Understanding Equity and Trust Law - Essay Example

"Law of Trusts" As a general principle law does not uphold purpose trusts. Trusts for charitable purposes are, however, a major exception. What counts as charitable is the source of a never ending supply of case law. A trust to be valid must have certainty of objects. However charitable trusts do not need to any identifiable beneficiary at all since the general overseeing of such trusts is the responsibility of Charity Commissioners, while the Attorney General is entrusted with the task of enforcing such a trust in court. A gift to charity will be upheld, even if there is no indication of the giver's intention as to how it should be used. The primary authority on what is charitable used to be the repealed Preamble to the Charities Uses Act 1601. Charitable purposes were those listed in the preamble, or those which are analogous to those in the preamble, and are within its 'spirit and intendment'. Since the repeal of the Preamble, the law has progressed on the back of judicial decisions arrived at in the light of the Preamble. The traditional definition of such trusts came from Commissioners for Special Purposes of Income Tax v Pemsel (1891), which divided charitable trusts into four categories: trusts for 'Relief of Poverty', for 'Advancement of Education', for 'Advancement of Religion' and, trusts for 'Purposes Beneficial to the Community'. Trusts for the advancement of education, includes conventional education and training. Thus trusts for schools, colleges, universities and other institutions of learning are valid. But this head extends to any mode of acquiring useful knowledge from literary learning to scientific researches etc. In the case of Re Shaw (1957) it was held that a gift by George Bernard Shaw in his will for research of a forty letter alphabet and translation of one of his plays into it was not charitable. It is arguable whether the same result would have been reached under the principle laid down in the later case of Re Hopkins (1965). It concerned a gift to Francis Bacon Society to be used to find manuscripts proving that the plays of Shakespeare were written by Francis Bacon. The gift was held charitable. The result of research must also enter the public domain, usually by publication, and if the information is kept only for the use of the researcher, it will not be charitable. Therefore research carried out by companies and kept for their exclusive commercial use is not charitable. Although far from the concerns of the Preamble, trusts for animal welfare such as that of the preservation of wildlife through animal sanctuaries have been held to be charitable, this has been due to a change in the general approach that was adopted by the courts in the mid-nineteenth century, where charities of this kind were likely to be held to be a failure because of various reasons. Trusts for animals would be charitable if they 'tend to promote and encourage kindness towards animals and to stimulate humane and generous sentiments in man towards lower animals': Re Wedgewood. However in Re Grove Grady (1929), the Court of Appeal held that a gift for an animal sanctuary which specifically excluded humans so that the animals would not be molested was not charitable, for such a gift produced no public benefit. If it is found that the charitable purpose would be a failure because the means for its implementation as chosen by the testator are either impractical or impossible to carry out then the doctrine of cy-pres or ss13 and 14 of the Charities Act 1993, can be applied so that it would not fail. The cy-pres doctrine allows the courts to direct that the trust property be applied to a purpose as close as possible to the one intended by the settler. Cy-pres can save charitable trusts from failure at the outset or from subsequent failure when carrying out the purpose becomes impossible or impractical. The doctrine only applies to a purpose which already counts as a charitable purpose. In order for the courts to re-direct trust money intended for charitable purposes, the courts must find that the donor manifested a 'general' or 'paramount' charitable intention. If the intention was to give only to the specific charity or charitable purpose and the charity is defunct or the purpose impossible to carry out, then the gift fails. This is known as particular charitable intention. The distinction between the two was drawn by Buckley J in Re Lysaght. In this case the testatrix gave funds to Royal College of Surgeons to fund medical education. The gift was subject to restrictions in that the students were to be male and not of Jewish or Roman Catholic faiths. The RCS declined to take the gift on these terms. It was held that there was a paramount charitable intention to benefit the College and that the conditions were not fatal to such construction. A scheme was thus ordered whereby the religious disqualifications were omitted. In contrast, if it appears that the donor wanted to benefit a particular body only, then the courts will be left with no choice but to hold the gift invalid. In Re Rymer, there was a legacy of 500 pounds to the rector for the time being of St Thomas seminary for the education of priests. At the time of the testators death, the seminary had ceased to exist and the students has been transferred to another seminary in Birmingham. The Court of Appeal held that the gift failed as 'it was a gift to a particular seminary for the purposes thereof. There was no wider intent.' Paramount general intention may be deluded where the charity intended to be the recipient of the gift did not exist. The argument is that since the charity never existed, the settlor must have had a general intention to benefit on those lines. In Re Faraker (1912) there was a gift to Mrs. Bayley's Charity, Rotherhithe. A charity had been founded by Mrs. Bayley in 1756 for the benefit of poor widows in Rotherhithe. This, with a number of other local charities had been amalgamated under a scheme by the Charity Commissioners in 1905, and the funds were held in various trusts for the benefit of the poor in Rotherhithe. Court of Appeal held that the Bayley trust had not been destroyed by the scheme and that the consolidated charities were entitled to legacy. So if the charity although not existing as envisaged, continue in some amalgamated or reconstituted form, the gift takes effect in favour of the body administering the assets of the old charity. This is so even in the circumstances similar to Faraker, where the continuing charity has substantially different overall purposes. If a charity only wound up subsequently, the 'general paramount charitable' intention to benefit may be difficult to be assumed. In Re Harwood (1936), the court held that 'if a particular institution is correctly identified, then it is that institution and no other which is intended.' In this case the testatrix, who died in 1934, left 200 pounds to Wisbech Peace Society and 300 pounds to the Peace Society in Belfast. The Wisbech Society has existed prior to 1934 but had ceased by that date to exist. There was no evidence that the Peace Society of Belfast ever existed. The former trust failed, but in respect of the latter an intention was found to benefit societies whose object was the promotion of peace. Where a particular charitable institution named to be the recipient of gift no longer exists, the gift will not fail if on the true construction of the testator's intentions, he intended to create a charitable purpose trust and merely indicated this institution to serve as a trustee. Since a trust will not fail for want of a trustee, the court will find another trustee to carry out the charitable purpose. This construction is much more likely in the case of a gift to an unincorporated charitable body than an incorporated one. In Re Vernon's Will Trust (1972), Buckley J stated that every bequest to an unincorporated charity by name must take effect as a gift for a charitable purpose. No individual or aggregate of individuals could claim to take such a bequest beneficially. A bequest to a corporate body, on the other hand, takes effect simply as a gift to that body beneficially, unless there is contrary evidence. This reasoning is inventive and unpersuasive. Surely most testators do not know whether the institution to which they give are unincorporated or not. Nevertheless the distinction is good law and it was applied in Re Finger's Will Trusts so that a gift to a now defunct unincorporated association was a valid as a purpose trust, whereas a gift to a defunct incorporated body failed. In Neville Estates Ltd v Madden (1962) it was held that there are three possible constructions of a gift to a unincorporated association. The first is as a gift to individual members as co-owners, whereby each may take their own share. Secondly the gift may be to the individual members but subject to their respective contractual rights and liabilities towards one another as members of the association. Thirdly, the terms of the gift or the rules of the association may show that the property is not to be at the disposal of members, but is to be held in trust for or applied for the purposes of the association. In this case, the gift will fail unless the association is a charitable body. Impracticality and impossibility to carry out the trust are issues which have been dealt with.When a charitable trust has been effectively carried out for sometime, but then its purpose becomes impossible or impractical to carry out, the courts may modify the purposes, on the basis that they are giving effect to the settlor's intention to give 'out and out' to charity. The cy-pres doctrine is this regard was very narrow until the Charities Act 1960 and was available only where it was impossible or impractical to carry out the purposes of the trust. Thus, trusts for the distribution of loaves of bread to the poor or stocking for poor maid servants continued until modern times. Their performance was cumbersome, uneconomical and inconvenient but not impossible or impractical. Section 13 of the Charities Act 1960 states that the cy-pres doctrine would apply where original purposes have been fulfilled or cannot be carried out, the gift can be used more effectively for other common purposes, the purpose has ceased to be suitable, if in the present circumstances the purpose of the charitable gift is being adequately provided for by other means or if the purpose has become useless or harmful to the community. Section 14 of the Act allows property given for specific charity which fails to be applied cy-pres doctrine as if given for charitable purposes generally, provided the donor can be traced or has disclaimed his right to have the property returned. Some modest reforms to the law of charity were made by the Charities Act 2006. While not providing a statutory definition of charity, s.2 extends the fourfold categorization in Pemsel to 12. Charitable trust for advancement of animal welfare have been recognized under s. 2(2)(k). David's Will provides 100,000 to the Derby & District Cat Club so that they can use the money to fund their annual show for the next 10 years. The Derby & District Cat Club is a non-charitable unincorporated association which has a great need for funds so that it can move to better premises. Following Re Vernon's Will Trust (1972), Re Finger's Will Trusts and Neville Estates Ltd v Madden (1962 , it appears that the gift of 100,000 to the Derby & District Cat Club will not be valid since the club is not a charitable association and so an unincorporated association will be unlikely to receive the funds and therefore the money will result back to the testator's estate. 50,000 to the Derby Animal Rescue Centre are likely to be held charitable following the decisions in Re Wedgewood, Re Grove Grady and s. 2(2)(k) of Charities Act 2006. However Derby Animal Rescue Centre was a charity that was wound up 6 months' ago due to lack of funds, this would be an important factor which requires scrutiny. This involves consideration of the doctrine of cy-pres. The doctrine of cy-pres states that where a particular charitable institution named to be the recipient of gift no longer exists, the gift will not fail if on the true construction of the testator's intentions, he intended to create a charitable purpose trust and merely indicated this institution to serve as a trustee. Since a trust will not fail for want of a trustee, the court will find another trustee to carry out the charitable purpose, it is generally the attorney general who works out the charitable trust. If a charity only wound up subsequently, the 'general paramount charitable' intention to benefit may be difficult to be assumed. In Re Harwood (1936), the court held that 'if a particular institution is correctly identified, then it is that institution and no other which is intended.' It appears that 50,000 will not fail since the Derby Animal Rescue Centre ceased to exist before David passed away thus making it more likely for the courts to assume general paramount charitable intention and therefore upholding the trust and the testator's intention. 30,000 to the Buxton Wildlife Centre are likely to fail since the Centre ceased to exist a week after David passed away thus making it less likely for courts to assume 'general paramount charitable intention'. If a particular institution is correctly identified in the testator's will, then it is that institution and no other which is intended, as a clearly specified charity can be said to have been identified and so the testator's intention can be ascertained quite clearly. 800,000 to be used to set up a research centre to conduct research into using alternatives to animals for the testing of medicines to be established at my house in Derby. Derby City Council has indicated informally that they are not minded to grant planning permission for an animal testing centre at David's house however it is unclear if the Council will grant planning permission for alternative to animals for the testing of medicines to be established at David's house in Derby. Assuming the Council will allow or grant the permission and following the decisions in Re Wedgewood, Re Grove Grady and s. 2(2)(k) of Charities Act 2006 it appears that this trust will unlikely fail and would therefore result back to the testator's estate. A resulting trust is said to be a trust which springs back to the person who intended a trust to have been created. Bibliography: Martin, Jill E., and Harold Greville Handbury. Hanbury & Martin Modern Equity. London: Sweet & Maxwell Ltd, 2005. Oakley, A. J., and David B. Parker. Parker and Mellows: The Modern Law of Trusts. London: Sweet & Maxwell, 2003. Pettit, Philip Henry. Equity and the Law of Trusts. Oxford: Oxford University Press, 2005. Hayton, David J, Charles Mitchell, and Oshley Roy Marshall. Commentary and Cases on the Law of Trusts and Equitable Remedies. London: Sweet & Maxwell, 2005. Moffat, Graham, Gerard M. D. Bean, and John Dewar. Trusts Law Text and Materials. Law in context. 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