Harrison v Hearn
Facts: The Executive Council of the students’ council at Macquarie University resolved to give some of the student’s council’s money to La Trobe University Students Representative Council to assist that council in paying legal costs incurred in what was called a struggle to retain control of that society’s funds. A student at Macquarie sought to restrain the council from making the payments.
Held: An injunction was granted holding that the Student’s Council was obliged to use the funds it received for the interests and welfare of students of Macquarie, and that members of the executive council owed a fiduciary duty to the people they represented in disposing of the funds. Even though individual students had no proprietary right in the property of the council, they had a sufficient interest to seek a declaration or to apply for injunctive relief to prevent improper use of the council’s funds.

The relaxation of beneficiary principle formed by Re Baden’s Deed Trusts; McPhail v Doulton applies to trusts for unincorporated associations. It thus is no longer necessary to ascertain all the members of an association or to show that the gift is one to the individual members as joint tenants, provided that the trust is ‘administratively workable’ and that it can be said with certainty whether a given individual is or is not a member of the group intended to benefit from the gift.

In such a case the emphasis rests on the enforcement of the trust, and the standing of the party seeking to enforce it. Should a court be called upon to enforce a trust, in favour of a club or society now, it is highly unlikely that it would do so by distributing the trust property among the members. It would be more likely to appoint new trustees or to order some scheme of arrangement.

In Re Denley’s Trust Deed [1969] it was stated that the beneficiary principle was confined to purpose trusts which were abstract or impersonal, and that it should not apply to purpose trusts which provided benefits to individuals, albeit indirectly, who possessed standing to enforce the trust. On this view, a trust will fall outside the beneficiary principle where, although expressed as a trust for a purpose, it is directly or indirectly a trust for the benefit of identifiable individuals who can approach the court to enforce the trust.

S16 Perpetuities Act 1984 (NSW)
-    sets a perpetuity period of 80 years for settlement in favour of a non-charitable purpose and allows for such dispositions to be dealt with on a wait-and-see basis.
-    This extends to purpose trusts in which the trust is limited for a period not in excess of the perpetuity period, usually 21 years and allows them to run for 80 years.
-    Act also saves gifts for present and future members of association.

S 106 Property Law Act 1969 (WA)
- Provides that any limitation in favour of such a class shall be construed as one in favour only of those members of the class who attain a vested interest within the perpetuity period.

The acceptability of trusts for the non-charitable purposes of unincorporated associations remains a matter of some controversy. A trust for a purpose and not for persons has been said to fail for lack of certainty of object, rather than just on the principle that, to be valid, a private trust must be in favour of a beneficiary and beneficiaries: Morice v Bishop of Durham (1804).

The approach taken in Re Denley does not sanction pure purpose trusts. It also seems necessary that the gift, either expressly or by necessary implication, must
show an intention that the purpose is to be carried out for the benefit of individuals.

6.6 The Constitution of a Voluntary Trust

For a voluntary trust to be enforceable at the suit of the beneficiaries, it must be completely constituted. Once this stage has been reached it will not be open to the trustee to argue that the beneficiaries are volunteers: Paul v Paul (1882).

An incompletely constituted trust can only amount to an agreement to create a trust which, of course, will not be enforceable without consideration.

•    Transfer to a Trustee

This may be effected either by settlement inter vivos or by will. The general view is that it would be sufficient if the settlor does all that he or she alone can do, thus satisfying the rule in Milroy v Lord that, ‘In order to render a voluntary settlement valid and effectual, the settlor must have done everything which according to the nature of the property comprised in the settlement was necessary to be done to transfer the property and render the settlement binding upon him’: Corin v Patton (1990).

The result is that a valid trust may be constituted in some cases where the legal title has not vested in the trustees, but where they have been put in a position in which they can complete the title unaided.

The trust needs to be acknowledged by the intended trustee. In the case of a trust created by will, where the intended trustee is also the executor of the will, it is not necessary for the legal title to the trust property to be transferred into the executor’s name. An executor has complete rights of property in the assets of the estate by virtue of the grant of probate.

•    Declaration of trust

A voluntary trust created by way of declaration of trust will be fully constituted, and thus enforceable at the suit of the beneficiaries, even though they may be volunteers, once the settlor has made an express declaration of trust intended to be binding on himself or herself, subject only to any statutory requirement that such a trust be in writing.

•    Direction to a trustee

Where a beneficiary of an existing trust wishes to create a new trust in favour of a third party, he or she may do so by directing the trustee to hold the property on trust for the new beneficiary thereafter. Such a direction must be in writing: Grey v IRC.

Re Pryce [1917] caused some confusion with the principles.
Criticism rests on the principle that there can be a completely constituted trust of the benefit of a voluntary covenant (Fletcher v Fletcher), and that the trustees, rather than approaching the Chancery Division to ask whether they ‘ought’ to take proceedings for breach of the covenant to settle after-acquired property, should have commenced an action at common law for breach of covenant in accord with their duty to preserve the trust property.

•    The requirement of writing for express trusts

Under the Statute of Frauds legislation in each state, inter vivos declarations of trust respecting any land or interest in land must be manifested and proved by some writing, while any disposition of a subsisting equitable interest must be in writing signed by the disponer or the disponer’s agent.

Under the relevant wills legislation in each state, testamentary trusts must be in writing to be validly created.

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