Purpose Trusts Flashcards
1
Q
What is the beneficiary principle?
A
there must be a beneficiary in order for there to be a valid trust.
The general rule is that a trust without a beneficiary is void.
- the trust cannot exist for an abstract purpose –> unless its a charitable purpose trust
2
Q
What is the link with the beneficiary principle and certainty of objects as a requirement for trust?
A
both about find a beneficiary however the beneficiary principle for purpose trusts is about the mere fact that there must be a beneficiary rather than specifying who the beneficiaries are
3
Q
What are the FOUR general objections to non-charitable purpose trusts?
A
- enforceability - if there’s no specific beneficiary who will enforce the trust? – i.e. the Beneficiary Principle.
- drafted in an uncertain manner
- Perpetuity problem - tie up property in trust, taking it out of the market for long periods of time.
- tend towards capriciousness
4
Q
three cases which argue that non-charitable purpose trusts are unenforceable because of the need for certainty of objects to enforce the terms of the trust i.e. because of the beneficiary principle
A
- Morice v Bishop of Durham (1804) - “there must be someone in whose favour the court can decree performance.”
- Bowman v Secular Society Ltd [1917]
- Re Astor’s Settlement [1952]
5
Q
Case which argued that a non-charitable purpose trust is unenforceable because “a trustee would not be expected to be subject to an equitable obligation unless there was somebody who could enforce a correlative equitable right”
A
Re Astor’s Settlement [1952], per Roxburgh J
FACTS - was a trust supposedly for the purpose of promoting freedom of the press
- held there needs to be a correlation between the trustee’s duty and the equitable rights of the beneficiaries. there is no defined beneficiary so saw that it is unenforceable
6
Q
Case which held that non-charitable purpose trusts are unenforceable because “in order to be effective [they] must have ascertained or ascertainable beneficiaries”
A
Re Endacott [1960] per Lord Evershed MR
a ‘trust’ set up “for the purpose of creating some useful memorial to myself”
HELD - The very existence of a trust depends on the existence of a beneficiary because it depends on their being an obligation to someone with standing to enforce the trust.
7
Q
Case in which a non-charitable purpose trust failed and the property went in a resulting trust back to legatee because it was uncertain
A
Morice v Bishop of Durham (1804)
FACTS - Trust for the purposes of ‘beneficence and liberality’
COURT HELD - couldn’t know what settlor intended so couldn’t control the administration of the trust
- If intention of settlor cannot be cleaned by trust instrument, trust must fail for uncertainty.
reaffirmed in Re Astor’s Settlement [1952] - court must have some control
8
Q
THREE cases which discuss the issue of perpetuity in the context of non-charitable purpose trusts
A
- Mussett v Bingle [1876]
- Re Hooper [1932]
- Re Haines (The Times 7 Nov 1952)
9
Q
Case which held part of the trust void because a non-charitable purpose trust cannot run for an ‘excessive duration’
A
Mussett v Bingle [1876]
FACTS - Trust of £300 for erection of monument of wife and children, £200 for maintaining it.
HELD - First request was valid, but second failed because it was void for perpetuity - potentially never ending?
10
Q
Case which held that the maximum period for a non-charitable purpose trust was 21 yrs
A
Re Hooper [1932]
FACTS - Trustees directed to maintain a monument for “as long as they legally can do so”
HELD - it could only be for 21yrs
11
Q
Leading authority for the court’s preventing the capriciousness of non-charitable purpose trusts through tying up property for useless purposes
A
Brown v Burdett (1882) per Sir James Bacon V-C
FACTS - For 20 years the house was to be boarded up and unused
HELD - the useless, undisposed property was to be ‘unsealed’
12
Q
TWO interpretive devices used in order to uphold what initially appears to be a non-charitable purpose trust as valid
A
- Absolute Gifts of Property with a Motive
2. Trusts with ‘indirect beneficiaries’
13
Q
Example case in which it was held that it was an absolute gift of property with a motive rather than a non-charitable purpose trust for an abstract purpose (i.e. it wasn’t void)
A
Re Bowes [1896]
FACTS - £5,000 for purposes of planting trees on family estates.
HELD - interpreted this as an absolute gift to improve the estate for the benefit of the persons entitled to it –> rather than a trust for the purpose of planting trees
therefore it is within the beneficiary principle, planting the trees was merely a motive for giving the gift.
14
Q
Example in which a trust for the ‘training of my daughter up to university age’ was held to be an absolute gift of property with a motive rather than a non-charitable trust for the purpose of education to prevent it from being invalid
A
Re Osoba [1979]
FACTS - Testator left the residue of estate upon trust for the ‘training of my daughter up to university age’. Intended to be a trust of which daughter was a beneficiary
- HELD – the purpose (education) was merely motive for making the absolute gift to which she was the beneficiary to prevent frustration of the testator’s express intention
15
Q
What is the limit to the court’s use of the interpretive device - holding it is an absolute Gifts of Property with a Motive rather than a NCPT
A
if it is clear from the terms of the trust that those who benefit are not intended to take beneficial interest in the property then the court’s cannot construe it as a gift
SO…. look at declaring it as a trust with indirect beneficiaries
16
Q
First case in which a trust was upheld as a valid trust for the benefit of ‘indirect beneficiaries’ - rather than a non-charitable purpose trust
A
Re Denley [1969] per Sir Goff
- FACTS - The settlor conveyed a plot of land to the trustees “for the purposes of a recreation or sports ground primarily for the benefit of the employees of the company and secondarily for the benefit of such other…persons…as the trustees may allow.”
- but for a specific period only, after which the land was to be given to the General Hospital Cheltenham.
HELD - employees were not intended to be beneficiaries under the trust since it was only for a short time but the fact they benefitted and were given locus standi to apply to the court to enforce the terms was sufficient to satisfy the beneficiary principle and make a trust for persons as ‘indirect beneficiaries’
NB - don’t call them identifiable beneficiaries because they don’t have a beneficial interest
17
Q
What is the limitations of the TWO authorities for holding a trust to be a trust for ‘indirect beneficiaries’
A
BOTH first instance decisions so they are weak precedent and they’re old cases now
18
Q
Second case in which a trust was upheld as a valid trust for the benefit of ‘indirect beneficiaries’ - rather than a non-charitable purpose trust
A
Re Lipinski’s Will Trusts [1976]
FACTS - The testator left his residuary estate to trustees for the Hull Judeans (Maccabi) Association in memory of his late wife ‘to be used solely in the work of constructing the new buildings for the association and/or improvements to the said buildings.’
HELD - applied reasoning of Goff in Re Denley that because “a purpose is prescribed which is clearly intended for the benefit of ascertained or ascertainable beneficiaries” is enforceable so should be a trust for indirect beneficiaries
19
Q
Are the courts holding that a purpose trust is a trust for indirect beneficiaries rather than non-charitable purpose trust the exception?
A
NO - it is a separate court ruling that there are beneficiaries that can enforce the trust even though they don’t have beneficial entitlement.
- rather than an exception to the beneficiary principle
20
Q
What are the FOUR exceptional cases in non-charitable purpose trusts?
A
- Testamentary trusts for the creation and maintenance of tombs and monuments
- Testamentary trusts for the care of specific animals
- Testamentary trusts for saying masses in private
- Testamentary trusts for the promotion of fox-hunting
21
Q
What was the perpetuity period for non-charitable purpose trusts before the perpetuity and accumulations act 2009 (applies to trusts commencing after april 2010)?
A
Re Astor’s Settlement - could be valid within 21 yrs
22
Q
What is a trust of imperfect obligation?
A
Places a duty on trustee but there is no one with correlative right to enforce that duty. Even where the trust is held valid - doesn’t mean that the trustee can do whatever they like with the trust fund.
23
Q
Authority for the exceptional case in NCPTs of testamentary trusts for the creation and maintenance of tombs and monuments
A
Re Hooper [1932]
FACTS - testator bequeathed £1000 to trustees for the care and upkeep of the graves and monuments of his parents, his wife, his two daughters and his son. The testator stipulated that the trustees were to maintain the monuments “so far as they legally can do so”. The testator died in 1929 and the question arose as to whether this was a valid trust.
HELD - terms of the trust are certain so it was valid for the perpetuity period of 21yrs from the death of the testator
24
Q
Authority for the exceptional case in NCPTs of testamentary trusts for the care of specific animals
A
Pettingall v Pettingall (1842)
FACTS - testator made a bequest in his will that his favourite mare be looked after with £50 per year by an executor and payment will cease at her death
HELD - Trustee makes undertaking to court to use the £50 a year for the purpose in the trust, those entitled to the estate will have right to sue estate to make sure the £50 is used for that purpose – this is known as the Pettingall order.
25
Case which applied a Pettingall order as an exceptional case in non-charitable purpose trusts
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Re Dean (1889)
- trusts for the care of specific animals
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Annuity of £750 p/a for looking after 8 horses, ponies and hounds.
- Must be particular animals - not just general.
- used the reasoning of why trusts for the erection and upkeep of monuments are valid without a beneficiary - as long as they are within the perpetuity period
BUT... this case is questionable in terms of application of the perpetuity period because it held that the trust would be valid for 50yrs if any of the animals lived that long - typical period is still 21yrs at this time
26
Authority for the exceptional case in NCPTs of testamentary trusts for saying masses in private
Bourne v Keen [1919]
FACTS - Bequeathed personal estate to Jesuit fathers for purposes of saying masses in private, this request couldn't be charitable trust because masses were said in private - charity needs public benefit.
- Instead HoL held trust valid as a NCPT, but with little discussion of the point
27
Authority for the exceptional case in NCPTs of testamentary trusts for the promotion of fox-hunting
Re Thompson [1934], per Clauson J
BUT ... illegal under the Hunting Act now so irrelevant now
28
Case which held these exceptional cases in NCPTs will not be expanded in the future
Re Endacott [1960]
- cannot argue by analogy from these cases.
- exceptions are narrow, likely that non-charitable purpose trust will continue to be void.
29
Criticism of Re Lipiniski's [1976] application of Re Denley's 'indirect beneficiaries' to hold a non-charitable purpose trust as valid
In the case they mix ideas of gifts and trusts --> which brings perpetuity period into question because Re Denley trusts have to comply with the rule on perpetuities but gifts don't.
30
Academic which supports the need for reform of non-charitable purpose trusts - in favour of an enforcer rule clause in non-charitable trusts
DJ Hayton - Developing the Obligation Character of the Trust (2001)
1. wants to continue recognising non-charitable purpose trusts in order for the UK to stay competitive --> non-charitable working trusts are already recognised in many places, e.g. Cayman Islands
2. Trust should include a clause (enforcer principle) which allows someone to sue for the enforcement of the trust as this fixes the problem of enforceability in charitable trusts
3. in favour of an enforcer rule in trusts - argued the enforcer doesn't have to be beneficially entitled because law of trusts ALREADY RECOGNISES that someone can enforce the trust without being beneficially entitled e.g. objects under a discretionary trust aren’t beneficially entitled but can still sue for enforcement
31
Academic which argues against reform of non-charitable purpose trusts
P Matthews (2002) - condemns the view of Hayton
1. law of trusts relies on the enforcer being beneficially entitled - remedies/right to sue depends on the beneficiary having a proprietary interest
2. putting in an enforcer rule risks a collapse in the law of contract - would include a lot of trust cases into contract law
3. refutes Hayton's claim that objects of a discretionary trust are proof that English law already recognises that someone can enforce the trust without being beneficially entitled - says that Re Smith [1928] applying Saunders v Vautier in discretionary trusts ARE NOT exceptions to the beneficiary principle
- Objects of a discretionary trust are beneficially entitled as, acting in concert, they can collapse the trust
4. non-charitable purpose trusts creates avoidance of tax
5. problem of creating inalienable property and perpetual trusts - this is only accepted in charitable trusts because they're for the pubic benefit
32
Argument against reform of non-charitable purpose trusts - there are already alternatives available in the law of trusts already?
1. gift to an unincorporated association - a trust for human beneficiaries with a power to apply for a non-charitable purpose
Don’t need a trust for an abstract purpose you can just have a trust for a person with a power to apply for an abstract purpose e.g. you give £1,000 to hold on trust for son, can give power to apply that money for abstract purpose, but son would still be beneficiary of the trust
2. Can use the Contract (Rights of Third Parties) Act 1999 to create promises enforceable by third parties
33
who enforces charitable purpose trusts?
the Attorney -General
34
What are the tax advantages of being a charitable trust?
UK charities don’t pay income or corporation tax, don’t pay capital gains tax on selling of property, don’t pay stamp duty and have certain VAT exemptions.
- There’s no inheritance tax on gifts to charities
35
Famous comments by Lord Cross regarding tax advantages for charitable purposes
Dingle v Turner [1972] per Lord Cross
- lamented the fact that recognising a purpose as charitable automatically entitled the purpose to tax relief
There has been debate as to whether the courts should consider the fiscal implications of declaring a purpose charitable because there is an opportunity cost
Lord Cross’ comments have been largely rejected by the courts and charity commission – said the effect of tax policies is for purely for parliament to decide BUT... his view has been influential in case law and academic literature
36
THREE legal advantages of being recognised as a charitable purpose trust
1. rule against perpetuities doesn’t apply
2. trustees of a charitable trust only need a vote by majority to make a decision of how the property is used - not unanimous
3. no limitation period on bringing enforcement proceedings against breaches of a charitable purpose trust
37
What are the FOUR requirements to be a charity?
1) The character of the purpose must be legally charitable
2) 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)
3) The purpose cannot be political in nature e.g. can’t aim purely for the repeal of a certain legislation
4) The purpose must be exclusively charitable (e.g. cannot involve the distribution of profits to private individuals)
38
Statutory provision which includes list of charitable purposes
ss.2(1)(a),3(1) Charities Act 2011
specifically includes the 'Old Law' under s.3(1)(m)(i) CA 2011
39
Statute with contains the "old law" for charitable purposes
Preamble to the Statute of Charitable Uses 1601
40
Case which demonstrated the courts approach if presented with a new purpose which wasn't within the Preamble of the 1601 Act
Scottish Burial Reform and Cremation Society Ltd v Glasgow Corporation [1968] per Lord Reid
- if it wasn't in the preamble they would look to see if it was analogous to anything in it
FACTS - Question of whether a trust for the burning of corpses was a charitable purpose/ Charitable trust for repair of churches was in the 1601 Act, which was extended to trusts for upkeep of graveyards and provision of burial ground --> so then extended the analogy one further to trust for cremation as analogous to this purpose
can have an analogy of an analogy
41
Statutory provision which supports the analogous reasoning in the Old Law of recognising charitable purposes
s. 3(1)(m)(ii) and (iii) CA 2011
- can be analogous or an analogy of an analogy - ad hoc analogical extension of the law
- allows the law to remain flexible, as society changes.
42
FOUR general criticisms of the rules on identifying charitable purposes
1. The analogical reasoning employed by the courts is unprincipled/artificial
2. Analogical reasoning does not account for how the consequences of charitable status have changed over time.
3. Fiscal Consequences
4. The distinction between Purposes and Activities
43
Case which is an example of the artificiality of the way the courts identify charitable purposes
Vancouver Regional FreeNet Association v MNR [1996]
- held that a non-profit organisation which provided internet was a charitable purpose analogous to repair of bridges, ports, causeways and highways in the Preamble
- metaphorical analogy between the ‘information highway’ i.e. the internet and bridges
44
Academic opinion which criticises the ways the courts identify charitable purposes for being artificial
Charles Mitchell and Ben Macfarlane textbook, said that such analogous reasoning draws the legal process into disrepute -
- from a constitutional point of view it’s problematic- if power to recognise charitable trusts is statutory in nature then where is the constitutional authority to recognise something as a charitable purpose which has absolutely no connection to the statute from which you draw your authority – don’t have authority so just make up analogy from a 400yr old statute
45
Case which highlights the criticism of the analogous reasoning used in identifying charitable purposes as not accounting for how the consequences of charitable status have changed over time
Thornton v Howe (1862)
FACTS - Mortmain Act 1736, c. 26 (now repealed) – held that any gifts of land for a charitable purpose were void. Courts adopted a wide definition for charitable purpose to allow them to set aside gifts. The testatrix bequeathed the land on trust to publish the religious works of Joanna Southcote’s who claimed at 64 to be giving birth to the 2nd messiah. Question was is this a charitable purpose?
HELD - it was a charitable purpose to render the gift of land was held void. BUT... this is used as a reason why organisations today should be recognised as charitable and therefore get tax breaks!
46
Authority for the criticism of the analogous reasoning used in identifying charitable purposes that the courts should take into account fiscal consequences of the decision
Dingle v Turner per Lord Cross
'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...'
BUT... other law lords in this case disassociated themselves from his opinion
47
What is the distinction between purposes and activities in charitable trusts?
General rule is that charitable status of a trust is to be judged by its purpose not its activities
- A trust’s purpose is in the trusts instruments whereas activities of the trust are the actions undertaken to achieve the purpose
48
Academic criticism of the analogous reasoning in identifying charitable trusts relying on the strict distinction between purposes and activities in charitable trusts
J Garton, Charitable Purposes and Activities (2014)
- says this distinction presupposes a “bright line dividing purposes from activities” which is rarely the case in practice
this reasoning is similar to that used by HoL in NAVS v IRC [1948]
49
Authority which highlights the disadvantages of adopting a clear distinction between purposes and activities of charitable trusts
National Anti-Vivisection Society v IRC [1948]
FACTS - NAVS was set up to repeal the cruelty to animals act 1876 – they argued that the repeal of the act was a ‘merely ancillary’ activity of its main charitable purpose of protecting animal welfare
HoL HELD - their main activity was campaigning for the repeal of legislation and thus was their main purpose and where that is the sole activity it is not a charitable purpose because of its political nature.
50
Case which supports the academic opinion of J Garton in his 2014 article
National Anti-Vivisection Society v IRC [1948]
Supports the opinion of J Garton by proving that there isn't a bright dividing line in practice because the courts in some circumstances having to look at the activities to find a charity’s purpose
51
Why might blurring of the dividing line between charitable purposes and activities create uncertainty when deciding whether to recognise new purposes as charitable?
Because it means that the court can't simply conclude on the basis that the charitable purpose is the same or analogous to one previously recognised - have to look at whether the purpose is charitable AND look at the activities they undertake to achieve this purpose
- added layer of complexity
52
Statutory provision for the requirement for charities to be for the public benefit
s.4 Charities Act 2011
53
Authority explaining the two aspects to the public benefit requirement under s.4 CA 2011
Independent Schools Council v Charity Commission [2012] per Warren J
1. public benefit in the first sense - benefit to society
2. public benefit in the second sense - those that will benefit must be sufficiently numerous and identifiable
54
Case which hitched the 1601 Preamble to the law of charity
Morice v Bishop of Durham (1805) per Lord Eldon
four-fold classification -
1. relief of the indigent - poverty
2. the advancement of learning
3. advancement of religion
4. the advancement of objects of general public utility - said this was the most difficult
dont need to know off by heart per se
55
Case which further discussed the four-fold classification of public benefit in Morice v Bishop of Durham (1805)
Lord Macnaughten in Cmmrs of Income Tax v Pemsel [1891] --> the Pemsel Heads of Charity
56
What is the starting point for the identification of charitable purposes until the passing of s. 2 of Charities Act 2006 which was then replaced by s. 3 of Charities Act 2011
the Pemsel Heads of Charity per Lord Mcnaughten [1891]
"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."
57
Are there any purposes which are presumed to be for the public benefit?
NO - because s.4(2) CA 2011 abolished the presumption for any purposes, mainly education used to be presumed for the public benefit
- Labour govt. reformed this so that fee paying schools could be scrutinised rather than presumed to be charities
58
Authority which concluded that there never existed a presumption of public benefit and therefore the abolishment of this presumption had no effect
R (on the application of the Independent Schools Council) v Charity Commission [2012] per Warren J
i.e. Independent Schools
HELD - It is a question of fact whether a given purpose exists for the public benefit – there never was a presumption and therefore s.4 wasn't abolishing the presumption – it was a misunderstanding of the law
59
What is one major consideration for the courts when considering public benefit in the first sense
the judge must be convinced that the benefits of that purpose must outweigh any harm caused
e. g. NAVS v IRC
e. g. R(Independent Schools) - BUT... this case showed a limitation of this because it held the the courts can only weigh benefits and detriments based on evidence --> nothing which requires political resolution
60
What are the THREE issues for considering whether a purpose is for the public benefit in the second sense?
1. can't be a class within a class
2. can't be a group of individuals linked by a 'personal nexus'
3. can't be for a political purpose
61
Leading authority for the fact that a trust can't be for the public benefit in the second sense if it is a class within a class
IRC v Baddeley [1955] per Viscount Simmonds -
FACTS - Trust was for the benefit of people living in west ham who were or were likely to become part of the Methodist church.
HELD - such class wasn’t a sufficient section of society because they are a class within a class.
62
TWO cases on the fact that a trust fails the public benefit test in the second sense if the class of individuals cannot be linked by a common personal nexus
1. Re Compton [1945] per Lord Greene MR
| 2. Oppenheim v Tobacco Securities Co Ltd [1951]
63
Authority which set out the personal nexus test to find if a trust passed the public benefit requirement
Oppenheim v Tobacco Securities Co Ltd [1951] per Lord Simonds
HELD - must have evidence of two things -
1. beneficiaries must not be numerically negligible
2. the quality which distinguishes them from other members of the community, so that they form by themselves a section of it, must be a quality which does not depend upon their relationship to a particular individual.
64
What was the dissenting opinion of Lord Macdermott in Oppenheim v Tobacco Securities Co Ltd [1951]
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A famous dissent -
1. he criticised the personal nexus test – said that in Oppenheim there was over 110,000 employees, by any standard that is a large class in society --> it seems somewhat perverse to see that as a small private class
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2. simple redrafting would have held it to be for a charitable purpose e.g. a trust to educate those living in a particular region
3. it is open to artificial exploitation by the fact that it is automatically applied without concern for whether it could be fixed with simple re-drafting
overall argument - suggesting that the personal nexus test might be informative but it ought not be decisive
65
Authority which approved the dissenting opinion of Lord Macdermott in Oppenheim v Tobacco Securities Co Ltd [1951]
Dingle v Turner [1972] per Lord Cross
'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'
66
FACTS of R(Independent Schools Council) v Charity Commission [2012]
- the charity commission began a review of fee-paying schools and concluded they could only be charitable if they provided means tested bursaries for students and made their facilities open to the general public
- the Independent Schools Council sought Judicial review – which is this case
67
How is there conflict in the highest courts regarding the personal nexus test in the public benefit requirement
- In Oppenheim it was said that a trust for the advancement of education of employees failed because of their personal nexus – sharing a common employer
- But in that case Lord Macdermott made a dissent suggesting that the personal nexus test might be informative but it ought not be decisive. Argued it isextreme to say that 110,000 isn’t a sufficient section
- This was echoed by Lord Cross in Dingle v Turner – seems to favour lord Macdermott’s approach
So there is conflicting authority in the highest court
68
What did Independent Schools [2012] conclude was the test for public benefit in the second sense
i.e. Beneficial to a sufficient section of the public
Warren J HELD - 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 de minimis or token) aid to those who could not afford the fees.
- applied the broader approach of Lord Macdermott - holding that it should be a broad contextual reflection of the evidence to work out on balance whether this charitable trust exists for the public benefit in the second sense --> 'rather than a single conclusive test'
69
Leading authority for the rule that a charitable purpose cannot be political in nature
NAVS v IRC [1948] - HoL
- HoL per Lord Simmons held that trusts for the political purposes cannot be charitable because the courts have no means of judging whether the proposed change in law will be for the public benefit and therefore cannot say whether the gift to secure the change is a charitable gift
- is it open for the 3rd branch of govt. to criticise other branches? Strong separation of powers argument
confirmed what was said in the earlier case of Bowman v Secular Society Ltd [1917] per Lord Parker
70
Academic criticism of the decision in NAVS v IRC [1948] - HoL
J Garton in Landmark Cases in Equity (2012)
1. Granting charitable status to political purposes does not necessarily mean those purposes will be achieved --> recognising it as charitable doesn’t mean they’ll be successful
2. Nor does it mean that the court necessarily approves of those purposes or approves of a change in the law --> Parliament isn’t required to change the law
3. Charities already try to fulfil their purposes by political means. It is artificial to refuse to recognise political purpose trusts --> just by saying its charitable doesn’t mean they are approving the charity. Courts regularly recognise religious trusts without approving a specific set of beliefs – e.g. Thornton v Howe
71
Example case for proof that the decision in NAVS v IRC {1948] that trusts for charitable purposes cannot be political in nature hasn't been applied in the commonwealth
Aid/Watch Incorporated v Federal Commissioners of Taxation (2010)
- FACTS - Trust whose purpose was to campaign for changes in the law and this was held to be beneficial to the public on the grounds that it would encourage public debate
also Re Greenpeace of New Zealand Inc (2014)
72
Which statutory provision has brought us closer to recognising trusts for a political purpose?
s.3(1)(h) CA 2011
73
What does it mean to say that a trust must be exclusively charitable to be recognised as a charitable purpose trust?
If the trust instrument permits trust funds be used for charitable and non-charitable purposes then it can’t be a charitable trust
74
Case which held that a trust for 'worthy causes' wasn't exclusively charitable in nature
Chichester Diocesan Fund v Simpson [1944]
- held that the advancement of 'worthy causes' could include non-charitable purposes --> trust was void for uncertainty
NB - Trust for the benefit of “worthy individuals” and “organisations and corporations operating for the public good” and “education and welfare of children” are also not charitable for the same reason
75
Example of a borderline case which was held to be exclusively charitable
Guild v IRC [1992] - HoL
FACTS - Trust provided for funds to be used for a sports centre ‘or some similar purpose’ with sport
HELD - said that ‘some similar purpose’ as meaning some similar charitable purpose and so upheld the purpose as charitable
shows that there is some scope for the courts to interpret the trust instrument
76
Case in which the distinction between activities and purposes was discussed in the context of considering whether a trust was exclusively charitable in nature
AG v McGovern [1982] per Slade J
FACTS - Amnesty international set up a trust to administer some of its purposes which they considered charitable so sought a declaration from the charity commission that it was a valid charity
HELD - it wasn't a valid charity because the trust instrument stated that one of the purposes was ‘procuring the abolition of torture or inhumane treatment’ – this isn’t one of their activities so it was held to be a trust for political purposes and so not exclusively charitable
- he noted that it would have been valid if the non-charitable activities authorised by the trust instrument were merely subsidiary or incidental to the charitable purpose
BUT... this case would now come within s.3(1)(h) CA 2011 but the reasoning is valid
77
What definition of poverty do the courts used when interpreting charities under s.3(1)(a) CA 2011?
Applied in Re Coulthurst [1951]
- Doesn’t require the beneficiaries of the charity to be destitute – it is a relative term which is interpreted broadly --> so includes people who go short from time-to-time
78
Case which held that the purpose under s.3(1)(a) CA 2011 must be drafted so it doesn’t include people outside this definition of poverty
Re Sanders’ WT [1954]
FACTS - the trust was to ‘provide dwellings for the working classes and their families’
- to fulfil the requirement that it is exclusively charitable it must not include people who aren't in poverty and it was held that the word 'working class' isn't appropriate today
79
Charity commission guidance on the definition of poverty
households living on less than 60% of median income that go short in some unacceptable way
80
The exception to the application of the 'personal nexus' rule from Oppenheim
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"poor relations" cases -
Trusts for the relief of poverty (s.3(1)(a) CA 2011) are an exception to the principle that the people benefiting from a charity cannot form a private class of individuals
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e.g. can have a trust for the relief of poverty of “poor relations” or “my poor employees” if their primary intent is to relieve poverty amongst that limited class
81
TWO examples of applying the rule that a trust for the relief of poverty can be for class of objects that are defined by reference to some personal relationship (linked by a personal nexus) as long as the primary intention is to relieve poverty
1. AG v Bucknall (1741)
- Decided by Lord Chancellor Hardwick
- Trust set up to assist the poor relations of Mr Ward – was held to be a valid charitable trust
2. Re Scarisbrick [1951] per Lord Evershed MR
- the testatrix bequeathed her residuary estate on trust “for such relations of my said son and daughters as…shall be in needy circumstances” --> CoA held the primary intention was the relief of poverty
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Case which asked if the exception to the personal nexus rule in "poor relations" cases applies in the case of poor employees
Dingle v Turner [1972]
- So trusts for poor relations are an exception to the personal nexus rule and they have been extended to trusts for poor employees in Re Gosling (years ago) and reaffirmed in Dingle v Turner
- mainly because it was illogical to distinguish between trusts for poor relations and trusts for poor employees
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Example case which shows the scope of education under s.3(1)(b) CA 2011 to include a wide range of activities
IRC v McMullen [1981]
- HoL held that a trust to provide sports facilities for schools and universities was charitable because physical education was an integral part of the education of the young because it was limited to schools and universities
NB - At the time of this case trusts for the promotion of sport were not charitable. But now s.3(1)(g) recognises the advancement of amateur sport as a charitable purpose.
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Authority which is against the inclusion of research as within the charitable purpose of the advancement of education under s.3(1)(b) CA 2011
Re Shaw [1965]
FACTS - Playwright George Bernard Shaw bequeathed a sum of money into a new 40 letter alphabet
HELD - If the object be merely the increase of knowledge that is not in itself a charitable object unless it be combined with the teaching of education
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Authority which is for the inclusion of research as within the charitable purpose of the advancement of education under s.3(1)(b) CA 2011
Re Hopkins WT [1965] per Lord Wilberforce
FACTS - Money left in trust to find "the Bacon-Shakespeare manuscripts"
HELD - Applied a broad definition of education – anything which is of educational value to the researcher or directed to lead to something or improve the sum of communicable knowledge – not a limited test as in Re Shaw
BUT... the research still needs to be in some way capable of benefitting society
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The Charity Commission's position on the inclusion of research as within the charitable purpose of the advancement of education under s.3(1)(b) CA 2011
in Charity Commission, Public Benefit and the Advancement of Education (2008)
- what is important is that the research is published and made publicly available even if only experts in that field can understand it
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Case which considers the issue of propaganda within the consideration of a purpose as being for the advancement of education under s.3(1)(b) CA 2011
Southwood v AG [2000]
FACTS - trust for 'the advancement of the education of the public in the subject of militarism and disarmament and related fields by all charitable means'
HELD - Chadwick LJ -
‘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...’
It was a political purpose that was masked as a charitable one and so wasn't a valid charitable trust within the rules set out in NAVS v IRC and McGovern v Attorney-General
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Case which held a trust to convert people to a particular religious belief cannot be a valid charitable trust for the purpose of education
Charity Commission, Decision on the Agnostic Centre’s Application for Registration as a Charity (16 Dec 2009)
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Case which held that trusts for the advancement of education do not fail the public benefit test in the second sense merely because they charge fees
R (Independent Schools Council) v Charity Commission [2012]
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Can trusts for the advancement of education under s.3(1)(b) CA 2011 be held charitable if the beneficiaries are linked by a 'personal nexus'?
general rule is NO - Oppenheim [1951]
BUT... there are cases where you have trust to educate members of a town (Re Tree [1945]) and trusts to educate children of members of a particular profession (Hall v Derby Sanitary Authority (1885)) which are valid!
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Statutory provision which states what is included in the term 'religion' for the purposes of trusts for the advancement of religion under s.3(1)(c) CA 2011
s. 3(2)(a) Charities Act 2011
| - is this too broad?
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Authority for the definition of 'religion' for the purposes of trusts for the advancement of religion under s.3(1)(c) CA 2011 which Parliament subsequently held to be too narrow
Re South Place Ethical Society [1980]
per Dillon J - 'It seems to me that two essential attributes of religion are faith and worship: faith in a god and worship of that god.’
- this excludes religions which aren’t predicated on the belief of god e.g. Buddhism
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What kind of proof does the public benefit test in the second sense require?
i. e. benefits a sufficient section of society
| - the benefit must be capable of empirical proof
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Leading authority for the public benefit test in the second sense for trusts for the advancement of religion under s.3(1)(c) CA 2011
Gilmour v Coates [1949]
FACTS - Trust set up to further the purposes of an order of cloistered nuns. Trust for the provision of intercessory prayers (on behalf of others) to a deity , didn’t leave the cloisters. It was claimed that the trust was for the public benefit because the nuns were setting an example to people and improve the lives of others through prayers
HoL HELD - the purpose of the trust was too vague and was impossible to prove the tangible benefit to society so failed to prove public benefit in the second sense
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Case which concluded that it isn’t enough that the donor or settlor believes that the gift is for the public benefit, the public benefit must be empirically proved before the court
Gilmour v Coates [1949]
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Example case where 'counselling sessions' were held to have failed the public benefit test in the second sense because they did not amount to worship and existed only for the private benefit of its members
Charity Commission, Decision on Application for Registration by Church of Scientology (17 Dec 1999)
- They drew explicitly on Gilmour v Coates
- also noted that even if they agreed that it was worship, any benefit to the public that may flow from auditing and training is incapable of proof! ---> so the problem wouldn't have been fixed by them making them doing the sessions in front of the public
useful quote - ‘ [The] burden is upon the religious organisation in question to demonstrate both its impact upon the community and that the impact is beneficial’
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Case which demonstrates the importance of having to prove a TANGIBLE benefit to satisfy the legal test of public benefit
Charity Commission, Decision on Application for Registration by Church of Scientology (17 Dec 1999)
HELD - Even if you can prove that you had the counselling sessions in public they would still have to prove that these sessions were beneficial in society. You have to have some empirical basis behind it
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statutory provision which contains the meaning of 'advancement of health' for the purposes of s.3(1)(d) CA 2011
s.3(2)(b) CA 2011
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Charity Commission guidance on the meaning of 'advancement of health' for the purposes of s.3(1)(d) CA 2011
The Charity Commission Guidance in 2009
includes - '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 of illness.’
BUT... ‘To be charitable there needs to be sufficient evidence of the efficacy of the method used.’ ---> like with trusts for alternative methods claiming to be for the advancement of religion
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Case in which it was said that merely because you’re a hospital doesn’t mean you’re a charity for the purposes of s.3(1)d) CA 2011
Re Resch’s WT [1969] per Lord Wilberforce
‘To provide…medical treatment otherwise inaccessible but in its nature expensive, without any profit motive, might well be charitable.’
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What is the supplementary statutory provision for s.3(1)(e) CA 2011?
s.3(2)(c) CA 2011
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What is included in cultural heritage under s.3(1)(f) CA 2011?
Might include tangible culture (such as buildings or paintings) and intangible culture (such as traditional dance or other historical traditions).
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Example case discussing what comes within s.3(1)(f) CA 2011 as a trust for the advancement of science
Royal College of Surgeons of England v National Provincial Bank [1952]
FACTS - A gift beneficial to surgeons was upheld as a gift for the advancement of surgery
HELD - applied a broad meaning of "the study and practice of the art and science", saying it meant both the acquisition of knowledge and skill to perform surgeries but also new research and improvement and skills of current and future surgeons
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What is the supplementary statutory provision for s.3(1)(g) CA 2011?
s.3(2)(d) CA 2011
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Odd examples of trusts either coming or not coming within the category of advancement of amateur sport under s.3(1)(g) CA 2011?
It is ultimately subject to the empirical proof standard -
- 2015 - Charity Commission refused to register the Cambridgeshire Target Shooting Association as a charity. They accepted that target shooting involved some physical and mental exertion, but refused to find that target shooting promoted health.
- 2011 - Charity Commission registered 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).
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Example of a valid charitable trust within s.3(1)(h) CA 2011
Koeppler’s Will Trust [1986] -
FACTS - a trust was set up to fund conferences promoting co-operation in Europe.
HELD - mere organisation of the conferences isn't a charitable purpose BUT... the participants in the courses were selected from wide categories as persons likely to influence opinion in their own country so it was held that not only they themselves are likely to benefit from the courses, but are likely to pass on such benefits to others.
- upheld it as valid charitable purpose for the advancement of education at the time but would now be under s.3(1)(h)
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Is there a potential overlap between a trust for the advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity under s.3(1)(h) CA 2011 and political purposes (non-charitable)
Slade J noted this potential overlap in Koeppler’s Will Trust [1986], comparing it to the decision in McGovern v A-G [1982]
HELD - Koeppler's trust which was set up to fund conferences promoting co-operation in Europe is -
'not of a party political nature. Nor… are they designed to procure changes in the laws or governmental policy of this or any other country: even when they touch on political matters, they constitute… no more than genuine attempts in an objective manner to ascertain and disseminate the truth'
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Example case which shows that pre-2006 trusts for the advancement of environmental protection or improvement were held to be non-charitable
Re Grove-Grady [1929] per Lord Hanworth MR
HELD - Trust where the public cannot enter cannot exist for the public benefit
Today this would be held to be charitable under s.3(1)(i) CA 2011 as long as it passed the public benefit test --> but it could quite easily do so by merely publishing pamphlets or books or research which could inform the public of its work
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Leading authority for the advancement of animal welfare under s.3(1)(k) CA 2011
Re Wedgwood [1915]
FACTS - a trust was set up to promote humane methods of slaughtering animals.
HELD - it was a valid charitable trust because it tends to promote public morality by checking the innate tendency to cruelty.’
- BUT.... remember that it has to be a group of animals not just a specific animal
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FOUR suggestions for reform?
1. Lord Cross and Lord Macdermott spoke of a need to decouple the link between fiscal advantages (tax-relief) and charitable status? Does it ask the courts too close to criticising public policy?
2. Do we need a new definition of Religion for the purposes of charity?
3. Ought we place stricter limits upon use of analogical reasoning to recognise new heads of charity? Does it create an unprincipled way of developing the law?
4. Ought we to permit Political charities?
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Noteworthy influencer in Charity Law
Hubert Picarda QC - has been involved in many of the main cases in recent time e.g. Re Niyazi's
