purpose trusts (workbook)

Question 1

do charitable purpose trusts have beneficiaries?

Answer 1

no, but they are recognised despite the absence of ascertainable beneficiaries since they are for public benefit

Question 2

when are non-charitable purpose trusts valid?

Answer 2

• if the trust is created in a will
• if it falls into the Endacott exceptions to beneficiary principle

Question 3

for how long can charitable purpose trusts exist?

Answer 3

forever / in perpetuity

Question 4

what is a key benefit of obtaining charitable status?

Answer 4

tax benefits

Question 5

can non-charitable purpose trusts be enforced?

Answer 5

no (‘trusts of imperfect obligation’)

Question 6

for how long can non-charitable purpose trusts exist?

Answer 6

restricted in duration by the common law perpetuity rules

Question 7

what is the rule against remoteness of vesting

Answer 7

applies to trusts with beneficiaries or charitable
purposes as their objects.

Question 8

what is the rule against inalienability

Answer 8

• non-charitable purpose trusts

Question 9

to have charitable status, a trust must:

Answer 9

1. be for a charitable purpose;
2. satisfy the public benefit test; AND
3. be wholly and exclusively charitable

Question 10

what are the 12 heads of charity?

Answer 10

• poverty;
• education
• religion
• health / saving lives
• citizenship / community development
• arts / culture / heritage / science
• amateur sport
• human rights / conflict resolution / reconciliation / promotion of religious or racial harmony or equality and diversity
• environmental protection or improvement
• relief of those in need because of youth, age, ill health, disability, financial hardship or other disadvantage
• animal welfare
• armed forces / police / fire / rescue services / ambulance services
  (+ other additional purposes - catch-all)

Question 11

what are the rules relating to prevention or relief of poverty?

Answer 11

• Poverty means ‘going short’
• Poverty does not mean destitution
• Poverty is a relative concept, judged against a person’s ‘status in life’
• The purpose must not benefit the rich, otherwise it will not be ‘wholly and exclusively charitable’
• Poverty can be temporary, available due to a sudden change of circumstances
• Poverty can be inferred (eg provision of a soup kitchen)

Question 12

what are the rules relating to the advancement of education?

Answer 12

• scholarships
• lectureships
• ancillary organisations eg students’ union, provided it exists to further the educational purposes of the institution
• dissemination of knowledge

Question 13

case law on advancement of education is not entirely consistent e.g.,

Answer 13

Re Shaw: developing a 40-letter phonetic was held to be an increase in knowledge, but not held as a charitable object because there was no element of teaching or education.

versus

Re Hopkins’ Will Trust: gift was left on trust for the purpose of researching whether plays
attributed to Shakespeare may have been authored by Francis Bacon. The Judge was not constrained by ‘an element of teaching or education’ requirement; instead, he held that the research must be ‘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’.

either way, both cases predate the statutory requirement to prove public benefit, which was previously presume.

Question 14

Charity Commission guidance (non-exhaustive list of other educational purposes):

Answer 14

• Museums, galleries, libraries, scientific institutes
• Pre-schools, playgroups, summer schools and homework clubs
• Organisations supporting the work of educational establishments such as parent-teacher associations, teacher training organisations or exam boards
• Organisations providing life skills training such as the Duke of Edinburgh award schemes,
  Scouts and Guides

Question 15

what are the definition of religion?

Answer 15

Charities Act definition - religion includes:
- belief in more than one god; and
- no god.
Charity Commission guidelines:
* Belief in a god or goddess, or supreme being, or divine or
transcendental being or entity or spiritual principle which is the
object or focus of the religion
* A relationship between the believer and the supreme being or entity by showing worship of,
reverence for or veneration of the supreme being or entity
* A degree of cogency, cohesion, seriousness and importance
* An identifiable positive, beneficial, moral or ethical framework
- includes scientology

Question 16

trusts for religion:

Answer 16

• Support of a religious order such as a monastery or convent (Re Banfield)
• Public masses celebrating the dead (Re Hetherington)
• The repair of churchyards or burial grounds (Re Douglas)

Question 17

The advancement of health/saving of lives

Answer 17

includes:
- complementary, alternative or holistic methods as well as conventional methods, though to be charitable there must be sufficient evidence for the claimed benefits of the method used
- relief of the sick, including the provision of hospitals or healthcare advice
- rescue services including associations, mountain rescue and
cave rescue.

Question 18

Citizenship/community development

Answer 18

includes:
(a) Rural and urban regeneration
(b) The promotion of civic responsibility, volunteering, the voluntary sector or the effectiveness or efficiency of charities

Question 19

when might a trust for Citizenship/community development be deemed as not wholly and exclusively charitable?

Answer 19

an organisation was held not to be a charity because, in addition to providing vocational training for the unemployed, it also promoted trade, commerce and enterprise and provided advice to new businesses (IRC v Oldham Training and Enterprise Council)

Question 20

Charity Commission guidance on art

Answer 20

the art needs to be of merit, the assessment of which may require expert evidence.

Question 21

case law on art

Answer 21

Re Delius (in relation to promoting the music of the composer Delius): was considered charitable, though
the judge left open the question as to the consequence if the trust had related to a lesser
composer.

versus

Re Pinion (in relation to the settlor’s art collection): Court of Appeal described the collection as ‘junk’

Question 22

under which head can monuments be charitable (if of cultural or historical importance)?

Answer 22

Arts, culture, heritage or science

Question 23

are monuments to private individuals more likely to be charitable or non-charitable purpose trusts?

Answer 23

non-charitable purpose trusts

Question 24

what is meant by heritage?

Answer 24

• part of a country’s
  local or national history and traditions which are passed down through successive generations
• preservation of historic land and buildings and might also include
  activities concerned with preserving or maintaining a tradition (where the benefit to the public in
  preserving it can be shown).

Question 25

meaning of sport under Charities Act

Answer 25

sports or games which promote health by involving physical or mental skill or exertion.
- football
-athletics
-chess (mental skill)

Question 26

how is relief of those in need different to relief of poverty?

Answer 26

• a person does not need to be poor to be in need
• but they must have a specific need

Question 27

example of relief of those in need?

Answer 27

accommodation was provided for the elderly without a poverty
requirement. In fact the tenants could sell their leases and make a profit. The purpose was found
to be charitable on the basis that the tenants had a need (for suitable/accessible accommodation) which the charity sought to relieve by providing suitable accommodation (eg
with communal services and a warden).

Question 28

what does the advancement of animal welfare include?

Answer 28

• particular types of animal (eg cats and kittens)
• animals generally
• improving methods for slaughtering animals

❌ONE animal (eg a pet) is not included, but possibility to be a non-charitable purpose trust❌

❌abolition of vivisection (seen as a political purpose seeking a change in the law + does not need public benefit test)❌

Question 29

in relation to efficiency of public services, what has been upheld by case law / suggested by the Charity Commission?

Answer 29

• fund for the promotion of physical fitness (Re Gray)
• the provision of a library for an army regiment (Re Good)
• Increasing technical knowledge of members of the services through the provision of educational resources, competitions and prizes
• Providing opportunities for services personnel to gain additional experience relevant to their jobs

Question 30

what is a long-standing principle of charitable purposes?

Answer 30

recognising charitable purposes by analogy - hence, s3(1)(m)

Question 31

what happens if a trust has a mixture of charitable and non-charitable purposes?

Answer 31

• the trust will be void unless the non-charitable purpose falls within a recognised category of non-charitable purpose trusts. If the trust fails, the property will return to the settlor on a resulting trust.
• If the non-charitable purpose can be construed as ‘incidental or subsidiary’ to the main,
  charitable purpose, the trust will remain effective (Latimer v IRC).
• If the charitable and non-charitable purposes can be separated, and a portion of the fund allocated to each, the court will ‘sever’ the trust and recognise the charitable part. This will only be possible if the trust language contemplates severance of the fund (Salusbury v Denton). This requires the amount allocated to each purpose to be quantifiable (Re Coxen).

Question 32

what is the meaning of public benefit?

Answer 32

• There is no presumption of public benefit (s 4(2))
• Charity trustees must have regard to any guidance published by the Charity Commission in
  pursuance of its public benefit objective

two elements:
1. is there an identifiable benefit; and
2. what constitutes the public, or a section of the public

Question 33

what is an identifiable benefit?

Answer 33

• The settlor’s belief as to benefit is not relevant.
• Benefit is balanced against any detriment or harm arising from the purpose
• benefit must be capable of being identified and described even if it cannot be quantified or measured
• If it is not
  obvious that the purpose is beneficial, the Charity Commission may require evidence

Question 34

cases where an identifiable benefit was not found?

Answer 34

• Re Hummeltenberg: A benefit could not be identified in relation to a training college for
  mediums notwithstanding the settlor’s belief that it was beneficial.
• National Anti-Vivisection Society v IRC: The adverse effect on medical research outweighed the
  benefit arising to the welfare of animals of abolishing vivisection.

Question 35

what is the public or section of the public?

Answer 35

• The possible beneficiaries must not be negligible in number; and
• The quality which distinguishes them from other members of the community must be a quality which does not depend on their relationship to a particular individual (Oppenheim - a trust for the education of children of the employees of a company of 100k staff was held not to be charitable because the beneficiaries where defined by reference to their personal relationship with the employer).

Charity Commission guidance provides that charities can choose to focus on certain beneficiaries
provided that:
- they have proper reasons for doing so
- the poor are not excluded from benefit
- the people focused on are a sufficient section of the public for the charity’s purpose - subjective depending on the charity

Question 36

can charities charge for their services or make a profit?

Answer 36

✅ charging for services
✅ making a profit, provided it is reasonable and necessary to deliver the charity’s aims

BUT
❌ fees should not unreasonably restrict opportunity to benefit

Question 37

what is deemed to be a political objective?

Answer 37

• seek to change the law
• seek to change government policy
• promote the views of a political party

Question 38

can charities pursue political objectives?

Answer 38

no, however the use of political means to achieve a non-political objective can be charitable.

Question 39

distinction between political purposes which are not charitable, and the use of political means to achieve a non-political objective which may be charitable

Answer 39

A trust set up by Amnesty International included the objective (among others) of securing the
release of prisoners of conscience by procuring the reversal of government policy (McGovern v
Attorney General - non-charitable

An organisation set up to protect the environment carries out a range of activities including
political activity aimed at changing government policy in relation to airports (Charity Commission
Guidance) - charitable

Question 40

poverty and the public benefit test

Answer 40

poor persons - public element is inferred

Question 41

education and the public benefit test

Answer 41

in The ISC v The Charity Commission:
Identifiable benefit: The benefit of providing education was not outweighed by the social
mobility implications of the requirement to pay fees.

Section of the public: Although the accessibility of the benefit can be restricted by a requirement to pay fees, if fees are of a level which the poor cannot afford the trustees must make provision so that the poor can otherwise benefit. This benefit must be more than a de minimis or ‘token’ benefit. However, once that hurdle is met, it is for the trustees to determine how this requirement might be met in the particular circumstances (eg provision of scholarships or making teaching materials or other facilities (such as
swimming pools or sports grounds) available).

Question 42

religion and the public benefit test

Answer 42

Gilmour v Coats: a gift on trust to secluded nuns did not have public benefit. The decision would have been different had the nuns gone out into the community.

Neville Estates (Catford Synagogue): land held by the Synagogue was charitable, because there was deemed to be a benefit to the public from mixing with others in a place of worship, in contrast with the secluded nuns.

Question 43

where a private trust fails, what happens?

Answer 43

there is usually a resulting trust to the settlor

Question 44

where a charitable purpose trust fails, what happens?

Answer 44

• Charitable trusts are therefore subject to the cy-près doctrine: where a charitable purpose trust fails, any surplus funds will be applied to
  another charitable purpose by way of a scheme established by the Charity Commission or court

Question 45

what is the purpose of the cy-près doctrine?

Answer 45

• A person who donates property to a charitable purpose therefore knows that it will be used for
  general charitable purposes, even if the particular purpose fails
• a resulting trust would defeat the intention of the person who had dedicated their property to a charitable purpose

Question 46

what are the five grounds on which the original purpose of a charitable gift can be altered? (s62 Charities Act 2011)

Answer 46

(a) The original purpose has been fulfilled or cannot be carried out.
(b) The original purpose may still be workable but does not provide a use for all the property available to the trust (ie there are surplus funds).
(c) The property from similar trusts is combined so as to be used more effectively.
(d) The original purpose referred to an area or class of persons which is no longer relevant or
suitable.
(e) The purpose has:
(i) Been adequately provided for by other means;
(ii) Ceased to be charitable in law; or
(iii) Ceased to provide a suitable and effective method of using the property.

Question 47

Key case on the cy-près doctrine: Biscoe v Jackson

Answer 47

The intended purpose was the provision of a soup kitchen and cottage hospital for the parish of Shoreditch. Suitable land could not be found and so the purpose failed. However, the court found that there was a general charitable intention to benefit the sick and poor of the parish. The impossibility only related to the form of the gift, and the general charitable purpose could be
executed cy-près.

Question 48

Key case on the cy-près doctrine: Re Good’s Will Trusts

Answer 48

A trust to provide rest homes in Hull was found to be too specific to demonstrate a general charitable intention. The testator had created detailed plans relating to the management of the homes which the court found to be inconsistent with a general charitable intention.

There could therefore be no cy-près application of the funds when they transpired to be insufficient for the intended purpose.

Question 49

what is another name for a non-charitable purpose trust?

Answer 49

private purpose trust / trusts of imperfect obligation

Question 50

requirements for non-charitable purpose trusts (Re Endacott)

Answer 50

(a) Trusts for the maintenance of particular animals
(b) Trusts for the erection and maintenance of monuments and graves
(c) Trusts for conducting religious ceremonies, provided they comply with certainty and perpetuity requirements
((d) Gifts to unincorporated associations?)

NOTE: UNLIKE CHARITABLE PURPOSES, NON-CHARITABLE PURPOSE TRUSTS MUST FALL SQUARELY WITHIN AN EXCEPTION.

Question 51

Why are non-charitable purpose trusts sometimes known as trusts of imperfect obligation?

Answer 51

although the court recognises their validity (meaning they
will not fail if included in a will), they are not enforceable

Question 52

how can a court make a non-charitable purpose trust enforceable?

Answer 52

the appointed trustee must be willing to carry out the terms of the trust.
- If so, the court will make a Pettingall order
- If not, the testator’s residuary legatees (who would otherwise receive the property) can sue to enforce the undertaking and prevent a misapplication of the fund

Question 53

what is broadly the rules around perpetuity for a non-charitable purpose trust?

Answer 53

the trust should be drafted with an express perpetuity clause to ensure it does not fail for want of perpetuity