SGS 10 - Charitable Trusts PDF

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charitable trusts notes....

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SGS 10 – Charitable Trusts

Preamble to Charities Uses Act 1601: The Charitable Uses Act 1601 featured a Preamble which identified a number of charitable purposes. The purpose of the statute was to correct abuses in the administration of charitable trusts. Charity is defined as a ‘recognised purpose of charity which is for the public benefit.’ This preamble was used to assist in the determination of whether a purpose was charitable. It provided a foundation for the development of law of charity by applying the ‘spirit of the preamble.’ The preamble was used as a foundation and this led to the identification of the ‘four heads of charity’ (i.e. relief of poverty, relief of education etc) in case of Pemsel. Four Heads of Charity – Pemsel i. ii. iii. iv.

The relief of poverty The advancement of education The advancement of religion; and Other purposes beneficial to the community

Lord Macnaghten stated that the four heads of charity are valuable and a ‘classification of convenience’. Also, that certain purposes may not fit neatly into the heads. As a result, he said any charity must be in the benefit of the public ‘within the intendment/spirit of the preamble.’ If it’s within the head or by analogy of the head, then it must be for the public benefit. Public benefit was presumed for the first three heads but not fourth. It is possible for it to be rebutted if it’s shown that the purpose isn’t beneficial. To satisfy the public benefit requirement, there are two aspects: 1. Identifiable benefit or benefits (i.e. nature itself must be beneficial to community) - The nature of the purpose must be a benefit to the community, and it must able to be recognised or described instead of measured. Case: Re Shaw – Shaw requested in his will that his residuary estate should be used to create a 40-letter alphabet to replace the existing 26-letter. This was considered to not be of general utility to the public. Case: Re Hummeltenberg – A training college for medium’s wouldn’t be a benefit to the public. Despite the testator’s belief that it was an advancement of education, his opinion doesn’t matter, it is a matter for the judge. If a detriment exceeds the benefit, the public benefit requirement will not be satisfied. National Anti-Vivisection Society v IRC: It was held that the public benefit test wasn’t satisfied where an organisation tried to ban experimentation on animals. This is because the detriment to the public was that it had adverse effects on medical research due to the ban which outweighed the benefit arising from the welfare of animals.

2. To the public (i.e. numbers to benefit must be sufficient)

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The benefit must be available for the public in general or to some section of the public (Re Scarisbrick: charitable purpose was limited to collective individuals ascertained by familial connections. It must ‘in favour of the public at large or a section thereof’. It must be a public class! The class may be small but not numerically negligible. Case: Oppenheim v Tobacco Securities Trust Co Ltd – Trustees were directed to apply certain income ‘in providing for the education of children of employees or former employees.’ Established the ‘personal nexus rule’: it’s not appropriate for a settlor to obtain benefits where the beneficiaries are a private group of people, such as the settlor’s close family/friends. Must be a public class! In terms of restriction, restricting to benefit people living in a town is acceptable as ‘section of the public’ but limit it to people living in a particular street will not. It must be EXCLUSIVELY CHARITABLE. It cannot be a mix of charitable/non charitable purposes. S1 (1) (a) of CA 2011 states ‘established for charitable purposes only.’ e.g. if the purposes of a trust are described as being ‘charitable or benevolent’ then this cannot be exclusively charitable because a benevolent purpose can be wider than charitable purposes. Whereas, if it said ‘charitable and benevolent purposes’ – This would be charitable because the purpose must be charitable even if it’s benevolent. Case: Simpson – He directed his executors to apply the residue of estate for such charitable institutions ‘or benevolent objects’. It was void because the executor could choose benevolent objects that extended beyond charitable trusts. The benevolence acts as ‘ancillary purpose.’ If we have an ancillary purpose benefitting student’s education and also for it to be used for a Christmas ball, it’s ancillary (extra) not the main purpose which is the student’s education....