Purpose and Charitable Trusts

Q: What is the beneficiary principle? + case

A: “There must be somebody in whose favour the court can decree performance,” as per Morice v Bishop of Durham (1804).

Q: Why did the trust in Re Astor’s Settlement Trust (1952) fail?

A:

• It was a non-charitable purpose trust that no one could enforce (following the beneficiary principle).

• The objects of the trust were too uncertain.

Q: What are the four exceptions and cases to the beneficiary principle, known as “trusts of imperfect obligation”?

A: The Court of Appeal in Re Endacott (1960) recognised four cases where non-charitable purpose trusts may be upheld:

1. Trusts for the erection or maintenance of graves and monuments: Musset v Bingle (1876) and Re Hooper (1932)

2. Trusts for the maintenance of particular animals: Pettingall v Pettingall (1842) and Re Dean (1889)

3. Trusts for the saying of masses in private: Bourne v Keane (1919)

4. Trusts for the promotion and furtherance of fox hunting: Re Thompson (1934)

Q: How did Re Denley’s Trust Deed (1969) extend the beneficiary principle?

A:

• The trust provided land to be used as a sports ground primarily for the benefit of employees, with a gift over to charity.

• Goff J suggested that the beneficiary principle applies only to purpose or object trusts that are abstract or impersonal.

• Since the employees could enforce the trust, it was valid.

Q: What are the six possible constructions of a disposition to an unincorporated association?

A:

1. The disposition is for a charitable purpose.

2. The disposition is a non-charitable purpose trust.

3. The disposition is for the present members beneficially as joint tenants or tenants-in-common, allowing each member to claim their share immediately.

4. The disposition is to present and future members, but confined to the perpetuity period.

5. The disposition is to the officers of the association on trust for the association’s purposes.

6. The disposition is for the present members beneficially but subject to their contractual rights and duties to each other.

Q: What issue regarding unincorporated associations did Leahy v Attorney General for New South Wales address?

A: It was the first case where courts considered how an unincorporated association holds assets, rather than solely determining if a gift was void for perpetuity.

Q: How did earlier cases (2) determine whether a gift to an unincorporated association was valid?

A:

• If the present members could freely deal with the property, the gift was valid (Re Drummond [1914]).

• If not, the gift was void for perpetuity (Carne v Long (1860)).

Q: Why was the disposition in Re Lipinski’s Will Trusts (1976) considered a non-charitable purpose trust?

A:

• The testator left property to a sports and social club for Jewish children in memory of his late wife.

• He specified that the property must only be used for constructing or improving club buildings.

• The restriction on use suggested it was a purpose trust rather than a gift to members.

Q: What arguments were made to classify the gift in Re Lipinski’s Will Trusts as a pure purpose trust?

A:

1. The gift was explicitly stated to be in memory of the testator’s late wife.

2. The property was designated solely for constructing new buildings.

3. The requirement for improvements indicated a need for continuity.

Q: What are the four advantages enjoyed by charities?

A:

1. Purpose trusts – Charitable trusts can exist for purposes rather than beneficiaries.

2. Certainty – Charitable trusts are less likely to fail for uncertainty.

3. Perpetuity – Charities are exempt from the rule against perpetuities.

4. Tax – Charities receive tax benefits, such as exemptions from income and capital gains tax.

Q: What was required to establish charitable status before modern legislation?

A: The purpose of the trust had to fall within the “spirit and intendment” of the preamble to the Charitable Uses Act 1601.

Q: What are the four categories of charitable trusts established in Pemsel’s Case?

A: Commissioners for Special Purposes of Income Tax v Pemsel [1891]

1. Trusts for the relief of poverty.

2. Trusts for the advancement of education.

3. Trusts for the advancement of religion.

4. Trusts for other purposes beneficial to the community.

Q: What was the issue in Scottish Burial Reform and Cremation Society Ltd v Glasgow City Corporation (1968)?

A: The appellant, a non-profit company promoting inexpensive and sanitary methods of disposing of the dead (particularly cremation), claimed charitable status for rating purposes.

Q: What additional requirements must a trust meet to be considered charitable beyond Pemsel’s Case classification?

A:

1. The trust must be for the benefit of the public.

2. The trust must be wholly and exclusively charitable.

Q: How did the 2006 Act change the public benefit requirement for charitable trusts?

A:

• It removed the presumption that certain charitable trusts were automatically for the public benefit.

• All charitable trusts must now demonstrate public benefit (2011 Act s. 4(2)).

Q: What are the two questions used to assess public benefit under the 2006 Act?

A:

1. Does the purpose confer a tangible benefit on the public (directly or indirectly)?

2. Is the class of beneficiaries defined broadly enough to constitute the public or a sufficient section of it?

Q: How must public benefit be assessed after the 2006 Act?

A: Public benefit must be considered in light of:

• 2011 Act s. 4

• Charity Commission guidance on public benefit

Q: What case established that a trust must be wholly and exclusively charitable to qualify?

A: Morice v Bishop of Durham (1804) – A trust for “objects of benevolence and liberality” was held not to be charitable because it was not exclusively for charitable purposes.

Q: What is the current legal definition of a charitable purpose?

A: A charitable purpose is one that:

1. Falls within one of the purposes described in the Charities Act 2011.

2. Is for the public benefit, as determined by section 4 of the 2011 Act.

Q: What are the two aspects of public benefit that all charitable trusts must satisfy?

A:

1. Wider sense – The trust’s purpose must provide a tangible benefit to society (pre-2006 Act concept).

2. Narrower sense – The benefit must extend to the public or a sufficient section of it (pre-2006 Act concept).

Q: Does the Charities Act 2011 define public benefit?

A: No, the Act does not provide a statutory definition. Instead, it consolidates earlier laws, including the modernisation provisions from the Charities Act 2006.

Q: What role does the Charity Commission play in charity law?

A: The Charity Commission was established as a regulator under the Charities Act 2006 to oversee and enforce charity law.

Q: How does Charities Act 2011, s.1 (1) define a charity?

A: A charity is an institution that:

1. Is established for charitable purposes only.

2. Falls under the jurisdiction of the High Court in matters relating to charities.

Q: What principle was established in Morice v Bishop of Durham (1804)?

A: A trust must be wholly and exclusively charitable to qualify as a charity. A trust for “objects of benevolence and liberality” was held not to be charitable because it was too broad.

Q: Can a trust still be charitable if it provides incidental private benefits? + case

A: Yes, a trust can still be charitable if private benefits are merely incidental. In Re Coxen (1948) – A testator left over £200,000 for medical charities but also provided £100 per year for trustee dinners. The primary charitable purpose was upheld.

Q: What happens if a trust includes both charitable and private purposes? + case

A: The trust will not be charitable if part of the purpose is for private benefit. In Salusbury v Denton (1857) – A trust was partly for founding a school (charitable) and partly for benefiting the testatrix’s relatives (private). The private element invalidated the charitable status.

Q: How does Charities Act 2011, s. 2 define a charitable purpose?

A: A charitable purpose must:

1. Fall within one of the thirteen categories in s. 3(1).

2. Be for the public benefit under s. 4.

Q: What change did s. 4(2) of the Charities Act 2011 introduce?

A: It removed the presumption of public benefit, meaning no type of charitable purpose is automatically assumed to be for the public benefit.

Q: What does s. 4(3) of the Charities Act 2011 clarify about public benefit?

A: Any reference to public benefit must be understood in line with established charity law in England and Wales.

Principles of Public Benefit - Q: What are the two principles of public benefit in charity law?

A:

1. Benefit aspect – The charity’s purpose must provide a tangible benefit to the public.

• A purpose must be beneficial.

• Any detriment or harm must not outweigh the benefit.

2. Public aspect – The charity must benefit the public or a sufficient section of it.

• The benefit must be to the public in general or a sufficient section of the public.

• It must not give rise to more than incidental personal benefit.

Advancement of Education - Q: What are the two key aspects of educational merit in a charitable trust?

A:

1. The subject must be capable of educational merit or value.

2. The process must deliver educational merit or value.

Q: What was the ruling in Re Shaw (1957) regarding charitable education?

A: The court held that changing the alphabet to save time was not a charitable purpose because it lacked educational value in the legal sense.

Q: What was the ruling in Re Hopkins (1965) regarding charitable education?

A: The court held that researching whether Francis Bacon wrote Shakespeare’s plays had educational value because it involved serious historical investigation.

Q: What were the three requirements set out in McGovern v Attorney-General for research trusts to qualify as charitable?

A:

1. The research must be a useful subject of study.

2. The knowledge gained must be disseminated to others (presumed unless evidence suggests otherwise).

3. The trust must be for the benefit of the public or a sufficient section of it.

Q: What was the ruling in Re Shaw’s Will Trusts (1952) regarding charitable education?

A: The court held that a trust for teaching oratory, deportment, and social skills was not a charitable purpose because it was too vague and personal in nature.

Q: What was the ruling in Re Pinion (1965) regarding charitable gifts?

A: A testator left his art collection and furniture to be displayed as a museum. The court found the items lacked artistic or educational value, so the trust was not charitable.

Q: What was held in Re Compton [1945] regarding family-based trusts?

A: A trust cannot be charitable if beneficiaries must prove a relationship through common descent.

Q: What principle was established in Oppenheim v Tobacco Securities Trust Co Ltd [1951]?

A: The personal nexus test, which states that a group linked by family or employment does not constitute a sufficient section of the public. There were over 110,000 employees, so the class of beneficiaries would have been very large.

Q: What is the personal nexus test?

A: A class of beneficiaries is not a section of the public if they are linked by family ties or common employment.

Q: Can a trust give preference to a certain group while remaining charitable? + case

A: Yes, as long as the trust benefits the wider public and does not give absolute priority to the preferred group (Re Koettgen [1954]).

Q: Why was Re Koettgen distinguished in Caffoor v Commissioners of Income Tax [1961]?

A: Caffoor gave absolute priority to the settlor’s family, making it too restrictive to be charitable.

Q: How was Re Koettgen criticised by Lord Radcliffe in the context of public benefit and educational trusts?

A: Lord Radcliffe criticised Re Koettgen for its approach, emphasising that the opportunity to benefit from an educational trust should not be unreasonably restricted by the ability to pay fees.

Q: What was the issue in Independent Schools Council v Charity Commission [2012]?

A: Independent schools had to prove their public benefit under the Charities Act 2011, removing the previous presumption of charitable status.

Q: What does Charity Commission guidance say about fee-charging charities?

A: They must provide more than a minimal or token benefit for those who cannot afford the fees.

Q: What change does the Finance Bill 2024 introduce for private schools?

A: It abolishes the VAT exemption for public school fees from January 2025.

Q: How is “poverty” defined for the purposes of a charitable poverty trust?

A: According to Sir Raymond Evershed MR, poverty does not mean destitution but refers to persons who have to “go short” in the ordinary sense, considering their status in life.

Q: What was the case of Re Coulthurst [1951] about?

A: A trust was established to benefit widows and orphans of a company’s employees and ex-employees who were financially deserving of assistance.

Q: What was the testatrix’s intention in Re Cohen [1973]?

A: The testatrix left property to benefit relatives who, in the opinion of the trustees, were “in special need.”

Q: Will a gift be charitable if it benefits both the rich and the poor, as in Re Gwyon [1930]?

A: No, in Re Gwyon, a gift was not charitable because it benefited boys whose families were not necessarily poor, even excluding those receiving poor relief.

Q: What was the outcome of Re Scarisbrick [1951]?

A: A testatrix left her residuary estate for relations of her children who were in needy circumstances, with the distribution based on the survivor’s discretion.

Q: What was the issue in Dingle v Turner [1972]?

A: A trust was established to provide pensions for poor employees, but there was a personal connection (nexus) between the beneficiaries and their employer.

Q: What is the current Charity Commission guidance on the operation of the public benefit requirement for poverty trusts?

A: The Charity Commission guidance acknowledges that the law regarding old “poverty trusts” is still to be recognised.

Q: According to the Charities Act 2011, what does the term “religion” include?

A: “Religion” includes a religion that involves belief in more than one God, and a religion that does not involve belief in a god (Charities Act 2011, s. 3(2)(a)).

Q: What was the outcome of Re King [1923]?

A: A trust to repair a church was deemed charitable.

Q: What was the ruling in Re Douglas [1905]?

A: A trust for the upkeep of a churchyard was considered charitable.

Q: Was a trust to maintain a particular tomb in the churchyard charitable in Re Hooper [1932]?

A: No, a trust to maintain a particular tomb was not considered charitable.

Q: What was the issue in Re South Place Ethical Society [1980]?

A: The society claimed charitable status, and it was considered whether ethical societies could qualify as charities.

Q: What was the decision in Thornton v Howe (1862)?

A: Land was given to promote the publication of the “foolish works” of Joanna Southcott, who prophesied the Second Coming. The trust was deemed charitable. If it is not beneficial, it cannot be upheld as being charitable. It would therefore be difficult to see how the decision in Thornton v Howe could be upheld today.

Q: What was the outcome of Re Watson [1973]?

A: A trust was established for the publication of religious commentaries, despite the expert opinion that the works were worthless. The trust was still upheld as charitable for the advancement of religion.

Q: What does the Charity Commission state about the “benefit” of a charitable purpose?

A: For a purpose to be charitable, it must be beneficial in a way that is identifiable, capable of being proved by evidence, and not based on personal views (Charity Commission Document PB1).

Q: For sufficient section of the public, what was the ruling in Gilmour v Coats [1949]?

A: A testamentary trust for a Roman Catholic community of strictly cloistered nuns, who did not engage in public religious tasks, was not considered to benefit the public.

Q: What was the issue in Neville Estates v Madden [1962]?

A: A trust for members of the Catford synagogue was considered and questioned for its public benefit.

Q: What two groups will not constitute the public or a sufficient section of the public, according to the Charity Commission guidance (Document PB1)?

A: Groups that will not constitute the public include:

• A purpose confined to a closed religious organisation.

• A purpose where the number of people who can benefit is numerically negligible, unless the purpose is for the relief or prevention of poverty.

Q: Political trusts: what are the three main restrictions on a trust’s main aims to be considered charitable in relation to political activities?

A: A trust’s main aims must not include:

• Furthering the interests of a political party.

• Attempting to bring about changes in the law in this country or abroad.

• Attempting to influence government policy or decisions.

Q: What was the ruling in National Anti-Vivisection Society v Inland Revenue Commissioners [1948]?

A: A trust established to abolish vivisection was not considered charitable because it aimed to change the law, which is not a charitable purpose.

Q: What was the outcome in Hanchett-Stamford v Attorney-General [2009]?

A: The Performing and Captive Animals Defence League did not have charitable status because its purpose was to change the law, which is not a charitable aim under the Charities Act 2006.

Q: What is the Cy-Près doctrine?

A: The Cy-Près doctrine allows property to be redirected to a charitable purpose if the original purpose fails or is fulfilled and the trust cannot be carried out. It is used to ensure the property serves a charitable cause.

Q: When does the Cy-Près doctrine apply, according to the Charities Act 2011, s. 61?

A: The Cy-Près doctrine applies when a charitable purpose is impossible to perform, and there is a general charitable intent. Trustees have a duty to apply property cy-près to secure its effective use for charity.

Q: How is a “general charitable intent” determined under the Cy-Près doctrine?

A: A general charitable intent is established by examining whether the testator intended a general gift with a specific method for carrying it out or if they intended a gift for a particular purpose only.

Q: Can the Cy-Près doctrine be applied in the case of subsequent failure of a trust?

A: Yes, the Cy-Près doctrine applies in the case of subsequent failure if the trust is impossible to perform.