Equity & Trusts 2005

1. Equity & Trusts 2005 3. Forms of Express Trusts B - Charitable Trusts

2. Charitable Trusts - Generally • Meaning of “charitable” at law: • Purpose must be “charitable” • Purpose must be for the “public benefit”

3. Charitable Trusts - Generally • Purpose must be “charitable”: • Historically - Preamble - Statute of Charitable Uses 1601 • “relief of aged, impotent and poor people; maintenance of sick and maimed soldiers and mariners, schools of learning, free schools and scholars in universities; repair of bridges, ports, havens, causeways, churches, seabanks and highways; education and preferment of orphans; relief stock or maintenance of houses of correction; marriages of poor maids; support aid and help for young tradesmen, handicraftsmen and persons decayed; relief or redemption of prisoners or captives; aid and ease of any poor inhabitants concerning payment of fifteens, setting out soldiers and other taxes.”

4. Charitable Trusts - Generally“Charitable” • Purpose must be “charitable”: • Modern definition - Charity comprises four principal divisions: • Trusts for the relief of the poor, aged or impotent • Trusts for the advancement of education • Trusts for the advancement of religion • Trusts for other purposes beneficial to the community

5. Charitable Trusts - GenerallyPublic Benefit • Purpose must be for the “public benefit”: • “Public” Element - • “whether it is for the benefit of the community or of an appreciably important class of the community” • Oppenheim v Tobacco Securities Trust Co Ltd • These words “section of the community” have no special sanctity, but they conveniently indicate first, that the possible (I emphasise the word “possible”) beneficiaries must not be numerically negligible, and secondly, that the quality which distinguishes them from other members of the community, so that they form by themselves a section of it, must be a quality which does not depend on their relationship to a particular individual. (at 306 per Lord Simonds)

6. Charitable Trusts - GenerallyPublic Benefit • “Public” Element - • Oppenheim v Tobacco Securities Trust Co Ltd • Dissent - Lord MacDermott (at 565): • If, then, the class of potential beneficiaries in an educational trust is substantial, and not obviously private in nature, I think one may reasonably commence, in the kind of investigation I am considering, by assuming, until the contrary appears, that the trust is for the benefit of the community.

7. Charitable Trusts - GenerallyPublic Benefit • “Benefit” Element - • Purpose must be beneficial in itself • Assumption? • Exception to the “Public Benefit” requirement • Trusts for the purpose of relieving poverty • Re Segelman • Trustees required to hold and apply trust fund for: • “the poor and needy of the persons set out in the Second Schedule then living”

8. Charitable Trusts - GenerallyPublic Benefit - Exception • Re Segelman (at 691-692 per Chadwick J): • The position is, therefore, that the court must decide, as a matter of construction, whether the gift is (a) for the relief of poverty amongst poor people of the particular description, or (b) a gift to particular poor persons, the relief of poverty among them being the motive of the gift … • … The basis for disqualification as a charitable gift must be that the restricted nature of the class leads to the conclusion that the gift is really a gift to the individual members of the class.

9. Trusts for the Relief of the Poor, Aged & Impotent • Trusts for the relief of the poor • Meaning of “poverty” • “Going short” • Necessitous circumstances • Downing v FCT • Trustee gave balance of residuary estate for: • “the amelioration of the conditions of the dependants of any member or ex-member of Her Majesty's Naval, Military or Air Forces or the Naval, Military or Air Forces of the Commonwealth”.

10. Trusts for the Relief of the Poor, Aged & Impotent • Trusts for the relief of the aged • “Aged” • “Relief” of aged • Need to satisfy public benefit requirement • Trusts for the relief of the impotent • Meaning of impotent: • Physically weak, disabled or helpless • Need to satisfy public benefit requirement • Eg - Hospitals - Re Resch’s Will Trusts

11. Trusts for the Advancement of Education • Meaning of “education” • “Advancement” of education • Knowledge must be imparted not merely accumulated • Research trusts

12. Trusts for the Advancement of Education • Must satisfy the requirement of “public benefit” • Re Mason: • trust for “the constitution and maintenance of a [law] library or libraries”. • Whether the trustees could lawfully make grants for: • (a) the purchase of all kinds of books for the Auckland Law Society’s library at the Supreme Court; • (b) the purchase of all kinds of books for any other library maintained by the Society; • (c) the cataloguing and restoration of and housing for all or any kinds of books or documents or other papers owned by the Society; and • (d) the writing, printing and publishing of pamphlets for the purpose of training or informing students or graduates in or about legal or practical skills.

13. Trusts for the Advancement of Religion • Meaning of “religion” • Church of the New Faith v Commissioner for Pay-roll Tax (Vic): • Mason CJ and Brennan J at 136: • We would therefore hold that, for the purposes of the law, the criteria of religion are twofold: • first, belief in a supernatural Being, Thing or Principle; and • second, the acceptance of canons of conduct in order to give effect to that belief, though canons of conduct which offend against the ordinary laws are outside the area of any immunity, privilege or right conferred on the grounds of religion.

14. Trusts for the Advancement of Religion • “Advancement” of religion • United Grand Lodge case • Donovan J at 285: • To advance religion means to promote it, to spread its message ever wider among mankind; to take some positive steps to sustain and increase religious belief; and these things are done in a variety of ways which may be comprehensively described as pastoral and missionary.

15. Trusts for the Advancement of Religion • “Advancement” of religion • Gifts to Church Officers? • Eg - gift to a named church official for the time being • Eg - gift to a named church official and his/her successors • Gift - “Virtute officii” (by virtue of his/her office) • Superadded words? • Do such words broaden the scope of the gift? • Farley v Westminster Bank • Bequest to vicars and churchwardens for “parish work”. • Perpetual Trustee Co (Ltd) v St Luke’s Hospital • “for the assistance of such poor parish or parishes as the said Archbishop in his uncontrollable discretion may think fit”

16. Trusts for the Advancement of Religion • Public Benefit • Crowther v Brophy: • “Upon trust for masses to be said for my soul, and the souls of my said sister … and [another person] and St Anthony’s Monastery, Hawthorn, and I direct my trustee to make such arrangements in connection therewith as he shall deem appropriate”

17. Trusts for the Advancement of Religion • Public Benefit • Crowther v Brophy: • Gobbo J (at 100): • It is not to the point that the masses are to be celebrated for the repose of the souls of a limited number of individuals, since the public edification involved in the celebration of the mass was itself an act which was a central act of the religion of a large proportion of Christian people and was productive itself of reinforcing and enhancing the religious life of both the congregation and all the members of that religious persuasion who come to know of the fact that there is the regular practice of intercessory prayer through the offering up of the mass containing as it does a public prayer for the repose of the souls of the departed.

18. Trusts for the Advancement of Religion • Extension of Charitable Purpose Act 2004 (Cth): • (1) Without limiting what constitutes a public benefit, an institution has a purpose that is for the public benefit to the extent that the institution is: • (a) an open and non-discriminatory self-help group (see subsection (2)); or • (b) a closed or contemplative religious order that regularly undertakes prayerful intervention at the request of members of the public.

19. Trusts for Other Purposes Beneficial to the Community • Requirements: • Two stage analogy test • Purpose must fall within the spirit of the Preamble to the Statute of Charitable Uses • Purpose must be beneficial to the community • Incorporated Council of Law Reporting (Qld) v FCT

20. Trusts for Other Purposes Beneficial to the CommunityTrusts for the Protection of Animals • Trusts for the protection of animals are generally charitable • Murdoch v A-G (Tas) • Bequest for “the benefit of animals generally”?

21. Trusts for Other Purposes Beneficial to the CommunityTrusts for Sport and Recreation • Trusts for mere sport or recreation are not generally charitable • BUT may be charitable where: • Attached or incidental to a valid charitable purpose; • Is a gift of land or facilities for public use (ie public recreational facility) • Validated pursuant to statute

22. Trusts for Other Purposes Beneficial to the CommunityTrusts for Sport and Recreation • Attached or incidental to a valid charitable purpose: - • IRC v McMullen • Football Association established trust: • “to organise or provide or assist in the organisation or provision of facilities which will enable and encourage pupils at schools and universities in any part of the United Kingdom to play association football or other games or sports and thereby to assist in ensuring that due attention is given to the physical education and development and occupation of their minds”.

23. Trusts for Other Purposes Beneficial to the CommunityTrusts for Sport and Recreation • Legislation: • Variation of Trusts Act 1994 (Tas) s 4(1) • A gift of property to provide opportunities or facilities for sport, recreation or other activities associated with leisure is taken to be, and to have always been, a gift for charitable purposes.

24. Trusts for Other Purposes Beneficial to the CommunityPolitical Purpose trusts • Generally, trusts for the promulgation of political views or agitation for legislative change are invalid. • Molloy v Commissioner of Inland Revenue • Society for the Protection of the Unborn Child • Various objects, including: • (c) To maintain and improve legal and social and medical safeguards for protecting and preserving the rights of unborn children.

25. Mixed Charitable and Non-Charitable Purposes • General Law - trusts must be exclusively charitable. • A trust expressed to be for both charitable and non-charitable purposes is non-charitable unless: • Apportion and Sever • Saving Legislation

26. Mixed Charitable and Non-Charitable Purposes • Alternative and Cumulative Expressions • Chichester Case • Residue of estate to be applied for “other charitable or benevolent objects” • Lord MacMillan (at 350-351): • If the testator had written “charitable and benevolent” instead of “charitable or benevolent” the bequest would, on the authorities, have been sustained, for it would then have been read as in favour of such benevolent objects as are charitable or such charitable objects as are benevolent, charity in either way predominating, but again I find no warrant for reading conjunctively two words which the testator has expressly disjoined.

27. Mixed Charitable and Non-Charitable Purposes • Alternative and Cumulative Expressions • A-G of the Cayman Islands v Wahr-Hansen • Trust to distribute income: • “to any one or more religious, charitable or educational institutions…or organisations or institutions operating in the public good”. • Note: Compendious Expressions

28. Mixed Charitable and Non-Charitable Purposes • Gifts for the Purposes of Associations • “(1) If the main purpose of the body of persons is charitable and the only elements in its constitution and operations which are non-charitable are merely incidental to that main purpose, that body of persons is a charity notwithstanding the presence of those elements … • (2) If, however, a non-charitable object is itself one of the purposes of the body of persons and is not merely incidental to the charitable purpose, the body of persons is not a body of persons formed for charitable purposes”. Inland Revenue Commissioners v City of Glasgow Police Athletic Association [1953] AC 380 at 405 per Lord Cohen

29. Mixed Charitable and Non-Charitable Purposes • Gifts for the Purposes of Associations • Congregational Union of NSW v Thistlethwayte • Organisation with various objects, including: • (3) United action for the creation, maintenance and improvement of our educational, religious, and philanthropic agencies • (4) The preservation of civil and religious liberty

30. Mixed Charitable and Non-Charitable Purposes • Gifts for the Purposes of Associations • Congregational Union of NSW v Thistlethwayte: • The fundamental purpose of the Union is the advancement of religion. It can create, maintain and improve educational, religious and philanthropic agencies only to the extent to which such agencies are conducive to the achievement of this purpose. The same may be said, … of the other object, the preservation of civil and religious liberty. The object is to preserve civil liberty so that Congregationalists may worship according to their religious beliefs. (at 442 per Dixon CJ, McTiernan, Williams and Fullagar JJ)

31. Mixed Charitable and Non-Charitable PurposesExceptions • Apportionment and Severance • Quantify the non-charitable aspect of the gift? • Legislation: • Variation of Trusts Act 1994 ss 4(2), 4(3). • (2) A charitable trust is not invalid by reason only that a non-charitable purpose is, or could be taken to be, included in any of the purposes to, or for which, an application of any of the trust funds is directed or allowed by the trust. • (3) A trust of a type referred to in subsection (2) is to be construed and has effect as if no application of any of the trust funds to or for any such non-charitable purpose were directed or allowed by the trust.

32. Mixed Charitable and Non-Charitable PurposesExceptions • Legislation • Leahy v A-G (NSW) • Bequest for property (Elmslea) upon trust: • “for such Order of Nuns of the Catholic Church or the Christian Brothers as my executors and trustees shall select” • Viscount Simonds (at 475): • …language of the section…covers the case of a composite expression embracing charitable and non-charitable purposes… • BUT note - not every compendious expression

33. Cy-présVariation • Issue: Destination of the trust fund if the purpose of a charitable trust is impossible, impracticable or illegal to carry out? • Court can settle a “cy-prés scheme” • Court applies the funds to objects that are as near as possible ( ie “cy-prés”) to the testator’s original intention.

34. Cy-présVariation • Initial Impossibility & Impracticability • Initial impossibility or impracticability occurs where the bequest is impossible or impracticable to give effect to as at the date from which it intended to operate. • General charitable intention

35. Cy-présVariation • Initial Impossibility & Impracticability • A-G (NSW) v Perpetual Trustee Co Ltd • Dixon and Evatt JJ (at 225): • The question is often stated to be whether the trust instrument discloses a general intention of charity or a particular intention only. • But, … the doctrine requires no more than a purpose wider than the execution of a specific plan involving the particular direction that has failed. In other words “general intention of charity” means only an intention which, while not going beyond the bounds of the legal conception of charity, is more general than a bare intention that the impracticable direction be carried into execution as an indispensable part of the trust declared • Cf - Re Good’s Will Trusts

36. Cy-présVariation • Cy-prés and Statute - Variation of Trusts Act 1994 s 5 • (2) If it has become impossible, impracticable or inexpedient to carry out the original purposes of a trust for charitable purposes in whole or in part, an application may be made for a variation of those purposes by a scheme approved under this Part. • (3) Without limiting the generality of subsection (2), an application for a variation of trust may be made in the following circumstances: • (a) if the original purposes, in whole or in part – • (i) have been as far as possible fulfilled; or • (ii) cannot be carried out, either at all or according to the directions given or to the spirit of the gift; • (b) if the original purposes provide a use for a part only of the trust property; • (c) if the trust property could be used more effectively if combined with other property applicable for similar purposes and administered jointly with that property;

37. Cy-présVariation Cy-prés and Statute - Variation of Trusts Act 1994 s 5 • (3)… • (d) if it is not reasonably practicable to apply the trust property in accordance with the original purposes having regard to – • (i) the value of the trust property; or • (ii) changes in circumstances; or • (iii) any other relevant factor; • (e) if the original purposes, in whole or in part – • (i) have been adequately provided for by other means; or • (ii) have ceased to be charitable purposes; or • (iii) have ceased to provide a suitable and effective method of using the trust property. • (4) This section does not affect the requirement for a general charitable intention in any case where such an intention is a condition before the purposes of a charitable trust may be varied.

38. Administrative Schemes • Issue: - gift made for a charitable purpose but the settlor has failed to specify a means by which it is applied •  Administrative Scheme • Distinguished from “cy-prés scheme”