Student number: 01922054

Equity and Trusts

The trust concept was utilised as a device for preserving family wealth. However the mechanism of splitting the legal and beneficial interests in property has enabled it to expand and constitute many of the most significant economic actors of the global economy.Trusts have been employed in a variety of contexts in the commercial sphere (for example pension funds), in the charitable domain and for tax saving schemes. It is estimated that approximately half of the independent wealth in the world is held through one form of trust structure or another.

Due to the wide range of purposes to which the trust is employed and the development and expansion of the trust to meet changing needs, there is no comprehensive and exact definition. I agree with the statement,

“ there can be no area of law in which there is more confusion about basic definitions than the law of trusts”.

Various academics have attempted to define the trust concept; Hayton defines the trust as;

“an equitable obligation, binding a person… to deal with property owned by him… for the benefit of persons… of whom he may himself be one, and any one of whom may enforce the obligation.”

A further aspect, which may cause confusion when defining the trust concept is the various ways they have been classified, be it by method of creation (express/implied), according to type of beneficiary (private/ public) or character of the interest (fixed/discretionary). These classifications are central to Moffat’s quote; consequently I am going to commence my discussion by analysing the characteristics of public and private trusts as an example of the diverse nature of the trust classification.

One of the most important and far reaching distinctions in the classification of the trust is that of public and private trusts (charities). Charitable trusts (often referred to as public trusts due to their nature) are trusts whose aims are to benefit society, or a section of society. In contrast a private trust benefits an individual or individuals. Non-charitable purpose trusts fall outside of either category, they do not get the benefits accorded to charitable trusts but in certain circumstances they may be upheld as valid.

I am going to concentrate on charitable and non-charitable purpose trusts. I anticipate this analysis will demonstrate how the trust concept has been used by equity in more than one way. By outlining areas of possible future development and existing growth in these two areas I aim to show how trusts are at varying stages of development.

The courts often have to determine whether a trust is charitable, as there are many advantages in applying charitable status to a trust. Charitable trusts operate under different rules of creation, enjoy privileges not shared by private trusts and are controlled by different people, thus it is crucial to distinguish between the two.

Under English Law, a trust for non-charitable purposes is void. Before the twentieth Century, non-charitable purpose trusts were permitted, however the law took a turn in Re Endacott, and the rule against them became so entrenched, it is unlikely to change unless legislation intervenes. One objection to non-charitable purpose trusts is that they have no human beneficiary capable of enforcing them. This is known as the beneficiary principle, and was stated by Lord Parker, in Morice v Bishop of Durham,

“a trust to be valid must either be for the benefit of individuals or must be in that class of gifts for the benefit of the public which the courts recognise as charitable

The beneficiary principle does not operate for charitable trusts, as the Attorney General sues in place of beneficiaries to enforce the trust. There are several exceptions to the beneficiary principle, which were classified by Lord Evershed M.R in Re Endacott, and comprise of trusts for the erection of monuments and graves, trusts for the saying of masses and trusts for the maintenance of particular animals. The beneficiary principle was re-affirmed in Re Astors Settlement Trust, where it was made clear that trusts for non-charitable purposes will fail unless they are kept within the confines of these exceptional cases.These exceptions were described in Re Astors Settlement Trustas “properly to be regarded as anomalous and exceptional”

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A further objection to non- charitable purpose trusts is the issue of uncertainty. For a non-charitable purpose trust to be recognised by the law, the purposes must be sufficiently certain to enable the court to control the performance of the trust. The trust in Morice v Bishop of Durham, failed because the purposes were uncertain. In contrast there is no such requirement for certainty of objects with charitable trusts, as a trust for charitable purposes will be certain, therefore valid.

Another rule that doesn’t apply to charitable trusts is the rule of perpetuities, as charitable trusts may continue forever. A ...

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