EQUITY AND TRUSTS

1. EQUITY AND TRUSTS CHARITIES 3

2. A definition of Charity? • Legal definition imperfect. • Committees looking at law (e.g. Nathan, Goodman) both advocated definition of charity but were unable to formulate one. • List of purposes proposed instead (the “Goodman guidelines” ) + enacting definition using Macnaghten heads. • 1989 White Paper considered simplification + possibility of statutory basis. But flexible non- statutory evolutionary approach favoured. • Deacon Report on charity reform proposed replacing four heads with single “benefit to community” test but led to criticism by Goodman and rejection through White Paper.

3. Proposals for reform • In September 2002 Home Office Strategy Unit published a consultation paper “Private action, Public Benefit: A Review of Charities and the Wider Not-For-Profit Sector”. • Not limited to law on charitable status – also proposes e.g widening trading abilities of charities, reform of CC guidelines on campaigns, improving information, better regulation of fundraising, changes to role of CC, establishment of independent tribunal.

4. Difficulties with definition Report highlights that: law is unclear, four heads not reflective of range of charitable work or logical in extent of assumption of public benefit.

5. Expanded purposes Expanding the list of purposes to ten? • Prevention relief of poverty • Advancement of education • Advancement of religion • Advancement of health • Social and community advancement • Advancement of culture arts and heritage • Advancement of amateur sport • Promotion of HR, conflict resolution and reconciliation • Advancement of environmental protection and improvement • Other purposes beneficial to the community NB 10 is head 4 of Pemsel.

6. Public benefit • Report recognises centrality of public benefit in definition of charitable status • No presumptions of public benefit – must be demonstrated • Common law definition to remain • Report recommended redefinition as public benefit falling under one of the ten heads.

7. Consultation July 2003 Government responded to report – accepting recommendations for review based on principle of public benefit adding to the list: • promotion of animal welfare • provision of social housing and • advancement of science.

8. Draft Charities Bill • Published in May 2004. • Section1 provides the first general stat definition of charity s1(1) gives the meaning of charity. • Section 2 first stat def of charitable purpose s2(1) – purpose is charitable if it meets 2 criteria: that it falls under 1 or more heads of charity in S2(2) +it is for public benefit.

9. Descriptions of charity • Eleven specific and one general description. • 2(4) covers purposes analagous to purposes set out in a paras a-k and enables the description of purpose to be expanded • S3 deals with public benefit s3(2) abolishes presumption. PB refers to existing concept.

10. Scrutiny of Bill • The Bill has been scrutinised by a joint committee of the Houses of Parliament which recommended an additional charitable purpose be added to 2(2) – the promotion of racial and religious harmony and equality and diversity + that culture be added to the arts/science head + that saving of lives be added to health head. Also a more explicit definition of public benefit was needed – perhaps by adding non-binding examples of public benefit.

11. Legislation? Charities Bill published in November 2004. Charities Act 2005 is anticipated.

12. Legislation? • The Bill follows draft Bill and incorporates some of the joint committees recommendations. • The Bill will give the CC new objectives – to promote understanding /awareness of public benefit requirement. Clause 4 requires the CC to issue guidance to aid in this. • CC guidance will not be legally binding.

13. Reform Reform of charities law has been discussed for over fifty years but whether this recent legislation will in fact become law remains to be seen.

14. Cy-pres The following section deals with the charitable doctrine of cy-pres.

15. Cy-pres In contract to a private trust, if a charitable trust fails there is no resulting trust – rather the doctrine of cy-pres may apply to save the gift.

16. Cy-pres • Cy-pres means as near as possible • Doctrine applies where property is given with charitable purposes but the gift cannot be made then the court of CC may apply property to other purposes as near as possible to those intended by the donor. • Law somewhat complex – where purposes fail, redundant, anachronistic, then trust may be re-written.

17. Cy-pres – application Two main circumstances: • Initial failure where clear from outset that intention cannot be fulfilled • Subsequent failure where purposes cannot be achieved during the life of the trust.

18. Initial failure e.g. gift to institution that has never existed or has ceased top exist doctrine will only apply if a paramount or general charitable intention is found: i.e. a general intention not an intention to benefit a particular institution.

19. Principles • If specific institution is mentioned then is taken as presumed intention. • Re Rymer v Stansfield [1895] 1 Ch 19 CA gift to defunct seminary – so no general charitable intent.

20. Principles • In cases where a charity has never existed then general charitable intent is easier to find. • Re Harwood [1936] Ch 285 testatrix made gift to organisation that had never existed. No specific intent so gift applied cy-pres. • Also second gift to society that had existed so gift failed.

21. Principles • No assumption that all gifts are charitable just become some are. Re Jenkins W/T [1966] 1All ER 926: number of charitable gifts + to British Union for Abolition of Vivisection (non-charitable). Latter gift failed. Buckley J: cannot infer that testator wished non-charitable gift to take effect as a charitable purpose even where close relation between two purposes.

22. Re Satterthwaites WT [1966] 1 WLR 277 Compare with Jenkins. Testatrix left residuary estate to animal charities. Evidence that she hated human beings. One non-charitable donee (the London Animal Hospital) claimed the gift. Court held that it was a case of general charitable intent. Court applied the gift cy-pres.

23. Cy-pres Gift may not have failed. If specific institution exists in another form then cy-pres may not be necessary. Re Faraker [1912] 2 Ch 488 CA. Gift to charity for poor widows that had been later consolidated in charity for benefit of poor. Old charity existed within the new so no cy-pres necessary. NB charities had existed for different purposes. But – how different can purposes be? In Re Roberts[1963] 1 WLR 406 gift to Sheffield Boy’s Home – wound up into Sheffield Town Trust. Failed because court saw purposes as different.

24. Gifts to unincorporated charity • Has to be for purposes not organisation (because not a legal entity). • If purposes can be fulfilled gift will not fail –another trustee/charity will be found (i.e. no cy-pres because no initial failure). • Re Fingers WT [1972] Ch 286 both organisations had ceased to exist at death of testator. First gift to further objects of unincorporated organisation – purposes continued so gift did not fail. See dicta of Buckley J in Re Vernon’s WT [1972] Ch 300 as quoted by Goff J in Re Finger’s, “every bequest to an unincorporated charity by name without more must take effect as a gift for a charitable purpose..If the gift is to be permitted to take effect at all, it must be as a bequest for a purpose. A bequest which is in terms for a charitable purpose will not fail for lack of a trustee but will be carried into effect..” • The second gift to incorporated charitable organisation was treated as having a general charitable intention allowing for cy-pres to be applied.

25. Subsequent failure • If failure occurs after the trust takes effect then = subsequent failure and cy-pres is straightforward. • Only question is has there been an outright gift to charity?

26. CA 1960 – s13 • Prior to Charities Act 1960 cy pres could only operate through common law where it was impossible or impracticable to carry out terms of the trust. • If initial failure then cy-pres may apply – but where trust was difficult to execute or outdated or not useful the nothing could be done. Thus, old charitable trusts simply continued. • Under CA 1960 cy-pres doctrine reformed. S13 extended application of cy-pres e.g. where original purpose fulfilled, in case of surplus or original purpose adequately provided for.

27. CA 1960 – s14 • Act also allows for where donors of a failed charitable gift cannot be found e.g. from collections etc. • Re Ulverston fund raising insufficient for purpose and no general charitable intention since for the building of new hospital – cy- pres could not apply and funds went to Crown as bona vacantia. • S14 allows cy-pres to apply as if general charitable intent where donor cannot be found and in cases of lotteries, collections, raffles etc. Applies in case of initial failure only.

28. Reform of cy-pres • See s14A of 1993 Act. New procedure for cases of chartable giving to appeals. Also • S14B sets out 3 matters court or CC must consider: • spirit of the original gift • desirability of applying new purposes • need for relevant charity to make a significant social/economic impact

29. Consideration of past examination question We will consider the will of Mavis Miller – the following slides set out the clauses contained in the problem question.

30. Problem question – clause 1 Qualifications for charitable status: • Must be for one or more charitable purposes – i.e.. Pemsel heads • Be for the benefit of the public • Be exclusively charitable NB Head 4 (other purposes) analogical connection requires with preamble to CUA 1601.

31. Problem question (1) I give £2000 to my trustees to buy books about political history for use by the members of the Oldcastle Town Council, in the hope that they might learn from the mistakes of politicians in the past. Which head? Education? Education is a very wide head, give examples of what counts as education e.g. Incorporated Council of Law Reporting for England & Wales v Att-Gen [1972] Ch73, Re Dupree's W/T [1945] Ch 16, Re Delius [1957] Ch 299, Re Shaw [1957] 1 WLR 729 Re Hopkins [1965] Ch 669, Re Nottage [1895] 2 Ch 649, Re Mariette [1915] 2 Ch 284. Identify problems: political activity? See Re Hopkinson. What is a political purpose? Is it partisan – see AG v Ross.

32. Public benefit • Is the educational purpose for benefit or public or section of public. NB class must not be defined by personal nexus. • Make reference to Oppenheim, outline facts, outcome. • Is the employee nexus extant here? • Could argument of indirect benefit of educating politicians apply? • Are purposes of clause 1 exclusively charitable (i.e. educational)?

33. Clause 2 (2) I give £3000 to assist the campaign to prevent open cast coal mining from being extended in Southumberland with its consequent destruction of the local environment. Does this fall within Pemsel head 2? More likely head 4. Set out how to decide if purpose is charitable under head 4. Beneficial to the community (i.e. positive not detrimental effect). See Anti-vivisection Soc v AG where public benefit was outweighed by detriment to science and public health. Consider this balancing test in application to the clause.

34. Clause 2 and public benefit • Purpose must be beneficial in legally charitable sense. • Preamble sets out purposes which are charitable – i.e. those covered by preamble or case authority. • Novel purposes must fall within spirit and intendment of preamble – analagous with previously accepted purpose.

35. Clause 2 – environmental concerns • Valid charitable purpose – conservation recognised under head 4 by CC in 2004 in review document RR9. • Document sates that area must be worthy. • BUT – environmental groups with political purposes will not be charitable. Is purpose here political – see McGovern v AG sets out political purposes. Is clause 2 campaign seeking a change in law?

36. Clause 2 and public benefit • For public or section of public? • Have any limitations been placed on the class?

37. Exclusively charitable? • If the trust benefits objects which are not exclusively charitable then trust will not be charitable. • If for political purpose then the gift may not be charitable at all.

38. Clause 3 (3) I give £10,000 to set up an after school play scheme to keep the children of Oldcastle out of mischief. With preference to be given to children of the employees of Oldcastle Glassworks Limited. Education? Sport can be educational –see Re Marriette and IRC v McMullen. Depends on purpose - is after school group/avoiding mischief educational? See Re Dupree's W/T.

39. Clause 3 and public Benefit • Children of Oldcastle are the class of beneficiary. The oprefecne expressed for children of employees of Oldcastle Glassworks may be problematic. • In IRC v Educational Grants court found that fund for educating children connected with employees of Metal Box was not charitable. Compare with Re Koettgen where preference given to employee families of named company up to max 75% of income was held charitable.

40. Consistent? Was IRC v Educational Grants consistent with Re Koettgen but seems that preference is permissible up to max 75% of income. No max expressed in clause 3 so will fail under public benefit test. As expressed trustees may apply whole £10,000 to employees’ children and so fails personal nexus test.

41. Clause 3 – head 4? • See Glasgow Police case, Baddeley, and Williams v IRC. • Are recreational purposes charitable under Head 4? • Public benefit problem remain. • NB also class within a class restriction. Section of community cannot be further delineated to create a class within a class. Do the children constitute such a delineation?

42. Recreational Charities Act 1958 RCA 1958 validates facilities for recreation etc if provided in interests of social welfare. Satisfied if under s1(2)(a) they improve conditions of life in s1(2)(b).

43. RCA 1958 • Young persons are included s1(2)(b) and so children of Oldcastle would – although a class within a class – fall within the scope of this section. • NB – nexus problem still applies. • S1 RCA principle of public benefit still applies (Oppenheim). Outcome could therefore be as set out above under the educational preference cases and would fail.

44. Clause 4 (4) I give the rest of my estate to my trustees to set up a trust fund to improve the economic and social prospects of the disadvantaged people of Oldcastle, in particular by providing outings to places of interest to broaden their horizons. Head 1 – relief of poverty?

45. Clause 4 - meaning of poverty See Re Coulthurst [1951] Ch 661 “poverty does not mean destitution. It is a word of wide and somewhat indefinite import. It may be paraphrased as meaning persons who have to go short in the ordinary sense of that term due regard being had to their status in life …. ” No absolute standard – relative concept.

46. Limitations The head of poverty need is crucial. See IRC v Baddeley [1955] AC 572 “relief connotes need of some sort …” In Joseph Rowntree Memorial Trust Housing Association Ltd v Att-Gen [1983] Ch159 must be a need attributable to the condition of the person that they cannot or would have difficulty relieving themselves. Does clause 4 in “providing outing to places of interest” relieve poverty?

47. Other restrictions Gift only applies to the poor. Gift will not be charitable if those who are not poor can benefit. Consider: Re Gwyon [1930] 1 Ch 255 Re Sander’s WT [1954] 2 WLR 487 Are the people of Oldcastle necessarily poor?

48. Clause 4 - education See Associated Artists Ltd v IRC [1956] 1 WLR 752 – is clause too vague? Oppenheim also relevant – is clause for the benefit of the public – is there a personal nexus to be found in the wording of the clause?

49. Clause 4 and Head 4 • Consider use of term “social purposes” in clause 4 – risk of it not being exclusively charitable? See Williams v IRC [1947] AC 447 &IRC v Baddeley [1955] AC 572 N.b. wording of clause: “economic and social purposes”. Would “or” have made a difference? • Would public benefit be satisfied under head 4. • Personal nexus is not apparent – but is there a class within a class?

50. RCA 1958 Reconsider: Recreational Charities Act 1958 s.1 (1) It is charitable “to provide... facilities for recreation or other leisure time occupation, if the facilities are provided in the interests of social welfare.” Does the class fall within 1(2)(b) provided for people who have need of the facilities due to youth, age, infirmity/ disablement, poverty, social and economic circumstances? Although objects need not be certain and objects need only be charitable – the expressed purpose must not be too vague. “Broadening horizons” may be too vague and the gift may fail.