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Published online by Cambridge University Press: 06 September 2021
In England, Parliament introduced the ‘necessary interest rule’ through the enactment of section 115 of the Charities Act 2011 (England and Wales), allowing ‘any person interested’ in a charitable trust to initiate charity proceedings against defaulting trustees in their administration of charitable assets. Nevertheless, insufficient attention has been paid to this rule despite it being initially enacted in 1853. Parliament has refrained from clearly defining the rule, and the courts have long been grappling with its meaning in determining whether a person is eligible to sue. This paper studies the necessary interest rule by exploring the way in which the courts have interpreted it and the uncertainties surrounding its operation. It is shown that, in the context of charitable trusts, the concern of securing the due administration and execution of the trust lies at the heart of the rule. The final section of this paper discusses the significant theoretical implications of the necessary interest rule. It considers the beneficiary-enforcer debate concerning the conceptual nature of express trusts and highlights the insights that analysis of the rule can provide into this debate.
I thank Andrew Godwin, Matthew Harding and Michael Bryan for their generous comments on earlier drafts. I am also grateful to Yiming Liu for research assistance. The usual responsibility for errors applies.
1 Knight v Knight (1840) 3 Beav 148 at 172.
2 Morice v Bishop of Durham (1805) 32 ER 947 at 955.
3 Morice v Bishop of Durham (1804) 9 Ves 399 at 405.
4 Gray, J ‘Gifts for a non-charitable purpose’ (1902) 15(7) Harvard Law Review 509 at 515CrossRefGoogle Scholar. Clauson J observed in Re Thompson that this element is certain where ‘the object of the gift has been defined with sufficient clearness and is of a nature to which effect can be given’: see Re Thompson [1934] Ch 342 at 344.
5 Radmanovich v Nedeljkovic [2001] NSWSC 492 (15 June 2001) at [102]; Re Denley's Trust Deed (1969) 1 Ch 373 at 377; Re Hummeltenberg [1923] All ER Rep 49 at 51.
6 See eg Bourne v Keane [1919] AC 815; Pedulla v Nasti (1990) 20 NSWLR 720; Re Thompson, above n 4; Re Pearce [1946] SASR 118 (24 October 1946); Chesterman v Mitchell (1923) 24 SR NSW 108; Carson v Presbyterian Church of Queensland [1956] St R Qd 466 (15 December 1955).
7 D Parker and A Mellows The Modern Law of Trusts (Sweet and Maxwell, 5th edn, 1983) p 177.
8 It is the factor of public benefit that distinguishes charitable trusts from private trusts. Morris, D ‘Charities and the big society: a doomed coalition?’ (2012) 32(1) LS 132 at 135Google Scholar.
9 On account of the enforcement of charitable trusts by the Attorney General, see eg Bathurst City Council v PWC Properties Pty Ltd [1998] HCA 59 (30 September 1998) at [39], [54], [67]; Pont, G Charity Law in Australia and New Zealand (Oxford University Press, 1999) pp 266–267Google Scholar; Picarda, H The Law and Practice Relating to Charities (Bloomsbury Professional, 4th edn, 2010) pp 727–729Google Scholar.
10 Leahy v Attorney-General for New South Wales [1959] AC 457.
11 Ibid, at 479.
12 Jones, G History of the Law of Charity 1532–1827 (Cambridge University Press, 1969) p 161CrossRefGoogle Scholar.
13 Morice, above n 3, at 405.
14 Charitable Trusts Act 1853 (UK), s LVII; Charities Act 1960 (England and Wales), s 28; Charities Act 1993 (England and Wales), s 33; Charities Act 2011 (England and Wales), s 115.
15 Its legislative text is ‘persons claiming to administer the trust, or persons otherwise interested in the trust’.
16 Its legislative text is ‘a person who … has a relevant interest in the trust’.
17 Its legislative text is ‘any person who … has a proper interest in the trust’.
18 Charitable Trusts Act 1853 (UK), s LVII; Re Hampton Fuel Allotment Charity [1989] Ch 484 at 490; Metropolitan Petar v Mitreski [2001] NSWSC 976 (31 October 2001) at [8]. On the limited literature that discusses the necessary interest rule, see K Chan The Public-Private Nature of Charity Law (Oxford: Hart Publishing, 2016) pp 94–97; R Pearce et al The Law of Trusts and Equitable Obligations (Oxford: Oxford University Press, 5th edn, 2010) pp 856–859.
19 See eg Chan, K ‘The role of the Attorney General in charity proceedings in Canada and in England and in Wales’ (2010) 89(2) Canadian Bar Review 373 at 388–391Google Scholar; Vestal, A ‘Critical evaluation of the charitable trust as a giving device’ (1957) 1957(3) Washington University Law Review 195 at 210–211Google Scholar; Kutner, L and Koven, H ‘Charitable trust legislation in the several states’ (1966) 61 Northwestern University Law Review 411 at 425Google Scholar.
20 See eg Bryan, M et al. Equity and Trusts in Australia (Cambridge: Cambridge University Press, 2nd edn, 2017)CrossRefGoogle Scholar para [16.2]; L Tucker et al (eds) Lewin on Trusts (Volume 1) (Sweet & Maxwell, 20th edn, 2020) para [1-031]; J Penner The Law of Trusts (Oxford: Oxford University Press, 10th edn, 2016) para [13.3]; Garton, J Public Benefit in Charity Law (Oxford: Oxford University Press, 2013) para [6.05]Google Scholar; Chan, above n 18, p 80.
21 Given that the UK has three legal systems: English law, applying in England and Wales, Northern Irish law, applying in Northern Ireland and Scots law, applying in Scotland. When referring to laws of the UK or English law in this paper, it particularly means the law of England and Wales.
22 Wallis v Solicitor-General for New Zealand [1903] AC 173 at 181–182.
23 Perpetual Trustees Victoria Limited v Barns & Another [2012] VSCA 77 (2 May 2012) at [42].
24 National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31 at 63.
25 Chan, above n 19, at 391–392; Vestal, above n 19, at 210; Kutner and Koven, above n 19, at 412.
26 Fries, R ‘Charity Commission for England and Wales’ (2006) 8(2) International Journal of Not-for-Profit Law 7 at 8Google Scholar; Pearce et al, above n 18, p 855.
27 Charities Act 2011, above n 14, s 30(2).
28 Decker, C and Harding, M ‘Three challenges in charity regulation: the case of England and Wales’ in Harding, M et al. (eds) Not-for-Profit Law: Theoretical and Comparative Perspectives (Cambridge: Cambridge University Press, 2014) p 334Google Scholar; Dunn, A ‘Using the wrong policy tools: education, charity, and public benefit’ (2012) 39(4) Journal of Law and Society 491 at 512CrossRefGoogle Scholar; Charity Commission for England and Wales Charity Commission Annual Report (2019–2020) pp 15–16, available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/901690/Charity_Commission_Annual_Report_and_Accounts_2019_to_2020.pdf.
29 McFarlane, B and Mitchell, C Hayton and Mitchell: Text, Cases and Materials on the Law of Trusts and Equitable Remedies (Sweet & Maxwell, 14th edn, 2015) p 197Google Scholar.
30 Hudson, J ‘Mere and other discretionary objects in Australia’ in Liew, Y and Harding, M (eds) Asia-Pacific Trusts Law: Theory and Practice in Context (Oxford: Hart Publishing, 2021) forthcomingGoogle Scholar.
31 McFarlane and Mitchell, above n 29, p 197.
32 Getzler, J ‘Morice v Bishop of Durham (1805)’ in Mitchell, P and Mitchell, C (eds) Landmark Cases in Equity (Oxford: Hart Publishing, 2012) p 200Google Scholar.
33 McFarlane and Mitchell, above n 29, p 170.
34 Ibid, p 197. See also Turner, P ‘The entitlements of objects as defining features of discretionary trusts’ in Nolan, R et al. (eds) Trusts and Modern Wealth Management (Cambridge: Cambridge University Press, 2018) p 258Google Scholar.
35 Charities Act 2011, above n 14.
36 Ibid, s 115(8).
37 Ibid, s 115(1).
38 Re Hampton Fuel Allotment Charity, above n 18, p 493.
39 Ibid.
40 The predecessors of s 115 of the Charities Act 2011 are s 28 of the Charities Act 1960, s 33 of the Charities Act 1993, and s LVII of the Charitable Trusts Act 1853.
41 Scott v National Trust for Places of Historical Interest or Natural Beauty [1998] 2 All ER 705 at 714.
42 Re Hampton Fuel Allotment Charity, above n 18, at 493.
43 Nicholls LJ noted in Re Hampton that ‘charitable trusts vary so widely that to seek a definition here is, we believe, to search for a will-o’-the-wisp’. See ibid, at 494.
44 Gartside v Inland Revenue Commissioners [1968] AC 553 at 617.
45 Ibid.
46 Ibid, at 617.
47 Metropolitan Petar v Mitreski, above n 18, at [8].
48 Haslemere Estates Ltd v Baker [1982] 1 WLR 1109 at 1122.
49 Ibid.
50 Haslemere Estates Ltd v Baker, above n 48.
51 Ibid, at 1121.
52 Ibid, at 1122.
53 Ibid.
54 Ibid.
55 Rosenzweig v NMC Recordings Ltd [2013] EWHC 3792 (Ch) at [34].
56 Re Hampton Fuel Allotment Charity, above n 18, at 494.
57 Haslemere Estates Ltd v Baker, above n 48, at 1122.
58 Re Hampton Fuel Allotment Charity, above n 18, at 493–494.
59 Haslemere Estates Ltd v Baker, above n 48, at 1122; Re Hampton Fuel Allotment Charity, above n 18, at 493.
60 Haslemere Estates Ltd v Baker, above n 48, at 1122.
61 Ibid.
62 Re Hampton Fuel Allotment Charity, above n 18, at 493.
63 Ibid, at 494.
64 Scott v National Trust for Places of Historical Interest or Natural Beauty, above n 41, at 714. See also Re Hampton Fuel Allotment Charity, above n 18, at 494.
65 Haslemere Estates Ltd v Baker, above n 48, at 1122; Bradshaw v University College of Wales [1988] 1 WLR 190 at 192–193; Re Hampton Fuel Allotment Charity, above n 18, at 493; Scott v National Trust for Places of Historical Interest or Natural Beauty, above n 41, at 715; Rosenzweig v NMC Recordings Ltd, above n 55, at [22]; Royal Society for the Prevention of Cruelty to Animals v Attorney General [2002] 1 WLR 448 at 459; Bisrat v Kebede [2015] EWHC 840 (Ch) at [22].
66 Gunning v Buckfast Abbey Trustees Registered (1994) Times, 9 June.
67 Ibid.
68 Ibid.
69 Scott v National Trust for Places of Historical Interest or Natural Beauty, above n 41.
70 Ibid, at 715.
71 Ibid, at 714.
72 Metropolitan Petar v Mitreski, above n 18.
73 Ibid, at [8].
74 Sik Chiu Yuet v Secretary for Justice [2017] HKCU 2269.
75 This section is the Hong Kong equivalent of the English necessary interest rule.
76 Sik Chiu Yuet v Secretary for Justice, above n 74, at [85].
77 Ibid, at [67], [86].
78 Re Hampton Fuel Allotment Charity, above n 18, at 492.
79 Bradshaw v University College of Wales, above n 65.
80 Ibid, at 194E.
81 Stack v Dowden [2007] 2 AC 432 at 457.
82 Bradshaw v University College of Wales, above n 65, at 191.
83 Ibid, at 193.
84 Re Hampton Fuel Allotment Charity, above n 18, at 492.
85 Ibid.
86 Ibid, at 493.
87 Ibid, at 492.
88 Royal Society for the Prevention of Cruelty to Animals v Attorney General, above n 65.
89 Bisrat v Kebede, above n 65.
90 Ibid, at [22].
91 Sik Chiu Yuet v Secretary for Justice, above n 74, at [84].
92 Ibid, at [67].
93 Ibid, at [50].
94 Ibid, at [67].
95 Ibid.
96 Scott v National Trust for Places of Historical Interest or Natural Beauty, above n 41, at 713.
97 Rosenzweig v NMC Recordings Ltd, above n 55.
98 Ibid, at [35]. See also Pearce et al, above n 18, p 859.
99 Scott v National Trust for Places of Historical Interest or Natural Beauty, above n 41, at 713.
100 Ibid, at 718.
101 Freeman, J ‘Extending public law norms through privatization’ (2003) 116(5) Harvard Law Review 1285 at 1303–1304CrossRefGoogle Scholar; McLean, J ‘Convergence in public and private law doctrines – the case of public contracts’ (2016) 1 New Zealand Law Review 5 at 9Google Scholar; Krahe, J ‘The impact of public law norms on private law relationships’ (2015) 2 European Journal of Comparative Law and Governance 124 at 126CrossRefGoogle Scholar; Chan, above n 18, p 98.
102 Rosenzweig v NMC Recordings Ltd, above n 55, at [22].
103 Ibid, at [34].
104 Ibid, at [11].
105 Ibid, at [34].
106 Ibid, at [35].
107 Ibid.
108 Bisrat v Kebede, above n 65, at [26].
109 Ibid.
110 Ibid, at [22].
111 Royal Society for the Prevention of Cruelty to Animals v Attorney General, above n 65, at 459.
112 Ibid, at 464.
113 Ibid, at 459.
114 Ibid, at 458.
115 Charity is a gift to the general public use. See Jones v William (1767) 27 ER 422 at 422.
116 The word ‘public’ runs through all the charity cases. See Inland Revenue Commissioners v Educational Grants Association Ltd [1967] Ch 993 at 1011.
117 Scott v National Trust for Places of Historical Interest or Natural Beauty, above n 41, at 712.
118 Ibid, at 715.
119 Rosenzweig v NMC Recordings Ltd, above n 55, at [22].
120 Scott v National Trust for Places of Historical Interest or Natural Beauty, above n 41, at 715.
121 Ibid.
122 Ibid.
123 Ibid.
124 Ibid, at 713.
125 Re Hampton Fuel Allotment Charity, above n 18, at 493–494.
126 Hudson, above n 30.
127 Haslemere Estates Ltd v Baker, above n 48, at 1121; Scott v National Trust for Places of Historical Interest or Natural Beauty, above n 41, at 716; Sik Chiu Yuet v Secretary for Justice, above n 74, at [52]; Hunter Region SLSA Helicopter Rescue Service Ltd v Attorney General [2000] NSWSC 456 (22 May 2000) at [5]; Re Estate Polykarpou [2016] NSWSC 409 (22 July 2016) at [40].
128 McFarlane and Mitchell, above n 29, p 197.
129 Ibid.
130 Ibid.
131 D Hayton ‘Developing the obligation characteristic of the trust’ (2011) 117 Law Quarterly Review 96 at 100; Tucker et al, above n 20, para [1-005]; Penner, above n 20, para [9.26].
132 Getzler, above n 32, p 159.
133 McFarlane and Mitchell, above n 29, p 176.
134 Re Denley's Trust Deed, above n 5.
135 Ibid, at 383.
136 Chan, above n 19, at 378.
137 McPhail v Doulton [1971] AC 424.
138 Re Gulbenkian's Settlement [1970] AC 508.
139 There is a lack of uniform agreement as to the analytical nature of a discretionary object's entitlement. Controversial questions include: (a) whether such entitlement is limited to ‘claims enforceable as of right’; and (b) whether such entitlement indicates that discretionary objects hold an ‘interest’ under the trust; if so, what the nature of the interest is, ie interest in trust assets for the purpose of conveyancing or interest of any kind. On discussion of these questions, see Turner, above n 34, pp 252–264.
140 Gartside v Inland Revenue Commissioners, above n 44.
141 Ibid, at 617.
142 Johns v Johns (2004) 3 NZLR 202.
143 Gartside v Inland Revenue Commissioners, above n 44, at 617. See also Re Cooper Street Property Trust [2016] VSC 756 (9 December 2016) at [35].
144 Turner, above n 34, p 248.
145 Virgo, G The Principles of Equity & Trusts (Oxford: Oxford University Press, 3rd edn, 2018) p 56CrossRefGoogle Scholar.
146 Johns v Johns, above n 142, at [34].
147 Hudson, above n 30.
148 Ibid.
149 L Smith ‘Massively discretionary trusts’ in Nolan et al, above n 34, pp 154–155.
150 Ibid. The rule established in Saunders v Vautier [1841] EWHC J82 is that, where all of the beneficiaries in the trust are of adult age and under no disability, they are entitled to require the trustee to transfer the trust asset to them and thereby terminate the trust.
151 Smith, above n 149, p 141.
152 Hudson, above n 30.
153 Because of the court's inherent jurisdiction over the execution of trusts, Lord Walker of Gestingthorpe in Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at [66] remarked that it was meaningless to ‘draw any bright dividing-line either between the rights of an object of a discretionary trust and those of the object of a mere power (of a fiduciary character)’.
154 McFarlane and Mitchell, above n 29, p 197.
155 Getzler, above n 32, p 195.
156 Morice v Bishop of Durham, above n 2, at 954.
157 See eg Penner, above n 20, para [9.4]; Virgo, above n 145, p 101; Bryan et al, above n 20, para [16.46].
158 Royal Society for the Prevention of Cruelty to Animals v Attorney General, above n 65, at 458.
159 Nolan, R ‘The execution of a trust shall be under the control of a court: a maxim in modern times’ (2016) 2(2) Canadian Journal of Comparative and Contemporary Law 469 at 487Google Scholar.
160 McFarlane and Mitchell, above n 29, p 170. Holland J's statement in Randall v Lubrano (Supreme Court (NSW), Holland J, 31 October 1975, unreported) was also illustrative to this point. His Honour (at 3) considered the possible consequence of an object of the mere power being deprived of the entitlement to seek relief, that is: ‘[the trustee] could do as he pleases with the trust property and commit any breach of trust that he cared to commit. There may be no way of detecting it and no person could require him to reveal what he had been doing’.
161 Morice, above n 3, at 405.
162 McFarlane and Mitchell, above n 29, p 170.
163 The court's supervisory role can be seen in various aspects of the law of trusts. For example, as to the beneficiary's right to information, Lord Walker of Gestingthorpe in Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at [66] commented that the basis of the beneficiary's right to information was ‘best approached as one aspect of the court's inherent jurisdiction to supervise the administration of trusts’.
164 The background is important to the understanding of a rule, as Dixon CJ famously said in Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 at 397, ‘the context, the general purpose and policy of a [rule] and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed’.
165 Getzler, above n 32, p 171.
166 Ibid.
167 Albeit the cases examined in this paper are mainly related to incorporated charities rather than charitable trusts, the reasoning behind the court's decision as to whether or not a charity proceeding can be upheld in these cases is equally applicable to charitable trusts. The essence of the necessary interest rule suggests that, for the purpose of this paper, there is no need to distinguish between charitable trusts and incorporated charities when exploring its application and rationale.
168 Smith, above n 149, p 141.
169 Gartside v Inland Revenue Commissioners, above n 44, at 617.
170 Morice, above n 2, at 954.
171 Sik Chiu Yuet v Secretary for Justice, above n 74, at [53].
172 Ibid, at [57].
173 Royal Society for the Prevention of Cruelty to Animals v Attorney General, above n 65, at 458.
174 K Low ‘Non-charitable purpose trusts: the missing right to forego enforcement’ in Nolan et al, above n 34, p 491; Virgo, above n 145, p 201.
175 The rule that ‘prima facie the correct person to bring proceedings is the person whose interests are at issue, which, for present purposes, is prima facie a beneficiary affected by the breach of trust in question’. See Nolan, R ‘Invoking the administrative jurisdiction: the enforcement of modern trust structures’ in Davies, P and Penner, J (eds) Equity, Trusts, and Commerce (Oxford: Hart Publishing, 2017) p 172Google Scholar.
176 Independent Schools Council v Charity Commission for England and Wales [2012] Ch 214 at 230.
177 Ibid, at 273.
178 Gregg v Scott [2002] All ER (D) 418 at [57].
179 Haslemere Estates Ltd v Baker, above n 48, at 1122.
180 Nolan, above n 175, p 159.
181 Ibid, p 167.
182 Ibid, p 173.
183 Ibid, p 167.
184 Ibid.
185 Smith, above n 149, p 135; Nolan, above n 159, at 493; Nolan, above n 175, p 167.
186 Jessica Hudson in her book chapter summarised five entitlements that discretionary objects under Australian trust law have: (a) relief when there has been an unauthorised or improper exercise of a power to replace a trustee, appointor or guardian; (b) relief when there has been an unauthorised disbursement of trust property; (c) pursue derivative proceedings; (d) disclosure of trust information; and (e) relief for the replacement of a trustee or other power-holder under an express trust. See Hudson, above n 30.
187 Virgo, above n 145, p 623.
