Charitable Trusts

Question 1

What is a charitable trust

Answer 1

A public trust for purposes that provide a benefit to the public or a section of the public
Heavily regulated by statute and and there are specific rules that must be complied with

Question 2

Definition of charity

Answer 2

S1 charities act 2011- ‘an institution which is established for charitable purposes only’

Charitable purposes defined as: falls within 13 purposes under s3.1 CA 2011 and is for the public benefit under s4

Question 3

Benefits of charitable trusts

Answer 3

1. Perpetual duration: can last forever once vested
2. Rules are more relaxed: once a general intention is established it will give effect to the trust and objects can be broader
3. Tax exemptions and reliefs
4. Cypres doctrine takes effect so surplus is given to a similar charity determined by the charities commission or attorney general.

Question 4

Disadvantage of charitable trusts

Answer 4

Several bureaucratic rules and regulations govern charitable trusts including requirement for the filing of annual reports and other filings.

Question 5

2 stage test for charitable purpose

Answer 5

1. Exclusively for a charitable purpose
2. For the public benefit

Question 6

Exclusively charitable purpose

Answer 6

Can’t be a mixture of charitable and non-charitable purposes: Chichester diocesan fund and board of finance incorporated v Simpson

Previous law- 4 purposes - commissioners for special purposes of income tax and pemsel

Replaced by s3 CA 2011:
- prevention of relief of poverty
- + education
- + religion
- + health or the saving of lives
- + citizenship or community development
- + arts, culture, heritage or science
- + amateur sport
- +human rights, conflict resolution or reconciliation or promotion of religious or racial harmony or equality or diversity
- + environmental protection or improvement
- relief of those in need because of youth, age, ill-health, disability, financial hardship or other disadvantage
- + animal welfare
- promotion of armed forces or police, fire rescue, ambulance services
- any other closely similar to the above

Question 7

Prevention of relief of poverty

Answer 7

Identified as a charitable purpose in the Pemsel case
The independent schools council v charity commission for England and wales- doesnt always mean destitute, its someone who cannot reasonably afford to meet a particular need by purchasing at the full cost price.
Re Coulthurst: temporary financial hardship is sufficient
IRC v Oldham training and enterprise council- trust set up for unemployed people is sufficient

Question 8

Advancement of education

Answer 8

‘Education’= teaching at home or abroad, not confined to a school and considers mental and physical elements- indep schools council v charity commission

Also encompasses research- incorporated council of law reporting for England and wales v AG

Question 9

Advancement of religion

Answer 9

Any belief of a higher being- not necessarily ‘god’
S3.2 CA 2011- more than one god- Buddhism, Hinduism

United grand lodge of ancient free and accepted masons of England v Holborn Borough council- Scientology not a religion- has to be a belief of a higher power such as a god. Also applies to freemasonry

Charity commission on application for registration by the Temple of the Jedi order

Question 10

Advancement of animal welfare

Answer 10

• all animals
• trusts for the RSPCA fall under this category
• also includes other purposes related to welfare of animals such as methods of slaughtering animals

Question 11

Other charitable purposes

Answer 11

Allows the court to create flexibility for new purposes that may arise in the future.

Certain conditions: has to be recognised under existing charity law and be reasonably similar to the other 12 purposes

Question 12

Implication of not being a charitable purpose

Answer 12

• generally render it void And trust property will be held on a resulting trust for the settlor or the settlors estate
• Chichester diocesan fund and board of finance v Simpson- next of kin entitled to property

In rare cases you can sever the property
- only possible where language can be construed as directing such a division
- Salusbury v Denton

Question 13

Public benefit

Answer 13

S4 CA 2011
2 distinct aspects: benefit aspect and public aspect

Question 14

The benefit aspect

Answer 14

Must be shown that the benefit outweighs any detriment, risk or harm to be public from pursuing that purpose

Parts 3 and 4 charity commission guidelines 2013: capable of being proved by evidence where necessary, not based on personal views and any harm doesnt outweigh the benefit.

Re hummeltenberg: opinion of the judge not the settlor is relevant

Question 15

The public aspect

Answer 15

Must benefit the public in general or a sufficient section of the public
‘Public class’- sufficient size and represents the public- re Duffy 2013

Cannot relate to people that a settlor has a personal relationship with e.g no personal nexus between creator and public class which benefits from it- dingle and turner

This rule is relaxed in relation to trusts for the relief or prevention of property
- can relate to family- re scarisbrick

Cannot be for a purpose which is for the benefit of named individuals even if its for poverty.

Public class cannot relate to skin colour- equality act 2010

Question 16

Political objectives

Answer 16

Charitable trusts cannot pursue political objectives
E.g promoting objectives of a political organisation or campaigns to change the law
Hanchett-Stamford v AG

Question 17

The cypres doctrine

Answer 17

Where it fails or becomes impossible to execute the outcome will depend on initial failure or subsequent failure

Initial failure= before trust has taken effect
- property will revert to the settlor On a resulting trust unless a clear intent exists for a general charitable purpose
- re rymer

Subsequent failure= after the trust has taken affect but becomes impossible or impractical
- cypres doctrine applies and property will be applied in another similar charitable purpose
- re wright
S62-67 CA 2011

Factors to consider: spirit of original gift, desirability of securing that the property is applied for charitable purposes which are close to the original purposes and the need for the relevant charity to have purposes which are suitable and effective in the light of current social and economic circumstances

Exception- trust instrument