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TRUSTS NOTES

1.0. Nature of a trust

The exact definition of a trust is controversial, but in simple terms, a trust relationship can be
identified when the legal title is owned by one person (the trustee) and the beneficial interest
is held by another (the beneficiary). The trust provides for a legal owner to be able to deal
with property for the benefit of those who cannot or do not want to deal with it themselves.

1.1. Categories of trusts

Trusts can be broadly categorized into two: express trusts and implied trusts.

Express trusts
An express trust can be either private or public.
Private trusts are created for the benefit of private individuals or class of individuals. Public
trusts are trusts which will benefit members of the public. Express trusts are made expressly
by a settlor (the person making a trust). Express trusts can be inter vivos (made during the
lifetime of the settlor) or testamentary (made through the settlor’s will to take effect upon his
death. After death the settlor is referred to as testator).

Fixed or discretionary express trusts

In a fixed trust, the beneficiaries and their interests under the trust are clearly specified. For
example, to my sisters Aisha and Farida I create a trust of N50m in equal parts. They have
N25m each held on trust. In a discretionary trust, the property is held on trust by the trustee
who has some discretion (choice) over who is to benefit, what their share of the property will
be or both. For example, ‘a trust of N50m to my two sisters, Aisha and Farida as the trustee
decides they need’, would be a discretionary trust.
Under this trust, neither Aisha nor Farida has anything more than an expectation in the trust;
only when the trustee exercises that discretion will they have an interest. However, they can
require the trustee to exercise that discretion.

Bare trusts and protective trusts

Bare trusts
Bare trusts are when property is left on trust and the trustee has no discretion or
contingencies. The trustee’s only duty is to hold the property for the beneficiary. A simple
example is a stockbroker who holds the shares on behalf of another.

Protective trusts
Protective trusts are trusts aimed at preventing an irresponsible beneficiary from wasting the
trust property, for example, when a beneficiary is given a life interest which is determinable
(can be forfeited) on bankruptcy or sale. At this point the trust ends and the property is then
held on a discretionary trust for the beneficiary, their spouse and children.

Classifications of interest under a trust

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An interest under a trust can be either vested or contingent. An interest under a trust is said to
vest in the beneficiaries when they have a present right over the trust property. However, this
vested interest can either be to a present right to a present interest, or a present right to a
future interest. This is important because a vested interest is owned by the beneficiary and
may pass with his estate.
Example 1
I leave my home Aso Villa to my wife Zainab for life then to my son Mukhtar. Zainab’s
interest is a present right to a present interest, said to be vested in possession. Mukhtar’s
interest is a present right to a future interest, said to be vested in remainder. This must be
distinguished from a contingent interest. A contingent interest is one that is conditional.

Example 2
I leave my house to Zainab for life then to Aitana should she reach 25 years. Zainab’s interest
is the same as in example 1 but Aitana’s is contingent. She has no interest until she reaches
25.

Implied trusts
Implied trusts are those not expressly created. There are three types of implied trusts:
resulting, constructive, and statutory.

Resulting trusts
These kinds of trusts arise when there has been a failure to validly create a trust. This means
that the beneficial interest exists in a vacuum. Equity, like nature abhors a vacuum and the
vacuum is filled by creating a resulting trust.

Constructive trusts
These trusts are based on the presumed intention of the parties. This intention is found to
exist when the court feels that it is unconscionable to deny another person’s interest in the
property. This is exemplified by the case of Attorney General for Hong Kong v Reid [1994],
where the receipt of bribes which arose from a position of responsibility was found to be held
on constructive trust for the state.

Trust, fiduciary and mere powers

Trust powers
A trustee has powers to manage the trust, such as the power to invest or to appoint agents.
There are also power to appoint, meaning that the trustee can give (appoint) property to the
beneficiaries.
Fiduciary powers
These are not powers of a trust but a ‘pure’ power, i.e. something that can be done but not
enforceable. This is power held by a person in a fiduciary relationship. Example, I give
Ibrahim, my solicitor, my shares in Nile University in the hope that he uses the income to
help my nieces Maryam and Aisha.
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There is no clear intention to create a trust but there is a wish (power) that Ibrahim use it a
certain way. My nieces cannot make him give them any benefit.
Mere power
This is a power of appointment with no fiduciary obligation. If, in the above example,
Ibrahim was my friend then the power was entirely without obligation. Unless moral
obligation.

The three certainties

Introduction
Every trust (except for charitable trusts) must satisfy the three certainties of intention,
subject matter and objects as propounded by Lord Lansdale in Knight v Knight (1840). The
three certainties serve to clarify the trustees’ obligations and if necessary the court itself may
step in to administer the trust.

1. Certainty of intention
As ‘equity looks to intent rather than form’, there is no need for any technical expression to
be used in order to create a trust. Intention in every case is a question of construction of the
words used. In working out what was intended, there are a number of indicators that guide the
court:
Imperative and precatory language
Since the case of Lambe v Eames (1871), the courts have generally made a distinction
between the use of precatory and imperative words. Precatory words express a hope, a wish,
or a moral obligation. The use of precatory words typically indicates that a gift is intended.
As seen in Re Adams and the Kensington Vestry (1884) where a testator devised his property
to his wife ‘in full confidence that she will do what is right as to the disposal thereof between
my children.’ It was held that no trust was created. Imperative words express a command, a
duty to do something. The use of imperative words indicates that a trust (or power) is
intended.
While the courts will be guided by the language used, you should remember that just
as there is no magic in the use of the word ‘trust’, the presence of precatory words will not
necessarily prevent the court from finding that a trust exists, as long as it is satisfied that this
was the intention of the donor. In Comiskey v Bowring-Hanbury (1905), for instance, the
testator left his wife the whole estate ‘in full confidence that she will make such use of it as I
should have made myself and that at her death she will devise it to such one or more of my
nieces as she may think fit…’ These words sound precatory and would suggest a gift.
However, the will continued, ‘in default of any disposition by her thereof by her will or
testament I hereby direct that all my estate…shall at her death be equally divided among the
surviving said nieces.’ Reading the statement as a whole, the court concluded that the
testator had intended a trust, under which the wife held a life interest. The court may also take
into account surrounding evidence which sheds light on the intention of the parties. In Staden
v Jones (2008), the Court of Appeal looked to a solicitor’s covering letter to conclude that a
divorcing couple’s arrangement that the wife transferred her share in the family home to her
husband on the basis that their daughter should ultimately be entitled to her share amounted
to a constructive trust.
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Conduct
An intention to create a trust can also be inferred from the conduct of the donor. As illustrated
by the case of Paul v Constance (1977). After the death of Mr. Constance, a dispute arose
regarding whether his wife (from whom he was separated but not divorced) or his new
partner, Mrs. Paul was entitled to money held in a bank account in his sole name. During
their relationship, Mr. Constance had made arrangements for Mrs. Paul to be able to
withdraw money with his written permission. Only Mr. Constance withdrew money once,
which was split evenly between them and he often told Mrs. Paul that the money was ‘as
much yours as mine’. In addition, they had also paid some joint winnings from bingo into the
account. It was held that these actions were sufficient to infer that Mr. Constance had made a
declaration of trust of the money in the bank account and Mrs. Constance was entitled to half
of the account. A similar approach has been taken in some commercial contexts. For
example, in Re Kayford Ltd (in Liquidation) (1975), the separation of customers’ money in a
different bank account was deemed sufficient to demonstrate an intention to create a trust.

The effect of lack of certainty of intention

If there is no intention to create a trust (or power), the donee will take the property absolutely,
as a gift see Lassence v Tierney (1849).

Certainty of subject matter

There are two elements to certainty of subject matter: - The property held on trust must be
identifiable; and - The beneficial interests must be clear.

The property held on trust must be certain

Vague or general descriptions of the trust property The donor must make it clear what
property is to be held on trust or the trust will be void as the trustees, beneficiaries and,
ultimately, the court will be unable to know what is held on trust.

Trusts of part of property

This situation arises where there is an attempt to create a trust over part of a bulk of tangible
property, e.g. the furniture in a home or a warehouse filled with desktop computers. Where
there is a trust of part of a bulk of tangible property, the trust property will only be certain if it
has been separated from the rest. That was the decision in Re London Wine Co [1986]. LWC
stocked cases of wine in various warehouses. When wine was purchased by customers, they
received a certificate of title which indicated that the wine would be held on trust for them
until dispatched.
When LWC went into liquidation, the question arose whether the wine was held on
trust for the customers or was to be considered part of LWC’s general assets available to
creditors. It was held that there was no trust as the wine ordered by customers had not been
separated from the general stock and therefore the subject matter of each trust could not be
identified. However, where there is a trust of part of some intangible property, such as shares,
there is no need to identify the specific shares to be held on trust as held in Hunter v Moss
(1994). Moss owned 950 shares in a company and was found to have declared himself trustee
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of 50 of those shares for Hunter. However, Moss sold all his shares and kept the proceeds for
himself. When Hunter sought a share of the proceeds, Moss argued that the trust was void
because he had not separated or identified the specific shares to be held on trust for Hunter.
Dillon J distinguished Re London Wine Co on the basis that, unlike cases of wine or other
tangible property, these shares were indistinguishable from one another. Therefore, no
segregation was required as holding any 50 of the 950 shares on trust would achieve the same
thing.

The beneficial interests under the trust must be certain

The beneficial interest under the trust must also be clear. Two cases can help to illustrate the
problems that may arise in this context: in Boyce v Boyce (1849). A testator devised two
houses to trustees on trust to convey one to Maria ‘whichever she may think proper to choose
or select and the other to Charlotte. Maria died before making her choice. The trust failed as
it was no longer possible to say which houses would be held on trust for Charlotte. The
property had been clearly identified but the beneficial interest had not. The trust would have
succeeded if the trustees had been given the power to choose the house, but in the absence of
this power, neither the trustees nor the court could determine the beneficial interest. In Re
Golay’s WT [1965], the question was whether the instructions given to the trustees were
certain enough to allow them carry out the terms of the trust. The
testator directed that the beneficiary was to ‘receive a reasonable income’ from the
testator’s properties. It was held that the phrase ‘reasonable income’ allowed the trustees to
make an objective assessment of what that might be, based on the beneficiary’s
circumstances. In other words, the trust was sufficiently certain as the income the beneficiary
would receive will be based on her circumstance - while this might vary with the years; the
trustees would always have an objective yardstick by which to act. Please note that the legal
issues surrounding the certainty of beneficial interest will not apply in respect of
discretionary trusts. This is because the class to benefit merely holds a spec (hope) of
benefiting – the extent to which they can benefit if at all, is at the absolute discretion of the
trustees.

A link between certainty of intention and certainty of subject matter

If there is a lack of certainty as to the subject matter of the trust, this will cast doubt on
whether the settlor truly intended to create a trust see Mussoorie Bank Ltd v Raynor (1882).
The effect of lack of certainty of subject matter
If there is a lack of certainty as to the subject matter, the trust fails and the property will
return to the settlor or estate on resulting trust.

2. Certainty of objects (beneficiaries)

Certainty of objects relates to the question of who are the beneficiaries of a trust. Every trust -
with the exception of charitable trusts - must satisfy the certainty of objects requirement. The
certainty of objects test is different for fixed trusts and discretionary trusts. –
Fixed trusts - the beneficial interests are fixed, e.g. a trust to benefit Ralia and Laila in equal
shares. –
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Discretionary trust - this is a type of trust in which the trustees are given the power to appoint
people as beneficiaries of the trust. The class of potential beneficiaries does not hold any
beneficial interest until trustees exercise their discretion to appoint in their favour. The
amount they receive is at the discretion of the trustees.

Fixed trusts
In order to satisfy the certainty of objects requirement, a full list of the beneficiaries must be
able to be created see IRC v Broadway Cottages Trust [1955], i.e. all the beneficiaries must
be able to be identified.
Discretionary trusts
A different approach was taken in respect of discretionary trusts in the key decision of
McPhail v Doulton: (Re Baden’s Trust (No 1)) [1971] AC 424 The settlor setup a fund for
the benefit of employees of Matthew Hall & Co Ltd and their relatives and dependents at the
‘absolute discretion’ of the trustees. The House of Lords had to decide:
(a) whether this was a trust or a power and
(b) the appropriate test for the certainty of objects requirement.
While all the judges agreed that this was a discretionary trust rather than a power, they
were split regarding the appropriate test. On a 3:2 majority, Lord Wilberforce, who delivered
the leading judgment of the majority, held: The complete list approach adopted in IRC v
Broadway Cottages [1955] was overruled in respect of discretionary trusts. The test for
certainty of objects in discretionary trusts is the same as the test for fiduciary power in Re
Gulbenkian’s Settlement [1970], namely whether it could be said with certainty that any
given individual is or is not a member of the class. Applying the test in McPhail v Doulton:
Re Baden’s trust (No 2) Having decided on the test for certainty of objects for discretionary
trusts, the case was returned to the court of first instance for the test to be applied. Despite the
court deciding that it satisfied the new test, the executors of Baden’s will relentlessly
continued to contest its validity, and the case came before the court of Appeal for the second
time: Re Baden’s Trusts (No 2) [1973] Ch 9 The trust setup by Baden was to benefit
‘employees of Matthew Hall & Co Ltd and their relatives and dependants’. The issue in this
appeal was whether the groups ‘relatives’ and ‘dependants’ satisfied the new test set out in
McPhail v Doulton – i.e. could it be said with certainty that any given individual is or is not a
member of these classes? The court of Appeal held that only if a class of beneficiaries is
conceptually certain will it be possible to satisfy the test of whether it can be said with
certainty that any given individual is or is not a member of the class.

What is conceptual certainty?

Conceptual certainty has been described as ‘linguistic or semantic certainty’- in other words,
a class of beneficiaries will be conceptually certain when the description enables you to
define the group clearly. Consider the following examples: Example - A discretionary trust of
E100,000 for members of the British Army who served in the Gulf War. - A discretionary
trust of E50,000 for morally upstanding residents of Gloucester. The first trust can be said to
be conceptually certain as the group to benefit can be clearly understood. However, it is
unlikely that the second trust would be valid as it is extremely difficult to pin down what
exactly would be meant by ‘morally upstanding’. For example, X may attend church
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regularly but may also cheat at poker. Y might give regularly to charity but cheat on her
husband. If Z is in favour of same-sex marriage, does this means he is morally upstanding or
not? Where exactly can the line be drawn?

Gifts subject to a condition precedent

Gifts subject to a condition precedent do not require the same degree of conceptual certainty
as discretionary trusts. Re Barlow’s WT [1979] 1 WLR 278 A testatrix provided that a
number of her paintings could be sold at a reduced price to ‘any members of my family and
any friends of mine’. The gift in question here was difference in price between their market
value and the reduced price. The central issue was whether the condition precedent - i.e. that
they be family members or friends - rendered the gift void for uncertainty. The court upheld
the gift. Whereas the objects of a discretionary trust must be conceptually certain, a condition
precedent will be valid if at least one person can be said to satisfy the condition. In a gift to a
class, as the objects are only entitled to a share of the property, it is vital to be able to say
whether any given individual is or is not a member of the class. However, in this case, the
‘family and friends’ were each given an individual opportunity to purchase the paintings.
Therefore, a greater degree of uncertainty as to who satisfied this condition did not affect the
opportunity they received.
Distinguishing conceptual uncertainty from evidential uncertainty
It is important to distinguish ‘conceptual uncertainty’ from ‘evidential uncertainty’.
Conceptual certainty relates to the certainty of the class; evidential certainty relates to the
issue of whether an individual can be found or proven to be member of the class or not. If a
class is conceptually uncertain, the trust will be void, but evidential uncertainty will not
defeat a trust. Having discussed the meaning of conceptual certainty in general terms, it is
important to return to the case of Re Baden’s Trusts (No 2). The Court of Appeal was asked
if the groups ‘dependants’ and ‘relatives’ were conceptually certain. All the judges agreed
that ‘dependants’ and ‘relatives’ were conceptually certain, the three judges each reached this
conclusion by different reasoning!
Sachs LJ started by defining ‘relatives’ to mean ‘descendants of a common ancestor’.
He argued that this was conceptually certain as its meaning was clearly understandable. He
then stated that trustees have fiduciary obligation to survey the range of possible
beneficiaries. This involves the trustees gaining a sense of the general width of the class- it
does not require an exhaustive list. Beyond that survey, who can prove that they are a
member of the class can be included. Sachs LJ’s approach clearly separates the question of
evidential uncertainty by stressing that an exhaustive list is not required. Moreover, in
response to the problem that a potentially limitless number of people could be included
within the definition ‘descendants of a common ancestor’, he makes three points: - The
trustees should exercise their discretion in a sensible way, thus making it more likely that
they would choose close relatives in the general course of events. - Proof of one’s
relationship to another soon becomes very difficult, providing a natural limit on who could
establish their membership of the class. - Most importantly, these issues are evidential and the
fact that it will not always be possible to prove that any given individual is not a member of
the class will not render the trust void. This approach is arguably the purest interpretation of
conceptual certainty. The only drawback is that Sachs LJ’s reasoning provides no simple way
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for the trustees to work out whether the class benefit under the trust is conceptually certain.
Simple common sense can be dangerous path for trustees who could be liable if they
distribute the money wrongly. Megaw LJ: the middle ground Megaw LJ also defined
‘relatives’ as ‘descendants of a common ancestor’. However, he argued that a class would be
conceptually certain if it could be said with certainty that a substantial number of objects fell
within the class, even if there were a substantial number of others of whom it could not
definitely be said that they were within or without class.
Megaw LJ’s approach offers trustees more guidance in that the conceptual certainty of
the group can be tested by seeking a substantial number of individuals who definitely come
within the class. However, what exactly is meant by a ‘substantial number’? Megaw LJ
suggests that this is a question of common sense but wary trustees will still find themselves
questioning whether they have done enough, especially should the situation arise where there
are definitely a substantial number about whom they cannot say with clarity that they are
within the class. Despite it being said that evidential certainty will not defeat a discretionary
trust, Megaw LJ’s rests on being able to provide evidence that a sufficient number come
within the class. Stamp LJ: the strict approach Stamp LJ takes a literal approach to the test set
out in McPhail v Doulton that to be conceptually certain it must be possible to say of any
given individual that they are or are not within the class. On this basis, Stamp LJ rejected the
idea that ‘descendants of a common ancestor could be conceptually certain and argued that
the discretionary trust could be valid if ‘relatives’ was defined as next-of-kin’. Stamp LJ’s
reasoning seems determined to undermine the liberal implications of the decision in McPhail
v Doulton. Applying his approach, there would be no real difference between the new test
adopted in McPhail v Doulton and the previous complete list approach of IRC v Broadway
Cottages Trust [1955] as every individual’s membership of the class would have to be
capable of being established. It is questionable whether this approach would be followed in
the future, particularly as Lord Wilberforce’s full expression of the test states that a trust
‘does not fail simply because it is impossible to ascertain every member of the class’.

Can conceptual uncertainty be cured?

There is some debate over whether conceptual uncertainty can be cured by reference to the
decision or opinion of the trustees or a third party. Re Tuck’s ST [1978] Ch 49 A trust was
established to benefit future baronets on the condition that they were of the Jewish faith and
married to a wife of ‘Jewish blood’, as determined by the chief Rabbi. The court upheld the
trust: any conceptual uncertainty regarding the conditions was cured by the power given to
chief Rabbi. While Denning LJ simply argues that reference to the trustees’ or third party’s
opinion may cure conceptual uncertainty, Eveleigh LJ’s reasoning rests on the narrower
ground that there was no conceptual uncertainty because the settlor was ‘in effect saying that
his definition of “Jewish faith” is the same as the chief Rabbi’s definition’ (a conceptually
certain class). Note: Re Tuck’s ST addresses the validity of conditions precedent. It remains
unclear whether: - The same approach would be adopted in respect of a discretionary trust
with conceptually uncertain objects; and - Whether the courts would adopt the broad
approach of Denning LJ or the more restrictive approach of Eveleigh LJ. Both approaches
remain problematic. Whereas Denning LJ’s approach would ensure the validity of many
more discretionary trusts, it would also seem to empower individuals named by the settlor to
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cure conceptual uncertainty in circumstances where the court would otherwise declare the
trust void. On the other hand, Eveleigh LJ’s approach maintains the need for conceptual
certainty but rests on a very fine factual distinction that many settlors will not appreciate.

Constitution of trusts
Introduction
When a person transfers a legal title to another the legal title is said to ‘vest’ in the other
person. Under construction, we shall be treating the rules for the transfer of title (ownership)
in different types of property. Where property is not transferred by correct legal rules it fails,
it is said to be imperfect. A transferee without consideration is said to be a volunteer. If
however he had furnished a consideration he can specifically enforce the contract. Benefitting
another with property
There are three ways in which an absolute owner of property could benefit another
with it, see Milroy v Lord (1862).
1. An outright gift
2. Transfer to a third party to hold on trust for another
3. The owner holding it in trust for another
Land
A transfer of land or an interest in land is set out in section 52 Law of Property Act
1925. a. It must be by deed b. Transfer is completed by registration at Land Registry In
Richards v Delridge (1874) a grandfather assigned his leasehold to the boy’s mother in
writing, the deed failed for want of a deed.
Stocks and shares which regulate the ownership of companies
Private limited company: 1. Memorandum of transfer 2. Registration of shares 3.
Companies and Allied Matters Act, 2004

Public limited company (plc): - Companies and Allied Matters Act, 2004 In Milroy v
Lord (1862), the rules of the company required share transfer to be completed in the bank’s
book. Although it was by deed and delivered to the respondent, failure to register them on
company books rendered the transfer imperfect.
Chattels
This includes such things as paintings, jewellery, etc. 1. By deed, or 2. Compliance
with Re Cole (1964) a. Delivery b. Intention to transfer legal ownership Note that
requirement for delivery can be actual delivery or constructive, this may include delivery of
car keys, representing the delivery of the car.
Money
For a valid transfer of money it merely requires delivery.
Transfer of an equitable interest
Another type of property that can be transferred in another is the ownership of a beneficial
interest. The legal requirements to transfer this interest to another are set out in section 53 (1)
(c) of the Law of Property Act 1925: A disposition of an equitable interest or trust subsisting
at the time of the disposition must be in writing signed by the person disposing of the same or
by his agent thereunto lawfully authorized in writing or by will. This applies to any types of
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property held beneficially, not just interest in land. There are legal rules, either from statutes
or common law for such a transfer. However, equity has developed means to overcome
problems of imperfect title transfer. Where legal title has not vested correctly then equity has
developed exceptions to the legal rules.
Legal title vests in another capacity
Where the legal owner promises to transfer property (or not to enforce the repayment
of a debt) but fail to do this in their lifetime then the gift would fail. However, if the promised
property vests in the potential transferee in another capacity such transfer has been perfected
as held in Strong v Bird (1874). The requirements for reliance on the rule in Strong v Bird
are:
a. There is a clear intention to make an inter vivos gift to the transferee;
b. There is a present intention to give;
c. The intention continues until death; and
d. The intended transferee obtains legal ownership by appointment as executor or
personal representative.
Intention
The intention must be a clear intention to give immediately and there has only been
some practical barrier to the transfer. It must not be an intention to give in the future. This
rule originated in the release from debts but it has been extended to include: 1. Chattels; and
2. An intention to transfer legal title to hold as trustee.
Donatio mortis causa
Property transferred under a will must comply with the Wills Act 1837. Section 9 requires
that the will be in writing, signed by the testator and witnessed by two people who are not
beneficiaries. However, a deathbed bequest can supersede the will if it complies with the
requirements of a donatio mortis causa as set out in Cain v Moon (1896). If the bequest is
made: a. In contemplation of imminent death; b. Contingent on death; and c. There is actual
or constructive delivery of the property

Contemplation of death
This is more than contemplation of death which everyone must face. It can be in
contemplation of hazardous undertaking, active service during war, or a dangerous trip. It
will not apply in the contemplation of suicide Re Dudman (1925).
Contingent on death
If the transferor recovers, then the intended gift fails; so the gift is revocable should death not
occur. It can also be expressly revoked or by taking back dominion of the property.
Actual or constructive delivery
This means that the transferor hands ‘dominion’ to the transferee, by giving him the means to
control the property. This will depend on the nature of the property. Where the goods are
tangible it may not be difficult but where the property is intangible, such as money, there may
be evidential problems. In the latter situations the courts look for the relevant evidence which
will indicate the transfer of dominion:
a. Safety deposit box: this may include handing the key to a trunk which held the keys to a
safety box, which had another key to a further such box Re Lillingston (1952).
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b. Car: giving the car keys Woodard v Woodard (1995)

c. Bank accounts: the relevant pass book will suffice Re Dillon (1890)
d. Uncertified land: the relevant title deeds Sen v Headley (1991)
e. Certified land: delivery of such a certificate may be evidence of delivery of ‘dominion.’
f. Shares: by handing over the executed share transfer form see Staniland v Willott (1852).
Note that a cheque which is a mandate that ends on death cannot be a subject matter of
donatio mortis causa, Re Beaumont (1902). However, a cheque payable to the transferor can
be, Re Mead (1880).

Every effort has been taken by the transferor

The property has failed to vest despite every effort of the transferor to perfect the title in the
transferee, Re Rose (1952). Where power to complete the transfer is out of the hands of the
transferor then equity will ‘look as done that which ought to be done.’ In Re Rose the
husband wanted to transfer shares to his wife and completed the forms and sent them to the
company. When there was 3 months delay in registering the shares, the court held that
transfer was effective when the transferor had done all that he could do to complete the
transfer. It seems from this case that the transferor must have ‘gone beyond the point of no
return.’ In effect, the transferor has practically lost dominion of the property. Compare Re
Rose to Re Fry. In Re Fry (1946), after completing and sending the forms to transfer the title
to be registered, the company still needs the consent of the Treasury to make the transfer. The
transferor completed all the forms for the consent but had died before it was given. The court
held he still has the power of the shares and had not done all that was required to transfer
them. It can be gleaned from the authorities that it is when the transferor can no longer
change her mind and the property is out of control of the transferor, will the courts perfect the
transfer. In Mascall v Mascall (1984) a father and son have completed all the forms necessary
to transfer a house to the son and sent them to the Stamp Office. After an argument the father
tried to stop the transfer. It was held that the father had done all within his power to do and it
was the responsibility of the Land Registry to complete the transfer, who were third parties to
the transferor.
Estoppel
Estoppel is the equitable principle which enforces promises that are unsupported by
valuable consideration. Proprietary estoppel, unlike promissory estoppel, can
form the basis of a claim, Pascoe v Turner (1979), so it can act as a sword, not only a
shield. The requirements are that:
1. There be a clear promise, this can be acquiescence, Ramsden v Dyson (1866),
2. There be reliance, and
3. It be inequitable not to enforce the assurance.
In Gillett v Holt (2001), the claimant had worked for the defendant since he was 16.
The claimant had rejected opportunities to work elsewhere and better himself on assurances
by the defendant that he would leave him the farm. Over 40 years later they fell out and the
defendant made a new will leaving the farm to another. On these facts an estoppel had arisen.
Promise
The promise must be unequivocal, which means that they must be able to identify the
property over which the equity arises.
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Reliance
The burden is on the claimant to prove a causal link between the assurance and the act in
reliance. In Coombes v Smith (1986), Coombes moved into a house owned by Smith when
she became pregnant by Smith, leaving behind an unhappy marriage. The court held that both
of these acts were not in reliance on any assurance by Smith but the actions of a woman in
love with a man and unhappy in her marriage. If a promise and reliance can be proven then
evidentially the courts can find the necessary basis on which to raise a remedy in equity, for
instance in Gillett v Holt where the claimant had carried out substantial improvements on the
property the court found this sufficient equity. Note that our next topic, formalities, is closely
related with construction of trusts. Remember that constitution deals with legal requirements
for the transfer of an interest in property while formalities is about creating and dealing with a
trust interest.
Formalities
In this session we shall treat the formalities necessary to create a testamentary (made by a
will) and an inter vivos trust and the formalities regulating the transfer of an existing
equitable interest. Three types of trusts property that will be discussed are:
a. Trusts of property other than land including trusts of personal property;
b. Trusts of land or an interest in land; and
c. Disposition of an equitable interest. One of the purposes of formalities is to create
certainty of transactions and prevent fraud. By this the trustee avoids personal liability, fraud
from the trustee is prevented and where necessary the court will find it easier to allocate the
trust correctly.
Testamentary trusts
Many trusts are created by will. A requirement of all wills is that they must comply with the
requirements of Wills Act 1837 to be valid. By section 9 it must be: 1. In writing 2. Signed by
the testator, or someone acting at his direction in his presence; 3. In the presence of two
witnesses who sign and attest the will before the testator. Note that any amendment made by
codicil must also comply with these requirements. These requirements will satisfy any need
for the evidence of transfer of equitable interests or the creation of trusts.
Creation of an inter vivos trust in property other than land
The creation of trusts of an interest in property other than land requires no formalities for the
creation of a trust. This will apply to such property as shares, money, paintings, etc. What is
important to establish is certainty of intention to create the trust. This is a question of fact to
be established by evidence. This may
be demonstrated by words, written statements, or by conduct as seen in Paul v
Constance supra. However, where no sufficient certainty can be found, the courts will not
impose a trust to achieve justice see Jones v Locke (1865). The maxims are ‘equity will not
perfect an imperfect gift’ and ‘equity will not assist a volunteer.’ Creation of an inter vivos
trust of an interest in land
An express trust of an interest in land can be declared orally or in writing, but until it
is in writing it is unenforceable. The statutory requirements for creating such trusts are set out
in section 53 (1) (b) of the English Law of Property Act 1925: A declaration of trusts
respecting land or any interest therein must be manifested and proved by some writing signed
by someone who is able to declare such trust or by his will.
13

Interest affected
This rule applies to freehold and leasehold interests. It will also apply where a person tries to
create a trust of their equitable interest in land. The above section deals only with the creation
of a trust over an interest in land. It does not deal with the transfer of legal title in land, nor
does it deal with the creation of a trust in anything but an interest in land. The section
requires two formalities for the creation of an express trust of any interest in land:
a. There must be evidence of the trust in writing, and b. The evidence must have been
signed by the settlor
b. Evidence in writing
c. The writing required does not need to be in form of a deed to be valid. Written
evidence signed by the settlor will suffice. But the trust is not enforceable until the
requirement of section 53 (1) (b) are satisfied. In most cases, however, the declaration
of a trust of an interest in land will be created through formal written trust instrument
which is signed by the settlor, thus satisfying the requirement of
section 53 above. In this situation both the declaration of trust and the formality
requirements will be completed at the same time.
Signed by the settlor
Unlike in section 53 (1) (c) the written evidence here must be signed by the settlor; it
cannot be signed by an agent. However, where a settlor declares herself trustee of her interest
in land for a beneficiary, remember that the settlor will only have to declare the trust of land
and complete the required formalities of section 53 (1) (b) as she still retains the legal title.

Avoiding the formalities of section 53 (1) (b)

Although the courts are extremely reluctant to avoid formalities, the case of Rochefoucauld v
Boustead (1897) provides an exception to the formalities. If the settlor has transferred legal
title to a trustee effectively, intending that it be held on trust but has failed to evidence this in
writing, then the courts may admit oral evidence as proof of the transaction. The maxim is
‘equity will not permit a statute to be used as an instrument of fraud.’ Therefore, the
unenforceable trust is validated by means of a constructive trust, imposed against the
conscience of the person trying to use statutory provision to perpetrate fraud.
Dealing with existing equitable interests
The first point to remember is that equitable property interest is a chose in action
treated in the same manner as all property. The case of Timpson’s Executors v Yerbury
(1936) identified four ways to benefit another person with a beneficial interest: 1. Directly
assign to a third party; 2. Contract for valuable consideration to assign to another; 3. Direct
the trustee to hold for another; 4. Declare that the interest is held by the beneficial owner on
trust for another.

Direct assignment of equitable interest to a third party

This must comply with assignment of chose in action which must be of the whole interest not
just part of it. The formalities are that the assignment: a. Be in writing b. Signed by assignor
c. Express notice given to the trustee Nonetheless, the absence of formalities may not be fatal
in equity see William Brandts’ Sons & Co v Dunlop Rubber Co (1905). The assignment is
14

enforceable at equity when there is: 1. A clear intention to assign 2. A clear transfer 3. The
interest is clearly identifiable

Contract to assign to another

Where there has been a valid contract to assign an equitable interest the contract may be
capable of specific performance. Then it may be possible that such a disposition need not be
in writing. See Oughtred v IRC (1960), where a chose in action was held by the legal owner
for the benefit of the person who had provided valuable consideration.
Direct trustee holding the benefit for another
The requirements for this transfer are set out in section 53 (1) (c) LPA and apply to any type
of property held beneficially not just interest in land:
a. The equitable interest has to be subsisting i.e. an already existing interest. It
does not apply to the creation of an original trust,
b. The transfer must be in writing,
c. Signed by the transferor or his agent.
Example 1
Farida declares that she will hold her shares in Shoprite on trust for her sister Zainab. Since
this is an original trust no need to comply with section 53 (1) (c).
Example 2
Zainab who now owns the beneficial interest in the shares, asks her trustee Farida to
hold her beneficial interest in Shoprite for the benefit of her son, Ahmed. Here Zainab must
comply with section 53 (1) (c) as she holds only the beneficial interest, which is subsisting at
the time she intends to give the interest away (a disposition) to Ahmed. Example 3 Israel is
the beneficiary of a trust of shares in Nile Ltd. In March he orally instructs his trustee,
Hannatu to hold his shares for the benefit of his children. In May he writes a letter to Hannatu
to confirm this request. This transfer is void without writing and writing to confirm it is
equally invalid. As the transfer is void ab initio no writing can confirm a non-existent transfer
see Grey v IRC supra

SPECIAL TRUSTEES
a. Custodian and Managing Trustees
In modern commercial relationships trust property may be created in custodian and
managing trustees, e.g. are employers trust schemes. Today in Nigeria many
companies have Trust Schemes for their employees which are controlled and managed by
trustees for and on behalf of the employees. Apart from the statutory power to charge, a
custodian trustee is just as much subject to the rule that a trustee may not profit from his trust
as any other trustee. He should maintain custody of the trust property with due diligence and
honestly.

b. The Public Trustee

The Public trustees are usually a corporation sole capable of being sued and to sue
under the name of the corporation. A Public trustee may be an ordinary Trustee or a
15

custodian trustee or even a judicial trustee e.g. of a public Trustee is the Administrator
General.1
c. Trust Companies – various types of companies (including Banks and Insurance
Companies) undertake the duties of trustees and executors for remuneration, varying
with the size of the estate which is administers. The Appointment of trust companies
has the following advantages;
(i) Continuity of the Administrator
(ii) The resources of the corporation are available to indemnify the
Beneficiaries in case of breach
(i) The investment of the trust property is reviewed at regular intervals by experts
in the line of investment.

d. Judicial Trusts
Under the Common law or statute, the High Court of the state may on application of a
beneficiary, a trustee, or a settlor appoint, any fit and proper person nominated in the
application or an official of the court to act as a judicial trustee either alone or jointly with
another person to act on the trust property. Further, on proof of a reasonable cause, a judge
may appoint a judicial trustee to administer an estate of the deceased instead of the executor
or administrator. In appointing trustees, the court would take into account three factors
namely (a) the wishes of the person by whom the trust was created; (b) conflict of interests;
and(c) efficient administration of the trust. To avoid conflict of interest, the Court may not
appoint any relative or friend of any of the beneficiaries for such appointment may hinder the
trustee from being impartial.2
On appointment, the judicial trustee becomes an officer of the court and subject to its control
and supervision. Further, The court is empowered where the circumstances so warrant, on the
death of a person to appoint and authorize an officer of the Court or some other fit person to
take possession of his property within its jurisdiction or put it under seal and so keep it until it
can be dealt with in accordance with the provisions of law.3
Trust Distinguished From Other Legal Relationship and Concept
1. Bailment: A bailment is a delivery of a personal chattel upon a condition express or
implied that the chattel shall be redelivered or returned to the bailor or deal according to
the direction of the bailor after the fulfillment of the conditions of the bailment. 4 While
the bailee may be regarded as holding upon a kind of trust, the nature of the trust
relationship existing in respect of the bailment is contractual which a legal relationship
is whereas a trust relationship is equitable. While only chattel may be subject of
bailment, any kind of property both real and personal may be subject of trust.
Further, a bailee does not have a legal title over the bail property and therefore cannot
transfer the chattel whereas a trustee do have a legal title and can transfer the trust
property to a bona fide purchaser.

1
See Public Trustee Act Cap. 170 LFN 1988 (applicable to Lagos) now Public Trustee Law Cap. 162, Law of
Lagos State 1994.

2
Re Tempest [1886] LR 1 Ch app. 485
3
Okafor v. Onedibe (2003) 9 NWLR (Pt. 825)339 CA, Anowo v. Anowo (1991) 7 NWLR (Pt. 201) 58 CA.
Order 30 Rules 2 of the High Court (Civil Procedure)Rules of Anambra State, 1988

4
P.H. Petit, Equity And The Law Of Trusts, 9th Ed.( U.K. Oxford University Press, 2001)p.27.
16

2. Agency: Trustees and agents are in a fiduciary relationship and therefore shares some
common rules.
(a) both must act in good faith,
(b) both must avoid conflict of interest
(c) both must not make secret profits
(d) both must keep proper accounts and
(e) both are under obligation not to delegate responsibilities

However, agency relationship may be contrasted with trust relationship on the following
grounds.
(a) while agency relationship is a legal one, trust relationship is equitable
(b) An agent does not possess legal interest over his principal’s property though he is able
to dispose of the property and pass good title provided he acts pursuant to powers
given to him by his principal. On the other hand, a trustee possesses a legal interest
and need no conferment of authority before he can transfer title to a third party
(c) while the agent is subject to the principal’s control, the trustee is not subject to the
control of the beneficiary but acts however under the best interest of the trust and
according to the trust instruments
3. Contract – A contractual relationship is legal having evolved from the Court of
Chancery, whereas, trust is equitable and evolved from Court of Equity.
(i) Though both relationship may arose by way of an agreement, 5 however trust
relationship may in some cases not necessarily arise by way of an agreement but by way
of grant
(ii) While a contract gives rise to a right in personam, a trust gives rise to a right in rem.
(iii) In a contractual relationship privities of contract restrains nonparties to the contract
from enforcing its terms but in a trust relationship, beneficiaries may sue even though
they are not parties to the agreement.

4. Power and Charges

A power may be defined as an authority given to a person to manage or dispose another
person’s property on behalf of the owner. While a trust is imperative, power is
discretionary. While trust imposes an obligation on the trustee, power confers discretion.
A special power of appointment may be confusing with a trust, it is a power given to
someone (donee) under a trust of settlement authorizing him to appoint some or all of the
trust property among a limited class of persons (called the object of power). Where the
donee of the power fails to exercise that power, the objects of the power will not take any
thing and the court has no jurisdiction to intervene. But the court will have jurisdiction, if
the donee exceeds his power as when he appoints to the grand children while his power
was to appoint the children or where he commits fraud in the appointment.

3. CHARITABLE TRUSTS
Charitable trusts unlike private trusts have as their objects, the benefit of the general public or
a significant portion of it. Despite the common use of charitable trusts in England and the tax
advantages given to this class of trusts, the use of it has been at a slow pace in Nigeria. The
reason for this can be attributed to the great difference in the cultural and social
5
See Chuba Ikpeazu v. African Continental Bank Ltd (1966)NMLR 374 at 379
17

life/orientation of the people in England and Nigeria. Also, the economic situation in Nigeria
has to some extent limited the setting up or donating to charities in Nigeria. Notwithstanding,
the use of charitable trusts has witnessed a steady growth especially with respect to the
advance of education in Nigeria. It is thus important for you to be familiarized with the law
and practice of charitable trusts in Nigeria.

LESSON OUTCOME:
Distinguish between a charitable and a private trust. - Know the essential features of a
charitable trust. - Mention the major divisions of charitable trusts. - Understand the law
that guides the creation of charitable trusts in Nigeria. - Explain why charitable trusts enjoy
liberal construction in the courts. - Explain who is responsible for the enforcement of
charitable trusts. - Appreciate when the cy-pres doctrine will be applied.
Meaning and Features of Charitable Trusts
What is a charitable trust? The term is synonymous with the terms public trust and charity.'
The definition formulated in a Massachusetts case has been extensively quoted:
"A charity in the legal sense may be more fully defined as a gift, to be applied consistently
with existing laws, for the benefit of an indefinite number of persons, either by bringing their
minds or hearts under the influence of education or religion, by relieving their bodies from
disease, suffering or constraint, by assisting them to establish themselves in life, or by
creating and maintaining public buildings or works, or otherwise lessening the burdens of
government." 2
The definition of Lord Camden, that a charity is a gift to a general public use which extends
to the poor as well as to the rich, has been adopted by the Supreme Court of the United
States.3 Another court has said that "any gift not inconsistent with existing laws, which is
promotive of science or tends to the education, enlightening, benefit or amelioration of the
condition of mankind, or the diffusion of useful knowledge, or is for the public convenience,
is a charity." 4 Definitions throughout the various jurisdictions are substantially similar to
those quoted above.5 The origin of the charitable trust is obscure. Though some early courts
seemed to be of the view that the Statute of Charitable Uses 7 created them, carefully
considered authorities agree that the charitable use operated under the guidance of chancery
prior to that time and that its development was under Roman-Christian ififluence.8 In 1601,
the English Parliament enacted the Statute of Charitable Uses.9 The Statute recognized the
existence of certain uses 10 and provided for their enforcement.

The meaning of charitable trust is best discerned by examining the purpose or objects of
charitable trusts, as defining the word ‘charity’ or ‘charitable’ like most legal terms will be a
difficult task. This difficulty was acknowledged in Re Nottage (1895) 2 Ch. 649 as the legal
meanings of the said words are different from those ascribed to them in common usage
the Charitable Uses Act 1601 commonly referred to as the Statute of Elizabeth, an Act of
parliament 43 Eliz I, c.4. The preamble to this Statute contained a catalogue of objects that
can be regarded as charitable. Although, the Statute of Elizabeth has been repealed by the
18

Mortmain and Charitable Uses Act, 1888, Section 13(2) of the latter Act preserved the
provisions of the said preamble to the Statute of Elizabeth.
The two essential features you need to know about charitable trusts are that, before a trust can
qualify as a charitable one, the element of public benefit, i.e. it must be for public benefit and
the class of the intended beneficiaries must not be on the basis of personal relationship. If
these elements are absent in a trust, it cannot be regarded as charitable. However, trusts for
the relief of poverty are exempted from this requirement of public benefit because such trusts
may be restricted to family members or other restricted class of people.
Thus, a trust must be for the benefit of the community or a significant portion of it for it to
pass the public benefit test. See Verge v. Somerville (1924) A.C. 496. A trust created for the
training and education of the grandchildren of the testator and other child, was held not to be
a charitable one. See Re Obabunmi Pedro [1961] L.L.R. 127. Also, in Re Crompton
[1945] Ch. 299 a trust created for the education of the descendants of three named
individuals only, failed the test of public benefit.
However, you need to know that, the fact that the number or size of the intended beneficiaries
of a charitable trust is small may not necessarily rob it of its public benefit feature, if the class
of the intended beneficiaries is not to be determined purely on the grounds of personal
relationship to the testator, settlor or donor. See Re Simson [1946] Ch. 299 where gift made
to only one person. On the other hand, a trust may be created for the benefit of a larger
number of people, yet fail to pass the test of public benefit. See Oppenheim v. Tobacco
Securities Trust Co. Ltd. [1951] A.C. 297 where in spite of a trust for the education of
children of employees and ex-employees of a particular company with the number of
intended beneficiaries running into over a hundred thousand people was nonetheless held not
to be charitable based on the personal relationship between the settlor and the potential
beneficiaries.
It is equally essential for you to know some of the certain peculiarities that marked charitable
trusts different from private trusts, although the two classes of trusts are express. As noted
above, charitable trusts in most cases have no human objects or beneficiaries who can enforce
them hence; it is the responsibility of the Attorney General to enforce such trusts. This is one
of the reasons why the lack of human objects will not invalidate a charitable trust, unlike the
case with a private trust which will fail for uncertainty of objects. However, in exceptional
cases where charitable trusts have human beneficiaries, they do not have power of
enforcement.
Although charitable trusts are subjected to the perpetuity rule like private trusts by which the
subject matter of a charitable trust must vest within the perpetuity period, unlike private trusts
however, the part of the perpetuity rule relating to the rule against inalienability does not
apply to charitable trusts. See Re Gwyon [1930] 1 Ch. 255.

Difference between charitable trust and other types of trust

In a private express trust, the beneficiaries have the ability to enforce the terms of the trusts
against the trustees. A private trust benefits certain individuals while a charitable trust is said
to benefit the public or some part of it. This is significant for two reasons: a. Enforcement:
19

since there are no specific named beneficiaries who can enforce the trust then, in general, it
will be void. However, in charitable trusts, this role is performed by the Attorney-General. b.
Certainty of objects: generally, all trusts must satisfy the three certainties. However,
charitable trusts are exempt from the certainty of objects requirement see Morice v Bishop of
Durham (1805).

Advantages of charitable status

The work of charities is highly valued in society, as such; charitable trusts are accorded a
number of advantages: 1. Tax advantages: charitable trusts are exempt from a number of
taxes, including income tax, corporation tax, and capital gains tax.
2. The rule against perpetuities: in contrast to other trusts, property can be dedicated
indefinitely to a charitable purpose.
Legal requirements of a valid charitable trust
a. It must have a recognized charitable purpose
b. It must be for ‘public benefit.’
c. It must have exclusively charitable purposes Recognized charitable purpose All
charitable trusts must be for recognized charitable purposes. Charitable purposes were
first defined in the Preamble to the Statute of Charitable Uses 1601, now repealed.
Nonetheless, the Preamble is still the foundation for the definition of charitable
purposes.
a. Exclusively charitable purposes
If a trust is to benefit from the advantages of charitable status, it must operate for
exclusively charitable purposes: The construction of the gift It must be clear that a gift
or trust is made for charitable purposes. In Re Atkinson’s Will Trust (1978), a gift to
be divided amongst ‘worthy causes’ was held to be void because ‘worthy causes’
could not be limited to exclusively charitable purposes. So, for instance, it might be
‘worthy’ to provide flowers for hospital patients but this would not be seen as
charitable. Note that a non-charitable purpose which is linked to the overall aims of a
trust will likely be acceptable as ancillary non-charitable purposes; see Re Coxen
(1948)

[Link] must be for public benefit

This requirement ensures that the significant tax advantages enjoyed by charitable
trusts are not abused. The charitable trust must benefit the public or some section of
the public. For instance, in Oppenheim v Tobacco Securities Trust Co (1951) a trust
to help pay for the education of employees and ex-employees of British American
Tobacco was held to be not charitable. The court reasoned that where membership is
determined by a personal nexus with the donor like family relations or is based on
contract then the public benefit requirement is not satisfied.

Classifications of Charitable Trusts

20

Section 13(2) of the Mortmain and Charitable Uses Act, 1888 which preserved the
provisions of the preamble to the Statute of Elizabeth, contained a catalogue of
objects that can be regarded as charitable which are as follows:
The relief of the aged, impotent and poor people, the maintenance of sick and maimed
soldiers and mariners, schools of learning, free schools and schools in universities; the
repair of bridges, ports, havens, causeways, churches, sea-banks and highways; the
education and preferment of orphans, the relief, stock or maintenance for houses of
correction; the marriage of the poor maids; the supportation, aid and the relief or
redemption of prisoners or captives; help of young tradesmen, handicraftsmen and
persons decayed; and the aid or ease of any poor inhabitants concerning payment of
fifteens, setting out of soldiers and other taxes.”
The above objects have been classified into four main headings for convenience by
Lord MacNaughten in Commissioners for Special Purposes of Income Tax v. Pemsel
(1891) A.C. 531 at 583 as stated hereunder:

i.) Trusts for the relief of poverty;

ii.) Trusts for the advancement of education;

iii.) Trusts for the advancement of religion; and

iv.) Trusts for other purposes beneficial to the community.

i.) Trusts for the Relief of Poverty

Although this class of trust may not necessarily satisfy the public benefit requirement,
it is nonetheless accepted as charitable even if the intended beneficiaries of the trust
are drawn based on personal consideration. This makes this class of trust an
exemption to the public benefit test. This classification is based on the preamble to the
Statute of Elizabeth which listed ‘the relief of aged, impotent and poor people’ as
some of the objects of charitable trusts.

These four heads of charity will now be considered in turn:

Relief of poverty: Poverty is defined relatively and has a wider meaning than
destitution – it includes those who might be said to ‘go short’ see Re Coulturst (1951).
It is therefore important to analyse each situation carefully to determine whether the
trust is truly aimed at the relief of poverty. In Re Sanders (1954) a gift to provide
housing for the ‘working class’ was held not to be for the relief of poverty. Although
working class may have relatively low incomes, it did not mean they could not afford
housing.
However, in Re Niyazi’s Will Trusts (1973) a gift to build a working men’s hostel in
Cyprus was upheld as a trust for the relief of poverty. The court believed that such
temporary accommodation would only be used by those who could not afford more
permanent housing.
In construing the words ‘aged, impotent and poor’, interpreted the words are to be
read disjunctively such that it will not be interpreted as meaning someone who is
21

aged, poor and impotent; which will make nonsense of the provision. See Re Glyn’s
Will Trusts [1950] 2 All E.R. 1150. What is essential for you to note here is that, a
trust must have the object of being applied to the relief of poverty and it is not
material that the word ‘poverty’ was not specifically used or stated in the document.
Although the meaning of ‘poverty’ was not given, gifts to those who are in need, the
indigent, ladies of limited means See Re Gardom [1914] 1 Ch. 662 and in relief of
poverty, have generally been upheld. It is not required that the intended beneficiaries
must be destitute or in abject poverty.
Where the beneficiaries of a trust cannot be classified as poor or in need, it will not be
upheld as charitable, such as where gift was made for working class and their
families, which itself does not evidence poverty. Gifts to beneficiaries who are old do
not present difficulty as they are easily discerned from the expression used e.g. gift to
old people over 65 years resident of a particular district. See Re Robinson [1951] Ch.
198.

ii.) Trusts for the Advance of Education

Education has been defined in IRC v McMullen (1981) by Lord Hailsham as ‘the
picture of a balanced and systematic process of instruction, training and practice
containing...spiritual, moral, mental and physical elements.’ It is clear that, in addition
to schools and universities, education can encompass a wide variety of other purposes.
Education has been held to include the following: promoting the study of Egyptology
see Re British school of Egyptology (1964); a chess tournament for young people see
Re Dupree (1945); London Zoo see Re Lopes (1931) among others.
Education has been construed in the wider sense beyond teaching and includes the
promotion of arts and graces of life. As a result of the perceived value of education to
the society, various acts and gifts have been held to constitute the advancement of
education. Some of these are, chess playing among boys and youth, see Re Dupree’s
Deed Trust [1945] Ch. 16; advancement of learning all over the world, see Whicker v.
Hume (1858) 7 H.L. Cas. 124; for the establishment and support of law reports, see
Incorporated Council of Law Reporting for England and Wales v. A.G. [1972] Ch.
73; for the establishment and support of professorship and lectureships, see A.G. v.
Margaret and Regius Professors In Cambridge (1682) 1 Verno 55. the spread of
knowledge and appreciation of scholarships and prizes in Universities and schools see
University College of North Wales v. Taylor (1908) p. 140; promotion of squash
racket courts and a prize, see Re Mariette (1915) 2 Ch. 284.
An educational trust fund created for the benefit of the community but with
preference to a particular class and to a certain percentage, such as where preference
was given to the families of employees of a particular company up to a maximum of
75 per cent of the fund was held to be charitable. See Re Koettgen’s Will Trusts
[1954] Ch. 252.
Other gifts have been held not charitable such as a public library to be devoted
entirely to works of pornography or of a corrupting nature were held not charitable.
The important thing to note here is where the element of public benefit is lacking, it
will not constitute charity.
22

iii.) Trusts for the Advance of Religion

The word ‘religion’ has not been exclusively defined but in Karen Kayemeth Le
Jisroel v. IRC [1931] 2 K.B. 465 at 477 per Lord Hanworth MR, the promotion of
religion have been interpreted to mean the promotion of spiritual teaching in a wide
sense, and the maintenance of the doctrines on which it rests, and the observances that
serve to promote and manifest it – not merely a foundation or cause to which it can be
related. In spite of this, the courts have taken a liberal view on the construction of the
word ‘religion’ in order to ensure that the law is neutral between different religions
and not to make distinction between one sect and another. See Neville Estates Ltd. v.
Madden [1961] 3 All E.R. 769. If however, the tenets of a particular sect inculcate
doctrines adverse to the very foundation of all religions or subversive of all morality,
the court will not assist to execute such bequest, but declare it void.
The courts locate a religion’s “benefit” in its secular side-effects i.e. the positive
impact which religious doctrine has on the public at large
 What this means then is that a religious purpose is beneficial only if it involves an
engagement with the broader community, because it is only in this way that religious

⇒ A religious purpose thus satisfies both elements of public benefit in the same way
doctrine can be spread throughout the community and deliver a benefit

viz. by demonstrating that it involves a direct engagement with the community

Contrast Gilmour v Coats with Neville Estates v Madden
 In Gilmour v Coats, money was settled on trust for the purpose of supporting a
community of cloistered nuns. It was held that the trust’s purpose fell within the
category of advancement of religion, but the purpose was not held beneficial and so
was not charitable; the counsel claimed that the purpose was beneficial on the basis
that the nuns’ prayers delivered a benefit to the wider public. As the court could locate
no benefit to the purpose, there could logically be no benefit to the public – so the
public aspect was not satisfied
 C.f. In Neville Estates v Madden, the purposes of the Catford Synagogue were held
beneficial on the basis that those attending the synagogue would mix with the general
public and so diffuse positive religious doctrine throughout society; and the benefit
stemming from the synagogue’s purposes was held to be to the public in general

However, if the tendency were not immoral, although the court might consider the
opinions sought to be propagated foolish or even devoid of foundation, it will not on
that account declare it void. See Thornton v. Howe (1862) 54 E.R. 1042 at 1043-4.
Thus, a bequest to promote atheistic doctrines was held to be charitable although this
was not in advance of religion. A trust for the promotion of Jewish religion was also
held to be charitable. Re Thackrah (1939) 2 All E.R. 4
The courts have since departed from recognizing different forms of Christianity as
religions to embracing all the major world religions. However, the law adopts a
neutral stance between different religions, but assumes that some religion is better
than none see Neville Estates v Madden (1962). In Thornton v Howe (1862) a gift to
promote the religious beliefs of Joanna Douthcote, who claimed she would give birth
23

to the new Messiah was upheld as charitable – it did not matter if the court believed
the religion to be foolish or even devoid of foundation. However, the court will not
recognize a religion whose tenets are subversive of all morality.
Gift to a group not concerned with the promotion of religion was held not charitable.
See United Grand Lodge v. Holborn Borough Council (1957) 3 All E.R. 281. Also, a
society whose principal object is the teaching of a doctrine, which may be regarded as
philosophical or metaphysical conception was held not to constitute the advancement
of religion. See Berry v. St Marylebone Borough Council [1958] 1 Ch. 406. In this
regard, the religion must be one concerned with relationship between man and God,
and its purposes are for the benefit of the public and not one based on ethics; which is
concerned with man’s relationship with man. See Re South Place Ethical Society
[1980] 1 W.L.R. 1565.

In the Nigerian case of Re Obabunmi Pedro (supra) a trust for the saying of Masses to
the dead was held to be charitable while the bequest of a room to be used as a private
family mosque in a private house was held not charitable. See Iyanda v. Ajike (1948)
19 N.L.R. 11. Trusts for the repair of parish yard see Re Vaugham (1886) 33 Ch. D.
187; for the maintenance of a cemetery, a gift for the stipend of clergy; have been
held to be charitable.

iii.) Trusts for other Purposes Beneficial to the Community

These headings operated as general groupings, within which a wide variety of

different activities could take place. ‘Other purposes beneficial to the community’ are
other charitable purposes which did not fit easily into the other headings. For
example, in Scottish burial reform and Cremation Society Ltd v Glasgow Corpn
(1968) a trust for maintenance of crematoria was upheld as analogous repair of
Churches, mentioned in the 1601 Preamble. This head allows new purposes to be
developed by way of analogy with any of the other existing or new purposes. These
purposes may include: the advancement of environment and protection; the
advancement of animal welfare; the advancement of citizenship or community
development among others.
As the heading implies, this trust covers all others with have the element of public
benefit apart from the three headings earlier treated. A trust of this nature includes
those promoting the mental or moral improvements of the community, such as gift for
the welfare of cats and kittens; see Re Moss [1949] 1 Ch.D. 495 or the benefit of
animals, see Re Wedgwood [1915] 1 Ch. 113; for home for lost dogs; see Re Douglas
(1887) 35Ch.D. 472.
A gift for the specific animals, see Re Dean (1889) 41 Ch.D. 552; trusts to procure a
change in the law, see Bowman v. Secular Society [1917] A.C. 406; were held not
charitable.

Trusts for the welfare of animals in particular were given recognition as a result of
their benefit to mankind. Trusts for the promotion of sport per se, has been held not
charitable, see Re Nottage (1895) 2 Ch. 649; except if such trust is meant for the
promotion of sport within a charitable institution such as schools, colleges and
24

Universities. See Re Mariette [1915] 2 Ch. 284. Trust for the building of recreational
facilities has been held charitable. See Re Jones Deceased [1918] 3 N.L.R 80.

What you need to note under this heading is that, four sub-headings can be
categorized and these are:

i.) Trusts for the welfare of animals.

ii.) Trusts for sports and recreation.

iii.) Political trusts.

iv.) Miscellaneous.

The first two have been examined in details, while trusts for political purposes are not
charitable since the courts have no means of determining their likelihood of benefit to
the public, for example, where they promote the cause or interest of a political party,
promote change in law or procuring a reversal of government policy. See Re
Hopkinson [1949] 1 All ER 346. Under the miscellaneous subheadings, this covers
gifts or trusts for purposes not covered by the other three sub-heads, e.g. gift to a
voluntary fire brigade, gift to promote the defence of a country from attack. See Re
Driffill [1950] Ch. 92. Trust to assist victims of flood is also covered by the fourth
branch. See Re North Devon and West Somerset Relief Fund [1953] 2 All E.R. 1032.
You need to understand that profit making charitable trusts such as schools, medical
or housings bodies, will still retain their status so long as they do not distribute the
profits to members. See Re Resch’s W.T. [1969] 1 A.C. 514. Also, not that as a result
of their benefit to the public, charitable trusts enjoys some tax advantages over other
classes of trusts. For example, charitable trusts are exempted from tax on their income
on their investment; properties donated/bequeathed to charitable institutions are
exempted from capital gains or transfer tax on disposals made by the them (see for
example, Section 17 Capital Gains Tax), and donations made by companies for
charitable purposes aredeductible from the income of companies for the purposes of
tax computations. See Section 21(5)(e) of the Companies Income Tax Act. Charitable
trusts are in some cases either wholly or partly exempted from stamp duties.
The above reasons accounted for why you will observe that in many of the cases, a
usual party is the Inland Revenue Commissioners, abbreviated as “I.R.C.”, which is
the body in charge of revenue generation in England. This body has to be involved in
the cases in order to determine whether some of the trusts qualify as charitable in
order to be exempted from tax or not.
In order for a purpose to satisfy the “public” aspect of the public benefit test it must
benefit either:
 i. The public in general; or
 ii. A sufficient section of the public

THE PUBLIC IN GENERAL

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This is the first way a purpose can satisfy the ‘public’ aspect of public benefit test
So, for example, a purpose aimed at conserving an endangered animal benefits the public in
general
This extends to purpose in general because the benefit is not limited to a certain category of
people: it is for us all
RELIGION AND THE PUBLIC IN GENERAL
The courts locate a religion’s “benefit” in its secular side-effects i.e. the positive impact
which religious doctrine has on the public at large
What this means then is that a religious purpose is beneficial only if it involves an
engagement with the broader community, because it is only in this way that religious doctrine
can be spread throughout the community and deliver a benefit
A religious purpose thus satisfies both elements of public benefit in the same way viz. by
demonstrating that it involves a direct engagement with the community
Contrast Gilmour v Coats with Neville Estates v Madden
In Gilmour v Coats, money was settled on trust for the purpose of supporting a community
of cloistered nuns. It was held that the trust’s purpose fell within the category of advancement
of religion, but the purpose was not held beneficial and so was not charitable; the counsel
claimed that the purpose was beneficial on the basis that the nuns’ prayers delivered a benefit
to the wider public. As the court could locate no benefit to the purpose, there could logically
be no benefit to the public – so the public aspect was not satisfied
C.f. In Neville Estates v Madden, the purposes of the Catford Synagogue were held
beneficial on the basis that those attending the synagogue would mix with the general public
and so diffuse positive religious doctrine throughout society; and the benefit stemming from
the synagogue’s purposes was held to be to the public in general
II. A SUFFICIENT SECTION OF THE PUBLIC
The meaning of “sufficient section of the public” differs depending on the category of
charitable purpose (s.3(1)) in question
There is a usual rule which applies to all categories of charitable purpose, but this ‘usual rule’
is amended in respect of purposes which (i) prevent or relieve poverty, and is amended in a
different way in respect of purposes which (ii) advance education
So there are 3 different sets of rules operating which govern what amounts to a sufficient
section of the public
Sufficient section of the public”: the usual rule
THE USUAL RULE EXPLAINED
The usual rule is that a charitable purpose benefits a “sufficient section of the public” (and
thereby satisfy the public aspect of the public benefit test) provided there are no unreasonable
restrictions on the opportunity to benefit from the purpose. So:
26

 i. The purpose of providing a children’s playground does benefit a sufficient section

of the public → This purpose is restricted to ‘children’, but the restriction is a
reasonable one
 ii. The purpose of providing a playground for churchgoing children does not benefit a
sufficient section of the public → This restriction to ‘churchgoers’ would be an
unreasonable restriction, therefore churchgoing children would not constitute a
section of the public and the purpose in question would not satisfy the public aspect of

⇒ But what is an ‘unreasonable restriction’?

the public benefit test

 It is notoriously difficult to define when a restriction becomes unreasonable

 Simon Gardner suggests an unreasonable restriction is one which is extrinsic to the
purpose’s nature → this definition is pretty difficult to work with

⇒ Secondly, the ‘usual rule’ focuses on the ‘opportunity’ to benefit from the purpose
 Ultimately it will be a matter of judicial discretion

 This makes clear then that it is irrelevant that the relatively small numbers are likely
actually to benefit from any given purpose, what is important is that the opportunity to
benefit is not unreasonably restricted

SELECTION PERMISSIBLE
The fact that selection is involved in determining who will benefit from a purpose does not
prevent that purpose from benefiting a section of the public…
…provided the selection process is open to all who could benefit from the purpose
E.g. say there is a purpose of sending 12 disadvantaged children on holiday → some selection
will be involved in determining which 12 children will actually get to benefit from the
holiday, but this wont prevent the purpose from benefiting a section of the public, provided
that the selection process is open to all who could benefit from the purpose (i.e. provided that
all disadvantaged children can apply for a place on the holiday)
GEOGRAPHICAL RESTRICTIONS
Restricting the opportunity to benefit to the inhabitants of a certain locality will often be
reasonable e.g. the purpose of providing counselling to inhabitants of Bristol
It will, however, be unreasonable if the geographical area is too narrowly defined given the
particular purpose e.g. the purpose of providing an Olympic-standard swimming pool to be
used exclusively by the inhabitants of a particular street
KEY CASES ON THE ‘USUAL RULE’
Williams’ Trustees v IRC [1947]: the purpose of the charitable trust was for maintaining an
institute for the benefit of Welsh people living in London. This was held not to extend to a
“sufficient section of the public”; the geographic limitation was reasonable, but the further
restriction (being Welsh) was unreasonable, so did not satisfy the public aspect of public
benefit test
IRC v Baddeley [1955]: a purpose of providing social and recreational facilities to members
of the Methodist Church in West Ham was held not to extend to a “sufficient section of the
27

public”; the geographic restriction was reasonable, but the further restriction (i.e. to
Methodists) was held to be unreasonable, so did not satisfy public aspect.

RESTRICTIONS ON OPPORTUNITY TO BENEFIT PERMISSIBLE

Where the purpose in question is for the prevention or relief of poverty, the opportunity to
benefit can be unreasonably restricted in any way (and still extend to a sufficient section of
the public and still satisfy the public aspect of the public benefit test) including:
 i. To the members of a particular family (Re Scarisbrick [1951]);
So if your purpose is for the prevention or relief of poverty then the opportunity to benefit
can be restricted to the members of a particular family as in the above case.
For example, a trust can be established for the purpose of relieving poverty amongst the
settlor’s relatives. This would not be
permitted under the ‘usual rule’ → a restriction to family members under the ‘usual rule’
would be held unreasonable
ii. To the employees of a particular employer (Dingle v Turner [1972]);
The opportunity to benefit can also be extended to the employees of a particular employer
The Question for the House of Lords was whether a trust for benefit and relief of poverty of
particular employees should be treated in same way as a trust for poor family members → the
court held it could
Again, under the ‘usual rule’ a trust for the benefit of employees of a particular employer
would be considered unreasonable and would prevent the purpose from benefitting a
sufficient section of the public, but as regards poverty
Poverty purposes the usual rule is amended and the restriction is permitted
iii. To the members of a particular association (Spiller v Maude (1881)); and
iv. To the residents of a small geographical area (Re Monk [1927])
This include a small geographic location that is too narrowly defined in comparison to
the purpose in question (this is in contrast to the usual rule, where this would not be
permitted and would be deemed unreasonable)

DISTINGUISHING NON-CHARITABLE, PRIVATE PURPOSES

But, in order to be charitable those that are to benefit must amount to a class/category,
because charitable trusts are aimed at fulfilling particular purposes
Charitable purposes aimed at relieving poverty among a restricted class must be distinguished
from non-charitable purposes aimed at particular poor individuals. So:
“To relieve poverty amongst my relatives” is charitable → this is a class/category to benefit
from the purpose to relieve poverty
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“To relieve the poverty suffered by my son and daughter” is not charitable → this is aimed at
particular named individuals so is essentially a private trust
The distinction ensures the benefits of charitable status do not extend to private trusts

WHY IS THE POVERTY RULE MORE LIBERAL (THAN THE USUAL RULE)?
It may be that the law’s approach to poverty purposes is best understood not as an
amendment to the usual rule on what constitutes a “section of the public” but rather as an
acknowledgment that such purposes benefit the public in general
Any purpose relieving or preventing poverty lifts the burden of providing such relief from the
state who would otherwise have to act; this in turn reduces taxes to the benefit of all
taxpayers and in this way the benefit extends to the taxpaying public → So it indirectly
delivers a benefit to entire taxpaying public
On this account, poverty purposes, like religious purposes, do not engage the rules on what
constitutes a “section of the public”
“Sufficient section of the public”: education
SOME RESTRICTIONS ON OPPORTUNITY TO BENEFIT PERMISSIBLE
Where the purpose in question is to advance education, the opportunity to benefit can be
unreasonably restricted in some ways, but not in others
The opportunity to benefit may be restricted by locality, parental occupation or religion
The opportunity to benefit may not be restricted by reference to a ‘personal nexus’ i.e. to the
members of a particular family (Re Compton [1945]) or to the employees of a particular
employer (Oppenheim v Tobacco Securities Trust [1951])
See the case of Oppenheim v Tobacco Securities Trust [1951] → as the opportunity to
benefit was restricted by a personal nexus the public aspect was not satisfied. The court noted
the conclusion reached would have been different had the purpose been to educate children of
those involved in the tobacco industry in a given town, because restrictions as to locality and
parental occupation are allowed in the context of education!
CRITICISM
Lord MacDermott dissented in Oppenheim → he doesn't like how some restrictions on the
opportunity to benefit are permissible where others are not, and suggest an alternative test
arguing that ‘sufficient section of the public’ should be a matter of degree, to be determined
by conducting a “general survey of the circumstances and considerations regarded as
relevant”
On this test, he held the trust in Oppenheim to benefit a “sufficient section of the public” →
his judgment as a whole shows what he is ultimately interested in is whether the purpose
benefit the public or whether it is aimed at a collection of private individuals
29

This test, taken to its logical conclusion, seems to permit any restriction (whether reasonable
or unreasonable) on the opportunity to benefit, provided that those that are able to benefit
amount to a public rather than a private class
Although in theory this test was only said in the context of educational purposes, the test
could be generalised across the board and indeed this would align with circumstances where
the context is that of poverty, too
Excluding the poor
The last point to elaborate on with regards to the public aspect of the public benefit test is
whether the poor can be excluded and the public aspect nonetheless satisfied
WHO COUNTS AS POOR?
⇒ Poverty is not the same as destitution; it embraces those who do not have access to

⇒ Thus in ISC v Charity Commission the Upper Tribunal held that people count as
things which most people take for granted

poor if they are ‘of moderate means’; ‘not very well off’ (ISC v Charity Commission
[2012]])

⇒ A purpose excludes the poor if its benefit is limited to the rich either:
WHEN DOES A PURPOSE EXCLUDE THE POOR?

 i. Expressly (e.g. “to provide medical treatment to those earning over

£100,000/annum”) → so an express limitation to those who are wealthy

⇒ A purpose also excludes the poor if even though not absolutely limited to the rich,
 ii. De facto (e.g. “to educate the children of Clifford Chance partners”)

it is open to only a token number of the poor (ISC v Charity Commission [2012])
 The Upper Tribunal here held those that can afford to pay for private school education
are not poor → So it was
Excluding the poor
The last point to elaborate on with regards to the public aspect of the public benefit
test is whether the poor can be excluded and the public aspect nonetheless satisfied

⇒ Poverty is not the same as destitution; it embraces those who do not have access to
WHO COUNTS AS POOR?

⇒ Thus in ISC v Charity Commission the Upper Tribunal held that people count as
things which most people take for granted

poor if they are ‘of moderate means’; ‘not very well off’ (ISC v Charity Commission
[2012]])

⇒ The Charities Act s.1 dictates that a trust is charitable only if all its purposes are
THE EXCLUSIVITY REQUIREMENT

charitable (i.e. each and every purpose falls within s.3(1) and is for the public benefit:

⇒ So a trust which has a mixture of charitable and non-charitable purposes is not a

Charities Act s.2)

charitable trust

⇒ Chichester Diocesan Fund v Simpson [1944]: the trust was not limited to
KEY CASES

charitable purposes but extended also to benevolent purposes. It was held that the
30

description ‘benevolent purpose’ was broader than charitable purpose, so the trust was
seen to be aimed at both charitable and non-charitable purposes and so could not be a

⇒ Re Macduff [1896]: trust for charitable or philanthropic purposes held not

charitable trust

⇒ By contrast see Re Sutton (1885): A trust for charitable and deserving objects was
charitable

held charitable. This contrast lies in the fact the trust was for charitable ‘AND’
deserving objects. The key word is ‘and’, whereas the other two cases used the word
‘OR’
Qualifying the exclusivity requirement
There are, however, two ways in which the demand for exclusively charitable
purposes is mitigated

⇒ If a trust’s non-charitable purpose is incidental to its main, charitable purpose, the

1) INCIDENTAL PURPOSES

⇒ In order to be ‘incidental’, the non-charitable purpose must be a by-product of the

trust will be held charitable after all

⇒ See the cases of Re Coxen [1948] and Re South Place Ethical Society [1980]
main, charitable purpose

⇒ The court may be able to sever a fund which has a mixture of charitable and non-
2) SEVERANCE

charitable purposes into two parts: one part comprising exclusively charitable

⇒ The part comprising exclusively charitable purposes can then be a valid charitable
purposes, and the other part non-charitable purposes

⇒ Severance is possible only when the trust instrument contemplates a division and
trust

⇒ In Salusbury v Denton (1857) a trust was established in part to found a

the money to be applied to each part can be quantified (Re Coxen [1948])

school/provide for the poor, the remainder to benefit the testator’s relatives. The trust
was severed into two parts, the first of which was a valid charitable trust

The Cy-pres Doctrine

A discussion of this doctrine is important for you as a result of its usefulness in cases of
ineffective or failed trusts.
Cy-pres literally means ‘near there.’ It is a doctrine which deals with situation where a
charitable gift cannot be applied to the purposes intended by the settlor. It works by allowing
the purposes of the gift to be varied so that the property can be applied to a related charitable
purpose. In this sense, cy-pres saves the gift from failing and returning on resulting trust to
the testator’s estate or being given to the Crown.
Under the doctrine, when a private trust is ineffective or fails, the property results to the
settlor or the residuary estate in case he is deceased. In the case of a charitable trust, where
this is impracticable or impossible, the property results to the settlor or his estate (if
31

deceased), except in cases where a general charitable intention can be presumed on the part of
the settlor. See Re Rymer [1895] 1 Ch. 19.

Where the settlor has a general charitable intention, the trust property will be applied cy-pres
to other charitable purposes as nearly as possible to the original purposes. Cy-pres doctrine
will also be applied in cases where an effective charitable trust becomes impracticable or
impossible to perform, irrespective of whether the settlor has a general charitable intention or
not.
Types of failure Cy-pres can intervene when a charitable trust is failing. There are two
different types of failure: a. Initial failure b. Subsequent failure
Initial failure
At common law, there was an initial failure of a charitable purpose only if it was impossible
to apply funds for the identified charitable purpose.E.g. giving money to a hospital that has
already shut down
The Charities Act s.62 (previously Charities Act 1960 s.13) has expanded on the common
law position e.g. s.62(e) provides that a purpose fails if it is adequately provided for by other
means or is not a “suitable and effective” use of the available funds
So now, a charitable purpose will have initial failure not only if it is impossible to apply the
funds for the identified charitable purpose, but also if the purpose is already adequately
provided for by other means or is not a “suitable and effective” use of the available funds
.
In this situation the gift will lapse and return on resulting trust to the testator’s estate unless it
can be saved by cy-pres. Cy-pres can only be used if the court can find a general charitable
intention on the part of the testator. Essentially, the court has to determine whether the
testator would have wished the gift to be applied to another related purpose. This
determination is enhanced where the rest of the will is charitable or where the gift is to an
association which has been dissolved. The court would likely construe the gift as being for
charitable purposes and apply the money cy-pres to another body carrying out these purposes
see Re Finger’s WT (1972). Where, however, the terms of the gift are precise or specific, the
court is less likely to construe a general charitable intention see Re Rymer (1895). Example
N5 Million to help patients of Nile University Spinal Injuries Centre to purchase equipment
that can assist in their continued recovery.
Should this centre cease to exist prior to testator’s death, cy-pres would not be used in this
case. Because there would be no more patients in the centre, the git will lapse.
Subsequent failure
There is a subsequent failure of a charitable purpose if:
i. The charitable purpose becomes impossible to achieve; or
32

E.g. purpose to save endangered animal which then becomes extinct → here
the charitable purpose has become impossible to achieve so there is a
subsequent failure of the purpose
ii. The purpose ceases to be charitable; or
E.g. because the court’s assessment of whether on balance the purpose is
beneficial may change = subsequent failure of charitable purpose
iii. The purpose is fulfilled, leaving a surplus of funds
E.g. Re King: £1000 was settled to install a stain-glass window in a church. It cost £700,
achieving the purpose. So there was a subsequent failure of the charitable purpose (as there
was still £300 remaining
In cases of subsequent failure, cy-pres operates automatically. In effect, as the gift has
already been dedicated to charitable purposes, the court can vary the purposes and apply the
money to another related charity. To identify cases of subsequent failure, you must be able to
identify when the charitable gift takes effect: a. A charitable gift takes effect at the time of the
death of the testator, i.e. when the will comes into effect. b. It does not matter if the will has
not yet been administered. c. It also does not matter if the gift is a remainder interest which
only takes effect after the death of a life tenant. Note that in case of amalgamation with
another charity, the gift will automatically apply to the new organization without the cy-pres
jurisdiction of the court see Re Faraker (1912).
Non-charitable purpose trusts
Generally, trusts without a human beneficiary are void except if they are charitable trusts.
Purpose trusts are other exceptions allowed by the courts. They are:
1. Monuments: the erection and upkeep of monuments and graves
2. Animals: the upkeep of individual animals
3. Masses: the saying of private masses
4. Miscellaneous: like the promotion of fox hunting
Quistclose trusts
Another type of possible purpose trusts which has developed is illustrated by Barclays Bank v
Quistclose (1970). In this case loans were given by the bank to the company for the payment
of dividends. This was not done and the company went into liquidation. The bank claimed
that since the money was not used for its purpose a resulting trust was created. Lord
Wilberforce held that the money was transferred on trust, with a power to use for a particular
purpose. When such a power was not exercised then a second trust arose to return the money
to the bank.
CONCLUSION
Charitable trust is an important class of trusts as a result of the public benefit they offer.
However, it is crucial to the validity of this trust that the class of the intended beneficiaries
must not be one based on personal relationship. Some of the varying trusts considered on the
major four headings of charitable trusts signify compliance with the public benefit element,
except trusts for the relief of poverty. Charitable trusts thus have to be carefully drafted or
worded in order to ensure that they incorporate its essential features; otherwise, the trust will
fail and result to the residuary estate of the settlor or testator.
33

1. Discuss any two of the classifications of charitable trusts according to Lord MacNaughten
in Commissioners of Income Tax v. Pemsel (1891) A.C. 531 at 583
2. The fact that the number of the intended beneficiaries of a charitable trust is small may not
necessarily rob it of its public benefit feature, and on the other hand, a trust may be created
for the benefit of a larger number of people, yet fail to pass the test of public benefit. Discuss.