CHARITABLE TRUSTS

Question 1

EXCEPTIONS TO GENERAL RULES

Answer 1

Trusts for purposes

Rule of certainty

Charitable trusts may be perpetual in duration

Tax Benefits

Charity Commission

Question 2

Trusts for purposes

Answer 2

• General rule: “Every other trust [which is not charitable] must have a definite object. There must be somebody in whose favour the court can decree performance” [Morice v Bishop of Durham]
• Exception for charities: “a trust to be valid must be for the benefit of individuals . . . or must be in that class of gifts for the benefit of the public which the courts in this country recognise as charitable in the legal as opposed to the popular sense of that term” [Bowman v Secular Society]

Question 3

Rule of certainty

Answer 3

• The objects of a trust must be certain
• The only requirement in respect of certainty is for the trust to be exclusively charitable [s1 Charities Act 2011; Chichester Diocesan Fund and Board of Finance v Simpson]
  
  • Test for certainty of object
  • If there is more than one purpose identified, each of them must be identifiable

Question 4

Charitable trusts and perpetuity

Answer 4

• Charitable trusts may last forever
• The rule of remoteness of vesting does still apply
  
  • Subject to gift over from one charity to another [s2 Perpetuities and Accumulations Act]

Question 5

Tax benefits

Answer 5

• There are various tax benefits that come with charitable trusts
• Dingle v Turner: you cannot take into account the fact in determining what counts as charitable of the consequence of finding that a trust is charitable that it will be to various tax benefits
  
  • Just apply the law as laid out in statute and the cases

Question 6

Exceptions to general rules

Charity commission

Answer 6

• Statutory regulator of charities
• Has the ability to decide whether something meets the test for a charity as a matter of law
• It is only applying the law to the facts presented to it, they are not making political or moral judgments

Question 7

Preamble to Charitable Uses Act 1602

Answer 7

• The Statute of Elizabeth I
• Identified a host of purposes that were thought to be for the public benefit and thus were suitable as objects of charity
• Purposes that were expressly identified in this preamble, or were within the spirit and intendment of those purposes (analogous purposes to those expressly listed)

Question 8

Pemsel Classification

Answer 8

• ‘Charity’ in its legal sense comprises of four principal divisions
  
  • 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’
• The first three heads used to have public benefit presumed

Question 9

Charities Act 2006 and 2011

Answer 9

• 2006 major reform and consolidation
• 2011 tidying up and further consolidation of 2006 Act

Question 10

What is a charity?

Answer 10

S1(1) Charities Act 2011

“For the purposes of the law of England and Wales, “charity” means an institution which—

(a) is established for charitable purposes only, and
(b) falls to be subject to the control of the High Court in the exercise of its jurisdiction with respect to charities”
* It must be exclusively for charitable purposes

Question 11

What is a charitable purpose?

Answer 11

s2(1) Charities Act 2011

For the purposes of the law of England and Wales, a charitable purpose is a purpose which—

(a) falls within section 3(1), and
(b) is for the public benefit (see section 4).

Question 12

Purposes recognised by the 2011 Charities Act

Answer 12

S3(1)

• Lists all of the recognised purposes
• All the previously recognised purposes are listed

(m) any other purposes—

1. that are not within paragraphs (a) to (l) but are recognised as charitable purposes by virtue of section 5 (recreational and similar trusts, etc.) or under the old law,
2. that may reasonably be regarded as analogous to, or within the spirit of, any purposes falling within any of paragraphs (a) to (l) or sub-paragraph (i), or
3. that may reasonably be regarded as analogous to, or within the spirit of, any purposes which have been recognised, under the law relating to charities in England and Wales, as falling within sub-paragraph (ii) or this sub-paragraph.

• Expressly leaves open space for development
• A charitable purpose is one that falls within this section and is for the public benefit

Question 13

Definitions and clarifications of s3(1) purposes

Answer 13

S3(2)

• Deals with controversies that were in the law prior to the 2006 act, and offers some definitions or clarifications
• The law prior to the 2006/2011 Acts is still relevant (except as modified by the Acts)

Question 14

Law prior to the Charities Acts

Answer 14

• s3(3): “Where any of the terms used in any of paragraphs (a) to (l) of subsection (1), or in subsection (2), has a particular meaning under the law relating to charities in England and Wales, the term is to be taken as having the same meaning where it appears in that provision.”
• s3(4): “In subsection (1)(m)(i), “the old law” means the law relating to charities in England and Wales as in force immediately before 1 April 2008”
• Prior cases continue to apply subject to modifications by the Act and subsequent case law

Question 15

General structure for problem questions

Answer 15

• s1: Exclusively charitable?
• s2: What are charitable purposes?
• s3: Is it a purpose from the s3(1) list?
  
  • Any clarification in s3(2)?
  • Old authorities?
  • Post-Act authorities?
• s4: public benefit
• A purpose could fall under multiple provisions of s3(1)

Question 16

Specific s3(1) purposes

Answer 16

• Virtually all of the purposes refer to ‘advancement’
  
  • It is not enough to show that X is involved, it must be advancing it
• Prevention of relief of poverty
• Advancement of education
• Advancement of religion

Question 17

Prevention or relief of poverty

Answer 17

• “It is quite clearly established that poverty does not mean destitution; it is a word of wide and somewhat indefinite import; it may not unfairly be paraphrased for present purposes as meaning persons who have to “go short” in the ordinary acceptation of that term, due regard being had to their status in life, and so forth” [Re Coulthurst]
  
  • Those who are struggling to make ends meet and go short in a broader sense
• Note that it is the prevention or relief of poverty

Question 18

Advancement of education

Answer 18

• Re Hopkins: the word education is not just the investigation in and of itself
  
  • It must engage the wider society
• Pure public engagement with no educational value does not count [Re Pinion]
• We need to sure that it is adding to the store of shared human knowledge

Question 19

Re Shaw

Answer 19

• Shaw wanted to fund investigations into whether a 40-letter alphabet would be viable, as opposed to the advancement of this study, and so the objects failed
  
  • Even though it would have increased the knowledge of society in a broad sense, there was no provision of teaching or education or otherwise dissemination of the information
  • The advancement of education is not simply adding to the store of human knowledge, it involves in the dissemination of the information

Question 20

Advancement of religion

Answer 20

s3(2)(1)

1. in paragraph (c), “religion” includes –
2. a religion which involves belief in more than one god, and
3. a religion which does not involve belief in a god

Question 21

Charity Commission, The Advancement of Religion for the Public Benefit

Answer 21

“Belief in a god (or gods) or goddess (or goddesses)**, or supreme being, or divine or transcendental being or entity or spiritual principle, which is the object or focus of the religion;

• a relationship between the believer and the supreme being or entity by showing worship of, reverence for or veneration of the supreme being or entity;
  
  • Requirement of worship and engagement
• a degree of cogency, cohesion, seriousness and importance;
• an identifiable positive, beneficial, moral or ethical framework”
• These together establish what is a religion for charity law

Question 22

Scientology

Answer 22

• Declined to register the church of scientology as a church in 1999 applying the previous criteria (before the 2006 and 2011 Acts)
  
  • Because of the element of payment and exclusivity, it does not qualify as a religion under the requirements
• The Supreme Court in Regina (Hodkin) v Registrar General of Births, Deaths and Marriages considered as to whether the scientology chapels were places of worship that would qualify to hold weddings (not on charities)
  
  • It was held as a place of worship, but not necessarily a religion
  • In engaging with the church of scientology, it can be seen how carefully the Charity Commission engages with the question as to whether or not a belief system qualifies as a religion
• You are now required to show that each religious charity operates for the public benefit

Question 23

Application for Registration, Charity Commission Decision

Temple of the Jedi Order

Answer 23

• The Temple of the Jedi Order applied to be registered as a religious charity
• It was held that it was not entitled to be registered as a religion because, although it did advance a way of life in a broad sense, it did not meet the requirements (belief in a god, worship, cogency and a moral framework)

Question 24

Public benefit

What is a charitable purpose

Answer 24

• S.2(1) For the purposes of the law of England and Wales, a charitable purpose is a purpose which—
  
  • (a) falls within section 3(1), and
  • (b) is for the public benefit (see section 4).

Question 25

The Public Benefit Requirement

Answer 25

S4 1. *In this Act “the public benefit requirement” means the requirement in section 2(1)(b) that a purpose falling within section 3(1) must be for the public benefit if it is to be a charitable purpose.* 2. *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.* 3. *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.* 4. *Subsection (3) is subject to subsection (2).* * For every charitable purpose, you need to positively establish that it is for the public benefit

Question 26

*Independent Schools Council v The Charity Commission*

Answer 26

* If independent schools charge very high fees, that is a barrier to most of society * The Charity Commission showed ways in which fee-paying schools can be for the general public benefit * Opening of facilities * Giving out scholarships and bursaries * Prescriptive – requiring a lot of independent schools to show that they are a for the public good * The decision held that the guidance was too prescriptive as to what is to be expected from schools * Although the charging of fees should be considered when assessing public benefit, the mere charging does not mean it is not for the public benefit, the situation needs to be assessed in the round

Question 27

The 'Benefit Aspect'

Answer 27

* Public benefit: the public benefit requirement – “*The ‘benefit aspect’ of public benefit is about whether the _purpose is beneficial_”* * *The purpose must be beneficial*

Question 28

*Gilmour v Coats*

Answer 28

* A sum of money to be left on trust for a closed order of nuns (they did not engage with the rest of the world, they simply prayed together) * It is clearly for religion, but not necessarily for the public benefit because they are not being engaged by the activities of the nuns * It was ruled that there were benefit to the nuns in their contemplative lives, and they would pray for the wider community * The judges ruled that this may be beneficial in a broad sense, but it is not for the public benefit in a broad sense; further, there is no quantifiable benefit * You must be able to demonstrate the beneficial aspect of the purpose

Question 29

The 'Public Aspect'

Answer 29

* *_About whom the purpose benefits_* * Public benefit the public benefit requirement – “*legal requirement: to satisfy the public aspect, the public benefit must:* * *Benefit the public in general, or a sufficient section of the public* * *Not give rise to more than incidental personal benefit*” * Must be the public in general or a sufficient section * There cannot be a personal nexus

Question 30

Public in general or sufficient section

Answer 30

* *IRC v Baddeley*: a bridge that can be used for all people is a charity regardless of how many people use it, but if the use of the bridge is confined to a certain number of people, that would not be a sufficient section of the public because the nature of a bridge * If you exclude some people from a general public utility, it will not be a charity * Explains how local charities are still fine

Question 31

Personal Nexus rule

Answer 31

***Those who may benefit must not be linked by connection such as family, common employer, etc*** * You cannot restrict access to a charity to those who have a familial or contractual connection * *Oppenheim v Tobacco Securities*: there was a settlement, and the trustees were supposed to provide an income for the education of children of employees or ex-employees of Tobacco Securities (over 100,000 people) * They argued that because so many people would benefit, it should be considered a charity * HoL ruled that “*the possible beneficiaries … must be a quality which does not depend on their relationship to a particular individual*” * A further restriction on the requirement that the charity must be for the public benefit ***Exception for trusts for the relief or prevention of poverty*** * Helping anyone out of poverty is a good thing * *Dingle v Turner* confirms this, there can be a personal nexus in a charity, but only for the relief or prevention of poverty

Question 32

Overseas charities

Answer 32

* Geographical limitations are not in themselves problematic * The benefit does not need to be accrued in the UK [*McGovern v AG*] * “*The mere fact that the trust was intended to be carried out abroad would not by itself necessarily deprive it of charitable status*” * There still needs to be a benefit to a sufficient section to the public, but not necessarily the British public

Question 33

Political purposes

Answer 33

* Political purposes are not charitable * Purposes that would require a change in the law / government

Question 34

*National Anti-Vivisection Society v IRC*

Answer 34

* The NAVS campaigned for the total suppression of vivisection, and that would have required a change of the law to achieve the purpose. * “*The* *court has no means of judging whether a proposed change in the law will or will not be for the public benefit. It is not for the court to judge and the court has no means of judging*” * The court cannot second guess government / legislative decisions * That does not mean that operating in a political context will stop the purpose from being charitable

Question 35

*Human Dignity Trust v The Charity Commission for England and Wales*

Answer 35

* It was held that campaigning for the better treatment of LGBTQ people in countries they are being oppressed was not achieving a political purpose because those countries already prohibited these particular practices * “*The Trust* *is not concerned with procuring the reversal of lawful government policies and decisions. It is concerned only with reversing decisions and policies which are unlawful by virtue of binding, justiciable, superior constitutional law or applicable human rights law*”