(A) Charitable Purposes

Features of charitable trusts
•    Valid trusts for purposes rather than for people
•    These trusts are by virtue of statute often exempt from taxes etc
•    We ask, is this charitable for the purposes of some particular benefit in the tax system?
•    Is this gift charitable? If so can we change or tweak a bit?
•    If you create a trust inter vivos, you are settlor and you give to trustee. If it fails property goes back to you
•    If you are dead you are called testator. If trust fails, property goes back to executors.
•    A charitable trust can be created while you are alive or dead.
•    If a charitable purpose becomes impossible, the property may (subject to certain rules) be applied to another charitable purpose (“cy-pres”)
•    An equitable jurisdiction can create “cy-pres” scheme for a charitable trust only, not a private trust.
•    Where one of several charitable gifts fails, it can be severed without invalidating the remaining gifts: Charitable Trusts Act 1993 (NSW) s23
•    Charitable trusts may continue in perpetuity. A gift over in default to a charity doesn’t have perpetuity problem.
•    We look at cases where next of kin challenge testator’s charitable gift.

Charitable Purposes
Note: We are looking at the purpose of the trust and not the nature of the trustee institution (or beneficiaries)
•    These days tax statutes require charities to be registered to avoid these tax problems.
•    Not everything that is for a good cause fits the legal definition of a charity.

The Statute of Elizabeth (Charitable Uses Act 1601)  Preamble still referred to
 “… for relief of aged, impotent, and poor people, some for maintenance of sick and maimed soldiers and mariners, schools of learning, free schools, and scholars in universities: some for repair of bridges, ports, havens, causeways, churches, seabanks and highways; some for education and preferment of orphans, some for or toward the relief, stock or maintenance of houses of correction; some for marriages of poor maidens; some for supportation, aid, and help of young tradesmen, handicraftsmen, and persons decayed; and other for relief or redemption of prisoners or captives, and for the aid or ease of any poor inhabitants concerning payment of fifteens, setting out of soldiers, and other taxes; …”
•    Four classes of charitable purpose arise.
•    Have to show your purpose is within one of these classes.
1.    Relief of poverty  poor, impotent etc
2.    Trust for advancement of education
3.    Trust for advancement of religion
4.    Trust for other purposes  have to be beneficial to the community within intendment of the statute of Elizabeth, e.g. repair of bridges, causeways etc

Commissioner for Special Purposes of Income Tax v Pemsel (1891)
Lord Macnaghten:
“Charity” in its legal sense comprises four principal divisions: trusts for the relief of poverty; trusts for the advancement of education; trusts for advancement of religion; and trusts for other purposes beneficial to the community not falling under any of the other preceding heads.

Scottish Burial Reform & Cremation Society Ltd v Glasgow Corporation
•    Money left for cremation of bodies rather than burial.
•    This was found to be charitable
•    It was categorised as an activity of public utility
•    Either argue by analogy from the Statute or as in this case make a case for public utility
•    It fit within the burials, churches and maintenance of graves etc always considered charitable in statute. So by analogy, doing it in hygienic way is considered charitable.
•    Wilberforce LJ says can read statute generously
“The purposes in question, to be charitable, must be shown to be for the benefit of the public or the community in a sense or in a manner within the intendment of the preamble to the statute 43 Eliz 1c4. The latter requirement does not mean quite what it says; for it is now accepted that what must be regarded is not the wording of the preamble itself, but the effect of decisions given by the courts as to its scope, decisions which have endeavoured to keep the law as to charities moving according as new social needs arise or old ones become obsolete or satisfied”
•    Upjohn LJ takes opposite view
“The authorities show that the ‘spirit and intendment’ of the preamble to the Statute of Elizabeth have been stretched almost to breaking point. In the 19th and 20th centuries this was often due to a desire on the part of the courts to save the intentions of the settlor or testator from failure …Now that is used so frequently to avoid the common man’s liability to rates or taxes, this generous trend in the law may one day require reconsideration.”

Royal National Agricultural Society v Chester
•    Trust for breeding of racing pigeons
Two approaches from the Scottish Burial Case
(i)    Argue by analogy from Statute of Elizabeth and decided cases
(ii)    Characterise the activity as one of public utility
•    Argument in this case was that breeding was a wonderful thing because it was a useful form of communication.

(B) Public Benefit

Public Benefit
•    Must be for the benefit of a section of the public

“The
Public”

Re Compton
•    Although trust was for educational purposes, it was only for children of those belonging to particular families (Compton, Powell and Montague children). Doesn’t meet public test.
Lord Greene MR: “A gift under which the beneficiaries are defined by reference to a purely personal relationship to a named propositus cannot on principle be a valid gift”
•    Public benefit test not applied strictly to poverty cases (Dingle v Turner)
•    Even a charity that has a small class may survive despite fact that class is defined by relationship to a family

Oppenheim v Tobacco Securities Trust Co Ltd
•    Trust for education of children of employees or former employees
Lord Simonds: “The possible beneficiaries must not be numerically negligible, and …the quality which distinguishes them from other members or the community, so that they by themselves form a section of it, must be a quality which does not depend on their relationship to a particular individual.”
•    Still failed, had to have a relationship with the public
•    This was providing scholarship whereas Dingle v Turner was helping poverty.

Re Koettgenn’s Will Trusts
Facts: Testatrix made a gift for the “promotion and furtherance of commercial education”. Those eligible were born of British descent and wanted to educate themselves but didn’t have the money. Gift provided that up to 75% of the fund be given to “preferred beneficiaries” who were to be “employees of John Batt & Co or members of the family of such employees”
•    Public benefit test was passed because the trustees had to give 25% to the public but could have given more.
•    Where does the line get drawn.
•    As soon as you can say that a section of the public cannot benefit from the trust charitable trust fails.
Trust was for the advancement of education but was it for the public?
Held: Determine the validity of trust by looking at primary class of objects. Here primary class is anyone of British descent without means of furthering their education  This is clearly the public, a subsequent expression of preference did not make the trust invalid.

•    Public benefit test is not rigorously applied for the relief of poverty. This is because the salvation of one person is good for the whole community. Hence, even though may have a very small class, may nevertheless survive even though may involve relationship to family.

Dingle v Turner
Facts: Pensions for “poor employees” of a particular Co.
Held: Even though for a small group of beneficiaries, still could be public trust as it was for the relief of poverty.

Downing v FCT - Don’t have to prove that in absolute penury.

Re Income Tax Acts No 1
Facts: Gift to benevolent asylum to which only freemasons and their wives or widows could be admitted.
Issue: Is this a public benevolent asylum within the Victorian Tax enactment?
Held: No. A group may constitute a section of the public if there is no restriction on the admission of some members of the public while others are allowed (i.e. any member of the public may adhere to a certain faith or live in a particular area). This can be distinguished from associations which take the power themselves to admit or exclude members of the public according to some arbitrary test which they set up in their rules or otherwise e.g. trade unions, clubs, literary societies.

IRC v Baddeley
Facts: A conveyance of land on trust for “the promotion of the religious social and physical well-being of persons resident in …West Ham and Leyton [who are or are likely to become] members of the Methodist church”.
•    Viscount Simon  tough on finding charities
•    It was for the promotion of physical and social well being not for religion per se
•    It was also not for the public as such  there were too many restrictions preventing people joining. Had to live in the territory (geographical limitation) and be or likely to become Methodist.

Held (per Viscount Simond): “Somewhat different considerations arise if the form, which the purporting charity takes, is something of general utility which is nevertheless made available not to the whole public but only to a selected body of the public – an important class of the public it may be. For example a bridge which is available for all the public may undoubtedly be a charity and it is indifferent how many people use it. But confine it to a selected number of persons, however numerous and important: it is clearly then not a charity. It is not of general public utility: for it does not serve the public purpose which its nature qualifies it to serve”

•    Viscount Simond distinguished between
“a form of relief extended to the whole community yet by its very nature is advantageous only to a few” [e.g. a sea wall or a bridge]
and “a form of relief accorded to a selected few out of a larger number equally willing and able to take advantage of it”
•    No public benefit if beneficiaries confined to persons of a particular area selected from it by reference to a particular creed.

Davies v Perpetual Trustee Co
Facts: Property left to “the Presbyterians the descendants of those settled in the colony hailing from or born in the North of Ireland to be held in trust for the purpose of establishing a college for the education and tuition of their youth in the standards of Westminster Divines as taught in the scriptures.”

Held: The objects of the trust are clearly not the community. The testator has been at pains to impose particular and capricious qualifications on the persons who are to benefit from this education. These persons cannot be a “section of the community” …it is clear that the nexus between the beneficiaries is simply their relationship to several people living at the death of the testator.
- I.e. the qualifications needed to benefit from the gift are irrelevant to the educational object of the trust and are purely personal

Thompson v FCT
Facts: For schools for the brethren and the deceased brethren of the Masonic Order in NSW.

Held: Even though wide reach, still had to be a member of the club, and so couldn’t be a charitable trust. Here association takes power itself to exclude or admit members of the public.

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