Charities

• Second exemption to purpose trusts: Charites have existed since 1601.

  • Charities Act (2006) (amended Charities Act (2011)) – not an amending but a consolidating act (all previous caselaw therefore relevant)

  • S.1(1) A charity is an institution which is established for a charitable purpose only: A charitable purpose is one which falls in s.3(1) and which is for the public benefit.

• The need for charitable laws:

  • Charites are good things: morally ethically good, emotive, welfare state, distribution of wealth to those in need. Inland revenue could not raise similar amounts.

  • Charities are not as benevolent as we might hope: workers can abuse powers; often patriarchal; tax breaks; potential corruption; proliferation of small charities on the same issue can be inefficient.

    • “Independent schools, private hospitals and clinics, universities, artistic performances and a number of other upper and middle-class institutions should be excluded” (Minority Report of Bent Whitaker in the Goodman Report)

    • It retards progress towards true socialism because it presupposes the inequality which it purports to try to eliminate – MR Chesterman

• The Disadvantages

  • Cannot be for profit

  • Charitable funds can only be spent for charitable purposes

• Charitable Advantages:

  • Legal (these are uncontroversial)

    • No need for three certainties (no certainty of object)

      • Courts lean towards validating a Charity rather than not – unless there is very clearly no intention

      • Moggridge v Thackwell (1802): A charitable trust will not fail if the object of the trust are uncertain. It will also not fail if the aims of the trust are not clear.

    • Rule against inalienability and against perpetuities inapplicable (can last for ever)

    • Majority Vote: n private express trust trustees must act unanimously.

    • Number of Trustees: four in private express, 20-30 in charities.

    • Charities are enforced by the AG

    • Cy-près Doctrine (below)

  • Fiscal (more controversial)

    • Charities are exempt from the vast majority of taxations: no cooperation tax, income tax, inheritance tax plus gift aid.

      • Hayton and Marshall: “The fiscal advantages are such that … over 400 million tax is lost” pa

    • A large number of tax avoidance schemes.

• Traditionally a charity:

  • 1) Had a charitable purpose

    • Preamble of the Statute of Elizabeth 1601:

      • Relief of poverty

      • Advancement of education

      • Advancement of religion

      • Other purposes beneficial to the Community (the catch all)

    • List expanded over time. Now s.3 of Charities Act 2006/11

  • 2) For Public Benefit: own test.

    • Previously presumed. Now no presumption. Must be proved on a annual basis (s.4(1) CA 2011)

  • 3) Exclusively charitable: if more than one purpose all purposes must be charitable

    • Chichester Diocesan Board v Simpson [1944] – ‘charitable or benevolent objects’ were held not to be charitable.

      • If the purposes are ‘charitable and philanthropic’, they are wholly charitable; but if they are described as ‘charitable or philanthropic’, the trust will not be charitable as the funds could be applied entirely to non-charitable purposes. So will fail.

Charitable Purposes

• 1) The Relief and Prevention of Poverty: a genuine risk that someone may fall below the poverty line as objectively determined.

  • Poverty is relative not looking for absolute poverty (Re Clarke [1923])

    • It is enough to ‘go short’ (not having enough to satisfy basic requirement) Re Coulhurst [1951])

    • Being simply ‘working class’ does not mean poor (Re Sanders [1954])

    • But Poverty can be adduced from additional evidence:

      • Re Niyazi’s [1978] - ‘working men’s hostel’ may suffice to imply those in need; the money left was so limited it could only cover the most basic of facilities.

    • Other permitted charities:

      • “distressed gentlefolk” (Re Young);

      • “widows and orphans in a particular area” (AG v Power),

      • “to give 5 Guinea per week to the eldest respectable inhabitant in Gunville” (Re Lucas)

      • “gifts for unsuccessful literary men” (Thompson v Thompson)

      • But not provision of ‘knickers’ to boys (Re Gwyon)

  • Meaning of relief:

    • IRC v Baddeley [1955] – relief is equated with need; a need people have but cannot satisfy themselves.

    • Joseph Rowantree v AG – cannot be for amusement purposes (e.g. going on holiday)

      • Children’s Charities that send sick kids to Disneyland can only do so under the advancement of health headings.

  • Meaning of prevention:

    • Was an addition to the existing law. Influenced by AITC Foundation's Application for Registration as a Charity [2005]

      • Wanted to help people who had suffered as a result of the collapse of a particular type of investment. Investors were nto poor but were held to be at risk.

• 2) Advancement of Education

  • Advancement – must be for genuine progression.

  • Meaning of Education

    • Schools of learning/free schools/scholars and Universities

    • But schools are not necessarily charitable, e.g. local schools and private schools for profit.

  • Other types of education (very broad):

    • Royal Choral Society v IRC [1943] ‘to form and maintain a choir’

    • Council of Law Reporting EW v AG [1973] – ‘the improvement of useful branch of a human knowledge and its public dissemination’

    • Re Dupree – “chess tournament” - ok - although it came with “slippery slope” warning”

    • McGraph v Cohen: Trust to establish rose garden at university. Held it would be valid if it is deemed to inspire all but the most blase students.

    • Re Melody – “to provide annual treat or field days for school children” - ok as it would encourage nature studies

    • Re Lopes “even a ride on an elephant may be considered education”

  • But there are limits

    • Re Hummeltenberg - college to train spiritualistic mediums - not charitable

    • Re Pinion - Harman LJ – ‘museum of junk’ and “schools for pickpockets or prostitutes - not charitable

    • Southwood v AG –political activities masquerading as education are not cahritible

  • Research can be educational but must be some dissemination with others (i.e. public benefit)

    • Slade J in McGovern v AG [1982]: must be a useful...

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