VIII - Charitable purpose trusts Flashcards
Does a charitable purpose trust require beneficiaries?
They don’t have a beneficiary who has a vested interest in trust property: object of trust is charitable purpose. They are enforced by the AG. (Attorney General)
Why does the law permit charitable trusts?
- Charitable purpose trusts (unlike private purpose trusts) are upheld because of their value to society.
What advantages do charities enjoy?
- Charities enjoy a number of fiscal and legal advantages, including:
- Fiscal: Relief from income tax, corporation tax, CGT, stamp duty, VAT and inheritance tax.
- Legal: Exemption from the rule against perpetuities and limitation periods on bringing enforcement proceedings.
What tax advantages do charitable trusts have?
- No income or incorporation tax. No capital gains tax, gains from VAT with regards to some supplies. If you can become a charity, you are tax exempt from a wide range of situations.
- Recognising a purpose as a charity has huge tax implications. Dingle v Turner – automatic to tax relief
- When deciding whether there should be a charitable purpose trust, should the courts decide whether it exists for the public benefit? because public money will be spent for this purpose: not pay VAT or income tax. Money given to charity will not be taxed. These moneys cannot be spent on education etc – there is an opportunity cost to recognising this charity.
- Thrust of this argument of lord Cross in Dingle v Turner has been rejected largely by courts. For tax purposes is purely for parliament to decide. Court should not take this into account but Lord Cross’ views have been influential.
What are the legal advantages of charitable trusts?
- Rule against perpetuities does not apply to CP
- No limit as to how long it can be conveyed
- Unlike most private trusts, trustees can act by a majority vote as to how the charitable property will be used. Most private trustee require trustee to act unanimously unless provision saying otherwise
- No limitation period for bringing enforcement proceedings
- Private period – limitation period for sueing trustee (6 months)
- This limitation period does not apply to CT
Charitable purposes are those which:
- Benefit the public; and
- On the authority of statute and common law are defined as ‘charitable’
In order for a purpose to be charitable:
- The character of the purpose must be legally charitable recognised as being a charity.
- The purpose must satisfy the public benefit test: it must be beneficial to society;** and it must **benefit a significant section of the public (as opposed to a class of private individuals as opposed to a class, must exist for a public benefit.
- The purpose cannot be political Cannot be specific for the repeal of a legislation – this is political.
- The purpose must be exclusively charitable (eg: cannot involve the distribution of profits to private individuals as this would be a private trust)
What does:
- The character of the purpose must be legally charitable:
mean?
- Charities Act 2011: Recognised Heads of Charity
- “The Old law” s. 3(1)(m)(i) Charities Act 2011
- Growth by analogy with Existing Charitable Purposes
What is s2-3 Charities Act 2011?
These are recognised Heads of Charity.
Charities Act 2011, ss. 2-3 provides a list of purposes which are regarded as charitable. S2(1)(a) and s3(1) gives statutory meaning of charitable purpose but it does not constitute a legal definition of charitable purpose, only lists.
Why is the old law under s3(1)(m)(i) CA 2011 relevant?
Older case law is relevant because s3(1)(m) specifically preserves any charities recognised by old law (pre 2006 common law), which slowly recognised new charities over time. Need to look at history to work out what charities have been recognised.
Scottish Burial Reform v Glasgow Corporation
per Lord Reid: when looking at if a charity, prior to 2006 and 2011, the law recognised what was charitable by looking at the statute of Elizabeth.
Ask if it is within the statute, if not, ask whether it can be analogised within the state.
Must show that the “public benefit is of a kind within the spirit and intendment of the Statute of Elizabeth I.”
“all that is necessary to bring the objects and activities of the appellants within the spirit and intendment of the preamble to the Statute of Elizabeth I is to find an alogous decided cases”
Held: the question for HL was whether trust for cremation of corpses was charitable (this was not listed in 1601 preamble). Held: it was charitable, by analogy of upkeep of graveyards and churches (contained in 1601). Analogy built upon analogy. Trust for repair of churches are in 1601 preamble and by analogy the repair and upkeep of graveyards and churches was an analogy held correct, within this, the cremation of corpses fell within this exception of an exception.
Preamble to the Statute of Charitable Uses 1601:
The statute of Elizabeth I
If not listed within the 1601 preamble or has not been previously argued, the courts could argue by analogy.
When courts were presented with a new purpose, deciding whether it was a charitable nature, the courts would look towards the 1601 preamble, if the purpose was not here, they would say “is this new purpose analogous to anything in the preamble”.
Facts of Scottish Burial: the question for HL was whether trust for cremation of corpses was charitable (this was not listed in 1601 preamble). Held: it was charitable, by analogy of upkeep of graveyards and churches (contained in 1601). Analogy built upon analogy. Trust for repair of churches are in 1601 preamble and by analogy the repair and upkeep of graveyards and churches was an analogy held correct, within this, the cremation of corpses fell within this exception of an exception.
What does s(1)(m)(ii) and (iii) mean?
This analogising has been preserved within the 2011 statute within the (s3)(1)(m). This analogising reasoning means that even if the purpose is not within a-l, if it is analogous to these purposes, then they can recognise it as a new purpose within (m). This form of analogising reasoning has been popular with courts – it means the law will be flexible. As society changes, new charitable purposes can be. In 1601 would not have recognised trust for the provision of cremation services, but now it has been.
Criticisms of the rules on identifying charitable purposes
- The analogical reasoning employed by the courts is unprincipled
- Analogical reasoning does not account for how the consequences of charitable status have changed over time.
- Fiscal Consequences : lord Cross’ concerns
- The distinction between Purposes and Activities
Vancouver Regional v MNR
The analogical reasoning employed by the courts is unprincipled
Access to internet is not within the statute. But by analogy the statute “ highway and bridges” was analogous to the internet. Holding a trust for internet services are therefore charitable. Such reasoning between highways for internet and highways has drawn criticism.
The preamble [to the Statute of Charitable Uses] speaks of repair of bridges, ports, causeways and highways. These were, of course, at the time essential means of communication…
“it is within the spirit and intendment of the preamble…’”
What are the consequences of chartiable status having changed over time?
Recognising charitable purposes are important for tax relief and the benefit of society. But in past, recognising purposes as charitable in nature did not have those consequences. The Mortmain Act held: gifts of land for charitable purpose are void. There was a concern that it should not be given over for charitable purposes and land held in perpetuity.
In the past, recognising a purpose as charitable had the effect of rendering the gift void. As a result, the courts adopted a wide definition of charity in order to set aside gifts of land.
Thornton v Howe
Facts: Land given on trust to publish the religious works of Joanna Southcote. Romilly MR called her works “foolish” and “ignorant”, but nonetheless held it a charitable purpose. As a result, it was void under the Mortmain Act 1736, 9 Geo II, c. 26. Southcote declared herself pregnant by the holy ghost. The testatrix bequeathed land for publishing works of Southcote. Is this a charitable purpose: if so, the gift of land would be void. Romilly MR held: this was a charitable trust for the advancement of religion. Therefore, under the Mortmain act, the trust was void. A wide definition of charitable purposes was given by the mortmain act which now gives advantage to other people.
New purposes can be recognised by analogy to the previous case law, even though the effect of the gift of land was to make the gift void. The fact it was recognised as a valid charitable purpose meant that later charities can argue by analogies that their purpose is similar and so should get tax exemptions.
Dingle v Turner
Fiscal Consequences : lord Cross’ concerns
- Charitable status automatically entitles a purpose to significant tax exemptions.
When considering whether a purpose is charitable, the courts do not consider specifically one purpose over another because taxation is a matter for parliament and don’t for courts or charity commission. Nevertheless, the courts avoid the obvious fact that if they recognise a trust as charitable, it will have implications for the revenue.
Lord Cross -
“cannot avoid having regard to the fiscal privileges accorded to charities… Charities automatically enjoy fiscal privileges which with the increased burden of taxation have become more and more important and in deciding that such and such a trust is a charitable trust the court is endowing it with a substantial annual subsidy at the expense of the taxpayer”
What did Lord Cross in Dinge v Turner think?
Lord Cross strongly says that a court OUGHT to consider whether a given purpose will be beneficial to society so that it justifies the tax exemptions. He emphasises that immunity for certain privileges apply for any purpose recognised as charitable, but this is dangerous water, even at HL level. Three other law lords disassociated himself from Lord Cross’s comments
What did Viscount Dilhorne in Dinge v Turner think?
He refused to enter the debate with Lord Cross about the fiscal privileges of a legal charity.
Although he doubts whether the existence be a determining factor in deciding whether a gift or trust is charitable.
R (Independent Schools) v Charity Commission
“Rather, [matters of] tax relief…[are] for Parliament, not for us, to determine.”
Showing the Lord Cross’ approach should not be followed.
Criticisms against the tules on identifying charitavble purposes
- unprincipled/unstructured
- In the 19th Century, finding a purpose as charitable could have effect of making gift void, as a result, the chancery developed a broad definition of what a charity was and even though the Mortmain acts are repealed, the case law remains so modern organisations can use these 19th century case law and be considered charitable. Consequences of charitable status has change over the time.
- Because of the recognition that a purpose is of charitable bring, there is an automatic tax relief, should courts ought to take into account the fiscal consequences of their decision?
- Is this a good use of the money – what is the opportunity cost. Held: this is a matter for the government. Nevertheless, automatic tax uplift which charities receive brings courts closely within the political relief and is this justified.
- Distinction between purposes and charities.
J Garton, Charitable Purposes and Activities
This distinction between purposes and actives presupposes a “bright dividing line” between the two – Said Garton. He said that sometimes the distinction is merely a question of degree.
Garton said: ‘Sometimes the distinction between a purpose and an activity is merely a question of degree.
- J Garton (2014) says this distinction presupposes a “bright line dividing purposes from activities”
- This has proven especially controversial where charities engage in political activities because political purposes are not considered charitable in English law.
National Anti-Vivisection Society v IRC
HL
NAVS was set up to achieve the repeal of the cruelty of animals act 1876. The society argued the repeal of act was ancillary (ancillary activity) to its central purpose – protecting animal welfare. The HL rejected this and even aiming for the repeal of act was all charity did and as such, this activity was its main purpose. Campaigning for repeal of legislation or change in government policy where it is the SOLE purpose of the organisation, so was held not to be a charitable purpose because of its political nature. In this case, because the sole activity was for the repeal of legislation, they said it was A activity but sole purpose and as its sole purpose was political it was not charitable. Not a drawn line between purposes and activities, sometimes we look at the activities to work out what the purpose of the trust are.
Lord Normand thought you can aim to repeal the law but it should not be the SOLE objective. If sole purpose was the repeal of legislation it would be political. In certain circumstances, we must look to the charities activities to discover the purpose, as such a bright dividing line may not exist in practise. This distinction between activities and practises may create uncertainty when deciding whether to recognise new purposes as charitable.
s 2 CA 2011?
provides that a purpose is legal charitable if it falls within the purposes listed in s. 3 and if it satisfies the public benefit requirement in s. 4.
R ( Independent Schools Council) v Charity Commission
per Warren J
- Two senses of Public Benefit
(I) purpose is beneficial to society
(ii) that purpose benefits the whole or a substantial section of society
Did the 1601 Preamble include charitable purposes?
Yes!
Morice v Bishop of Durham
per Lord Eldon: Courts when considering whether a purpose was charitable, the courts should start with the 1601 preamble. Landmark case hitched the law of charity with the 1601 preamble. Lord Eldon approved the following classification of charitable purposes:
- relief of the indigent
- including education, money
- advancement of learning
- advancement of religion
- advancement of objects of general public utility
Commissioners of Income Tax v Pemsel
Lord Macnaughten:
Charity” in its legal sense comprises four principal divisions:
- trusts for the relief of poverty;
- trusts for the advancement of education;
- trusts for the advancement of religion;
- and trusts for other purposes beneficial to the community, not falling under any of the preceding heads.
The “Pemsel heads of charity” as they came to be known remained the starting point for the identification of charitable purposes until the passing of s. 2 of Charities Act 2006 which sought to codify the common law rules. The 2006 Act was, in turn, replaced by the s. 3 of the Charities Act 2011.
Is there a presumption of a public benefit?
Pre-2006: presumption that purposes within the first three Pemsel heads of charity (i.e. poverty, education and religion) were for the public benefit.
But the labour government when passing 2006 charities act, in s3(2) of that act abolished this presumption.
- Presumption abolished by Charities Act 2006, s. 3(2).
- Now contained in Charities Act 2011, s. 4(2):
In determining whether the public benefit requirement is satisfied in relation to any purpose falling within section 3(1), it is not to be presumed that a purpose of a particular description is for the public benefit. Example: If you have trust for advancement of education, you need to prove beneficial for society in a specified benefit to a section of society.
R (Independent Schools Council) v Charity Commission
Warren thought there never existed a presumption of public benefit and as such statutory sections which abolish this presumption had no effect, there was nothing to abolish. Warren explained:
Warren said that there never existed a presumption of certain trusts, but it is a matter of evidence. This is a question of evidence and fact whether any given purpose exists for a public benefit, no presumption, so s4(2) was not needed and was as a result of legislative craftsman misunderstanding the state of the law. Trust for education/religion/poverty etc will not be presumed as a public benefit, the court needs to look at the facts and evidence.
Simple principle in R v CC
Per Warren J
- Charity Commission’s review of fee-paying schools
- Warren J found that there had never existed a presumption of public benefit.
- The Court was entitled to consider :
- The terms of the trust; and
- The available evidence
Example given: a trust to train pickpockets. It is a trust for the advancement of education (within the Pemsal Heads), it may be open to the public. But it is not education of a sort which is beneficial to society (in the first sence)
Can the courts weigh the benefit and detriment for public benefit in the first sence?
- The Court must be convinced that the benefits of the purpose are not outweighed by the harm such a purpose may cause.
- NAVS v IRC [1948] AC 31, 47 (per Lord Wright): Wright made particular reference of weighing the benefit and the detriment. In that case the detriment outweighed the benfits allowing it.
- R (Independent Schools Council) v Charity Commission [2012] Argument from charity commission that private education is awful for society and it does not satisfy the public benefit test in first sense so should not be able to be charitable. Unsurprisingly: Warren disagreed, independent schools were valid trusts for education.
What did Warren J say about weighing up the benefits and detriment?
He said that if it is shown that an object is ordinarily charitable is not [education], then a “clear case will have to be made out”
Contradictory evidence can be drawn and made. It could be argued that fee paying schools are socially divisive. On the other hand, fee paying schools provide bursaries etc. Warren J said that: political resolution needs to resolve this problem. Warren gave a strong judgment saying this is not within competence as a judge to decide. Warren did not explicitly disagree with what Lord Wright said in the IRC, but there must be clear obligations on benefit and detriment. Once the court weighs this, it can only do so on clear evidence that something is detrimental to society. Where evidence is unclear or nonexistence, it is not for the courts to decide, especially in a trust for education where historically it is allowed.
IRC v Baddeley
- Public benefit in the second sense: Benefit to a significant section of the public
Class within a Class
per Viscount Simmonds: A purpose of providing social and recreational facilities to members of the Methodist Church in West Ham was held not to extend to a “sufficient section of the public”; the geographic restriction was reasonable, but the further restriction (i.e. to Methodists) was held to be unreasonable, so did not satisfy public aspect.
Simmonds thought:
“It is not of general public utility: for it does not serve the public purpose which its nature qualifies it to serve.”
Example Simmonds thought of: a bridge which is available for all the public may undoubtedly be a charity and it is indifferent how many people use it. But confine its use to a selected number of persons, however numerous and important: it is then clearly not a charity
Re Compton
Personal Nexus
Facts: A trust for the descendant for X could not be charitable . The Compton test has been used to strike down trusts.
“‘A gift under which the beneficiaries are defined by reference to a purely personal relationship to a named proposition cannot on principle be a valid charitable gift.”
Oppenheim
HL
Lord Simonds -
Facts: A trust will not be valid if there is a factor linking a class of people to a common person. Here, the trust in question was to educate the employees of British American Tobacco, this was held not to be a trust. The HL held, applying the Compton test, that the trust could not be charitable as the only thing linking the employees together was the employer. It was not a trust for benefit of specific section of society but for a private class of individuals linked together.
‘section of the community’ has “no special sanctity”, but indictate that:
- beneficiaries must not be numerically negligible
- the quality does not depend upon their relationship to a particular individual.
Lord Simonds:
“A group of persons may be numerous, but, if the nexus between them is their personal relationship to a single propositus…they are neither the community nor a section of the community for charitable purposes.”
What was Lord MacDermott’s dissent in Oppenheim?
- In Oppenheim, there were over 110,000 current employees of the company. This was a sizeable class. It is such a large class, but the trust apparently failed to benefit a sector of society. The Lords held that the trust was not valid because the class of beneficiaries was not wide enough, when the beneficiaries are huge.
- If the purpose had been “to educate those formerly employed in the tobacco industry” it would have been valid. Moreover, a trust educating those living in a particular region would have been valid, such redrafting would have achieved this purposes.
For Lord MacDermott, the personal nexus test ought not to be automatically conclusive as to whether a class constitutes a section of the public (p 317):
Personal nexus test is capricious (changing), even where there is a large class of beneficiaries, it might still be struck down. Moreover, the test can be avoided through good drafting, for example, by saying the trust is for the education of the children in Bournville, in reality this might only benefit the employees of Cadburys etc. Lord MacDermott’s view was then approved in Lord Cross (HOUSE OF LORDS) in Dingle v Turner.
Dingle v Turner
Lord MacDermott’s view was then approved in Lord Cross (HOUSE OF LORDS) in Dingle v Turner.
OBITER -
In truth the question whether or not the potential beneficiaries of a trust can fairly be said to constitute a section of the public is a question of degree and cannot be by itself decisive of the question whether a trust is a charity. Much must depend on the purpose of the trust.
What is the problem with Oppenheim and Dinge v Turner?
For Lords Macdermott and Lord Cross, there should be a broader formulation of the personal nexus text. The conflict between these two cases were the highest level of judicial (Oppenheim and Dingle v Turner). The narrower test in Compton is artificial and the Dingle v Turner test avoids artificialness but loses certainty.
R (Independant Schools) v CC
In 2008, the Charity Commission began a review of fee paying schools. The CC decided that fee paying schools were required to provide bursaries and to make their facilities available to the general public. Unsurprisingly, the schools sought a judicial review. In this case, Warren took opportunity to review and summarise law on “public benefit”.
Per Warren J:
There are two senses of public benefit: warren distinguishes the two senses of public benefit.
(i) Beneficial to society
(ii) Beneficial to a sufficient section of the public
- A Charitable purpose must satisfy both of these requirements. A purpose which is beneficial to society but does not benefit a sufficient section of the public is not capable of being a charity.
- Provision of education is clearly beneficial to society.
- Fee charging does not prevent a trust being for the public benefit, but a trust which excludes the poor cannot be charitable.
- Fee charging trusts had, therefore, to provide some tangible (more than token) aid to those who could not afford the fees.
Warren J in R (Independent Schools) v Charity Commission
A Charitable purpose must satisfy both of these requirements. A purpose which is beneficial to society but does not benefit a sufficient section of the public is not capable of being a charity.
Warren gave the example of a trust in Oppenheim. The trust was for the education of the children of the employees, trusts for education were within 1601 preamble and specifically mentioned in the Pemsals heads. Therefore, it clearly beneficial to society. Nonetheless because the trust in Oppenheim only benefited the class of people benefiting from a personal nexus, it did not benefit a sufficient section of society so the trust failed the second limb of public benefit test. Applying this reasoning in Independent schools, it was clear that schools had proof both that they were beneficial to society and beneficial to a sufficient section of the public.
Warren J in R (Independent Schools) v Charity Commission
Provision of education is clearly beneficial to society.
The provision of education is within the 1601 preamble and the Pemsal heads. But the question was raised as to whether the benefit that education gives is outweighed by the negative effect of charging fees. This goes back to whether a trust for private education is considered socially divisive so it is inherently unbeneficial to society. This submission was rejected. Warren said that it cannot be for the courts to carry out a political exercise. As a result, the court held the independent schools were found to be for the benefit of society in the first sense.
Warren J in R (Independent Schools) v Charity Commission
. Fee charging does not prevent a trust being for the public benefit, but a trust which excludes the poor cannot be charitable.
Justice Warren in the Independent schools case seems broadly to follow the line of Lord MacDermott and Lord Cross. Warren J made it clear that the mere charging of fees did not prevent a trust from being for the public benefit. Nevertheless, to satisfy the public benefit requirement in the second sense, a trust could not exclude the poor altogether.
He said that “a school for the rich is not charitable because a trust for that class if not for the public benefit”. Therefore, you cannot have a trust for a class that excludes the poor. Just as the beneficiaries in the Oppenheim case were not a sufficient section of society, a trust purely for the benfit of the wealthy could not be for the benfit of society in the second sense. Moreover, the provision of scholarships to some poor students does not turn a non-charitable application of funds to the rich into a charitable application for the benefit of the public.
Therefore, if the school charges high fees and offers one scholarship every 10 years – this does not mean the trust is suddenly charitable. In order to make such a trust exist for the public benefit, it would need more than merely de minimus or token provisions for those who cannot afford the fees.
Therefore, it is not possible to turn a non-charitable operation of the school into a charitable one by providing some benefits which are for the public benefit – one needs to provide something more substantial.
As a result, the independent schools needed to prove that they were doing enough for those who could not afford the fees in order to satisfy the public benefit test. The tribunal left open the question of what was enough to satisfy the public benefit test.
Justice Warren said merely “it has to be more than de minimus or token provisions”. But Warren refused to lay down precise guidelines. In refusing to lay down a strict rule, Warren LJ seemed to be following the approach favoured by lord MacDermoot in Oppenheim and approved by the Lord Cross in Dingle v Turner. Warren said “each case much depend on its own facts” He referred to what Lord MacDemoot and Lord Cross said.
Warren J in R (Independent Schools) v Charity Commission
Fee charging trusts had, therefore, to provide some tangible (more than token) aid to those who could not afford the fees.
We have the minority in Oppenheim (Lord MacDermott’s dissent) supported by Lord Cross in Dingle v Turner, saying we ought not have a single conclusive test for the public benefit in the second sense, it ought to be a broad contextual reflection of the evidence to work out on balance whether the trust exists for the public benefit in the second sense. Warren J is explicitly here attaching himself to Lord MacDermott and Lord Cross at para 216 and 217 of the independent schools case.
NAVS v IRC
HL
The HL held trusts for political purposes cannot be charitable because the courts have no means of judging whether a change in the law would benefit the public.
Facts: The purpose of the trust was to campaign for repeal of the Cruelty to Animals Act 1876. Here there was a fear that the courts might usurp the role of Parliament. The HL stated its opinion: lord simons and lord Wright approved Lord Parker in Bowman v Secular Society (1917).
Lord Simonds and Lord Wright in NAVS v IRC [1948] approved of the earlier statements of Lord Parker in Bowman v Secular Society Ltd
Bowman v Secular Society
Lord Parker-
‘A trust for the attainment of political objects has always been held invalid, not because it is illegal, for everyone is at liberty to advocate or promote by any lawful means a change in the law, 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, and therefore cannot say that a gift to secure the change is a charitable gift
J Garton (2012)
Garton has been highly critical of the reasoning in NAVS an has written critically of the HL’s refusal to recognise trusts with political purposes.
- Granting charitable status to political purposes does not necessarily mean those purposes will be achieved
- Nor does it mean that the court necessarily approves of those purposes or approves of a change in the law;
- Parliament might only take argument under advisement, they would not be required to change the law.
- Charities already try to fulfil their purposes by political means. It is artificial to refuse to recognise political purpose trusts.
Aid/Watch Incorporated v FCT
NAVS v IRC have not been followed in other common law jurisdictions.
Australian Case. Trust whose purpose was to campaign for changes in the law was held it could be beneficial to public because it would encourage public debate. The opinion in this case was partially followed in the Re Greenpeace case
Re Greenpeace of New Zealand
NAVS v IRC have not been followed in other common law jurisdictions.
Chichester Diocesan Fund v Simpson
The purpose must be exclusively charitable
Facts: A trust “for such charitable institution or institutions or other charitable or benevolent object or objects in England” The House of Lords held the bequest void for uncertainty. Trust for advancement of “worthy causes”. HELD: incapable of being a charitable trust because “worthy causes” could involve purposes which were not exclusively charitable
Morice v Bishop of Durham
the trust failed as a charity because the stated objects were for the purposes of “benevolence and liberality” and when courts considered what “liberality” meant, they considered this as too broad a word which could include nearly anything. Held: not exclusively charitable so was not a charitable trust.
AG of the Bahamas v Royal Trust
The purpose must be exclusively charitable
trusts for purposes connected with education and welfare of children and trusts for the public good have been held not charitable for the same reason.
AG of Cayman Islands v Wahr-Hansen
- The purpose must be exclusively charitable
__Trust for the benefit of “worthy individuals” and “organisations and corporations operating for the public good”
Privy Council held there was no intention to confine the purposes of the trust to those which were exclusively charitable.
Guild v IRC
- The purpose must be exclusively charitable.
Although there are some borderline cases:
Facts: Trust for a sports centre “or some similar purpose”. House of Lords held this to mean “some similar charitable purpose”. Here the HL subjected the trust to a benign subjection. They construed the phrase “some similar purpose” as “some similar charitable purpose”. There is scope of a benign construction being used to uphold it as a charitable purpose trust.
AG v McGovern
- The purpose must be exclusively charitable
Although there are some borderline cases:
Per Slade J
Trust purposes included “relief of needy persons” “promotion of research and “abolition of torture”. Trustee then applied to the HL for a declaration that the trust was charitable. Slade J held this was a trust for political purposes, but sought to distinguish charitable purposes from charitable activities. The fact that within the trust instrument one of their purposes was listed as “abolition of torture” as this was one of their purposes and not as one of their incidental activities, it was held to be a trust of political purposes and not exclusively charitable.
‘The distinction is thus one between (a) those non-charitable activities authorised by the trust instrument which are merely subsidiary or incidental to the charitable purpose, and (b) those non-charitable activities so authorised which in themselves form part of the trust purpose. In the latter but not the former case, the reference to non-charitable activities will deprive the trust of its charitable status. The distinction is perhaps easier to apply in practice.’
The prevention or relief of poverty
(i) Public Benefit in the First Sense
Trusts for the relief of poverty were recognised in the 1601 preamble, which spoke of “the relief of aged, impotent and poor people”. S. 3(1)(a) now recognises trusts for relief of poverty as charitable, whilst s. 3(1)(j) recognises trusts for the elderly or infirm.
(i) Beneficial to Society
1601 Preamble
Charities Act s. 3(1)(a)
Re Coulthurst
(a) the prevention or relief of poverty
Poverty does not necessarily mean “destitution”. Poverty is a relative term and can include those who “go short” from time to time.
Facts:
Trusts for “ladies of limited means” were recognised as charitable in Re Garden (1914).
But the purpose must be drafted so it does not include those who are outside this definition of poverty. If you capture those who are outside this definition of poverty it is not a trust exclusively for the relief of poverty and cannot be charitable.
Re Sanders’ WT
(a) the prevention or relief of poverty
Facts: the trust was to ‘provide dwellings for the working classes and their families’. It was declared that a trust for working classes was not a trust for the relief of poverty because the expression “working class” did not indicate poverty.
Strong statement here that the description of the class for relief of poverty must NOT include anyone who does not fit the definition of poverty in Re Coulthurst!
Re Niyazi’s Will Trusts
(a) the prevention or relief of poverty
Facts: the case was “desperately near the border-line”. Boarderline case. £15,000 on trust to construct a working man’s hostel in Cyprus. Upheld for purpose of poverty. Megarry V-C said the size of the gift, the extent of the housing shortage in Famagusta and the description “working man’s hostel” was sufficient to uphold the trust as charitable trust for the alleviation of poverty.the case was “desperately near the border-line”. Boarderline case. £15,000 on trust to construct a working man’s hostel in Cyprus. Upheld for purpose of poverty. Megarry V-C said the size of the gift, the extent of the housing shortage in Famagusta and the description “working man’s hostel” was sufficient to uphold the trust as charitable trust for the alleviation of poverty.
Megarry fights hard to find this a valid charitable trust in the face of what Justice Harman had said in Re Sanders about working classes. He said it was desperately a case of the borderline.
What did the charity commission say about pverty?
Charity commissions recent guidance provides the following definition:
“households living on less than 60% of medium income who go short in some unacceptable way”.
As long as trust is drafted so that it only covers those who are within that definition of poverty, they will be capable as being trust for the relief of poverty.
Do trusts for the relief of poverty fall within the “personal nexus” test?
Trusts for the relief of poverty are an exception to the “personal nexus” test in Oppenhiem v Tobacco Securities
AG v Bucknall
trust set up to assist poor relations of a certain person. Held: valid charitable trust. Earliest case about this.
Re Scarisbrick
Case of poor relations. There must be a primary intention to relieve poverty. If the primary intention is to relieve poverty, the fact you define objects with regards to some personal relation wont matter.
Facts: The testatrix bequeathed her residuary estate upon trust “for such relations of my said son and daughters as…shall be in needy circumstances”.
Roxburgh J held that the trust was merely a private trust for the benefit of particular poor persons.
The Court of Appeal held that the testatrix’s primary intention was the relief of poverty.
‘The “poor relations” cases may be justified on the basis that the relief of poverty is of so altruistic a character that the public element may necessarily be inferred thereby; or they may be accepted as a hallowed, if illogical, exception.’
Dingle v Turner
per Lord Cross:
“the] “poor employees” decisions were a natural development of the “poor relations” decisions and to draw a distinction between different sorts of “poverty” trusts would be quite illogical.”
There was a trust for poor employees. Question: can the poor relations cases be extended to cover poor employees. Appellants argued the personal nexus in Oppenheim. The appellants argued although there is an exception for poor relations this exception should not be extended for poor employees. Defendants argued that if the trust for poor relations cases are correct, then there must be poor employees too. Held: trust for poor employees had been recognised.
IRC v McMullen
HL
Scope of Education
HL held: a trust to provide sports facilities at schools and universities was charitable because physical education was an integral part of education. At that stage, trusts for the promotion of sport were not charitable. See now s. 3(1)(g) of the 2011 Act. Lord Hailsham LC held that the fact the purposes had been limited to schools and universities demonstrated that the settlor’s intentions had been the advancement of education. The fact it was limited to schools and universities showed the settlor’s intention for education.
Royal Choral Society v IRC
Other cases have recognised that trusts for education can include:
choral singing in London
Re Delius
Other cases have recognised that trusts for education can include:
the music of Delius
Re South Place Ethical Society
the study of ethical principles and rational religious sentiment
Re Shaw
Research and Publication
Debate about whether research is allowed.
Facts: bequeathed a sum of money for research into a new 40 letter alphabet.
- Harman J denied charitable status to the gift on the basis that research, without any element of teaching, was not a good charitable purpose. Did not exist for the public benefit. If the object be merely the increase knowledge, this in itself is not a charitable object.
- Harman said not just a trust for research, must be linked to teaching or education to exist for the public benefit.
Re Hopkins WT
Lord Wilberforce took a different view to Harman J in Re Shaw. Trust to find “the Bacon-Shakespeare manuscripts” Harman held the gift in Re Shaw was not educational, Wilberforce disagrees to Harman in Re Shaw.
This is a broad definition of education, any thing which is
1) of educational value to the researcher
2) or will lead to something to add to store of educational material
3) or improve the sum of communicable knowledge
Lord Wilberforce:
Education includes: “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”
AG v McGovern
position in relation to education was summarised by Slade. A trust for research will ordinarily qualify as a charitable trust if, but only if:
- the subject matter of the proposed research is a useful subject of study; and
- it is contemplated that knowledge acquired as a result of the research will be disseminated to others; and
- the trust is for the benefit of the public, or a sufficiently important section of the public.
What did the charity commission say about education and research?
This does not mean that research has to be presented in a way that is understandable by everyone. It might only be capable of being understood by people who are experts in the field. What is is important is that it is published and made publicly available so that everyone who is capable of understanding it has access to it, and its benefits or usefulness are widely available to everyone.
Southwood v AG
Propaganda is not education.
Trust for “project for demilitarisation”, The objects of the trust were:
‘The advancement of the education of the public in the subject of militarism and disarmament
On its face, this looks like a valid trust for advancement of education, for public and subject of militaries. But as Chadwick pointed out, the question to be discussed is:
It is not enough that the objects should be expressed to be for the advancement of education; it is necessary that the advancement of education in the manner intended should promote public benefit
R (Independent Schools Council) v Charity Commission
(i) Public Benefit in the Second Sense
Trusts supporting educational activities are charitable even if they charge fees – provided they do not make and distribute profits
If you distribute the profits, you are not exclusively charitable and exist for the benefit of shareholders (at least in part). But just because you charge fees does not make you uncharitable.
Re Tree
A trust to educate members of a town was held to be valid.
Contrast Oppenheim
Hall v Derby Sanitary
trusts to educate children of members of a particular profession was held to be valid.
Re South Place Ethical Society
(a) the advancement of religion
(i) Public Benefit in the First Sense
Facts: an ethical society sought charitable status as a trust for the advancement of religion. An ethical society sought charitable status as a trust for the advancement of religion. Main case for trust for advancement of religion.
- But this definition was too narrow
- See 2011 Act, s. 3(2)(a): religion includes:
(i) a religion which involves belief in more than one god, and
(ii) a religion which does not involve belief in a god
Dillon J - It seems to me that two essential attributes of religion are faith and worship.
Dillon J set out the definition of religion. This definition of religion excludes beliefs of ethical society and religions not predicated upon belief of God – such as Buddhist. They do not think of Buddha as a God. Buddhist is a religion. But Dillion’s definition of religion is too narrow. Therefore, parliament recognised this problem and introduced CA 2011 s3(2)(a)(ii)
Charities Act 2011 s. 3(2)(a)(ii) now provides that, for the purposes of charity, religion includes “a religion which does not involve belief in a god.”
Gilmour v Coates
(a) the advancement of religion
(i) Public Benefit in the Second Sense
Facts: Trust was set up to further the purposes of an order of cloistered nuns. It was claimed that the trust was for the public benefit because the nuns set an example for society. HL: held purpose of the trust was too vague and it was impossible to prove the tangible benefit. Prayers are not susceptible to empirical proof so HL could not say whether trust existed for the public benefit in the second sense.
“Here is something which is manifestly not susceptible of proof…the court can act only on proof.”
What did the charity commission think about scientology?
Decision on Application for Registration by Church of Scientology
- Scientologists do believe in a supreme being.
- They notionally fit Justice Dillions’ definition of religion. The Charity Commission held these form of worships did not amount to worship and existed only for private benefit for members.
- Charity Commission held that the counselling sessions run by the Church of Scientology did not amount to worship and existed only for the private benefit of its members.
- Must prove empirically that religion is beneficial to society.
Like the group of nuns (praying but not going to public) these counselling sessions were tailored to individuals, their simple existence could not be said to be for the public benefit. These are the private rather than public kind. Any benefit following from this is incapable of proof (Gilmore v Coats).
R (Hodkin) v Registrar General of Births, Deaths and Marriages
said that the chapel of church of scientology was a place of worship. In holding that the chapel was to be a place of worship, the judge drew on the definition of religion in the charities act to draw of breath of religion in modern case. Therefore, the SC (highest court), might have adopted religion and it might trickle down into the courts.
What did the charity commission say about:
The advancement of health or the saving of lives?
Charity Commission said that the advancement of health included:
‘Conventional methods as well as complementary, alternative or holistic methods which are concerned with healing, mind, body and spirit in the alleviation of symptoms and the cure off illness.’
This is a broad definition, not just western medicine, but includes alternative methods. But as with trusts for advancement of religion, these holistic methods of healing – there needs to be sufficient evidence.
Re Resch’s WT
(a) the advancement of health or the saving of lives
Money given upon trust to a private hospital (which did not make or distribute profits).
A private hospital which charges fees, will not necessarily fall foul of the public benefit requirement. Can charge a sum below market rate and this was still be a valid charitable purpose, but to limit admission only to the very wealthy would not be valid because it would exclude a very large class.
Trustees of the British Museum v White
(a) the advancement of the arts, culture, heritage or science
This section encompasses trust for museums
Royal College of Surgeons of England
(a) the advancement of the arts, culture, heritage or science
‘The words “the study and practice of the art and science” of surgery do not, in my opinion, mean “the academic study and professional practice of the art and science of surgery”; they signify rather the acquisition of knowledge and skill in surgery both by abstract study and by the exercise of the art in the dissecting room and the anatomy theatre, and they are capable of covering both the discovery of new knowledge, which is the fruit of research, and the learning of existing knowledge either by students who are qualifying or by qualified surgeons desirous of improving their knowledge and skill. On that construction the professed objects of the college all fall into the categories of the advancement of science or of the advancement of education, and are charitable.’
IRC v Mcmullen
for a long time, the promotion of sport would only be upheld as charitable when ancillary to another purpose. Here because the trust was for schools and universities, held to be a trust for the advancement of education. Trusts for the advancement of sports was recognised in 2006.
Cambridgeshire Target Shooting Association
-2015 decision refusing to register the Cambridgeshire Target Shooting Association as a charity. The commissioners accepted that target shooting involved some physical and mental exertion, it refused to find that target shooting promoted health.
Hitchin Bridge Club
2011 decision registering the Hitchin Bridge Club on the basis that playing bridge was proved to lower the risk of developing Alzheimer’s disease and, hence, satisfied the requirement of ‘promoting health’ in s. 3(2)(d).
What is the difference between the Cambridgeshire Target Shooting Association and the Hitchin Bridge Club?
Both were sports, one was registered and one not. In Hitchin Bridge they did provide evidence of lowing the risk so perhaps satisfying the empirical evidence requirement.
Koeppler’s WT
the advancement of human rights
Facts:a trust was set up to fund conferences promoting co-operation in Europe. The mere organisation of the conference will not exist for charitable purposes but Slade LJ upheld it as a charitable purposes, as a valid trust for the advancement of education but would not probably be for the advancement of human rights under s3(1)(h).
“I find little difficulty in inferring that not only they themselves are likely to benefit from the courses, but are likely to pass on such benefits to others.’”
Re Grove-Grady
(a) the advancement of environmental protection or improvement
Prior to 2006, held to be non-charitable.
Facts: : trusts for bird sanctuary. Held: not a trust
Refusing to find it is not a charitable trust where the public could not enter could be not for public benefit?
Re Wedgwood
(a) the advancement of animal welfare
a trust was set up to promote humane methods of slaughtering animals. The stated purpose was to:
‘forward the movement for the humane slaughtering of animals and also the movement to provide municipal abattoirs where animals could be properly and decently slaughtered.’
Held:The advancement of animal welfare cannot just be for a specific animal, it must be for a benefit for a group of animals, not a specific animals because this will be a non charitable purpose trust.
I should be prepared to support the trust on the ground that it tends to promote public morality by checking the innate tendency to cruelty.’
IRC v Baddeley
- Section 5 (Recreational purposes)
The HL in this case held a trust to promote a trust for Methodists was a trust within a class but also because it was a trust to promote the social wellbeing and not a charity. Trust for creation was then established and is enshrined in s5.
Scottish Burial Reform and cremation
- Recognised as charitable prior to the Charities Act 2006
provision of a crematorium
What is the reform for charitable purpose trusts?
- Lord Cross and Macdermott spoke of the need to relieve the tax implications.
- Ought we place limits to analogical reasoning and create unstructured/ unprincipled way of establishing
- Ought to have a more rigorous principle of differing between activities and purposes
- Ought we permit political purposes – if we allow political purposes does this undermine trust for advancement of education, taking into account courts in other jurisdictions and what they say
Do we need a better definition of religion for purpose of law charity?
