Trusts and Equity Essay - Question 4
Martin Aston was a local entrepreneur who owned 'Pro -Tech' a company manufacturing components for high performance motorcars. His company employed over 5,000 people. He died last month leaving the bequests in his will.
(i) £100,000 to be used to provide bursaries to enable the children of workers who have been made redundant from jobs in the car industry to attend private schools;
In order to enforce purpose trusts, three conditions must be satisfied. Their purpose must be beneficial in a way which is charitable, the benefit must be shown to be available to the public or sufficient section of the public, and not merely a private class of individuals, and, finally, the funds must be devoted exclusively to charity. Martin's children must prove that the bequests are non- charitable in purpose to show that they are invalid.
The relief of poverty is recognised to be a charitable purpose1. Martin Aston is attempting to create a trust to allow the children to attend private schools. However, attending a private school does not necessarily assist in reducing poverty. The 2001 Charity Commission said that poverty concerns those who 'cannot afford the normal things in life that most people take for granted'. However, paying for the private is not a normal thing that that most people are able to afford and take for granted as they are accessible to those who are well off enough to afford such education.
Furthermore, the trust is to provide bursaries for the children of workers who have been made redundant from jobs in the car industry. There is no evidence that the workers are actually poor. It is only clear that they no longer have jobs in the car industry and this does not necessarily indicate that they are poor. The bequest did not confine the bursaries to be for the children of poor workers who have been made redundant from jobs in the car industry. Therefore, it is not charitable. This was found in Re Gwyon2 where a gift for the provision of clothing for children was held not charitable since the terms of the gift did not exclude children who were from affluent backgrounds. Therefore the bequest would be invalid since its purpose is not found to be beneficial in a way which is charitable.
In addition, the bequest would fail to satisfy the second condition in order for it to be held to be charitable, which is that the benefit should be available to the public or sufficient section of the public, and not merely a private class of individuals. This is because of the 'personal nexus rule'. In Oppenheim v Tobacco Securities Trust Co Ltd.3 On the death of a large shareholder in British American Tobacco (BAT) he left securities to the trust company to be held upon trust and the income applied to provide for the education of the children of its employees or ex-employees of BAT. The question was whether this group of beneficiaries could constitute a section of the public. The 'personal nexus' rule establishes that in order to constitute a section of the public, such a class would have to be 'not numerically negligible', and the identity of the members of the class should not be defined by means of a personal nexus. Hence, the group must be of a reasonable size and not be defined as having some sort of personal relationship. The House of Lords held that although the employees and ex-employees formed a class of some 110,000 persons, they were not a section of the public because they were identified by their personal contractual relationship with BAT. Hence the group was not a section of the public but a private class and the trust was, therefore, not charitable. Similarly, the £100,000 could not be given as a bursary to the children as it would fail to fulfil the criteria to constitute a charitable purpose that it should be for public benefit.
Martin Aston was a local entrepreneur who owned 'Pro -Tech' a company manufacturing components for high performance motorcars. His company employed over 5,000 people. He died last month leaving the bequests in his will.
(i) £100,000 to be used to provide bursaries to enable the children of workers who have been made redundant from jobs in the car industry to attend private schools;
In order to enforce purpose trusts, three conditions must be satisfied. Their purpose must be beneficial in a way which is charitable, the benefit must be shown to be available to the public or sufficient section of the public, and not merely a private class of individuals, and, finally, the funds must be devoted exclusively to charity. Martin's children must prove that the bequests are non- charitable in purpose to show that they are invalid.
The relief of poverty is recognised to be a charitable purpose1. Martin Aston is attempting to create a trust to allow the children to attend private schools. However, attending a private school does not necessarily assist in reducing poverty. The 2001 Charity Commission said that poverty concerns those who 'cannot afford the normal things in life that most people take for granted'. However, paying for the private is not a normal thing that that most people are able to afford and take for granted as they are accessible to those who are well off enough to afford such education.
Furthermore, the trust is to provide bursaries for the children of workers who have been made redundant from jobs in the car industry. There is no evidence that the workers are actually poor. It is only clear that they no longer have jobs in the car industry and this does not necessarily indicate that they are poor. The bequest did not confine the bursaries to be for the children of poor workers who have been made redundant from jobs in the car industry. Therefore, it is not charitable. This was found in Re Gwyon2 where a gift for the provision of clothing for children was held not charitable since the terms of the gift did not exclude children who were from affluent backgrounds. Therefore the bequest would be invalid since its purpose is not found to be beneficial in a way which is charitable.
In addition, the bequest would fail to satisfy the second condition in order for it to be held to be charitable, which is that the benefit should be available to the public or sufficient section of the public, and not merely a private class of individuals. This is because of the 'personal nexus rule'. In Oppenheim v Tobacco Securities Trust Co Ltd.3 On the death of a large shareholder in British American Tobacco (BAT) he left securities to the trust company to be held upon trust and the income applied to provide for the education of the children of its employees or ex-employees of BAT. The question was whether this group of beneficiaries could constitute a section of the public. The 'personal nexus' rule establishes that in order to constitute a section of the public, such a class would have to be 'not numerically negligible', and the identity of the members of the class should not be defined by means of a personal nexus. Hence, the group must be of a reasonable size and not be defined as having some sort of personal relationship. The House of Lords held that although the employees and ex-employees formed a class of some 110,000 persons, they were not a section of the public because they were identified by their personal contractual relationship with BAT. Hence the group was not a section of the public but a private class and the trust was, therefore, not charitable. Similarly, the £100,000 could not be given as a bursary to the children as it would fail to fulfil the criteria to constitute a charitable purpose that it should be for public benefit.
