Charitable Trust
- Valeria
- Mar 27
- 11 min read
INTRODUCTION
Commissioners for Special Purpose of the Income Tax v Pemsel [1891] AC 531 AT 581-2 per
Lord Macnaghten:
Of all the words in the English language bearing a popular as well as a legal signification I am not sure that there is one which more unmistakably has a technical meaning in the strictest sense of them, that is a meaning clear and distinct, peculiar to the law as understood and administered in this country, and not depending upon or conterminous with the popular or vulgar use of the word.
...A non-profit trust to supply provisions to the British Army will almost certainly be charitable, whereas a trust to campaign for unilateral nuclear disarmament will certainly not be.
Chichester Diocesan Fund and Board of Finance v Simpson [1944] AC 341, per Lord Porter at 363:
The words ‘charity’ and ‘charitable’ are: Technical words in English law and must be so construed unless it can be seen from the wording of the will as a eholethat they are used in some other than their technical sense.
Gaudiya Mission v Brahmachary [1997] 4 All ER 957, per Mummery LJ at 963:
Charitable trusts are, in many respects, fundamentally different from private trust.
For Instance:
The beneficiary principle does not apply;
There is only a need to show 'a public benefit';
The trust must be created for a charitable purpose;
They are exempt from many taxes;
Attorney General (or Charity Commissioners) enforces rather than private law principles.
CRITERIA
To amount to a charitable trust three basic requirements must be proven:
A charitable Purpose
For the public benefit
Wholly and exclusively charitable
CRITERIA I - CHARITABLE PURPOSE
Brent LBC v Johnson [2022] EWCA Civ 28 - As a preliminary point it is worth saying that property held for charitable purposes will not always be held on charitable trusts.
Charitable purposes - 'charity' means 'an institution which is established for charitable purposes only' and is 'subject to the control of the High Court in the exercise of its jurisdiction with respect to the charities'.
Charities Act 2011, s2(1) - The definition provides that a purpose is charitable if it satisfies two criteria: that it comes under one of the 'heads' of charities listed in the statute and it is for the public benefit.
The main definitional 'heads' of charitable purpose:
Commissioners for Special Purpose of the Income Tax v Pemsel [1891] AC 531- every charitable purpse can be classified under one of the four heads: trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; trusts for other purposes beneficial to the community not falling under any of the preceding heads.
However the heads were extended to 13 Heads under the Charities Act 2011 s3(1) of:
(a) The relief of poverty
(b) Advancement of education
(c) Advancement of religion
(d) Advancement of Health or the savings 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 by reason 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
(m)Other purposes not specified above but which come within the charitable remit.
The first head: the Prevention or relief of Poverty: Re Gardom [1914] 1Ch - The attitude of the courts has been that the destitute are always poor, but the poor are not always destitute: 'there are degrees of poverty less acute than object poverty or destitution, but poverty nevertheless'. Re Coulthurst [1951] Ch 622 CA - A person in poverty is one who has to '"go short" in the ordinary acceptation of that term, due regard being had to their status in life, and so forth'. Some words do imply poverty: Re Niyazi's Will Trusts [1978] 1 WLR 910 - A trust to build 'hostels' for working men was held to be a valid charitable trust for the relief of poverty. Re Sandres' Will Trusts [1954] Ch 265 - A trust to provide 'dwellings' for working class families was not a valid charitable trust. Re Gwyon [1930] 1 Ch 255 - Because a charity must be exclusively charitable, the trustee will have the power to deny benefits to the financially well-off. |
The second head: the advancement of education: Incorporated Council of Law Reporting for England and Wales v AG [1972] Ch 73 - 'the second head should be regarded as extending to the improvement of a useful branch of human knowledge and its public dissemination'. Re Shaw [1957] 1 WLR 729 - A trust for the mere increase of knowledge is not charitable. It was held that knowledge must be combined with teaching or education. Re Hopkins [1965] Ch 680 - A trust for the advancement of education is a valid charitable trust, even though it might advance the education of none but the researchers themselves. Re Pinion [1965] Ch. 85 - The court held that the art furniture were of no artistic and educational value. Expert evidence described the collection as lacking quality and importance, and it was deemed incapable of educating the public in any meaningful way. Webb v O'Doherty (1991) - Using Student Union funds to campaign to end the Gulf war was not charitable. Sport under the head of education: IRC v McMullen [1981] AC 1, HL - the trust created in this case was held to be charitable , because its purpose was not merely to recognize the playing of sport, but to promote physical education. |
The third head: the advancement of religion Varsani v Jesani [1998] 3 All E.R. 273 - Major world religions and minor sects are recognised as charitable. Khaira v Shergill [2014] UKSC 33 - The court of Chancery makes no distinction between one religion and another... [or] one sect and another... [unless] the tenets of a particular sect inculcate doctrines adverse to the very foundations of all religions and... subversive of all morality. Gilmore v Coates [1949] UKHL 1 - It was held that the trust must advance the religion - not an inward-looking sect with no promotion of religion to others. |
The fourth head: the advancement of health or the saving of lives Re Resch's Will Trusts [1969] 1 AC 514 - A gift for the purposes of a hospital is prima facie a good charitable gift under his head, but the presumption can be rebutted if evidence is showed that the hospital was carried on on commercially for the benefit of private individuals. The Charitable Commission has confirmed tha charity trustees can make gifts or loans to hospitals provided that 'the trustees are satisfied that the hospital concerned is one attended primarily by sick people from the charity's area of benefit, and that they will benefit directly from the gifts. Other purposes falling under this head include charities that provide 'complimentary' or 'alternative' medical treatment or health-related services such as research and hospital radio, and even self-defences classes. |
The fith head: the advancement of citizenship of community development of citizenship
The Act itself equates those lofty ambitions with modest and appealing aims such as 'rural or urban regeneration', and 'the promotion of civic responsibility, volunteering, the voluntary sector or the effectiveness or efficiency of charities'.
'Community capacity building' addresses social disadvantages in particular communities. |
The sixth head: the advancement of arts, culture, heritage, or science Royal Choral Society v IRC [1943] 2 All ER 101 at 104 - Lord Greene MR stated that 'the education of artistic taste is one of the most important things in the development of a civilised human being' Re Delius [1957] 1 Ch 299 - the cases suggest that it is only charitable to promote artistic taste if it is good taste, whatever that might be. 'It must be charitable to promote music of a particular composer, presupposing... that the composer is one whose music is worth appreciating'. A charitable trust such as the Delius trust is bound to bound to enhance the composer's reputation, but this private benefit is no reason to deny charitable status. The trust would have failed, had there been a possibility that the residury legatee could have profited personally from the trusts to any significant degree. |
The seventh head : the advancement of amateur sport: The charity commission stated that in order for a trust to be charitable, the sport must be 'capable of improving physical health and fitness' and the club must have an 'open membership' which means that 'access to the club's facilities must be genuinely available to anyone who wishes to take advantage of them'. Re Dupree's Deed Trust [1945] Ch 16 - Less energetic sports, such chess, may also be charitable, if they are educational. |
The eight head: the promotion of human rights, conflict resolution or reconciliation, or the promotion of religious or racial harmony, or equality and diversity According to the Charity Commission website, examples of charitable purposes falling under this head include:
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The ninth head: the advancement of environmental protection or improvement If woodland is replaced by a thousand new homes equipped with solar panels, charities such as the Woodlaand Trust will no doubt object, but charities promoting solar powers might approve. |
The tenth head: the relief of those in need by reason of youth, age, ill health, disability, financial hardship, or other disadvantages. A trust under this head will not be charitable if it excludes the poor. Joseph Rowntree Memorial Trust Housing Association Ltd v AG [1983] 2 WLR 284 - An incidental financial benefit might be permitted. The court held that the scheme was a valid charitable scheme for the relief of the aged, notwithstanding the objections of the Charity Commissioners. |
The eleventh head: the advancement of animal welfare Re Wedgwood [1915] 1 Ch 113 - A trust established for the well-being of animals generally may be charitable. Re Grove-Grady [1929] 1 Ch 557 CA - An 'animal sanctuary' run by anti-vivisectionists and opponents of blood sports failed to attract charitable status, because the animals would be free to molest each other. Re Wedgwood [1915] 1 Ch 113 - A trust to promote humane ways of slaughtering animals was held to be a valid charitable trust of animal welfare. |
The twelfth head: the promotion of the efficiency of the armed forces of the Crown, or of the efficiency of the police, fire, and rescue services, or the ambulance services. Charities currently registered for the improvement of the serving armed forces include:
Part 2 of the Fire and Rescue Services Act 2004 - Fire and rescue services' means services provided by fire and rescue authorities. |
The Thirteenth (residual) head: other existing charitable purposes or analogous charitable purposes The theory that novel charitable purposes are purposes that a modern government might see as being its own responsibility is borne out by a number of purposes that were admitted into the residual head before the Charities Act 2006 Scottish Burial Reform and Cremation Society Ltd v Glasgow Corporation [1968] AC 138 HL - Purpose of providing cremation services. IRC v Oldham Training and Enterprise Council [1996] STC 1218 - Retraining and assistance to the unemployed. The Charity Commission Commentary on the 2006 Act also identifies the following examples of purposes within the residual head:
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CRITERIA II - PUBLIC BENEFIT
Public Benefit:Verge v Somerville [1924] AC 496 - The purpose must benefit the community or some appreciably important class of the community.
Public benefit for Poverty:
Dingle v Turner [1972] AC 601 - Charitable benefits under this head are restricted to 'people who can fairly be said to be, according to current standards, "poor"
Public benefit under the third head for the advancement of religion
Gilmour v Coats [1949] AC 426 - When the available evidence demonstrates that a particular religion or religious practice is actually detrimental to the public, or confers no tangible benefit on the public, that religion or religious practice will not be recognised as charitable - at any rate, as long as charitable status enjoys fiscal immunity.
Public Benefit for education: Re Compton [1945] 1 Ch 123 - addresses whether a trust serves a sufficiently large and indefinite section of the public to qualify
Oppenheim v Tobacco Securities Trust Co. Ltd [1951] AC 297, HL - a trust established for the education of members of the general public will not be charitable if the settlor directs the trustees to prefer the employees of a particular company or members of his own family.
Re Koettgen [1954] 1 All ER 581 - but if the settlor merely expresses his 'wish' that the trustee should prefer the employee of a particular company or members of his own family the trust will be presumed charitable
CRITERIA III - WHOLLY AND EXCLUSIVELY CHARITABLE
To qualify for special treatment, a charitable trust must be exclusively charitable both with regard to its stated purposes and in the practca pursuit of those purposes. Section 1(1)(a) of the Charities Act 2011retains this rule by stating that a body or trust is a charity if it is established for a charitable purposes 'only'. Whether trust purposes are exclusively charitable is a question of construction.
IRC v McMullen [1981] AC 1 - [i]n construing trust deeds the intention of which is to set up a charitable trust... where it can be claimed that there is ambiguity, a beningnant construction should be given if possible'
Re Best [1904] 2 Ch 354 - A trust for 'charitable and benevolent' objects is exclusively charitable.
Chichester Diocesan Fund and Board of Finance v Simpson [1944] AC 341 - a trust for 'charitable or benevolent' objects, on the other hand, is not exclusively charitable and will therefore fail for uncertainty.
Re Coxen [1948] Ch 747 - A charity is permitted to pursue non-charitable purposes that are merely ancillary to, incidental to, or de minimis in comparison with, its charitable purposes.
Scottish Burial Reform and Cremation Society Ltd v Glasgow Corporation [1968] AC 138 - A charity is permitted to charge for its services as long as it is not in the business of making commercial profits.
Goodman Committee(1976) at para [27] - A commercial venture run for the primary purpose of making profits is not charitable, even though it may be highly beneficial to the community.
Re Harding [2008] Ch 235 - If a trust established for a certain class of people does not specify any purpose, the courts may construe it to be for purely charitable purposes.
CY- PRES
Cy-pres occurs when the property is given for a valid charitable purpose, but which is impossible, or impracticable to carry out.
To understand whether the money given should be considered charitable It is important to make a distinction between an initial failure and a subsequent failure.
The date of the death of the donor must be ascertained and then a hypothetical test must be carried out.
On the date when the donor died, if he tried to give the money to the institution stated in the will, could he in theory done so?
Initial Failure - If the answer is no because either the stated institution never existed or else by the date of the death of the donor the stated institution has ceased to exist.
Subsequent Failure - If the answer is yes, but you cannot pass the gift now because since the death of the donor the stated institution has ceased to exist.
Initial failure
If the property cannot be applied at the date the gift takes effect, it is impossible or impracticable. However, if it is possible to show that there was a general charitable intention to benefit, the gift can then be applied for another charitable purpose.
The test to be applied in this situation is to determine whether the settlor intended to benefit charities of the type transferred in general, or did the settlor had a particular charitable objective in mind.
If it was designated for specifically that institution - the money cannot be passed
