Transcript Slide 1

EQUITY AND TRUSTS
CHARITIES 3
A definition of Charity?
• Legal definition imperfect.
• Committees looking at law (e.g. Nathan, Goodman) both
advocated definition of charity but were unable to formulate
one.
• List of purposes proposed instead (the “Goodman
guidelines” ) + enacting definition using Macnaghten heads.
• 1989 White Paper considered simplification + possibility of
statutory basis. But flexible non- statutory evolutionary
approach favoured.
• Deacon Report on charity reform proposed replacing four
heads with single “benefit to community” test but led to
criticism by Goodman and rejection through White Paper.
Proposals for reform
• In September 2002 Home Office Strategy
Unit published a consultation paper “Private
action, Public Benefit: A Review of Charities
and the Wider Not-For-Profit Sector”.
• Not limited to law on charitable status – also
proposes e.g widening trading abilities of
charities, reform of CC guidelines on
campaigns, improving information, better
regulation of fundraising, changes to role of
CC, establishment of independent tribunal.
Difficulties with definition
Report highlights that: law is unclear,
four heads not reflective of range of
charitable work or logical in extent of
assumption of public benefit.
Expanded purposes
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Expanding the list of purposes to ten?
Prevention relief of poverty
Advancement of education
Advancement of religion
Advancement of health
Social and community advancement
Advancement of culture arts and heritage
Advancement of amateur sport
Promotion of HR, conflict resolution and reconciliation
Advancement of environmental protection and improvement
Other purposes beneficial to the community
NB 10 is head 4 of Pemsel.
Public benefit
• Report recognises centrality of public
benefit in definition of charitable status
• No presumptions of public benefit –
must be demonstrated
• Common law definition to remain
• Report recommended redefinition as
public benefit falling under one of the
ten heads.
Consultation
July 2003 Government responded to
report – accepting recommendations for
review based on principle of public
benefit adding to the list:
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promotion of animal welfare
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provision of social housing and
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advancement of science.
Draft Charities Bill
• Published in May 2004.
• Section1 provides the first general stat
definition of charity s1(1) gives the meaning
of charity.
• Section 2 first stat def of charitable purpose
s2(1) – purpose is charitable if it meets 2
criteria: that it falls under 1 or more heads of
charity in S2(2) +it is for public benefit.
Descriptions of charity
• Eleven specific and one general description.
• 2(4) covers purposes analagous to purposes
set out in a paras a-k and enables the
description of purpose to be expanded
• S3 deals with public benefit s3(2) abolishes
presumption. PB refers to existing concept.
Scrutiny of Bill
• The Bill has been scrutinised by a joint
committee of the Houses of Parliament which
recommended an additional charitable
purpose be added to 2(2) – the promotion of
racial and religious harmony and equality and
diversity + that culture be added to the
arts/science head + that saving of lives be
added to health head. Also a more explicit
definition of public benefit was needed –
perhaps by adding non-binding examples of
public benefit.
Legislation?
Charities Bill published in November
2004. Charities Act 2005 is anticipated.
Legislation?
• The Bill follows draft Bill and incorporates
some of the joint committees
recommendations.
• The Bill will give the CC new objectives – to
promote understanding /awareness of public
benefit requirement. Clause 4 requires the
CC to issue guidance to aid in this.
• CC guidance will not be legally binding.
Reform
Reform of charities law has been
discussed for over fifty years but
whether this recent legislation will in fact
become law remains to be seen.
Cy-pres
The following section deals with the
charitable doctrine of cy-pres.
Cy-pres
In contract to a private trust, if a
charitable trust fails there is no resulting
trust – rather the doctrine of cy-pres
may apply to save the gift.
Cy-pres
• Cy-pres means as near as possible
• Doctrine applies where property is given with
charitable purposes but the gift cannot be
made then the court of CC may apply
property to other purposes as near as
possible to those intended by the donor.
• Law somewhat complex – where purposes
fail, redundant, anachronistic, then trust may
be re-written.
Cy-pres – application
Two main circumstances:
1. Initial failure where clear from outset that
intention cannot be fulfilled
2. Subsequent failure where purposes
cannot be achieved during the life of the
trust.
Initial failure
e.g. gift to institution that has never
existed or has ceased top exist doctrine
will only apply if a paramount or general
charitable intention is found:
i.e. a general intention not an intention
to benefit a particular institution.
Principles
• If specific institution is mentioned then is
taken as presumed intention.
• Re Rymer v Stansfield [1895] 1 Ch 19
CA gift to defunct seminary – so no
general charitable intent.
Principles
• In cases where a charity has never existed
then general charitable intent is easier to find.
• Re Harwood [1936] Ch 285 testatrix made gift
to organisation that had never existed. No
specific intent so gift applied cy-pres.
• Also second gift to society that had existed so
gift failed.
Principles
• No assumption that all gifts are charitable just
become some are. Re Jenkins W/T [1966]
1All ER 926: number of charitable gifts + to
British Union for Abolition of Vivisection (noncharitable). Latter gift failed.
Buckley J: cannot infer that testator wished
non-charitable gift to take effect as a
charitable purpose even where close relation
between two purposes.
Re Satterthwaites WT
[1966] 1 WLR 277
Compare with Jenkins. Testatrix left
residuary estate to animal charities.
Evidence that she hated human beings.
One non-charitable donee (the London
Animal Hospital) claimed the gift. Court
held that it was a case of general
charitable intent. Court applied the gift
cy-pres.
Cy-pres
Gift may not have failed. If specific institution exists in
another form then cy-pres may not be necessary. Re
Faraker [1912] 2 Ch 488 CA. Gift to charity for poor
widows that had been later consolidated in charity for
benefit of poor. Old charity existed within the new so
no cy-pres necessary. NB charities had existed for
different purposes.
But – how different can purposes be? In Re
Roberts [1963] 1 WLR 406 gift to Sheffield Boy’s
Home – wound up into Sheffield Town Trust. Failed
because court saw purposes as different.
Gifts to unincorporated charity
• Has to be for purposes not organisation (because not a legal entity).
• If purposes can be fulfilled gift will not fail –another trustee/charity will
be found (i.e. no cy-pres because no initial failure).
• Re Fingers WT [1972] Ch 286 both organisations had ceased to exist
at death of testator. First gift to further objects of unincorporated
organisation – purposes continued so gift did not fail. See dicta of
Buckley J in Re Vernon’s WT [1972] Ch 300 as quoted by Goff J in Re
Finger’s, “every bequest to an unincorporated charity by name without
more must take effect as a gift for a charitable purpose..If the gift is to
be permitted to take effect at all, it must be as a bequest for a purpose.
A bequest which is in terms for a charitable purpose will not fail for lack
of a trustee but will be carried into effect..”
• The second gift to incorporated charitable organisation was treated as
having a general charitable intention allowing for cy-pres to be applied.
Subsequent failure
• If failure occurs after the trust takes
effect then = subsequent failure and cypres is straightforward.
• Only question is has there been an
outright gift to charity?
CA 1960 – s13
• Prior to Charities Act 1960 cy pres could only operate
through common law where it was impossible or
impracticable to carry out terms of the trust.
• If initial failure then cy-pres may apply – but where
trust was difficult to execute or outdated or not useful
the nothing could be done. Thus, old charitable trusts
simply continued.
• Under CA 1960 cy-pres doctrine reformed. S13
extended application of cy-pres e.g. where original
purpose fulfilled, in case of surplus or original
purpose adequately provided for.
CA 1960 – s14
• Act also allows for where donors of a failed
charitable gift cannot be found e.g. from
collections etc.
• Re Ulverston fund raising insufficient for purpose
and no general charitable intention since for the
building of new hospital – cy- pres could not apply
and funds went to Crown as bona vacantia.
• S14 allows cy-pres to apply as if general
charitable intent where donor cannot be found
and in cases of lotteries, collections, raffles etc.
Applies in case of initial failure only.
Reform of cy-pres
• See s14A of 1993 Act. New procedure for
cases of chartable giving to appeals.
Also
• S14B sets out 3 matters court or CC must
consider:
– spirit of the original gift
– desirability of applying new purposes
– need for relevant charity to make a significant
social/economic impact
Consideration of past
examination question
We will consider the will of Mavis Miller
– the following slides set out the clauses
contained in the problem question.
Problem question – clause 1
Qualifications for charitable status:
• Must be for one or more charitable purposes
– i.e.. Pemsel heads
• Be for the benefit of the public
• Be exclusively charitable
NB Head 4 (other purposes) analogical
connection requires with preamble to CUA
1601.
Problem question
(1) I give £2000 to my trustees to buy books about political
history for use by the members of the Oldcastle Town Council, in
the hope that they might learn from the mistakes of politicians in
the past.
Which head? Education? Education is a very wide head, give
examples of what counts as education e.g. Incorporated Council
of Law Reporting for England & Wales v Att-Gen [1972] Ch73,
Re Dupree's W/T [1945] Ch 16, Re Delius [1957] Ch 299, Re
Shaw [1957] 1 WLR 729 Re Hopkins [1965] Ch 669, Re Nottage
[1895] 2 Ch 649, Re Mariette [1915] 2 Ch 284.
Identify problems: political activity? See Re Hopkinson. What is
a political purpose? Is it partisan – see AG v Ross.
Public benefit
• Is the educational purpose for benefit or
public or section of public. NB class must not
be defined by personal nexus.
• Make reference to Oppenheim, outline facts,
outcome.
• Is the employee nexus extant here?
• Could argument of indirect benefit of
educating politicians apply?
• Are purposes of clause 1 exclusively
charitable (i.e. educational)?
Clause 2
(2) I give £3000 to assist the campaign to prevent
open cast coal mining from being extended in
Southumberland with its consequent destruction of
the local environment.
Does this fall within Pemsel head 2? More likely head
4. Set out how to decide if purpose is charitable
under head 4.
Beneficial to the community (i.e. positive not
detrimental effect). See Anti-vivisection Soc v AG
where public benefit was outweighed by detriment to
science and public health. Consider this balancing
test in application to the clause.
Clause 2 and public benefit
• Purpose must be beneficial in legally
charitable sense.
• Preamble sets out purposes which are
charitable – i.e. those covered by preamble or
case authority.
• Novel purposes must fall within spirit and
intendment of preamble – analagous with
previously accepted purpose.
Clause 2 – environmental
concerns
• Valid charitable purpose – conservation
recognised under head 4 by CC in 2004 in
review document RR9.
• Document sates that area must be worthy.
• BUT – environmental groups with political
purposes will not be charitable. Is purpose
here political – see McGovern v AG sets out
political purposes. Is clause 2 campaign
seeking a change in law?
Clause 2 and public benefit
• For public or section of public?
• Have any limitations been placed on the
class?
Exclusively charitable?
• If the trust benefits objects which are
not exclusively charitable then trust will
not be charitable.
• If for political purpose then the gift may
not be charitable at all.
Clause 3
(3) I give £10,000 to set up an after school
play scheme to keep the children of Oldcastle
out of mischief. With preference to be given to
children of the employees of Oldcastle
Glassworks Limited.
Education? Sport can be educational –see
Re Marriette and IRC v McMullen. Depends
on purpose - is after school group/avoiding
mischief educational? See Re Dupree's W/T.
Clause 3 and public Benefit
• Children of Oldcastle are the class of
beneficiary. The oprefecne expressed for
children of employees of Oldcastle
Glassworks may be problematic.
• In IRC v Educational Grants court found that
fund for educating children connected with
employees of Metal Box was not charitable.
Compare with Re Koettgen where
preference given to employee families of
named company up to max 75% of income
was held charitable.
Consistent?
Was IRC v Educational Grants consistent
with Re Koettgen but seems that preference
is permissible up to max 75% of income.
No max expressed in clause 3 so will fail
under public benefit test. As expressed
trustees may apply whole £10,000 to
employees’ children and so fails personal
nexus test.
Clause 3 – head 4?
• See Glasgow Police case, Baddeley, and
Williams v IRC.
• Are recreational purposes charitable under
Head 4?
• Public benefit problem remain.
• NB also class within a class restriction.
Section of community cannot be further
delineated to create a class within a class.
Do the children constitute such a delineation?
Recreational Charities Act
1958
RCA 1958 validates facilities for
recreation etc if provided in interests of
social welfare.
Satisfied if under s1(2)(a) they improve
conditions of life in s1(2)(b).
RCA 1958
• Young persons are included s1(2)(b) and so
children of Oldcastle would – although a class
within a class – fall within the scope of this
section.
• NB – nexus problem still applies.
• S1 RCA principle of public benefit still applies
(Oppenheim). Outcome could therefore be
as set out above under the educational
preference cases and would fail.
Clause 4
(4) I give the rest of my estate to my
trustees to set up a trust fund to
improve the economic and social
prospects of the disadvantaged people
of Oldcastle, in particular by providing
outings to places of interest to broaden
their horizons.
Head 1 – relief of poverty?
Clause 4 - meaning of poverty
See Re Coulthurst [1951] Ch 661
“poverty does not mean destitution. It is a
word of wide and somewhat indefinite import.
It may be paraphrased as meaning persons
who have to go short in the ordinary sense of
that term due regard being had to their status
in life …. ”
No absolute standard – relative concept.
Limitations
The head of poverty need is crucial.
See IRC v Baddeley [1955] AC 572
“relief connotes need of some sort …”
In Joseph Rowntree Memorial Trust Housing
Association Ltd v Att-Gen [1983] Ch159 must be a
need attributable to the condition of the person that
they cannot or would have difficulty relieving
themselves.
Does clause 4 in “providing outing to places of
interest” relieve poverty?
Other restrictions
Gift only applies to the poor.
Gift will not be charitable if those who are not poor
can benefit.
Consider:
Re Gwyon [1930] 1 Ch 255
Re Sander’s WT [1954] 2 WLR 487
Are the people of Oldcastle necessarily poor?
Clause 4 - education
See Associated Artists Ltd v IRC [1956]
1 WLR 752 – is clause too vague?
Oppenheim also relevant – is clause for
the benefit of the public – is there a
personal nexus to be found in the
wording of the clause?
Clause 4 and Head 4
• Consider use of term “social purposes” in clause 4
– risk of it not being exclusively charitable?
See Williams v IRC [1947] AC 447
& IRC v Baddeley [1955] AC 572
N.b. wording of clause: “economic and social
purposes”. Would “or” have made a difference?
• Would public benefit be satisfied under head 4.
• Personal nexus is not apparent – but is there a
class within a class?
RCA 1958
Reconsider:
Recreational Charities Act 1958
s.1 (1) It is charitable “to provide... facilities for recreation or
other leisure time occupation, if the facilities are provided in the
interests of social welfare.”
Does the class fall within 1(2)(b) provided for people who have
need of the facilities due to youth, age, infirmity/ disablement,
poverty, social and economic circumstances?
Although objects need not be certain and objects need only be
charitable – the expressed purpose must not be too vague.
“Broadening horizons” may be too vague and the gift may fail.
Concluding the answer to
the problem
• Review each disposition and offer
conclusions on each.
• If one or more or clauses 1-4 only is
charitable what effect will this have on
the charitable purposes?
• Separate clauses – can non-charitable
be separated off?
Currency of law
The points made here applying the law as it
stands at March 2005 – prior to the passing
of the Charities Act 2005 which will include 12
purposes and the requirement of public
benefit. CC will be required to provide
guidance on operation of the public benefit
requirement.
Conclusion