DAVID CHRISTOPHER GIWA ON THE DIFFERENCE BETWEEN PRIVATE TRUST AND CHARITABLE TRUST

THE DIFFERENCE BETWEEN CHARITABLE TRUST AND PRIVATE

TRUST
David Christopher Giwa*

ABSTRACT
It is common knowledge in the legal profession that the concept of trust, which
emanated from the concept of uses, was established by the Court of Chancery in order
to mitigate the harshness of common law. This trust recognized the possibility of more
than one person having rights in the same property concurrently.1 However, the class of
trust used determines the responsibilities created and rights claimable. Therefore, a
study of the classifications of trust is apt especially as regards the possibility of
bringing an enforceable claim before the court. To this end this work places the
spotlight on charitable and private trusts with the aim of drawing distinctions between
the two classes.

Keywords: Private trusts, charitable trusts, human objects, cy-pres doctrine, etc.

INTRODUCTION
Trust, being the relationship resulting from the compulsion of a trustee in equity, to
administrate property which he got by legal or equitable title, for the benefit of another
or others (beneficiaries); is capable of diverse classifications. Among the many
classifications which trust accommodates, are the two major classifications of private
and charitable trusts. These two classifications come in handy when trust is being
classified according to purpose. The aim of this assignment is to bring to the fore the
contradistinctions existing and differentiating the two from each other. We dive
substantively into the two classes.

CHARITABLE TRUSTS

Charitable or public trusts are set up with the objective of providing benefit to the
general or a significant portion of the public. A focus on the objective of creating public

*[email protected]
1
Adewalwe Taiwo& Oluwatoyin Akintola, Introduction to Equity & Trusts in Nigeria, Princeton& Associates
Publishing Co. Ltd., (2016) P. 197

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 DAVID CHRISTOPHER GIWA ON THE DIFFERENCE BETWEEN PRIVATE TRUST AND CHARITABLE TRUST

trusts will enhance an understanding of the answer to the question; “What are charitable
trusts?” better than a definitive approach. Attempting to define charitable trusts is
essentially trying to make the understanding of it difficult and complex. In Re
Nottage2the court observed this difficulty as it took knowledge of the fact that there is a
disparity between the meanings of the words ‘charity’ and ‘charitable’ in legal parlance,
and their meanings in common usage.

The Statute of Elizabeth,3 also known as the Charitable Uses Act 1601, is foremost in
providing insight into what things can be termed as charitable. Although this Statute has
been repealed by the Mortmain and Charitable Uses Act 1888, section 13(2) of the latter
Act preserved the provisions of its preamble, which contained a catalogue of objects
that can be recognized as charitable.

Two essential distinctive features of charitable trusts are that –

 it must be for public benefit4. And

 it must not be on the basis of personal relationship that the class of intended
beneficiaries are chosen.

The opposite is obtainable under private trust.

PRIVATE TRUSTS

Kodilinye opines that a trust is private if it is not for the benefit of the public at large, but
either for the benefit of an individual, a group/class of individuals or for some private
purpose.5 The usual objective of a private trust is to confer benefit on human objects
(beneficiaries) on the basis of filial or other consideration. Thus the presence of human
objects is very sacrosanct in private trusts.6 However, there is the possibility of creating
private trust for non-human objects, and they are sometimes called “trusts of imperfect
obligations” or “non-charitable trusts” such as trusts that make provision for building
and maintaining tombs and monuments, trust created for taking care of animals, etc.

DISTINCTIONS BETWEEN CHARITABLE TRUSTS AND PRIVATE TRUSTS

The following listed areas reflects the distinctions that exist between charitable and
private trusts –

2
(1895) 2 Ch. 649
3
An Act of Parliament 43 Eliz 1, c.4.
4
See Iyanda v. Ajike (1948) 19. N.L.R. 11
5
Kodilinye, G, An Introduction to Equity in Nigeria (Spectrum Law |Publishing, Ibadan 1975) 67.
6
See Morice v. Bishop of Durham (1804) 9 Ves. Jr. 399 at 404.

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 DAVID CHRISTOPHER GIWA ON THE DIFFERENCE BETWEEN PRIVATE TRUST AND CHARITABLE TRUST

a. The objective of creating the trust

b. The relationship between the settlor and the objects of the trust

c. The place of human objects in the trust

d. The person(s) that can enforce the trust

e. The application of the perpetuity rule

f. The application of the Cy-pres Doctrine

g. Tax advantages

a. THE OBJECTIVE OF CREATING THE TRUST

The objective of creating a charitable trust generally is to confer or provide benefit to

the general public at large7 or a significant portion of it. In Re Crompton , where the
8

purpose of creating the trust was for the education of the descendants of three named
individuals only, it was held that the test or requirement of public benefit was not met.
Thus the purpose must fall within the spirit and intendment of the preamble to the
Statute of Elizabeth, which provides a list of charitable objects. This list is now more
simplified by the categorization provided by Lord Macnaghten in Commissioner of
Income Tax v. Pemsel9, which are

 Trusts for the relief of poverty

 Trusts for the advancement of education

 Trust for the advancement of religion;

 Trusts for other purposes beneficial to the community.

On the other hand, the objective of creating a private trust is the provision of benefit to
human objects based on filial or other considerations. The benefit is usually to an
individual, a group/class of individuals or in pursuance of some private purpose. The
objective therefore is not one that seeks to provide benefit to the public at large or a
significant portion of it.

b. THE RELATIONSHIP BETWEEN THE SETTLOR AND THE OBJECTS OF THE TRUST

7
See Fatumola v. Ogundimu (1977) 12 CCHCJ 298 at 299, where it was held that it is an essential
element that such trust should benefit the public at large and not a section of it and not only members of
a religious sect.
8
[1945] Ch. 299.
9
(1891) AC 531 at 538.

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 DAVID CHRISTOPHER GIWA ON THE DIFFERENCE BETWEEN PRIVATE TRUST AND CHARITABLE TRUST

In a charitable trust, there is no personal or other relationship existing between the

settlor and the intended beneficiaries, as the presence of such relationship has been
observed to result in a holding by the Court that such trust is not a charitable trust.
Instances of such judicial position are the following cases; Re Obabunmi Pedro10 and
Oppenheim v. Tobacco securities Trust Co. Ltd11.

In the first case, a trust set up for the training of the grandchildren of the testator and
other child was not counted as a charitable trust by the Court. In the second, the trust
was for the education of children of employees and ex-employees of a particular
company. The number of intended beneficiaries was even rapidly increasing into over a
hundred thousand people. It was however held not to be a charitable trust on the ground
that there was a personal relationship between the settlor and the potential
beneficiaries.

On the hand, private trust is created in order to provide benefit to beneficiaries who are
in a filial, cordial or other relationship with the settlor.

c. THE PLACE OF HUMAN OBJECTS IN THE TRUST

Another distinction lies in the place or importance of the human objects in the trust. In
Morice v. Bishop of Durham12, the court per Sir William Grant stressed the importance of human
objects in a private trust, holding that there must be someone in whose favour the court can
decree performance. Thus specificity is even required in this trust in three areas which
are otherwise known as the three certainties. As enumerated in Knight v. Knight13, the
uncertainty of beneficiaries of a private trust is one of these certainties that can cause
such trust to fail.

On the other hand, the presence or absence of human objects does not terminate a
charitable trust, especially since it is not the beneficiaries, but the Attorney General that
enforces a charitable trust.

d. THE PERSON(S) THAT CAN ENFORCE THE TRUST

As earlier stated, charitable trusts do not have human objects that have power to
enforce such trusts. The responsibility of enforcement is on the Attorney general.

However, in private trusts, the beneficiaries shoulder the responsibility of enforcement

against a defaulting trustee.

e. THE APPLICATION OF THE PERPETUITY RULE

10
[1961] L.L.R. 127.
11
[1951] A.C. 297.
12
Supra.
13
(1804) 3 Beav 148 at 173.

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 DAVID CHRISTOPHER GIWA ON THE DIFFERENCE BETWEEN PRIVATE TRUST AND CHARITABLE TRUST

The rule of perpetuity refers to the fact that the individuals which are the objects or
beneficiaries of the trust and their beneficiary interest in the trust property must be
identified/ascertained within the perpetuity period. The period is the lifetime of a person
in existence with further addition of twenty-one years. Failure to do this within the
perpetuity period renders the trust void.

Under private trusts, the capital of such trust must not be rendered inalienable for
longer than the perpetuity period; and any attempt to create such trust so as to apply its
income to some private purpose in perpetuity will fail14. The idea is to prevent the kind
of disposition of property that postpones its absolute vesting forever or in perpetuities;
as it ties up property and prevent its unhindered alienation15.

However, under charitable trusts, although the rule of perpetuity applies, it differs from
private trust in the area of inalienability. This is because the rule of perpetuity’s rule
16
against inalienablity does not apply to charitable trusts as held in Re Gwyon . In other
words, charitable trust can validly remain inalienable, where the purpose of the trust is
charitable and the income of the trust is continually used for charitable purposes.17

f. THE APPLICATION OF THE CY-PRES DOCTRINE

The Cy-pres doctrine simply connotes the application of a trust property to some
charitable purpose “as nearly as possible” resembling the original trusts, where such
trust is initially or subsequently impracticable or impossible.18

Now, under private trusts, where the trust suffers initial ineffectiveness or subsequent
failure, there is a resulting trust for the settlor, i.e. the settlor or donor becomes the
beneficiary, or the property results to his residuary estate if he is deceased.

However, under a charitable trust we find that the Cy-pres doctrine is applied, provided
that a general charitable intention on the part of the settlor can be presumed.19
Moreover, under charitable trusts, this doctrine will also be applied regardless of the
presence or absence of a general charitable intention, where an effective charitable
trust becomes impracticable/impossible to carry out.

g. TAX ADVANTAGES

Charitable trusts may be excluded from income tax on rents, interest, dividends and

14
Adewalwe Taiwo& Oluwatoyin Akintola, Introduction to Equity & Trusts in Nigeria, Princeton&
Associates Publishing Co. Ltd., (2016) p. 238.
15
Ibid. p. 237.
16
[1930] 1 Ch. 255.
17
See Re Mariette (1915) 2 Ch. 284.
18
See Ironmongers’ Co. v. AG (1844) 10 CL & F 908.
19
Re Rymer [1895] 1 Ch. 19.

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 DAVID CHRISTOPHER GIWA ON THE DIFFERENCE BETWEEN PRIVATE TRUST AND CHARITABLE TRUST

annual payment so long as the income is applied for charitable purpose only.20

Obviously, under private trusts, the income of such trust is not usually applied for
charitable purposes; and so may not enjoy such tax advantages.

CONCLUSION

Having observed these many distinctions between charitable trusts and private trusts, it
suffices to say that the two are different from each other. These differences have been
seen in the objective of creating the trust; the relationship, if any, between the settlor
and the beneficiaries; the importance of human objects in private trusts; the person(s)
that can enforce the trust; the application of the perpetuity rule; the application of the Cy
-pres Doctrine and in the tax advantages enjoyable in charitable trusts but not enjoyable
in private trusts. This would serve verily as a useful tool in distinguishing between the
two kinds and aid the avoidance of the loss to be incurred when a legal professional
mistakes one for the other.

20
Adewalwe Taiwo& Oluwatoyin Akintola, Introduction to Equity & Trusts in Nigeria, Princeton&
Associates Publishing Co. Ltd., (2016) p. 238.

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