The Beneficiary Principle under English law
1. In English law trusts for purposes fail in limine. In this area all the books begin with a reference to the locus classicus of Morice v Bishop of Durham in which William Grant M.R. observed “every other [i.e. non-charitable] trust must have a definite object. There must be somebody in whose favour the court can decree performance”. In English law the matter is beyond doubt . Purpose trusts fail as they breach the ‘beneficiary principle’ that a valid trust requires a person in whose favour a court can decree performance . Somewhat artificially, perhaps, in the context of charity the view is taken that the Attorney General is charged with the duty of enforcement. In the case of purely private purposes the Attorney General has no interest in enforcement which would enable the trustees to misapply the property by, for example, holding it absolutely for themselves as no one would have locus standi to complain. The beneficiary principle can also be viewed as an objection to the absence of a beneficial owner of the property . It is clear, however, since the House of Lords decision in McPhail v Doulton that beneficial ownership may remain outstanding and that a discretionary object without a beneficial interest may still seek to enforce a trust.
2. Notwithstanding the beneficiary principle, in those rare cases referred to at paragraph 5 below, in which the ordinary rule is suspended, there remains an additional requirement that the purposes of a trust are sufficiently certain to permit a court to control the application of funds. As was stated in Morice v Bishop of Durham “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 trust, is indisposed of; 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”. This important principle still applies in most jurisdictions in which the law has been changed by statute to invalidate purpose trusts. As we shall see, however, an exception in this regard is found in purpose trusts created under the Special Trusts (Alternative Regime) Law 1997 of the Cayman Islands.
Modern examples of the Rule by Non-Charitable Purpose Trusts
3. In Re Astor’s Settlement Trusts a settlement in which the trustees were directed to hold the fund upon various trusts including “the maintenance of good relations between nations… the preservation of the independence of the newspapers,” and other similar purposes in favour of independent newspapers was held void as there was no one who could enforce the trust and because its purposes were uncertain. Similarly inRe Shaw George Bernard had provided that the residue of his estate should be applied in the development of a forty-letter alphabet and that one of his plays should be translated into the new alphabet. Again the gift failed on the beneficiary principle. In Re Endicott a gift in the sum of twenty thousand pounds to a parish council “for the purpose of providing some useful memorial to myself” failed as the purpose was considered by the English Court of Appeal to be too wide and uncertain. In Re District Auditor, ex p. West Yorkshire Metropolitan County Council an attempt by a local authority to create a trust “for the benefit of any or all or some of the inhabitants of the County of West Yorkshire” in any of four ways: (i) to assist economic development in the County in order to relieve unemployment and poverty; (ii) to assist bodies concerned with youth and community problems in West Yorkshire; (iii) to assist and encourage ethnic and minority groups in West Yorkshire; and (iv) to inform all interested and influential persons of the consequences of the abolition of the council and other metropolitan county councils and of the proposals affecting local government in the country, was held void as a non-charitable purpose trust.