Non-charitable purpose trusts are prima facie void, but is that the end of the analysis? From narrowly preserved “anomalous exceptions” to the Re Denley principle, this entry explores the circumstances in which an otherwise invalid purpose trust can survive.

Introduction

The preceding instalment of this mini-series introduced the category of purpose trusts as a distinct typology within express trusts and further delineated between charitable and non-charitable purpose trusts.[1] As discussed, charitable purpose trusts are recognized as a narrow exception to the beneficiary principle because the Attorney General retains standing to enforce them in the public interest.[2] Conversely, because non-charitable purpose trusts do not benefit from that same institutional safeguard, they are prima facie void for lack of identifiable beneficiary.[3]

Nonetheless, there are notable exceptions to this rule, as the common law, equity, and Ontario’s Legislature have each recognized the validity of various non-charitable purpose trusts. This entry surveys three such routes:

• The narrow common law exceptions historically referred to as trusts of imperfect obligation;
• The reconceptualization of certain purpose trusts as trusts for ascertainable persons, commonly referred to as the Re Denley principle; and
• The statutory conversion mechanism found in section 16 of Ontario’s Perpetuities Act.[4]

The Anomalous Exceptions: Trusts of Imperfect Obligation

Notwithstanding the general prohibition against non-charitable purpose trusts, a small and long-standing category has been consistently upheld by the Courts. This category, as described by Roxburgh J. in Re Astor’s Settlement Trusts is commonly referred to as “anomalous and exceptional”.[5] Rather than being justified on any unifying principle, these trusts survive as historical curiosities that the Courts have consistently declined to expand upon.

In short, the anomalous and exceptional category of non-charitable purposes, remains confined to:

• Trusts for the erection or maintenance of monuments and graves;
• Trusts for the saying of private masses; and
• Trusts for the maintenance of particular animals.[6]

The Court has been express in holding that these anomalous trusts “ought not to be extended”,[7] and Canadian courts have shown no appetite to depart from that position.

This category of anomalous exceptions is also described as trusts of imperfect obligation because the trustee is technically not compelled to administer the trust since there is no party holding an equitable interest in the subject property. However, if a trustee is willing to accept the office, the Court may make a Pettingall order, requiring the trustee to give an undertaking to apply the property to the stated purpose.[8] Should the trustee later depart from that undertaking, those who would take the property on failure of the trust (typically the residuary beneficiaries) are given standing to compel compliance.[9]

The Denley “Person” Principle: A Different Route Out

A more analytically significant, and more commercially relevant, exception to non-charitable purpose trusts emerged from the decision of Re Denley’s Trust Deed. In this case, land had been conveyed to trustees to be maintained and used as a sports ground, primarily for the benefit of the employees of a named company.[10] On its face, this appeared to be a non-charitable purpose trust, and therefore prima facie void via the beneficiary principle.

However, in its analysis the Court reviewed the beneficiary principle, as articulated in Re Astor’s Settlement Trusts and approved in Re Endacott, to hold that it is properly confined to trusts for purposes that are abstract or impersonal in character.[11] Accordingly, the Court found that, where a trust, though expressed as a purpose, is directly or indirectly for the benefit of ascertainable individuals who possess sufficient standing to enforce it, the trust falls outside the mischief that the beneficiary principle was designed to address.[12]

In essence, because the employees were an ascertainable class entitled to the use and enjoyment of the land, they possessed the requisite standing, and the trust was upheld.

The doctrinal significance of Denley lies in its reframing of the inquiry. Rather than asking whether a trust confers a beneficial interest on identifiable persons, the Re Denley analysis asks whether identifiable persons stand to benefit, directly or indirectly, in a manner sufficiently tangible to give them locus standi to enforce the arrangement. This is a materially lower threshold, and it is the principle that Ontario courts have most recently relied upon to validate a non-charitable purpose trust.

The Statutory Rescue: Section 16 of Ontario’s Perpetuities Act

Where neither the anomalous exceptions nor the Denley principle is applicable, Ontario’s Legislature has provided a further route to validity pursuant to Section 16(1) of the Perpetuities Act, which provides that,

that a trust for a specific non-charitable purpose that creates no enforceable equitable interest in a specific person shall be construed as a power to appoint the income or capital, […] and, the trust is valid so long as and to the extent that it is exercised either by the original trustee or the trustee’s successor, within a period of twenty-one years.[13]

According, rather than a non-charitable purpose trust being declared void outright, section 16 of the Perpetuities Act, may be invoked to save the otherwise invalid purpose trust by re-framing the obligations of the trustee as powers exercisable by the trustee.

Subsection 16(2) provides that if the income or capital is not fully expended within the twenty-one-year period, the property reverts to whoever would have been entitled to it had the trust been invalid from the outset.[14]

Final Remarks

The beneficiary principle renders non-charitable purpose trusts presumptively void, but the rule is subject to three important qualifications:

• The common law recognizes a narrow and closed class of “trusts of imperfect obligation” for purposes such as the maintenance of particular animals, graves and monuments;
• Under the Re Denley principle, a trust expressed as a purpose may nevertheless be valid where ascertainable individuals benefit directly or indirectly in a manner sufficient to confer locus standi to enforce the trust.
• Where neither route is available, section 16 of the Perpetuities Act may provide a statutory mechanism for preserving certain non-charitable purpose trusts by construing them as powers to appoint income or capital, subject to the prescribed twenty-one-year limitation.

Taken together, these exceptions demonstrate that while the beneficiary principle remains a fundamental constraint on non-charitable purpose trusts, it is not an absolute bar to their validity.

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[1]See Express Trust Mini-Series Part 6: Introducing Purpose Trusts & the Beneficiary Principle | WEL Partners Blog.

[2] Vancouver Society of Immigrant and Visible Minority Women v. Canada (Minister of National Revenue), 1999 CanLII 704 (SCC), at paras 41–44 (“Vancouver Society”).

[3] Morice v. Bishop of Durham (1804), 9 Ves Jun 399 at 404–405, 32 ER 656 (Ch).

[4] Perpetuities Act, R.S.O. 1990, c. P.9, at section 16(1).

[5] Re Astor’s Settlement Trusts, [1952] Ch 534, at 547.

[6] Re Endacott, [1960] Ch 232 (CA) (“Endacott”).

[7] Ibid., at 246.

[8] Pettingall v. Pettingall, (1842), 11 LJ Ch 176.

[9] See Re Thompson, [1934] Ch 342, at 344.

[10] Re Denley’s Trust Deed, [1969] 1 Ch 373 (“Re Denley”).

[11] Ibid., at 382.

[12]Ibid., at 383–384.

[13] Perpetuities Act, at section 16(1).

[14]Ibid., at section 16(2).