Introduction

The
area of trust law has provided a wide range of legal and beneficial
relationships dealing with a variety of situations where it would be seen as
appropriate and equitable to provide some form of interest to another person.
Essentially, a trust will involve a three-party fiduciary style relationship
and can emerge as a result of a variety of different factors. Two leading cases
in the area of trust law have been identified here, both providing guidance on
specific areas relating to trust law. Each will be looked at in turn,
considering the nature of the key points of the case raised during the judgment
speeches as well as ultimately determining whether these cases have provided
the clarity necessary for future cases in their relevant areas.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Oppenheim1

The
case of Oppenheim dealt with the difficult concept of charitable or public
benefit. Although there have been more recent legislative provisions dealing
with charities, the focus of this paper was on the notion of the charitable
trust. In this specific case, the focus was on a charitable trust which had the
purpose of advancing education. The case relied on the preamble of the
Charities Uses Act 1601, stating that there needed to be a public benefit and
it was this that was at the heart of the judgment in the Oppenheim case. In the
judgment provided, the differential between public and private was looked at,
with L Simonds laying down two requirements that needed to be met in order for
the trust to be deemed to be for a public benefit.2

In
his judgment, he stated that it would need to be the case that the possible
beneficiaries were not negligible in number and, secondly, that the factor
which would distinguish the beneficiary from other potential beneficiaries does
not depend on their relationship to another individual—i.e. it is a standalone
factor that allows beneficiaries to be identified. This second requirement was
established in this case to prevent companies such as Tobacco Securities from
setting up a trust to gain a financial benefit when it simply favours one
group, in this case employees. This was essentially viewed as a mechanism used
to disguise the trust as being charitable when in reality it lacked the
fundamental feel of being charitable at all.3 It
became necessary in this case for the appellant to satisfy the court that the
group of beneficiaries were public and were a section of the overall community
rather than being a private group of individuals. In making this determination,
a great deal of emphasis was placed on the previous case of Re Compton and the
established Compton test, suggesting the concept of there being a personal
nexus and the need to show that there is no personal nexus between the settlor
and the beneficiaries and that there is a sufficient public benefit.

Interestingly,
there was one dissenting judgment from Lord MacDermott who, when referring to
the Compton rule, suggested that the division between private and public or
between personal and impersonal relations was in fact very artificial. He even
stated that if it were to be accepted that the blind were considered a section
of the public, how could it be said that blindness was not a personal trait?
MacDermott went on to agree with Simonds that the question really was whether
the trust was public in its nature or whether it was in fact a trust that was
set to benefit private individuals, even if there were quite a few of them
within that private category.4 He
argued that where there was an educational trust of this nature that benefitted
a large number of people, it would be right to consider it a trust for the
public benefit until there was evidence to the contrary. MacDermott was more
concerned about the general applicability of the Compton5
test rather than necessarily the ultimate determination.

When
looking at the two speeches here, there is a clear value in the discussion that
was had in this case related to the understanding of when a charitable trust is
established and when it is not. Although on the face of it Simonds has provided
a clear two-stage test, the actual practical application of the second test and
the need for contemplation of the personal nexus element from Compton created
some dissention from MacDermott, which provides a useful obiter dictum in this
instance.6

Whilst
it is argued here that the two speeches have far from conclusively dealt with
the issue of public benefit in a charity trust, they have raised some important
points and given some clarity in the guidelines of when certain matters are
likely to be seen as public and when private. They offer a useful addition that
has been continuously developed since 1950 but are far from providing a conclusive
statement in either of the judgments.

 

Twinsectra7

Another
leading case in the area of trust law is that of Twinsectra, heard more
recently in 2002 and dealing with the area of Quistclose trusts.8 In
this case, Twinsectra brought an action against a business entrepreneur and his
two solicitors (Leach and Sims), as they had allegedly failed to repay a loan
forwarded to them for £1m. The facts were that Twinsectra had sent the £1m to
Mr Sims with the expectation that it would be passed on to Mr Yardley for the
purpose of purchasing some real estate property. This loan was only being
forwarded on the basis that there would be a guarantee given for Yardley’s
repayment. This was refused by Leach, but the guarantee was given by Sims. The
term of the loan stated that “the loan moneys will be retained by Sims and
Roper until such time as they are applied in the acquisition of property on
behalf of our client.” Despite this, Sims passed the monies to Leach (acting
for the borrower Mr Yardley) immediately and Mr Yardley then used a proportion
of the loan to pay off his debts, which was a breach of the loan agreement. It
was then argued that Mr Sims was in breach of trust and that he had been bound
by a trust when the funds had been forwarded to him.9
There was a further argument based on dishonesty that goes beyond the scope of the
question here.

L
Millett’s handling of the question of whether a Quistclose trust existed was
significant. A Quistclose trust being established broadly when a trust is
created where a creditor has lent money to the debtor for a specific purpose,
if the debtor uses the funds for a different purpose it can be argued that he
held the money on trust for the creditor, meaning that the funds were misappropriated
and could then be returned to the lender. L Millett argued that where a Quistclose
trust existed, the question of where the beneficial interest should lie could
be answered in one of four ways: with the lender, with the borrower, with the
end purpose, or with no-one. He went on to analyse this further and concluded
that based on practicality it simply had to rest with the lender and therefore
the beneficial interest was held by the lender on a resulting trust. One of the
particularly relevant elements of the discussion held by L Millet was the
determination that this was a resulting trust and other judges in the case felt
that it should be categorised as an express trust rather than a resulting trust.10 By
identifying the potential flaw with the Quistclose trust, L Millett raised the
issue that he believed it to be unfair to simply presume a Quistclose trust
where there is no clear evidence that it was the intention of the lender to
retain the benefit of the loan. That said, in this case, his opinion was not
shared, and this speech remains merely a useful obiter dictum and a further
element of food for thought when it comes to dealing with complex lender
situations.

Conclusions

Both
of the cases here have shown how judgments, and in particular dissenting
judgments, can provide useful discussion points in the development of an area
of law even if they do not in themselves produce a precedent to be relied on. The
establishment of trusts is an important part of equitable principles and offers
an opportunity for the courts to develop principles depending on the facts that
are surrounding the situation. As noted in both of the cases above, it is clear
that the judiciary’s discussion on the issues that are raised not only gives strong
guidance at the time of the decision but also puts foundational blocks in place
for future discussions. It is these discussions that are formative in the
evolution of legal principles and therefore, whilst it is concluded here that
no specific certainty was provided in these judgments, they did offer a greater
understanding.

1 Oppenheim v Tobacco Securities Trust Co Ltd
1950 UKHL 2

2 R Mulheron, The Modern Cy-pres Doctrine (UCL Press, 2006)

3 Paul Davies and
Graham Virgo, Equity and Trusts: Text,
Cases and Materials (Oxford University Press, 2016)

4 Richard Edwards
and Nigel Stockwell, Trusts and Equity (8th
ed, Pearson Longman,
2007)

5 Re
Compton 1945 Ch 123

6 Alastair Hudson, Equity and Trusts (6th ed, Routledge-Cavendish, 2009)

7 Twinsectra
v Yardley 2002 UKHL 12

8 P Birks, ‘Retrieving Tied Money’ in
Swadling W (ed) The Quistclose Trust:
Critical Essays (Hart, 2004)

9 J Glister, ‘Twinsectra v Yardley:
Trusts, Powers and Contractual Obligations’ (2002) 16 Trust Law International
223

10 James Penner, ‘Lord Millett’s Analysis’
in William Swadling (ed) The Quistclose
Trust: Critical Essays (Hart, 2004)

Author