CHARITABLE PURPOSES OF TRUST

Historically, the legal definition of charity was the product of common law → this recently changed with the introduction of the Charities Act 2006 (in force 2008)

So since the Charities Act 2006 there has been a comprehensive statutory definition of charity → it effectively codified the common law definition

The Charities Act 2006 has now been consolidated in the Charities Act 2011

• So, the 2011 act is a consolidating statute → it is one which repealed a number of other statutes relating to charity law and brought them together in one single, overarching, piece of legislation

The legal definition of ‘charity’ is contained in the Charities Act sections 1-2

Charities Act s.1 defines a ‘charity’ as an “institution established for charitable purposes only”

Charities Act s.2 defines a ‘charitable purpose’ as one which “falls within s. 3(1) and is for the public benefit”

A charity is an “institution” established for exclusively charitable purposes (CA s.1)

“Institution” is defined in s.9 as “an institution whether incorporated or not, and includes a trust or undertaking”

• s.9 provides a fairly broad definition of an institution, to embrace unincorporated associations (see topic notes), incorporated organisations (i.e. companies) and also, explicitly, to embrace a trust → So section 9 of the Charities Act is telling us a trust counts as an institution i.e. a trust can be a legal charity under s.1 of the CA 2011

The focus of these notes is on charitable trusts

TAX:

All charitable institutions benefit from tax reliefs and exemptions

• There is full exemption from income tax, corporation tax, capital gains, stamp duty, and partial exemption from VAT
• Gifts to charities are also afforded tax breaks via ‘Gift Aid’

ADVICE:

General guidance for charity trustees provided by the Charity Commission via its website

• So the people administering a charity (charitable trustees) are given free advice by the Charity Commission, which helps to ensure they are properly run

The Charity Commission also provides individualised advice (Charities Act s.110)

• This advice is either generic (i.e. provided to all charity trustees by the charity commission website) or individualised (i.e. to particular charitable trustee)

Giving charitable instruments tax breaks and a public funded Charity Commission is at the expense of the State → the rationale for this lies in the fact that charities are institutions with purposes for the public benefit

CERTAINTY:

The certainty rules are more flexible for charitable trusts than private trusts

• So there is no requirement, as with other trusts, that the objects of the trust must be certain → thus, a trust for “charitable purposes” will be valid

A charitable trust will be validly created provided there is an intention to apply property for a charitable purpose

• If there is any doubt surrounding the charitable purpose the court or charity commission can specify its charitable purpose
• The purpose expressed must not be so vague and uncertain that the court could not control the application of the assets

THE BENEFICIARY PRINCIPLE:

Charitable trusts are exempt from the ‘beneficiary principle’ (i.e. the demand that a valid trust must have ascertainable beneficiaries)

• charitable trust is a purpose trust → they are not trusts for ascertainable beneficiaries, but rather they are trusts for broad brush purposes
• So, charitable trusts then present a direct challenge to the beneficiary principle

PERPETUITIES:

Charitable trusts are exempt from aspects of the rule against perpetuities

Charitable trusts are exempt from ‘the rule against inalienability’ (Chamberlayne v Brockett (1872)) i.e. a charitable trust, in principle, endures forever

Charitable trusts are subject to ‘the rule against remoteness of vesting’ (Perpetuities and Accumulations Act 2009, s.5)

• So this means that the charity’s interest in the property in question must vest in the charity within the perpetuity period i.e. property must vest within 125yrs

CY-PRES:

On the failure of a private trust any funds that remain will revert back to the settlor on a resulting trust, but charitable trusts are slightly different…

Any funds that remain on the failure of a charitable trust are applied to a similar/analogous charitable purpose → so they do not revert back to the settlor

For a purpose to be a charitable purpose, for the purposes of s2 of the Charities Act, it must fall within one of the categories listed in s.3(1). It reads as follows:

CA s.3(1): “A purpose falls within this subsection if it falls within any of the following descriptions of purposes –

• a) The prevention or relief of poverty;
• b) The advancement of education;
• c) The advancement of religion;
• d) The advancement of health or the saving of lives;
• e) The advancement of citizenship or community development;
• f) The advancement of the arts, culture, heritage or science;
• g) The advancement of amateur sport;
• h) The advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity;
• i) The advancement of environmental protection or improvement;
• j) The relief of those in need because of youth, age, ill-health, disability, financial hardship or other disadvantage;
• k) The advancement of animal welfare;
• l) The promotion of the efficiency of the armed forces of the Crown or of the efficiency of the police, fire and rescue services or ambulance services.
• m) Any other purposes…that may reasonably be regarded as analogous to, or within the spirit of, any purposes falling within any of paragraphs (a) to (l)…”

Foundations of s.3(1) lie in the Charitable Uses Act 1601 (i.e. the “Statute of Elizabeth”)

The Preamble to the 1601 Act listed a number of charitable purposes, which the 17th century judiciary then used in their determinations of charitable status

• So the judiciary used the list in the preamble in order to determine whether a purpose was charitable or not

Over the next 300 years, the judiciary developed the list of charitable purposes by including purposes analogous to the purposes in the list

The Preamble influenced this development; a purpose was held charitable only if it fell within the Preamble expressly or by analogy

The list of charitable purposes has now been placed on a statutory footing and is contained in the Charities Act s.3(1) (previously CA 2006 S.2(2))

Statutory articulation has made little difference to the contents of the list

But possible innovations are:

• 1) The addition of the “advancement of amateur sport” (s.3(1)(g))
• 2) The inclusion within the “advancement of religion” of “the advancement of a religion which does not involve belief in a god” (s.3(2)(a)(ii))

“Poor” does not equate to “destitute”; it embraces those who do not have access to the normal things in life that most people would take for granted

• Destitution is a poverty that is so extreme that one lacks the means to provide for oneself; Poor, therefore embraces those who do not have access to the normal things in life that most people would take for granted
• Mary Clark Homes Trustees v Anderson: someone is poor if he is in ‘genuinely straightened circumstances and unable to maintain a very modest standard of living for himself and persons dependent upon him’

‘Poor’ for the purposes of s.3(1)(a) also includes those who suffer a merely temporary financial hardship caused by a sudden change in circumstance (Re Coulthurst [1951]; IRC v Oldham Training and Enterprise Council [1996])

• In Re Coulthurst [1951], a fund was set up for a newly widowed women and the orphans of deceased bank offices. It was held that this purpose was charitable because the purpose relieved poverty under s3(1)(a) Charities Act
  • So poverty embraces those who suffer only a temporary financial hardship caused by a sudden change of circumstance i.e. the death of a family member as in the case of Re Coulthurst
• IRC v Oldham Training [1996], a trust for the unemployed in business was held charitable on the basis that it relieved poverty → So the unemployed were held to be poor on the grounds that they suffered a temporary financial hardship

Poor and working class are not synonymous: one can be both working class and wealthy

A trust to provide dwellings for the working classes was refused charitable status in Re Sanders’ Will Trusts [1954]

• This was because there was no requirement the people who received dwellings had to be poor
• In Re Gwyon, money was left to provide boys in Hampshire with underwear. This purpose ws not for the prevention or relieve of poverty because there was no requirement the boys be poor

Education is not restricted to the teacher-pupil context; it has been broadly defined to encompass the transmission of knowledge and ideas

“[The advancement of education extends] to the improvement of a useful branch of human knowledge and its public dissemination (Buckley L.J. in Incorporated Council of Law Reporting for England and Wales v A-G [1972])

• So the transmission of knowledge thus suffices to advance education

“[T]he concept of education is now wide enough to cover the intensive discussion process…designed to dent opinions and to cross-fertilise ideas” (Re Koeppler [1984])

• In Re Koeppler [1984], the court saisaid the advancement includes the transmission of ideas too → money was left on trust for a centre dedicated to holding conferences on global issues, attended by high-profile individuals. This purposes did fall under advancing education

Education also encompasses research, provided both that: (i) it concerns a subject of study which is not manifestly futile; and (ii) the results are to be disseminated

“[I]n order to be charitable, research…must be so directed as to lead to something which will pass into the store of educational material, or so as to improve the sum of communicable knowledge [including] the formation of literary taste and appreciation.” (Wilberforce J in Re Hopkins [1965])

• In Re Hopkins [1965], money had been settled for purpose of researching whether Shakespeare plays were actually written by Francis Bacon. It was held this was a purpose under s3(1)(b) as it was not manifestly futile and that on publication of the research the sum of knowledge would be improved

Re Shaw [1958]: a trust was established for the purpose of undertaking research to create a new alphabet that would be comprehensible to all. It was held that this was not charitable because it involved propaganda

In Re Dupree’s Deed Trusts, Vaisey J was uneasy about the limits to charitable education purposes. When validating a trust to provide funds for an annual chess tournament for young men under the age of 21, his Lordship sensed: “one is on rather a slippery slope. If chess, why not draughts? If draughts, why not bezique, and so on”

Prior to the Charities Act 2006 it was well-established in case law that ‘religion’ necessitates faith in, and worship of, a God (see Dillon J in Re South Place Ethical Society [1980])

This understanding of ‘religion’ has been altered by the Charities Acts: religion now expressly includes (i) a religion which involves belief in more than one god; and (ii) a religion which does not involve belief in a god (Charities Act s.3(2)(a))

The inclusion of religions involving belief in more than one god means that purposes advancing Hinduism fall squarely within s.3(1)(c)

• Although, note, that Hinduism was always accepted by the Charity Commission as constituting a religion for charity law purposes

The inclusion of religions which do not involve belief in a god means that purposes advancing Buddhism fall squarely within s.3(1)(c)

• There are some limits though to qualifying as a religion in the absence of a God
• In order to be a religion in the absence of a god there needs to be faith in, and worship of, a “supreme being, or divine or transcendental being or entity or spiritual principle.” (Charity Commission guidance)

The requirements of “faith” and “worship” remain unchanged: “religion” still demands faith in, and worship of, a god/multiple gods/supreme being/principle

It has been held that “worship” must have some of the following characteristics:

• “Submission to the object worshipped, veneration of that object, praise, thanksgiving, prayer or intercession.” (R v Registrar General ex p Segerdal)
• Lack of ‘worship’ is reason why Scientology is not accepted as a charity: instead they engage in counselling (called auditing) and studying the works of Hubbard

A “religion” must promote a moral framework

The requirement of moral framework serves to explain the following decisions:

• i) Charity Commission rules that paganism is a religion (2010) as it promotes moral code: in particular, the preservation of ancient monuments
• ii) Charity Commission rules that Gnosticism is not a religion (2009)

The promotion of ethical principles does not advance religion; religion concerns man’s relationship with god (or, in lieu of this, a supreme being, entity, or principle) while ethics concerns man’s relations with man → so ethics is not a requirement of s3(1)(c)

Re South Place Ethical Society [1980]: the purpose of studying and disseminating ethical principles was held not to advance religion (s3(1)(c)) i.e. so it was not a charitable purpose

To fall within CA s.3(1)(c) a purpose must advance religion

The advancement of religion is defined as taking positive steps to promote or spread religious belief (United Grand Lodge of Ancient Free and Accepted Masons of England v Holborn Borough Council [1957])

• In this case, freemasonary was held not to advance religion within s3(1)(c) → although it is a religion, its goals are not to advance the religion therefore its purposes cannot be charitable purposes under s3(1)(c)

Religion can be advanced by instruction/teaching; persuading unbelievers; religious services and pastoral or missionary work

Before the enactment of the Charities Act 2006 (now CA 2011) the advancement of amateur sport was not a charitable purpose in its own right

• This explains why the purpose of promoting yachting was not held to be a charitable purpose in Re Nottage 1885

Trusts to advance sport were, however, held charitable if they could be construed as advancing education

• Re Mariette 1915: there was a gift to provide Eton fives courts and squash rackets courts at Aldenham School. Eve J upheld this, on the principle that learning to play games at a boarding school was as important as learning from the books

The advancement of sport is now a charitable purpose in its own right (Charities Act s.3(1)(g))

Sport is defined in the Charities Act s.3(2)(d) as “sports or games which promote health by involving physical or mental skill or exertion”

The definition encompasses games, such as chess, which involve mental skill

A purpose “advances” amateur sport if it either (i) provides facilities for sporting activity; or (ii) encourages participation in a sport

• So amateur sport must be advanced, just like religion had to be