Trusts - Head 8

Public Trusts & Charities

Public Trusts

trusts which are constituted for the public at large, or at least a section of the public, as opposed to for specific persons, with some kind of public favour

public trusts - Salvesen’s Trs v Wye 1954

“any poor relations, friends or acquaintances of mine”

“According to Scots law the mere introduction of the adjective ‘poor’ as a qualification of ‘relations, friends or acquaintances of mine’ will not suffice to impart to this bequest the special qualities and privileges of a trust for charitable uses. It remains a private trust; and I can given no further or other affect to the word ‘poor’ than a narrowing of the class by a requirement that its members should be in need of financial assistance.” (Lord President (Cooper) at 447).

Public Trusts - Glentanar v Scottish Industrial Musical Association 1925 SC 226

case where a silver shield presented to trustees to be awarded annually to the winners of ‘juvenile brass band competitions’

Held: this was not a public trust; but not clear the court was right here – why was it not a public trust? The identified beneficiaries were a section of the public (best to see the case as an erratic authority on a small value case…?)

Charitable trusts

Public Trusts which meet statutory requirement to qualify

Charities and Trustee Investment (S) Act 2005

sets out the requirements which an entity must meet in order to qualify as a charity

charity test

Charities and Trustee Investment (Scotland) Act 2005 (CATISA) - s.5

Charity test requirements

CATISA s.7

• its purposes consist only of one or more of the charitable purposes, AND

it provides (or, in the case of an applicant, provides or intends to provide) public benefit in Scotland or elsewhere

CATISA s.7(2)

qualified charitable purposes

Public benefit - CATISA

s.8

analysing whether or not the charity is doing what it purports to be doing

relative to what the trust members receive in return

Regulation and administration of Charitable Trusts

• CATISA - s.28 - 36

• Office of the Scottish Charity Regulator (OSCR)

  • oversee and investidate

  • can direct a charity to cease activity

  • power to obtain documents

  • remove a trust from charity register

Court Powers on OSCR application re. misconduct

CATISA - S.34

• interdict

• appointment of a judicil factor

• Appointment of a new trustee

• Suspension or removal of trustees

• Order freezing assets

• Orders restricting ability to make transactions of certain nature or amount with approval of the court

• court really likes to get involved and regulate

accounting obligations of charity

• CATISA s 44(1)

• Keep proper accounting records

• Prepare for each financial year of the charity a statement of account, including a report on its activities in the financial year

• Have the statement of account independently examined or audited, and

After such examination or audit, send a copy of the statement of accounts to the OSCR

charitable trustee’s duties

• same as normal trustees but different Act

• CATISA s 66

charitable trustee’s duties - implications of breach

• Initiates the inquiry from the regulator s.31(4)&(10)

• Reminder that some charities are not trusts which is why it is also important to certify what the law is.. Charities which are not trusts won’t necessarily know what the law is on trusts.

• s.66 CATISA

Law Reform (Miscellaneous Provisions)(Scotland) Act 1990, s 9

NON-CHARITABLE PUBLIC TRUSTS

Variation of public trusts by court

• A longer history of variation than private trusts. 

• Refer to the reasons for variation to private trusts for explanation.

• Classic example of s.9(1)(d):

  • Late 1940’s when the NHS was created, before this most healthcare was provided by a mixture of state bodies and public trusts 

  • When the step to nationalise healthcare took place, many of these public trusts were instantly obsolete and had very minimal purpose because their service was now being provided for in a more suitable or effective way 

  • Trustees can go to the court for suggestions on moving forward with the trust

Law Reform (Miscellaneous Provisions)(Scotland) Act 1990, S.9(2)-(7)

NON-CHARITABLE PUBLIC TRUSTS

• s 9(2): variation must “enable the resources of the trust to be applied to better effect consistently with the spirit of the trust deed or other document constituting the trust, having regard to changes in social and economic conditions since the time when the trust was constituted.”

• S 9(3): added to/combine with other public trusts

• S 9(6): Lord Advocate to be informed of any application

S 9(7): does not affect competence of cy pres jurisdiction

variation - noncharitable public trusts

Inverclyde Council v Dunlop 2005 SLT 967

• Public trust owned a park, and the trustee (Inverclyde Council) wanted to develop the dilapidate pavilion by changing how it charged for use of various facilities, because otherwise it would unable to make repairs. The trust deed only authorised ‘organised games’, whereas it wanted to build a gym so that it could charge for gym admission to pay for improvements to other facilities, including the pavilion, so brought petition under s9(1)(d)(iii)

• Held: proven that the money that could be raised under the current arrangements entirely inadequate, and the trust purposes varied to allow for charging for the use of gym facilities and other facilities.

reorganisation - Charitable public trusts

• CATISA governs any changes to CHARITABLE trusts; they are termed ‘reorganisation schemes’ rather than variation.

S 42(2): reorganisation conditions that must be met

(i) have been fulfilled as far as possible or adequately provided for by other means,

(ii) can no longer be given effect to (whether or not in accordance with the directions or spirit of its constitution),

(iii) have ceased to be charitable purposes, or

(iv) have ceased in any other way to provide a suitable and effective method of using its property, having regard to the spirit of its constitution

(b): purposes of the charity provide use for only part of the trust fund

(c) Provision of the trust deed (or than purpose) can no longer be given effect to as ‘no longer desirable’

(d): desirable to add a new provision (other than a purpose)

reorgnisation of charitable public trusts - after conditions met

S 39: charity applies to the OSCR to approve changes

S 40: OSCR applies to the Court of Session to approve changes

s.39 CATISA

reorganisation of charitable public trusts

OSCR may approve reorganisation if it considers:

(a) any of s 42 conditions met; AND

(b) reorganisation will enable resources to be used to better effect consistently with charitable purposes consistently with the spirit of its constitution (for conditions s 42(2)(a) or (b)); or enable more effective administration (for conditions s 42(2)(c) or (d).

s.40 - CATISA

Reoganisation of charitable public trusts

OSCR applies to the Court of Session if OSCR considers:

(a) any of s 42 conditions met; AND
(b) reorganisation will enable resources to be used to better effect consistently with charitable purposes consistently with the spirit of its constitution (for conditions s 42(2)(a) or (b)); or enable more effective administration (for conditions s 42(2)(c) or (d).

s.40(2)&(3) CATISA

OSCR application to reorganise

S 40 (2): Court of Session can approve the OSCR’s application if it agrees with the OSCR

S 40(3): OSCR must inform the charity trustees 28 days in advance of making such an application.

s.42(3) - CATISA

what can or will reorganisations consist of

A ‘reorganisation scheme’ is a scheme for–

Variation of the constitution of the charity (whether or not in relation to its purposes)

Transfer of the property of the charity (after satisfaction of any liabilities) to another charity (whether or not involving a change to the purposes of the other charity), or

Amalgamation of the charity with another charity

Cy Près: ALL PUBLIC TRUSTS

Court of Session has a common law power to order the variation of public trusts (charitable AND noncharitable), but will only do so where there is an active failure or inability to continue the trust = unworkable. 2 situations

1. Initial failure: the trust is incapable of taking effect at all, and the court is asked to take measures to direct fund

Supervening failure: the trust was able to take effect, but for whatever reason the ‘machinery’ of the trust needs alteration.