Charities, purpose trusts and cypres Flashcards
(18 cards)
What is a purpose trust
A trust made to achieve a specific goal (not to benefit a person)
E.g: £10,000 to John to maintain my old care forever
why are Non-charitable purpose trusts usually void in english law
They fail the beneficiary principle- no one to enforce them if it goes wrong
Morice v Bishop of Durhan- trust for ‘objects of benevolence’ failed as it lacked certainty and did not fit charitable conditios
why do purpose trusts often fail?
1) Uncertainty- the purpose is too vague (Re Astor)
2) Perpertuity- can’t last forever, purpose trusts max 21 years, charitable are excempt
what if a trust looks like its for a purpose
sometimes it looks like a purpose trust but the courts say its for people
2 ways the courts might interpret:
1) purpose as a motive -the purpose was just the reason for the gift- doesn’t limit how the money is used
Re Bowes- money for tree planting= really for landowners
Re Osoba: money for maintenance and training of daughter and mother- really just a gift to both
2) re denely type trusts:- trust looks like its for a purpose but benefits people directly
- re denely- sports field for employees (purpose sports, but it helps identifiable people (employees) so its valid)
What are quistclose trusts
Money that has been lent for a specific purpose (Barclays Bank v Quistclose investments)
if the purpose fails (they don’t use the money as intended), it goes back to the lender, the courts treats this as a resulting trust
What’s the problem with purpose trusts and unincorporated associations
purpose trusts are usually void unless charitable,
an unincorporated association (UA) is not a legal person unlike a company, it is just a group of people with shared goals. it cannot own property or gifts. the law cannot treat it the same as a gift to a legal body- looks like a purpose trust
How might the courts reinterperet gifts to UA’s? 4 ways
1) Gift to members as co-owners (not UA itself)
Re Lipsinki- gift was to a UA for building improvements, courts said its a gift to the current members jointly. members can enforce the trust, downside: members may spend however, purpose may be ignored
2) Trusts for the benefit of individuals (re denely’s principle)
land left for a sports ground for employees, though it was phrased as a purpose trust, the employees benefited directly, valid as there were udentifiable beneficaries
3) treating the purpose as motive- courts sometimes treat a purpose as the motive (re bowes- trees/ re osoba- maintainence to girl and mum). as long as beneficaries are names and purpose is guidance, not a binding condition
4) Trusts for current and futute members
Leahy v AG- courts might explore
- trusts for current members
- trusts for current and future members
- trusts for the purpose of the association (most likely void unless charitable)
In Leahy gift fails as -
- phrased “ on trust”
- recipients (nuns) were numerous and worldwide
- gfift was a large farm- hard to divide among individuals
What are exceptions to the rule of void purpose trusts: Charities
- Charitable Trusts- they benefit the public and are enforced by th Attorney General or Charitt Commission. Don’t need to establish certainty of objects
What are the 3 requirements for a valid charity
1) Must fit into a charity catergory under s3(1) charities act 2011
- Re Dupree- chess tournament- advancing education
IRC v McMullen 1981- football facitilites in schools- education should be interpreated broadly
Re shaw- phonetic alphabet- not directly advancing education but promoting an idea
2) Must be for the public benefit
small exception: trusts for the erection and maintenance of monuments or gravestones and for specific animals (horses and houds) (Re Hooper, Re Dean). but these cannot e extended (Re Eddacott)
3) Must be esclusively charitable
what is the public benefit test
There are 4 requirements to meet public benefit-
identifiable benefit: must be clear what the benefitds are and should be capable of being recognised, identified, defined or described. no lomger a presumption of public benefit for all catergories. the donor’s idea of benefit is not relevant
benefits must be related to the aims: and ancillary benefits (extra benefits that aren;t primary focus of the legal arrangement but enhance its value) don’t count towards fulliflment
Re Grove- saving wild birds from humans, not charitable, the fact it incidentally preserved a scientific are was not enough to meet
benefits vs harm: the benefits must be balances against any detriment or harm
National Anti- Vivisection Society v IRC- failed as political trusts cannot be charitable, additinally the aims could harm the public
Benefit to the public or section: can’t be restricted by benefiting one class in a city.
- Personal nexus: a trust defined group based on personal connection (family members or a specific company of employees) fails Oppenheim v Tabacco- trust to educate children of tabacco company failed as charitable.
-* Exception: relief of poverty: *poverty trusts are an exception to the personal nexus rule. can create charitable trusts for poor employees of poor relatives- Dingle v Turner- trust for poor employees was upheld as relieving poverty justified narrower group
Fee charging charities
institutions like independent/ private schools that chareg fees can still be haritable as long as it can be shown they benefit beyond just paying students
- Scholorships
- bursaries
- community access to facilites
- educational outreach
previosuly, striclty, people in poverty could not be excluded, but in R (independent schools council) v CC 2011, the court said it’s up to the trustees to decide how to meet public benefit not commisson.
Incidental private benefit
sometimes a charity might accidentally benefit private individuals or businesses. some private benefit is allowed but it must be:
incidental (not the main goal, just a side effect) and
necessary (to achieve the charitable purpose)
Example- paying a teacher to run a free educational programme is an incidental benefit
Re Besterman- research on voltaire
a trust was set up to fund researc into Volitare. 3 requirements for research to be charitable
1) the research must be a useful subject
2) the results must be disseminated (shared with others)
3) the research must be for the public benefit
Private research does not qualify as charitable unless it met those criteria
Religion and charity
Gilmour v Coates 1949 AC- trust given to fund nun’s religious activies was regected ad prayer could not be considered a public benefit. must show tangible benefit to public
Neville estates v madden- a trust for a synogauge was deemed charitable because it facilitated public worship
Thorton v howe- trust set up to publish and distribute religious writing was held to be charitable as spreading religious ideas through publications
A trust must also be exclusively charitable
this means all trust’s purposes must fall under one of the s.3(1) catergories.
a trust for “charities and benevolent” purposes failed because benevolent is wider than charities (Chichester Dioesan Fund v Simpson)
courts may look at the wording, “and” will be read conjunctively requiring the word to be within or narrower than charity, saving the gitft
but “or” will be read disjunctively, property could be applied to either which fails the gift
a non charitable object might be permissible if it is merly incidental to the main charitable purpose (IRC v Baddely)
The Cy-pres doctrine
allows courts or CC to ensure that charitable gifts remain effective, even when the original purpose cannot be carried out. it a charitable trust fails because it is impossible or impractival, the court of CC can redirect thee funds to a similar charitable purpose
2 types of failures
1) inital failure: the trusts purpose was impossible from the start (e.g the court must find a general charitable intention (donor wanted to support charity in general not just one specific organisation)
if it was one specific organisation, gift fails and may result in resulting trust)
2) subsequent failure- the trust’s purpose becomes impossible later (e.g charity closes down or the purppose is no longer needed (cure to disease)).
- the funds must remain dedicated to charity- give to another similar
- the court does not need general charitable intention
Re Selvin- if a charity closes after donors’s death but before gift is administarted, money still goes to another similar charity
The Charites Act 2011 S62, outlines when cy-pres can be applied:- When the original purpose has been fulfilled or cannot be carried out
- When the fund can be used more effectively for a similar charitable purpose
- When the original purpose is no longer suitable or effective
What happens when there is a failure of charitable trust
if a charitable trust fails (e.g not exclusively charitablle or initial failure without general charitable intention) and cy-pres is not applicable, the property may be held on resulting trust
a resulting trust can also arise for any surplus after the trust purposes have beenf ully carried out and there is no direction for the surplus and cy-pres is not applicable
how to answer a charities question
- Is the gift charitable? If not would it still be a valid trust? (if it’s a purpose trust it is void unless exception arises, if its private trust, it won’t get charitable tax benefits but might still be valid if meets 3 certaintes)
- Is it charitable (3 key requirements: statue list under s3(1) charities act 2011, does it provide a public benefit, is it exclusively charitable? If not it might fail)
- Is this a cy-pres situation? (if the original purpose cannot be carried out, court decide whether cy pres applies. Initial failure or subsequent failure? They apply differently depending on if its before or after donors death).
