Charitable Purposes

SEMESTER A
EQUITY & TRUSTS
 INTRODUCTION
Trusts

Trusts for Persons Purpose Trusts

Private Purpose Trusts Public Purpose Trusts

 INTRODUCTION
Trusts

Trusts for Persons Purpose Trusts

Private Purpose Trusts Public Purpose Trusts

• If Morice v Bishop of Durham (1804) 9 Ves Jr 399 were strictly

applied, it would mean that equity only recognised charitable (or
public) purpose trusts but not non-charitable (or private) purpose
trusts.
 CHARITIES & CHARITABLE
TRUSTS
• Charities ≠ Charitable Trusts

NGOs

Charities

Charitable
Trusts
 CHARITABLE TRUSTS
• Charitable trusts in England are enforced by the Attorney-General,
acting on behalf of the Crown, in its parens patriae (parent of the
nation) jurisdiction.
• In Hong Kong, this role falls to the Secretary for Justice.
• Historically, charitable trusts also benefitted from being exempt
from the perpetuity rule, which all private trusts were subject to.
This remains the case in England.
• But in Hong Kong, the perpetuity rule was abolished in 2013 in
respect of private trusts for persons: s 3A Perpetuities and
Accumulations Ordinance (Cap 257).
• The perpetuities rule still applies to non-charitable purpose
“trusts”: s 3C Perpetuities and Accumulations Ordinance (Cap
257).
 CHARITABLE TRUSTS
• Of the three certainties, charitable trusts also enjoy certain
advantages:
i. The courts are more likely to find that a trust was intended in a
charitable context than in a commercial context: Charity
Commission for England and Wales v Framjee [2015] 1 WLR
16.
ii.To the extent that a purpose replaces a person as an object of the
trust, the lack of certainty in defining the purpose is not fatal:
Moggridge v Thackwell (1802) 7 Ves Jun 36.
iii.If necessary, the courts can order administrative schemes to be
submitted by the Secretary for Justice for the use of the property:
see Ng Chi Fong v Hui Ho Pui-Fun [1987] HKLR 462 (trust for
“the development of Chinese culture”)
 CHARITABLE TRUSTS
• Charitable trusts, like all charities, enjoy tax advantages. Most
obviously, donors to charities may enjoy tax deductions.
• Charitable trusts may be applied to other charitable purposes
should the original purpose fail via the doctrine of cy-près (law
French for “so near”).
• Though not strictly a legal advantage, charitable status tends to
carry reputational benefits.
 BASIC FRAMEWORK
• The basic framework of Hong Kong’s charity law dates to 1601.
The Preamble of the Charitable Uses Act 1601 (also known as the
Statute of Elizabeth) provided:
“the relief of aged, impotent, and poor people; the maintenance of
sick and maimed soldiers and mariners; schools of learning; free
schools and scholars in universities; the repair of bridges, ports,
havens, causeways, churches, sea banks, and highways; the
education and preferment of orphans; the relief, stock, or
maintenance of houses of correction; marriages of poor maids;
support, aid, and help of young tradesmen, handicraftsmen and
persons decayed; the relief or redemption or prisoners or captives;
and the aid or ease of any poor inhabitants covering payments of
fifteens, setting out of soldiers, and other taxes.”
 BASIC FRAMEWORK
• The law developed with reference to this hodgepodge of charitable
purposes for almost 300 years until the end of the 19 th century.
• In Commissioners for Special Purposes of Income Tax v Pemsel
[1891] AC 531, Lord Macnaghten extracted the key principles
from the cases and identified the four heads of charity:
i. the relief of poverty;
ii. the advancement of education;
iii. the advancement of religion; and
iv. other purposes that are beneficial to the community.
 BASIC FRAMEWORK
• Apart from falling within one of the heads of charity, it was also
necessary to establish that the purpose was for the public benefit.
• In England, the law of charities underwent significant reform via
the Charities Act 2006 and Charities Act 2011, in particular greatly
expanding the categories of charities.
• In December 2013, the Law Reform Commission of Hong Kong
recommended reform along similar lines of expansion but this has
to date not been carried out.
 BASIC FRAMEWORK
Current Hong Kong Law Current English Law Hong Kong Recommendations
the relief of poverty the prevention or relief of poverty the prevention or relief of poverty
the advancement of education the advancement of education the advancement of education
the advancement of religion the advancement of religion the advancement of religion
other purposes that are beneficial to the advancement of health or the the advancement of health
the community. saving of lives
the saving of lives
the advancement of citizenship or the advancement of citizenship or
community development community development, which
includes (i) rural or urban
regeneration; and (ii) the promotion of
civic responsibility, volunteering, the
voluntary sector or the effectiveness
or efficiency of charities
the advancement of amateur sport
 BASIC FRAMEWORK
Current Hong Kong Law Current English Law Hong Kong Recommendations
the advancement of human rights, the advancement of human rights,
conflict resolution or reconciliation or conflict resolution or reconciliation
the promotion of religious or racial
harmony or equality and diversity
the promotion of religious or racial
harmony
the promotion of equality and
diversity
the advancement of environmental the advancement of environmental
protection or improvement protection or improvement
the relief of those in need because of the relief of those in need because of
youth, age, ill-health, disability, youth, age, ill-health, disability,
financial hardship or other financial hardship or other
disadvantage disadvantage
the advancement of animal welfare the advancement of animal welfare
 BASIC FRAMEWORK
Current Hong Kong Law Current English Law Hong Kong Recommendations
the 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
any other purpose that may reasonably any other purpose that is of benefit to
be regarded as analogous to any of the the community
preceding purposes
 PUBLIC BENEFIT
• Apart from falling within one of the heads of charity, it was also
necessary to establish that the purpose was for the public benefit.
• Public benefit was presumed for (i), (ii), and (iii) (though the
presumption was rebuttable) but must be demonstrated for (iv).
• The presumption of public benefit has since been removed in
England from 2006: see now s 4(2) Charities Act 2011: “it is not to
be presumed that a purpose of a particular description is for the
public benefit”.
• Under s 17 of the Charities Act 2011, the Charities Commission is
required to issue guidance as to the operation of the public benefit
requirement, to promote awareness and understanding of it.
 PUBLIC BENEFIT
• Public benefit according to the House of Lords in Oppenheim v
Tobacco Securities Trust Co Ltd [1951] AC 297 set out two
requirements for public benefit:
i. the beneficiaries must not be numerically negligible; and
ii. the quality which distinguishes them from other members of
the community, so that they form by themselves a section of it,
must be a quality which does not depend on their relationship
to a particular individual.
• Thus, in the case itself, a trust to provide for the education of the
children of employees and ex-employees of the British American
Tobacco Co and its subsidiaries and associated companies did not
benefit the public.
 PUBLIC BENEFIT
• The trust in Ip Cheung Kwok v Ip Siu Bun [1988] 1 HKC 437
failed for a similar reason.
• The trust was purported set up “to assist in the common welfare of
the village”, meaning the Gut Tai village.
• The village was a clan village settled by the Ip clan in 1875 and the
various Halls within the village had rules that provided that
managers of the Hall had to be elected from amongst members of
the clan.
• Godfrey J found that the settlor’s intention was to benefit his clan
in the village rather than the inhabitants of the village generally.
• Accordingly, the trust failed the public benefit test.
 PUBLIC BENEFIT
• Nevertheless, limb (ii) of Oppenheim v Tobacco Securities Trust
Co Ltd [1951] AC 297 applies only in a very attenuated sense to
charitable trusts for the relief of poverty.
• In Dingle v Turner [1972] AC 601, the House of Lords
distinguished the earlier case.
• The court was here concerned with the validity of a trust for the
relief of poor employees.
• The House of Lords upheld the trust as charitable in part, because
of older case law upholding charitable trusts in favour of “poor
relations”.
• The court opined that it would be illogical to distinguish “poor
relations” and “poor employees”.
 PUBLIC BENEFIT
• The House of Lords also suggested that the fiscal advantages for
charitable trusts for the relief of poverty was considered less
serious than those for the advancement of education.
• The difficulties of reconciling Dingle v Turner [1972] AC 601 with
Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297, and
the difficulties of applying the Oppenheim test has revived
questions of whether the fiscal (ie tax) advantages of charitable
trusts ought to be divorced from the test of the charitable nature of
purpose trusts.
 PUBLIC BENEFIT
• The separation of charitable status (for trust law purposes) and tax
advantages was first advocated by the Royal Commission on the
Taxation of Profits and Income – Final Report (the Radcliffe
Commission) in June 1955.

• Geoffrey Cross (later Lord Cross, who

delivered the leading judgment in Dingle v
Turner [1972] AC 601) likewise supported
the separation of the two: “Some Recent
Developments in the Law of Charity”(1956)
72 LQR 187.
• However, no such development has
followed.
 RELIEF OF POVERTY
• The relief of poverty is the first of the four heads of charity under
Commissioners for Special Purposes of Income Tax v Pemsel
[1891] AC 531.
• As Channel J explained in Trustees of the Mary Clark Home v
Anderson [1904] 2 KB 645, “the expression ‘poor person’ in a trust
for the benefit of poor persons does not mean the very poorest, the
absolutely destitute; the word ‘poor’ is more or less relative.”
• As Evershed MR explained more recently in Re Couthurst [1951]
Ch 661:
“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.”
 RELIEF OF POVERTY
• In Re Couthurst [1951] Ch 661, a trust for income to be applied “to
or for the benefit of such one or more exclusively of the others or
other of the widows and orphaned children of deceased officers
and deceased ex-officers living … as the bank shall in its absolute
discretion consider by reason of his her or their financial
circumstances to be most deserving of such assistance” was upheld
as charitable.
• Although it is clear that destitution is not required, the line
between trusts for the relief of poverty that have been upheld and
those that have been rejected is a fine one.
 RELIEF OF POVERTY
• Thus, in Re Sanders’ Will Trusts [1954] Ch 265, a trust “to provide
or assist in providing dwellings for the working classes and their
families resident in the area of Pembroke Dock, Pembrokeshire,
Wales, or within a radius of five miles therefrom (with preference
to actual dockworkers and their families employed at the said
docks)” was not upheld because it was not possible to imply a
qualification of any element of poverty in the expression “working
classes”.
• On the other hand, a trust to construct a working men’s hostel in
Cyprus was upheld as charitable in Re Niyazi’s Will Trusts [1978] 1
WLR 910.
 RELIEF OF POVERTY
• Re Sanders’ Will Trusts [1954] Ch 265 was distinguished by
Megarry VC, who explained:
“I think that the adjectival expression ‘working mens’ plainly has
some flavour of ‘lower income’ about it, just as ‘upper class’ has
some flavour of affluence, and ‘middle class’ some flavour of
comfortable means. Of course there are impoverished members of
the ‘upper’ and ‘middle’ classes, just as there are some ‘working
men’ who are at least of comfortable means, if not affluence: ….
But in construing a will I think that I am concerned with the
ordinary or general import of words rather than exceptional cases;
and whatever may be the future meaning of ‘working men’ or
‘working class,’ I think that by 1967 such phrases had not lost their
general connotation of ‘lower income.’”
 RELIEF OF POVERTY
• Re Sanders’ Will Trusts [1954] Ch 265 was distinguished by
Megarry VC, who explained:
“The connotation of ‘lower income’ is, I think, emphasised by the
word ‘hostel.’ No doubt there are a number of hostels of superior
quality; and one day, perhaps, I may even encounter the expression
‘luxury hostel.’ But without any such laudatory adjective the word
‘hostel’ has to my mind a strong flavour of a building which
provides somewhat modest accommodation for those who have
some temporary need for it and are willing to accept
accommodation of that standard in order to meet the need. When
‘hostel’ is prefixed by the expression ‘working mens,’ then the
further restriction is introduced of the hostel being intended for
those with a relatively low income who work for their living,
especially as manual workers. …”
 RELIEF OF POVERTY
• Re Sanders’ Will Trusts [1954] Ch 265 was distinguished by
Megarry VC, who explained:
“Furthermore, the need will not be the need of the better paid
working men who can afford something superior to mere hostel
accommodation, but the need of the lower end of the financial
scale of working men, who cannot compete for the better
accommodation but have to content themselves with the economies
and shortcomings of hostel life. It seems to me that the word
‘hostel’ in this case is significantly different from the word
‘dwellings’ in In re Sanders’ Will Trusts [1954] Ch 265, a word
which is appropriate to ordinary houses in which the well-to-do
may live, as well as the relatively poor.”
 PUBLIC ELEMENT ON
POVERTY
• Re Scarisbrick [1951] Ch 622, CA Per Jenkins, L.J. at 649

• “trusts or gifts for the relief of poverty have been held to be charitable
even though they are limited in their application to some aggregate of
individuals…and are therefore not trusts or gifts for the benefit of the
public or a section thereof. This exception operates whether the
personal tie is one of blood (as in the numerous so-called "poor relations"
cases, to some of which I will presently refer) or of contract (e.g., the
relief of poverty amongst the members of a particular society…or amongst
employees of a particular company or their dependents). This exception
cannot be accounted for by reference to any principle, but is established by
a series of authorities of long standing, and must at the present date be
accepted as valid, at all events as far as this court is concerned”
 PUBLIC ELEMENT ON
POVERTY
• Dingle v. Turner [1972] AC 601, HL

• “… though not as old as the “poor relations” trusts, “poor

employees” trusts have been recognised as charities for many
years; there are now a large number of such trusts in existence;
and assuming, as one must, that they are properly administered
in the sense that benefits under them are only given to people
who can fairly be said to be, according to current standards,
“poor persons,” to treat such trusts as charities is not open to
any practical objection.” (per Lord Cross)
 ADVANCEMENT OF EDUCATION
• Although education encompasses research, the court will
nevertheless consider its utility.
• Famously, in Re Shaw [1957] 1 WLR 729, a gift in
the will of George Bernard Shaw, who famously
wrote Pygmalion, for the development of a
phonetic alphabet was held not to be educational.

• First, the object of the gift merely tended to the increase of

knowledge without being combined with teaching or education.
• Secondly, Harman J did not consider that the trust was of any
general utility to the public.
 ADVANCEMENT OF EDUCATION
• Re Shaw [1957] 1 WLR 729’s apparent insistence on an element of
teaching or education was subsequently qualified in Re Hopkins’
Will Trust [1965] Ch 669.
• There, a gift to the Francis Bacon
Society, to identify evidence in
support of his authorship of plays
attributed to Shakespeare was held
to be charitable as an advancement
of education despite an absence of
an explicit requirement on the part
of the researcher to engage in
teaching or education in the
conventional sense.
 ADVANCEMENT OF EDUCATION
• The conclusion in Re Shaw [1957] 1 WLR 729 that a phonetic
alphabet was not beneficial to the public is surely controversial.
• The Korean Hangul ( 한글 ) alphabet developed by King Sejong
the Great in 1443 to complement the Hanja ( 漢字 ) script was
intended to improve literacy.
 PUBLIC ELEMENT IN
EDUCATION
• “A trust which is not for the relief of poverty cannot
be charitable if the beneficiaries are selected on the
basis of a personal connection, either with the donor
or between themselves. Thus, a trust for the
education of name persons or for descendants of
named persons is not charitable. But a trust for the
education of children of members of a particular
profession is charitable, as are trusts for specified
schools and colleges…” (Hanbury &Martin)
 PUBLIC ELEMENT IN
EDUCATION
Oppenheim v Tobacco Securities Trust Co
[1951] AC 297
110,000 people – but failed public benefit
requirement because of the link. (A dissenting
view of Lord McDermott, was taken up by
Lord Cross subsequently in Dingle v. Turner
[1972] AC 601 (see above under ‘Poverty’))
 ADVANCEMENT OF RELIGION
• So far as the advancement of religion is
concerned, various religious trusts have been
recognised, including a trust for the
publication of the works of Joanna Southcote.
• Joanna Southcote was born in 1750 and died in
1814. She famously claimed to be impregnated
with the second Messiah by the Holy Ghost.

• Despite the apparent laxity of the category, a gift to an ethical

society was held not to advance religion in Re South Place
Ethical Society [1980] 1 WLR 1565, although the gift was upheld
as an advancement of education.
 ADVANCEMENT OF RELIGION
• The decision in Re South Place Ethical Society [1980] 1 WLR
1565 poses a challenge to non-theistic traditions (such as
Confucianism or even Buddhism) to fall within the head of
advancement of religion.

• In England, this aspect of the law was significantly relaxed in 2006

through a statutory definition that defines religion as including a
belief in more than one god and even one that does not involve a
belief in a god: see now s 3(2)(a) Charities Act 2011.
 UK COMMISSIONER’S
REPORT
• Charity Commission The advancement of religion for the public benefit
(Version December 2008, as amended December 2011 and September 2013)

• “When considering whether or not a system of belief constitutes a religion

for the purposes of charity law, the courts have identified certain
characteristics which describe a religious belief. These characteristics
include: 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 (referred to throughout this
guidance as 'supreme being or entity'); 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; a degree of cogency, cohesion,
seriousness and importance; an identifiable positive, beneficial, moral or
ethical framework”
 SCIENTOLOGY A
RELIGION?
• R v Registrar General ex parte Segerdal [1970] 2 QB 697

• That a place of meeting for religious worship connoted a

place where people came together to do reverence with
prayer, humility and thanksgiving to a Supreme Being; and
as on the evidence the services and ceremonies carried on in
the building contained none of those elements but consisted
in instruction in the tenets of a philosophy concerned with
man and not with worship of a deity the building did not
qualify for registration under the Act of 1855
LAW OR MISSION
IMPOSSIBLE
 A LEAP OF FAITH
• Hodkin & Ors, R (on the application of) v Registrar
General of Births, Deaths and Marriages [2013]
UKSC 77 compared this to R v Registrar General ex
parte Segerdal and South Place Case on the
recognition of Scientology

• Mission accomplished!
 PUBLIC ELEMENT ON THE RELIGION
• The public benefit requirement has caused particular difficulty in
the category of advancement of religion.
• In Gilmour v Coats [1949] AC 426, a gift in trust for a Carmelite
Priory was held not to be charitable because it lacked a public
benefit.
• This was because
Carmelite nuns devote
their lives to prayer,
contemplation, penance,
and self-sanctification
and do not work outside
the convent.
 ADVANCEMENT OF RELIGION
• By contrast, in Neville Estates Ltd v Madden [1962] Ch 832, a gift
of land to the Catford Synagogue was held to be by way of a
charitable trust under the head of advancement of religion because
the members of the synagogue spent time in the community.
• Similarly, a gift by a testatrix to a Roman Catholic church for
masses to be held for her soul was upheld in Re Hetherington
[1990] Ch 1 because it was possible for the masses to be celebrated
in public.
• However, in Yeap Cheah Neo v Ong Cheng Neo (1875) LR 6 PC
381, a gift by a testatrix to her trustee to erect a house for
performing religious ceremonies to her late husband and herself
was held to be void by the Privy Council.
 OTHER BENEFICIAL PURPOSES
• The fourth head of charity is a catch-all provision or safety net to
enable the courts to develop charitable purposes as society evolves.
• So long as Hong Kong does not reform its charities law, it is
arguable that many of the proposed limbs of charities by the Law
Commission can be accommodated within this fourth head.

• A leading example of a purpose that could fall within

the fourth head is Incorporated Council of Law
Reporting for England and Wales v Attorney General
[1972] Ch 73, in which the Incorporated Council of
Law Reporting was registered as a charity either
because it advanced education or else fell within the
fourth head.
 HOW CERTAIN IS A PURPOSE
RECOGNISED UNDER 4TH
HEADING?
• There is no certainty in HK to assume, based
on the old common law, that the purpose
under the fourth heading will be charitable.
On the contrary, the old common law does
not recognise many purposes and this would
be an outdated precedent to follow suit.
 COMPARISON ON
UNCERTAINTIES AND
CERTAINTIES IN LAW
• Old common law not • Statutory Charitable purposes:
charitable: • CA s.3(1)(g) the advancement of
• The advancement of sport per se was amateur sport; and CA s.3 (2)(d)
not charitable prior to the 2006 Act which explains that in s.3 (1) (g),
(See for example Re Nottage [1895] 2 “sport” means sports or games which
Ch 649) promote health by involving physical
or mental skill or exertion.
• Advancement of art,
• S3(1) (f) The advancement of the
culture..etc was not Re Delius arts, culture, heritage or science
[1957] Ch 299 and Re Pinion [1965]
Ch 85
 S.3 (1) AS FOLLOWS:
“A PURPOSE FALLS WITHIN THIS SUBSECTION IF IT FALLS
WITHIN ANY OF THE FOLLOWING DESCRIPTIONS OF PURPOSES
—
• (a) the prevention or relief of poverty;
• (b) the advancement of education;
• (c) the advancement of religion;
• (d) the advancement of health or the saving of lives;
• (e) the advancement of citizenship or community development;
• (f) the advancement of the arts, culture, heritage or science;
• (g) the advancement of amateur sport;
• (h) the advancement of human rights, conflict resolution or reconciliation or the
promotion of religious or racial harmony or equality and diversity;
• (i) the advancement of environmental protection or improvement;
• (j) the relief of those in need because of youth, age, ill-health, disability, financial
hardship or other disadvantage;
• (k) the advancement of animal welfare;
• (l) the 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;
• (m) any other purposes—
 PUBLIC BENEFIT

1. Public element

2. Benefit element
 PUBLIC ELEMENT
Public element restriction: Double restriction
IRC v Baddeley [1955] AC 572 Methodists in
West Ham and Leyton
• A “double restriction”, however – a “class within a class”
is unlikely to be a sufficient section of the public. The
way the Charity Commission have interpreted this
principle is that the restriction on who can benefit must
not be arbitrary or irrational and should be related to the
aims of the body.
 PUBLIC ELEMENT
• Benefit also must not be unduly restricted by ability to pay any fees
charged
Independent Schools Council v Charity Commission for England
and Wales [2012] Ch 214
• People in poverty must not be excluded from the opportunity to benefit
Independent Schools Council v Charity Commission for England
and Wales [2012] Ch 214
• Any private benefits must be “incidental “ (and see further under
Education & Poverty ‘heads’ re problems with personal connections to
beneficiaries)
Re Coxen [1948] Ch 747
 BENEFIT ELEMENT
• Principle 1: There must be an identifiable benefit or benefits
Re Shaw [1957] 1 WLR 729
Re Hummeltenberg [1923] 1 Ch 237
Re Pinion [1965] Ch 85
• Benefit must relate to the charity’s aims. Incidental benefits
not related to those aims will not count
• Benefits must be balanced against any detriment or harm
National Anti-Vivisection Society v IRC [1948] AC 31
 BENEFIT ELEMENT
Principle 2: Benefit must be to the public, or a section of the public
• Benefit to the public
Gilmour v Coats [1949] AC 426
Cf. Re Hetherington (Deceased) [1990] Ch 1 – masses in public
• Beneficiaries must be appropriate to the aims
• What is ‘the public’? Charity Commission Guidance :
• "There is not a set minimum number of people who have to benefit in order to be a public
class. Whether or not a section of the public is or is not a 'public' class is not the same for
every purpose. What is sufficient for one purpose may not be sufficient for another. An
example of circumstances in which it might not be sufficient is where the geographical
restriction is too narrowly defined (such as people living in a few named houses)".
• Benefit may be restricted to a section of the public, but the opportunity to benefit must not
be unreasonably restricted by geographical or other restrictions ( See IRC v Baddeley