tax%20requirements%20during%20your%2

0lifetime.

What is a Spendthrift Trust? Metlife. Retrieved from;

https://www.metlife.com/stories/legal/spendthrift-trust/

‘When does a distribution to a beneficiary under a trust not confer a benefit?’. Retrieved from:

https://www.lexology.com/library/detail.aspx?g=b225c0d1-6842-44c5-8d0a-407abdb160

e3

Lawprof Team. IRC v McMullen [1981] AC 14. Retrieved from,

https://lawprof.co/trust/charitable-purpose-trust-cases/irc-v-mcmullen-1981-ac-14/

Lawprof Team. Re Shaw [1957] 1 WLR 729. Retrieved from,

https://lawprof.co/trust/charitable-purpose-trust-cases/re-shaw-1957-1-wlr-729/

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LECTURE NOTES/SLIDES

Anonymous. (n.d.). ‘Charitable Trusts’ [Powerpoint Presentation]. Sultan Sharif Ali Islamic

University, Brunei Darussalam. Lecture.

Anonymous. (n.d.). Introduction to the Law of Trust. [PowerPoint slides]. Sultan Sharif Ali

Islamic University.

Kamil Shah. (2017). ‘4. Beneficiary principle notes (9 pgs).’ Studocu. University of

Southampton. Lecture notes. Retrieved from:

https://www.studocu.com/en-ca/document/university-of-southampton/equity-and-trusts/4-

beneficiary-principle-notes-9-pgs/1747339

Law Explores, (2015), Trust Formation: The beneficiary Principle. Retrieved from,

https://lawexplores.com/trust-formation-the-beneficiary-principle/

Scottish Charity Regulator, (n.d), The Prevention or relief of Poverty. Retrieved from,

https://www.oscr.org.uk/guidance-and-forms/meeting-the-charity-test-guidance/a-the-pre

vention-or-relief-of-poverty/

Studocu. (n.d), Charitable Trust. Retrieved from,

https://www.studocu.com/en-gb/document/leeds-beckett-university/foundations-of-the-la

w-of-equity-trusts/charitable-trusts/2078197

Studocu. Topic 8 Charitable Trust. Retrieved from,

https://www.studocu.com/my/document/multimedia-university/equity-and-trust-i/topic-8-

charitable-trust/17144259

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