The 'Public Benefit' test and the doctrine of cy-pres Flashcards
(12 cards)
The ‘Public Benefit’ test
not enough for charity to be for a charitable purpose, exclusively charitable or not be for purely political objects - must also be for public benefit - Charities Act 2011, ss 2(1)(b) and 4
Charity trustees are required to report on public benefit as part of the Trustees’ Annual Report, under Charities (Accounts and Reports) Regulations 2008, SI 2008/629, Annex A - failure could lead to loss of charitable status
The ‘Public Benefit’ test and the Charities Act 2011:
a charitable purpose is a purpose which—
s 2(1)(a): falls within section 3(1) [the statutory list of charitable purposes], and
s 2(1)(b): is for the public benefit (see s.4)
Under s 4(2) Charities Act 2011— 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. - if you satisfy first stage then you are for charitable purpose don’t automatically pass 2nd test for public benefit - need to demonstrate separately
Under s 4(3) Charities Act 2011— In this Chapter any reference to the public benefit is a reference to the public benefit as that term is understood for the purposes of the law relating to charities in England and Wales. [emphasis added] - no new definition, go back and look at common law that existed prior 2011 act to figure out if an org is for a public benefit
What is ‘Public Benefit’?
Mary Synge - resumed academically if can satisfy charitable purpose test for one of 3 heads of pemsel test then auto satisfy public benefit test - don’t need to prove separately BUT THIS IS NOT THE CASE
Upper Tribunal’s ruling in the The Independent Schools Council case, ‘public benefit’ will be assessed as a question of fact in every case
Attorney General v Charity Commission - example = school for pickpockets, satisfies the advancement of education but not a public benefit
Satisfying the ‘Public Benefit’ requirement: The Independent Schools Council case
Independent schools council identified 2 princips that must be identified on facts of each case
- identifiable benefit
- to the public or a sufficient section of the public
These principles were incorporated in the Charity Commission’s revised guidance in Charity Commission, Public Benefit: The Public Benefit Requirement (PB1) (September 2013)
‘Public Benefit’ in the case law: ‘identifiable benefit’
Practical or intangible:
‘Public benefit’ may consist of providing practical assistance - e.g. food bank, rehoming pets etc
Re Wedgewood - a gift for the protection of animals would, ‘promote public morality by checking the innate tendency to cruelty’ - intangible outcome that was held to be in public benefit
Direct or indirect:
R (Independent Schools Council)
‘(1) Direct benefits: benefits to persons whose needs it is a purpose of the charity to relieve which are received by such persons as recipients of the main service which the charity provides. - e.g. those who can benefit directly by private schools = the students as they benefit more than state schools as higher qual of education
(2) Indirect benefits: benefits to persons whose needs it is a purpose of the charity to relieve which are received by such persons otherwise than as recipients of the main service which the charity provides.’ - e.g. benefit community at large and companies who higher alumni and receive higher education so higher qual of education so better workers
‘Public Benefit’ in the case law: ‘to the public’
‘To the public or a sufficient section of the public’: - e.g. purposes that may benefit 100%of population e.g. cancer research
although relatively small numbers are likely to benefit from any given charity’s purpose, crucial that opportunity to benefit be available to a sufficient section of public - Oppenheim v Tobacco Securities Trust Co Ltd - ‘personal nexus’ rule (making a charity that benefits you and small group of ppl around you)
opportunity to benefit must not be unreasonably restricted by reference to geographical location e.g. restricting the benefit to people living in a particular town is likely to be acceptable as constituting an appropriate section of the public, whereas limiting it to people living on a particular street will not
must also not be unreasonably restricted by the ability of potential beneficiaries to pay fees, although this won’t necessarily disqualify a charity from charging private - independent schools council
So long as the organisation reinvests its private profits back into the charitable work, it will be satisfying the public benefit requirement: IRC v Falkirk Temperance Café Trust
‘Public Benefit’ and ‘political purposes’: National Anti-Vivisection Society v IRC
House of Lords ruled that a proposed change in the law, in the form of the abolition of vivisection, was not in the public interest because benefits to the public in terms of scientific and medical research outweighed the harm to animals arising from vivisection
Lord Wright - pubic benefit could be judged on basis of approval by common understanding of enlightened opinion for time being - if the public at large at the time would determine this is utilitarian
‘Public Benefit’ in today’s world: an outdated phenomenon?
public benefit likely continue to change - e.g. now a belief that protection of biodiversity could in itself be of value without needing to establish immediate practical benefits
e.g. during WWI public benefit to provide cigarettes for sedatives, not know it damages your health
Cy-près
when a charitable trust fails not always case trust should fail with it
charitable trust and gifts made to that trust can be reassigned to a similar charitable purpose to that which failed, so long as certain criteria are met
Failure of the charitable purpose ab initio:
the property will be applied cy-près only if the donor can be considered to have an intention that the property should be used for the benefit of charity generally, rather than confined to the specific charitable purpose that has failed e.g. if died and didn’t amend will before passing away and charity dissolved before death then fails at the outset - certainty of intention and looking at specific intention and ascertaining evidence that supporting area they wanted to donate to not a specific charity e.g. any animal charity not specifically the RSPCA
Failure of the charitable purpose subsequently:
once property has been applied for charitable purposes and there is a subsequent failure of those purposes, the property will be applied cy-près whether or not the donor had an intention to benefit charity generally. - e.g. donate money now and charity dissolves later
The Doctrine of Cy-près – statutory framework
Re Wright - - once gift has taken effect (no ab initio failure) heirs of that person are forever excluded
the courts and the Charity Commission have the power under statute to make schemes so that the property is applied for a similar charitable purpose.
This statutory power is conferred by s 67 Charities Act 2011. - sub section 3 specifically
The Doctrine of Cy-près – Initial or Subsequent Failure?
Failure of Charitable Purpose Ab Initio:
To establish an initial failure of charitable purpose, it is necessary to consider whether, at the time the trust is to take effect, the identified purpose is impossible or impracticable to fulfil.
Re Faraker - - gift in someone’s will assigned to Mrs. B charity intended to refer to Hannah Baylys charity - poor drafting of will - this charity ceased to exist but because broader collective group came together - court reassigned donation
Re Slatter’s Will Trusts - A testatrix had left money to a hospital in Australia for the treatment of tuberculosis, but the hospital had closed down before the testatrix’s death. Since the hospital had not left any funds to continue this purpose, it followed that there was a failure of the gift ab initio. - no similar purpose
Failure of Charitable Purpose Subsequently:
Once a trust fund has been dedicated to a charitable purpose, the fact that the purpose then fails cannot destroy the charitable nature of the fund. The same rule applies for individual gifts dedicated to a charitable purpose. - unless express declaration of what will happen if charity fails e.g. go to another beneficiary etc
The courts will find a similar charitable purpose and the fund/gift will be transferred to it, regardless of whether the donor had a general or specific charitable intent.
exceptions are where the donor has expressly provided for what should happen to the fund/gift if the purpose subsequently fails
The Doctrine of Cy-près – s 63A Charities Act 2011
s 63A(4) Charities Act 2011 (as amended by s 6 Charities Act 2022) applies where a gift for a specific charitable purpose has failed ab initio, but the resulting trust for the donor also fails. - when cannot locate original donor or died or formally disclaimed right to have property returned
For example, where the donor cannot be identified or found, or they have formally disclaimed their right to have the property returned, the donor’s intention is substituted and the property is treated as if it were given for charitable purposes generally, and can therefore be applied cy-près. - property treated as if for charitable purposes generally and applied cy-pres. - statute overriding intention
The property can also be applied cy-près if the donation made was a single gift of £120 or less, per s 63A(3)(a).
