charitable - public benefit and the doctrine of cy pres Flashcards
public benefit test
- It is not enough for a charitable trust – or a gift to charity – to be for a ‘charitable purpose’, for its purpose(s) to be ‘exclusively charitable’ and for its purpose(s) not to be for ‘purely political objects.’ It must also be for the ‘public benefit.’
- The requirement for ‘public benefit’ has existed for many years but has been given statutory force by the Charities Act 2011, ss 2(1)(b) and 4.
- Have to do this on annual reports and demonstrate that there activitys are continuing to be for the public benefit
- Failure to satisfy the public benefit requirement could lead to removal from the
Charity Commission’s register, and therefore the loss of charitable status.
Under s 2(1) Charities Act 2011
a charitable purpose is a purpose which—
s 2(1)(a): falls within section 3(1) [the statutory list of charitable purposes], and
- Ss a-m
s 2(1)(b): is for the public benefit (see section 4).
s4(2) charitys act 2011
- If you satisfy the first stage of that first test that you’re for a charitable purpose, you don’t automatically pass to the second stage the second test for the public benefit you have to demonstrate separately that you’re for the public benefit
- cant say its for a charitable purpose under s3(1) but it may not be for the public benefit - separate test and s4(2) makes this clear
s4(3) charitys act 2011
-In this Chapter any reference to the public benefit is a reference to the public benefit as that term is understood for the purposes of the law relating to charities in England and Wales. [emphasis added]
- basically to understand if its for the public benefit have to look to case law
Attorney General v Charity Commission
An example provided in this case was a school for pickpockets – it would satisfy the ‘advancement of education under s 3(1)(b) Charities Act 2011, but could not reasonably be described as being for the ‘public benefit.’
The independent schools council case
-at the time of the 2006 act, documents by the charity comission defining public benefit made it difficult for these schools to satisfy the pb test
as they charge fees and exclude the majority of the population
- bought judicial review so they werent challenged as a charity and won
- upper tribunal identified 2 prinicples that must be considered
-1) identifiable benefit
-2) to the public or sufficient section of the public
-upper tribunal got the charity comission to revise there guidelines
-schools make profit which they reinvest
they build facilitys and hire new teachers and reinvest money into bursarys and scholarships so a wider proprotion of the public can access them
-this compelled them tp revise guidelines
- now have pb 1, 2 and 3 (charity comission revised guidelines)
what did the upper tribeunal say needs to be considered in indepenendent schools council
(1) Identifiable benefit
(2) To the public or a sufficient section of the public.
These principles were incorporated in the Charity Commission’s revised guidance in Charity Commission, Public Benefit: The Public Benefit Requirement (PB1) (September 2013).
identifiable benefit can be what
-An ‘identifiable benefit’ may be practical or intangible, as well as direct or indirect.
Re Wedgewood [1915]
a gift for the protection of animals would, ‘promote public morality by checking the innate
tendency to cruelty’ – an intangible outcome that was held to be in the ‘public benefit.’
- intangible outcome held to be for public benefit
-intangible outcome = based on public morals as opposed to practical
direct or indirect outcome of a public benefit
-in the schools case the upper tribunal gave guidance
- direct benefit - benefit of people who the charity is relieving
- indirect benefit - benefit of people other than the main recipients of the charity aims/purpose is to benefit
to the public or a sufficient section of the public cases -
2
1) Oppenheim
2) IRC v falkirk
Oppenheim
-Can reasonably say some group of people will benefit from it
- Crucial that the opportunity to benefit be available to a sufficient section of the public
- to satisfy this, personal nexus, if you set something up to benefit yourself and a small group of people then you wont satisfy the oppenheim personal nexus rule to demonstrate youre for the public benefit as its not a sufficiently large section
- The opportunity to benefit must not be unreasonably restricted by reference to geographical location - like people living on a particular street
case for sufficient section of public
IRC v Falkirk
- cant be unreasonably restricted by fees (schools case)
- wont necessarily disqualify if its being reinvested to benefit a large portion of the public
public benefit and political purposes case
National Anti-Vivisection Society v IRC [1948]
National Anti-Vivisection Society v IRC [1948]
- Vivisection – extermination on live animals
- National anti-vicisection society had existing charitable status and were campaigning for a change in the law to abolish vivisections
- Make it illegal
- The company’s doing them argued its essential for scientifically research to know how drugs will wok for humans
- The issue that came to appeal, was whether or not when you balance the 2 together which one is for the greater public benefit the advancement of animal welfare or the advancement of scientific research
- HOL - said scientific research
- greater piblic interest and public benefit
- charitable purpose comes first, can have political but it needs to be secondary
- Lord Wright (page 49): public benefit could be judged on the basis of ‘approval by the common understanding of enlightened opinion for the time being’ that there is benefit to the public.
- courts go with what people at the time would say, societal attitudes change
the doctrine of cy pres definition
-when a charitable trust fails, the doctrine of cy pres may arise to make possible the application of funds to charitable purposes as near as possible as those selected by the donor
application of the doctrine of cy pres
The doctrine applies differently depending on whether the failure of the charitable purpose occurs ab initio or subsequently.
Failure of the charitable purpose ab initio:
the property will be applied cy-près only if the donor can be considered to have an intention that the property should be used for the benefit of charity generally, rather than confined to the specific charitable purpose that has failed
Failure of the charitable purpose subsequently:
once property has been applied for charitable purposes and there is a subsequent failure of those purposes, the property will be applied cy-près whether or not the donor had an intention to benefit charity generally.
Re Wright [1954]
-once money is effectaully dedicated to charity, the testators next of kin/residuary legatees are forever excluded
- as doctrine of cy pres takes effect automatically with subsequent failures of charitable donations
s67 charities act 2011
- involves the power of the court/comission to make schemes for cy pres has to be in accordance with s67 - if it is the property can be applied for a similar purpose (charity comission do this)
- 67(3) - as it considers appropriate, - things they have to consider in reassigning it
(3)(a)The spirit of the original gift – motivation behind the gift/purpose
(3)(b)Desirability and securing of properties that lied for charitable purposes that are close to the original purposes
(3)(c)Need for the relevant charity to have purposes that are suitable and effective in the light of current social and economic circumstances
cases for failure ab nitio
3
1) Re Faraker
2) Re Slatters
3) Re Fingers Wills Trust
Re Faraker
-A testamentary gift to ‘Mrs Bailey’s Charity, Rotherhithe’ had intended to refer to ‘Hannah Bayly’s Charity’
- Hannah Bayly’s Charity had been consolidated with other local charities so, although it no longer existed,
- its purpose could continue in the consolidated charities
failure ab nitio
Re Slatters Wills trust
- A testatrix had left money to a hospital in Australia for the treatment of tuberculosis, but the hospital had closed down before the testatrix’s death.
- ## Since the hospital had not left any funds to continue this purpose, it followed that there was a failure of the gift ab initio.
