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CHARITABLE TRUSTS

Public Purpose Trusts

C CHARITABLE TRUSTS

A charitable trust is a type of express trust dedicated to benefiting the public, and which by statute is considered charitable. It differs from a private trust in that the latter exists for the benefit of a defined set of persons or defined classes of persons. What counts as charitable can vary widely, as is evident from the abundance of case law, which recent reform has sought to codify, resulting in the Charities Act 2006. Charitable trusts are not allowed to be run for profit, or political or legal purposes. Because of their public nature they enjoy a number of benefits not afforded to private trusts.

ADVANTAGES OF CHARITABLE TRUSTS:


The Beneficiary principle charitable trusts have no beneficiaries in a legal sense and as such no one can bring an action against the trustees, as there is no relationship between the two. Charitable trusts may however be enforced by the Attorney General who is assisted by the charitable trusts regulators, the Charity Commission (formerly the Charity Commissioners). The Charity Commissions scope and powers include: registration of charities, monitoring of charitable trusts' accounts and activities, investigation into mismanagement and abuses, and providing advise to trustees on administrative matters. The Commission can sanction the trustees, remove them, appoint new ones or temporarily take the trust property itself. Decisions made by the Charity Commission may be appealed at the Charity Tribunal, whose decisions may in turn be appealed at the High Court.

ADVANTAGES OF CHARITABLE TRUSTS:

Certainty of objects a charity will not fail for uncertainty of objects provided that the settlor clearly intended the funds to be devoted exclusively to charity, Moggridge v Thackwell (1803). Perpetuity charitable trusts can last forever and as such are not subject to the rule against perpetuity (i.e., the rule against excessive duration). To that end, and given the relaxation of certainty of objects a gift for such a purpose will still be valid. This is because it is not contrary to public policy for money to be permanently dedicated to charitable purposes beneficial to the community.

ADVANTAGES OF CHARITABLE TRUSTS:

Taxation charities generally enjoy relief from most taxes and their donors may also have some tax relief available to them for their contributions to charity. Cy-prs doctrine should a charitable trust fail; e.g. because the body administering the funds becomes defunct, or it is impractical to carry out, or because it has achieved its original objects; normal rules of resulting trust might be displaced. Instead the money can be used for purposes as near as possible to the original purposes under the rule of cy-prs.

DEFINITION OF CHARITY

There is no statutory definition for what amounts to charitable status; and historically, determining whether a purpose is charitable has been based in the Preamble to the Statute of Charitable Uses 1601. Basing himself in the Preamble, Lord Macnaghten sought to extract from it a generalised classification of what constitutes charitable in the landmark case Commissioners of Income Tax v Pemsel (1891), which resulted in the following four-fold divisions: Trusts for the relief of poverty Trusts for the advancement of education Trusts for the advancement of religion Trusts for other purposes beneficial to the community

DEFINITION

The first three heads have generally not presented much difficulty and are now embedded in statute as the first three charitable purposes listed in s2(2) of the new Charities Act 2006. However, the vagueness of the fourth head has been a source of various decisions as the courts had adopted a general approach of determining charitable purpose by analogy Scottish Burial Reform and Cremation Society Ltd v Glasgow Corporation (1968). This method has not proven to be fool-proof as occasionally what was once regarded as charitable could be later revoked. Such was the case, when the then Charity Commissioners deregistered gun and rifle associations (due to changes in societal views) which were formerly deemed charitable, Re Stephens (1892).

DEFINITION

More recently the Charity Commission and the courts have determined to look beyond an organisation's stated purpose and consider its actual activities to determine charitability, Southwood v A-G (2000). Under the 2006 Act, extension of the list of charitable purposes by analogy is now allowed under s2(4)(6). Generally, for a trust to be charitable three requirements must be satisfied: It must be prima facie charitable. There must be a presence of the public benefit requirement. The trust must be wholly and exclusively charitable, i.e., absence of contaminating non-charitable elements.

PRIMA FACIE CHARITABLE


TRUSTS FOR THE RELIEF OF POVERTY Poverty, of course, does not mean destitution. It is a word of wide and somewhat indefinite import, and. as meaning persons who have to go short in the ordinary acceptation of that term per Sir Raymond Evershed MR in Re Coulthurst (1951). See the following cases: Joseph Rowntree Memorial Trust Housing Association v AG (1983) the words describing the beneficiaries... are to be read disjunctively so that beneficiaries could be either aged, impotent or poor but that in order to be considered charitable the gift to such people had to have as its purpose the "relief" of a need attributable to the condition of the beneficiaries Note: if trust is for the aged or impotent but not the poor then it would be valid only under the fourth head.

PRIMA FACIE CHARITABLE Cases (Poverty):


Re Lucas (1922) A testator by his will, after providing that the income of his estate should go to a niece during her life, directed as follows: And after the decease of my said niece I desire . . . all income derived from the investments to be given to the oldest respectable inhabitants in Gunville to the amount of five shillings per week each. Held: the element of poverty could be read into the gift owing to the smallness of the sum contemplated, and that, coupled with the use of the word oldest, constituted a good charitable gift. Re Sanders Will Trusts (1954) a gift for the provision of housing for working classes was not charitable, because a member of the working class did not necessarily entail poverty. Re Niyazis Will Trusts (1978) in contrast to Sanders (supra) a gift for the construction of a working mens hostel in an area where there was a grave housing shortage, was held to be charitable.

PRIMA FACIE CHARITABLE


TRUSTS FOR THE ADVANCEMENT OF EDUCATION This head includes traditional forms of education, such that trusts for schools and universities are valid. However, it also covers other aspects of education, such as research, artistic and aesthetic education. Research Re Hopkins Will Trusts (1965) a gift to the Frances Bacon society to find the Bacon-Shakespeare manuscripts was held to be charitable given that discovery of those manuscripts would be of great educational value. Lord Wilberforce stated I think, therefore, that the word education must be used in a wide sense, certainly extending beyond teaching in order to be charitable, 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 may cover . Re Shaw (1957) a gift to research the advantages to be gained by substituting the present 26-letter alphabet by a new 40-letter one was held not to be charitable.

PRIMA FACIE CHARITABLE Cases (Education):

Artistic education Royal Choral Society v IRC (1943) a gift to promote the practice and performance of choral works, and in Re Delius (1957) a gift to promote the general appreciation of the musical work of the composer Delius were held to be charitable. Youth and sport a trust to promote sports or leisure among a group of persons is not generally treated as charitable. The courts have however accepted that the provision of sporting facilities is charitable in the educational sphere: Re Mariette (1915) a gift for building squash courts in a school was held charitable. IRC v Mc Mullen (1981) - facilities for football and other games held valid by House of Lords. However, note that although Lord Hailsham recognized that recreation was an important aspect of education he stated, The mere playing of games for enjoyment or amusement or for competition was not per se charitable or reasonably educational.

PRIMA FACIE CHARITABLE


TRUSTS FOR THE ADVANCEMENT OF RELIGION Prior to the 2006 Act religion was defined as a spiritual belief or faith in a higher power and did not include ethical principles or rationalism, as in Bowman v Secular Society (1917). The 2006 Act expanded this, noting that religion "includes a religion which does not involve belief in a god". This extends to the support of religious buildings and sick or old members of the clergy, as in Forster, Gellatly v Palmer (1938). This category also covers groups with small followings, as in Re Watson (1973), and with doubtful theology, as in Thornton v Howe. Thornton v Howe (1862) The law is neutral between different types of religions; as such there is no distinction between religions. In this case a sect inculcating doctrine adverse to the very foundation of all religion and subverse of all morality was not charitable. Re South Place Ethical Society (1980) religion must be something more than morality or a recommended way of life. In this case it was held that a trust for the promotion of ethical behaviour without a component of spiritual belief will not be charitable.

PRIMA FACIE CHARITABLE Cases (Religion):

R v Registrar General, ex p Segerdal (1970) The Church of Scientology was held to be a philosophy, not a religion, an therefore not charitable. Farley v Westminster Bank a testatrix bequeathed the residue of her estate in equal shares to Vicars and churchwardens of two named parishes for parish work. Held gift was not wholly and exclusively charitable as it could include work which is not for religious purposes. In contrast with Re Simon (1946) a gift to a Vicar to be used for his work in the parish was held to be charitable. See also Re Hetherington (1989)

TRUSTS FOR OTHER PURPOSES BENEFITING THE COMMUNITY


This Category was set out by Lord Macnaghten in IRC v Pemsel and was split into three subcategories which cover: I. Trust for the Benefit of the Ages, Impotent and Poor people II. Charitable Trust relating to Animals III.Charitable Trust for the benefit of Localities These Trust however are subject to the rule set out in Oppenheim v Tobacco Securities Ltd. (1951) namely that it must Benefit the public or a genuine sector of the community and There should not be a bond or personal nexus between the beneficiaries and the settlor

TRUSTS FOR OTHER PURPOSES BENEFITING THE COMMUNITY


The trusts for the benefit of the public must be wholly Charitable and excludes all trusts which are exclusive, political, Personal or Profit Making. Where the funds can be applied for purposes that are benevolent but not Charitable the trust may fail, for the successful execution of a Charitable Trust it must be inter alia Charitable.

Trust for the Benefit of the Aged, Impotent and Poor people
This is to be construed disjunctively that is the trust can be for the Aged OR Impotent OR Poor. There is no requirement that the beneficiary be subject to all misfortunes. Any one category can be excluded as in Re: Reschs Will Trusts which excluded the poor. Re Resch [1969] 1 AC 514 (which concerned a fee-charging hospital), established that: (a) both direct and indirect benefits to the public or a sufficient section of the public may be taken into account in deciding whether an organization does, or can, operate for the public benefit; (b) the fact that charitable facilities or services will be charged for and will be provided mainly to people who can afford to pay the charges does not necessarily mean that the organization does not operate for the public benefit; and (c) an organization which wholly excluded poor people from any benefits, direct or indirect, would not be established and operate for the public benefit and therefore would not be a charity. Re: Lewis provided a explicit basis for trust of the disabled or impotent Gray v Taylor(1998) The CA and to decide if an occupant of an almshouse was a tenant or licensee

Charitable Trust relating to Animals


This benefit is derived not from the comfort afforded to the Animals but from the indirect moral benefit to mankind. Not all purposes associated with Animal Welfare would be deemed charitable. National Anti-Vivisection Society v IRC (1948) Where the goal of the association was the banning of animals in experiments. It was held that the human benefit far outweigh any interest to discontinue them. As with Religion trusts which isolate beneficiaries from the public will fail as in Re Grove-Grady where the trust sort to provide a refuge for animals so that they shall be safe from molestation and destruction by man. Charities however for the creation of animal sanctuaries will often pass the PBR test as they do not completely exclude the public and often have educational value

Charitable Trust for the benefit of Localities


A trust for the benefit of a locality is generally valid for that area once it is charitable. If the money is spent on noncharitable purposes the trust will fail even if it applies only to one area. Goodman v Saltash Corporation held that a charity can be valid even when it only impacts a class within the locality and such class would still render the trust valid even if it fluctuates as we held in the case of Re: Christchurch Inclosure Act where the gift was made for the benefit of inhabitants of a group of cottages, whoever those inhabitants might be.

Charities for the Purposes of Recreational Activities


Historically these Trusts have failed if they were for purely recreational past times IRC v City of Glasgow Police Athletic Association the fact that the charity included a recreational element invalidated the trust. The Recreational Charities Act 1958 reformed this position and provided that it shall be and be deemed always to have been charitable to provide or assist in the provision, or assist in the provision, or assist in the provision of, facilities for recreation or other leisure-time occupation, if the facilities are provided in the interest of social welfare Re: Hadden (1932) held that the provision of playing fields and parks and recreational facilities for the general public is charitable. IRC v Mc Mullen, Re: Maritte and Re:Guild Sporting facilities which are not open to the public may be charitable because they are linked with the education of the young.

Recreational Charities Act 1958 (RCA)


The Recreational Charities Act 1958 (RCA) was enacted to clear doubts as to the status of civic amenities such as village halls and community centres which were for purely recreational purposes. In summary the Act states that it is charitable to provide or assist in the provision of facilities for recreation or other leisure-time activities if these facilities are provided in the interest of social welfare. In order to fulfill the social welfare requirement two conditions must be satisfied: have been provided with the object of improving the condition of life of persons for whom they are primarily intended; must be available either: for the use of the public at large or the female members of the public, or on a more restricted basis for persons who by reason of infirmity, disability, youth, age, social or economic circumstances have need for such facilities. See IRC v Mc Mullen and IRC v Guild

PUBLIC BENEFIT REQUIREMENT (PBR)


Although a purpose may fall within one of the above heads it would still be necessary to show that the purpose will benefit the public itself or a sufficient section of it. In other words, the law admits the special status and privileges of charitable trusts and requires in return that the benefits thereby granted be not confined to a select few. Trust for other purposes beneficial to the community. Strict Oppenheim Test. The trust must be for an appreciable sector of the community. IRC v Williams Trustees (1947) a trust for Welsh people in London did not form an appreciable sector of the community. IRC v Baddeley (1955) a trust for the members or would be members of a Methodist Church in an area in London was held not to satisfy the PBR requirement. It was not for an appreciable sector of the community or for the inhabitants of a given geographical area, but for a class within a class.

TRUSTS EXCLUDED AS CHARITABLE


Political Trusts National Anti-Vivisection Society v IRC sets out a strict rule that charities cannot campaign politically. In Bowman v Secular Society (1971) Lord Parker stated the general position as follows: 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 he 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.

TRUSTS EXCLUDED AS CHARITABLE


Profit Making No Organization run for profit can be a charity; a public school may be charitable despite fees paid once they are not run directly for profit. Exclusivity - A charitable trust created from a gift must be exclusively charitable; if there are any purposes which would not be charitable on their own, the trust fails. Trust instruments should ideally identify that the money is to be used for "charitable purposes".

Exclusivity Cont
The use of other words such as "beneficial" or "benevolent" causes the trust to fail at creation, as the words are not synonymous with charity. An example is the Privy Council decision in Attorney General of the Cayman Islands v WahrHansen,[54] where the Council held that gifts to "organizations or institutions operating for the public good" and acting "for the good or for the benefit of mankind" failed, because the definition given was not exclusively charitable

CONT
Southwood and Another v AG (1998) - This case concerned a trust whose object was the advancement of the education of the public in the subject of militarism and disarmament. The court held the trust was not charitable because it was clear from the surrounding facts, including the activities of the promoters both before and after the trust deed was executed, and the dominant purpose of the trust was political. Severance Where the language permits funds to be applied partly for charitable and partly for noncharitable purposes, the court will, in some cases, apply a doctrine of severance. Separating the good from the bad, and allow the former to stand and the latter to fail. In Salusbury v Denton (1857) a testator bequeathed a fund to his widow to be applied by her in his will, part towards the foundation of a charity school and the rest towards the benefit of the testators relatives. The widow died without making any apportionment, but it was held, relying on the maxim equity is equality, that the court would divide the fund into two halves.

Charities and the Human Rights Act 1998


It should be noted that the Human Rights Act 1998, which came into force in October 2000, may have an impact in this area. The Act makes it unlawful for public authorities, including private bodies that carry out public functions, to act in a manner which is incompatible with the European Convention on Human Rights. Charities are not public bodies for these purposes merely because they are charities, but if they carry out public functions, particularly if they do so in conjunction with, for example, local authorities, they may be caught by the Act. Thus, for example, the provision of care homes could be subject to Article 3, the right not to be subjected to torture or inhuman treatment, and Article 8, the right to respect for private and family life. It seems unlikely that the Act will have any dramatic effect in this area, but time, and case law, will tell. The Court of Appeal, in Heather v Leonard Cheshire Foundation [2002] 2 All ER 936, has held that a charity providing residential care in the private sector does not perform a public function within the meaning of s 6 of the Human Rights Act 1998.

PROBLEM QUESTION
Albert, by will, left the following bequests: 10,000 to the Worcester Women's Benevolent Society which provides grants to elderly women in Worcester who are in need. 15,000 to the Faith Society which welcomes those of any faith or none to join them in their quest for spiritual enlightenment. 20,000 to provide scholarships to enable children resident in Worcester to attend university, preference to be given to children of workers employed in the porcelain industry in Worcester. The residue of his property on trust to be used foe such charitable, humanitarian or benevolent causes as his trustees may select. Advise Albert's trustees on the validity of these gifts.

ANSWER GUIDELINES
In each case, ask three questions: 1) Is the gift for charitable purposes? 2) If so, is there sufficient public benefit? 3) If so, is it exclusively charitable? Note: unless it is absolutely certain that the gift does not satisfy 1 you should go on to consider 2, and the same applies to 2 and 3. Important points to include (a)Gift may be for the relief of poverty but is there a public benefit? (b)Is the society for the advancement of religion? If so, could it come under other heads? (c)The purpose is educational but is it a public benefit? Look at Oppenheim and R v Koettgen. (d)Is it exclusively charitable? Chichester Diocesan Fund v Simpson. Humanitarian?

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