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TRUSTS FOR PURPOSES
ELEMENT 1: State the Beneficiary Principle
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The Beneficiary Principle provides that a trust must be for the benefit of PERSONS NOT
PURPOSES unless the purpose is for a charitable purpose
 A trust for non-charitable purposes is invalid.
Morice v. Bishop of Durham
- The testatrix by will left all her personal estate to the Bishop of Durham upon trust to pay certain debts
and legacies, the ultimate residue to be applied for “such objects of benevolence and liberality as the
Bishop should approve”.
- The next of kin succeeded in having this declared void.
- It was said that the intention was not that the Bishop himself be the object and benevolence and
liberality were not clearly charitable.
- Ct found that such objects might include charitable purposes, but also other purposes, so therefore here
it was invalid.
- Court must be able to control the trust (there must be certainty so that the court can step in and
administer the trust)
- There must be someone who is able to enforce the trust (Charitable trusts – the A-G enforces it)
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In Australia, the beneficiary principle was affirmed by the PC in Leahy v. AG for NSW and by the
HC in Bacon v. Pianta
ELEMENT 2: What is the nature of the trust?
1. Non Charitable Purpose Trust – Go to Element 3
2. Charitable Purpose Trust – Go to Element 4
Here the trust is …………..
ELEMENT 3: Non-Charitable Purpose Trust
Re Astor
- In England, the beneficiary principle was upheld in this case.
- A trust for “improvement of understanding b/w nations, preservation and promotion of newspapers”
- Held invalid as not charitable purposes and not for individuals.
There has been strong criticism of the beneficiary principle. As a result the courts attempted to put
a new construction on the principle by distinguishing
1. Fewer Purpose Trusts
2. Trusts which indirectly benefit individuals which will be valid
Re Denley Trusts
- The settlor set up a trust for the maintenance of sports grounds for the employees of a particular coy.
- On a strict reading, this gift should fail.
Held:
- Ct distinguished pure purpose trusts and “trusts though expressed as purpose are directly or
indirectly for the benefit of individual/individuals.” These types of trusts are outside the
beneficiary principle.
- But the ct held that it was valid b/c there are individuals who will directly or indirectly benefit from the
sports grounds being maintained and these individuals would have sufficient standing to go to court
and administer the trust.
- The ct could then enforce the trust
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now adopted in Australia in Leahy v. AG
UNINCORPORATED ASSOCIATIONS
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causes particular problems
e.g. where someone makes a gift or sets up a trust for an unincorporated association.
Corporated Association indicated via Pty, Ltd or Inc.
Issue: What is an Unincorporated Association?
 Unincorporated Associations have no separate entity from their members so prima facie not a trust for
persons (in looking at the beneficiary principle)
 Eg clubs, church groups, sports clubs (school associations are usually incorporated).
Issue: Are Gifts to Unincorporated Associations Valid?
A. According to Leahy v AG, there are 3 ways a gift to unincorporated associations may be
construed:
1. Prima facie a gift to an unincorporated association will be treat as if it were a gift for each
present member of the association and the look to see if there’s something that can rebut that
position.
 Ie becomes trust for persons so doesn’t infringe the beneficiary principle.
 Each and every member could demand that property be split up among them.
2. If it can be construed as a trust for present and future members, it will fail unless limited to the
perpetuity period (ie future members cause this problem)
3. If the gift on trust is for the purpose of the association, the gift will fail unless the purpose is
charitable.
The prima facie construction is rebuttable. Can find the true construction by using 4 factors:
(a) The form of the Gift
- What were the actual words used in creating the gift?
- Bacon – “to the Communist Party for its sole use” indicated against the finding that the gift was for
each and every member of the association. Instead it was for the party as a whole.
(b) The Membership
- Where were these people located
- How many were there?
- Were they a stable group or a fluctuating group
- Leahy – members of any one of the selected orders could be spread all over the world thus fluctuating
the group.
- Bacon – If membership was small and stable it may be easy to find each member. Here large and
fluctuating groups are difficult to construe especially if the gift is for each and every existing member
(c) Subject Matter
- What was being given under the trust? Ie subject matter
- Leahy – here the subject matter was grazing property. From the nature of the gift it does not appear
they intended each selected order was going to be able to get a piece of the of the property. Therefore
they could not argue that each member was going to benefit personally.
- Bacon – If the Gift includes money and personalty – then its probably ok because the personalty can be
sold.
Leahy v. AG
- There was a gift “for such orders of nuns of the catholic church or Christian brothers as my trustee may
select”.
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-
The ct said is it a gift to the members of that order individually, or was it intended that it be used for
the religious purposes of the order?
Held:
- It was held that it was not charitable b/c could include non-charitable order (e.g. nuns that keep to
themselves and don’t work for others).
- Held prima facie construction rebutted (i.e they rebutted that the gift was for each member)
- The Ct looked at four characteristics:
form of the gift – words used; membership (e.g. members spread over the world is unlikely to be for a
trust); subject matter; nature of association (could the association be wound up and divide money
amongst members?)
- Here it was for an order, not for the individual members – therefore not charitable purposes.
Bacon v. Pianta
- for the Communist party for its sole use.
- Ct looked at four factors – words used – communist party for its sole use
- Membership (spread all over Australia)
- The constitution of the party was silent on the matter of ownership
- Looking for an express rule which will allow the party to divide up and split assets.
- Gift failed b/c it couldn’t be construed for present individual members, but only for the purposes and
here it was non-charitable.
Alternative Approaches
B.
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Contract theory
Gift to existing individual members is subject to contractual obligations towards one another as
members of the association Ie hold property on behalf of the association
It assumes that the members of the associations have an implied K b/w them that they use the gift for
the purposes of the assoc. Neville Estates Ltd v Madden
Criticised because some cases have held there is NO contract between members inter se and that
constitution of most clubs do not have provisions dealing with club property
Re Goodsen
- They said it was treated as if it was a gift to the general funds of the association and although it was a
gift to each of the individual members, it was to use for their K and for the purposes of the association
C.
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Indirect Benefit Theory
Re Denley Trusts – occurs where individuals directly benefit such that they have standing to sue – it
does not breach the beneficiary principle.
distinguish from a pure purpose trust where no one could come to crt to enforce it
not followed in Australia: Tidex v Trustees Agency
D.
Statutory Provisions in Australia
S.63 of the Succession Act in Qld will save any gifts and trusts in a will (ie 2&3 in Leahy view) – in
augmentation (adding to) of the general funds of the association and to be applied for the purposes of
the association:
Re Lovell
– it was a gift to the local branch of the Masonic Lodge (unincorporated association), not a charitable
assoc, and probably not for the individual members, but the legislation was applied.
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ELEMENT 4: Non-Charitable Purpose Trust - EXCEPTION
There have been a number of cases where non-charitable purpose trusts have been held to be valid.
These can be categorised under the following headings:
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For upkeep of testator’s tomb/monument
For maintenance of testator’s animals
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Where they have been held to be valid, they are unenforceable - only permissive
 (testator is dead, no one will go and complain to ct that grave is covered by grass…)
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Unlikely to be extended
ELEMENT 5: Effect – Breach of the Beneficiary Principle
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Holders of the gift will hold on trust either as resulting trust for settlor or for residuary beneficiaries
under the will or next of kin if no will.
ELEMENT 6: Charitable Purpose Trusts
How to create a valid Charitable Purpose Trust
 Requirements
1. Charitable purpose
2. Public benefit
 Enforcement and Administration
ISSUE: Charitable Purposes
What is a charitable purpose?
 Determining whether a gift is charitable is a question of law for the judge: Re Cox
 The accepted starting point for the legal meaning of charitable is the preamble to the Charitable
Users Act 1601 (Statute of Elizabeth)
 Preamble may be used by analogy to extend the list beyond those expressly mentioned to include also
those within its spirit; Scottish British Reform Case
 This has since been repealed but S.103(1) Trusts Act preserves the established rules.
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The accepted CLASSIFICATION of the various single instances falling expressly or by analogy
within the preamble is taken from Lord MacNaughten’s 4 Heads of Charity in Pemsel’s Case’
Therefore the charitable purpose must come within the 4 heads of Charity
- relief of poverty,
- advancement of education,
- advancement of religion,
- other purposes beneficial to community
Relief of Poverty:
 The phrase used in the preamble is “the relief of aged, , impotent and poor people.”
 Poverty has never been clearly defined by the courts and clearly does not mean absolute destitution:
Re Coulthursts
- consider due regard being had to their status in life
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The Court looks to the whole gift to see whether the purpose is relief of poverty, so that no
specific reference to poverty is necessary. The intention may be implicit in the gift.
 Not conjunctive (don’t have to be all three, but can get charity for one reason)
Le Cras v. Perpetual Trustee
- money had been left to a private hospital and it was argued that it was not a charity b/c although there
were sick people, they were rich people b/c they had to pay fees.
- Ct held that not to be correct, the terms are to be read separately. It was enough that they were a
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hospital for the sick. They did not have to be aged, impotent AND poor.
 The Ct is looking for intention to relieve poverty and the are willing to imply that.
Re Niyazi’s Will Trusts
- working man’s hostel
- the word “hostel” implied poverty and was held a valid trust
Re Drummond
- holiday expenses of work people
- held invalid because work people could not be described as poor even if on small wages
Advancement of Education
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Used in a wide sense and includes not only education in general but the advancement of education in
particular fields, for example surgery and nursing ; Royal College
 Not limited to formal training or education
 Extends to cultural matters, scouts
 Courts looking for dissemination imparting of knowledge
NOT
- pure research which does not increase useful knowledge – Taylor v. Taylor
- Sport – that’s not connected to schooling: IRC v. McMullen
– note s.103(2) – sport has been picked up where it satisfies other conditions as well.
Advancement of Religion
Meaning of religion:
Church of the New Faith
- Question whether this church was a charitable organisation
1. Need some belief in supernatural being, thing or principle
2. Code of conduct to give effect to belief
Purposes which have been recognised as charitable include the following recognised examples:
- building and maintenance of houses of worship & incidental buildings – Re Tyne
- creation & maintenance of yards, tombs associated with churches – Re Vaughan
- gifts for maintenance or erection of tombs – but must be part of the fabric or ornament of the church 
otherwise no public benefit
- purchase and maintenance of church ornaments – Re King
- provision and payment of clergy, training, missionaries
- masses for the dead where service is open to public – Nelan v Downes
Meaning of advancement:
- setting up missions overseas
- maintenance of churches and graveyards
Gilmour v. Coates
- there was no proof that the prayer was beneficial to the public.
- They drew a distinction b/w public prayer and those that engage in teaching or other works of public
education which would be advancement.
- They may believe what they are doing was charitable (ie prayer) but the public appears to get no
benefit.
Leahy v. AG
- Nuns which engage in consultative prayer (preach to themselves)
- Intercessory prayer
**S.104 might now save these gifts.
Other purposes beneficial to the community
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Must both benefit community AND fall within preamble or spirit and intendment of the
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preamble.
Incorporated Council of Law Reporting
- Whether or not the production of law reports for no profit was a charitable organisation under this
head.
- CT said it had to be of benefit to community (which it was – having the law reports recording the body
of law was necessary for the sustaining fabric of the law) and for the public utility (the administration
of the legal system was a public utility which was equivalent to matters in the preamble.)
Chester v. RNA
- Breeding of racing pigeons was held not to be of benefit to the community
Some of the purposes which have held to be charitable trusts under this head are:
 Trusts that promote moral and spiritual well-being – e.g. trusts for the protection of animals.
 Gifts in favour of animals generally or classes of animals – though not for specific pets
- Individual pets are not under this heading (but do fall under anomalous purposes)
 gifts for relief of sick analogous to ‘impotent’ – gifts to hospitals valid – Re Smiths
 gifts for the benefit of aborigines – Aboriginal Hotels v DCC
 armed services – resettlement of returned soldiers – Verge v Somerville
 cremation – Scottish Burial v Glasgow City; furtherance of vegetarianism –Re Slatter
 encouragement of gardening - Re Pleasants; temperance – Re Hood
 recall that gifts for sports unrelated to schooling not valid – Re Nottage - but now s.103(2)
 Not political purposes: Mcgovern – Amnesty Int’l – can’t be a charity if it’s for political purposes.
 Gifts for public utilities such as repair of bridges, public halls and amenities including parks and
playing fields (BCC v. AG for Qld);
IRC v. Baderley
- to provide recreation grounds was not going to be charitable – England
- it was for this reason that s.103 was introduced.
Effect of s.103(2), (3), (4)
 Recreational facilities will be charitable where they’re in the interests of social welfare
- It will be in the interests of social welfare where it improves the conditions of life for persons intended
to benefit AND
- either those persons have need (age, disability, etc.) OR
- it’s for the public at large
 ss.(4) say they still have to be for public benefit.
MIXED PURPOSES
 At general law the whole gift is void
- Eg “charitable or benevolent purposes”
- Eg “objects of benevolence of liberality” – Morice v. Bishop of Durham
- Eg “such order of nuns as he shall select” – Leahy
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s.104 validates those sort of trusts.
Where there are mixed trusts, it will sever the non-charitable part.
E.g. with alternative purposes, e.g. “Charitable or benevolent” – s.104 would sever the “or benevolent”
part.
Where there are compendious purposes as in Leahy – it would be read as if the moneys could only be
applied for the charitable purposes.
- Requires significant indication of charitable purpose – court is NOT going to put some artificial
meaning: Re Blythe
ISSUE: Public Benefit
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Charitable trust must be for a charitable purpose and a public benefit.
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There are Two Aspects
1. Benefit
2. Public Nature
1. Benefit
 There must be some benefit to the community (This is for the court to decide): National v IRC
 Benefit is easy to find in education and poverty
Gilmour v. Coates
- The nuns might have believed that they were benefiting the community with their silent prayer, but
they weren’t
National Anti- Vivisection v. IRC
- It failed b/c bodies set up to change the law are generally not going to be charitable.
- They also said that you have to weigh up the benefit to the community (yes it’s good you shouldn’t be
cruel to animals, but if you don’t do the experimentation, then it may harm humans)
- Here it was held not to benefit??
2. Public Nature
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It must benefit the public at large or a section of the public. However , a gift to an association
which has power to admit or exclude members of the public according to an arbitrary test will
not be considered as a section of the public.
Thompson v. FCT
- it’s not going to include an association which admits members of the public based on some arbitrary
test.
- The Masons were involved and there was a trust set up for the children of the Masons.
- Is it for the public or section?
- Ct said it wasn’t b/c it was for a group that could exclude members of the public.
- Certain large groups that may be recognised – members that reside in a particular geographical area or
a church group…a trade union could not be seen as a section of the public.
The Compton Test
 A trust will NOT have the requisite public nature if the factor which determines whether a class
of beneficiaries will benefit is dependent on their relationship to a particular individual or
propositus eg blood relationship (Re Compton) or employer (Oppenheim v Tobacco Securities)
Re Compton
- it’s not going to be benefiting the public where the group that’s going to benefit is defined by their
r’ship with the named entity.
- e.g. on trust for the education of three named persons.
- Ct said there wasn’t a sufficient public facto
Oppenheim
- extended this to not only r’ship with a named person, but also to employment r’ship.
- It was for the purposes of educating the children of the employees of the coy.
- The coy employed over 100,000 people, so it was providing for the children of 100,000 people. They
said it was essentially private, b/c it involved relationship.
- One judge said this test was artificial and should look into benefit to community as a whole.
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One trust for children of employees of Qld Rail – probably fail on Compton test
Trust for children of Railway Workers in Qld- would probably be okay
Poor relations exception
 also poor employees
Dingal v. Turner
- it would also extend to trusts to relieve poverty of poor employees.
- With a poverty heading, more private cases may be considered.
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-
View of McDermott in Oppenheim is probably better view
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Each case should be a question of degree.
ELEMENT 7: Administration and Control
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Charitable trusts or trusts for purposes have to be created in the same way as a private trust, i.e. it must
be fully constituted and created either inter vivos, or under a will.
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Under the beneficiary principle, there must be someone to enforce the trust and if not it was said that
the court must be able to control the trust.
Supreme Court has jurisdiction in relation to charitable trusts in Queensland under s.106 Trusts Act
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SCHEMES
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The courts use schemes to save charitable trusts that would otherwise fail (unlike private trusts
where property goes back to the estate on resulting trust if it fails)
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There are 2 types of schemes – GENERAL and CY-PRES SCHEME
Both Schemes are dependent on the type of charitable intention:
1. Particular charitable intention
- where settlor clearly intended to benefit the stated object and no other and shows an intention that the
gift should fail if it cannot be put into effect as stated.
2. General intention
- if there is some impracticable direction as part of the trust, it’s not indispensable to the trust (it’s not
essential to the trust).
AG (NSW) v. Perpetual Trustee (Milly Milly Case)
- MM was a farm that was left on trust to be used as a training farm for orphan lads.
- The farm was in a run-down condition and needed a lot of maintenance work (there was no money
provided for capital work and it was also very small)
- It was decided that the farm was unsuitable for that purpose.
- Before the ct could decide whether it was a suitable scheme, they had to determine whether the
testatrix had a particular or a general intention.
- The Ct found that the use of the farm itself was not an indispensable part of the trust and therefore it
was a general charitable intention and they applied a cy pres scheme to provide farm training in some
other way.
- The Ct distinguished b/w the essential characteristics of the trust and incidental characteristics of the
trust.
General Schemes:
They arise where:
1. The original charitable purpose can be achieved; AND
2. Where the donor exhibited a general charitable intention but has either not specified an object, has
provided inadequate instructions or has made provisions which require the continuing supervision of
the trust
– e.g. a trust for cancer research would fail because there is no specified objects, so the court would
apply a scheme
 The stated charitable purpose can be achieved but for some reason, administratively, it has
become difficult.
Cy Pres Schemes:
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The stated purpose here is not able to be achieved and the court alters that purpose to some
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other purpose as “near as possible” to the settlor’s original intention.
At general law there were 3 circumstances where Cy Pres schemes will be applied:
1. The Donor exhibits a general charitable purpose BUT there is an initial failure of the purpose
nominated e.g. impossibility, illegality or impracticability
- must show general charitable intention
- if there’s a particular charitable intention, the trust fails and it will revert back to the estate
2. Where there is a subsequent or supervening failure of the purpose nominated
- This would occur where the trust is up and running, but the organisation may cease to exist or the
purpose may have been legal, but has not become illegal.
- Can be general charitable intention or particular charitable intention as fund will already be impressed
with trust. Ct will seek a new charitable purpose.
3. where residue left and no provision made by settlor
- Can be general or particular intention as fund will remain impressed with trust (once impressed with a
charitable trust, always impressed with a charitable trust)
s.105 TRUSTS ACT
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This section sets out specific cases where Cy Pres schemes may be ordered (all reflect general law).
S.105(2) retains the requirement of general charitable intention where there is failure of the original
purpose (it is not set out in these words though!)
S.105(4) imposes a duty on the trustee to apply for a Cy Pres scheme where the case permits (can’t just
sit on money).
LAPSE OR FAILURE
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Where there is a particular charitable intention, if the trust cannot be carried out in the 1 st instance in
its original form, the trust will fail and the gift will revert to the settlor or, in the case of a testator, the
residuary beneficiary or next of kin.
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If supervening impossibility and surplus funds, the funds can be applied Cy Pres whether the intention
is general or even particular since once it is impressed with the charitable purpose it will remain so
forever
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