The General Principle

Morice v Bishop of Durham
•    A trust for objects of “benevolence and liberality” is not charitable, and lacking “somebody in whose favour the court can decree performance”, therefore invalid.

Special Exceptions

1.    The upkeep of animals: People would leave money in trust to be used to look after their animals. These trusts do not satisfy the public benefit test. However, these cases have been held valid as an exception. They cannot live beyond the perpetuity period. This was okay, as the person entitled to the money in the event of default would always be there to ensure that the gift could be enforced.
Pettingall v Pettingal; Re Dean; Cooper-Dean v Stevens

2.    The maintenance of graves and tombstones: Not charitable to maintain your own grave and tombstone, but trust can survive so long as it only survives during the perpetuity period. There was a residuary legatee to bring before the court any failure to comply with the decisions.
Pirbright v Salwey; Re Hooper

Should these “exceptions” be expanded?
Re Endacott

Facts: Testator left a gift to the North Tawton Parish Council to provide a memorial to himself.
Held: The special exception categories should not be expanded.
The trust failed because:
•    It could not be construes as an out-and out gift to the Parish Council – there was clearly an intention f trust
•    The Parish Council’s activities were not clearly and exclusively charitable
•    The terms of the gift were too wide and uncertain to fall within the established “anomalous” class of non-charitable purpose trusts
Also rejected the notion that purpose trusts should be treated as powers rather than trusts.

Harman LJ: “I cannot think that charity has anything to do with this bequest. As for establishing it without the crutch of charity, I applaud the orthodox sentiments expressed by Roxborough J in the Astor case…that though one knows there have been decisions at times which are not really to be satisfactorily classified, but are perhaps merely occasions when Homer has nodded, at any rate these cases stand by themselves and not to be increased in number, nor indeed followed, except where one is exactly like another. Whether it would be better that some authority now should say those cases were wrong, this perhaps is not the moment to consider. At any rate, I cannot think a case of this kind, the case of providing outside a church an unspecified and unidentified memorial, is the kind of instance which should be allowed to add to those troublesome, anomalous and aberrant cases.”
Court of Appeal took firm attitude towards animal and tomb cases, stating that they were all inconsistent with the beneficiary principle.

Re Astor’s Settlement Trusts

Facts: A settlement of shares in Observer Ltd (publisher of the Observer newspaper) on trustees, to use the income for any or all of a list of non-charitable purposes, including “improvement of the cooperation between nations” and “preservation of the integrity of the press”.

Held (per Roxburgh J):
Upholding Two propositions of Lord Parker in Bowman v Secular Society
1.    Question of whether a trust is invalid arises only when a trust exists and can be enforced
2.    A trust to be valid must be for the benefit of individuals.

These non-charitable trusts were invalid on two grounds
1.    They are not trusts for the benefit of individuals. There must be somebody, in whose favour the court can decree performance (Morice). I.e. a gift on trust must have a ‘cestui qui trust’ (Re Wood) and be capable of being enforced by someone. But the two exceptions above (animals and graves) still apply.
2.    The trusts are uncertain. The purposes must be stated in phrases which embody definite concepts and the means by which a trustee is to attain them must also be prescribed with a sufficient degree of certainty. The trust must be of such a nature that it can be administered or executed by the court. It fails under the beneficiary principle.

Leahy v Ag

Issues: Could gift be construed as a gift to the existing members of the order? Did that include future members? Can a gift to future members be sufficiently certain?

Held: As the association has no separate legal personality (so can’t itself be the beneficiary), when a gift is given to it, it is possible to read the gift as a trust for the benefit of existing individual members of the association, and thereby validate the gift rather than a trust for the non-charitable purpose that the association represents.
•    Gifts to unincorporated associations are not automatically gifts to existing member. Consider three factors.
Wording: It was held that the trust was expressly set out for an order of nuns rather nuns individually.
Size of Association: The breadth of the order meant that if every member was treated as a beneficiary, little benefit would be conferred upon each member individually. If there is a high degree of fluctuation in the number of members then it cannot be a gift to members.
Nature of the trust property: The grazing land was not amenable to such a broad division (unlike cash, can’t divide the land out to 100 people etc).

Gifts to Unincorporated Associations

Bacon v Pianta (adopted and applied Leahy)

Facts: A gift to the Communist Party of Australia for its sole use and benefit.
Involved giving the money to a large number of people, not an entity.

Held: A gift to an unincorporated association operates prima facie, as a gift to the individual members at the time when the bequest becomes operative – Per McTiernan, Taylor and Owen JJ.
This was invalid as it attempted to create a non-charitable purpose trust. This is because the membership is constantly changing, and so who can ever be the owners of the property. It is not a gift solely for the presently members; future members will also be entitled to the property.
If it appears that gift is for future members, it offends perpetuity. If it is for a purpose it must be charitable.

Basic Principles (Jacobs [1104]):
1.    A gift to an unincorporated association is valid if it operates as one to the individual members at the time of the bequest.
2.    A gift in trust for the benefit of present and future members will fail as not vesting within the perpetuity period;
3.    A gift for a purpose will fail unless charitable, even if the association has a charitable “flavour”.

Neville Estates v Madden

Facts: Re sale of land for Catford Synagogue: was the permission of the Charity Commissioner required for the sale of land to go ahead?

Held: Only if the property was subject to a  charitable trust.
Cross J: “The question of the construction and effect of gifts to or in trust for unincorporated associations was recently considered by the Privy Council in Leahy. The position…is as follows. Such a gift may take effect in … three quite different ways.
In the first place, it may on its true construction, be a gift to the members of the association at the relevant date as joint tenants, so that a member can sever his share and claim it whether or not he continues to be a member of the association.”
Secondly, it may be a gift to the existing members not as joint tenants, but subject to their respective contractual rights and liabilities towards one another as members of the association. In such a case, a member cannot sever his share. It will accrue to the other members on his death or resignation, even though such members include persons who became members after the gift took effect.”
    “If this is the effect of the gift, it will not be open to objection on the score of perpetuity or uncertainty unless there is something in its terms or circumstances or in the rules of the association which preclude the members at any given time from dividing the subject of the gift between them on the footing that they are solely entitled to it in equity.”
    “Thirdly, the terms or circumstances of the gift or the rules of the association may show that the property in question in not to be at the disposal of the members for the time being but is to be held in trust for or applied for the purposes of the association as a quasi-corporate entity. In this case the gift will fail unless the association is a charitable body. If the gift is of the second class, ie, one which the members of the association for the time being are entitled to divide among themselves, then even if the objects of the association are in themselves charitable, the gift would not I think be a charitable gift.”

In summary there are three alternatives:
1.    An absolute gift to existing members – each entitled to a share.
2.    A gift to existing members, subject to the constitutional rules of the organisation, which operate as a contract between the members.
3.    A gift to the association as trustee for purposes, which must be charitable.

What if the “purpose” reveals sufficiently certain, private objects?    

Re Denley’s Trust Deed  
Facts: A trust to provide sporting facilities for employees of a named company was
Held: The beneficiaries could be determined with sufficient certainty within the perpetuity period, so the trust was held valid.
-    Sporting facilities have never been held to be charitable.
-    Held that employees of the named company were a sufficiently certain criteria to identify who was to benefit from the particular facility.
-    Trust was carefully expressed so that there was no perpetuity problem.
Goff J: “Where…the trust, though express as a purpose, is directly or indirectly for the benefit of an individual or individuals, it seems to me that it is generally outside the mischief of the beneficiary principle”

NB: Jacobs states this case is contrary to the authorities and difficult to justify in principle. Unlikely to be followed in Australia, given the restricted approach to unincorporated associations in Bacon and Leahy.

A recent example
    
Public Trustee v AG NSW (1997) 42 NSWLR 600
-    Ruby Ellen Bins dies in 1986.
-    Her will, made in 1970, left her entire estate to the “Federal Council for the Advancement of Aborigines and Torres Strait Islanders”, for its general purposes.
-    This body was unincorporated association which ceased to exist in 1978.
-    The purposes of the association included the lobbying for changes in the law, land rights, and improvements to indigenous people’s welfare.

What should be done with this gift?

Process:
-    Look at whether there is a general or specific purpose.
-    Look at whether there could be a scheme implemented.
-    Use s10 of Charitable Trusts Act: There is a presumption in finding a general purpose when in doubt. In addition, there is a general intention to benefit Aboriginals and Torres Strait Islanders, not just the specific association.
-    Can use a cy pres scheme.
-    Looks like having mixed purposes. Clearly a charitable intention and charitable purposes. Trustees would be restricted so that they cannot use the funds to expressly lobby for changing the laws.
-    Section 23 of the Act can save the trust.