Summary Charitable Trusts - Equity & Trusts Law (LLB)
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Course
Equity And Trust
Institution
City University (City)
Charitable Trusts Summarised Notes for the Equity and Trusts Law module, LLB, at City, University of London (achieved a 1st class using these) - can of course be used for other universities as well! Should be used with the full bundle of notes!
LEGAL CONTEXT OF CHARITIES
Tax exempted (except VAT and one/two others) use as device for tax avoidance
Charities not conform with express trusts as charities do not have beneficiaries, governed by
Charities Act 2011, own regulator of Charity Commission
Charities= institution that act to public benefit to relieve distress or provide services, do not seek
to earn profits for any purposes other than charitable purposes
3 clear ‘heads’ (categories): relief of poverty, advancement of religion and advancement of
education, and fourth ‘other purposes beneficial to community’
Categories of charitable trust under case law
Preamble to Statute of Elizabeth 1601: giving to poor established in 1601 Statute of Elizabeth, set
out categories of activity considered to be charitable:
Relief of aged and poor people, maintenance of hurt soldiers and mariners, schools of learning
and schools in university, repair of bridges, ports, havens, causeways, churches, sea-banks and
highways, education of orphans, relief, stock or maintenance for houses of correction, marriage
of poor maids, aid and help of young trademen, handicraftsmen, redemption of prisoners and aid
or ease of any poor inhabitants with payment of fifteens
Pemsel’s case [1891] (start here for definition) case law + Charities Act 2011
1) Relief of poverty
2) Advancement of education
3) Advancement of religion
4) Other purposes beneficial to the community
Definition of ‘charitable purposes’ under Charities Act 2011
Charities Act 2006= 9 new categories of charity broaden
‘Charity’ defined in s.1 Charities Act 2011, institution ‘which is established for charitable purposes
only’ and ‘falls to be subject of control of High Court in exercise of its jurisdiction’
Charitable purposes: satisfied ‘public benefit test’ + falls in s.3(1) (13 categories)
(a) prevention of relief of poverty, (b) advancement of education, (c) advancement of religion, (d)
advancement of health or saving of lives, (e) advancement of citizenship or community
development (f) advancement of arts, culture, heritage or science, (g) advancement of amateur
sport, (h) advancement of HR, conflict resolution or reconciliation or promotion of religion or
racial harmony or equality and diversity, (i) advancement of environmental protection, (j) relief of
those in the reason of youth age, ill-health, disability, financial hardship etc, (k) advancement of
animal welfare, (L) promotion of efficiency of armed forces of the Crown or efficiency of police,
fire and rescue services or ambulance services, (m) any other purposes in case law
Statutory test of ‘PUBLIC BENEFIT’
Statutory requirement states public benefit as understood in case law
Analysis of what will not constitute a public benefit
Oppenheim v Tobacco Securities [1951]*: HOL held cannot be a public benefit if connection with
people who established charity and people who intended to benefit such that the people stood
to benefit cannot constitute a section of public, company sought a trust to pay for school fees to
children of employees held no public benefit due to nexus between children and company
BUT recent cases, mainly in religion, shows for public benefit, even if trustees operate the trust
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,Distinction between 2 lines of authority for public benefit
1. Requirement only needs show genuine charitable intention for valid (Dingle v Turner)
Establish something intrinsically charitable in creation of the trust
2. Requirement applicant demonstrate no personal nexus between settlor and class of people to
be benefitted, sufficiently public benefit from trust’s purpose (Re Compton)
Mathematical question of showing there is a predominantly public rather than private benefit
Settlors seeking tax breaks by pretending charitable, where benefits closely linked people
SPECIAL FEATURES OF CHARITIES
Were in control under individual parishes under ecclesiastical courts, now Courts of Chancery
Trustee/beneficiary structure more complex intention create trust, settlor, trustees to oversee
trust property but no nexus between trustee and beneficiary as no individual beneficiaries
Attorney-General sues in place of beneficiaries to enforce purposes of charities against trustees
AG and The Charity Commission oversee trust in terms of Charities Act 2011
Beneficiaries do not acquire proprietary rights in property for charitable purpose
Charitable trusts have less formalities – exempted from:
o Rules as to perpetuities do not apply to charitable trusts
o Rules against inalienability and remoteness of vesting do not apply
oNo need to satisfy certainty of objects as long as general charitable intention
Cy-pres: purpose impossible Charity Commissioners reapply near possible purpose –s.13 CA
1993 e.g. cat sanctuary no longer, cy-pres to another cat sanctuary in local area
oApplicant only need to declare trust over property and fill forms to show charitable intentions
which Charity Commission then grant registration
Tax advantages: free most taxesincome tax, corporation tax, capital gains tax, council tax and
other local taxes, but subject to VAT for any person who supplies goods/ services
Advantages to third persons: individuals make deeds of covenant in favour of charities taken as
charity’s income for tax purposes , also Gift Aid scheme (charities can recover tax paid by donors)
Factors that negate finding of charitable status: Exclusively charitable + non-political
Sole charitable intention + no Political purpose
Sufficient intention for charitable status: settlor must have sole charitable intention for valid
trust if 2 purposes, one charitable other not, trust can be held not valid
Need for exclusivity of charitable intention: settlor must have sole intent strict rule e.g. if
settlor declares property held as charitable or other purposes, trust invalid, word ‘or’ can make
invalid but if e.g. ‘charity, or any other public objects in parish’ then not valid
Re Koeppler [1984]*: general charitable intention of testator who sought to leave money for a
charitable project on which he worked, held even when gift is expressed in vague terms, would be
interpreted as charitable – will find charitable intention valid wherever possible
St Andrews Tennis Club Trust [2012]*: members of trust played tennis for years until point raised as
to whether trust valid as charity, trust instrument provided use funds for ‘any other purposes in
connection with St Andrew’s Church’ not exclusive charitable purpose invalid
Re Harding [2008]*: purpose broadly drafted, property ‘for black community of Hackney, Haringey,
Islington and Tower Hamlets’ , held purpose makes valid, but broadly drafted did not disclose
charitable purpose for benefit of 4 boroughs court stated trustees generate scheme to use
property satisfy Charity Commission –specify trustees behave achieve charitable ends
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, Political purposes
Charity cannot attempt to promote political purposes
Factual circumstances charitable purpose advanced for politics e.g. charitable purpose care for
elderly women, general rule if campaign= political, if not campaign + pursue charitable objective
RSPCA= charity, attempts to stop vivisection still only part of activities Lord Normand society
whose main aim is not to change law, could be charitable, as mere subsidiary activity
National Anti-Vivisection Society v IRC [1940]*HOL society’s political campaign for banning
vivisection (animal experimentation) held aim too political as aim to change legislation is
political not charitable not exempt from tax strict rule (leading case)
McGovern v Attorney-General [1982]: human rights campaigning organisation held not
charitable as changes laws, but Charity Commissioners suggests organisation may support
information to government for changes in law without forfeiting its charitable status
Webb v O’Doherty [1991]: students’ union pay funds to national committee of students which
sought to apply pressure to stop conflict in Persian Gulf in 1991 but union not able to uphold as
charitable purpose as politically motivated
RELIEF AND PREVENTION OF POVERTY
Case law refers to only ‘relief of poverty’, s.3(1)(1) 2011 Act states ‘prevention or relief of poverty’
Dingle v Turner [1972]* – leading case of relief of poverty
Bequest of £10k to ‘pay pensions to poor employees of E Dingle & Company’ , those arguing
invalid sought rely on Oppenheim v Tobacco and Re Compton which held trust not charitable if
‘benefits confined to descendants of named individual or company’, Lord Cross rule not universal
application particularly for relief of poverty different test, not require public benefit
Lord Cross pointed public itself is fluctuating body of private individuals, total of 60mill, but still a
fluctuating body of private individuals insufficient difference between private and public class
Lord Cross explained residents of a particular London borough could be both section of public and
fluctuating body of private individuals (some born/die, some move in/outfluctuate)
E.g. over 100k postwomen +postwoman, trust for them fail under Compton as connected by
common employment Lord Cross showed Compton test not appealing for relief of poverty
Intention vital in Dingle v Turner genuinely acting with charitable purpose in relief of poverty
For poverty DO NOT need show public benefit
What is POVERTY?
Measurement (income levels, health and housing), when individual reaches this, ceases to be
poor issues level of poverty change over time e.g. inflation + more consumer goods
Absolute standards not good as should be relative to standard of living at any period of time
Case law shows no need of proof of outright destitution but exceed simply ‘going short’
Joseph v Attorney-General [1983]*, argued ‘aged, impotent and poor’ in preamble to 1601
Statute should be classed as charitable purpose e.g. if not aged then not fall within test held
only need to be 1 of them, but Charities Act 2006, 1601 Preamble role limited trust to establish
home for elderly Presbyterians held sufficiently public benefit even if limited
Re Sanders’ WT [1954]: ‘working class’ held not constitute poor
Re Niyazi’s WT [1978]: held gift for construction of working men’s hostel in area of extreme
poverty in Cyprus could be considered impoverished courts look at manner money used
Re Gwyob [1930]*: trust for clothing of boys held invalid as no requirements boys in poverty, but
court applied de facto by the trustees for benefit of poor boys only
‘Relief’: sufficient some alleviation from activities of trust e.g. soup kitchen for poor
‘Prevention’: added by Charities Act 2011 s.3(1)(a). e.g. anticipate someone fall into poverty
For relief of poverty settlor can validly define limited group of people entitled to benefit, and
even show a nexus between intended beneficiaries
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