Download Resulting trusts - The importance of the three certainties and more Study notes Law in PDF only on Docsity!
Resulting trusts
Resulting trusts are trusts created where property is not properly disposed of. Megarry VC as
"essentially a property concept; any property that a man does not effectually dispose of remains his
own". In Re Vandervell's Trusts (No 2) , he divided them into two categories; automatic resulting
trusts, and presumed resulting trusts.
Automatic resulting trusts arise from a "gap" in the equitable title of property. The equitable maxim
"equity abhors a vacuum" is followed; it is against principle for a piece of property to have no
owner. As such, the courts assign the property to somebody in a resulting trust to avoid this
becoming an issue. Automatic resulting trusts occur in one of four situations;
-where there is no declaration of trust: No declaration of trust is the most "straightforward" form of
resulting trust, and is created when a trust is created, but the settlor does not give the form in which
the property is to be held. For example, the settlor might give property to the beneficiary to hold for
life, but fail to explain what is to happen to the property when the holder dies. When this occurs, the
property is held on resulting trust for the settlor, as in Vandervell v IRC. This also occurs where a
trust is formed over property which requires formality, but is improperly created (for example, a
land transfer not adhering to the Law of Property Act 1925.
-where an express trust fails: when a settlor intends to creat an express trust but his attempt fails eg
because of uncertenty of object, or beneficial interest, the property will be held on resulting trust for
the settlor (if dead it will pass to the residuary beneficiary or next of kin if any) Boyce v Boyce. The
trust may also fail because the property was given for a purpose which didn’t materialise Re Ames;
Quistclose.
-where there is surplus property: this is usually an accidental situation. The trust is created but the
settlor does not dispose of all the beneficial interest, eg the settlor might transfer property of all
trustees to hold for his son for life and his son’s childern but dies without any. The trustees will hold
the property in reslting trust for the settlor when the son dies.
-or upon the dissolution of an unincorporated association.
A presumed resulting trust is where the transfer fails, and there is no reason to assume it was
intended as an outright gift. There are several types of relationship where it is automatically
presumed to be a gift. Where a father transfers property to a child, it is presumed that the property
was an outright gift, as in Bennet v Bennet. There is no similar recognition for a transfer from a
mother, something recognised as a gift in Australia. A similar presumption exists where a transfer is
made from a husband to a wife, as in Tinker v Tinker or person in loco parentis – child. This is
called a counter presumption or presumption in advancement. It has been widely criticised not
just because it is one way only but also because it contravenesArt. 5 ECHR which states that the
spauses ahall enjoy equality rights.
Presumed resulting trusts do arise, however, in one of three situations
-where it is a voluntary gift: Where a gift is voluntary, the assumption for personal property is that it
creates a resulting trust on failure, as in Re Vinogradoff. For real property, Section 60(3) of the Law
of Property Act 1925 prevents the creation of automatic resulting trusts, but does not comment on
presumed trusts. In Hodgson v Marks , it is generally agreed that a presumed resulting trust was
created over a transfer of real property, although there is some dispute. Where a person contributed
to the price of a piece of property, they are presumed to take an equivalent equitable interest in that
property; this is the "clearest form of presumed resulting trust", and was recognised by both
Browne-Wilkinson in Westdeutsche Landesbank and Megarry in Vandervell (No. 2). These
principles originated with Eyre CB's judgment in Dyer v Dyer , where he said that:
The clearest result of all the cases, without a single exception, is that the trust of a legal estate,
whether freehold, copyhold or leashold; whether taken in the names of the purchasers and others
jointly, or in the names of other without that of the purchaser; whether in one name or several;
whether jointly or successive - results to the man who advances the purchase money.
-where there is a contribution to purchase price: where a person contributes to the purchase of the
property, they will receive an equivalent equitable interest in any resulting trust that arises. For
trusts over homes, a distinct set of rules have arisen that do not apply to other land, because of the
additional concerns. For example, while contributing to the mortgage will create an equitable
interest, as in Lloyds Bank v Rosset , contributing to domestic expenses will not, as in Burns v Burns
. It must also be demonstrated that the contribution was not made for any purpose other than
acquiring an equitable interest; in Sekhon v Alissa , for example, a mother transferred a house into
her daughter's name to avoid capital gains tax. The court ruled that this created a resulting trust;
because tax avoidance was the main objective, the mother could not possibly have intended it to be
an outright gift.
-and where the presumption that it was an outright gift can be rebutted: The last situation where a
presumed resulting trust is created is if the court can rebut the presumption of an outright gift. The
general philosophy here was set out by James LJ in Fowkes v Pascoe , and is that the judge should
base his decision on "[the] story as to how I came to have [the property], and judge that story with
reference to the surrounding facts and circumstances". Where the property is money held in a joint
bank account, the presumption is that it is a joint tenancy of that account. As such, when one dies
the property is passed absolutely to the other, as in Marshall v Crutwell. This presumption can be
rebutted in several situations. It will be rebutted when the account, while in the name of both the
husband and wife, is used exclusively for the husband's personal use, as in Young v Sealey , or where
the joint account exists solely so the husband can guarantee the wife's account, as in Anson v Anson
. Tax avoidance (which is legal, as opposed to tax evasion) frequently involves transferring property
to a family member to avoid tax. Where the family member refuses to transfer it back, the taxpayer
can come to court and argue it was a resulting trust.
Illegality
Traditionally, when a person sought to rebut presumptions but was required to rely on an illegal act
to prove that a resulting trust was intended, the equitable maxim that "he who comes to equity must
come with clean hands" was applied; the presumption would take effect, and no resulting trust
would be created, as in Mucklestone v Brown. In addition, as in Gascoigne v Gascoigne , where the
purpose of the transfer involves illegality, the courts will not uphold it as a resulting trust. This rule
was subtly modified by the House of Lords decision in Tinsley v Milligan. Tinsley and Milligan had
jointly purchased a house to run as a business, and both accepted that it had been bought to own
jointly. Only Tinsley was registered as the owner, however, so that Milligan (with Tinsley's
knowledge) could claim state benefits. The House of Lords decided that Milligan could claim an
equitable interest, since it was the contribution to the purchase price (a lawful act) which she was
relying on, not the associated fraud (an illegal act). Although the purpose of the initial registration
had been illegal, the purpose of the purchase itself had not. [
Since Tinsley , the courts have been more willing to examine the intention of the parties rather than
relying on the strict maxim that "he who comes to equity must come with clean hands". The
standard law on this was set out by Millett LJ in Tribe v Tribe :
(1) Title to property passes both at law and in equity even if the transfer is made for an illegal
purpose. The fact that title has passed to the transferee does not preclude the transferor from
bringing an action for restitution.
(2) The transferor's action will fail if it would be illegal for him to retain any interest in the property
(3) Subject to (2) the transferor can recover the property if he can do so without relying on the
illegal purpose. This will normally be the case where the property was transferred without
consideration in circumstances where the transferor can rely on an express declaration of trust or as
a resulting trust in his favour.
(4) It will almost invariably be so where the illegal purpose has not been carried out. It may be
otherwise where the illegal purpose has been carried out and the transferee can rely on the
transferor's conduct as inconsistent with his retention of a beneficial interest.
However, two criticisms are made of this:
(1) In some cases the courts may be required to enforce the trusts, despite
very serious illegality.
(2) In a few arbitrary cases, the claimant trying to enforce a beneficial interest
will lose, even though the illegality is minor. The result depends not on the
merits of the case, but on obscure legal presumptions, which are often
outdated and may be discriminatory. Under human rights law, if people are
to be deprived of valuable property rights, the law should be clear,
proportionate, and justifiable.
In 2006, we considered whether the law could be made fairer simply by
abolishing the presumption of advancement. However, we concluded that this
would not solve all the problems.
In 2007 a House of Lords decision, Stack v Dowden, 8 introduced further
uncertainty into the law. The case appears to overturn the presumption that
property is held on trust in the proportions to which the parties contributed
towards the purchase money. Instead, in cases involving a family home, the
starting point is that the property is owned by the registered owner. The nonowner
is therefore required to produce evidence that the parties intended this to
be different, so as to prove a “constructive trust”.
It is difficult to tell what effect this will have where cohabitants have placed the
property in one of their names for an illegal purpose. It seems that the claimant
may lead some evidence of a common intention to own property jointly, but not
the most direct evidence, if this is associated with the illegality. As a result, the
law is uncertain and complex, and is likely to lead to arbitrary results. Some
claimants will win and some will lose, depending on how far any given
conversation or action reveals the illegal intention of the parties.
In Tinsley v Milligan the issue arose in the context of the breakdown of a
cohabiting relationship. Cohabitants are the group most likely to be affected by
our recommendations.
In the case of married couples or civil partners, the court has a general discretion
to transfer property as it thinks is fair. It does not have this discretion for
cohabitants. Instead, unmarried couples are forced to rely on the complexities of trust law.
However, disputes over trusts of this sort also arise in other contexts, whenever family members, friends or
business partners own property together.
This report includes a seven-clause draft Bill to reform the law on illegality in
trusts. This is a limited, targeted reform. The Bill would apply where a trust has
been created or continued to conceal the beneficiary’s interest for a criminal
purpose. These are the circumstances in which it is easiest to abuse the trust
mechanism.
We recommend that in most cases a beneficiary would be able to rely on their
normal legal rights. However, in “exceptional circumstances” the court would
have a discretion to deny the beneficiary their normal right to enforce the trust.
The draft Bill sets out a list of factors that the courts may take into account,
including the conduct of the parties; the value of the interest at stake; whether
refusing the claim would act as a deterrent; and the interests of third parties.
Where the court decides that the beneficiary should not receive the property, the
court will then have to decide to whom the interest belongs. In a simple case,
involving a claimant beneficial owner and a defendant legal owner, we
recommend that the beneficial interest should be transferred to the legal owner.
In more complex cases we recommend that the court should be given a power to
decide whether the property should belong to the trustee, the settlor or another
beneficiary under the trust.
It is important that the draft Bill should not prejudice the powers of the State to
confiscate the proceeds of crime. The draft Bill therefore includes a small
amendment to the Proceeds of Crime Act 2002. This is designed to ensure that
even if the court exercises its discretion to allow a trustee or other party to keep
the property, the property can still be recovered by the State.
Gifts to unincoporated associations
In principle, because it has no legal personality, gifts and donations cannot be made to
unincorporated associations, nor can they be beneficiaries under a Trust, nor act as trustees in their
own right. And yet, bequests are routinely made to such associations, and very frequently they do
manage testamentory gifts that purport to recognize them as valid trustees. Problems only arise
when members of the association attempt to use the assets outside the declared purpose, and it is at
that point that the lack of any solid legal foundation for properly-holding by unincorporated
associations becomes evidence.
There are at least five views of how a gift made to an unincorporated association operates at law.
1. An absolute gift to its present members. On this view, the gift succeeds because any purpose
attached to the gift is tacitly ignored. The members would hold the property as joint tenants or
Tenants In Common. In principle, the members of the association can do what they like with the
property. Re Lipinski
2. An absolute gift to its present members subject to contractual obligations. This is the most
widespread view, and tends to be accepted by default by English courts. On this analysis, the gift is
still an absolute gift to the members of the association, but the members are bound by the
contractual relationship between them to use the property to the associations's purposes. If one
member tried to misuse the property outside the association's purposes, the other members could
seek to restrain him by injunction, or proceed against him for breach of contract. (best solution). Re
Recher’s
3. An absolute gift to its present and future members (with or without contractual obligations). On
this construction, the gift will fail if its not limited in perpetuity (see rule against perpetuities). Re
Drummond
4. Gift to a charitable uniconrporated association. No problem because: although no beneficiary, the
attorney general will enforce the trust; charitable trusts may be perpetual, i.e. capital and asset tied
up indefinitely; if it comes to an end the fund goes to another chiarutable association.
5. A mandate to an officer of the association. In the same way that drawing a cheque creates a
mandate (that is, an instruction) to your bank to pay money to the payee, the gift to an association
can be seen as a mandate to an officer of the association to disburse the gift in a particular way. As
mandates are (by definition) revocable when initially created, there must be some point at which the
mandate to the association becomes irrevocable. The most logical view seems to be that this takes
place when the property of the gift is disbursed. Disbursal of assets of the dissolution of the
association
6. gift construed as a trust for non charitable purposes. It will be void, there is no beneficiary nor
attorney general to enforce the trust. This trust has been highly criticised. This is likely to occur
when unincorporated associations are outwait looking / abstract purpose E.g. trust to bring back
hunting – imaginary)
7. presumption of an outright gift to members as joint tenant. Coks v manners; Neville Estate v
Madden. Members could sever the joint tenantcy to avoid right of survaiorship. Problem with this
interpretation: 1) such a presumption would be rebutted if clearly against testator’s intentions, 2)
may not be practical eg because of the nature of the property or the number of members Leahy.
A common problem concerning unincorporated associations is the distribution of their assets when
they are dissolved. Where the assets are contributed by the individual members the problem is not
particularly acute, but there are particular difficulties where the assets are funds that have been
raised by public subscription (see re west sussex constabulary widows fund (1971)). The prevailing
view is that there is no obligation to return these funds to their contributors, but in air jamaica v
charlton (1999) Lord Millet stated that such a return should be effected where the number of
contributors was small and readily ascertainable
indirect contributions to the purchase price, such as payments into a joint account out of which the mortgage is paid (as was the case in Abbott) or works of improvement to the property. It probably remains the case, therefore, that the contribution of domestic endeavour in itself will not give rise to a presumption of a common intention to share beneficial ownership (see Burns v Burns [1984] Ch 317). In Oxley v Hiscox [2005] 1 Fam 211 Chadwick L.J. had expressed the view that an indirect contribution to the purchase price may suffice, such as a contribution which has added to the resources out of which the property has been acquired, e.g. work done or services rendered, or expenditure relieving the other spouse of some, at any rate, of his financial obligations. In Oxley v Hiscox a property was transferred into the name of the male partner (the defendant). However, both parties directly contributed to the purchase price. It was, therefore, proper to infer that the non-legal owner should have some beneficial interest. It was then necessary, in the absence of any express agreement, to quantify that share. In the view of Chadwick L.J. each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property, including the arrangements which they make from time to time in order to meet the outgoings (e.g., mortgage contributions, council tax and utilities, repairs, insurance and housekeeping). He concluded that it would be unfair to award the claimant a 50% share, given that the defendant’s contribution to the purchase price was greater than that of the claimant. He assessed the claimant’s share at 40%, not 50%, on the basis, it seems, that approximately 40% of the purchase price was attributable to the claimant’s contributions. Lord Walker in Stack v Dowden referred to Chadwick L.J.’s judgment in Oxley v Hiscox with approval. However, he added the rider that he would include contributions in kind by way of manual labour, provided that they are significant, as factors to be taken into account in determining the quantum of the claimant’s share (para. 36). Baroness Hale also referred to Chadwick L.J’s judgment, albeit commenting that the task of the court was not to assess a fair share, but to determine what the parties must, in the light of their conduct, be taken to have intended (para. 61).
Approach in sole legal ownership cases after
Stack v Dowden It would seem that the approach to be adopted after Stack v Dowden is as follows: (1) The burden is on the non-legal owner to establish a beneficial interest. He must overcome the first hurdle of establishing that he has some beneficial interest. That hurdle can be overcome either on the basis of an express oral agreement, or is to be inferred from conduct. Direct contributions to the purchase price and mortgage repayments will certainly give rise to an inference of a common intention to share beneficial ownership. Indirect contributions, such as payment of household expenses, may also suffice, in particular if they have relieved the legal owner of expenditure, thus enabling the legal owner to pay the mortgage. (2) Once it has been established that the claimant has some beneficial interest, the court must assess, by reference to the whole course of conduct of the parties, the quantum of the share. There will be no presumption of joint, or equal, beneficial ownership. In the absence of an express agreement, a crucial consideration will no doubt remain the extent of the parties’ respective financial contributions. This will be so even in a case where both parties have pooled resources. In many cases, therefore, the court may well make an award of a proportionate share in line with the parties’ respective contributions on the basis that this most likely reflects their common intention. (3) However, it will not necessarily be the case that an award will be made in accord with the parties’ respective contributions. (4) Firstly, the court may well award a half share where there evidence of an intention to share assets equally or to hold assets jointly, e.g: (a) Midland Bank v Cooke [1995] 4 All ER 562: where a wife had made a direct contribution to the purchase price of the matrimonial home, held in the sole name of the husband, of 6.74% (one-half of the deposit given to the parties as a wedding gift). The court, however,
awarded her a 50% share, having particular regard to: (a) the fact that the wife was contributing what she could to the family’s finances from part-time work while also bringing up the couple’s children; (b) she had undertaken a liability under a second charge over the matrimonial home for the benefit of the husband’s business, thus evidencing an intention to share everything equally; and (c) the parties had introduced
into the relationship the additional commitment of marriage.
(b) In Grant v Edwards [1986] 1 Ch 618, insurance monies received following a fire at the property were paid into a joint account. The claimant was awarded a 50% share, mainly on the basis that: (a) the payment into a joint account evidenced an intention to share assets equally; and (b) the claimant had had made substantial contributions to household expenses. (c) In Abbott v Abbott (Lawtel, 26 July 2007) a half share was awarded to a wife on the basis that the parties had arranged their finances entirely jointly and undertook joint liability for the repayment of the mortgage. (5) Alternatively, the court may not award a 50%, but nonetheless award a share greater than that which would be awarded on a resulting trust basis, e.g. in a case where there is no evidence of an intention to share assets equally, but where the non-legal owner has made contributions, of a financial or non-financial nature, other than, or in addition to, contributions to the purchase price. In Drake v Whipp [1986] Ch 638 cohabitees purchased a property in the name of the male partner with the intention that it should be their home. The female partner’s monetary contribution was 19.4%. However, she was awarded a one-third share, having regard to her contribution of labour and money in the conversion of the property,
her payment of household expenses, and housekeeping.
Final analysis If there is joint legal ownership, there will be joint beneficial ownership unless there is evidence that the parties did not intend to pool resources, and/or kept their finances separate, and did not contribute equally. In other words, the presumption is in favour of joint beneficial ownership. It will only be in a rare case that that presumption will be rebutted. If the presumption is rebutted, then the shares of the parties will be assessed in the same way as they are assessed in a case of sole legal ownership. If there is sole beneficial ownership, the presumption will be that the sole legal owner is the sole beneficial owner. However, that presumption will be rebutted, if there is an express agreement, or direct or indirect contributions to the purchase price. Once it has been established that the claimant has some beneficial interest, then the court can consider matters other than financial
contributions in assessing the quantum of the claimant’s share.
Facts In Stack v Dowden Mr Stack (S) and Miss Dowden (D) purchased in 1993 a property as their family home (“the Property”). It was conveyed into, and registered in, joint names. S and D were unmarried, but had been in a relationship for 18 years when they purchased the Property. They had 4 children. The parties did not execute a formal declaration of trust. The transfer deed did, however, contain a declaration that the survivor would be entitled to give a valid receipt for capital money arising from a disposition of all or part of the property. Both S and D contributed to the purchase price of the Property. D contributed 65% of the purchase price from funds in a building society account in her sole name. However, S had, arguably, contributed part of those funds. The balance was provided by an interest-only loan secured by a mortgage in the parties’ joint names. The capital of the loan was repayable out of two endowment policies, one in joint names, and the other in D’s sole name. S paid the mortgage interest and the premiums due under the endowment policy in joint names. D paid the premiums due under the endowment policy in her sole name.
or maladministration, it can sanction the trustees, removing them, appointing new ones or temporarily taking the trust property itself to prevent harm being done. Where there are flaws with a charity, the High Court can administer schemes directing the function of the charity, or even, under the Cy-près doctrine, change the purpose of the charity or gift altogether.
As a form of express trust, charitable trusts are subject to certain formalities, as well as the requirements of the three certainties, when being created. These vary depending on whether the gift that creates the trust is given in life, given after death, or includes land. If the gift is given after death through a will, the will must comply with Section 9 of the Wills Act 1837, which requires that the will be in writing and signed by the testator (or somebody else present, at the testator's instruction), it is clear that the testator intended to give effect to the will, and the signature is made or noted by two or more witnesses. If these are all carried out, the will is a valid document, and the gift made as part of it can create a charitable trust. If the gift is of land and made during the donor's lifetime, it must comply with Section 53(1)(b) of the Law of Property Act 1925, which requires that the agreement be a written document signed by the person giving it.[1]^ If the gift is of personal property and made inter vivos , there are no formal requirements; it is enough that an oral declaration is made creating the trust. Once constituted properly, a charitable trust, like all express trusts, cannot be undone unless there is something allowing that within the trust instrument. [2]
There are a variety of advantages to charity status. Within English trusts law, a standard express trust has a relationship between the trustees and the beneficiaries; this does not apply to charitable trusts, partially because of the special
definition of trustee used and partially because there are no individual beneficiaries identified in a charitable trust. Instead, the Attorney General of England and Wales sues on behalf of beneficiaries to enforce a charitable trust. Because of this lack of a relationship, the trustees' powers are far wider-ranging, only being regulated by the Charity Commission and actions brought by the Attorney General; the beneficiaries have no direct control. [3]^ Charitable trusts
are also exempt from many formalities when being created, including the rule against perpetuities. The trustees are also not required to act unanimously, only with a majority. [4]
Tax law also makes special exemptions for charitable trusts. They are free from the income tax paid by individuals and
companies, and also the corporation tax paid by incorporated and unincorporated associations. There is no requirement for charitable trusts to pay capital gains tax or council tax, although they are obliged to pay VAT. [5]^ This freedom from
tax liability applies not just to charitable trusts, but also to people who donate to them. Individuals who form deeds of
covenant (promising a regular payment to charity) are free from paying tax on that amount, while companies who give gifts to charity can claim tax on the amount back from HM Revenue & Customs.[6]
The definitions of a trustee and a trust within charitable trusts differ significantly from the norm. In particular, according to the Charities Act 1993 (section 37):
'charity trustees' means the person having the general control and management of the charity... 'trusts' in relation to a charity means the provisions establishing it as a charity and regulating its purposes and administration, whether those provisions take effect as a trust or not, and in relation to other institutions has a corresponding meaning. [7]
There is no statutory definition of what a charity is; it is instead dealt with in a roundabout way. The Charities Act 2006 states in section 1(1) that:
For the purposes of the law of England and Wales, 'charity' means an institution which (a) is established for charitable purposes only, and
(b) falls to be subject to the control of the High Court in the exercise of its jurisdiction with respect to charities. [8]
Charitable purpose
The first definition of a "charitable purpose" was found in the preamble to the Charitable Uses Act 1601. The standard categorisation (since all previous attempts to put it on the statute books were "unduly cumbersome") was set out by Lord Macnaghten in IRC v Pemsel, [9]^ where he said that "Charity in its legal sense comprises four principal divisions:
Trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community". This "charitable purpose" was expanded on in Section 2(2) of the Charities Act 2006, but the Macnaghten categories are still widely used.[10]
Trusts must also be for "public benefit", which was considered at length in Oppenheim v Tobacco Securities Trust. [11]
A fund was created to benefit children of employees and former employees of British American Tobacco, which was a large number; the total number of employees was over 110,000. The House of Lords found that size was not the issue;
the group did not count as a section of the public because of the "personal nexus", or common relationship, between them. The nature of charitable trusts means that the definition of "public benefit" varies between Macnaghten's four categories.[12]
Administration of charitable trusts
The administration of charitable trusts is covered primarily by the Charities Act 1993 and the Charities Act 2006, and is widely divided between four groups; the Attorney General for England and Wales, the trustees, the Charity Commission and the Official Custodian for Charities. [60]
[edit] Attorney General and trustees
Dominic Grieve, the current Attorney General, who represents beneficiaries on behalf of The
Crown.
As mentioned, the Attorney General represents the beneficiaries as a parens patriae, appearing on the part of The Crown. Any case involving charities has him joined as a party, he may act against trustees in disputes, and take actions
to recover property from third parties. His role was discussed in Brooks v Richardson,[61]^ where the court quoted the
practitioner's text Tudor on Charity:
By reason of his duty as the Sovereign's representative protecting all the persons interested in the charity funds, the Attorney-General is as a general rule a necessary party to charity proceeding. He represents the beneficial interest; it follows that in all proceedings in which the beneficial interest has to be before the court, he must be a party. He
represents all the objects of the charity, who are in effect parties through him. [60]
The next significant role is played by the charity trustees, defined in Section 97 of the 1993 Act as those persons having the general control and management of the administration of charities. As mentioned, charitable trustees have
significantly more freedom to act than normal trustees, but the 1993 Act has put restrictions on who may be a charitable trustee. Section 72 excludes people convicted of a crime involving dishonesty, bankrupts, people previously removed from charity trusteeship, and people struck off as directors of companies. Those trustees appointed have many duties when administering the trust, including informing the Commission of changes to the charity or its dissolution, registering the charity and keeping proper accounts and records, to be submitted annually to the Commission. [62]
[edit] Charity Commission
The Charity Commission originated as the Charity Commissioners, created by the Charitable Trusts Act 1853 to provide advice to charitable trusts. The name was changed by the Charities Act 2006, Section 6, and the body now has five core objectives:
1. to increase public trust and confidence in charities;
2. to promote the understanding of the public benefit requirement;
3. to increase the compliance of trustees with their legal obligations;
4. to promote the effective use of charitable resources;
5. to make charities more accountable to the donors, beneficiaries and the public. [63]
Along with these objectives, it has six functions under the 2006 Act:
1. Determining whether institutions are or are not charities.
2. Encouraging and facilitating the better administration of charities.
3. Identifying, investigating and taking appropriate action with regard to apparent misconduct
or mismanagement.
effective method of using the property available by virtue of the gift, regarding being had to the
spirit of the gift.[73]
This definition was amended by the Charities Act 2006 to replace "the spirit of the gift" with "the appropriate considerations", which are defined as "(on the one hand) the spirit of the gift concerned, and (on the other) the social
and economic circumstances prevailing at the time of the proposed alteration of the original purposes". [74]
Failures that lead to an application for cy-près are of two sorts; subsequent failure, where the trust, constituted properly, failed after a period of action, and initial failure, where the trust fails at creation. Subsequent failure cases are designed to have the charity's funds applied to more effective purposes, and as such money already donated to the charity cannot
be returned to the next of kin of the original money; in Re Wright, [75]^ it was said that "once money has been effectually
dedicated to charity... the testator's next of kin or residuary legatees are for ever excluded". [76]^ Schemes for initial
failure, on the other hand, ask the court to decide whether the gifts should be returned to the testator's estate and next of kin or be applied to a new purpose under cy-près. When deciding if a gift has failed, there is a distinction made between
gifts to unincorporated bodies and incorporated bodies, as laid down in Re Vernon's Will Trust.[77]^ This is because gifts
to an unincorporated body must be treated as gifts to that body's purpose, not to the body itself, since unincorporated bodies cannot hold property. As such, the gift does not revert back to the next of kin, because even if the body is
dissolved the gift's purpose is (presumably) still valid. [78]
