Exam notes on charitable trust
Charities fall outside the scope of equity or trust. Rather it is governed by
common law and legislation.
Charitable purpose is trusts, which benefit the public, and secondly which
on authority of statue and common law are charitable.
Charitable trust is made to gain tax exemptions. However it is to be noted
that this advantage is not for the person creating trust, rather the charity
itself.
The court acknowledge that public purpose trust, such as those in
charities enjoy fiscal benefits (Dingle v. Turner) and (Income tax comrs v.
pemsel)
There is a huge debate regarding what amount to be public benefit for the
purpose of the public trust and that how it should be regulated.
What makes a trust charitable?
a. The character of the purpose must be charitable.
b. The purpose must, on balance be beneficial rather detrimental.
c. Must benefit section of public not collection of private individuals.
d. Exclusively charitable and must not have political agenda.
e. Aim should not be to make profits like business however operating profits
is justified.
There are three provisions, which govern the area of charities, i.e
charities act 2011, charities 2006 and case law prior to 2006 act.
Under charities act 2011, section 1 provides meaning of charities.
Section 2 further provides meaning of charitable purpose
Section 3 provides a big of list of things, which the statue list has,
charitable purpose.
Section 3(a) to 3(l) contains this list, so you must see these things if
your case falls under this. If not then
You go under section 3(m) which provides that if purpose is not found
under the list then consider the case under section 5 or UNDER OLD
LAW
Before 2006 and 2011 act, charitable purpose was found in the
preamble of the chartable uses act 1601.
^Based on this Lord Macnaghten in the Income tax special purpose
Comrs v. Pamsel, gave famous four characteristics for a trust:
a. Trust for relief of poverty
b. Advancement of education
c. Advancement of religion
d. Other purpose beneficial to community.
Scottish burial reform v. Glasgow corp- NGO, Non-profit organization involved in
providing cheap sanitary for dead providing burial services. This was held to be
charity.
Vancouver Regional v. Minister of National Revenue- Provision of free internet,
again here an analogy was made to the preamble.
Council of Law reporting for England v. AG
Re Stephans- Rifle and Gun association was held not be charitable.
One event or act, which is not charitable, wouldn’t violate charity law. It will
render when its fails to advance that purpose- Independent Schools Council v.
Charity permission.
Relief of Poverty:
It is important to note because under new act section 3(m) of 2011 act old law is
to be considered thus these case have a lot of significance. “Analogy is drawn”
I. Re Gardams- charity for “ladies with limited means” was held to
charitable.
II. Spiller v. Mande- again “decayed actors” was held to be charitable.
III. Re Sander’s Will’s trust- working class members were not held to be
charitable, as they don’t fall under poverty.
Advancement of Education:
Schools, colleges and university are all valid trusts.
I. Royal Chorol Society v. IRC
II. British Museum trustees v. White- Museums also fall into this.
III. Re Deluis- Promotion of culture
IV. Re Hopkinson- Education of adults in political party was not held to be
charitable.
Advancement of Religion:
Prior to 2006 act, religion must had some sort of spiritual belief
I. Re South Palace- the concept was further added in this case as religion
was one in which there was a relationship with God
II. Exparte Sagardal
III. Hodkin- trust for church of scientology.
Other Purpose beneficial to the community:
Here growth by analogy approach is most followed.
I. Re Allen – Gift to a village or town
II. Re Smith- Gift to whole England was also held to be valid.
III. AG v. National Provisional and Union Bank of England.- Purpose must be
charitable.
IV. Trusts for Blind, seriously ill, wounded, disabled are all charitable trusts
covered under this heading.
V. Certain public services are facilities are valid trust e.g law reports. Re
Varell
VI. Trust for wild flower and animals were valid even prior to 2006 however
in Re Grove Grady, COA held that trust for only animals doesn’t satisfy
public benefit requirement. However now under 2011 act situation is
different under section 3(1)(k).
VII. Charitable trusts for mere sports had difficult time been recognized as
charitable (Re Nottage), however now under 3(1)(g) sports are also
covered.
Recreational charities Act 1958 is repealed by section 5 of charities act 2011.
Which deals with recreational trusts. Mark the state book for section 5.
Public Benefit requirement:
In Case of Independent schools council two aspects of Public benefit were
explained:
a. It must be beneficial, not of no value or worse, detrimental
b. The purpose must be of benefit to public as opposed to some private
group.
A detrimental purpose cannot be charitable (National Anti vivisection Society v.
IRC) cant have political motive. Also church of scientology case.
Now under the 2011, section 4 deals with public benefit. Section 4(2) states that
there is no presumption that in any case public benefit is there, rather this is case
sensitive and must be found case by case.
In the case of Tabaco Securitas companies HOL developed a ‘personal nexus test’
to find out public benefit. This was basically when class of person is defined via
personal nexus of someone, e.g children of employees or friends of James.. then it
would not reflect public.
However this position was rejected by HOL in Dingle v. Turner as it was held that
public benefit must seen by considering all circumstances.
A charity must have an exclusive charitable purpose:
National Anti vivisection Society
McGovern v. AG
The charities commission produces guidance from time to time on allowable
political activities by charities.
A charity must be non Profit distributing
Funds can be raised, services fee’s can be charged. (Independent School council)
However distribution of Profits is forbidden.
Cypres Doctrine- Prevention from Failure:
When ever a charitable purpose trust fails due to impractically of carrying it. The
courts have adopted this doctrine. This simply means “as near as possible”. The
concept of this doctrine is there under section 6 of the 2011 act aswell. This is
the power with the court, that whenever a charitable trust is about to fail for any
reason mostly impractically the court directs the trust property for the purpose
as closely as was intended.
It is important to note, that this doctrine applies only once trust is held to be
charitable under law and then about to fail due to given reasons.
Re Vernon Wills trust.
