EQUITY AND TRUSTS
CHARITIES 2
Requirements of charitable
status
• Charitable purposes derive from • Preamble to CUA 1601
• Pemsel (see Charities 1 – first three heads
considered: poverty, education, advancement of
religion)
Now consider: (4) other purposes beneficial to the
community
• 2 stage test is adopted – must prove “beneficial”
aspect of purpose – must be beneficial in way that
law regards as charitable I.e. must fall within “spirit
and intendment” of the preamble.
What purposes are
charitable under this head?
Difficult question – purposes mentioned in
preamble will be charitable. Novel purpose
will rely on analogical approach.
• Impossibility of categorisation:
Majority of new cases occur under head 4.
• So – best to examine some of the cases
within the established categories under head
4.
Examples under head 4
Preamble mentions aged / impotent and
poor people – Rowntree (see Charities
1) established a disjunctive reading so
charities for the sick/or for health
promotion accepted.
Animals
• NB not gifts to specific pets abut for
welfare generally
• See Re Wedgewood for “humanity”
reasoning. Compare with Re Grove
Grady where animal sanctuary was not
charitable.
Social Recreational and
Sporting Trusts
• Re Nottage – sport for sports sake not charitable
- it must be a means to charitable end.
• Re Hadden?
• IRC v Baddeley trust to promote religious, social, physical
of Methodists not charitable
• Williams v IRC: trust for moral, social, spiritual, educational
welfare of Welsh people in London not charitable
• IRC v City of Glasgow Police Athletic Association: merely a
charitable side effect
Social / recreational component caused trusts to fail.
Recreational Charities Act
1958
As a result the RCA 1958 was passed.
In effect the Act adds a fifth head to
charity
Grants prospective and retrospective
validity to the provision of facilities for
recreation/leisure time occupation if
provided in interests of social welfare.
Recreational Charities Act
1958
• S1(2)(a)(b) sets out requirements for
social welfare
• Must improve life for those classes of
people in 2(b)
Construing the Act
In IRC McMullen CA considered that
“improving conditions of life” meant only
“deprived” could benefit.
Not so, see Guild v IRC s1(2) satisfied if
conditions of community generally
improved including those better off.
Recent application of the
RCA 1958
North Taunton RUFC (see decisions of
the Charity Commissioners, volume 5,
November 1997)
Club not charitable because did not
meet the social welfare requirement.
Further recent applications
of the RCA 1958
Community Server (see Decisions of
the CC 15th September 2003)
Community Internet access did meet
requirements of the Act.
Head 4: other
miscellaneous categories
Very wide. Specifically mentioned in the
preamble – now expanded to include
e.g preservation of national heritage.
Much subsequent case law provides
examples of width of head 4.
Charity Comms examples
In document: recognising charitable purposes
Commissioners set out examples of purposes
analogous with preamble
Also set out charitable purposes recognised
as analogous to other charitable purposes note the wide variety of purposes recognised
as having grown from the 1601 preamble.
CC expansion of head 4 register
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CC now reviewing the register – decisions:
Relieving unemployment is now recognised as
charitable (used to have to include e.g. poverty
relief) + charities which act to promote:
rural and urban regeneration
healthy recreation
human rights
religious harmony
equality and diversity for benefit of the public
+ GMC also now recognised.
The purpose of head 4
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Catch all category
Adapts to changes in society
Flexible development of the law
Reform of this head necessary to the
proposed statutory definition
Public benefit
In order to be a charitable trust within
the four Pemsel heads there is a
second hurdle that must be cleared:
Does the purpose benefit the public or a
sufficient section thereof?
Public Benefit
Two parts to the requirement:
1. Trust must be beneficial to the public
Assumed for heads 1-3. Must be proven
for head 4.
2. Benefits available to the public or a
section (rather than private individuals).
Public benefit
• If benefit not available to all the public
then section of the public is sufficient
• Limiting the class – raises possible
problem of private class therefore
private trust.
Public Benefit
Must be for the “public benefit” so who
are the public or a section of the public?
Different tests apply to each head.
Public benefit – poverty
• Poverty – very small requirement of PB. Test
set out in Re Scarisbrick [1951] Ch 622, CA –
a class or group not (an) individual(s)
• Will fail if for the benefit of named individuals
• Personal nexus test does not apply to poverty
(see next slide)
• Dingle v Turner [1972] AC 601, HL
• Re Segelman [1996] Ch 171.
Public benefit – education
Except for trusts fro poverty the courts have
developed tests to distinguish between
public/private trusts
• Education – personal nexus test from Re
Compton adopted by HL in Oppenheim v
Tobacco Securities Trust Co Ltd [1951] AC
297 HL
• Class will not be a section of the public if
defined by ref to a personal nexus.
Public benefit – Oppenheim
Trust for children of employees or
former employees.
Personal nexus that linked employees
was the common employer so
employees did not constitute a section
of the public.
Public benefit – Oppenheim
• The group of potential beneficiaries
must not be numerically negligible
• Must not be a personal nexus between
the bens. And an individual or
individuals.
Public benefit – personal
nexus
Trust for education ascertained by a
reference to a personal tie is not the
public or section thereof.
Examples of personal nexus:
• Blood e.g. families (see Re Compton
named families)
• Contract – common employer.
Public Benefit – criticism of
personal nexus test
Weaknesses of test:
n.b. dissenting judgment of Lord MacDermott
in Oppenheim. Test should be one of degree
and dependant on facts of each case.
Five law Lords supported this approach in
Dingle v Turner. PN Test criticised but not
overruled.
Public benefit
Test is law.
• See RR8 “The Public Character of
Charity” (Feb 2001) where CC
recognise test is doubted and favour
cautious flexible approach.
Public Benefit – problems
with the test
Preference cases – inconsistent with Oppenheim?
IRC v Educational Grants Assoc. [1953] AC 380. 76
–80% income of charity paid out to education of
children of people connected with Metal Box Co. CA
said not purely charitable.
Koettgen’s WT [1954] Ch 252. Trust for public with
preference to a private group up to maximum of 75%
income. Held charitable.
Caffour v ITC – Lord Radcliffe: Koettgen close to
being inconsistent with Oppenheim. CC has adopted
max 75% rule.
Public benefit – religion
Advancement of religion must be among public or
section – e.g. of a sect: Catholic, Protestant, Jewish
etc.
Gilmour v Coates[1949] AC 426 HL – no public
benefit because convent (in this case) had no contact
with the public.
Re Hetherington [1990] Ch 1 – gift for saying of
Catholic masses was charitable because services
were public.
Public benefit – religion
Church of Scientology – see above under advancement of religion)
CC found that CS activities were private and no benefit accrued to the
public
Public benefit to only to those who practice or of the public as a
whole? E.g. simply by having religious communities within society?
Neville Estates v Madden [1962] Ch 832. Cross J found services at a
synagogue to be charitable although said in private but court found
benefit in those attending mixing outside with other citizens.
Public Benefit – head 4
Under Head 4 the PN test applies.
There may also be a stricter test as well. If class is defined
to create a “class within a class” it cannot be to benefit of
the public. Williams v IRC [1947] AC 447 HL IRC v
Baddeley [1955] AC 572 HL failed because for social
purposes and not charitable. Lord Simmonds in Williams
said Welsh in London did not constitute a section of public.
Reiterated this in Baddeley – public ben not satisfied if bens
“ not only confined to a particular area but selected by
reference to a particular creed.” Question remains whether
class within a class rule is law.
Ratios of these cases led to RCA 1958.
Exclusively Charitable
• All purposes must be charitable otherwise trust will fail.
• If trust has more than one object all must be charitable
• Trust may be charitable if some money is spent on noncharitable objects if these are incidental/subsidiary to the
main charitable aim. In IRC v Glasgow Police sports
facilities were recreational not incidental. Compare with
Royal College of Surgeons v National Provincial Bank Ltd
[1952] AC 631 HL.
• Is the non-charitable purpose incidental to the performance
of the charitable object of the trust?
Exclusively charitable
Problem can sometimes be overcome
by severance of gift allowing charitable
status on the remaining purposes. Noncharitable part must be specified.
see Salisbury v Denton
Exclusively charitable –
“and / or” cases
• “And/or” cases can cause problems – “or” is
read disjunctively and “and” conjunctively.
Chichester v Simpson involved gift for
charitable or benevolent purposes. Trustees
could spend money on purposes that might
not be charitable so trust was void.
AG v Wahr Hansen “or organisations
operating for the public good” trust was void.
Exclusively charitable –
“and” cases
• Cases of “and” is generally read conjunctively
– sufficient to draw the other word into the
orbit of the charitable purpose.
• E.g. Re Best “charitable and deserving
objects” was upheld.
• See also Manoogian v Sansino “education
and advancement in life” phrase given
conjunctive interpretation and composite
purpose was seen as educational.
Charities and political
activities
Trusts for political purposes are not charitable.
Rationale? See Bowman v The Secular Society [1917] AC 406
HL. Court has no means to judge whether a change proposed
will be to the public benefit.
What is a political purpose? Trying to change law – see National
Anti-vivisection Society v IRC [1948] AC 31 HL.
McGovern v AG [1982] Ch 321. Amnesty failed to gain
charitable status as was deemed a political organisation seeking
to change foreign law.
Political purposes
Danger of political trusts masquerading as
educational trusts.
Re Hopkinson [1949] 1 All ER 346
“political propaganda masquerading as education”.
See also Bonar Law Memorial.
Southwood v AG 1998 CA The Times July 18th 2000.
“Educational” trust political because challenging
prevailing militarism of Western governments. If it
could not be determined whether a trust promoted
public benefit then it could not be said to be
charitable.
Permissible political activity
Re Koeppler WT [1986] Ch 423 CA
Political activity which is incidental is
permissible – e.g. discussion of political
issues.
AG v Ross – Scott J: nothing wrong with
educational charity encouraging political
awareness.
Limits? Webb v O’Doherty – Student union
stopped from contributing to stop Gulf War
campaign.
Charities and political
activity
Campaigns and political activities – see CC
guidelines: “Campaigning and Political
Activities by Charities” CC9 Sept 2004.
Guidance revised to take account of 2002
Strategy Unit Report: “Private Action Public
Benefit” advising a less cautionary tone in the
CC approach. Also proposes reforms on
charitable status.
Next lecture – Charities 3
Charities 3 will deal with reform, the
doctrine of cy pres and a past
examination question.