Law of Equity and Trusts - Exam Revision Notes (Part 1)

Trusts lecture week 2.

Concerned with today and next week – definition of charities
Maybe not very much has changed in terms of the definition of charity
Definition – lecture outline a1 – definition says 0 the act of stating a précised meaning or essence of the word or term
In what way is charity law providing us with a definition
Last week 16 o 1
1891 case – pemesel – hl talked about relief of poverty, advancement of education, other putposes benefiting community. Just a lsit, not a definition
Charities act 2006 – s2..last page of handout. Headed meaning of charitable purpose
Purpose that falls within subsection 2 and public benefit
So, another list. The legislation accepts the first 3 pemsel categories and lists in some detail lots of other things held to be charitable under other purposes beneficial to community
Judges astute, very rarely use the word definition. DOG- - detailed operative guide.
So not really a definition.. but will use the word definition in lectures
Worksheets 11 and 12 about definition
Today 3 core elements –
A 2 heading –
Logical structure...
Last week – gareth jones and history of charity
2a – quote from last week, see handout.. ‘few branches’
Jones arguing that the impact of non legal considetartions had significantly shaped teh law. Shaping took place over very long period of time. Reiterate the point its judge made law
Subsidiary questions: 1 – historically, how enthhusicaritc were the courts to recognised novel purposes as charity? How keen were they to see property being devoted to chareity? Another question– what criteria?
Keep in mind, not much evidence of a consisitent attitude towards the claims of charity. Sensitive to possibility of swings of legal attitude towards merits of charity
Runiung through caselaw – family v charity
Clear tension emerging at different times. Conflict – desire to preotect interest of family structure/ right of people to inherent property.. against –a possible desire at times to ecorage people to leave property to charity
Contrast tutdor period.. with an attiide – more cautious, reserved attitude towards the merits of charity
1736 - - m and charitable uses act
Effect- prohibited gifts of land in wills to charity
Significant implications for heads of charity
So sometimes more favourable, smtimes more hostile
Diversity of approach can be carried forward to 20th century

See quote handout – weir c crim-brown.. ‘no better rule’’.. if there is any doubt, if you can swing your opinion in favour of charity, u will..

Quote reaffirmed in 1981 case – inland revenue

And then 10years later – guild .. against inland revenue.

Both of these reaffirm the guiding approach set up in earlier case

Judge in high court – didn’t think it was charitable to improve prospects of football team
Cases in intervening periods that have a different approach to claims of charitable status
Particularly – lord cross—writing in law quarterly review 1956 –talking about apparent disparity in decisions
Cross draws a distinction between cases where conflict between family – the people suing to overturn in court are other members of the family. ‘ the reports of chancery cases at first instance are full of borderline decisions in favour of charity’
Contrasts this to inland revenue cases. They have in interest in saying something is not charitable.
Their arguments tend to be listened to with more sympathy - says ‘most of the recent decisions in the higher courts limiting the scope of charity have been in revenue cases
Series of crucial and HL decisions made- restrictive of definition of charity. So competing strands running through law. Courts have adopted a restrictive approach
There are 2000 charities registered very year by regulatory body the charity commission.
Most – case law
Novel purposes, whre u ge something different. New purpose/ tweak on old purpose. These cases are decided primarily by charities commission
Until charities act 2006, only way of challenging that was to take case to high court. This is expenseive, charity unlikely to have funds for this
Recently, appeals tribunal for charities.. charities appeal tribunal
If u want to know where the definition of charity is going, see website of charities commission..they list teh cases and guidance
HEADING B – 4 requirements of validity
They have to be satisfied if your purpose is recognised as charitable
1) purpose have to fall within one of the specified purposes in charities act 2006
2) important – purpose has to be for the public befnefit. 2 strands – 1 .. purpose has to be beneficial to community, some tabgible benefit provided to community. E.g. advanced education is presumed to benefit community.. the tricker one – 2 ---- that benefit must be conferred on a sufficiently large section of the community. 20th century development, arguably outcome of cases that occurred 10-15 years after 1945. Ecample ----
To advance education of my children, beneficial. Certainly wouldn’t benefit large section of community
Emphasis – very important requirement
3) purposes must be exclusively charitable. Morris case – word used was benevolent – held to be not charitable
4) purposes shouldn’t fall foul of disqualifying factors- shouldn’t make a profit. Your purposes must not be political.. so political activity disqualification
First and most traditional heads -- C RELIEF OF POVERTY
Not necessary to use this term. Croruts have accepted lots of synomns – relieve distressed gentle folk; purpose stated to be to assist any members of my savage club who have fallen on evil days.. case ray young 1951. Club has 316 members. Membership fee is 631£ a year. Club for gentlemen only.
Case ray naazi – 1978 – 15000$ for construction ..off mens hotel in Cyprus..
Building and proiviidng hostel – seen as a gift for relieving poverty
There are fine distinvitons in this are. Compare to cse – ray sanders.. purpose: to provide dwellings for working fams .. corut said – not charitable. Court said working classes are not necessarily poor.
Similar outcome in ray hoben – company wanted to provide funds for benemfict of employes whose homes had been destroyed by blitz. Courts – relieving dire distress as arresult of war, does not mean they are poor,
So find discinticitons operating in case law
Fundamental q – what is poverty
Heading 2 0 3 conepts of poverty ----
Absolute – identifies some fixed, absolute minimum level of income sufficient to provide for basic needs, to maintain life and limb, perhaps keep roof over head
This takes no particular account of living standards in a society at a particular time.
Second category – generally relative –development of absolute standards, but change to society. E.g. average household income, so absolute in one sense btu fixed in relation to level of income in society generally
Individual – poverty defined in relation to own standards in life. U may be used to opulent living.
How have the courts responded? Cases are a muddle. Support for all sorts of propositions.
Most recent case – re segelman 1996- 8 milliion ounds to be held on trust for 21 years for ‘benefit of poor and needy members of beneficial class’. Provision for any surplus left to be distributed at trustees discretion
At the time, 26 members of persons family.
At time of litigation, 26 potential beneficiaries. But as courts said, number may increase by birth of other members whose economic case are unknown
What criteria are courts applying in deciding this is for relief of poverty? See textbooks.
More relevant is teh approach that the charity commission may take to relieving trusts for purposes of charity
Relief of financial hardship – charity commission -Guidance note 2003 – a person does not have to destitute to qualify as poor. Don’t need to be poor over a long period to qualify.
Anyone who does not have access to normal things of life that most people take for granted, would qualify for help
So q – what is this?
They list a number of things –
Furniture and bedding, washing machines and fridges, radio and tv sets
This it the criteria they say trustees should be looking at
Bigger policy question running though their guidance
We live in a welfare state, there are state benefits.. charity commission conscious that there is a policy issue involved
In the same guidance note they say – trustees need to take care not to use the charities fund to simply replace state benefits. Would be a waste e.g. if charity gave job seekers allowance.
Should claim entitlement and charities come after
If they were to replacing state benefits, they be relieving the state
Charity commission – maintance of principle and position is more difficult to sustain
Mid 1970s – supplementary benefits act 1976 section 3 (1)- introduced a payment for exceptional needs
People were not entltled to this, discretionary payment from state where there were exceptional needs
Covers basic living – notion that there would be a time when u couldn’t afford to replace bed, fridge etc when ehy break. So payments made 0 reasonable criteria applied
1986 new social security act is introduced. Section 33 –introduced the social fund
Replaces old system, department officials now rewuired to consider whether an exceptional need can be met by a load from the fund. Criteria for what constitutes exceptional need was restricted
Section 33 9 c --- in making a decision, officials guided to have regard to the possibility that some iother person or body may wholly or partly meet that exceptional need. See slides.
Concern is that you’ll go to gevemnt, they’ll say – have u though about going to welfare fam association. If they say exceptional need. Concern is that charities shouldn’t be replacing state.. and concern people will be shunted back and fourth
Read page 1 of worksheet materials. Underlying policy question – to what extent is charity filling gaps opening up in state benefits?
How far is the charity stepping into this?
Blurring of boundaries between public and voluntary sections.. said by Diane leade.. :S
So considered social problem of poverty
Now – advancement of education –second head of charitable purposes:
Never been narrowly restricted to educational establishments.
Covers all cultural activities – all dance etc comes under rubric.
Now separated out – advancement of education and advancement of arts/culture
Key legal question – is the test of what is educational beneficial objective or subjective?
is the fact that the founder of some trust, believes that the purposes are of cultural worth
Re Delius case – well known composer. Widow left her estate on trust for advancement of musical works of my late husband
‘a purpose of raising the level of artistic taste int eh courrty is one of the most important things in the development of a civilised human being and is for the advancement od education’... see slide
Did something that gave pleasure prevent it from being charitable?
Suppose the lyricist/ composer less well known?
Jello biafro comparison..
Delius yes—doesn’t worry about other cases until they come to court
1965 case – pinion case. Terms of will – after pinion, wanted to leave studio and contents to be maintained by executors as a museum open to public without cost.
Attorney general arguing for charity: the museum is a palce where the law assumes to have n educational value/purpose
The fact that a particular individual thinks something should be charitable/is for public benefit
The fact that the trust finder subjectively thinks that what he is leaving is publicly beneficial. Not decision. There is an objective element, the court can decide if its for public benefit
Wilberforce- upheld this as a valid charitable trust (district court)
Goes to high court - - justice Harmen – no useful object to be served in foisting upon the public this mass of junk – no educative or public value
Whose values are decisive about what is educational and what is meritorious?
The borderline between what is education and what is propaganda can become slippery. This is when the opinion of court can be very important
Shaw – had anarchic views –
Clause 35 of his will 0 see slide. Shaw was interested in phonetics, wanted a phonetic alphabet in place of current one. Wanted money left from will to be devoted to this purpose.
Shaw had written play called Pygmalion.. very successful. His estate became far more valuable than had ever been envisaged. So this clause in will takes on new dimensions. Is this for the advancement of education?
Clause 35 of will – the enquiry must not imply any approval or disapproval of the British alphabet. .. seems objective.
Clause 38 – expenditure type clause. See slide.
Is it a charitable purpose for advancemtn of education?
Before we decided this, lets look at someone else’s trust:
Re Hopkins Will trusts – 1965.. see slide.
Money left to be earmarked and applied towards...believed by person who left will that Shakespeare was an impostor and wanted money she left to prove this.
Attractiveness of cases – both seem eccentric to people. Usual.
Re Shaw was held to be void. High court said --Purpose was not beneficial to community.. clause 38 was shaws ... Hugh courts said the means were progandonaist not educational.
Re Hopkins trust upheld as valid. Wilberforce rejected argument that it was manifestly futile. No objection. No mention made of possible lack of objectivity in re Hopkins will trust
Remember – it was to find the ‘bacon- Shakespeare manuscripts..’
So both above – one upheld, one not upheld.
We cans see what shows alphabet looks like
Result: argued to publish andropolis and the lion.. in both normal and shaws alphabet
Advancement of religion
What is religion?
Case law – re south... religion is concerned with mans relation to god..fath and worship, faith in a god and worship of that god.
Debate – should we include definition of religion in legislation?
What some people see as religious cults obtain charitable status? Definition – dangerous..
Parliament—‘religion includes .. charities act 2006 s 2 3 a..

How do we go about deciding if a religion is for public benefit?
Long established caselaw-says what is NOT beneficial
THORNTON V HOWE – court held charitable a testamentary device of land the purpose of which was to ..promote works of Johanna Southcote..
Johanna had a lot of followers –
Case decided under 1736 m charitable uses act. This case was a victory, devise land was charitable mean that the gift would be void under the act
Thornton 0 leaves us with significant dicta in case.. the criteria for when a religious purpose would NOT be beneficial to community:
The purpose has to be ‘adverse to...’ see handout.
Another illustration – case of re Watson 1973 – case where proptery left for continuation of work of god ,, in propagating the truth as given in bible, see slide
Contained no member outside their immediate families; expert evidence was given that the extrinsic worth was nil
Trust was upheld, because it was not possible to say it was adverse... ‘subversive of all morality’
Nothing in charities act that changes these cases
Public policy problem – hra ..church of scientology
Charity commission in 2001, declined to register scientology
988 and 989 pages..see website for summary of their onions
At one stage, church of scientology wanted to appeal. Btu decided not to do it, would be too costly
One part of public benefit was that it needed to benefit a sufficiently large section of public
1016 to 1017 of Moffatt
Case- educating children of 2 fams not enough to benefit sufficiently large section of public.
Hl 1951 – Oppenheim v tobacco securities ---
Children of employees of british tobacco company.. so different to 3 fams. Estimated number of employees was 3000, so benefificares in excess of this
HL –educating employees was not charitable, did not benefit a sufficiently large section of the community
Reasining --- see slide – ‘seciton of the community’ indicate that the possible beneficies must not be numerically negligible.. and that the quality that distinguishes them from other members of the community, so they form by themselves a section of it
‘a personal nexus test’ – all of the beneficiaries here are linked to the tobacco company..personal nexus
CASE – dingle v turner – to pay pensions to poor employees of e dingle and co..
Personal nexus but a valid charitable trust 1011- 1113 txtbok.. materials pages 226..
Oppneheim and dingle.. lord cross said this: referring back to Oppenheim – see slide
Not a public purpose, it is a public purpose. His view is that it is an attempt to obtain fringe benefits for employees at the tax payers expense
2 THINGS- section of public test that differs according to particular head of charity
And lord cross saying decisions of this area are about tax relief rather than educational advancements.. trying to use it,,
This is NOT the agreed view of all of the lordships in HL. Remains unresolved and contentious
The test is at heart of debate