⇒ The beneficiary principle holds that a trust can be valid only if it has a beneficiary
⇒ The principle gives rise to the following questions:
There are 2 different understandings of what a beneficiary is, and therefore 2 different versions of the beneficiary principle
⇒ The first understanding of a beneficiary equates a beneficiary with an equitable owner
“Beneficiary” as equitable owner of the trust property
⇒ On one view, a “beneficiary” is someone who has equitable ownership of the trust property → The “beneficiary principle” thus demands the existence of an equitable owner in order for there to be a valid trust
When does X have “equitable ownership” of trust property?
⇒ X has equitable ownership of trust property if he has an immediate claim to the trust property → X has a claim to the trust property if he can avail himself of the rule in Saunders v Vautier (1841) (i.e. is able to wind up the trust and take the trust property absolutely)
“Beneficiary” as anyone holding a proprietary interest in trust property
⇒ An alternative view takes a “beneficiary” to be anyone possessing a proprietary interest in trust property → the “beneficiary principle” thus demands the existence of someone with a proprietary interest in the trust property in order for there to be a valid trust
When does X possess a “proprietary interest” in trust property?
⇒ X possesses a “proprietary interest” in trust property if it is at least possible that the trust property will be paid out to him (Nolan)
⇒ While the “equitable owner” of trust property necessarily has a “proprietary interest” in it, the converse is not true
⇒ In consequence, the 1st understanding of the beneficiary principle, is narrower than the 2nd
Does either version of the ben principle provide an accurate description of our law?
BENEFICIARY PRINCIPLE VERSION 1: EQUITABLE OWNER ESSENTIAL FOR VALIDITY:
Is this, first, description of the beneficiary principle an accurate description of our law?
⇒ The first, narrower, version of the beneficiary principle has the support of James Penner:
⇒ Equitable ownership is undoubtedly a feature of bare trusts
⇒ It is less clear that equitable ownership characterises other trust configurations, e.g.:
⇒ Even if we are happy, in theory, with viewing multiple individuals as together possession equitable ownership of trust property, we certainly encounter a problem with large scale discretionary trusts e.g. the large scale discretionary trust in Mcphail v Doulton
BENEFICIARY PRINCIPLE VERSION 2: PROPRIETARY INTEREST ESSENTIAL FOR VALIDITY:
⇒ The 2nd, wider, version of the beneficiary principle is implicit in various judicial statements including: “If the beneficial interest was in [X] and he fails to give it away effectively to another or others…it must remain in him.” (Vandervell v IRC  Lord Upjohn)
⇒ The version of the beneficiary principle which demands a proprietary interest in order for a trust to be valid provides a more accurate description of our law
⇒ Crucially, this version of the beneficiary principle accommodates trusts requiring payment to multiple people
⇒ However, this wider version of the beneficiary principle – just as much as the narrower version – struggles to account for the existence in our law of the validity of purpose trusts
⇒ The descriptive accuracy of the wider beneficiary principle is, however, called into question by the existence of legally valid purpose trusts
⇒ A “purpose trust” does not provide for the trust fund to be given to a person(s) as cash but instead specifies that it is to be spent on delivering a particular purpose
FOOL-PROOF methods of obtaining top grades
SECRETS your professors won't tell you and your peers don't know
INSIDER TIPS and tricks so you can spend less time studying and land the perfect job
We work really hard to provide you with incredible law notes for free...
The proceeds of this eBook helps us to run the site and keep the service FREE!
⇒ There are three categories/types of legally valid purpose trust:
⇒ A purpose trust not falling within one of the above categories is legally void (Re Astor’s Settlement Trusts ; Re Shaw’s Will Trust )
⇒ A charitable trust is one aimed at exclusively charitable purposes (CA s.1)
⇒ A charitable purpose is a purpose which falls within the list in CA s.3(1) and is for the public benefit (CA s.2)
⇒ The law has accepted as valid some non-charitable purpose trusts.
⇒ The trusts accepted as valid are limited to those aimed at the following purposes:
⇒ The final category of valid purpose trusts are what is known as a Re Denley purpose trust
⇒ Trusts aimed at purposes are valid when there are individuals directly and tangibly benefited by the purpose’s performance (Re Denley )
⇒ In Re Denley, a trust for the purpose of providing a sports field to be used by the employees of a particular company was held legally valid
⇒ The principle in Re Denley underlies a number of other decisions e.g. Re Abbott Fund Trusts ; Re Aberconway ; Barclays Bank v Quistclose 
⇒ Purpose trusts clearly lack a beneficiary (in both the narrow and wide sense of the word), but this does not dissuade those who consider the beneficiary principle an accurate description of our law
⇒ Advocates of the beneficiary principle regard charitable trusts as ‘exceptional’ (Re Endacott ), miscellaneous, non-charitable purpose trusts as ‘anomalous’ (Re Astor ) and Re Denley etc. as wrongly decided (Twinsectra v Yardley )
⇒ Enforceability principle holds a trust can be valid only if there is someone to enforce it
⇒ So what the enforceability principle is dictating then that a trust is only valid if there is someone who can take the trustees to court in the event of a breach or suspected breach of their duty
⇒ There are various judicial statements supporting the enforceability principle:
⇒ Trusts with beneficiaries (in both the narrow and wide sense of the word) comply with the enforceability principle: they are enforced by their beneficiaries
⇒ Importantly, the enforceability principle can also accommodate some categories of legally valid purpose trust
⇒ Charitable trusts comply with the enforceability principle: they are enforced by the Attorney-General and Charity Commission (something neither beneficiary principle could do)
⇒ Re Denley purpose trusts comply with the enforceability principle: they are enforced by those persons benefited by the purpose (as Goff J highlighted in the judgment)
⇒ The category of miscellaneous, non-charitable purpose trusts does not comply with the enforceability principle: such trusts are not fully enforceable as it is only the remainderman who has standing to sue the trustee (Pettingall v Pettingall (1842))
⇒ Given the legal validity of miscellaneous, non-charitable purpose trusts, the enforceability principle is not a fully accurate description of our law
⇒ Yet it provides a more accurate description than does the beneficiary principle
⇒ Are there any arguments to support the narrower version of the beneficiary principle as a normative vision of trust law i.e. should we be saying that you can only create a valid trust if that trust features an equitable owner?
⇒ The case for restricting valid trusts to those conferring equitable ownership rests on arguments relating to rights and economic utility
⇒ There are, however, countervailing considerations; not least, facilitative logic
⇒ The wider version of the beneficiary principle is inferior from a rights/economic utility perspective but responds better to facilitative logic
⇒ Although this version of the beneficiary principle is often rationalised and defended on its own terms, people frequently defend it as a normative vision on the grounds that a beneficiary is needed to enforce a trust
⇒ The enforceability principle, while rooted in the idea that trusts exist to facilitate settlor intent, does not fully express this idea
⇒ Facilitation is compromised by the demand for enforceability; this demand captures the thought that an unenforceable trust is an unintelligible concept
Learn how to effortlessly land vacation schemes, training contracts, and pupillages by making your law applications awesome. This eBook is constructed by lawyers and recruiters from the world's leading law firms and barristers' chambers.
✅ 60+ page eBook
✅ Research Methods, Success Secrets, Tips, Tricks, and more!
✅ Help keep Digestible Notes FREE