Charitable-Purpose Trusts

Question 1

Maxims of equity

Answer 1

1. Equity is discretionary
   a. Though now governed by principles, they are not set in stone and remedies are awarded at the discretion of the court, emphasizing fairness
   b. Schmidt v Rosewood – beneficiaries of a trust have no right to inspect trust documents but court has discretion to allow them to do so
2. Equity is triggered by unconscionability
3. Those who seek equity must do equity
   a. Equitable remedies won’t be granted if C doesn’t intend to treat D fairly
   b. Chappell v Times – employees denied remedy because they refused to sign an undertaking not to strike in the future
4. Those who come to equity must come with clean hands
   a. Remedies will not be granted to C who has acted improperly
   b. Dering v Earl of Winchelsea – legal impropriety only (not moral); conduct must relate to relief sought
5. Equity treats as done that which ought to be done
   a. If A has a specifically enforceable contractual obligation to transfer property to B, Equity will regard it as transferred
6. Equity protects the weak and vulnerable
7. Equity is cynical
   a. In certain cases Equity will mistrust gifts and hold that donee is holding them on a trust on behalf of donor
8. Equity is imaginative
9. Equity follows the law
   a. Equity recognizes Common Law principles but doesn’t apply them slavishly or always
10. Equity looks to substance rather than form
11. Equity will not assist a volunteer
12. Equity assists the diligent
    a. C may be denied a remedy due to lapse in time
13. Equity is equality
    a. If there are multiple equitable interests, they are treated equally
14. Equity acts in personam
    a. Rights destroyed when bona fide acquirer acquires the property (no rights in rem)

Question 2

II. Rule against perpetuities

Answer 2

Purpose trusts and gifts to unincorporated associations can infringe the perpetuity period and the latter may also raise problems of future vesting. The rule against perpetuities was reformed by the Perpetuities and Accumulations Act 2009 (a product of the 1998 LRC report). It still applies to trusts but abolishes the rule against perpetuities in most real property contexts. The perpetuity period is now simply 125 years (s.5).

Question 3

II. Rule against perpetuities

A - Rule against remoteness of vesting

Answer 3

A - Rule against remoteness of vesting

Question 4

II. Rule against perpetuities

B - Perpetuity Period

Answer 4

• Common Law: Life in being plus 25 years
• Reformed by Perpetuities and Accumulations Act 1964: possible to specify a period not exceeding 80 years
• Reformed by Perpetuities and Accumulations Act 2009: 125 years even if trust specifies a different period

Question 5

II. Rule against perpetuities

C - Wait-and-See Rule

Answer 5

• Under common law: if at the outset property may not be vested within the perpetuity period it is considered void
• Under the Perpetuities and Accumulation Act 2009: if at any one time it possible that property will not vest during perpetuity period it is not to be treated as void until it is certain that it will not vest.

Question 6

II. Rule against perpetuities

D - Duration of Purpose Trusts

Answer 6

• Charitable purpose-trusts: since these are vested in the public there is an interest in them lasting forever so Act does not apply
• Non-charitable purpose-trusts: Act still doesn’t apply but since no public interest these are caught by common law perpetuity rules

Question 7

Charitable purpose trusts

Answer 7

Charities are numerically (165,000 charities registered with the Charity Commission (‘CC’)), financially (annual income of £70M), and politically significant.

• Charity = an institution established exclusively for charitable purposes and is subject to the jurisdiction of the High Court (CA 2011, s1(1))
• CPT = one of the methods of implementing a CP – others include incorporating a charitable company (“charitable incorporated organization” – Part 11 CA 2011), or unincorporated association to effect a CP

Question 8

I. Requirements for Charitable Institution

Answer 8

• Established for a purpose that the law recognizes as charitable
• Purpose must benefit the public or a sufficient section thereof
• It must be wholly and exclusively charitable

Question 9

II. Advantages of a Charitable Trust (over a private trust)

6 listed:

Answer 9

• No need for ascertainable beneficiaries
• Duration (not subject to perpetuity rule)
• Certainty of purpose (more flexible than private trusts)
• Tax advantages (no income and capital gains tax)
• Cy-près (if CPT fails, funds will be used for another CP) – whereas where a private trust fails, the trust funds will be returned to the settlor by resulting trust
• Exception to the Equality Act 2010 (charities can adopt discriminatory charitable objects that can be objectively justified as a proportionate means of achieving a legitimate aim, or are a means of preventing or compensating for a particular disadvantage – s193(2)(a))

Question 10

III. Regulation and supervising of Charities

1. who enforces the CPTs?
2. Who determines whether an institution is charitable?
   - concerns that they are not exercising their powers appropriately?
3. Tribunals
   - JR?
   - Jurisdiction?
   - who can initiate?
   - with whose authorisation?
4. Who develops law of charity?

Answer 10

1. AG (enforces CPTs in the name of the Crown)
2. Charity Commission (s15 CA 2011) (determines whether institutions are charities, identifies misconduct, maintains register of charities – can direct charity trustees to take particular actions in the interests of the charity (s84)…) growing concern that the CC is not exercising its powers appropriately in determining whether an institution is a charity (Luxton and Evans)
3. Tribunals
   o Judicial review of Charity Commission’s decisions (though will only be available in the “most exceptional cases” because JR is not normally available where another procedure exists (charity proceedings) – Scott v National Trust (1998) per Rober Walker J)
   o Jurisdiction in charity proceedings (disputes relating to the internal or functional administration of a charitable trust – s115 CA 2011)
   ♣ can only be initiated by someone “interested in the charity” (someone with an interest in securing the due administration of the charity greater than or different from that of the general public – Re Hampton (1989))
   ♣ with the authorization of the Charity Commission (to prevent charities from “frittering away money subject to charitable trusts in pursuing litigation relating to internal disputes” – Muman v Nagasena (2000) per Mummery LJ)
   - Courts (develop law of charity)

Question 11

IV. Courts won’t Consider whether Political Institutions are Beneficial to the Public

3 reasons:

Answer 11

• Ct has no means to judge whether proposed change is beneficial
• Ct follows principle that the law is right where it stands or it would trespass on function of legislature
• Law should not stultify itself by holding change is beneficial

Question 12

V. Charitable Purposes

Answer 12

• Trust can only be CPT if it contains only charitable purposes
• Incidental NCP won’t prevent trust from being enforced
• Otherwise the trust will be declared void unless valid NCPT
• Exceptionally funds can be severed so some goes to CPT and others either a valid NCPT or resulting trust for settlors

Question 13

Law Before the Charities Act 2006 and 2011

I. Requirements

Answer 13

• Come within spirit of preamble to Statute of Uses 1601
  o Consolidated into four heads under Pemsel
• For the public benefit
  o Identifiable – presumed for poverty, education and religion
  o Public/section of the public
• Purpose must be exclusively charitable
  o Baddley failed because in “promotion of the religious, social and physical wellbeing…” ‘social’ was broader than charitable
  o Re Sanders failed because a gift for the working class was not a trust for poverty (not all the working class was poor)

Question 14

Law Before the Charities Act 2006 and 2011
II. Tests for “section of the public”

1. Trusts for the relief of poverty
2. Trusts for the advancement of education
3. Trusts for the advancement of religion
4. Trusts for other purposes

Answer 14

1. Trusts for the relief of poverty
o	Identifiable class of poor people (Dingle v Turner)
o	May be very narrow class of beneficiaries
♣	Re Segelman (‘poor relatives’ case - valid)
♣	Re Coulthurst (‘poor employees’ case - valid)

2. Trusts for the advancement of education
   o Nexus test (there must be no personal connection (by blood or contract) between beneficiaries and any given person) (Oppenheim v Tobacco Securities)
   ♣ Re Crompton (trust for education of descendants of named persons invalid)
   ♣ Oppenheim (beneficiaries were children of employees of a group of companies invalid)
   o Criticisms of the Nexus test – Lord MacDermott’s dissent in Oppenheim
   ♣ No fundamental distinction between emplyoees in an industry before it is nationalized (impersonal nexus – would be valid) and those employed once nationalized so one employer replaces many (personal nexus)
   ♣ Trust for railwaymen working north of Watford would avoid nexus whereas those working for identifiable named railway company would not
   ♣ Test should be one of fact and degree taking into account potential size and number of beneficiaries
   ♣ All Lords in Dingle v Turner agreed obiter and approved fact and degree test – majority in Oppenheim seems to be concerned with not giving tax perks

• Trusts for the advancement of religion
  o Members of religion have contact with community
  o Gift to cloistered nuns uncharitable (Gilmour v Coats)
• Trusts for other purposes
  o No presumption of public benefit – combination of nexus and ‘class within class’ test (IRC v Baddley)
  ♣ Class within class – bridge in town used only by Methodists (class – Methodists – within class – town)
  ♣ Court distinguishes between a gift that could be enjoyed by public but chosen to be used by few (valid) and the other way around (invalid)

Question 15

Law Before the Charities Act 2006 and 2011
III. Insufficiencies of the Law

5 points:

Answer 15

• No statutory definition of charity
• Public benefit is presumed in certain cases
• Charitable status defined by 400-year-old statute
• Case law sometimes inconsistent and difficult to reconcile
• Separate tests for public benefit

Question 16

Law Before the Charities Act 2006 and 2011

IV. Advantages of Charitable Status

Answer 16

• Less stringent test for certainty of objects (no need for identifiable beneficiaries)
• Tax advantages
• Perpetuity rules of inalienability do not apply
• Cy-pres doctrine may permit a failed gift to be transferred to a charity with similar objects

Question 17

New Law: Charities Act 2006 and 2011

I. Charities Act 2011

Answer 17

• Consolidates CA 2006, 1993 and doesn’t alter the 2006 Act
• Statutory definition of ‘charity’ – S1(1)
• Meaning of ‘charitable purpose’ – S2(1) as those that fall within S3 and public benefit under S4
• Charitable heads – 13 heads including the charitable purposes under existing case law (thus old law still applies)
• Recreational trusts are charitable if they provide facilities for leisure time activity in the interests of social welfare (S5) – relevant for eg. ‘village halls’ or ‘sports centres’

Question 18

New Law: Charities Act 2006 and 2011
II. Heads of Charitable Purposes

1. Prevention of relief of poverty
2. advancement of religion

Answer 18

1. Prevention or relief of poverty
   o Re Coulthurst – poverty doesn’t mean ‘destititution’ but people who have to ‘go short’
2. Advancement of education
   o Re Delius – this includes schools, universities, museums, scholarly societies, industrial and technical training, music and fine arts
   o Re Pinion – expert evidence can determine what is educational
   o Re Koeppler – though political objects will not qualify gifts strictly educational but involving political debate will

Question 19

New Law: Charities Act 2006 and 2011
III. Public Benefit

1. does the presumption of public benefit still apply?
2. Benefits must be identifiable

(i) clear what the benefits are
- Gilmour v Coates
- McGovern v AG
- Re Hetherton

(ii) benefits must be related to the aims
3. Benefit must be to the public or a section of the public

Answer 19

1. Presumption of public benefit removed (S4(2))
   o Now for the charity to prove public benefit (even for religion, education and poverty)
   o Public benefit assessed by reference to pre-existing law (S4(3))
   o **Thus the new law doesn’t assist with problem of having different tests for ‘section of public’
2. Benefits must be identifiable

(i) It must be clear what the benefits are
♣ Gilmour v Coates – court couldn’t assess public benefit of prayers of cloistered nuns
♣ McGovern v AG – court cannot assess public benefit of political purposes
♣ Re Hetherington – benefit must be capable of being identified, defined or described, not necessarily quantified (saying of public masses charitable though not quantifiable)

(ii) Benefits must be related to the aims
♣ Charity must act within its charitable aims
♣ Where more than one aim, all must be charitable
• If non-charitable element merely incidental to main aims, it will be permitted
♣ Accidental/unplanned benefit excluded in assessment (Oppenheim – public would benefit from education of employees’ children but this is not to be considered)

(iii) Benefits must be balanced against detriment or harm

3. Benefit must be to the public or a section of the public
   o Act has not substantially altered the law and thus there is uncertainty as to status of old tests
   o Beneficiaries must be appropriate to the aims
   ♣ Anyone who is eligible should be able to apply for benefits and not be excluded (this is the ‘fact and degree’ test approved in Dingle v Turner)
   o Benefits must not be unreasonably restricted by geographical restrictions/inability to pay fees
   ♣ Regarding restrictions due to nexus – fact and degree test is to be used
   o People in poverty must not be excluded
   ♣ Independent Schools Council – fee-charging charities must make provisions for the poor to attend and those charging entrance fee must have concessions for poor
   o Private benefits should be incidental
   ♣ Re Koettgen – trust for education of the public but preference be given for employees of a company held valid (no duty on trustees to apply benefit to that class)
   ♣ However this is probably no longer good law as:
   • Criticized in Caffoor
   • Refused to follow in IRC v Educational Grants Association
   • Charity Commission guidelines – only if the preferred class is a section of the public would the charity satisfy public benefit

Question 20

New Law: Charities Act 2006 and 2011
III. Public Benefit
Charities Act 2011 ss 1-5

Answer 20

• Section 2: meaning of “charitable purpose”
• Section 3: heads of charity (replicating some previous statutorily recognized categories, and codifying some others recognized by caselaw)
• Section 4: “public benefit” requirement (abolishing the old presumptions of benefit so that if in each case an organization cannot prove its purposes benefit the public, it will not be registered and if it’s an existing charity it will cease to be registered)
  o Once registered, charity trustees are under statutory duties to ensure that the charity acts for the public benefit, and to avoid making decisions that adversely affect the charity’s public benefit.
  o The Act doesn’t define public benefit but requires the CC to issue guidance (after carrying out public and other consultation, publish guidance, and charity trustees much have regard to that guidance when exercising any powers or duties to which the guidance is relevant) (section 17)

Question 21

New Law: Charities Act 2006 and 2011
III. Public Benefit
Charities Act 2011 ss 1-5

EXAM POINT

Answer 21

Charities are much more akin to public law than private law, so perhaps it shouldn’t be regulated by the (largely private-law oriented) trusts at all. Thus: (1) the Charity Commission and certain charities that have the characteristics of a public body are subject to JR, (2) it is regulated by the AG, (3) it is heavily dependent on guidance, (4) charity trustees owe statutory duties, (5) the Charities Act itself is mostly about public law – it sets up the Charity Commission and gives it a lot of powers and duties; it is a classic example of a public law statute setting up a public body – it is only incidentally about charitable purpose trusts.

The validity of the CC’s guidance was challenged in Independent Schools Council, and was found to be wanting because (1) incorrect as a matter of law and (2) ambiguous and obscure. It was then withdrawn and new guidance issued in 2013

Question 22

New Law: Charities Act 2006 and 2011
III. Public Benefit

Charity Commission, Analysis of the Law relating to Public Benefit (September 2013)

Intro

Answer 22

• The Commission’s public benefit guidance is not the law on public benefit (which is contained in charities’ legislation and decisions of the courts); it is high level general guidance, written for charity trustees, to explain what the law says on public benefit and how the CC interprets and applies that law.
• The CC makes decisions about public benefit in individual cases based on the law as it applies to the facts of the particular case, and not on this high level guidance, because its general guidance cannot cover all the complexities of the law.

Question 23

New Law: Charities Act 2006 and 2011
III. Public Benefit

Charity Commission, Analysis of the Law relating to Public Benefit (September 2013)

What “for the public benefit” means:

Answer 23

• Benefit aspect” =
  o the purpose must be beneficial (in a way that is identifiable, provable by evidence, and not based on personal views) +
  ♣ In some cases the purpose is so clearly beneficial that there is little need for trustees to provide evidence to prove this (ex. Purpose to provide emergency aid to natural disaster victims)
  ♣ Where it is not clear that a purpose is beneficial, the Commission may need to ask for evidence of this (ex. artistic merit of a collection for advancement of art purpose, architectural or historical merit of a building preserved under an advancement of heritage purpose…)
  o any detriment or harm that results from the purposes must not outweigh this benefit
  ♣ Where the benefit of a purpose is obvious and commonly recognized, there is an even greater need for evidence of detriment or harm to be clear and substantial if it is to outweigh the benefit

EXAM POINT

How is this (in some cases… clear and substantial… also the example (infra) of benefiting the public being conservation of an endangered species, and if the purpose doesn’t specify who benefits it’s taken that everyone can) not operating a presumption? Also, even where evidence is required, it is only the artistic/historical/educational merit that requires evidence, not the purpose in itself.

Question 24

New Law: Charities Act 2006 and 2011
III. Public Benefit

Charity Commission, Analysis of the Law relating to Public Benefit (September 2013)

“Public aspect” =

Answer 24

o The purpose must benefit
♣ the public in general (all of the public can benefit) or
• If purpose does not specify who can benefit, it will generally be taken to mean that it will benefit the public in general
• Example of a purpose for the benefit of the public in genera = conservation of an endangered species
♣ a sufficient section of it (no set minimum number, and will depend on the purpose):
• Defining according to people living in any geographical area (doesn’t have to be in England) will be sufficient unless too narrowly defined (ex. A few identified houses)
• Defining according to people with a particular charitable need is sufficient.
• Defining according to “protected characteristics” (Equality Act) must be justified in relation to the purpose
o Skin colour – not allowed (the purpose will be read as if that reference to skin color did not exist)
• Defining according to occupation or profession can be sufficient (ex. Relieve the sickness of teachers and their dependents is fine)
• Defining according to family relationship, contractual relationship or membership of an association is not allowed unless poverty
• Defining by reference to other personal characteristics (ex. employment status) will depend on the circumstance
o The purpose must not give rise to more than incidental (i.e. necessary result or by-product of carrying out the purpose) personal benefit (i.e. a benefit to an individual or organization)

Question 25

New Law: Charities Act 2006 and 2011
III. Public Benefit

Charity Commission, Analysis of the Law relating to Public Benefit (September 2013)

How the commission decides about public benefit:

Answer 25

• Each of a charity’s purposes must be for the public benefit. If a charity has multiple purposes, the Commission will look at each purpose on its own to decide if it is for the public benefit (the public benefit of one purpose cannot be used to offset any lack of public benefit in another)

Question 26

I - THE STRUCTURE OF ‘CHARITY’

Independent Schools Council v Charity Commission [2012] 1 All ER 127, [41]-[92] (Upper Tribunal)
How to find public benefit:

Answer 26

• Before the 2006 Act:
  o The courts have adopted an incremental and somewhat ad hoc approach in relation to what benefits the community or a section of the community. There has never been an attempt comprehensively to define what is, or is not, of public benefit. It is possible, however, to discern from the cases two related aspects of public benefit.
  ♣ First sense - The nature of the purpose itself must be such as to be a benefit to the community (in this sense the advancement of education has the necessary element of benefit to the community)
  ♣ Second sense - Those who may benefit must be sufficiently numerous, and identified in such manner as, to constitute what is described in the authorities as “a section of the public” (as Re Oppenheim illustrates, the advancement of education satisfies the first sense; but the practical restriction of the benefits to children of employees of certain employers was in effect to render the trust a private trust, because it was not for the benefit of a sufficient section of the public)
  o Result of the incremental test = what satisfies the public benefit requirement may differ markedly between different types of allegedly charitable purposes caution must be exercised in applying authorities decided in one area of charity to another area

Question 27

II – Heads of Charity (section 3 CA 2011)
A - ‘RELIEF OF Poverty’
1 – Charitable purpose

Independent Schools Council [2012] 1 All ER 127 (meaning of “poverty”)

Answer 27

• Meaning of “rich” and “poor”
  o “poor” does not mean destitute - a poor person is a person who cannot reasonably afford to meet a particular need by purchasing at the full cost price the service which it is the charity’s purpose to provide. (The meaning of “poor” may vary across the different heads of charity.)
  o “rich” does not mean extremely wealthy but rather a person who can afford to meet a particular need by purchasing at the full cost price the service which it is the charity’s purpose to provide, although many people could not afford to do so.

Question 28

II – Heads of Charity (section 3 CA 2011)
A - ‘RELIEF OF Poverty’
1 – Charitable purpose

Re Coulthurst [1951] Ch. 661

Answer 28

• A fund for the widows and orphans of officers of a bank whose financial circumstances were such that they were considered to deserve assistance was charitable.

Question 29

II – Heads of Charity (section 3 CA 2011)
A - ‘RELIEF OF Poverty’
1 – Charitable purpose

Re Niyazi [1978] 1 W.L.R. 910 (Megarry VC)

Answer 29

• A testamentary gift to construct working men’s hostel in Cyprus was charitable.
• Distinguished from Re Sander’s Will Trust on the basis that:
  o The word “hostel” has a strong flavor of a building that provides modest accommodation for those who have temporary need. And prefixing with “working men’s” denotes that the hostel is intended for those with relatively low income.
  o Thus, the need is for working men (≠battered wives, students…) and not better-paid working men who can afford something superior to hostels. This is different from “dwellings”, a word which is appropriate to ordinary houses in which both the relatively poor and well-to-do may live
• This case is “desperately near the border-line” but it is charitable, though “by no great margin”, and is supported by two further considerations:
  o The amount of the trust fund (low amount that won’t go very far in the envisaged project)
  o The state of housing in the area where the trust envisages constructing the hostel – a trust to erect a hostel in a slum or area with acute housing need (where the poor are likely to suffer more than the prosperous, so the hostel would be likely to help the poor and not the rich) may have to be construed differently from a trust to erect a hotel with housing affluence.

Question 30

II – Heads of Charity (section 3 CA 2011)
A - ‘RELIEF OF Poverty’
2 – Public Benefit

Answer 30

Because of the clear benefit to the State from relieving poverty, it is easier to justify allowing fiscal privileges to such charities, so that even though the “presumption” of public benefit for charities for the relief of the poor has been removed, the “public benefit” requirement has been interpreted as capable of relating to much smaller classes of potential beneficiaries than for other categories.

Question 31

II – Heads of Charity (section 3 CA 2011)
A - ‘RELIEF OF Poverty’
2 – Public Benefit

Re Segelman [1995] 3 All E.R. 676, 687-694 (poor relations – open class upon testator’s death)

Answer 31

• A trust for the a designated group of the testator’s family created a charitable trust.
• Chadwick J: The question was whether the class was so narrow that it was really a gift to the individual members of the class. IJO it is not because the class was not closed upon the testator’s death but remained open for another 21 years. It is impossible to attribute to the testator an intention to make a gift to those after-born issues as such – his intention must have been the relief of poverty among the class of which they would become members.

Question 32

II – Heads of Charity (section 3 CA 2011)
A - ‘RELIEF OF Poverty’
2 – Public Benefit

Dingle v. Turner [1972] A.C. 601; [1972] 1 All ER 878 (poor employees – indistinguishable from poor relations)

Answer 32

• A trust to pay “pensions to poor employees of Dingle and Co Ltd” who were aged or incapacitated, was charitable.
• Lord Cross:
  o The distinction between a charitable and public trust depends on whether, as a matter of construction, the gift was for (1) the relief of poverty amongst a particular description of poor people, or (2) a gift to particular poor persons, the relief of poverty among them being the motive of the gift.
  o Appellants sought to rely on Re Oppenheim
  o The “poor relations” trusts have long been recognized, and to draw a distinction between different sorts of “poverty” trusts would be illogical and could not be said to introduce “greater harmony” within trusts law.

Question 33

II – Heads of Charity (section 3 CA 2011)
A - ‘RELIEF OF Poverty’
2 – Public Benefit

Independent Schools Council [2012] 1 All ER 127 (meaning of “poverty”)

Answer 33

• Confirms that the law has not been changed by CA 2011 – that trusts for the relief of poverty defined in relation to (1) relationship, (2) employment or former employment and (3) members of an unincorporated association as all capable of being charitable trusts (in answer to the AG’s questions)
  This was confirmed by the Charity Commission Guidance (2013).

Question 34

II – Heads of Charity (section 3 CA 2011)
B - ‘ADVANCEMENT OF Education’

1 – Charitable Purpose

Answer 34

• Education includes:
  o Teaching
  o Vocational training
  o Practice containing spiritual, moral, mental and physical elements (IRC v Mcmllen per Lord Hailsham)
  o Research (though in assessing whether it is educational the court has regard to its aims and utility)

Question 35

II – Heads of Charity (section 3 CA 2011)
B - ‘ADVANCEMENT OF Education’
1 – Charitable Purpose

*Incorporated Council of Law Reporting v. A-G [1972] Ch. 73 (research)

Answer 35

• Facts: whether a trust for the publication of law reports advances education (YES – because it assisted research into the law and disseminated knowledge of the law)
• Buckley LJ:
  o Education is regarded as extending to the improvement of a useful branch of human knowledge and its public dissemination.
  o In our legal system, legal scholarship can only be acquired through a continual study of caselaw, so the Law Reports are beneficial to those who use law in practice, academically, trade/business/profession/affairs – the reports enable readers to study the law of the country.
  o Though the objects of the council are commercial (i.e. the council exists to publish and sell its publications), it is charitable because it is unself-regarding – the members are prohibited from deriving profit, and the council can only use profits in furtherance of its objects.
  Thus, “education” used to be widely interpreted as including the promotion of the arts and culture, but since this was separated out in the 2006 Act, it is no longer necessary to give “education” such a wide meaning.

Question 36

II – Heads of Charity (section 3 CA 2011)
B - ‘ADVANCEMENT OF Education’
1 – Charitable Purpose

*Re Hopkin’s Will Trusts [1965] Ch. 669; [1964] 3 All ER 46 (research)

Answer 36

• Facts: whether a gift to the Francis Bacon Society to identify evidence in support of his authorship of the plays attributed to Shakespeare (by searching for an original manuscript) was charitable (YES)
• Wilberforce J: The court is only concerned with the practicality and legality of carrying out the testator’s wishes (not with any conclusions about the authorship of the plays)
  o Is it so manifestly futile and devoid of any possibility of result that the court shouldn’t allow the money to be spent on it? NO – success is unlikely but the degree of improbability has not been reached that justifies this conclusion.
  o Would it add nothing worthwhile because we already have the texts of the play? NO – a manuscript would solve the authorship problem (which IJO is enough), but also improve the text or lead to more accurate dating.
  o Is there any authority that leads to conclusion that it is not charitable?
  ♣ Re Shaw (research must be combined with teaching or education):
  • This does not mean that the promotion of academic research is not charitable unless the researcher engaged in teaching or education in the conventional meaning
  • It merely means that research must either be of educational value to the researcher or must be so directed as to lead to something which will pass into the store of educational material, or so as to improve the sum of communicable knowledge in an area which education (understood in the wide sense extending to formation of literary taste and appreciation) may cover
  • Research of a private character, for the benefit only of the members of a society, would not normally be educational or otherwise charitable (but in this case it was inevitable and manifestly intended that results would be published)

Question 37

II – Heads of Charity (section 3 CA 2011)
B - ‘ADVANCEMENT OF Education’
2 – Public Benefit

Answer 37

Very significant for education (especially after presumption was removed), because tax advantages are particularly important here (esp. independent schools).

Question 38

II – Heads of Charity (section 3 CA 2011)
B - ‘ADVANCEMENT OF Education’
2 – Public Benefit

*Oppenheim v. Tobacco Securities Trusts Ltd [1951] A.C. 297; [1951] 1 All ER 31 (applies the personal nexus test)

facts/held

Answer 38

• Facts: whether a trust fund for the education of children of employees of a Company or any of its subsidiaries or allied companies as the acting trustees shall in their absolute discretion think fit (110,000 people)
• Held: because the qualifications to benefit was based on a personal nexus between settlor and those who might benefit, the class of beneficiaries was not a section of the public so was not charitable. It was therefore a private trust that was void for perpetuity.

Question 39

II – Heads of Charity (section 3 CA 2011)
B - ‘ADVANCEMENT OF Education’
2 – Public Benefit

• Oppenheim v. Tobacco Securities Trusts Ltd [1951] A.C. 297; [1951] 1 All ER 31 (applies the personal nexus test)
• Lord Simonds:

Answer 39

o	A trust by father for son’s education is not charitable (even though everyone might benefit from the son’s education)
o	A trust to establish a university, or to endow it by creating a scholarship is charitable
o	The difficulty is where the trust is not for the benefit of any institution, but for the benefit of a class of persons at large – the class must satisfy the test for “sufficient section of the public”:	
♣	Must not be numerically negligible (in this case satisfied) 
♣	Quality that distinguishes the class from other members of the Community cannot be based on relationship with a particular individual (in this case not satisfied because based on employment by particular employers)

Question 40

II – Heads of Charity (section 3 CA 2011)
B - ‘ADVANCEMENT OF Education’
2 – Public Benefit

• Oppenheim v. Tobacco Securities Trusts Ltd [1951] A.C. 297; [1951] 1 All ER 31 (applies the personal nexus test)
• Lord MacDermott (dissenting):

Answer 40

o	The class is large (110,000) – the large size is not decisive but cannot be left out of account
o	The beneficiaries are not limited to those presently employed but extend to former employees, nor to those of the company, but include employees of subsidiaries. 
o	The settlor had a special interest in the welfare of the particular class, but this is irrelevant except in explaining the particular form of the trust – what is material is the fact that the settlor has chosen to benefit (1) a class of substantial size and (2) demonstrates an intention to advance the interests of that class as a class and not collection of particular individuals. 
o	Holding otherwise would distinguish arbitrarily between sectors with many employers (ex. A trust for education of miners in London is fine) and nationalized sector with a single employer (ex. A trust for education of miners employed by the National Coal Board is not), or would otherwise force the first category also to lose charitable status. 
o	The personal nexus rule is very arbitrary and artificial: it was conceded that if the trust were for children of those engaged in the tobacco industry in Town X it would be charitable, even though it would benefit a far smaller number of people. 
It will also create confusion in case of many institutions whose charitable status has never been called into question.

Question 41

III – The Public Benefit Requirement (section 4 CA 2011)

Answer 41

• At least for charities that charge high fees, it seems that the term “public benefit” has been replaced by “social benefit” (because the charitable status of fee-charging independent schools – where the purpose of providing education is unquestionably charitable in nature – now at least in part depends on the extent of benefits offered to people who can’t afford their fees)
• The Commission’s plan to remove charitable status to organizations that failed to meet the “new public benefit test” was supposed to be for widening access to education and facilities offered by independent schools, but its effectiveness appears to be limited to the social benefits of threatening charities with a loss of status (and tax privileges, and possible threat to trustees for breach of trust), for actually removing charitable status would also remove the charity from the Commission’s jurisdiction, and therefore, remove any continuing obligation to provide social benefit.

Question 42

III – The Public Benefit Requirement (section 4 CA 2011)

Independent Schools Council [2012] 1 All ER 127 (pre-2006 state of the law regarding public benefit test)

Answer 42

Independent Schools Council [2012] 1 All ER 127 (pre-2006 state of the law regarding public benefit test)
(a) what was the meaning of “public benefit” as understood under pre–existing law? This is important becausesection 3(3)incorporates that understanding into the meaning of those words in the 2006 Act.

• The courts have adopted an incremental and somewhat ad hoc approach in relation to what benefits the community or a section of the community. There has never been an attempt comprehensively to define what is, or is not, of public benefit. It is possible, however, to discern from the cases two related aspects of public benefit.
  o First sense - The nature of the purpose itself must be such as to be a benefit to the community (in this sense the advancement of education has the necessary element of benefit to the community)
  o Second sense - Those who may benefit must be sufficiently numerous, and identified in such manner as, to constitute what is described in the authorities as “a section of the public” (as Re Oppenheim illustrates, the advancement of education satisfies the first sense; but the practical restriction of the benefits to children of employees of certain employers was in effect to render the trust a private trust, because it was not for the benefit of a sufficient section of the public)
• Results of the ad hoc development =
  o what satisfies the public benefit requirement may differ markedly between different types of allegedly charitable purposes caution must be exercised in applying authorities decided in one area of charity to another area
  o the authorities do not provide a comprehensive statement of the elements of the public benefit requirement but rather a series of examples of when the public benefit requirement is or is not satisfied
  o the relationship between the requirement immediately before the 2006 Act and the much earlier requirement of falling within, or within the spirit of, the Preamble [of the 1601 Act] is not entirely clear, but it is for our purposes sufficiently clear that:
  ♣ (1) A gift which did not fall within, or within the spirit of, the Preamble would not be regarded as charitable even if the nature of the purpose was beneficial to the community. It is trite law that not all purposes beneficial to the community are charitable.
  ♣ (2) A gift which fell within the express words of the Preamble might nevertheless fail to be charitable if the nature of the purpose was not such as to be beneficial to the community and so fell outside the spirit of the Preamble (ex. A school to train pickpockets)
• Therefore, we do not consider that a trust for the advancement of education is necessarily for the public benefit simply because it is such a trust, even if it is directed to a sufficiently wide section of the community. The terms of a particular trust have to be considered on a case-by-case basis although, as we will see when considering the alleged presumption of public benefit, that is not as radical a result as it may seem.
• Therefore, before the 2006 Act, “public benefit” encompassed the two elements identified above.
  (b) What presumptions, if any, were made under pre–existing law about purposes being for the public benefit? This is important sincesection 3(2)only has effect in relation to such presumptions.
  (c) To what extent do the material provisions of the 2006 Act reflect the pre–existing law? Is there any change at all other than that it is not to be presumed that any purpose is for the public benefit?
  (d) In the light of the answers to those questions, what effect doessection 3(2)have?

Question 43

III – The Public Benefit Requirement (section 4 CA 2011)

Independent Schools Council [2012] 1 All ER 127 (pre-2006 state of the law regarding public benefit test)

EXAM POINT

Answer 43

And it is “not as radical as it may seem” because there is a presumption – and even though ISC doesn’t consider that a trust for the advancement of education is necessarily for the public benefit, the CC (in its guidance) suggests that the only evidence that will be necessary is the educational merit of something, not the purpose of education being charitable itself. Though it will inevitably reach the same result, it is unclear…

Question 44

III – The Public Benefit Requirement (section 4 CA 2011)

A - ‘BENEFIT’
National Anti-Vivisection Society v IRC [1948] AC 31

Answer 44

• The public benefit test is not satisfied because the detriment to the public of banning experimentation on animals (i.e. adverse effects on medical research) outweigh the putative benefit from the welfare of the animals.
• Lord Wright says it fails for two reasons:
  o It is not beneficial to the community.
  ♣ What [anti-vivisection] seems to do however is to destroy a source of enormous blessings to mankind. That is a positive and calamitous detriment of appalling magnitude. Nothing is offered by way of counterweight but a vague and problematical moral elevation.
  ♣ The law may well say that quite apart from any question of balancing values, an assumed prospect, or possibility of gain so vague, intangible and remote cannot justly be treated as a benefit to humanity, and that the appellant cannot get into the class of charities at all unless it can establish that benefit.
  ♣ On the other hand, the vivisectionists can fairly claim that their purpose is charitable and would generally be so recognized either under the fourth head or under the head of advancement of learning. The whole tendency under the fourth head is towards tangible and objective benefits and at least that approval by the common understanding of enlightened opinion for the time being is necessary before an intangible benefit can be taken to constitute a sufficient benefit to the community.
  o It is a political purpose in that its object is to secure legislation to give legal effect to it.

Question 45

III – The Public Benefit Requirement (section 4 CA 2011)

A - ‘BENEFIT’
National Anti-Vivisection Society v IRC [1948] AC 31

EXAM POINT

Answer 45

The definition of “public benefit” will always favour certain kinds of interests (i.e. those that can be quantified) over other kinds of interests (those that cannot be quantified, that might be by nature vague and based on moral values) but nevertheless not inferior. How are judges supposed to weigh up these incommensurate interests?
It also demonstrates how the interpretation of public benefit can change over time – 50 years earlier (before awareness of benefits of animal experimentation on medical research) it had been held that a society whose purpose was to stop experiments on animals was charitable (Re Fouveaux)

Question 46

III – The Public Benefit Requirement (section 4 CA 2011)

A - ‘BENEFIT’

Independent Schools Council [2012] 1 All ER 127 (indirect and wider benefit can be relevant to public benefit test)

Answer 46

• Some charities have purposes which have the primary effect of conferring direct benefits on certain individuals (ex. Education), while other charities have purposes which confer benefits on the public much more indirectly (ex. Animal welfare). Some are in between (ex. Maintaining a bridge – direct to those who use it and indirect to those who don’t)
• Se distinguish the following three types of benefit.
  o (1) Direct benefits: benefits to persons whose needs it is a purpose of the charity to relieve which are received by such persons as recipients of the main service which the charity provides.
  o (2) Indirect benefits: benefits to persons whose needs it is a purpose of the charity to relieve which are received by such persons otherwise than as recipients of the main service which the charity provides.
  ♣ The benefit must relate to the charitable purpose:
  • Allowing the public to use the school’s facility was not relevant because it would not advance education
  • Student involvement in community projects as part of the school’s citizenship education programme is a relevant public benefit
  • Education in independent schools benefits the public by taking students out of the State sector, but this would make little, if any difference (because the benefit is highly speculative)
  o (3) Wider benefits: benefits other than direct and indirect benefits which are received by the community at large from the activities of the charity.
• Also distinguish groups of people benefited:
  o (1) Potential beneficiary: the group whose particular need it is a purpose of the relevant charity to relieve.
  o (2) Beneficiary: a person who actually receives the main service provided by the charity.
• Meaning of “rich” and “poor”
  o “poor” does not mean destitute - a poor person is a person who cannot reasonably afford to meet a particular need by purchasing at the full cost price the service which it is the charity’s purpose to provide. (The meaning of “poor” may vary across the different heads of charity.)
  o “rich” does not mean extremely wealthy but rather a person who can afford to meet a particular need by purchasing at the full cost price the service which it is the charity’s purpose to provide, although many people could not afford to do so.

Question 47

III – The Public Benefit Requirement (section 4 CA 2011)

A - ‘BENEFIT’
Gilmour v Coats [1949] AC 426

Answer 47

• Law is life, not logic – this is conspicuously true of the law of charity, which has built up not logically but empirically while in every category of legal charity some element of public benefit must be present, the court had not adopted the same measure in regard to different categories. To argue by a method of syllogism or analogy from the category of education to that of religion ignores this historical process of the law (cited with approval by UT in ISC)

Question 48

III – The Public Benefit Requirement (section 4 CA 2011)

B – Not political objectives

Answer 48

• Rationale for the rule that a trust for political objectives will be invalid:
  o Not because it is illegal but because the court has no means of judging whether a proposed change in the law will or will not be for the public benefit (Bowman v Secular Society, per Lord Parker)
  o But this might be “too dogmatic a view” (for in Anti-Vivisection Society the court did weigh up the competing benefits and harms – Hanchett-Stamford v AG per Lewison J), so a second reason is that the law cannot stultify itself by holding that it is for the public benefit that the law itself should be changed (National Anti-Vivisection Society per Lord Simonds)
  o The court would otherwise trespass on the role of the legislature whose constitutional responsibility is to evaluate the need for such changes (McGovern v AG per Slade J)
• But a charity is allowed to use political means to further non-political purposes as long as these are not the dominant means by which the charity carries out the charitable purpose.
• Rule has been criticized as being out of date

Question 49

III – The Public Benefit Requirement (section 4 CA 2011)

B – Not political objectives
Stevens and Feldman (1997)

Answer 49

• The fundamental objection (courts cannot judge) is plainly spurious – in a relativistic age and a mature democracy, the law should be able to uphold as charitable objects which are diametrically opposed to each other (provided they are for the public benefit in the view of a ‘sizeable body of adherents’).
• Religious purposes diametrically opposite each other are already upheld as equally charitable.
• Should extend to include (inter alia) human rights – the very fact that the UK has acceded to international conventions is indicative that the pursuit of such objectives should be conclusive evidence of benefit to the community.

EXAM POINT
Now that the advancement of human rights is a specific charitable purpose (since the 2011 Act), do concerns about not allowing political objectives still matter?

Indeed in National Anti-Vivisection Society, the HL judged that a proposed change in the law (banning vivisection) is not in the public interest… So how can it claim that it can’t judge and in the same case confirm that political objectives can’t be charitable?
Also the distinction between whether political purpose is main or only incidental purposes is hard to draw… Thus, according to Davies and Virgo, a political purpose should only not be charitable if (1) the detriment to the public outweighs the benefit as determined by the CC or Court, or (2) the objective is a party-political objective (because the fiscal benefits of charity law should not support such purposes).
Thus, both Australian High Court (Aid/Watch Incorporated) and New Zealand Supreme Court (Re Greenpeace) have recognized that political objectives can legitimately be charitable if they generate a public benefit.

Question 50

Adrian COLLECTION ON ‘PUBLIC BENEFIT’

Intro

Answer 50

law has lost its way and become muddled with impossibly fine distinctions.

1. the approach outlined in the quotation from ISC case is liable only to confuse, offering little guidance to charities and is intellectually dishonest.
2. though the approach evinced may sometimes be beneficial in the light of difficulties with measuring ‘benefit’, these are outweighed by greater incoherences around the finding of benefit in the charities act 2011.
3. the quest to provide meaning to ‘public benefit’ has only become harder due to the introduction of a third sense of benefit in the ISC case itself

Question 51

Adrian COLLECTION ON ‘PUBLIC BENEFIT’

1. No presumption of public benefit

Answer 51

The headline position, per s.4(2) CA 2011 is that there is never any presumption of ‘benefit’, even if the cause is one listed in s.3(1). If there hadany benefit pre-2006 which would be incorporated into the current law by s. 4(3), s. 4(2) abolishes it.

Yet despite s. 4(2) in ISC, the court said that the position remained that of national anti-vivisection society - that though there was never any formal presumption of benefit, the starting point of a judge in certain conventional contexts was that benefit would be readily found on the basis of the terms of the trust being able to ‘speak for themselves’ but that despite this, a judge would be prepared to find the category if so required. And conversely, the approach in a non-conventional context was that a balancing of benefit and disadvantages was to be undertaken; and that if a judge was to be convinced that something which was typically beneficial was not, the strongest evidence would have to be adduced to displace the status quo.

This meant the law does contain a fine distinction which is capable of being drawn. there is a difference from a formal presumption of evidence which has to be displaced and a mere assumption in the judge’s mind, is nothing more than a mere disposition in favour of one particular side. Yet, in practice, this distinction is one that will often elide charities and be exceedingly difficult to discern, thus offering no guidance to charities on whether they are likely to convince a court. The better approach would be to either adopt the balancing exercise in all scenarios, such that benefit will always have to be found on the facts, or clearly explicate which categories will feature a judge readily finding benefit in the absence of contrary evidence, and thpse categorised in which a full balancing exercise is required.

Question 52

Adrian COLLECTION ON ‘PUBLIC BENEFIT’

2. this approach has its merits

Answer 52

That being said, the ISC approach in the quotation may have some merits.

1. may be hard to undertake a full balancing exercise in every scenario because of the tangibility of the benefit (as in Gilmore v Coates), the impossibility of measuring the benefits, or the inability of the court to take them into account (e.g. because they are political (McGo,, v AG)). It would be hard for a court to undertake a balancing exercise in the face of little ascertainable evidence and so it makes sense for a court to be able to readily find benefit in some scenarios. For instance, in some scenarios, the benefit to local state schools by relieving them of additional pupils and tax funds was highly speculative, while the mentioned benefit can only be proven by looking at side-effects extrinsic to actually itseld e.g. religious advancement is often demonstrated by its secular side-effect (Neville Estates v Madden) and the promotion of animal welfare is often proved to be beneficial by its innate tendency to stem human cruelty (Hanchett-Stanford v ag).

The wider law of benefit seems riddle with problems when considering many strrange points that the ISC case seemed to introduce a 3rd sense of ‘public benefit’ rooted on any authority: a duty to (?) the (?) based on a results-oriented feeling by the court that ‘private schools should be seen to be doing their bit’. This new sense of benefit further complicates the existing law, as benefit cannot be automatically assumed from e.g. the fact that scholarships are availabl, unless it can be proved that those who would otherwise go to state schools could otherwise not afford the fees (which cannot be assumed).

Question 53

Adrian COLLECTION ON ‘PUBLIC BENEFIT’

3. Conclusion

Answer 53

The ISC case confuses an already confused area of law riddle with impossible distinctions. A clearer approach to benefit and the approach a judge will take is required.