lecture on Charities PDF

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Charities- Part I NOT subject to the 3 certainties or beneficiary principle.  Valid purpose trusts.Defining Charitable trustsi. When is a trust charitable Must be of charitable nature within the spirit of the preamble of the Statute of Charitable Uses 1601.  Must promote a public benefit , as re...

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Charities- Part I  NOT subject to the 3 certainties or beneficiary principle.  Valid purpose trusts.

Defining Charitable trusts i.

When is a trust charitable  Must be of charitable nature within the spirit of the preamble of the Statute of Charitable Uses 1601.  Must promote a public benefit, as recognized by the courts.  The purpose of the trust must be wholly and exclusively charitable.

ii.

Development of definition Statute of Charitable Uses 1601  The Spirit and Intendment of the Preamble  corrected abuses in the administration of charitable trusts. The historical approach Income Tax Special Purposes v Pemsel , Lord McNaughten i. ii. iii. iv.

Trusts for the relief of Poverty. Trusts for the advancement of Education. Trusts for the advancement of Religion. Trusts for other purposes beneficial to the community, not falling under any of the preceding categories.

 It codified the common law position.  Scottish Burial Reform and Cremation  We should use this with some caution because it was just a convenient list and the law of charity is a moving subject.

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Charities Act 2006:  A trust has to satisfy a 2 part test: it has to satisfy a charitable purpose + public benefit.  S. 1  Codified meaning of charity.  S. 2  Charitable purpose.  S. 3  Categories of charitable purposes. Charities Act 2011:  S. 1  Meaning of charity.  Charity means an institution which is established for charitable purposes only.  S. 2  Charitable purpose.  A charitable purpose is a purpose which falls within s. 3 (1) and (b) is for the public benefit. s. 3 (1) CA 2011: description of purposes a) b) c) d) e) f) g) h)

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; i) Advancement of environmental protection or improvement; j) Relief of those in need because 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...or the police, fire and rescue services...  new !! m) Any other analogous purposes...

List is not closed  The old law recognized the possibility of development by analogy or because of changes in society and public attitudes.

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Scottish Burial Reform v Glasgow Corp Facts: - A claim by an organization and the Scottish burial reform organization dealt with cremation. -It was seeking to provide inexpensive ways of disposing a dead body. - Was this sufficiently proximate or analogous to the preamble evolved over the centuries? Held: Sufficient link of activities of this organization and other charitable purposes. 1. There may be purposes which do not fit into McNaughten’s 4 categories. 2. Words used should not be treated as if they had the force of statute. 3. Charity law evolved and may be different over time. National Anti-Vivisection Society v IRC  also recognized here  A society, which promoted the suppression of vivisection, was held NOT to be charitable, as the court found that the advantages of reduced cruelty to animals were outweighed by the detriments to medical research that would be caused if the purpose was accomplished.

Privileges enjoyed by Charitable Trusts Dingle v Turner per Lord Cross 2 ‘’quite different sorts’’ of privileges: a) Privileges as to their essential validity. b) Financial privileges through exemption from some taxes.

Privileges as to their essential validity. a. Purpose trusts : Charitable trusts are the exception to the beneficiary principle. They are enforced by the Charity Commission or by the Attorney General in the name of the crown.

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b. Certainty of objects: Even though the exact purposes have not been identified with certainty, gifts made for charitable purposes are valid. c. Perpetuity: Charitable trusts are valid even though they may last for an indefinite period of time. They are exempt from the rule against perpetuity, where trusts are required to be retained for a period of life in being + 21 years. d. Financial privileges : Charities are exempt from: - tax on income and capital gains. - tax on certain trading activities. - inheritance tax. They also benefit from Gift Aid donations. However, they are not exempt from VAT tax. Rationale for advantages  Charities play a crucial role in society so they need to be protected & encouraged.  Necessity of the ‘’public benefit’’ test.

Case Law on Charitable purposes

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1. Trust for the prevention or relief of poverty: s. 3 (1) (a) ‘’Poverty may not be unfairly paraphrased as meaning persons who have to go short in the ordinary exception of that term with due regard to their status.’’ Re Coulthurst per Evershed MR  meaning of poverty  A trust for the benefit of orphans was charitable for the relief of poverty.

 Poverty= a relative concept, depending on the time the individuals lived.  Poverty is not absolute.  The gift is required to relieve the misery of poverty by providing the basic necessities of human existence- food, shelter, clothing. 2008 Charity Commission Report: The Prevention or Relief of Poverty

 Cannot satisfy a basic need.  The lack of something that the majority of ordinary people would consider essential. a) The meaning of ‘’poor’’

 NOT defined in the Charities Act 2011. Re Coulthurst per Sir Evershed: ‘’Poverty is not synonymous with destitution. Middle-class may also fall within this concept.’’ Re De Carteret Facts: The Bishop of Jamaica left property on trust to pay an annuity of £40/year to widows in England whose income was between £80-£120. Held: Valid charitable gift for the relief of poverty. Re Gwyon  EXCLUSIVITY Facts: A testator left money to establish a foundation for clothing. - There was not a sufficient amount of clothing. - The clothing was not restricted to persons who were poor. 5

- A gift for the provision of clothing for children. Held: NOT charitable organization since the terms of the gift did NOT exclude children who were from rich background. Re Sander’s WT  EXCLUSIVITY is fundamental Facts: A gift to set up an organization who would run dwellings for the working class of an area. Held: NOT charitable. Too broad to attract a charitable purpose. The term ‘’working class’’ did not indicate poor persons. Re Niyazi’s WT Held: A charitable gift of £15,000 for the construction of a ‘’working men’s hostel’’ in Cyprus was charitable.

 Different from Re Sander’s because: The word hostel meant a modest, temporary accommodation with a relatively low income. Dwellings were ordinary houses which may be inhabited by rich & poor. Joseph Rowntree Trust Housing Association v A-G Facts: A housing association wanted to built small dwellings for elderly people, who would be able to purchase them on long leases. - The elderly would pay 70 % of the purchase price of the premises, with the remainder being paid by the housing association. Held: Charitable purpose.  Peter Gibson: There must be a need which is to be relieved by the gift. Distinction between relief & prevention of poverty : The prevention of poverty includes those who are poor from becoming poorer and preventing people who are not poor from becoming poorer. IRC v Oldham Held: A trust to help the unemployed would be a charitable trust.

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Re Dean’s WT Held: Indirect provision of relief by providing accommodation for relatives coming from a distance to visit ill patients  charitable. 2. Trusts for the advancement of education : s. 3 (1) (b)  Some schools may charge fees but they can be charitable if they satisfy the criteria for a charitable organization.  To promote, sustain and increase individual & collective knowledge. IRC v McMullen, per Lord Hailsman Education= a balanced & systematic process of instructing, training and practice containing spiritual, moral, mental and physical elements. Teaching A-G v Ross

 Purposes subsidiary to teaching institutions may also be charitable. Held: The Student’s union at a university was charitable as it furthered the educational function of the institution. Customs and Excise Held: Trusts awarding fee-paying schools are charitable, provided that the school is non-profit making OR uses its profits for school purposes only.

Industrial training and professional bodies Re Koettgen’s WT Held: The advancement of industrial & technical training was charitable.

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IRC v White Held: An association with the purpose of encouraging craftsmanship and maintaining the standards of modern and ancient crafts was charitable. Research

 They can be charitable unless it is of no educational value. Re Besterman’s WT per Slade 3 criteria summarizing the present state as to when a trust for research is charitable: 1. The subject matter of the research must be a useful subject of study. 2. The knowledge acquired by the research must be disseminated to others. 3. The trust must be for the benefit of the public, or a sufficiently important section of the public. Re Shaw Facts: The testator left money to be used to develop a new language; He wanted to create a 40-letter alphabet and translate his play into this alphabet. Held: NOT charitable  NO public benefit, as it was aimed at the increase of knowledge.

Re Hopkins WT per Wilberforce Facts: - It concerned a gift to the Francis Bacon Society to be used to find scripts proving that the plays of Shakespeare were written by Francis Bacon. - Purpose: promote the work of Francis Bacon. 1. The research must be of educational value to the researcher. 8

2. Directed as to improve the sum of communicable knowledge in an area which education may cover. Held: Organization was charitable because it satisfied the public benefit. Royal Choral Society v IRC Facts: - Organization founded to establish a choir to perform in high level venues. - The government said that teaching is what is really involved in charities. Held: It was charitable. We have a broad conception of education. Re Pinion Facts: A collector; through his will he wanted to establish an organization of charitable character which would protect his collection. - The stuff was not of good quality and was not prepared to establish a charity because the quality was bad. Held: NOT charitable because there was no benefit in imposing this junk onto the public. NO social value. Re Hopkinson  Must be EXCLUSIVELY CHARITABLE Facts: A proposed trust for educating adults in the views of a single political party. Held: NOT charitable. Political propaganda is NOT education.  Political activities: NOT charitable purpose. They undermine educational purpose. 3. The advancement of religion : s. (3) (1) (c) Religion= ‘’a particular system of faith & worship’’ and the recognition on the part of humanity of some ‘’higher unseen power as having control of his destiny and as being entitled to obedience, reverence and worship’’. Tudor Religion includes: (s. 3 (2) (a) Charities Act 2011) 9

i. ii.

Religion which involves belief in more than 1 God. Religion which does not involve belief in God.

Bowman v Secular Society per Lord Parker  Monotheistic approach= only monotheistic faiths would count as religions, so the idea of some supreme God.  However, this view has been dismissed and now  polytheistic approach. Neville Estates v Madden  Courts assume that some religion is better than nothing at all. Thornton v Howe Facts: A trust to promote the publication of works of J. Southcote, who claimed that she was the mother of the 2nd messiah. Held: Charitable as the Church has been registered as a charity. Re South Place Ethical Society Facts: Study & dissemination of ethical principles and the cultivation of rational religious sentiment. Held: It was a charity because the promotion of ethical values and philosophies are charitable for the advancement of education.  ethics are about a secular and not a spiritual project. Charity Commission Guidance 2008  expanded the view of religion. Freemasons v Holborn  promotion Freemasonry was NOT charitable because it did not advance religion, but it encouraged its members to lead a good moral life. Gilmour v Coates  public benefit

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Facts: A closed order of nuns that prayed for the world within the organization. Held: NO public benefit as they could not establish that there was a benefit from paying. Religion is a private matter.  A religion can be regarded as beneficial without it being necessary to assume that all its beliefs are true. Church of the New Faith- Scientology The court identified a number of qualities that it had to be present for an organization to be charitable under religious purposes: 1. Belief in a supernatural being. 2. Acceptance of some kind of doctrine of theology. 3. Not only acceptance to the doctrine but adherence to that faith and practicing of that activity. 4. The collective grouping . Held: scientology did NOT qualify for a charitable organization But, we have moved away from this religious doctrine to a more spiritual doctrine. Purposes ancillary to religion: charitable

 Construction or maintenance of religious buildings (Re Hooper)  The provision of bells (Re Pardoe)  Provisions for the benefit of religious ministers, retired missionaries (Re Mylne)  Church choir (Re Royce)  Gifts to spiritual leaders if their work is exclusively spiritual (Re Flinn) 4. Advancement of health or the saving of lives: s. 3 (1) (d) Re Smith’s WT Held: a gift to be applied to the benefit of such hospitals as the trustees in their absolute discretion thought fit was charitable. - The Court considered that the testator, who has made his will before the creation of the NHS, had meant hospitals dependent on voluntary

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contributions and not nursing homes run for private profit, which would not be charitable.  Hospitals, which charge fees for the treatment they provide, can be charitable, even if as a result their services are only available to those who are capable of paying or have insurance.  Trusts for the protection of human life and property have been held to be charitable as falling within the ‘spirit and intendment’ of the preamble. Re Wokingham Fire Brigade Trusts  the provision of a voluntary fire brigade was held to be charitable. Re Resch’s WT Facts: A gift of $8m was made to a private hospital. Held: Valid charitable gift as there was sufficient benefit to the community resulting from the beds and mefical staff of the hospital.  If the hospital was carried on as a commercial venture with a view to make profits  NOT charitable Re North Devon Held: Charitable trust.  Objective was to provide financial assistance to those affected. Designed to help those who had suffered and aim to help save lives.

5. Advancement of citizenship or community development : s. 3 (1) (e) “Directed towards support for social and community infrastructure which is focused on the community rather than the individual”  Includes urban and rural regeneration (s. 3(2)(c) of the Charities Act 2011)

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 The organization must seek to maintain or improve ‘the physical, social and economic infrastructure’ and assist people ‘who are at a disadvantage because of their social and economic circumstances’ e.g.  Financial assistance to people who are poor  Providing or improving housing standards  Helping people find employment Re South Place Ethical Society Held: It was a charity because the promotion of ethical values and philosophies are charitable for the advancement of education.

6. The advancement of arts, culture, heritage or science: s. 3 (1) (f) Re Delius Facts: The creation of a trust to promote the music of the composer F. Delius Held: Charitable

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Re Pinion  NOT charitable Facts: Gifts of a studio and contents, to be maintained as a collection, were made to the National Trust Held: NOT charitable Associated Artists v IRC Facts: The promotion of ‘’artistic dramatic works’’. Held: It was NOT charitable. Purposes that are too vague & uncertain will NOT be held charitable. Incorporated Council of Law Reporting v A-G Held: Charitable. Monuments The person to be commemorated could be a figure of historical importance. Benefit: Foster patriotism and good citizenship. Re Endacott Facts: Memorials to private individuals of no such historical importance Held: NOT charitable 7. Advancement of amateur sports : s. 1 (3) (g) Re Nottage Facts: Establishing a prize for ocean yacht racing. Held: NOT charitable because there had to be some factor other than the playing of sport to justify the charitable purpose. IRC v McMullen 14

Facts: The Football Association had established a trust for the promotion of football and other games or sports in schools & universities. Held: Charitable for the advancement of education.

 Education includes: spiritual, moral, mental & physical elements. IRC v Baddeley Facts: A trust which provided outlet for members would be members of the Methodist church, in West Ham. Held: NOT charitable since this was not a section of the community but a class within a class.  Elite sports, which fail to satisfy the test of public benefit, will NOT be considered charitable, unless a trust to promote these sports includes measures which enable participation by people who without the support, could not afford to acquire the expensive equipment. Re Nottage Facts: Ocean Yacht racing is a sport for those who enjoy tearing up £50 notes while standing under a cold shower. Held: NOT charitable, unless evidence that people from all levels of society can participate. Re Hadden Held: Charitable 8. The advancement of human rights and equality : s. (1) (3) (h) McGovern v A-G Facts: Amnesty International wanted to set up a trust with four main objects relating to prisoners of conscience. - The Charity Commissioners had refused to register the trust as a charity. Held: NOT charitable. 15

 The main purpose was political. Re Strakosch (Decd) Facts: A gift to be used to appease racial feeling between the Dutch and English-speaking sections of the South African Community. Held: NOT charitable because it was a political purpose, too vague.

9. The advancement of environmental protection or improvement  However, environmental campaign groups that have primarily political purposes will not enjoy charitable status. Re Verrall Facts: National trusts for places of historic interest & national beauty. Held: Charitable because it was beneficial to the community. A-G for NSW v Sawtell Facts: A bequest to preserve native wild life. Held: Charitable

10. Relief of need : s. 3 (1) (j)  S. 3 (1) (j) CA 2011: relief for those in need ‘by reason of youth, age, ill-health, disability, financial hardship or other disadvantage’.  S. 3 (2) (e) CA 2011: This ‘includes relief given by the provision of accommodation or care to the persons mentioned in that paragraph’.

 Examples of relief of need:

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 Joseph Rowntree Memorial case (small dwellings for the elderly)  Unemployment: must be proved that the trust is tackling unemployment, either generally or for a significant section of the community Provision for recreational facilities:

 Recreational facilities are not considered to be charitable even though are for the general public. Williams’ Trustees v IRC Facts: A trust was established to promote Welsh interests in London, including the provision of a meeting place to promote Welsh interests in London and to promote the ‘moral, social, spiritual and educational welfare of Welsh people’ Held: NOT charitable because of the ‘social’ purposes, although many of the other purposes of the society would be charitable...