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23 Cards in this Set

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Introduction (1)

Charitable trusts- exception to the beneficiary principle.


Charitable purposes- relief of poverty; advancement of education; advancement of religion; other purposes beneficial to the community.


Charities Act 2006- 13 heads of charity.




Charitable trust is exempt from...


- aspects of certianty of object


- only requirement is that the settlor must make it clear that the trust is intending to advance charitable purposes and charitable purposes only.


- beneficiary principle


- enforcement is the responsibility of the AG- state enforcement agency which removes need for human beneficiary to do the enforcement.


- rules against excessive duration


- charitable trusts are pursuing worth purposes then they can go on forever.


- charity cannot accumulate income on its property for more than 21 years- should be spent on worthy causes.


- rules of doctrine of lapse


- in circumstances that would bring this in to play for charitable trusts we have the cy- pres doctrine- Charity commission will look around for some ongoing charitable purposes as close as possible to the original purposes that have now become impossible or impracticable.


- doctrine cannot be used to make invalid trusts valid




Tax law privileges- charities are exempt from a growing range of taxes and other fiscal liabilities. Only tax to which charities are liable in full is VAT.





The legal definition of 'charity': an overview: (2)




a. Lord McNaghten in Commissioners of Income tax v Pemsel:




b. Charities Act 2011: s3(1)

Purpose must fall within the legal definition of charity to be a charitable purpose.




a. Until recently found in Pemsel.


4 purposes:


- relief of poverty


- advancement of education


- advancement of religion


- other purposes beneficial to the community which the law regards as charitable




b. 13 'heads of charity'.


New list does not represent an enormous change it is just that the individual examples that usually fell within the 4th head are spelled out.



The legal definition of 'charity': an overview (3)




c. Purpose must be for the public benefit

c. s4(1) CA 2011.


Independent Schools Council v Charity Commission: requirement comprises 2 distinct, albeit closely related aspects:


(1) nature of the purpose itself must be such as to be a benefit to the community- public benefit int he first sense.


(2) those who benefit from the carrying out of the purpose must be sufficiently numerous, and identified in such manner as, to constitute what is described in the authorities as 'a section of the public' - public benefit in the second sense




(1) is the substance of the purpose for the public benefit? (2) who will benefit from carrying out the purpose? Must be the public or a sufficient section of the public.




A gift is not a charitable purpose even if it benefits the community.




Not every purpose which benefits the community is regarded as chartable, at law.




Trusts or purposes carried out overseas where the tangible benefit of those purposes is felt overseas can still enjoy charitable status under English law.

The legal definition of 'charity': an overview (4)




d-g. other requirements

d. purposes must not be substantially political




e. purposes must not involve profit distribution


- any money a charity has should be used for charitable purposes- not given to shareholders etc.




f. purposes, unless purely ancillary, must be wholly and exclusively charitable


- Morice- money for benevolence and liberality- beyond charity- not exclusively charitable




g. Role of Charity Commission/Courts/Tribunals


Trust must be recognised and registered as a charity to get the privileges of charitable status.

Categories of charity (5)




a. Prevention or relief of poverty

1601 preamble- 'the relief of aged, impotent and poor people' s3(1)(j). Do not need to show you come under all 3, just one of them.




Term poverty is interpreted broadly.




Re Coulthurst: fact it didn't say the word poverty wasn't important or fatal. If overall the sense of the document is that it is for the relief of poverty, then this will suffice.




What do we mean by poverty? Persons who have to go short in the ordinary accepted notion of that term having due regard to their status.




Re Sanders' Will Trusts: 'to provide dwellings for the working classes and their families' - nothing to say the only people who will benefit from this is the poor- no limitation in the forumulation to restrict it that way- not charitable.


Re Niyazo' Will Trusts: benefit of the purpose is felt overseas. Referred to Sanders. Megarry: takes the view that taking the whole instrument together providing hostel accommodation for working men, which has the quality of less well off, just about qualifies this case for charitable status- accepts its close to the line.


Cawdron v Merchant Taylors School: was charitable- talked about dependents, eligibility being based on assistance and all those notions together was sufficient to bring this within the scope of a trust for charitable purposes.




Have to show that you are relieving poverty or only relieving poverty.


Re Gwyon: G was not interest in relieving poverty nor were his presents confined to the poor so not charitable.


Must have no other purpose behind it.

Categories of charity (6)




b. Advancement of education

Broad interpretation by the courts- some limits. Education extends beyond 'traditional education.'


Re Koettgen's will trusts: business college- charitable. Still education taking place in an education establishment but it extends beyond institutional education.


Incorporated council of Law Reporting v AG: only one purpose of law reports- to provide essential material for the study of the law. Council cannot make a profit- members cannot make financial gain- if there is surplus then it has to be put back into the purposes. Satisfies the requirements of charity.


Re South Place Ethical Society: education is to be construed widely- regarded as extending to the improvement of a useful branch of human knowledge and its public dissemination. Held: advancement of education.




Trusts for research- educational?


Re Hopkins' Will Trusts: bequest for the purpose of search or research of these manuscripts would be in the laws perception of charitable purposes. Education must be used in a wide sense- in order to be charitable research must either be of educational value to the researcher or be so directed as to lead to something which will pass into the store of educational material or so as to improve the sum of communal knowledge to an area in which education may cover.


It is about dissemination of research making sure that these results pass into the store of human knowledge and for encouraging literary taste and appreciation.

Categories of charity (7)




b. Advancement of education (2)

McGovern v AG: guidelines for whether or not a trust for research will be charitable:


(1) (a) subject matter of the proposed research is a useful subject of study


(b) contemplated that knowledge acquired as a result of the research will be disseminated to others


(c) trust is for the benefit of the public, or a sufficiently important section of the public


(3) if a trust for research is to constitute a valid trust for the advancement of education it is not necessary either (a) that a teacher-pupil relationship should be in contemplation or (b) that the persons to benefit from the knowledge to be acquired should be persons who are already in the course of receiving 'education' in the conventional sense.


Trustees of British Museum v White: money for the purposes of a museum will be charitable as being for the advancement of education.


Re Shakespeare Memorial Trust: trust was charitable- main object of the scheme was to instruct in the art of producing plays which will benefit the community- designed to spread the influence of Shakespeare.


Royal Choral Society v IRC: goes further than previous cases. Just because carrying out of a service may produce, either for the provider or receiver of the service, does not stop it being charitable. If you are developing people's aesthetic taste, then this is educational. Charitable under the 2nd and 4th heads.




Money left for purposes which are not themselves educational but the purposes are carried out int he context of education- because they are subsidiary/ancillary to the educational activities they take on board the charitable status of the institution or trust to which they are attached.


Re Mariette: purpose of building squash racket courts. Happening in the context of a school which is educational so could take on this flavour. You can give money to an institution which is a registered charity but the purpose which you have imposed is not a charitable purpose.


If you can say that these activities, non charitable in themselves, are absorbed by the educational institution and purposes, then they can go ahead taking on the charitable nature and status of the institution.

Categories of charity (8)




b. Advancement of education (3)

London Hospital Medical College v IRC: same argument here- student union does not teach medicine but what it does is to assist the teaching of medicine by producing the outlets needed for the students.


IRC v McMullen: trust not committed to a particular institution but at large and intended for the benefit of school pupils and university students but not actually given to an institution as such. Held: for advancement of education.


Exclusionary aspects of education:


Re Bushnell: trust for 'the advancement and propagation of the teaching of socialised medicine' - struck down for being non-charitable- the main or dominant object of the trust was a political one- testator was trying to promote his own theory by education or propaganda.




Simply to assert that what you are doing is advancing education is not sufficient:


Southwood v AG: not enough to show that the advancement of education contemplated by the trust and its purposes will promote public benefit. Court refused charitable status on 2 grounds: (1) if purpose could only be achieved by a very significant change in the policy of the UK government then this is political. (2) just because the settlor says it is for the advancement of education the court is entitled to go behind this particular purpose and method and see if they are charitable and in this case they were not.


Re Pinion: court is entitled, and must, look behind the gift and look at the quality of the proposed exhibits in order to determine whether that will be conducive to the education of the public. Testator's object was not to educate anyone but to perpetuate his own name and the reputation of his family- not for the advancement of education.




Trust will be checked for actual benefit- do the trusts really advance education?

Categories of charity (9)




c. Advancement of religion

Re South Place Ethical Society: reflected the traditional view that religion requires some theistic element in order to be valid.




What is meant by religion? Long established that trusts can be valid and charitable for the advancement of religion irrespective of whether or not it is for Christianity or not. Arguably religion is broader than involvement with a God.




Two essential attributes of religion are faith and worship: faith in a God and worship of that God.




Charities Act 2011: s3(2)(a). No distinction is made between different religions and denominations.




Neville Estates v Madden: 'for the purpose of maintaining... places of worship for persons of the Jewish religion'- not an issue- was advancement of religion.




Earlier cases provide precedents for later cases which are hard to avoid.


Thornton v Howe: bequest of money made for the purpose of printing and circulating works of a religious tendency or for the purpose of extending the knowledge of the Christian religion- this is a charitable purpose.


As long as the purpose has the intention of extending the religious knowledge then this will suffice.


Re Watson: court does not prefer one religion to another and does not prefer one sect to another. Where the purposes are of a religious nature then the court assumes a public benefit unless a contrary is shown. Held: advancement of religion.


Danger is of having precedents that are difficult to escape.




Funnell v Stewart: 'promote faith healing' - was for public benefit under 4th head but also for the advancement of religion.




Purposes must be for the ADVANCEMENT of religion. Cases suggest this is not a difficult hurdle to get over.


Gilmour v Coats: purposes of a community of cloistered nuns- court was more strict- HOL rejected that this was a trust for the advancement of religion. The mere fact that the Catholic faith believes in the effectiveness of prayer and believes that nuns are setting an example this is not something the court can take into account- needs evidence of benefit to the public. Court decided there was no evidence here and it is not for the advancement of religion- not charitable.


United Grand Lodge v Holborn BC: court rejected the argument- no requirement the freemasons should go out and advance these traits so no promotion of religion. Not a charitable trust- not for the advancement of religion.



Categories of charity (10)




d. Advancement of health or the saving of lives.




e. Advancement of citizenship or community development




f. Advancement of the arts, culture, heritage or science




g. Advancement of amateur sport

d. CA 2011, s3(2) - includes complimentary, alternative and holistic methods providing there is evidence they can be effective.


Extends to trusts for the relief of distress from natural disasters- also includes establishment and maintenance of the fire brigade or lifeboat service, mountain rescue, promotion of road safety etc.




e. CA 2011, 3(2)




f. Cases like British Museum and Royal Choral Society would probably be decided under this now.




g. controversial- for years were not seen as charitable.


Re Nottage: seemed to rule out trusts for sport as being chartiable.


CA 2011, s3(2)(d)- adds mental skill or exertion.



Categories of charity (11)




h. Advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality or diversity




i. Advancement of environmental protection or improvement




j. Relief of those in need, by reason of youth, age, ill-health, disability, financial hardship or other disadvantage




k. Advancement of animal welfare




l. 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



h. Since HRA 1998- new approach- purposes could now be charitable as there was no longer a political issue.




i. Recognising public benefit of projects which protects the environment, promotes sustainable development etc.




j. overlaps with prevention or relief of poverty but this is wider- includes things like social welfare/rehabilitation activity/NSPCC/ bernados etc.




k. controversial- makes no reference to animals in the preamble.


Only charitable where the animals were useful to human beings.


Can justify promoting animal welfare through notions of the moral elevation of human beings- idea that if you are kind to animals it makes you a better person- cases also retract from this.


Re Grove-Grady: whole idea was that this refuge should mean the animals are free from being ill treated by man and humans have no part in it then it is difficult to see any public benefit.


If there is a conflict between welfare of humans and the welfare of animals, then the welfare of humans takes precedence.

Categories of charity (12)




m. any other purposes

Needed this catchall to ensure the list would not become outdated.




Limitations- position not altered that not every benevolent purposes is a charitable purpose.




Includes purposes not in any of the preceding categories, are beneficial to the community and are recognised by the law as charitable.




AG v National Provincial Bank: not charitable- not all trusts for purpose beneficial to the community are charitable but rather that there were certain charitable trusts that fell within this category.




Charitable is a narrower concept than benevolence or beneficial to the community.




AG of the Cayman Islands v Wahr-Hansen: public good does not necessarily mean charitable- so held to not be exclusively charitable.




To fall under this you have to show that the purpose is beneficial to the community but not within the preceding categories but also recognised by law as charity.




Incorporated Council of Law Reporting v AG: proper question to ask is whether there are grounds to hold it outside the equity of the statute.


Different approach- saying it is beneficial to the community so we are assuming that it is charitable and show that it is not.


Re South Place Ethical Society: questioned the above approach- thought it was not consistent with earlier approaches.

Categories of charity (13)




m. any other purpose (2)

National Anti-Vivisection Society v IRC: HOL: appeared to be trying to have it both ways: points:


(1) society was political- achievement of the objectives of the society involved a change in the law


(2) what if there are competing purposes? purpose of society was to prevent cruelty to society- but vivisection was carried out in order to advance medical knowledge so as to improve the health of humans- have a conflict- if say it was charitable then giving approval and status to something which might restrict medical research.


(3) benefit to humans in carrying out medical research v benefit to humans by being kind to animals- the former will win


(4) not charitable as on balance it was not for public benefit




HOL: trusts for social activity and recreation= not charitable.




P reversed this by passing - Recreational Charities Act 1958- no s5 CA 2011.




IRC v McMullen: Majority of CofA: phrase 'social welfare' particularly when amplified by the improving conditions of life requirement indicated an element of depravation- only the socially or economically deprived could have their conditions of life improved- so trust did not come within this provision.


Bridge LJ: disagreed- said anyone could have their conditions of life improved.




Guild v ORCE: HOL adopted approach of Bridge - broader approach.



The requirement of public benefit (14)




a. Preliminary




b. Prevention or relief of poverty

Remember- to senses of public benefit.




a. requirement in both senses has differed in respect to the different heads of charity.




b. public benefit requirement has been reduced.


Re Scarisbrick: size of the group was quite large. court was in no doubt that this was charitable but drew a distinction between gifts for the relief of poverty among a class of persons (charitable) and a gift to individuals who happen to be poor (non-charitable)


Re Segelman: 26 people in the named members of the family. Class would increase whilst the gift was running- court took the view that this still came within the people enunciated in Scarisbrick because:


- people named in the will did not include all of the testator's family- clear the testator has made considered selection of the class form amongst the descendants of his parents.


- clear the testator had not selected people on the basis that they were all poor


- court concluded that the testator had selected these people on the basis that they were people who had needed financial help in the past and who might need it in the future


So this was a gift for the relief of poverty among a class of persons.




Public benefit requirement is NOT negatived where the class of potential beneficaires is defined by reference to some 'personal nexus' - not a problem in poverty cases.


Dingle v Turner: trust for poor employees rather than poor relations. Still charitable- should be treated the same.


Cawdron v Merchant Taylors School: personal nexus linked the potential beneficiaries- not a problem in the case of trusts for the relief of poverty.




CA 2011, s4: no presumption is made that a purpose for a particular description is for the public benefit.




AG v Charity Commission: Upper Tribunal made the following propositions:


- trust for relief of poverty among people who are defined by reference to their relationship to one or more individuals is capable of being a charitable trust- trusts for relief of poverty poor relations remain capable of being charitable


- trust for relief of poverty among people linked by employment is capable if being a charitable trust


- Tribunal was asked directly whether the CA involved a statutory reversal of the decision in a number of cases - Scarisbrick and Dingle - tribunal said no- they had not been reversed.

The requirement of public benefit (15)




c. Advancement of education

'Personal nexus' - voids public benefit requirement- Re Compton.


Oppenheim v Tobacco Securities Trust: trusts satisfy the public benefit requirement? Lord Simmonds: no- everything said in Compton applied equally tot he employee cases. Dissent: Lord McDermott: when have a large scale trust you have to be more discriminating and take a more holistic view.


Dingle v Turner: Lord Cross: took on dissenting reasoning in O above. Should be looking more holistically at the cases and asking does this purpose really pursue a public purpose or is it pursuing a private purpose? When looking at borderline cases the court will look at the fiscal privileges.


Gravells: in light of this, if this case went to HOL again then maybe they would modify or qualify the principle in O.


If beneficiaries are linked by some personal nexus then they will not satisfy the public benefit requirement.

The requirement of public benefit (16)




c. Advancement of education (2)

Cases in which the principle has been compromised:


Re Koettgen's Will Trusts: commercial education- preference for employees or members of families of employees- did the preference offend or mean the trust offended the personal nexus prohibition? No - LJ Upjohn: determine the public benefit question by looking at the primary class from whom the trustees could select beneficiaries- this is the class which should be considered when determining public benefit or not. direction did not affect the validity.




By contrast: IRC v Educational Grants Association: no limitation but as a matter of fact about 80% of the income was applied for the education of children or employees of Metal Box. not an application for charitable purposes so the claim for tax exemption failed.




Could say the cases are compatible because the questions in the cases were different:


(1) whether the trust as set out in the trust deed was charitable and was held that it was


(2) question wasn't asked in K case was whether the fact of giving money was in fact charitable application of funds but this question was not asked.




Independent Schools Council v Charity Commission: public schools satisfy the requirements of public benefit as such schools normally enjoy charitable status and get the benefits? Organisation that positively excluded the poor from its benefits could not be charitable. Trustees of public schools have a duty to ensure that when they carry out their purpose the poor are not entirely excluded from benefitting and they must benefit beyond a mere token.


Show the poor was not excluded in a number of ways: may provide scholarships and bursaries; make arrangements with local state schools whereby pupils could attend classes which were now otherwise available to them; share teachers or teaching facilities; share or make available other facilities. Providing the schools were doing this then they wold be doing enough to extend the benefit of the facilities to those who could not afford the full fees.

The requirement of public benefit (17)




d. Advancement of religion





Gilmour v Coats: HOL: community spent all the time in intercessory prayer then this suggested there was no public benefit bearing in mind the court did not take into account the tenants of the Catholic faith and there was nothing to prove it was for the public benefit and benefited the community.




Contrastingly, Neville Estates v Madden: decision in Gilmour made it clear that a trust for religious purposes must be shown to have some element of public benefit in order to qualify as a charitable trust. Members of the synagogue spend their lives in the world whereas the members of the nuns living in seclusion do not- some public benefit from the Synagogue members in carrying out of their purposes.

The requirement of public benefit (18)




e. Other purposes beneficial to the community




f. Public benefit under CA 2011

e. Re Duffy: potential beneficiaries of purposes under the catchall must not be numerically negligible and in this context the personal nexus principle applies- trust will not be charitable as it is not for the public benefit if the potential beneficiaries are defined in this context.


Re Hoburn: nexus was sufficient to deny the public benefit and deny charitable status.


Re Mead's Trust deed: fell foul of personal nexus principle.


IRC v Baddeley: purpose were not charitable- even if they were then there was another problem- those who would benefit were a class within a class- this is not a section or sufficient section of the public for the purposes of charitable status.




f. s17(1) CA 2011.


Guidance published in 2008- validity of parts was questioned in Independent Schools Council v Charity Comm: decided that the CC's guidance contained a number of errors of law and state propositions not stated by case law- had to red the guidance- done.

Political purposes (19)

If something has a political purpose then it cannot be a charitable purpose- general proposition.




McGovern: Amnesty International: carrying out certain charitable purposes but these were coloured by purposes that were overtly political and this led to a denial of charitable status.




In Charity law politics has a specific meaning: Slade in Mcgovern: (1) a trust for political purposes can never be regarded as being for the public benefit in the manner which the law regards as charitable (2) this includes, trusts of which a direct principal purposes is either


(i) to further the interests of a particular party


(ii) procure changes in the laws of this country


(iii) procure changes in the laws of a foreign country


(iv) procure a reversal of government policy or of particular decisions of governmental authorities in this country


(v) procure a reversal of government policy or of particular decisions of governmental authorities in a foreign country.


Categorisation is not an exhaustive one.


Bonar Law Memorial Trust v IRC: just because the trustee was a political party did not in itself invalidate what would otherwise be a charitable purpose. but given that the added purpose was to commemorate a recent lead of the Conservative party and there was no restrictions on what education should take place there was nothing to stop it being used for party propaganda so this was in part political and therefore not exclusively charitable.


Re Bushnell: added purpose- socialised medicine could only operate properly in a socialised State- held to be political not charitable.


Position- even though this was stated to be political you have to see whether or not this is merely ancillary to the main charitable purpose.


National Anti-Vivisection Society v IRC: HOL: public benefit derived from such experimentation in terms of advancement of medical knowledge outweighed the detriment of cruelty to live animals. Alternative reason- required a change in the law- sufficient to bring the purposes within political purposes and not charitable.





Political purposes (2) (20)

McGovern v AG: since this the HRA has been adopted: pursuit of the advancement of HR is now compatible with UK law and policy this ceases to be a political issue and therefore would no longer be cut down.


Southwood v AG: settlor here wanted a change in policy so was political.


Hanchett-Stamford v AG: purposes of the association involved pursuing other changes in the law so was not charitable.


If promotion of a change in the law is only ancillary to the main charitable objective then the charitable status of the whole thing will not be lost - anti-vivisection case.




How far can a charity campaign in favour of its objectives and still be within their charitable objectives?


Charity Commission published a set of guidelines for trustees- what they could and couldn't do in terms of campaigning and lobbying.


Campaigning is permitted. Each case is likely to have to be resolved on its particular facts.

Fee Changing (21)

What difference does it make if a charitable institution charges fees?




Re Resch's Will Trusts: Privy Council on appeal from NSW: hospital charged fees to its patients. Upheld charitable status. Just because an institution charges fees does not rule out its having charitable status even though the fees may be set at a high rate. Shared benefits with those who could not afford the high fees so charging fees was not fatal.


Independent Schools Council v Charity Comm: as long as the school does not set fees with the intention of excluding the poor so you have to see if the benefit/facilities of the charity are made more widely available and if they are it means the schools will not lose their charitable status.


Joseph Rowntree Memorial Trust v AG: agreed it was not charitable for 3 reasons:


- benefits of charity were provided by contract:


- immaterial that a charitable benefit may be made available in return for a price.


- those people benefitting were private individuals and not a private class:


- misconceived argument- in every charity you identify specific people who will benefit


- system, or regime, could produce profit for the beneficiaries as people who bought the leases for these properties could sell them on at a profit and keep the surplus.


- selling at a higher price just reflects inflation so therefore was not a profit.


- not a profit at the expense of the charity


- once properties were built and made available they had no further interest in the property.


None of these factors stopped it being charitable.

Wholly and exclusively charitable (22)

If a disposition is so formulated that it extends beyond what the law understands as charity then the purposes are not exclusively charitable and the whole thing fails.


If a non-charitable purposes is ancillary then this will not deprive the institution of its charitable status.


Morice: money left for objects of benevolence and liberality- extend beyond the legal notion of charity- could not be seen as ancillary- so failed.


AG of Cayman Islands v Wahr-Hansen: property was given to religious, charitable or educational institutions or any other institution operating for the public good- last element was not charitable and could not be regarded as ancillary.




Problem can arise where the furtherance of charitable purposes brings about actual benefit to some people.


IRC v Glasgow Police Athletic Association: question arose as to the charitable status of the GPAA. what proved fatal in the view of HOL was that the police who joined this association enjoyed themselves. thought to be too major a part of the association's purpose therefore, it could not be regarded as merely ancillary.


By contrast- London Hospital Medical College v IRC: educational context- question was whether sporting purposes could be regarded as merely ancillary to wider educational purpose- court said yes.

Reform (23)

Two aspects:


(1) what should the scope of charity? How wide should it go?


CC though a definition based on the idea of social value could be the basis of the new definition but this could also be seen to be too broad.


(2) fiscal privileges- if held to be a charity then you get these tax breaks. If we give this trust charitable status will it deserve the automatic fiscal privileges? The two issues are mixed and therefore should fiscal privileges be automatic?


US- tax relief is only available where there is actual expenditure on the charitable purposes of the charity- only get tax relief as the money goes out not as it comes in.


Sweden- tax relief is granted on a sliding scale according to the charity's degree of social merit but how is this decided?


Alternative- get rid of automatic fiscal privileges and replace it by a system of discretionary cash subsidiaries.




Re Watson: only held charitable because of a similar case 100 years before and no obvious way of escaping the precedent- but gets the fiscal privileges- seems to be a hard decision to justify.