Charitable trust Flashcards
Must fall under?
Definition of charity in s 1 CA 2011. “Charity is an institution that is established for charitable purposes only”
s 3 (1) Charities act
Charitable purposes means one of the purposes & is for the public benefit
Charitable trusts must be?
Exclusively charitable
The benefits of the trust must be?
- Related to the aims of the charity
- Balanced against any detriment or harm
caused. - To the general public
The public interest test will fail where?
There is a link between the donor and the beneficiaries
Re Compton - public interest
A trust for the education of three of the settlor’s relatives was held not to be charitable
A charity can give preference to particular individuals but?
Needs to be a sufficient section of the public to satisfy the test, and usually must be public
Gilmour v Coats - public interest
Gift failed because it was made to an order of 20
cloistered nuns who did not engage with wider society
Oppenheim v Tobacco Securities (1951) - public interest
Beneficiaries cannot be
numerically negligible and should not be connected between themselves by
blood or contract. This was a gift for the education of the children of employees of British American Tobacco. Therefore, they are too connected and too small
Relief of poverty will always?
Be in the public interest, even where the classes of beneficiaries is very small
Dingle v Turner (1972) - relief of poverty
Allowed a charitable trust for the relief of poverty among employees of a company
Re Coulthurst’s Will Trust (1951) - Lord Evershed - relief of poverty
“poverty does not mean destitution; it is a word of wide and somewhat
indefinite import; it may not unfairly be paraphrased for present purposes as meaning persons who have to ‘go short’ in the ordinary
acceptation of that term, due regard being had to their status in life, and so forth”
Re Sanders (1954) - relief of poverty
A gift failed because it was held that w/c people cannot necessarily be claimed to be in poverty. Working class and poverty are not synonymous. Equally, being middle class does not prevent destitution.
Re Niyazi’s Will Trusts (1978) - relief of poverty
Here a gift for the construction of a working men’s hostel was held to be a charitable purpose. Hostels are used to house those who cannot afford housing.
Re Shaw (1957) - education
George Bernhard Shaw left a legacy for the research and
development of a 48 letter alphabet. Held that the advancement of education must involve some element of learning and teaching. Not just about the increase in
knowledge.
Incorporated Council for Law Reporting of England and Wales v AG (1971) - education
Whether law reports could fall under the head of education. AG argued that it was merely providing lawyers with ‘tools of their trade’. Not charitable:
A charity that is for … will fail
Political purposes
A charity that’s aim is to bring about change within the law will?
Fail, will be considered political
Mc Govern v IRC (1982) - political purposes
Amnesty International were held not to be charitable because they campaigned for changes in the law, release of
prisoners, abolition of torture and observance of human rights. They now have two arms - one charitable
and one non-charitable
A charitable trust
Property settled on trust for charitable purposes and
is managed by one or more trustees
An unincorporated charitable association
Purposes of the UA are entirely charitable and its income is more than £5,000 pa, requires registration with the CC
Charitable Incorporated Organisation (CIO)
Requires incorporation
and registration with the Charity Commission.
Important characteristics of charitable incorporated organisation
- Legal entity
- Registration is long
- If the association stops being entirely charitable, will be forced to close.
Charitable company
- A limited company (usually by guarantee as cannot distribute to shareholders). Must have charitable aims.
- strict requirements of filing accounts
Tax advantages of being a charity
- Tax exemptions
- No income tax on interest, provided it is applied only for charitable purposes
- No CGT
- Exemptions from VAT
- 80% exemption from business rates
- No charge to inheritance tax if someone dies and leaves a gift to charity
Charitable trusts are not subject to?
The beneficiary principle.
Distinctive features of the charitable trust
- purpose trusts and will fail if they are not expressed to be for a charitable purpose.
Charitable trusts undermine?
the principles applicable to private purpose trusts and the idea that there is nobody to enforce the trust and that it would be contrary to the process of transferring property because there would be no beneficial owner.
Private purpose trusts have problems with?
Enforcement because usually
private trusts are enforced by the beneficiary. However, charitable trusts are enforced by the AG on behalf of the Crown.
Charitable objects need not be
Certain, as long as there is general charitable purpose, the Charity Commission or the courts will fill the gap
A perpetual trust for charity would be?
Valid
When private trusts fail, the property is usually held on?
Resulting trust for the settlor. When charitable trusts fail, the cy-pres doctrine may step in to save the gift
Failure of objects in a private purpose trust - cy-pres
The property will revert back to settlor on resulting trust
Failure of purpose in a charitable trust
The doctrine of cy-pres may operate
Cy-pres doctrine
As near as possible to the testator’s or donor’s intentions when these cannot be precisely followed.
In some circumstances, the trust property can? - Cy- pres
Be applied to other charities with the same purposes, where there was a general charitable intention
Statutory extension of the meaning of failure - cy- pres
Under common law, had to show it was impossible or impracticable to carry out the purpose.
Where initial failure of charitable purpose, the property will only be applied cy-pres where
The donor can be shown to have a ‘general charitable intention’ rather than merely wanting to benefit one
cause
Subsequent failure - cy - pres
Will be applied cy-pres, whether or not there was
a general intention
What happens even when the charity ceased to exist?
The purpose may carry on
elsewhere
Re Faraker (1912) - Cy-pres
Money left to ‘Mrs Bailey’s Charity, Rotherhithe’. This charity (assisting widows) had been consolidated with other local charities.
Re Slatter’s Will Trust (1964) - Cy- pres
Money left to a tuberculosis hospital. This had been closed down because TB had been controlled in the
area. Held that there was initial failure of purpose as the purpose had
failed
Re Rymer (1895) - cy - pres
Where the gift is clearly for a specific charitable institution, rather than the general purpose, and the institution
ceases to exist before the death of the testator, there will be initial failure
Re Finger’s WT (1972) - cy - pres
Will also be dependent on whether the charity was incorporated or unincorporated. Gift to an unincorporated charity will always be for a purpose and there will be no initial failure
if the purpose continues elsewhere. Gift to an incorporated charity is
to a separate legal person and will fail if the body no longer exists.
If no general charitable intent
Will revert to the settlor on resulting trust
Re Rymer (1895)
Testator left money for the education of priests at a seminary in London. This had closed down and students transferred to Birmingham. Held: the testator meant to benefit the seminary rather than the purpose and the trust failed. Gift was too specific.
Re Good’s Will Trusts (1950)
Money was left to buy land and build six rest homes. The money was insufficient for this. Held: the money could not be applied cy-pres because the testator had been too specific as to their wishes
Re Harwood (1936)
Testator left money to Wisbech Peace Society and the Peace Society of Belfast. WPS did exist but had closed down before testator’s death. PSB had never existed. Only the money to PSB could be
applied cy-pres. Naming an existing charity is likely to make it too specific
– the non-existent charity shows a general purpose
Re Spence (1979)
Gift to a specific old people’s home. The home had
closed down. Held not to be general enough to be a gift to the old in the area.
Re Finger’s WT
Will find general charitable intent where the charity has
amalgamated with another and is still continuing
Re Slevin (1891)
Gift to an orphanage. The orphanage closed after the
death of the testator (so gift took effect) but before assets were distributed. The funds were applied cy-pres.
Re King (1923)
Gift for the construction of a stained glass window. There
was £1,000 surplus. This was applied cy-pres despite no general charitable intention
s 62 Charities Act 2011 - failure
Allowed greater court freedom to modify the purposes of a charitable trust.
Under s 62 Charities Act 2011 the court is allowed to alter the purpose of the trust when?
Original purposes in whole or part have been fulfilled OR where they “cannot be carried out, or not according to the directions given and to
the spirit of the gift”
Under s 62 Charities Act 2011 - the court is allowed to alter the purpose of the trust where the trust property?
- Can be more effectively used in conjunction with
other available property for similar purposes
When the purpose of the trust ceases to be appropriate what will the court do?
Under s 62 Charities Act 2011 - the court can alter the purpose of the trust. When the area/ class of persons ceases to be inappropriate
Under s 62 Charities Act 2011 - when the court makes alterations to the trust they must?
Consider both the spirit of the gift concerned (donor intentions) and “the social and economic circumstances prevailing at the time of the
proposed alteration of the original purpose”
Cy-pres doctrine operates to?
Change or modify the purpose of a charitable
trust where the original purpose is no longer possible or practicable
