EQUITY AND TRUSTS

1. EQUITY AND TRUSTS CHARITIES 2

2. Requirements of charitable status • Charitable purposes derive from - • Preamble to CUA 1601 • Pemsel (see Charities 1 – first three heads considered: poverty, education, advancement of religion) Now consider: (4) other purposes beneficial to the community • 2 stage test is adopted – must prove “beneficial” aspect of purpose – must be beneficial in way that law regards as charitable I.e. must fall within “spirit and intendment” of the preamble.

3. What purposes are charitable under this head? Difficult question – purposes mentioned in preamble will be charitable. Novel purpose will rely on analogical approach. • Impossibility of categorisation: Majority of new cases occur under head 4. • So – best to examine some of the cases within the established categories under head 4.

4. Examples under head 4 Preamble mentions aged / impotent and poor people – Rowntree (see Charities 1) established a disjunctive reading so charities for the sick/or for health promotion accepted.

5. Animals • NB not gifts to specific pets abut for welfare generally • See Re Wedgewood for “humanity” reasoning. Compare with Re Grove Grady where animal sanctuary was not charitable.

6. Social Recreational and Sporting Trusts • Re Nottage – sport for sports sake not charitable - it must be a means to charitable end. • Re Hadden? • IRC v Baddeley trust to promote religious, social, physical of Methodists not charitable • Williams v IRC: trust for moral, social, spiritual, educational welfare of Welsh people in London not charitable • IRC v City of Glasgow Police Athletic Association: merely a charitable side effect Social / recreational component caused trusts to fail.

7. Recreational Charities Act 1958 As a result the RCA 1958 was passed. In effect the Act adds a fifth head to charity Grants prospective and retrospective validity to the provision of facilities for recreation/leisure time occupation if provided in interests of social welfare.

8. Recreational Charities Act 1958 • S1(2)(a)(b) sets out requirements for social welfare • Must improve life for those classes of people in 2(b)

9. Construing the Act In IRC McMullen CA considered that “improving conditions of life” meant only “deprived” could benefit. Not so, see Guild v IRC s1(2) satisfied if conditions of community generally improved including those better off.

10. Recent application of the RCA 1958 North Taunton RUFC (see decisions of the Charity Commissioners, volume 5, November 1997) Club not charitable because did not meet the social welfare requirement.

11. Further recent applications of the RCA 1958 Community Server (see Decisions of the CC 15th September 2003) Community Internet access did meet requirements of the Act.

12. Head 4: other miscellaneous categories Very wide. Specifically mentioned in the preamble – now expanded to include e.g preservation of national heritage. Much subsequent case law provides examples of width of head 4.

13. Charity Comms examples In document: recognising charitable purposes Commissioners set out examples of purposes analogous with preamble Also set out charitable purposes recognised as analogous to other charitable purposes - note the wide variety of purposes recognised as having grown from the 1601 preamble.

14. CC expansion of head 4 register CC now reviewing the register – decisions: • Relieving unemployment is now recognised as charitable (used to have to include e.g. poverty relief) + charities which act to promote: • rural and urban regeneration • healthy recreation • human rights • religious harmony • equality and diversity for benefit of the public + GMC also now recognised.

15. The purpose of head 4 • Catch all category • Adapts to changes in society • Flexible development of the law • Reform of this head necessary to the proposed statutory definition

16. Public benefit In order to be a charitable trust within the four Pemsel heads there is a second hurdle that must be cleared: Does the purpose benefit the public or a sufficient section thereof?

17. Public Benefit Two parts to the requirement: 1. Trust must be beneficial to the public Assumed for heads 1-3. Must be proven for head 4. 2. Benefits available to the public or a section (rather than private individuals).

18. Public benefit • If benefit not available to all the public then section of the public is sufficient • Limiting the class – raises possible problem of private class therefore private trust.

19. Public Benefit Must be for the “public benefit” so who are the public or a section of the public? Different tests apply to each head.

20. Public benefit – poverty • Poverty – very small requirement of PB. Test set out in Re Scarisbrick [1951] Ch 622, CA – a class or group not (an) individual(s) • Will fail if for the benefit of named individuals • Personal nexus test does not apply to poverty (see next slide) • Dingle v Turner [1972] AC 601, HL • Re Segelman [1996] Ch 171.

21. Public benefit – education Except for trusts fro poverty the courts have developed tests to distinguish between public/private trusts • Education – personal nexus test from Re Compton adopted by HL in Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297 HL • Class will not be a section of the public if defined by ref to a personal nexus.

22. Public benefit – Oppenheim Trust for children of employees or former employees. Personal nexus that linked employees was the common employer so employees did not constitute a section of the public.

23. Public benefit – Oppenheim • The group of potential beneficiaries must not be numerically negligible • Must not be a personal nexus between the bens. And an individual or individuals.

24. Public benefit – personal nexus Trust for education ascertained by a reference to a personal tie is not the public or section thereof. Examples of personal nexus: • Blood e.g. families (see Re Compton named families) • Contract – common employer.

25. Public Benefit – criticism of personal nexus test Weaknesses of test: n.b. dissenting judgment of Lord MacDermott in Oppenheim. Test should be one of degree and dependant on facts of each case. Five law Lords supported this approach in Dingle v Turner. PN Test criticised but not overruled.

26. Public benefit Test is law. • See RR8 “The Public Character of Charity” (Feb 2001) where CC recognise test is doubted and favour cautious flexible approach.

27. Public Benefit – problems with the test Preference cases – inconsistent with Oppenheim? IRC v Educational Grants Assoc. [1953] AC 380. 76 –80% income of charity paid out to education of children of people connected with Metal Box Co. CA said not purely charitable. Koettgen’s WT [1954] Ch 252. Trust for public with preference to a private group up to maximum of 75% income. Held charitable. Caffour v ITC – Lord Radcliffe: Koettgen close to being inconsistent with Oppenheim. CC has adopted max 75% rule.

28. Public benefit – religion Advancement of religion must be among public or section – e.g. of a sect: Catholic, Protestant, Jewish etc. Gilmour v Coates[1949] AC 426 HL – no public benefit because convent (in this case) had no contact with the public. Re Hetherington [1990] Ch 1 – gift for saying of Catholic masses was charitable because services were public.

29. Public benefit – religion Church of Scientology – see above under advancement of religion) CC found that CS activities were private and no benefit accrued to the public Public benefit to only to those who practice or of the public as a whole? E.g. simply by having religious communities within society? Neville Estates v Madden [1962] Ch 832. Cross J found services at a synagogue to be charitable although said in private but court found benefit in those attending mixing outside with other citizens.

30. Public Benefit – head 4 Under Head 4 the PN test applies. There may also be a stricter test as well. If class is defined to create a “class within a class” it cannot be to benefit of the public. Williams v IRC [1947] AC 447 HL IRC v Baddeley [1955] AC 572 HL failed because for social purposes and not charitable. Lord Simmonds in Williams said Welsh in London did not constitute a section of public. Reiterated this in Baddeley – public ben not satisfied if bens “ not only confined to a particular area but selected by reference to a particular creed.” Question remains whether class within a class rule is law. Ratios of these cases led to RCA 1958.

31. Exclusively Charitable • All purposes must be charitable otherwise trust will fail. • If trust has more than one object all must be charitable • Trust may be charitable if some money is spent on non-charitable objects if these are incidental/subsidiary to the main charitable aim. In IRC v Glasgow Police sports facilities were recreational not incidental. Compare with Royal College of Surgeons v National Provincial Bank Ltd [1952] AC 631 HL. • Is the non-charitable purpose incidental to the performance of the charitable object of the trust?

32. Exclusively charitable Problem can sometimes be overcome by severance of gift allowing charitable status on the remaining purposes. Non-charitable part must be specified. see Salisbury v Denton

33. Exclusively charitable – “and / or” cases • “And/or” cases can cause problems – “or” is read disjunctively and “and” conjunctively. Chichester v Simpson involved gift for charitable or benevolent purposes. Trustees could spend money on purposes that might not be charitable so trust was void. AG v Wahr Hansen “or organisations operating for the public good” trust was void.

34. Exclusively charitable – “and” cases • Cases of “and” is generally read conjunctively – sufficient to draw the other word into the orbit of the charitable purpose. • E.g. Re Best “charitable and deserving objects” was upheld. • See also Manoogian v Sansino “education and advancement in life” phrase given conjunctive interpretation and composite purpose was seen as educational.

35. Charities and political activities Trusts for political purposes are not charitable. Rationale? See Bowman v The Secular Society [1917] AC 406 HL. Court has no means to judge whether a change proposed will be to the public benefit. What is a political purpose? Trying to change law – see National Anti-vivisection Society v IRC [1948] AC 31 HL. McGovern v AG [1982] Ch 321. Amnesty failed to gain charitable status as was deemed a political organisation seeking to change foreign law.

36. Political purposes Danger of political trusts masquerading as educational trusts. Re Hopkinson [1949] 1 All ER 346 “political propaganda masquerading as education”. See also Bonar Law Memorial. Southwood v AG 1998 CA The Times July 18th 2000. “Educational” trust political because challenging prevailing militarism of Western governments. If it could not be determined whether a trust promoted public benefit then it could not be said to be charitable.

37. Permissible political activity Re Koeppler WT [1986] Ch 423 CA Political activity which is incidental is permissible – e.g. discussion of political issues. AG v Ross – Scott J: nothing wrong with educational charity encouraging political awareness. Limits? Webb v O’Doherty – Student union stopped from contributing to stop Gulf War campaign.

38. Charities and political activity Campaigns and political activities – see CC guidelines: “Campaigning and Political Activities by Charities” CC9 Sept 2004. Guidance revised to take account of 2002 Strategy Unit Report: “Private Action Public Benefit” advising a less cautionary tone in the CC approach. Also proposes reforms on charitable status.

39. Next lecture – Charities 3 Charities 3 will deal with reform, the doctrine of cy pres and a past examination question.