CILEx L6 Equity & Trusts Advanced 2 — Questions and Answers
Question 1: What is the rule in Re Denley's Trust Deed [1969] regarding purpose trusts?
- A purpose trust is valid if it can be enforced by identifiable human beneficiaries who can come to court to enforce the trust, even if expressed as a purpose (Correct answer)
- All purpose trusts are void
- Purpose trusts are only valid if charitable
- A purpose trust is valid if it serves a useful social function
Correct answer: A purpose trust is valid if it can be enforced by identifiable human beneficiaries who can come to court to enforce the trust, even if expressed as a purpose
In Re Denley [1969] 1 Ch 373, Goff J held that a purpose trust for the benefit of employees of a company was valid because there were identifiable persons who could enforce it. This creates an exception to the rule that non-charitable purpose trusts are void.
Question 2: What are the 'anomalous' exceptions to the rule against non-charitable purpose trusts?
- Trusts for the maintenance of graves and tombs, trusts for the care of specific animals, trusts for the saying of private masses, and trusts for the erection and maintenance of monuments — all are valid but conceded exceptions (Correct answer)
- Any trust for a social or recreational purpose
- Trusts for named individuals expressed as being for their benefit
- Trusts attached to gifts to unincorporated associations
Correct answer: Trusts for the maintenance of graves and tombs, trusts for the care of specific animals, trusts for the saying of private masses, and trusts for the erection and maintenance of monuments — all are valid but conceded exceptions
English courts have accepted a small group of anomalous exceptions to the rule that pure purpose trusts are void: (1) trusts for specific graves and tombs (Musset v Bingle), (2) trusts for specific animals (Pettingall v Pettingall), (3) trusts for private masses (Bourne v Keane), (4) trusts for monuments. These are conceded exceptions without clear theoretical justification.
Question 3: What is the 'public benefit' requirement for charitable purposes under the Charities Act 2011?
- Every charitable purpose must benefit the public or a sufficient section of it, and the benefits must not be outweighed by detriments — the Charity Commission has issued guidance (Correct answer)
- Charities must benefit everyone in England and Wales
- The public benefit test only applies to educational charities
- Proof of public benefit is presumed and need not be demonstrated
Correct answer: Every charitable purpose must benefit the public or a sufficient section of it, and the benefits must not be outweighed by detriments — the Charity Commission has issued guidance
Under s.4 Charities Act 2011, the public benefit requirement applies to all charitable purposes — the presumption of public benefit was abolished. The Charity Commission issues public benefit guidance. For certain charities (e.g., fee-paying schools), the benefit must extend sufficiently beyond fee-paying members.
Question 4: What is 'knowing receipt' following Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001]?
- Liability in knowing receipt requires that the recipient's state of knowledge make it unconscionable for them to retain the benefit of the receipt (Correct answer)
- Knowledge of three types (actual knowledge, Nelsonian blindness, recklessness) is required
- Strict liability for receipt of trust property is the correct test
- Any receipt of misapplied trust property creates liability
Correct answer: Liability in knowing receipt requires that the recipient's state of knowledge make it unconscionable for them to retain the benefit of the receipt
In BCCI v Akindele [2001] Ch 437, the Court of Appeal held that the single touchstone for knowing receipt is whether the defendant's state of knowledge was such as to make it unconscionable for them to retain the benefit of the property.
Question 5: What is a 'constructive trust following a specifically enforceable contract for the sale of land'?
- As soon as a specifically enforceable contract for sale of land is entered into, the seller holds the property on constructive trust for the buyer (Lysaght v Edwards [1876]) (Correct answer)
- A trust arises only on completion of the conveyance
- A trust arises only if the buyer pays the purchase price in advance
- A trust arises only after exchange of contracts in registered land conveyancing
Correct answer: As soon as a specifically enforceable contract for sale of land is entered into, the seller holds the property on constructive trust for the buyer (Lysaght v Edwards [1876])
The principle from Lysaght v Edwards [1876] and Walsh v Lonsdale [1882] is that equity treats as done that which ought to be done — once a specifically enforceable contract for the sale of land is concluded, equity treats the seller as holding the property on constructive trust for the buyer.
Question 6: What is the significance of Westdeutsche Landesbank Girozentrale v Islington LBC [1996] for resulting trusts?
- Lord Browne-Wilkinson held that a resulting trust arises where the provider of property did not intend the recipient to take beneficially — it is based on absence of intention to benefit, not on unjust enrichment (Correct answer)
- The case abolished automatic resulting trusts
- Resulting trusts arise whenever a payment is made without consideration
- The case extended resulting trusts to all unjust enrichment situations
Correct answer: Lord Browne-Wilkinson held that a resulting trust arises where the provider of property did not intend the recipient to take beneficially — it is based on absence of intention to benefit, not on unjust enrichment
In Westdeutsche [1996] AC 669, Lord Browne-Wilkinson clarified that resulting trusts arise in two situations: (1) where property is transferred on a purpose that fails (automatic RT), and (2) where property is transferred without the intention to pass beneficial ownership (presumed RT). They are founded on the absence of intention to benefit the recipient, not on unjust enrichment.
CILEx L6 Equity & Trusts Advanced 2
What is the rule in Re Denley's Trust Deed [1969] regarding purpose trusts?