WHAT MORE

IS NEEDED
FOR THE
CREATION
OF EXPRESS
TRUSTS?
THE BENEFICIARY PRINCIPLE
TRUSTS FOR PURPOSES
GIFTS TO UNINCORPORATED ASSOCIATIONS
THE PERPETUITY RULES.
INTRODUCTION

Trusts

Trusts for Persons Purpose Trusts

T T

B P
INTRODUCTION

Trusts

Trusts for Persons Purpose Trusts

Private Purpose Trusts Public Purpose Trusts

 NON- CHARITABLE/ OR PRIVATE
PURPOSE TRUSTS

Non-Charitable
Purposes trusts
(Prima facie void with
below exceptions)

Purposes indirectly Commercial purpose

Purposes to maintain benefit or directly that failed and
aminals and objects benefit members: Re resulting trust (
Denley and Re Recher Quistclose Trust)
 CHARITABLE TRUSTS
• Charitable trusts in England are enforced by the
Attorney-General, acting on behalf of the Crown, in its
parens patriae (parent of the nation) jurisdiction.

• In Hong Kong, this role falls to the Secretary for

Justice.
• Historically, charitable trusts also benefitted from
being exempt from the perpetuity rule, which all
private trusts were subject to. This remains the case in
England.

• But in Hong Kong, the perpetuity rule was abolished in

2013 in respect of private trusts for persons: s 3A
Perpetuities and Accumulations Ordinance (Cap 257).

• The perpetuities rule still applies to non-charitable

purpose “trusts”: s 3C Perpetuities and Accumulations
Ordinance (Cap 257).
 INTRODUCTION
• “Beneficiary principle” by Sir William Grant MR in Morice v
Bishop of Durham (1804) 9 Ves Jr 399:
• “There can be no trust over the exercise of which this Court will
not assume a control:
• for an uncontrollable power of disposition would be ownership and
not trust.
• If there be a clear trust but for uncertain objects, the property, that
is the subject of the trust, is undisposed and the benefit of such
trust must result to those to whom the law gives the ownership in
default of disposition by the former owner……...”
 INTRODUCTION
• “Beneficiary principle” by Sir William Grant MR in Morice v
Bishop of Durham (1804) 9 Ves Jr 399:
• “……………….But this doctrine does not hold good with respect
to trusts for charity.

• ….Every other trust must have a definite object. There must be

somebody (Human?) in whose favour the Court can decree
performance.”
 PRIVATE PURPOSE TRUSTS

Purpose Trusts

PrivatePurpose
Private Purpose Trusts
Trusts? Public Purpose Trusts

Imperfect Obligations Re Denley’s Trust Deed

Enforcer?
“TRUSTS” OF IMPERFECT OBLIGATIONS OR
OFFENDING THE BENEFICIARY PRINCIPLE

• The category known as testamentary trusts of imperfect

obligations are acknowledged to be difficult to justify and are
considered to be concessions to human weakness or sentiment.
• The main categories for such non-charitable purpose “trusts” are:
i. “trusts” for particular animals;
ii. “trusts” to erect and maintain monuments and graves;
iii. “trusts” for the saying of private masses; and
iv. “trusts” for other purposes.
RE ASTOR’S SETTLEMENT
TRUSTS [1952] CH 534
RE ASTOR’S

• Settlement to hold the shares of a company on trust for

various purposes, including the purpose (1) to maintain a
good understanding, sympathy, and cooperation between
nation and the preservation of the independence and
integrity of news papers.

• Held: being for non charitable purposes, the trusts were void
since there were no identifiable beneficiaries… second
identified purpose were considered to be too uncertain..
RE ASTOR’S [1952] CH 534

Per Roxburgh J
‘The typical case of a trust is one in which the legal owner of property is
constrained by a court of equity so to deal with it as to give effect to the
equitable rights of another. These equitable rights have been hammered
out in the process of litigation in which a claimant on equitable grounds
has successfully asserted rights against a legal owner or other person in
control of property. Thus prima facie a trustee would not be expected to
be subject to an equitable right and the nature and extent of that
obligation unless there was somebody who could enforce a correlative
equitable right and the nature and extent of that obligation would be
work out in the proceedings for enforcement…’ [ 541]
 THE PERPETUITY RULES

•
 THE PERPETUITY RULES (U.K)

• The rule against remoteness of

vesting. The rule against
Stated periods, or “wait and see” inalienability of
trust capital

Must be possible
to “SPEND” the
capital.
 THE PERPETUITY RULES (HK)
PERPETUITIES AND ACCUMULATIONS ORDINANCE (CAP 257)

In Hong Kong, the perpetuity rule was abolished in 2013

in respect of private trusts for persons: s3A Perpetuities
and Accumulations Ordinance (Cap 257)

The perpetuity rule still applies to non-charitable purpose

trusts: s3C Perpetuities and Accumulations Ordinance
(Cap 257) See the Ordinance for the option of duration
80 or 21 years.
IF NO STIPULATED DURATION OF
YEAR?

Pirbright v Salwey [1896]

WN 86
‘for so long as the law for
the time being permits’
TRUST OR NO TRUST……….

OR EXCEPTION OR ANOMALOUS
CASES ON TESTAMENTARY
PURPOSE TRUSTS THAT HAVE
BEEN RECOGNIZED SHOULD NOT
BE EXTENDED. (RE ENDACOTT)
RE ENDACOTT
[1960]

• Left estate to a
parish council to
provide (1)
‘some useful
memorial to
himself.’ Held
not to be valid
 • care and upkeep of
family graves and
monuments and a
RE HOOPER
[1932] 1 CH 38 tablet in a window in
a church so far as they
legally can do so
RE SHAW
[1957] 1 WLR
INCREASED KNOWLEDGE
THROUGH INVENTED
ALPHABETICAL LETTERS ARE
NOT…
 • A trust for the promotion and
furthering of fox hunting for
RE 21 years after my death and
THOMPSON
[1934] CH 342 then for the Master Fellows
and Scholars of Trinity Hall,
Cambridge were held valid.
RE DEAN
(1889) 41
CH D 552
A trust to provide £750 per
year for 50 years to feed
testator’s horses and hounds
was held valid.
PETTINGALL
V
PETTINGALL
(1842) 11 LJ
CH 176
PETTINGALL V
PETTINGALL
 “TRUSTS” OF IMPERFECT
OBLIGATIONS
• More recently, however, it is thought that such “trusts” of imperfect
obligations are not really exceptions to the charitable trusts rule: e.g.
JE Penner, The Law of Trusts; Graham Virgo, The Principles of
Equity & Trusts.
• This is because such trusts are enforced by way of a Pettingall order:
see Pettingall v Pettingall (1842) 11 LJ Ch 176.
• Essentially, the “trustees” of such a “trust” must undertake to the
court that they will carry out the purpose and the persons who will
take should the trust fail (usually residual legatees) are given leave to
apply to court if the “trustee” fails to do so.
KARL LAGERFELD:
DESIGNER'S CAT
CHOUPETTE
'NAMED IN HIS
WILL'
 “TRUSTS” OF IMPERFECT OBLIGATIONS
• Historically, this category of cases were regarded as
exceptions to the rule that only charitable purpose trusts
were permitted. In Re Endacott [1960] Ch 232, Harman LJ
remarked:
• “I applaud the orthodox sentiments expressed by
Roxburgh J in the Astor case, and as I think he did, 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 ought
not to be increased in number, nor indeed followed,
except where the one is exactly like another.”
OCCASIONS
WHEN HOMER
HAS NODDED
 TRUSTS OF IMPERFECT
OBLIGATION.

• Who is the beneficial owner of the trust fund then?

• Re Bowes [1896] 1 Ch….planting the trees were not intended to be

imperative, but merely indicated the testator’s motive for creating a trust for
the benefit of A and B.

• Alternative approaches in other jurisdictions

 THE BENEFICIARY PRINCIPLE

• Trusts for people = ok

• Trusts for purposes are not –
except………
• Trusts for things which are not people are
not (except for…..!)
 THE WILL OF MRS X

• I want to cancel all previous wills and make new arrangements for the
future. These are my expressed wishes:
I want to appoint Mr A and Mrs A of…to be executors of the will
I would like to bequeath the following pecuniary legacies
The sum of ten thousand pounds to my friend Helen, and two thousand
pounds to her husband Colin
THE WILL OF MRS X CONT…

• The sum of two thousand pounds to my cousin Janet

• To my cousin Cyril and his family the sum of one pound
• To my cousin John and his family the sum of one pound
• “All other monies should be distributed to worthwhile
animal, education and care good causes by my
executors.”
• Signed by Mrs X in the presence of two witnesses – one of
whom, in fact, was Helen.
 CAN WE FIND
SOME “PEOPLE” TO
MAKE IT OKAY?
DIRECT?

INDIRECT?
WHAT SITUATION
COULD THERE BE NO
DIRECT PEOPLE?
• Unincorporated association- ie.
Clubs…non-legal personahood.
 RE DENLEY
• The case of Re Denley’s Trust Deed [1969] 1 Ch 373 is more difficult than
trusts of imperfect obligations.
• The trustees held land as a sports ground for the use and enjoyment of
employees of a particular company for a period within the perpetuity
period.
• Under those circumstances, Goff J held
that the beneficiary principle was not
offended as it directly or indirectly
benefited individuals and was not
abstract or impersonal.
 RE DENLEY

• The difficulty with reliance on Re Denley’s Trust Deed [1969] 1 Ch

373 is that it is a first instance judgment citing no authorities in
support of its proposition.
• It is also possible to re-analyse the case as a trust for persons but with
superadded directions as to use: see Re Grant’s Will Trusts [1980] 1
WLR 360; Re Lipinski’s Will Trusts [1976] 1 Ch 235.
• If that is correct, then in theory the beneficiaries can wind up the trust
irrespective of the directions in accordance with the rule in Saunders v
Vautier (1841) 4 Beav 1158.
• It would also mean that it is a simple trust for persons.
IMPORTANT CASE :

• Re Denley.
• Can we find people who have a tangible Direct or Indirect
benefit?
• If so, can get round the beneficiary principle even if it sounds like
a purpose trust.
 ENFORCERS
• Jurisdictions such as the Cayman Islands and the Bahamas now permit the setting up
of non-charitable purpose trusts by way of the appointment of an enforcer.

• Indeed, Hayton suggests that this can be done without

statutory intervention: David J Hayton, “Developing the T
Obligation Characteristic of the Trust” (2001) 117 LQR
96.
• In effect, it is considered that the appointment of an
enforcer would resolve the difficulties identified in EP
Morice v Bishop of Durham (1804) 9 Ves Jr 399.

In Hong Kong, many trust practitioners have pushed for legal reform along similar
lines to offshore jurisdictions: see Matteo Ho, “Time to Allow Non-Charitable Purpose
Trusts in Hong Kong?” (2014) 44 HKLJ 519.
 ENFORCERS

• Numerous objections have been raised as to this

proposal/reform.
• It is said that the proprietary effects of a trust mean that property
cannot be “ownerless” see Matteo Ho, “Time to Allow Non-
Charitable Purpose Trusts in Hong Kong?” (2014) 44 HKLJ 519.
• This engages in a potentially controversial examination of
property law which can be difficult given that the conception of
property in common law systems is famously loose.
• It is also difficult to follow given that a right in personam can be
held on trust.
 ENFORCERS
• Paul Matthews has suggested that this is not possible
because of the rule in Saunders v Vautier: Paul
Matthews, “The Comparative Importance of the Rule in
Saunders v Vautier” (2006) 122 LQR 266.
• But this is difficult to justify because the rule in
Saunders v Vautier does not apply in some common law
jurisdictions such as the United States: see Claflin v
Claflin 149 Mass 19, 20 NE 454 (1889); Shelton v King
299 US 90, 33 S Ct 676 (1913).

• The true problem is one of an obligation without an obligee since on almost

all conceptions, the enforcer is a fiduciary.
 ENFORCERS
• This creates a problem that may be encapsulated as “Quis custodiet
custodem custodum?”
• The famous expression by the Roman poet Juvenal, “Quis custodiet
ipsos custodies?” may be translated as

• If we answer the question “Who watches the (trustee) watchman?”

by positing that it is the enforcer who does so, this raises the
question “Who watches the (enforcer) watchman who watches the
(trustee) watchman?”

T P
E? ?
 ENFORCERS
• In the absence of any true beneficial owner, it is likely that
there will be a resulting trust in favour of the settlor, with
negative tax consequences.
• If the settlor makes it clear that the beneficial interest does
not result to him, then it is likely that the courts will
conclude that the enforcers are beneficiaries in the orthodox
sense.
• It is notable that most offshore non-charitable purpose
trusts are not used for any real fulfilment of their purposes
but merely to avoid/evade taxes.
T B
E S?
ALTERNATIVE TO RE DENLEY-
CONTRACT HOLDING THEORY

The issue with “unincorporated associations”

No separate legal identity. So how can
something with no legal identity “own” property
or “accept” gifts or legacies?

Leahy v A G for New South Wales [1959] AC

457
 CONSERVATIVE AND UNIONIST CENTRAL
OFFICE V BURRELL [1982] 1 WLR 522
• Unincorporated Association means:-two or more persons
bound together for one or more common purposes, not being
business purposes, by mutual undertakings, each having
mutual duties and obligations, in an organisation which has
rules which identify in whom control of it and its funds rests
and upon what terms and which can be joined or left at will.
The bond of union between the members of an
unincorporated association has to be contractual
ALTERNATIVE CONSTRUCTIONS
• Neville Estates v Madden. Gift to present members?

• Re Recher “Contract holding theory”

• Trust for present and future members?

NEVILLE ESTATES LTD V MADDEN
[1962] CH 832
• A gift to the relevant members as joint tenants so each member
can sever his share and take it

• A gift for the present members subject to their contractual rights

and duties to each other (i.e. the club’s constitution/rules) – the
“contract holding theory”
 - Beneficiary principle satisfied

- Members must have control over the

funds
RE RECHER - Rule against inalienability is satisfied
[1972] CH 526 provided the rules allow the members to
dissolve the association and divide the
assets between them at any time

- This is the preferable construction

although there are some possible flaws,
such as incapable or minor members.

- A gift on trust for present and future

members of the association
RE LIPINSKI’S W T Harry Lipinski left half his residuary estate to
[1976] CH 235 the “Hull Judeans (Maccabi) Association in
memory of my late wife” and added a
purpose: “to be used solely in constructing
the new buildings for the Association and/or
improvements to the said buildings”.

Oliver J suggested it was valid under either a

Re Recher approach or a Re Denley
approach.
HULL JUDEANS (MACCABI)
ASSOCIATION
RE LIPINSKI

Is a purpose specified?

Gift may be valid under Re

Recher (contract holding theory) Does purpose benefit members?
But remember Re Grants

Likely to be void Re Lipinski: may be valid

under
Re Recher or
Re Denley
REMEMBER INALIENABILITY

• Re Grants • Horley Town FC

• St Andrews (Cheam) • News Group Newspapers
Lawn Tennis Club v SOGAT
RE GRANTS W T Legacy to Chertsey and Walton Constituency
[1979] 3 ALL ER Labour Party. But the constituency party did not
have complete autonomy. It was subject to control
359 by the National Executive Committee of the Labour
Party and the national annual party conference. The
local constituency party members could not dispose
of the branch’s funds as they saw fit. Gift = VOID.

The key element to the contract holding theory is

the complete autonomy to exercise members’ right
under the charter or the articles of association of the
unincorporated association.
ST ANDREWS (CHEAM) LAWN TENNIS
CLUB TRUST [2012] EWHC 1040
• Lawn tennis club for churchgoers. The
rules prevented members from dividing
the land, or its sale proceeds, between
them. Also the members could not
amend those rules without the consent of
the Church. Trust = VOID.
HORLEY TOWN FOOTBALL
CLUB [2006] EWHC 2386
HORLEY TOWN FOOTBALL
CLUB
• The club created a category of “temporary” and
“associate” members for visiting teams from other
clubs and their supporters who were even entitled
to attend its AGM and cast one vote. The
existence of these temporary and associate
members was held not to prevent the application
of the contract holding theory as between the full
members of the club, however, on its dissolution
and distribution of its assets.
DISSOLUTION OF THE CLUB

• Why does it matter? Re GKN Bolts & Nuts Ltd Birmingham

Works Sports & Social Club [1982] 1 WLR
WHAT IF MEMBERSHIP
DWINDLES TO JUST
ONE?
CASE OF HANCHETT-STAMFORD V ATTORNEY GENERAL
A
COMPLETE
LY
DIFFERENT
APPROACH
:
MANDATE/AGENCY.
WILL ONLY WORK IF DONOR IS
ALIVE. SO NOT AN OPTION FOR
WILL TRUSTS.
PURPOSE
TRUSTS IN A
COMMERCIAL
SETTING ?
WHAT ARE QUISTCLOSE TRUSTS?
RESULTING TRUST ( GENERAL
PRINCIPLES)

2 Types of
Resulting Trust
(RT)

Automatic
Presumed RT
RT
RE VANDERVELL’S TRUSTS (NO 2)

1. Presumed resulting trusts, which arise where there is a

voluntary transfer of property or a purchase in the name
of another

2. Automatic resulting trusts, which arise in situations

where there is a vacuum in beneficial ownership and do
not depend on any intentions or presumptions ( Megarry
VC in Re Vandervell)
WESTDEUTSCHE LANDESBANK
GIROZENTRALE V ISLINGTON (1994)

Lord Browne-Wilkinson cast doubt on the distinction between

presumed and automatic resulting trusts and suggested in
effect that in all instances where resulting trusts are imposed,
this is done to give effect to the settlor’s presumed intention.
BARCLAYS BANK
LTD V QUISTCLOSE
INVESTMENTS LTD
 • Rolls Razor, which was in financial
difficulties, borrowed money from
Quistclose for the specific purpose of paying
BARCLAYS BANK
LTD V a dividend on its shares. However, before
QUISTCLOSE the dividend was paid Rolls Razor went into
INVESTMENTS liquidation and it was held that the loan was
LTD
held on a resulting trust for Quistclose and
could not be claimed by the bank, which had
notice of the trust, and which wished to set
the loan off against the firm’s overdraft.
• NB. The effect was to give the respondents
preference over the firm’s general creditor.
Had there been no trust and the action had
been brought in contract for debt then
Quistclose would not have had such a
preference.
RE E V T R ;
TWINSECTRA
V YARDLEY
RE E V T R
• Claimant deposited • Although the equipment
£60,000 for the purpose of had been purchased, the
allowing the Co. to equipment had not been
acquire equipment. Before delivered and the money
the equipment arrives, the had been repaid was held
Co went bankrupted. on trust.
TWINSECTRA V YARDLEY
• A solicitor acting for the • Held that the money was
lender bankrupted and to be used exclusively for
transferred part of the specific purpose, which
money to another gives rise to a resulting
solicitor. It was held that trust.
the solicitor’s undertaking
to the lender constituted
an express trust.
WHAT KIND OF TRUST IS IT?

Purpose Trust?
Express Trust?
Resulting Trust?
Constructive Trust?
Quistclose Trust?!
IS IT AN UNFAIR WAY OF GAINING
PRIORITY?

All part of the battle for what money is left over when a
company is insolvent
Do they have to be made public?

Beneficiary of a Quisclose Trust will recover significant

funds
Leaving even less for unsecured creditors
Core Readings:
• Graham Virgo, The Principles of Equity & Trusts, 5th edition,
Additional Optional Readings:
• Peter Luxton, “Cy-près and the ghost of things that might have been” [1983]
Conv 107
• Malcolm Merry, “Are T’sos Really Trusts?” [2012] 42 HKLJ 669
• David J Hayton, “Developing the Obligation Characteristic of the Trust” (2001)
117 LQR 96
• Matteo Ho, “Time to Allow Non-Charitable Purpose Trusts in Hong Kong?”
(2014) 44 HKLJ 519
• Kelvin FK Low, “Non-Charitable Purpose Trusts: The Missing Right to Forego
Enforcement” in Richard C Nolan, Kelvin FK Low and Tang Hang Wu (eds),
Trusts and Modern Wealth Management (2018), Ch 16
 “TRUSTS” OF IMPERFECT OBLIGATIONS H.K.
PECULIAR LEGACY

• So analysed, such “trusts” are not really being enforced as trusts at all but being
validated effectively as powers instead.
• Accordingly, this “exception” is not an exception to the rule prohibiting private
purpose trusts at all.
• It is really an exception to the rule that equity will not perfect an imperfect gift by
reinterpreting a failed trust as a valid power.
• In Hong Kong, one of the peculiarities of such purpose “trusts” is the t’so (祖), which
has rather oddly been given effect by colonial and post-handover courts as such
private purpose trusts.
“TRUSTS” OF IMPERFECT OBLIGATIONS
H.K. PECULIAR LEGACY
• Technically, speaking a t’so (祖) is an institution created under Qing
Chinese law and it is alien to both the common law and modern
Chinese law.
• Unlike a similar “trust” of imperfect obligation, there is no need for a
t’so (祖) under Qing law to comply with the perpetuities period.
• That this is the case is demonstrated in the Straits Settlements case of
Choa Choon Neoh v Spottiswoode (1869) 1 Kyshe 216.
• This case involved the will of Choa Chong Long, a businessman born
in Malacca in 1788 who was murdered in Macau.
 “TRUSTS” OF IMPERFECT OBLIGATIONS
H.K. PECULIAR LEGACY
• By his will, he made a bequest of certain houses and land in Singapore and Malacca,
and also his residuary estate, to his trustees, upon trust “in the performance of
such Sin-Chew [神祖] or Charity, in and to the names of myself and my said wives
. . . to be performed four times in each and every year.”
• His children applied to court in 1869 to declare the Sin-Chew purposes to be void.
• Although the court considered that such a purpose could have been upheld as a
“trust” for imperfect obligation if it did not offend the rule against perpetuities, as
there was no limitation for the period of the “trust”, it failed on this ground.
 “TRUSTS” OF IMPERFECT OBLIGATIONS
H.K. PECULIAR LEGACY
• In Hong Kong, there are said to be cases similar to Choa Choon Neoh v
Spottiswoode (1869) 1 Kyshe 216 whereby settlors supposedly make use of English
law to set up t’sos (祖).
• Merry considers Chu Tak Hing v Chu Chan Cheung-kiu [1968] HKLR 542 to be
such a case.
• However, the majority of t’sos (祖) predate Hong Kong’s colonial era and Merry
considers that it is wrong to regard t’sos (祖) as trusts since the sze lei (司理) or
managers of t’sos (祖) were not traditionally vested with legal title to the land nor
were they authorised to deal with the land except with the approval of all the
members of the t’so.
• A sze lei (司理) is more akin to an agent than a trustee.
 “TRUSTS” OF IMPERFECT OBLIGATIONS
H.K. PECULIAR LEGACY
• Provided the t’sos (祖) is set up within the New Territories, s 13 of the
New Territories Ordinance (Cap 97) is considered to disapply the
perpetuities period to them so that such private “purpose” “trusts” can
last in perpetuity: see Tang Kai Chung v Tang Chik Shang [1970]
HKLR 276.
• Section 13(1) of the New Territories Ordinance (Cap 97) provides:
“Subject to subsection (2), in any proceedings in the Court of First
Instance or the District Court in relation to land in the New Territories,
the court shall have power to recognize and enforce any Chinese
custom or customary right affecting such land.”
 “TRUSTS” OF IMPERFECT OBLIGATIONS
H.K. PECULIAR LEGACY
• However, it seems clear that t’sos (祖) in Hong Kong are not enforced by way of
Pettingall orders but are more accurately regarded by the courts, rightly or wrongly,
as true private purpose trusts.
• This despite the courts clearly having in mind the cases relating to trusts of imperfect
obligations.
• In Tang Kai Chung v Tang Chik Shang [1970] HKLR 276, Mills-Owen J cited the
Privy Council decision of Yeap Cheah Neo v Ong Cheng Neo (1875) 1 Kyshe 337,
which had affirmed Choa Choon Neoh v Spottiswoode (1869) 1 Kyshe 216.
• Yeap Cheah Neo v Ong Cheng Neo (1875) 1 Kyshe 337 was distinguished on
account only of s 13 of the New Territories Ordinance.