Purpose Trusts

Question 1

Why are charitable trusts not void for infringement of the beneficiary principle?

Answer 1

Because there is a mechanism for there enforcement as they can be enforced by the Attorney General with practical responsibility for this lying with the Charity Commission

Question 2

Is a charity a legal form or structure?

Answer 2

No it is a status so charities can come in many forms such as companies or trusts

Question 3

What are the benefits of charitable status?

Answer 3

• no requirement to comply with the beneficiary principle
• more flexible rules on certainty of objects
• no limit on their duration
• they can exist in perpetuity
• a rule known as the cy-pres doctrine allows trust property to be applied for other charitable purposes even if the specific trust fails
• tax benefits

Question 4

What are the rules for certainty of purpose and charitable purpose trusts?

Answer 4

• it is sufficient that there is an intention to apply property for a charitable purpose
• if there is uncertainty as to how this intention is to be carried out the trustees can direct that the property be applied for such charitable purposes as they select
• for charitable purpose trusts, the court will strive to resolve any uncertainty and hold the trust valid once it has established charitable intent
• charity commission or the court can provide a ‘scheme’ to specify the charitable purposes the property should be applied to

Question 5

What three requirements must be met for a charity purpose trust to be valid?

Answer 5

• must be for a charitable purpose
• must satisfy the public benefit test
• be wholly and exclusively charitable

Question 6

What are the 12 specific heads of charity in the Charities Act?

Answer 6

• prevention or relief of poverty
• advancement of education
• advancement of religion
• advancement of health or the saving of lives
• advancement of citizenship or community development
• advancement of the arts, culture, heritage or science
• advancement of amateur sport
• advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
• advancement of environmental protection or improvement
• relief of those in need because of youth, age, ill-health, disability, financial hardship or other disadvantage
• advancement of animal welfare
• promotion of the efficiency of the armed forces of the Crown or of the efficiency of the police, fire and rescue services or ambulance services

Question 7

What is the meaning of poverty in the 2011 Act?

Answer 7

• not defined
• poverty means going short
• poverty does not mean destitute
• poverty is a relative concept
• purpose must not benefit the rich
• poverty can be a temporary situation
• poverty can be inferred
• working class does not equal poverty

Question 8

What is the meaning of advancement of education under the 2011 Act?

Answer 8

• Not confined to purely formal instruction in an educational institution
• Can include training, research or broader education in the development of individual capabilities, competencies, skills and understanding
• includes scholarships to students
• includes ancillary organisations such as student unions
• includes distributing knowledge
• did not include study to create 40 letter phonetic alphabet

Question 9

What is the meaning of advancement of religion under the 2011 Act?

Answer 9

Religion includes:

• a religion which involves belief in more than one god and
• a religion which does not involve a belief in a god

Question 10

What is the meaning of advancement of health/saving of lives under the 2011 Act?

Answer 10

Includes prevention or relief of sickness, disease or human suffering as well as the promotion of health

Broad view taken including complementary alternative or holistic methods as well as conventional methods

Question 11

What is the meaning of advancement of citizenship/community development under the 2011 Act?

Answer 11

Includes rural and urban regeneration and the promotion of civic responsibility, volunteering, the voluntary sector or the effectiveness or efficiency of charities

Must be focus on community rather than individual

Question 12

What is the meaning of advancement of arts, culture, heritage or science under the 2011 Act?

Answer 12

• includes art of merit - may need expert evidence
• includes monuments of cultural or historical significance
• heritage - part of the country’s local or national history and traditions which are passed down through successive generations

Question 13

What is the meaning of advancement of amateur sport under the 2011 Act?

Answer 13

Sport is sports or games which promote health by involving physical or mental skill or exertion

Question 14

What is the meaning of advancement of human rights under the 2011 Act?

Answer 14

• includes advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
• must not stray into police objectives such as seeking to procure changes in the law

Question 15

What is the meaning of advancement of environmental protection under the 2011 Act?

Answer 15

• includes both protection and improvement of the environment
• includes preservation, conservation, and promotion of sustainable development
• may need to produce evidence that particular species is worthy of conservation

Question 16

What is the meaning of advancement of relief of those in need under the 2011 Act?

Answer 16

Relief of those in need because of youth, age, ill-health, disability, financial hardship or other disadvantages

• includes provision of accommodation or care
• person does not need to be poor to be in need - must show they have specific need

Question 17

What is the meaning of advancement of animal welfare under the 2011 Act?

Answer 17

• includes welfare of particular types or animals, animals generally, improving methods for slaughtering
• does not include provision for a specific animal eg my dog

Question 18

What is the meaning of advancement of the efficiency of public services under the 2011 Act?

Answer 18

• promotion of the efficiency of the armed forces of the Crown or of the efficiency of the police, fire and rescue services or ambulance services
• can include increasing technical knowledge of members of the services through the provision of educational resources, competitions and prizes
• include providing opportunities for services personnel to gain additional experience relevant to their jobs

Question 19

What is the general charitable purpose provision under the charities act?

Answer 19

If not covered by specific head may be caught by general charitable purpose.

Covers things that would have been recognised as charitable under old law or purposes analogous to heads of charity or old case law.

Leaves law flexible

Question 20

What is meant that trusts must be wholly and exclusively charitable?

Answer 20

All a trust purposes must be charitable

Question 21

What are the consequences of a trust being a mix of charitable and non-charitable purposes?

Answer 21

• basic rule - trust will be void unless the non-charitable purpose falls within a recognised category of non-charitable purpose trusts. If the not, the trust property will return to the settlor on resulting trust
• if the non-charitable purpose can be construed as incidental or subsidiary to the main charitable purpose, the trust will remain effective
• if the charitable and non-charitable purposes can be separated and a portion of the fund allocated to each, the court will ‘sever’ the trust and recognise the charitable party. Only possible if the trust language contemplates severance of the fund. Requires the amount allocated to each purpose to be quantifiable

Question 22

What is meant by the requirement for charitable trusts to be of public benefit?

Answer 22

• not defined in the Act
• no presumption of public benefit
• two elements needed (i) identifiable benefit and (ii) to public/section of the public

Question 23

What is an identifiable benefit?

Answer 23

• question of fact - have regard to all evidence in case
• benefit is to be balanced against any detriment or harm arising from the purpose
• benefit must be capable of being identified and described even if it cannot be quantified or measured

Question 24

What is ‘public/section of the public’?

Answer 24

• possible beneficiaries must not be negligible in number AND
• quality which distinguishes them from other members of the community must be a quality which does not depend on their relationship to a particular individual

Question 25

With regard to the public requirement, can charities still meet this requirement if they choose to focus on a specific element of the public?

Answer 25

Yes, provided: - they have proper reason for doing so - the poor are not excluded from benefit - the people focussed on are a sufficient section of the public for the charity's purpose.

Question 26

Can a charity have political objectives?

Answer 26

No - courts/charity commission is unwilling to consider whether such a purpose is for the public benefit, preferring to be politically neutral Charities can however use political means to achieve a non-political objective

Question 27

What is the cy-pres doctrine?

Answer 27

Where a charitable purpose trust fails, any surplus funds will be applied to another charitable purpose by way of a scheme established by the Charity Commission or Court.

Question 28

What are the five grounds whereby a charitable trust may be altered?

Answer 28

a) the original purpose has been fulfilled or cannot be carried out b) the original purpose may still be workable but does not provide a use for all the property available to the trust ie there are surplus funds c) the property from similar trusts is combined so as to be used more effectively d) original purpose referred to an area or class of persons which is no longer relevant or suitable e) the purpose has: i) been adequately provided for by other means ii) ceased to be charitable in law or iii) ceased to provided a suitable and effective method of using the property

Question 29

When there is an initial failure of a charitable trust when will the cy-pres doctrine apply and not apply?

Answer 29

Will apply where there is general charitable intention Detailed plans with regard to particular object will mean cy-pres doctrine will not apply

Question 30

What are the three Endacott exceptions whereby a private non-charitable trust will be valid?

Answer 30

- trust for the maintenance of particular animals - trusts for the erection and maintenance of monuments and graves - trusts for the saying of private masses

Question 31

Are the Endacott exception trusts enforceable?

Answer 31

No - although valid they are not enforceable.

Question 32

What happens if the appointed trustee is willing to carry out the terms of the trust?

Answer 32

The court will make a Pettingall order. This requires the trustee to give an undertaking to comply with the trust. If they do not testator's residuary legatees can sue to enforce the undertaking and prevent a misapplication of the fund.

Question 33

What perpetuity requirements must non-charitable purpose trusts also comply with?

Answer 33

They must come to end within 21 years which can be extended with reference to a human life