TRUSTS LAW: THE RIGHTS OF BENEFICIARIES AND THE BENEFICIARY PRINCIPLE (TERM 1 WEEK 8)

Overview:

A. The Nature of The Rights of Beneficiaries In the Trust Fund

 Beneficiary under ordinary express trust acquires equitable proprietary rights in the
property . Beneficiary also has rights (in personam) in the sense that (1) Demand an account
from trustee & (2) Hold trustee liable for any breach of trust (Term 2)

 Under Saunders v Vautier, provided all beneficiaries have reached the age of majority (21
years and above) and are all mentally sound, they (collectively) can direct trustees on how to
deal with trust property.

 Saunders v Vautier => What this means is that trustees are not obliged to obey any directons
which settlor may seek to give after the trust has been cosntitued if those terms are outwith
the terms of trust….

 Consider Fuller v Evans (2000) : Where trustees were vested with discretionary power to
provide for maintenance of settlor’s children => trustees were entitled to ignore settlor’s
financial position when considering exercise of their powers are not worry themselves that
this may have incidental effect of reducing settlor’s liabilities under a court consent order

 CONTRAST  An object of a MERE POWER has no such proprietary interests at all until
property is appointed to the property.

 Nature of rights under objects of ordinary discretionary trusts more complicated because
those objects may have NO VESTED RIGHTS in any property until appointed to theme xcept in
relation to closed discretionary trusts

B. The Beneficiary Principle (BP)

- There must be some person with beneficiary’s rights or else there will be no valid trust
(court need to know so can make decisions)

- Under BP, there must be some beneficiaries – some persons (individuals or corporate
entity) in whose favour court is able to exercise the trust) - Morice v Bishop of Durham

- There is a need to distinguish between Trusts for benefit of people (these will be held
valid)  and Trusts to achieve abstract purpose (these will be held invalid)   Re
Denley, Re Lipinski’s WT

- Trust created to achieve some abstract purpose w/o any person entitled to take any
interest in trust property as beneficiary will be invalid – Leahy v AG for NSW, Re
Grant’s WT Exception to this rule will be charitable trusts (Term 2 Weeks 8-10)

- Important illustration of this principle  Unincorporated Associations context – The

UA must be structured correctly so that it doesn't end up being an invalid abstract
purpose trust. (Re Recher’s WT)

- To be more specific, trusts purely for abstract purposes would often fail on grounds of
being perpetuitous (esp regards to rule against alienability of capital) OR capricious –
M’Caig v University of Glasgow

C. Unincorporated Associations

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  To make such transfer valid, transferor cannot transfer property to officers of
association such that it will be to use for abstract purpose of association.

 Structure of any transfer of property to unincorporated association must be

done super carefully to ensure trust is valid.

 When an unincorporated association terminates – individual members may

acquire individual rights to properly held for the association

 Contexts to structure so trust will be valid: (1) Whether trust for benefit of
identified people, (2) Accretion to association’s funds subject to contract, (3)
Transfer to club’s officers subject to mandate to use property in accordance
with purpose of association subject to contract OR (4) Gift to members of
association

NOTE: trust cannot exist in perpetuity because it breeds economic inefficiency, traps wealth (?)
Perpetuities and Accumulations Act 2009 now governs maximum length of time for which trusts may
exist. 125 YEARS. – Statutory Perpetuity Period.

A. The Nature of The Rights of Beneficiaries In the Trust Fund

Nature of rights of beneficiaries as both proprietary rights AND rights against trustees in personam

- Necessary for beneficiary to be able to enforce these rights to ensure

beneficiaries are capable of enforcing trustees’ performance – Bowman v
Secular Society

- Beneficiary under ordinary express trust acquires equitable proprietary rights in

the property = the trust fund. Beneficiary also has rights (in personam) in the
sense that (1) Demand an account from trustee & (2) Hold trustee liable for any
breach of trust (Term 2)

- Theoretical Basis  EQUITY. Defendant’s conscience. Defendant cannot act

unconscionably!

- Trusstes and Volunteers cannot resist to beneficiary’s enforcement of

proprietary rights (without providing consideration for it).

- Only a bona fide purchaser for value of trust property w/o notice of trust
(“Equity’s Darling”) can take good title in trust property – Westdeutsche and
even then beneficiaries’ rights will be attached to sale proceeds after property
being sold to bona fide purchase=> meaning that beneficiaries are not kept in
the lurch!

******* Saunders V Vautier

- Impt case. Principle in S v V: ALL BENEFICIARIES WHO CONSTITUE 100% OF EQUITABLE

INTEREST IN A TRUST FUND, PROVIDED THEY ARE ALL SUI JURIS (LEGALLY AN ADULT
AND OF SOUND MIND) AND ACTING TOGETHER, CAN DIRECT TRUSTEES HOW TO DEAL
WITH THET TRUST FUND) (even if how to direct trust fund not according to settlor’s
terms/wishes)

- Simple Example: Bare Trust. Sole beneficiary can direct trustee to do either (1) transfer
legal title to beneficiary to make him absolute owner of property OR (2) direct trustee on

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 how to deal with property, provided beneficiary was of sound mind and aged 18 and
above.

- This rule also extends to more than 1 beneficiary. The beneficiaries must eb sui juris and
must ALL ACT COLLECTIVELY so lets say if 1 person objects – i.e. do not agree to plan or
future beneficiary doesn't agree, it is not going to work.

- SIGNIFICANCE OF THIS PRINCIPLE  BENEFICIARY HAS RIGHT IN TRUST FUND ITSELF

AND NOT MERELY PERSONAL CLAIMS AGAINST TRUSTEES OR AGAINST SETTLOR. ONCE
TRUST IF DECLARED AND ONCE TRUST PROPERTY HAS BEEN VESTED IN TRUSTEES =>
BENEFICIARIES HAVE “WHIP HAND” NOW OVER CONTROL OF TRUST FUND, EVEN IF IT
DOESN'T MATCH SETTLOR’S EXPRESSED WISHES REGARDING HOW TO TREAT TRUSTS
PROPERTY.

- Saunders V Vautier Facts: The settlor said property (capital fund) to be managed and
hed intact until beneficiary reached 25 years old. Beneficiary reached aged of majority,
at that time 1800s is was 21 years and (and of sound mind) and wanted capital and
dividends to be delivered to him immediately instead of waiting until 25.

- HELD: Yes, capital and dividends had to be delivered to Vautier and Trustee must
follow. Although settlor specified beneficiary only entitled to property at 25 , RIGHTS
OF BENEFICIARY TOOK PRIORITY OVER DIRECTIONS OF SETTLOR.

- WHAT THIS MEANS IS THAT BENEFICIARIES ARE TREATED AS ULTIMATE OWNERS OF A

TRUSTS FUND. NOT THE SETTLOR.

Subsequent cases following Saunders V Vautier

 Re Bowes  trust fund created over GBP5K for express purpose of planting trees on
large estate. Beneficiaries entitled under other provisions of that same trust to call for
fund reserved for tree maintenance so that they could immediately alleviate financial
problems that they were experiencing at that time!

 Re Nelson (CA)  “where there is what amounts to an absolute gift it cant be fettered
by prescribing a mode of enjoyment” => if property held on trust for beneficiaries and
beneficiaries so direct Then terms of trust cant prevent them from winding up trust
OR directing trustees deal with trust property in a different way.

 When all equitable interest is settled for benefit of means of an assignment => such
trust amounts to absolute gift too all of those beneficiaries together.

 Baker v Archer-Shee  S v V, Lady Archer only beneficiary so could direct trustee what
to do with property. => She was taxable on income from trust as though she was
absolute owner..

 2 classes of beneficiaries would constitute WHOLE of equitable interest. Beneficiaries

could borrow $$ against their equitable interests  Re Smith

 There is nothing to stop one beneficiary from realizing his property rights  A
beneficiary permitted to take delivery of her divisible share into whole of truss fund
without needing to act together with other beneficiaries  Stephenson v Barclays Bank

 Under Saunders v Vautier, provided all beneficiaries have reached the age of majority
(21 years and above) and are all mentally sound, they (collectively) can direct trustees on
how to deal with trust property.

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  Under Saunders v Vautier => What this means is that trustees are not obliged to obey
any directons which settlor may seek to give after the trust has been cosntitued if those
terms are outwith the terms of trust….

 Consider Fuller v Evans (2000) : Where trustees were vested with discretionary power to
provide for maintenance of settlor’s children => trustees were entitled to ignore settlor’s
financial position when considering exercise of their powers are not worry themselves
that this may have incidental effect of reducing settlor’s liabilities under a court consent
order

Effects of beneficiaries having Proprietary rights in trusts fund & Some Observations

- Somehow the judges like to render trust akin to gifts.

- But this view fails to realise settlor deliberately made a trust and didn't just give property
XYZ to beneficiary immediately via gift => outright transfer.

- Milroy v Lord says Equity will not be used to give effect to gifts by means of trusts and
vice versa so 1 mode of transfer cant be effected by another…. Gift is gift. Express trust is
express trust.

- Alastair Hudson made some suggestions to which settlor can overcome these problems.
(1) Settlor make herself 1 of beneficiaries so she will never agree. OR (2) Settlor appoint
someone else as beneficiary with instructions that they don't agree to terminaton of
trust. => Basically draft the trust instrument such that all beneficiaries cannot act
collectively and trustees are enabled to hold on to part of trusts fund.

- In certain specific kinds of trusts – not clear if S v V provides clear description of rights of
beneficiaries, especially DT. =>could be said no objects of trust can have proprietary
rigstd whatsoever until trustees appoint some property to them….. => Must see TERMS
OF DT. => Similar issues will pop up for objects of fiduciary mere powers and unit trust.

- Another consideration  Can beneficiaries even get access to information of the trust
so as to set out claim?

- What is the trusts law stance regarding access to information? If it is based on equitable
ownership of property to which information relates, then anyone without such
ownership would not be entitled to access to that info.

- Answer in Re Ralli’s WT ,Neuberger J: Object of DT entitled to require trustee to provide

info to him regarding VALUE OF TRUST PROPERTY, MANAGEMENT MANNER OF TRUST
FUND & TRUST INCOME.

- Re Ralli’s WT: Rationale for thinking about remainder beneficiary was entitled to
proprietary right in property including income capable of founding trust over that
remainer interest was that remainer beneficiary has some right to know behaviour of
trustees.

B. The Beneficiary Principle

- There must be some person with beneficiary’s rights or else there will be no valid trust
(court need to know so can make decisions)

- Under BP, there must be some beneficiaries – some persons (individuals or corporate
entity) in whose favour court is able to exercise the trust) - Morice v Bishop of Durham

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- When there is a failure by trustees to perform their obligations, court insist on being
able to take control of a trust in the event that there is some failure to perform terms of
trusts properly – Morice v Bishop of Durham

- BP  Certainty of Objects. BP => We are concerned with whether there is even a

beneficiary in the 1st place.

- Theoretical idea => Beneficiaries to CONTROL the COSNCIENCES of the TRUSTEES. =>
That is what equity is all about!

- There must be a beneficiary who is able to keep trustee in check by brining matter to
court .

- Must have 1 beneficiary in favour where court can decree trust performance – Morice v
Bishop of Durham and prevent maladministration of trust.

- Essence of a trust that beneficiaries are able to petition to court in relation to actions or
omissions of trustees – Morice v Bishop of Durham & court has inherent jurisdiction to
monitor this - Schmidt v Rosewood Trust

- Right to petition to court rests with objects of DT as much as beneficiaries with vested
rights under bare trust – Re Ralli’s ST

- Control will be exercised by petition to court seeking declaration regarding manner

trustee must act.

- Most complete form of control for absolutely entitled sui juris beneficiaries acting
together is that they can terminate trust by directing trustees deliver trust property to
them – Saunders v Vautier.

- Only considered possible for court to maintain certainty and ensure trustees are
observing the terms of trust if there is a beneficiary capable of suing trustees – Re
Astor’s ST.

- Settlor disappears once trust is properly created, so it is really up to beneficiary to

pursue and ensure trustee is exercising his obligations – Paul v Paul.

- Re Endacott  “No principle has great sanction or authority in the la wof trysts than
requiring the existence of a beneficiary.”

- ** Trend  SHIFT in judicial approach in indentifying whether there is actually a

beneficiary? Traditional judicial attitudes tended to invalidate trusts which did not satisfy
the BP on literal interpretations of their provisions – Leahy v AG NSW . By contrast 
More recent cases have tended towards validating trusts provided there is some person
or group of persons who could sensibly be said to be capable of controlling trust by
bringing matters to courts (Re Denley)

- There is a need to distinguish between Trusts for benefit of people – identifiable

beneficiafies, the “people trusts” (these will be held valid)  and Trusts to achieve
abstract purpose - no ascertainable beneficareis “purpose trust” (these will be held
invalid)   Re Denley, Re Lipinski’s WT

- Trust created to achieve some abstract purpose w/o any person entitled to take any
interest in trust property as beneficiary will be invalid because there is no beneficiary

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 who can enforce trustee’s obligations! – Leahy v AG for NSW, Re Grant’s WT
Exception to this rule will be charitable trusts (Term 2 Weeks 8-10)

- Important illustration of this principle  Unincorporated Associations context – The

UA must be structured correctly so that it doesn't end up being an invalid abstract
purpose trust. (Re Recher’s WT)

- Note that there are some exceptions to the the BP  (1) Re Hooper – some anomalous
cases + (2) Charities  No need beneficiaries as activities undertaken which are
considered y law to be in public interest – law creates special category for them!!! AG
sues in place of beneficiary (Term 2 topic – Charities CRF)

Policy against Abstract Purpose Trusts

An abstract purpose trust is a trust that is for the pursuit of an abstract purpose, not for benefit of
ascertainable beneficiaries.

Trust created to achieve some abstract purpose w/o any person entitled to take any interest in trust
property as beneficiary will be invalid because there is no beneficiary who can enforce trustee’s
obligations! – Leahy v AG for NSW

Reasons why no abstract purpose trusts:

(1) Effect of allowing abstract purpose trust = leaving trustees at liberty to use trusts fund to
pursue purpose of trust entirely as they saw fit w/o control mechanism of beneficiary who is
entitled to petition to court and ensure trustees perform their fiduciary duties properly.
Abuse of powers. (Trustees cannot use trust property for their own benefit or else they will
be committing breach of trust!)

(2) Effect of allowing abstract purpose trust = Mandating courts to oversee and validate
operation of such trust w/o guidelines on how trustees can act properly => there is a
LOGICAL PROBLEM HERE!!!!!

(3) Abstract purpose trusts may continue to exit in perpetuity! Capital all tied up = Capital
cannot circulate around economy => prevent people from benefitting => This results in
current rule against perpetuities and accumulations!!!

(4) Consequence of abstract purpose trust = No human beneficiary, no locus standi to enforce
trust and trust clearly created to achieve an abstract purpose!

Strict Approach to Beneficiary Principle:

1. Approach based on identifying abstract purpose w/o any benefit to any person

“No identifiable beneficiary”

(1) Re Astor’s ST 

Facts: Trust was created with goal of “advancing preservation of independence and integrity of
newspapers” => preservation of The Observer Newspaper where Astor family played huge role in
creating.

HELD: Purported trust VOID. No beneficiary of such a purpose + Purpose in any event = UNCERTAIN!!!

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(2) Re Shaw 

Facts: George Bernard Shaw left $ in his will to create a new universal alphabet for everyone in the
world in attempt to promote peace.

HELD: VOID PURPOSE TRUST. No beneficiary of such a purpose based on facts of case.

Benefit to any person = meaning there must be at least 1 person who can benefit in the sense of
having some proprietary right in the subject matter of the trust thus giving person a right to control
actions of trustee. NOT enough that trust would improve life in some indirect way w/o you having a
right in trust property: Only charitable trusts can operate in indirect, abstract fashion.

Example:

Re Nottage  trust purportedly created so that a cup would be provided for best yachtsman in
yachting competition.

Qn: Whether this trust will benefit those people who were yachting club members OR whether simply
a trust for purpose of advancing yachting competition at that club.

HELD: VOID PURPOSE TRUST. Trust was not a people trust as its purpose was designed to improve
yachting. => Promoted competition among yachting enthusiasts not sufficient to make it purpose trust
as there were NO BEENFICIARIES with any entitlement to trust property under S v V principle.

2. Approach based on avoidance of trusts lasting in perpetuity

Traditional Approach Modern Approach

Approach Perpetuities & Accumulations
BP  literal interp of trust instrument + sought to Act 1964 Permit cases that
decide whether or not there was any logical possible might theoretically continue
risk of trusts fund failing to vest in person as a beyong perpetuity period to
beneficiary within reasonable period of time continue in full effect  Max
(meaning not last in perpetuity) statutory period is 125 YEARS
under new P & A Act 2009.
Case law developed complex series of rules in which
property could be said to vest in beneficiaries within
sufficient period of time. If the trust fall outside
within suitable time period – VOID => Leahy v AG
NSW

In Re Wood  profits of working gravel pits to be

held for identifiable family members, but because of
drafting of trust  trust terms nominally CAPABLE of
lasting in perpetuity => Held void for remoteness of
vesting!

Academic Re Wood absurd (?)  One day the profits will be

Critique exhausted as gravel would be exhausted..

But reason why held perpetuity was because gravel

could have been extracted so slowly that trust could
last in perpetuity!

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 “People Trust”
Definition Trust with intention of benefitting identifiable
people as beneficiaries.
Consequence BP will be  satisfied because there are
identifiable beneficiaries.
Illustration Trust to provide sports facilities for employees
of a particular company  => because
particular benefits provided for identifiable
beneficiaries (Re Denley)
“Purpose Trust”
Trust that focuses on achieving
some abstract purpose.
BP will be NOT be satisfied
because there NO identifiable
beneficiaries.
Trust to preserve gravestones
will be a trust for abtract
purpose. “Providing some useful
monument for myself” 
CANNOT.

Thus, VOID. ( Re Endacott)

Traditional, Literalist Approach  Leahy v AG NSW

Facts: Property left “upon trust for such order of nuns of the Catholic Church… as my executors and
trustees shall select”. The trustees selected non-charitable order of Carmelite uns. Property  Huge
piece of land and sheep station 

Qn: Whether this trust was an abstract purpose trust for benefit of order of nuns or whether it could
be construed to be a people trust for benefit of individual nuns who belonged to Carmelite Order.

HELD (PC): In the form of non-charitable purpose trust => VOID PURPOSE TRUST based on literal
interpretation!

VC Simonds’ Reasons:

1. Trust was expressed as being made to the order of the nuns => Furtherance of communal
purpose, rather than any specified individual nuns. Trust deemed to have been intended for
abstract purposes of the order.

2. Terms of trust being order of nuns => trust would be for benefit of people who would
become nuns at some time in future, rather than limit members of order at time of making
trust, and therefore would “tend to perpetuity” and breach rule against remoteness of
vesting.

3. Matter of logic => could NOT have been intended that “immediate possession” of rights of
beneficiaries could have been taken by an order over small homestead of sheep farm.

Academic Critique:

- The sheep farm issue not addressed deeply enough?

- Lack of evidence to show if possibly order will be dismantled and then nuns can become
individual beneficiaries  In line with S v V?
- VC’s view was that property should be taken in “immediate possession” of rights in
property => something Lordship considered could not have been intended in relation to
Carmelite Nuns.

Alternative approach to Leahy?

Q: Bequest could be seen as gift made to persons rather than for purpose or object, OR alternatively
as a gift for each and every member of order individually?

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PC could have decided differently? Theoretically, possible for testator to give gift to nuns or put in gift
subject to some condition precedent to hold property for present and future nuns under a perpetuity
period.

Cocks v Mother  $ settled on trust, Mother Superior = trustee. Issue was whether trust intended for
order of nuns => invalidated trust?

HELD: No. Transfer not intended to support order of nuns but hat trust was found to be valid as gift in
favour of all the members of order individually. => BP did not apply in Cocks v Manners.

Direct or Indirect Use or enjoyment of property: Re Denley

Re Denley

Facts: Sports ground left for recreational purposes of company’s employees. Trust provided that
land

“be maintained and used as and for the purpose of a recreation or sports ground primarily for the
benefit of the employees of [a] company and secondarily for the benefit of such other person or
persons (if any) as the trustees may allow to use the same”

Q: Was this a void purpose trust for maintenance of sports ground OR valid people trust in favour of
company’s employees???

HELD: Valid people trust  . Lord Goff felt this arrangement is close to ordinary DT, employees will
enjoy practical benefit of having sports ground.

Deeper Theoretical Perspective:

Judges in Leahy and Re Denley had different attitudes and they will determine their reasoning,
whether an arrangement is to be regarded as a valid people trust or not.

Re Denley decided strict approach in Re Astor and Re Endacott were confined to abstract purpose
trusts (no human can take direct benefit) + not intended to include situations in which some
identifiable humans would take direct benefit from trust’s purpose.

Consequently, trust held to be a “people trust” => Fell within validating “wait and see” provisions of
Perpetuities and Accumulations Act 1964.

What Lord Goff was trying to do:

- His criteria is actually more lenient. BP will be satisfied in circs where there are
identifiable beneficiaries who will take some benefit even if that is only indirect from
the trust.

- Beneficiaries can take INDIRECT benefit is impt => this is different from VC’s initial
requirement of need to take immediate possession.

- Lord Goff isn’t accepting everything and anything as valid peoples’ trust and BP can be
ignored.

- Whatever it is, the benefit cannot be so intangible that beneficiaries cant bring matter
in court to control trustees’ activates => that’s an INVALID trust!

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 - $ used ostensibly for a purpose but being in truth for indirect benefit of ascertainable
people. OK  Why do we have such cases?? Termination of trusts so that capital can be
distributed among human beneficiaries. Q: How do you actually save cases from being
potentially void due to abstract purpose?

- Examples  (1) Amount of $ left on trust to maintain trees on land on which human
beneficiaries under same trust lives (Re Bowes) + $ left for upkeep of gardens for
benefits of human occupying land (Re Aberconway’s Settlement)

- Other cases in which prosecution of ostensibly abstract purpose had nevertherless been
upheld as being for indirect benefit of ascertainable peope – Re Harpur

*** THE DISCUSSION ON VOID ABSTACT PURPOSE TRUST VS VALID PEOPLE’S TRUST, WHETHER WE
CAN FIND A VALID PEOPLE’S TRUST ARISES BECAUSE OF IMPERFECT OBLIGATIONS.

E.G. 1 “SET UP A TRUST FOR RED-HAIRED PEOPLE”

COMMENT 1: PURELY CAPRICIOUS  NO GOOD REASON FOR COURT TO SUPPORT THIS! 

E.G. 2 “SET UP A TRUST TO BUILD SOCIAL CLUB FOR MY EMPLOYEES”

COMMENT 2: THIS SENTENCE ALONE SUGGESTS PURE PRIVATE PURPOSE!! BUT THIS WHOE SENSE
CAN SOUND NOT TO HAVE PURE PRIVATE ABSTRACT PURPOSE, IT CAN BE REGARDED TO BEENFIT
THE EMPLOYEES, WHO ARE IDENTIFIED BENEFICIARIES. THIS SOCIAL CLUB IS NOT AN OBLIGATION
BUT RATHER A MOTIVATION. THE SOCIAL CLUB IS JUST A METHOD. THE CLU IS NOT TRUST TO
BUILD SOCIAL CLUB. HOW YOU ACTUALLY WANT BENEFICIARIES TO ENJOY THE BENEFIT  RE
DENLEY, RE BOWES

E.G. 3 “SETTING UP A TRUST FOR PLANTING TREES” AS IN RE BOWES

COMMENT 3: VALID PEOPLE’S TRUST BECAUSE NOT A TRUST FOR A PURE PRIVATE PURPOS.
PLANTING TREES WITHIN 21 YEARS OF X’S DEATH NOT THE BEST IDEA. BUT IT IS ALLOWED, $ USED
FOR TREE = BENEFIT TO THE BENEFICIARIES, THE ESTATE.

MUST USE $ WITHIN 21 YEARS (UNDER OLD LAW PEP PERIOD) SO THAT £ WILL NOT BE TIED UP.

FIXED PERPETUITY PERIOD SERVES TO BRIDGE GAP BETWEEN BENEFITTING BENEFICIARY AND
BUILDING A POT OF $$$$$.

E.G. 4 “I GIVE $ FOR EDUCATION OF CHILD X UNTIL CHILD X’S FORMAL EDUCATION IS COMPLETED.

COMMENT 4: EXTRA $$  HOW TO DEAL WITH THIS? “HERE IS $ TO THE FURTHER EDUCATION OF
CHILD X”

SO IF TRUST IS ONLY FOR THAT CHILD X, IT IS A PURE PRIVATE ABSTRACT PURPOSE TRUST.

E.G. 5 “HERE IS $ TO GET YOURSELF A NICE JUMPER”

COMMENT 5: $ GIVE TO YOU DOESN'T MEAN YOU MUST BUY JUMPER. YOU WON’T GET SUED IF
YOU DO NOT BUY YOURSELF A JUMPER.

** ORDER OF DEVELOPMENT OF CASES  (1), (2), (3)

CASE ORDER (1) Leahy v (2) Re Denley (3) Re Lipinski (4) Re Conclusion?
AG NSW Turkington
VOID Valid people’s GIFT. Not void abstract GIFT. No *The more closely cases

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 abstract trust trust. void abstract are looked at => Hard to
trust trust. A case see how they are
involving a different!
power.
Sheds light on this matte
of Valid People Trust (?) Sheds light
on this
matte of
Valid People
Trust (?)
Nature of Immediate Goff J happy Capital $$$ set by somebody in his will
property possession some
involved in trust  VC’s beneficiary can ** These cases concerned gifts – But to overrule BP is going
view was bring trustee to statement from donor about purpose to disturb fundamental
that not court should property is to be used . principle that beneficiaries
intended there be any have equitable proprietary
that each irregularities in In each gift: Upheld on basis that rights in trust property and
of nuns in his conduct of ascertainable beneficiaries  who satisfied they are liable to be taxed
Carmelite activities! BP. accordingly => Remove BP
Order was = make tax avoidance and
to take BP will be So now its about people who may take regulatory avoidance
possession satisfied so long direct OR indirect benefit of trust.  easier.
of rights in as some people
small will benefit
homestead directly or
on sheep indirectly from
station. trust.
Policy Can validate It stretches Re Similar approach
Considerations trust that is Denley even further to Re Lipinski 
& Critique indirectly for => Oliver J goes so far Property left for
individuals’ to say he sees no purpose of
benefit reason why the gift Masonic lodge
although in face to HJMA should fail. (unincorporated
of it – it looks association) to
like there is a Suggestion: BP is a trustees who
trust to achieve stumbling block, were also sole
a purpose technical beneficiaries =
interference that EFFECT IS A GIFT
Trust  means hinders ordinary TO MEMBERS OF
of pooling $ for people’s abilities to LODGE AT THAT
lawful carry on perfectly TIME.
communal goals lawful and socially
=> Hard to see desirable activities of
why these forming associations
activities should and pooling property
be banned by to achieve common
trusts law and ends.
deprive citizens
of chance to Oliver J suggested
organize their here will be people
lives. trust if there were
ascertainable people
– implication that
transfer of club is
intended to be for
benefit of members –
OR a gift if members

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were given control
over capital of the
transfer

But view in green

problematic because
presence of some
identifiable person
who can hold
trustees to account
will make trust valid
AND understanding
for there to be such
person capable of
holding trusees into
account – I need this
to be made
sufficiently clear 
clearly drafted trust.

*What is exhibited
here is JUDICIAL
PRAGMATISM and
DESIRE TO SAVE
DONATIONS.

I give and devise

the rest residue
and remainder of
my estate real
and personal
whatsoever and
wheresoever
unto my trustees
upon trust to sell
call in and
convert into
money the same
with power to
postpone such
sale calling in
and conversion
and to hold the
net proceeds of
sale thereof and
my ready money
after payment
thereout of my
just debts and
my funeral and
testamentary
expenses upon
trust: – (a) as to

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 one half thereof
for the Hull
Judeans
(Maccabi)
Association in
memory of my
late wife to be
used solely
in  the  work of
constructing the
new buildings
for the
association and
or improvements
to the said
buildings . . . 

Seminar Q2  Are
any of the reasons
given for the decision
in Re Lipinski’s Will
Trusts [1976] Ch. 235
particularly
convincing? If you
were appealing
against the judgment
of Oliver J, what
arguments would
you raise against
each of his reasons?
What happens ‘short inactivity
when U.A. coupled with
dissolves? strong
circumstances, or
long inactivity
coupled with
weaker
circumstances may
equally suffice. The
question is
whether, put
together, the facts
carry sufficient
conviction that the
society is at an end
and not merely
dormant’. [Re GKN
Bolts and Nuts
Sports and Social
Club [1982] 1 WLR
774, per Sir Robert
Megarry V-C]
In Re GKN Bolts and

13
Nuts Sports and
Social Club, it was
held that the club
had ceased to exist,
but only by virtue of
the positive
resolution of the
members to sell the
club’s sports ground.
Sir Robert Megarry V-
C’s approach was
essentially a
pragmatic one. He
observed (at 776)
that: “in club cases,
there are many
obscurities and
uncertainties, and
some difficulty in the
law. In such cases,
the court usually has
to take a broad
sword to the
problems, and
eschew an unduly
meticulous
examination of the
rules and
regulations”.

The same pragmatic

approach was
adopted in Re Horley
Town Football Club
[2006] EWHC 2386,
Chancery Division,
when the trustees of
the Club sought
directions of the
court as to whether
they held club assets
for "temporary
members" and
"Associate Members"
as well as full
members. It was held
that beneficial
ownership was held
on bare trust for full
members only,
because they could
either unanimously
or at an AGM call for
the assets to be
transferred to them.

In short, the courts

14
 tend to look through
the contractual fine
print of the
association in order
to recognise the
underlying
proprietary basis of
the association,
which is normally
that the current
members own
absolutely. Of
course, in those
cases where a
certain donation
must be construed
to be held on trust
for the present and
future members of
the association,
there is a strong
argument for a
resulting trust to the
donor. One thing is
clear, that the courts
do not consider a
finding of bona
vacantia (vacant
goods => name even
to ownerless
property) to be an
appropriate
outcome (see Re
Bucks Constabulary
Fund (No. 2) [1979] 1
W.L.R. 936 (Walton
J.))

Implications SHIFT IN APPROACH FROM VERY STRICT TO MORE AND MORE LIBERAL

a) Transfer can be viewed as constituting gift (outright transfer either under contract or via gift) and
not trust? => This kind of construction is very impt, help circumvent BP requirement needed in
trusts law.

See Re Lipinski 

Facts: Testamentary Bequest left for benefit of association in form of what may first appear as a
purpose trust.

“as to 1.5 thereof for the Hull Judeans (Maccabi) Association HJMA in memory of my late wife to be
used solely in the work of constructing the new buildings for the association and/or improvements
in the said buildings”

Expression in grey => make bequest appear as a purpose trust.

Expression in green => makes it look like a permanent endowment

Held (Oliver J):

15
 - Precise wording of bequest => Testator intended that the association take control of the
capital completely => Possible for association if considered appropriate to spend ALL of
that capital at once in the construction and maintenance of buildings. 

- Make bequest on terms transferred control of capital = transfer of absolute beneficial

title or in other words = to making gift of $

- Bequest could be interpreted as outright gift rather than trust => No problem with BP as
BP does not apply to gifts.

- His approach in Re Lipinski is even BROADER then Re Denley Oliver J said it’s a matter to
common sense to distinguish between trust for intended beneficiaries (esp if
beneficiaries have power to make capital their own) and trust for no intended
beneficiaries, or beneficiaries unascertainable.

Academic Critique on Oliver J’s judgment in Re Lipinski :

- He is suggesting BP shouldn't be applied in unincorporation cases (like HJMA) in a way

that will TEND to INVALIDATE such dispositions by assuming they were made just for
purpose of that association.

- He suggested if association membership sufficiently certain, disposition to such

association ought to have been interpreted as valid people trust for benefit of those
member, esp when membership as beneficial class has right to control capital of fund.

- Re Lipinski  transfer of disposition to association for its benefit of members OK. BUT
transfer of disposition “useful monument for myself” => VOID

Purpose Trust OR Mere Motive?

Connoting only a motive  Imposing a trust obligation!

- Mixed Scenario: Settlor intended property to be used for specified individuals but
created a trust provision which states purpose for which property is to be applied

E.g. GBP10K to be held by T upon trust for my 3 children (so they can study better for
their A LEVELS) => Mixture of Re Denley trusts for benefit of people BUT comes with
overriding obligation to carry out particular purpose

- Re Bowes  Principle in S v V could be applied so absolutely entitled beneficiaries

acting together would be able to direct trustees HOW TO DEAL WITH TRUST
PROPERTY!!! E.g. GBP 5K settled to maintain trees on estate. Beneficiaries were
ENTITLED to DIRECT TRUSTEES TO TRANSFER TITLE IN MONEY TO BENEFICIARIES
OUTRIGHT.

Examples of Judiciary being creative :

- Bequest by testator for daughter for maintenance and training until her Uni grade and
maintenance of aged mother in Re Osoba  Court said not purpose trust, but an
absolute gift to 3 women with merely moral obligation expressed in trust. See also, Re
Sanderson’s Trust (1857) 69 E.R. 1206

- Re Sanderson’s Trust

16
 VICE-CHANCELLOR SIR W. PAGE WOOD: ... If a gross sum be given, or if the whole
income of the property be given, and a special purpose be assigned for that gift, this
Court always regards the gift as absolute, and the purpose merely as the motive of the
gift, and therefore holds that the gift takes effect as to the whole sum or the whole
income, as the case may be.
Thus, where there is a gift of a sum to apprentice a child, or to buy a commission for a
son, the Court gives effect to the entire gift; and, whether the sum can or cannot be
applied for the purpose of buying the commission or apprenticing the child, the Court
holds that the child is entitled to the whole of it. ...

- Intention not to create purpose trust but to make absolute gift to 7 children once their
education has been completed – Re Andrew’s Trust

*Problem comes in when purpose trust with intention to benefit people created bt objects of trust
become impossible before trust can be performed- i.e. they die.

Re Abbot Fund  Fund created for 2 elderly ladies but they died before receiving subscriptions so
held trust property remaining undistributed should be held on RT for subscribers.

Similar approach in Gillingham Bus Disaster Fund  Subscription fund for which $ was raised from
public in wake of bus crash! Vs in car crash didn't require all $ raised. Issue arose to treatment of
surplus $. Court said remaining surplus held on RT for subscribers. RMB  Equity abhors a vacuum.

4 Exceptions – Anomalous Purpose Trusts which have been held valid:

These exceptions confirmed in Re Endacott

1. Maintenance of specific animals where trust created to ensure animals looked after 
Pettingall, Re Dean => Fictional E.g. YOUR CATS. Your cat, not public cat.

2. Trusts for erection or maintenance of graves and sepulchral monuments, trust for
maintenance of particular gravestones in churchyards.  Re Hooper, Mussett v Bingle

3. Trusts for saying of Catholic masses in private (which would otherwise be non-charitable
purposes due to no public benefit. CRF Term 2: Charities) – Bourne v Keane

Anonymous note, (1920) 36 L.Q.R. 3, on Bourne v. Keane [1919] A.C. 815

The curious and elaborately argued case of Bourne v. Keane [1919] A.C. 815; 89 L.J. Ch. 17, shows
that, when the House of Lords is in the mood, it can be “even valiant” (a good phrase of Willes J.) in
correcting inveterate error, provided that the erroneous opinion has not entered into the framework
of men’s titles and become embodied in their common assurances. The question was whether an out-
and-out bequest of money for the purpose of saying masses is void under the Statute of Chantries of
Edward VI or otherwise; there was not any question of charity or perpetuity. In the opinion of four out
of five learned Lords the historical data work out as follows:
Gifts to establish masses were, of course, valid at common law before the Reformation, for which
Littleton is authority if required.
The celebration of mass according to the Roman ritual became illegal in 1559 and a statutory offence
in 1581, and so remained till 1791. During that time, therefore, a bequest for masses was void as
being for an illegal object.
But after 1791 no statute remaining in force had that effect. The Statute of Chantries confiscated
enumerated endowments of certain classes then existing; it did not forbid similar bequests in future.
The interpretation of that statute which reads into it the assumption that masses and bequests for
masses are illegal because “superstitious” is a figment adopted without due consideration from Duke

17
on Charities (1676), and Lord Cottenham’s decision in West v. Shuttleworth, 2 My. & K. 684, which
other Judges have felt bound to follow ever since, was founded on a misapprehension.
And so disappears bad law which had flourished – under cover of statutory prohibitions long repealed
– for two centuries and more. The full criticism of cases and statutes does not admit of abridgment.

4. Trusts for promotion and furtherance of Fox-Hunting, e.g. trust to fund maintenance of
particular hunt from which no specific individuals could be said to derive direct, personal
benefit! – Re Thompson

Anomalous Purpose Trust listed above are subject to perpetuity periods  They very often have clear
perpetuity provisions. So for gravestones erection case, purpose ceases. (Re Hooper)

Perpetuities and Accumulations

Current Position  Perpetuities and Accumulations Act 2009

2 common law rules:

1. Rule against remoteness of vesting - interests of beneficiaries must vest within perpetuity
period

2. Rule against inalienability => requires income NOT to be bound up in trust outside perpetuity
period.

Old Position under 1964 Act  trust disposition valid unless proven to fall outside statutory period 
21 years (Old Position).

Now, perpetuity period is 125 Years.

Arguments suggesting do away with BP won’t stand strong in the UK.

- Beneficiary is necessarily considered to have proprietary rights in trust fund and if lack of
any person with such rights, the purported trust will be held invalid.

- Contrary to public policy. Many people flock $$ assets to offshore tax havens => do not
want their trusts to be subject to UK trusts taxation…

Summary of case law approaches to BP:

 Can’t say there is a fixed approach to all cases.

 But the stance is very clear: No abstract purpose trusts are allowed in Uk law – Leahy v
AG NSW, Re Denley, Re Lipinski’s WT

 More challenging cases would be where there seems to be some intention to benefit
some ascertainable people indirectly!

 As long as settlor declares he has intention to transfer property on trust for benefit of
identified people whether directly or indirectly, that is a valid people trust. So long as
identified beneficiaries are present – OK  Re Grant  “Bequest left to Labour Party
Property Committee for benefit of Chertsey HQ of Chertsey & Walton Constituency
Labour Party (National Labour Party)”  Vinelott J held bequest should be interpreted
as beign intended to be held on trusts for Labour Party despite expression in italics.

18
 HELD: Intention to create endowment (a permanent block of capital) to generate income
for local or National Labour Party. Consequently, bequest held to be void for perpetuity
& void for being purpose trust

 Under Valid People Trust, there will be somebody in whose favour where court can
decree performance. (Morice V Bishop of Durham)

 Qn: Enough for court to say there is somebody’s favour where performance can be
decreed? Or Person must have some proprietary rights in trusts fund.

 Beneficiary has proprietary rights idea  Saunders v Vautier

 “Held on trust for the purpose of an [assocation]” OR “by the officers of the
association for the purposes of the association” = ALL THESE ARE VOID ABSTRACT
PURPOSE TRUSTS. THUS, VOID. WHY? CAN'T BE INTERPRETED THAT SOME PEOPLE
WILL BE BENEFICIARIES!

 BP will be satisfied so long as some people will benefit directly or indirectly from trust.
 Goff J in Re Denley

 Oliver J suggested here will be people trust if there were ascertainable people –
implication that transfer of club is intended to be for benefit of members – OR a gift if
members were given control over capital of the transfer

 But view in green problematic because presence of some identifiable person who can
hold trustees to account will make trust valid AND understanding for there to be such
person capable of holding trusees into account – I need this to be made sufficiently clear
 clearly drafted trust.

C. Unincorporated Associations

Most significant application of BP is to do with transfers of properties to UNINCORPORATED

ASSOCIATIONS.

Valid Unincorporated Association (U.A.)  Juridical Nature Void

People of U.A. Purpose
Trust Trust
Definition and how -Group of people bound together by contract, but not
it works Separate Legal Person. People gathered to form club
or society for particular purpose (E.g. Warwick Law
Society)

-When somebody wants to give property to the U.A. ,

it cannot be given to U.A. itself because it has no legal
personality

-Property will be given to some person (Human or

company) to hold on behalf of U.A.

-Key Feature: IDENTIFIABLE AS BEING COMPRISED OF

OWN MEMEBR, SUBJECT TO CONSTITUTION AND
RULES, SUCH THAT ASSOCIATION IS NOT A DISTINCT

19
 LEGAL PERSON!

Illustration Conservative Association v Burrell  Q: What’s the

legal nature of the Conservative Party?

- It’s about mutual duties and obligations undertaken

by people bound for common purpose.

-This bound of Union is CONTRACTUAL in nature.

Conservative Party:

When person joins C.P, she becomes a member of

Conservative Association serving in Constituency in
which she lived not national C.P. Nat C.P has no
central organization to monitor all these local
Conservative Associations so nat C.P as a whole NOT
AN UNINCOPORATED ASSOCIATION. But each local
Conservative Association constituted separate
unincorporated association because they has own
membership and own rules.

*Make comparison with Labour Party.

Labour Party has central admin function – centralized

membership and centralized rules which apply to all
members so that it is central party to which members
belong, although they are allocated to local,
constitutency areas and regions…

Labur Party is ONE SINGLE UNINCOPORATED

ASSOCIATION LIABLE TO CORPORATION TAX, C.P IS
NOT BECAUSE SMALL LOCAL ASSOCIATIONS ARE
TREATED DIFFERENTLY FOR TAX PURPOSES DUE TO
THEIR SIZE.

Eastbourne Town v Customs and Excise 

Group of people bound together by contract, but not

Separate Legal Person. People gathered to form club
or society for particular purpose

Property owned by officers of association OR on trust

for individual members subject to trules.Liability of
individual members for debts incurred because of
organization  Governed by contract law and agency
law.

Observation & How Gary Watt: Courts have construed donations to U.A.s
to construe what in wide variety of ways but where possible they prefer
U.A. is  What a to construe such donations as absolute gifts held by
U.A. actually does members of U.A. according to contractual bound
and mean? between them.

1. Absolute gift to present members of

association as Joint Tenants – Neville Estates
v Madden

20
 2. Absolute gift to present members of
association to hold subject to contractual
bond between them – Neville Estates v
Maden & Re Recher’s WT, Re Grant’s WT

3. Gifts on trust for present members of

association or club – Re Turkington

4. Gift on trust for present and future members

of association for DURATION of PERPETUITY
PERIOD – Re Denley’s Trust Deed => So it’s
about where emphasis is placed in “to build a
swimming pool for my employees to swim in”
VS “to build a swimming pool for my
employees to swim in”

5. Donation made to agent subject to

“mandate” – Conservative v Burrell

Effect/ Element Comply This U.A. itself causes problems because the U.A. Avoid
with BP may be considered to be holding property on BP!
unenforceable purpose trust.
*I.e. BP
not The expression “to be held on trust” will create
offended problems in the unincorporated associations U.A
context.

*Possible Constructions of Transfers to U.A.s

To make sure not abstract purpose trust  make sure it is such that property transferred  won’t
be in such a way there will be void abstract purpose trust.

Seminar Q3: Is the legal concept of the unincorporated association obsessed with the primacy of
the “person”, when its first concern ought to be the primacy of “property”? To put the matter
another way, are the funds of a club (including club house etc), rather than its members, the
fundamental constituents of the club’s distinct identity?

Methods for avoiding prohibition against trusts for abstract purposes:

1. Put in limit for suitable perpetuity period and which, “though expressed as a purpose, is
directly for the benefit of an individual OR individuals.”  Re Bowes (tree planting case),
Re Denley (Sports facility for company employees)
2. Draft as an outright gift with an expressed “motive”  Re Sanderson’s Trust and Re Osoba
3. Draft as an outright gift to charity with an expressed : “incentive” (Re Tyler)
4. Use a protector OR letter of wishes (esp popular in off-shore trusts)

MANNER => transfer made analysing closely terms in which transfer is made.

(1) Outright gift, or assignment to present members

21
 Same arguments – take from Re Lipinski – what Oliver J did.

(2) Trust for present members

Same arguments – take from Re Denley  Structure trust such that it is “for benefit of those 11
persons” (e.g.) = this will create a valid people trust over property for those current members as
individuals.

Then beneficiaries can direct trustees collectively under S v V.

Benefit of trust instrument is that our beneficiaries can go and get some kind of remedy from trustees
when they do not perform their obligations properly.

(3) Trust for present and future members – endowment capital

Endowment  $$$ to be locked into trust for a long period of time so Y is derived from property to
be paid to beneficiaries. Endowment created to solely create income. This arrangement tends to
perpetuity because it will continue to exist so long as there is capital left.

Suggestions for trust to be valid people trust  (1) Don't mention “future members” and (2) Impose a
statutory perpetuities period.

1. Perpetuity period in 2009 act  must have this perpetuity period or else can’t be trust. – Re
Denley idea 

2. Will 2009 Act operate to impose statutory perpetuity period, thus validating trust.

3. Trust deemed to be trust for purpose of association by supporting present and future
members => The suggestion posed here is that next time, there will be no outright gift in
favour of current members because interests of future members must be considered 
CONFIRM. VOID ABSTRACT PURPOSE TRUST.

(4) Transfer to members of an accretion to club’s capital to be used accd with club’s constitution
& Re Recher’s WT

- Contracts  Good, then can avoid trusts law principles, no need BP to apply! Individuals
gather for a common purpose.  contracts created  common association. => What
this means is that the courts can use contract concepts to go and decree performance….

- Outright transfer of property , to be in possession of society’s officers = society’s officers

will be holding property as AGENTS of ASSOCIATION’S MEMEBRSHIP  CONTRACT LAW
 & NOT AS TRUSTEES UNDER LAW OF TRUSTS. INTERPRETATION TO BE AVOIDED IS WE
DON'T WANT VOID PURPOSE TRUST.

- ** Re Recher’s Will Trusts 

Facts: Part of residue of WT for Anti Vivisection Association that ceased to exist.

Question: Validity of gift in any event, as if association continued to exist……

22
HELD: Brightman J  This transfer could be interpreted as an accretion to club’s capital to be used
accd with club’s constitution. => EFFECT: No need to consider trusts law, BP and this is OK. Policy
reasoning is that no need to stop an association from conducting non-charitable lawful purpose.

So next time, members can rely on provisions in mutual contract to terminate association and go
distribute property amongst themselves.

- ** Re Recher’s Will Trusts  When can we use this case?

(1) We must think about terms and circs of transfer closely.

(2) Donor should phrase his transfer as being “accretion to association’s general funds to be
used in accd with the terms of ‘association’s constitution’ for it to be held valid as in Re
Recher.

(3) Donor should NOT use expressions such as “the property is to be held on trust for purposes
of association” because it is going to suggest the existence of void purpose trust.
Re Recher’s WT  Academic Critique: Brightman J’s solution has 1 key problem:

Property involved must be owned by somebody and it doesn't explain who the owner is. Ok if
somebody must own it  it's either for club members or for abstract purposes of club. Brightman J
did not address this trusts law problem fulluy…

Alastair Hudson’s view is that this is 1 kind of legal analysis that can be adopted.

(5) Transfer subject to mandate to use property in accordance with club’s constitution

- Contracts  Good, then can avoid trusts law principles, no need BP to apply!
(Conservative Association v Burrell). Individuals gather for a common purpose. 
contracts created  common association. => What this means is that the courts can use
contract concepts to go and decree performance….

- Outright transfer of property , to be in possession of society’s officers = society’s

officers will be holding property as AGENTS of ASSOCIATION’S MEMEBRSHIP 
CONTRACT LAW  & NOT AS TRUSTEES UNDER LAW OF TRUSTS. INTERPRETATION TO
BE AVOIDED IS WE DON'T WANT VOID PURPOSE TRUST.

- Neville v Madden  Since such arrangement is going to be under contract law, it won’t
raise issue of perpetuity period or uncertainty, only unless some issue pops up that has
something to do with company’s constitution.

- Arrangement: Property to be controlled in accordance with U.A.’s constitution +

Administered strictly according to rules for benefit of membership generally! It’s a
MANDATE! Person forced to act on instructions, as AGENT of person giving direction.
All a mandate connotes is contractual fiduciary r/s, NOT a trust.=> Fiduciary r/s
element here. Sig of making peraosn an agent is that that person will bear fiduciary
obligations of an agent => transferor CAN rely on their actions being controlled.

- How the mandate works? Payment to U.A.= Contribution to association’s general

funds whereby U.A.’s treasurer holds property subject to a mandate to use it accd with
terms of U.A’s constitution. That is why no need to worry about BP!

(6) Trust for abstract, impersonal non-charitable purposes

23
 Expressions used by transferor such that transfer is likely to be interpreted to be trust:

 “the property is held on trust” and etc etc etc .. But Re Lipinski says if on true
construction by court it is an abstract purpose, there is going to be a void purpose trust!

 Re Grant’s WT  “Bequest left to Labour Party Property Committee for benefit of

Chertsey HQ of Chertsey & Walton Constituency Labour Party (National Labour Party)”
 Vinelott J held bequest should be interpreted as beign intended to be held on trusts
for Labour Party despite expression in italics. HELD: Intention to create endowment (a
permanent block of capital) to generate income for local or National Labour Party.
Consequently, bequest held to be void for perpetuity & void for being purpose trust

(7) Trust for charitable purposes

No need identifiable beneficiaries (Term 2 Weeks 8-10)

CORE QUESTION: HOW DO WE KNOW WHICH ANALYSIS TO ADOPT? WE MUST LOOK AT CLOSE
READING OF CLUB’S (U.A.’S) CONSTITUTION CONSIDER NATURE OF PROPERTY INVOLVED. SO
WHAT IS THE CONSEQUENCE OF TAKING ON A PARTICULAR PERSPECTIVE.

Case Elaboration
SCENARIO Re Horley Town FC Q: How to analyse a transfer of property to a small football club?

Sadly, the case did not reach any conclusion if this football association was based
on valid trust for benefit of identifiable people as beneficiaries OR association
predicated on valid contract to which property added to accredition of funds, OR
void trust without identifiable beneficiaries formed for abstract purpose.

TO DECIDE WHICH ANALYSIS IS BEST DEPENDS ON CLOSE READING OF U.A.’S CONSTI & CONSIDERATION OF
NATURE OF PROEPRTY INVOLVED.
ANALYSIS TO Re Denley Valid People Trust for benefit of its present members and any future members
ADOPT within perpetuity period whereby those people are treated as being akin to
objects of DT in that they can are entitled to use property by club’s management.
PERSPECTIV Re Lipinski Any property transferred to club could be interpreted as being a gift made to
E current members as tenants in common if they were entitled to dispose of capital
as they sought fit.

OR

Valid People Trust with ascertainable members

Re Grant’s WT Void Abstract Purpose Trust   Playing of sport  nobody is going to take
PROPRIETARY RIGHTS in it.
Conservative v Burrell Property passed to trust held in accd with terms of its constitution under terms of
contract between members as an accretion of club’s funds
Re Recher’s WT
Neville Estates v Property passed as gift to members as Joint Tenants
Madden

Answering PQs:

Facts of PQ scenario => Go and see which LEGAL MODEL fits BEST.

Effect of transfer of property?

1. Whether each bequest will be valid?

24
 2. Whether or not each provides donor with sufficient control over use of property once
transferred to intended recipient

3. Is the property supposed to be for (a) complete control of U.A.  i.e. U.A officers can go and
do anything with it? So “complete control” is gained OR (b) the donor wants to have some
control over how the property is being used => this is where fiduciary duties come in, where
officers are to use property appropriately …

Conclusion – Summary Table:

Various Abstract “People Gift passing An accretion Taking

analyses of Purpose Trust” complete to funds property as
transfer to control agent subject
U.A. to mandate
Leading case Leahy v AG Re Denley Re Lipinski Re Recher Conservative
exhibiting this NSW Association v
analysis Burrell
Valid or Void? Void Valid Valid Valid Valid
Does the Yes, but void Yes, because No, because No because Yes, because
transfer retain governed by all title passes governed only governed by
control of $$$ trustee’s by U.A.’s agent’s
after transfer? fiduciary constitution fiduciary
duties duties
Is it clear who Yes, but void Yes, held on Yes No No
owns the trust
property?

What is the practical use:

- Person seeking advice  What is his status? Role?

- Transferor if he an officer of association (1 of them) who will receive property on behalf

of association then having little control of propery afterwards QUA transferor might not
bother her particularly because she can exert control as club committee member!!

- So which structure to use is really based on circumstances!

Diagrams on GW’s points:

Gary Watt: Courts have construed donations to U.A.s in wide variety of ways but where possible they
prefer to construe such donations as absolute gifts held by members of U.A. according to contractual
bound between them.

1. Absolute gift to present members of association as Joint Tenants – Neville Estates v Madden

2. Absolute gift to present members of association to hold subject to contractual bond between
them – Neville Estates v Maden & Re Recher’s WT, Re Grant’s WT

3. Gifts on trust for present members of association or club – Re Turkington

4. Gift on trust for present and future members of association for DURATION of PERPETUITY
PERIOD – Re Denley’s Trust Deed => So it’s about where emphasis is placed in “to build a

25
 swimming pool for my employees to swim in” VS “to build a swimming pool for my
employees to swim in”

5. Donation made to agent subject to “mandate” – Conservative v Burrell

*Theme  Membership (Lawyerly Minds, Rules of Engagement) VS Property (to the Lay Person),
Rules VS Buildings

EXERCISE:
Seminar Q1 Scenario – See How to apply the law Alternative Analyses Conclusion
WC Notes Week 9 (Strict Test) (Mitigate Harshness)
 CHOOSE MOST
APPROPRIATE CASE.
Derek Smith, of Smithville, (1)_Alt idea can be **If the
(1) “Solely” for the primacy of the alternative
died last week. The following
purpose is going to person  Re analysis
bequests, among others, make this look like a Andrew’s/ Re construction
void abstract purpose Sanderson/ Re Albert cannot work, just
appear in his will:
trust.  Buying a meal trust fund => use strict test.
just for anniversary  Intended to be an
(1) ‘I leave £5,000 to my Is it to Mr AA’s absolute gift to
friend, Mr Albert Andrews, benefit? Apply Leahy v individual. Memorial
solely for the purpose of AG NSW .  Friendship,
buying a meal at Pierre’s Enforceability is a conduct of friendship
restaurant, Smithville, every problem – Closed => ABSTRACT IDEA
year on the anniversary of my interpretation of BP = (?) Re Lipinski 
death’; No beneficiary = building,
CANNOTE ENFORCE improvement in
memory of testator’s
wife? So the $$ for
buying meal =>
Benefit of Mr AA

(2) ‘I leave £8,000 to my (2) Animal exception (2) N.A.

executrix, Miss Bella Brown,
for the care of my cat, Cyril’;
Cyril is 5 years old and in good
health.  Will cat live
beyond perpetuity period?
Best practice is to set
perpetuity period so trust will
not be deemed unenforceable
at 1st instance
(3) ‘I leave £20,000 to
my friends, the Smithville
Madrigal Club’; Smithville
Madrigal Club has for its
objects the furtherance of the
recreational singing of
madrigals for the
entertainment of its members
 Re Dean =>
Maintenance of cat ..
Perpetuity Period for
trust for cat   PETS
– 21 YEARS. COMMON
LAW RULE AGAINST
REMOTENESS IN
VESTING . In this case
there will be a
discretionary trust 
Miss BB will be a (3) Do not want void
fiduciary. Trustee abstract purpose
trust  Can use Re
Denley formation?
(3) U.A. situation  BP will be satisfied so
SMC is not an long as some people
incorporated will benefit directly
association, no legal or indirectly from
personality… BUT, JTs - trust.– Re Denley’s
$ subject to use of Trust Deed ..
constitution of Basically a very
organization, Neville,

26
and the holding of members’
social events. Its rules contain
a provision for the alteration
or abrogation of its rules by
unanimous vote of the
members of the Club.
Qn: Unlikely you want to
sever $ and take it home.
(4) ‘I leave £600,000 to
the said Bella Brown, to hold
on trust to build a social
centre in my home town of
Smithville, to be used solely
by persons having
surname “Smith” and who
were born in that town either
prior to the date of my death
or less than 21 years after
that date.’
The provisions of Derek’s will
are such that, if any or all of
these bequests fail,
statutory next-of-kin
become entitled to
amount comprised in each
one.
Re Recher’s.. BUT THE strong emphasis
PROBLEM COMES must be placed on
WHEN ORGANISATION MY FRIENDS  So
CANNOT DETERMINE that the trust doesn't
OWN FATE  RE last in perpetuity. OR
GRANT: ORG CAN’T Perhaps frame this as
DET DESTINTY… a gift  Re Recher?
…. Neville v Madden
will be more suitable
 Utilise contract
law, U.A Consti, no
need to worry about
BP issue!
(4)Can take an
alternative approach
 perpetuity period
 .. We must see
what benefits are
there for a social
centre.. Re Denley..
How to frame
benefit? Indirect
benefit? Cultural??
Take same analysis
the as Re Denley 
sports club facility is
(4) Can be a void there 
abstract purpose trust
 again, used SOLELY
by persons with Smith
surname…… Leahy v
AG NSW
his
will
the
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