Charitable trusts and non-charitable purpose trusts - Non-ch...

Learning Outcomes

This article outlines the general principles governing non-charitable purpose trusts, focusing on the reasons why they are often invalid. It explores the beneficiary principle and the rule against perpetuities (specifically the rule against inalienability) as key limitations on such trusts. The discussion highlights the classic anomalous exceptions (animals, graves and monuments, and private masses) and the modern Re Denley approach, enabling precise differentiation between valid and invalid non-charitable purpose arrangements. For SQE1 purposes, the article emphasizes how to analyse problem questions and single best answer MCQs testing the beneficiary principle, enforcement, conceptual certainty, and compliance with the perpetuity period. It also explains the practical routes by which apparently “purpose-focused” dispositions can be recast as trusts for persons, including the treatment of gifts to unincorporated associations as contract-holding gifts or gifts to members for the time being. Finally, it examines how charitable status, public benefit, and the personal nexus requirement distinguish charitable trusts from non-charitable purpose trusts, ensuring a structured framework for evaluating any purpose-based disposition in exam scenarios.

SQE1 Syllabus

For SQE1, you are required to understand the distinction between trusts for individuals and trusts for purposes, specifically non-charitable purpose trusts and their limitations, with a focus on the following syllabus points:

• The beneficiary principle and its role in trust validity.
• The reasons why non-charitable purpose trusts generally fail, including the court’s inability to supervise vague or abstract purposes.
• The limited exceptions to the rule against non-charitable purpose trusts, including trusts for the maintenance of specific animals, graves/monuments, private masses, and the principle derived from Re Denley.
• The application of the rule against perpetuities (specifically the rule against inalienability) to non-charitable purpose trusts, and the effect of the Perpetuities and Accumulations Act 2009.
• How a gift to an unincorporated association may be construed so as to avoid the beneficiary principle problem (contract-holding gifts, gifts to members for the time being).
• Distinguishing valid non-charitable purpose trusts from invalid ones and from charitable trusts, including the personal nexus/public benefit restriction for charities.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What is the core reason, established in Morice v Bishop of Durham, why most non-charitable purpose trusts are void?
   1. Lack of certainty of intention
   2. Lack of certainty of subject matter
   3. Lack of ascertainable beneficiaries to enforce the trust
   4. Violation of the rule against perpetuities
2. Which of the following is NOT generally considered a valid anomalous exception to the rule against non-charitable purpose trusts?
   1. A trust for the maintenance of the testator's favourite cat for 21 years.
   2. A trust for the erection of a monument to the testator.
   3. A trust for the promotion of a specific political party's ideology.
   4. A trust for the upkeep of the testator's grave for the perpetuity period.
3. A trust is established to maintain a sports ground for the benefit of the employees of X Ltd and their families. Which principle might potentially validate this trust?
   1. The cy-près doctrine
   2. The rule in Saunders v Vautier
   3. The principle in Re Denley's Trust Deed
   4. The presumption of advancement

Introduction

While most trusts are established for the benefit of specific individuals (beneficiaries), some trusts are created to achieve a particular purpose. These are known as purpose trusts. Purpose trusts can be broadly divided into charitable trusts (which benefit the public and satisfy specific legal criteria) and non-charitable purpose trusts. This article focuses on the latter category.

Non-charitable purpose trusts face significant hurdles to validity under English law primarily because they often conflict with two fundamental trust principles: the beneficiary principle and the rule against perpetuities. Understanding these limitations and the narrow exceptions is essential for advising clients and for success in the SQE1 assessment. It is also important to recognise practical pathways by which a disposition framed as a “purpose” may be construed so as to benefit ascertainable persons and thereby escape invalidity.

Key Term: Beneficiary Principle
The rule stating that, for a private trust to be valid, there must be ascertainable beneficiaries who can enforce the trust against the trustees.

Key Term: Purpose Trust
A trust established not for the benefit of ascertainable individuals, but to achieve a specific aim or purpose.

The Beneficiary Principle

The fundamental principle dictating the validity of private trusts is the beneficiary principle.

This principle was clearly articulated in Morice v Bishop of Durham (1804) 9 Ves Jr 399, where Sir William Grant MR stated, “There must be somebody, in whose favour the court can decree performance.” Without beneficiaries, there is no one to hold the trustees accountable for fulfilling the trust's terms. This lack of enforceability means the court cannot supervise the trust's administration. Decisions such as Re Shaw [1957] 1 WLR 51 and Re Astor's Settlement Trusts [1952] Ch 534 confirm that a trust for abstract or politically sensitive aims (e.g., altering the alphabet or promoting press “integrity”) will fail if not charitable, since there are no ascertainable persons with standing to enforce and the courts lack standards against which to test performance.

Why Non-Charitable Purpose Trusts Usually Fail

Non-charitable purpose trusts, by their nature, are established for a purpose (e.g., maintaining a specific building, promoting a hobby) rather than for specific people. Consequently, they typically lack the ascertainable human beneficiaries required by the beneficiary principle. If there is no one who can legally compel the trustees to carry out the stated purpose, the trust arrangement is generally considered void. An additional difficulty is conceptual vagueness: indistinct or politically charged aims are unsuited to judicial control and monitoring.

Worked Example 1.1

A testator leaves £50,000 in his will to trustees "for the purpose of promoting better understanding between nations". Is this likely to be a valid trust?

Answer:
This trust is likely void. It is for a purpose, but the purpose is unlikely to be considered charitable (it's likely too political or vague). As a non-charitable purpose trust, it fails the beneficiary principle because there are no ascertainable human beneficiaries who can enforce it (Re Astor's Settlement Trusts [1952] Ch 534).

Distinction from Charitable Trusts

It is important to distinguish non-charitable purpose trusts from charitable trusts. Charitable trusts are purpose trusts, but they represent a major exception to the beneficiary principle. This is because:

• They fulfil purposes legally recognised as charitable (e.g., relief of poverty, advancement of education, advancement of religion, advancement of health, human rights, environmental protection, animal welfare, amateur sport, arts, etc.) under the Charities Act 2011.
• They benefit the public or a sufficient section of it.
• Enforcement is ensured by the Attorney General and the Charity Commission, acting on behalf of the public.

These factors justify their exemption from the beneficiary principle. Non-charitable purpose trusts lack this public benefit and enforcement mechanism.

Key Term: Unincorporated Association
A group bound together by rules or a contract between members, but not a separate legal person. Gifts to such bodies may be construed as gifts to members for the time being or additions to the association’s funds subject to its rules, avoiding an invalid “purpose trust”.

Exceptions to the Beneficiary Principle

Despite the general rule, courts have recognised some limited exceptions where non-charitable purpose trusts can be valid, largely as historical anomalies or concessions to human sentiment. Additionally, some apparent purpose arrangements can be saved by construing them as trusts for persons.

Anomalous Exceptions (Trusts of Imperfect Obligation)

These are specific, narrowly defined categories upheld in older case law. They are often called trusts of “imperfect obligation” because, while valid, there is no beneficiary who can compel the trustee to carry out the purpose; the trustee is effectively on their honour. These exceptions include trusts for:

• The maintenance of specific animals: Trusts for the care of particular pets (Re Dean (1889) 41 Ch D 552). The duration must be limited to the perpetuity period (see below). Courts may take judicial notice of a typical lifespan to save the gift if the animal cannot live beyond 21 years (Re Haines [1952] The Times, 7 Nov). Long-lived animals (e.g., certain tortoises) may defeat this saving.
• The erection and maintenance of graves and monuments: Trusts for building or maintaining specific tombs or monuments, provided they are not charitable (e.g., inside a church the broader charitable character may apply) and are limited in duration (Re Hooper [1932] 1 Ch 38; Mussett v Bingle [1876] WN 170). The erection of a monument is typically inferred to be completed within 21 years; ongoing upkeep requires express time limitation.

Key Term: Trust of Imperfect Obligation
A valid but unenforceable non-charitable purpose trust recognised as an anomaly (e.g., maintenance of a specific grave or animal), where trustees have no legally compellable duty and the arrangement must comply with the perpetuity restriction.

Exam Warning

These exceptions are narrowly construed and unlikely to be extended. A trust for a purpose falling outside these specific categories (and not being charitable or falling under Re Denley) will likely be void. For example, a trust for "providing some useful memorial to myself" was held void (Re Endacott [1960] Ch 232). Similarly, trusts for political purposes, or abstract research objectives lacking public benefit, will generally fail as non-charitable purpose trusts.

The Re Denley Principle

A more modern and conceptually distinct exception arises from Re Denley's Trust Deed [1969] 1 Ch 373.

Key Term: Re Denley Trust
A trust expressed as being for a purpose, but which directly or indirectly benefits ascertainable individuals, who can therefore enforce the trust.

In Re Denley, land was held on trust to be maintained and used as a sports ground primarily for the benefit of employees of a specific company. Goff J held the trust valid because, although framed as a purpose, it provided a direct and tangible benefit to an ascertainable class of individuals (the employees), who could enforce the trust if the trustees failed to maintain the sports ground.

The principle operates “outside the mischief” of the beneficiary rule where:

• There is a clear, tangible benefit accruing to a defined group of persons.
• Those persons are ascertainable. In practice, the description should be conceptually certain and, akin to discretionary trust analysis, it should be possible to say whether a given postulant is or is not within the class.
• The arrangement does not offend the rule against inalienability (see below).

Key Term: Administrative Unworkability
A discretionary trust may be invalid if the class is so hopelessly wide that the trustees cannot sensibly exercise the discretion (e.g., “inhabitants of West Yorkshire”). Although a Re Denley trust can be for a defined class, drafting that mirrors an administratively unworkable discretionary class risks failure.

Worked Example 1.2

A trust fund is established "for the purpose of providing a leisure centre for the benefit of the residents of Smallville for the next 20 years". Is this likely to be a valid trust?

Answer:
This trust might be valid under the Re Denley principle. Although stated as a purpose (providing a leisure centre), it confers a direct and tangible benefit on an ascertainable class of individuals (the residents of Smallville). These individuals would have standing to enforce the trust. The trust is also limited in duration (20 years), satisfying perpetuity requirements.

Revision Tip

For Re Denley to apply, the benefit to the individuals must not be too indirect or intangible, and the class of individuals must be ascertainable. If the benefit is too remote or the class too wide or uncertain, the trust may still fail. Drafting that replicates extremely broad classes risks invalidity for administrative unworkability.

Worked Example 1.3

A testator leaves £5,000 in his will "to my trustees to provide an annual prize for the best vegetable grown in the village allotments". Is this trust valid?

Answer:
This trust is likely void. It appears to be a non-charitable purpose trust (promoting vegetable growing). While allotment holders benefit in some sense, the benefit is indirect and, more importantly, an “annual” prize implies recurring use of income indefinitely, tying up capital beyond the permitted period for non-charitable purpose trusts. Without a 21-year limitation or a power to spend capital and then end the arrangement, the trust offends inalienability.

Worked Example 1.4

A company settles land “to be used and maintained as a sports ground for employees and their families,” with no express time limit. Can this stand?

Answer:
If construed as a Re Denley trust, the tangible benefit to a conceptually certain class (employees and families) may validate the arrangement. However, absent an express limit, the non-charitable purpose features risk offending the rule against inalienability. To avoid invalidity, the deed should either (i) permit spending capital to achieve the purpose and thereby end the trust, or (ii) limit duration to lives in being plus 21 years, or a fixed period not exceeding 21 years for non-charitable purposes.

The Rule Against Perpetuities

Even if a non-charitable purpose trust navigates the beneficiary principle (via an exception), it must also comply with the rule against perpetuities. For purpose trusts, the relevant rule is the rule against inalienability.

Key Term: Rule Against Inalienability
A common law rule stipulating that the capital of a non-charitable purpose trust cannot be tied up indefinitely; the trust must be limited in duration to the perpetuity period.

The common law perpetuity period is lives in being plus 21 years. For non-charitable purpose trusts (where relevant lives are often unavailable), this period is effectively 21 years. The Perpetuities and Accumulations Act 2009 does not abolish this restriction for non-charitable purpose arrangements: section 18 confirms that the common law limit on the duration of non-charitable purpose trusts continues to apply. Charitable trusts, by contrast, are immune from the inalienability rule.

Key Term: Perpetuity Period
The time limit within which property interests must vest or non-charitable purposes must end. For non-charitable purpose trusts without human measuring lives, the practical limit is 21 years.

Application to Purpose Trusts

• Trusts requiring ongoing expenditure from income: If a trust requires income to be used for the purpose indefinitely (e.g., "to maintain my grave forever"), the capital producing that income is tied up forever. Such a trust is void unless expressly limited in duration to the perpetuity period (max 21 years).
• Trusts allowing expenditure of capital: If the trustees can spend the entire capital on the purpose at any time (e.g., "£10,000 to build a statue"), the trust does not necessarily offend the rule, as the capital is not perpetually inalienable. The court may assume the purpose will be completed within 21 years (Mussett v Bingle [1876] WN 170). Including wording such as “for so long as the law allows” safely imports the maximum permitted period.

Worked Example 1.5

A will leaves “£20,000, the income to be applied to maintain my grave forever.” Valid?

Answer:
No. A direction to apply income “forever” renders the capital inalienable beyond the permitted 21 years. The trust would need express limitation to the perpetuity period (e.g., “for so long as the law allows” or “for 21 years”). Without that, it is void as a non-charitable purpose trust.

Perpetuity Period for Anomalous Exceptions

Trusts falling under the anomalous exceptions (animals, graves) must also comply. A trust for an animal’s life might be valid if the animal’s lifespan is clearly less than 21 years. Trusts for maintaining monuments or graves must be expressly limited (e.g., “for 21 years” or “as long as the law allows”). Where the purpose is erection (not maintenance), courts commonly infer completion within 21 years.

Worked Example 1.6

A bequest sets up “£15,000 to maintain my tortoise, Methuselah.” There is no time limit.

Answer:
Risky. Unlike cats or dogs, certain tortoises may live well beyond 21 years. Judicial notice would not safely salvage the gift. Unless the will limits duration (e.g., “for 21 years”), this non-charitable purpose trust will likely be void for infringing inalienability.

Worked Example 1.7

A testator leaves “£10,000 on trust to the bishop for the saying of masses for my soul for so long as the law allows; attendance by my immediate family only.” Valid?

Answer:
Yes, as a trust of imperfect obligation. Private masses are a recognised anomalous category. The phrase “for so long as the law allows” imports the permissible time limit, avoiding inalienability concerns. If the masses were public, the trust would likely be charitable (advancement of religion), but private masses remain a non-charitable purpose trust and must be time-limited.

Saving Apparent Purpose Gifts: Unincorporated Associations

Many gifts that look like “purpose gifts” in favour of clubs or societies are saved by construing them not as trusts for abstract ends, but as gifts to persons—usually the members—for the time being, subject to the association’s contract (rules), or as additions to the association’s funds. This avoids the beneficiary principle problem and inalienability.

• Contract-holding gift: The gift is to the members for the time being, to be applied per the club’s rules (Re Recher’s Will Trusts [1972] Ch 526; Re Horley Town FC [2006] EWHC 2386 (Ch)). Members can enforce the rules as a matter of contract.
• Gift to members (identification device): The association is not a legal entity; treating the gift as to its members provides ascertainable beneficiaries. The property is held, often on bare trust, for those members subject to their contractual arrangements.
• Caution—rules disabling members: If the club’s rules prevent members from controlling or disposing of the funds, or the gift is framed in purely purposive terms without a route to application by members, the gift may be treated as an invalid non-charitable purpose trust (Re Grant’s Will Trusts [1979] 3 All ER 359).

Worked Example 1.8

A testamentary gift leaves “£20,000 to Hanbury Cricket Club to build a pavilion.”

Answer:
If Hanbury CC is an unincorporated association, the gift can be construed as a contract-holding gift to the members for the time being, subject to the club rules (Re Recher; Re Horley Town FC). This avoids the beneficiary principle and inalienability issues. If the rules disable members from controlling application of funds, the gift risks being an invalid non-charitable purpose trust.

Summary

Table: Validity of Non-Charitable Purpose Trusts

Key Point Checklist

This article has covered the following key knowledge points:

• Non-charitable purpose trusts are generally void because they offend the beneficiary principle.
• The beneficiary principle requires ascertainable beneficiaries who can enforce the trust.
• Charitable trusts are an exception because they have public benefit and are enforced by the Attorney General/Charity Commission.
• Limited anomalous exceptions exist for trusts for specific animals, the maintenance of graves/monuments, and private masses; these are narrowly construed.
• The Re Denley principle allows trusts for purposes that directly benefit ascertainable individuals to be valid, provided the class is conceptually certain and enforcement is feasible.
• Non-charitable purpose trusts must comply with the rule against perpetuities (rule against inalienability), typically meaning they cannot last longer than 21 years unless the capital can be spent at any time.
• Gifts to unincorporated associations are often saved by construing them as contract-holding gifts or gifts to members for the time being, avoiding the beneficiary principle problem.
• Political or vague trusts are unlikely to be charitable and will fail as non-charitable purpose trusts.
• Express wording such as “for so long as the law allows” can safely limit time for non-charitable purposes to the permitted period.

Key Terms and Concepts

• Beneficiary Principle
• Purpose Trust
• Trust of Imperfect Obligation
• Re Denley Trust
• Rule Against Inalienability
• Perpetuity Period
• Unincorporated Association
• Administrative Unworkability