EQUITY AND TRUSTS
Unit 4
Purpose Trusts
WorkshopTask 02
Your supervising solicitor (Anna Choudhury) acts for Eleanor Hughes, the founder of
T-Mex Industries Ltd. Eleanor has written out her own will and asks whether it will
give effect to her wishes. Anna wants your view on the validity of the following
legacies.
(a) “I give £100,000 to my Trustee on trust to invest and use the income to provide
educational scholarships for children of employees of T Mex Industries Ltd.”
(b) “I give £500,000 to my Trustee on trust to invest and use the income to relieve
poverty among my relatives.”
(c) “I give £10,000 to my Trustees to hold on trust to maintain my horse, Bertie, for as
long as the law allows.”
(d) “I give the residue of my estate on trust for charitable and other purposes related
to improving health in Wales.”
1 Explain whether the above legacies are valid and, if not, how they should
be amended.
2 Prepare a report on the law as to public benefit in charitable trusts as it
applies to legacies (a) and (b) above, for Eleanor’s information.
2 different test on public benefit –
1. Validity of the Legacies
(a) This is a purpose trust. Trying to create a trust to provide educational
scholarships.
Education is a charitable purpose under s3(1)(b)
S 4 – Sufficient public benefit
Lord Simonds held that a class of beneficiaries defined by reference to employment
relationship was too narrow - The potential beneficiary class of 110,000 children was
deemed insufficient to constitute public benefit
Oppenheim v Tobacco Securities Trust Co Ltd (1951)
A trust to apply the trust income to provide for the education of the children of
employees or ex-employees of British American Tobacco was not charitable.
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It is not a valid trust.
They can not spent the capital, only investment, therefore the rule of inalienability is not
satisfied.
It will fail.
Ammend: Do not say to invest to fix it.
(b)
This is a purpose trust, as it is created to invest money to relief poverty. s. 3(1)
(a))
This legacy is potentially valid. It is a type of trust known as a poverty relief
trust. However, the term "relatives" needs to be more clearly defined to avoid
any potential issues of uncertainty.
Public benefit tes have been met
In H M Attorney General v Charity Commission for England and Wales (2011)
the Upper Tribunal Tax and Chancery Chamber confirmed that trusts to relieve
poverty among relations, employees of the same employer and members of a
club or society were charitable, following established case law.
This would be a valid trust for the relief of poverty
(c) It is a purpose trust to maintain a horse, Bercy.
Is the trust charitable? S 3(1)
Does it has sufficient public benefit?
No
This legacy is invalid. English law does not recognize trusts for the maintenance
of animals.
This could be amended to a discretionary trust with the trustees given the power
to use the trust property for the maintenance of the horse.
It can be a Valid as trust of imperfect obligation, but subject to perpetuity period,
21 year from death. Add clause “for 21 years from my death”
She says For as long is gonna last - it satisfies the Re Dean
(d)
It is a purpose trust to improve health in Wales.
S 3 sub d – improving health is charitable
Sufficient public benefit? Yes, it benefits the general public in Wales.
Exclusively charitable?
This legacy is potentially valid. It is a type of trust known as a charitable trust.
However, the phrase "charitable and other purposes" is too vague and could
lead to issues of uncertainty. It would be better to specify the charitable
purposes.
Can it succeed as non charitable purpose trust?
Is it a trust of imperfect obligations or a Re Denley trust?
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No
Does it comply with the rule against inalienability?
No, not limited to 21 years
Are the objects certain?
Trust is void
2. Law on Public Benefit in Charitable Trusts
1. Legislative Framework
Charities Act 2011 - Section 2(1)(b) requires that a charitable trust must be
established for the public benefit –
Section 4(2) states that public benefit is not presumed and must be
demonstrated –
Section 3(1) defines charitable purposes, including: The advancement of
education - The prevention or relief of poverty
2. Analysis of Legacy (a) - Educational Trust
Public Benefit Requirements
The trust for educational scholarships for T-Mex employees' children must
satisfy the public benefit requirement through: - Sufficient size of beneficiary
class - No personal nexus requirement
Relevant Case Law:
1. Re Compton [1945] Ch 123* - Educational trusts limited to family
members were held not charitable - Established the "personal nexus"
test 2. Oppenheim v Tobacco Securities Trust [1951] AC 297*
Trust for education of children of employees of British American
Tobacco was held non-charitable - Lord Simonds held that a class of
beneficiaries defined by reference to employment relationship was too
narrow - The potential beneficiary class of 110,000 children was deemed
insufficient to constitute public benefit
3. Gibson v South American Stores [1950] Ch 177- Educational trust
for company employees held non-charitable - Reinforced that
employment connection creates impermissible personal nexu
2. Analysis of Legacy (b) - Poverty Relief Trust
Public Benefit Requirements Relief of poverty has special status
regarding public benefit requirements
Relevant Case Law:
1. Re Scarisbrick [1951] Ch 622* - Relief of poverty among relations
allowed as charitable - Established that poverty relief has more
flexible public benefit requirements 2.
2. Dingle v Turner [1972] AC 601* - Lord Cross confirmed special
treatment for poverty relief trusts - Private trusts for poverty relief can
be charitable even with restricted class
3. 3. Re Segelman [1996] Ch 171* - Confirmed charitable status of
trust for relief of poor relations - Reinforced special treatment of
poverty trusts
4. Conclusions Legacy (a) - Educational Trust Based on Oppenheim,
the educational trust for T-Mex employees' children likely fails the
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public benefit requirement due to: - Employment connection creating
personal nexus.
5. Restricted class of beneficiaries Legacy (b) - Poverty Relief Trust
The trust for poor relatives likely valid as charitable because:
- Poverty relief has special status (Re Scarisbrick) –
Family connection acceptable for poverty relief - No requirement for
wide public benefit
5. Legislative Reform Context The Charities Act 2011 codified but did
not fundamentally alter these principles. The Act emphasizes that
public benefit must be demonstrated rather than presumed, but
maintains the special status of poverty relief in case law.
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