Law of Equity and Trusts - Exam Revision Notes (Part 2)

TRUSTS LECTURE TERM 2 WEEK 3

WEEK 13: WORKSHEET 12 LECTURE OUTLINE

Worksheet 12 is what this week and next week is about

Worksheet 12 partly about weaknesses of charity law as it is
Focus provided by a publication – ‘ The other invisible hand – Remaking charity law for the 20th century). Came out from a think tank called Demos. Left of centre think tank (sort of). Book written by moulgun.. and laundry. Moulgun was head of tony blairs number 10 think bank. authors setting out a background philosophy/ belief system:
1 – 1 hand of self interest that works through the market to promote economic prosperity
2 – 2nd hand of generosity, help and moral commitment that sustains a sense of community and mutual responsibility
social cement/glue issue from worksheet 10.
A policy objective that runs from their analysis: they want a change in the culture towards a more engaged society. Their response is intended to go against the prevailing ethos of individualism as the dominant motif in society. The merit of economic benefits hand needs to be countered by other – invisible hand
So greater sense of community – want to do this through charity law.
The heritage and influence of charity law is out of date, out of touch with modern society
See heading A3 on handout. Label of a rag bag.
Undermining demos critique: one argument is that their critique is based on a questionable understanding of the law
Theme 1 : is the definition of charitable purpose restrictive or flexible? Or both?
As regards flexibility y- under heading B. Other charitable purposes. Used to be called other purposes.. in case pemsel
Restrictiveness is concerned with politics and charity. Topic C
Another theme that underpins this whole area, is that however you come to analyse the definition (rigid/flex/mixture)... one question: do the rules reflect a logical system of the outcome?? Or are we dealing with an empirical morass? :S:S:S
Can find quotes from judges that law of charity has been developed empirically not logically
One focus with this theme is this section of the public requirement.
Third theme: one touched on my moulgun... in quote inn number 3. A question which does not concern us but: are the concerns of charity law shifting from gatekeeper type function to a policeman type function
Charities act 2006, yes concerned with defining charitable purposes
Relevant sections – 2, 3, 4 in materials
Most of the legislation is concerned with regulation/monitoring (most we don’t cover in this course so don’t worry!)
So above are the three themes.

Other purposes beneficial to community (as called under pemsel criteria) .. now any other purposes:

Obvious question: what do these words mean? Is there a coherent structure?

Mant of the purposes that cluster under the head (the pemsel pre-2006 crtiteria), now find their place in charities act 2006.. in a list.

1601 preamble (where we started). Example: providing relief or assistance to elderly, directly in preamble. Other purposes slightly trickier, particularly animals. Preamble: wont find anything about them

Case of re Wedgwood 1915 – cans see in CA said – what these charities try to do is promote and encourage kindness to animals, stimulate humane and generous sentiments in man towards the lower animals. In other words, its good for us. For our moral fibre and well being.

Good but raising our morality has limits.

Courts: the activities of such organisations are on balance NOT benefocical to community. The advancement of human knowledge by conducting experiments on animalas outweighs human morality

Overcome by benfits from experimenting

Decided in 1948 HL case.
Pages 990 – 998. Moffat. Coverage of these purposes. Most of these incorporated in the act that we had last week
Having a list – doesn’t tell u whether somthing not on the list is charitable?
When will some other purpose thats not on the list be charitable? Look at last page of lecture outline: charities act 2006 – masterpiece of paarliamertnary draftsmanship
Section 2(2) ---subsection 4... we have a list but some thigns that are not on the list but a re recognised as charitires, this covers them.
Incorpoaration int o staturty form that the courts applied in pemsel in 1891. So we have a list – a to l in section 2. Plus any other currently recognised purposes. Plus an analogy of any of those. Plus AN ANALAOGY UPON THE ANALOGY
So what does this mean?
HL a negative proposition – after pemsel – if smthing is beneficial to public, must be charity. Says inthis case: RE macduff 1896 .. ‘not every object of public general utility must necedsarily be acharity’
Case – Scottish bural reform v Glasgow --- lord read in this case who give the leading judgement says/ tried to explain what the sections in the act above mean: says - -
This gradual extention has proceeded so far that there aare few modern reported cases where a clearly specified object which was for the benefit of the public at large and not of individuals,,spirit Elizabeth
Four years later, case goes to CA. The charity commission refused to recognise as a charity the law reports.. but in CA: 2 of the judges thought it was educational. They all thought it was valid as some other purpose beneficial to community. Lord justice russel – talks about the above
Conclusion he reaches: russel lj : corourts accepting that if a purpose...
He says: it is a prima facie charitable test.
But left open a line of retreat based on teh equity of the statute..
‘not in Spirit and intendment of statute of elizabeth’. Tihis is a juduical get out.
1948: HL said test is a test that adopts the language within the spirit and intendment, not a prima facie test
So question – how does the charity commission adopt new purposes? It says – we are bound by the hl, cant follow russel..but doesn’t not seem to be rpesenting them with much diffulcity : they say this:
‘beleive it will enarly always be possible to find an analgy if the nature of the nefit is really of a kind that ought to be recognised as charitable’.. so theya re saying it is easy to find things analygous
.. see handout. went to supreme court

An organsiaiton wanted to provide free access to the internet. Could they find an analgy? They came up with one from the preamble. The preamble talkis about charitable: repairing highways. They used this connection.

Dissenting judge in Canadian court – dispproved the potentially misleading use of analgoies. So liberal process but still a apossibiikity of things going off the rail

So this is the process you have to go through to recognise new purposes

Should this issue go before HL again..dicta from privy council case.. cayman island..see sheet..

This shows where we are regarding other purposes beneifical to community

Flexibility within the law. Now we are shifting to possible contrants.. restircitng the definition (heading C) and disqualifying factors.
Worksheet 10 - - some of the readings concenred weith notion of altruism. This requiremet is consistent with one aspect of the first disqualifying factor
Relates to fee charging. If you have an organsiasiotn that charges fees, may make a profit. This is not liked by chairity commission.. where organsiations set up and then distribute dividends to shareholders. This is a business and not a charity
Does tihs mean an isntiutuin that seeks to heal the sick cant charge fees? If u can, must there be some limit on the fees charged?
Answer in case – re Resch wills trust.. privy council decided in 1969. Australian. Resch made fortune making beer, residual estate of 8 billion Australian dollars. Wanted to give gift to fee charging private hospital run by nuns. They were not distributing.
Yes it can be ca=haritable even if fee chargins
Propostion advanced in this case: can an instition that excludes the poor be said to satisfy the public benefit critera?
‘the private hopstial is not carried on for purposes ‘’befnefoical to the community’’ because it provides only for persons of means who are capable of paying the substantial fees required as a condition of admission
In other words: it does not satisfy the secition of the public requirement
The fees charged here were approx cost price. Plus references made to insurance. So people may have had insurance so the poor now wholly excluded.
Feauture of health care in new south wales, did not have nhs. Their system based on insurance.
Said: : : the test is essentially one of public benefit and indirect as well as direct benefits enters into the account
Had it been necessary to assess the benefit, lor Wilberforce identifies a 3 fold benefit
Said there is an indirect benefit to society – less pressure on beds in public hospitals
Also identifies a spill over effect. On the facts of this case, the private hospital was adjacent to general public hospital. Said: there will be a benefit to the standard of care, doctors can nip over
There are these 3 ttypes of indirect benefits which should be taken i to account when assessing the public benefit test
3 fold criticism: he does not consider the possibity that it could be zero sum game. He thinks there will be general uplift in resources. This is an empirical question that needs to be addressed. He doesn’t consider this possibility
Also, doesn’t consider at all – (can see why he wouldn’t): political debates about public and private
Also more legalistic point: is lord wilberofrce blurring two aspects of public benenfit?
[[[IS SMTHING Beneficial??? Does it nefiit a significant large sectior of public?]]]
Can justapose oppenhim with re resh. In Oppenheim the hl specifically reject the propisiton that indirect benefit to employees children is a relevant consdietation. Very different view taken in re resch
Second restrictive elements: the political purposes disqualificaiotn:
Case law – attorney general – amnesty intenatinal case.
1981 amnesty int trust had their application truned by charity commissiton for registration.
Bought case before court.
Several of the clauses in their trustee were unquestionably charitable
See a, d and e on handout. (may not be there) All of these were unquestiobaly charitable. A d and e were charitable.
Problem came with 2 clauses on lecture outline: clauses b and c.
Clause b – argument on behalf of amnesty put forward by their counsel – relief of inhumane and distress – directly applicable to purpose in preamble –redemption adn release of captives.
Courts view: what this purpose seeks to do is procure the revceersal of relevant decisions of gvemrns....
So court saying: Seeking to alter the decision of gments to detain prisoners of conscious. Thefgore it is a trust for a political purpose, and not charitable.
Clasue c. Court said to achieve the objective in clasue c, means/necessittaes the procuring of changes in law in foreign countries/reverisng gment deicisons on foreign coutries.. this is not charitable. It is political
So question; how does the law of cahirty, reach a position which involves a chaity whch is of great value to humanity.. how can they decide this is NOT a chairyt!?!?! (Amnesty)
Answer: in a rule – ‘a trust for the attainment of political objects has always been held invalid’
From bowman and securlar society HL 1917, said the above. Its a really thin read on which to base a major proposition. Issue in the case is whether the objects were blasphemous so what is said in case is obiter.
Bowman also comes up with rationale – trying to obtain a change in the law.
Proposition: the court has no means of judging whether a proposed change in the law will or will not be for the public benefit and therefor cannot say that a gift to secure the change is charitable. This is teh rationale for the rule.
1023 – 1032 -- -readings in his book/ good deal of analysis of this propostion..
Does the ‘cannot’ refer to practical diffilictues?? (actually cant define the outcome). This is not easy to reconcile with 1948 case – inland revenue..national anti ivisection society...case.. here court wanted to say – animals.. would be detriment to us. This case is important because lord simons advances a series of propsotions which take bowman further..
He says -we have to accept that the law is right as it stands, it is the legislator to change the law and the role of the courts to apply the law. Obvious response is – who could dissent from that??
But other hand -------- one of the thigs judge do is make the law. Running dispute between lord simons and lord denning. Simons was a real judicial formalist.. comes to this with a partiulcar perspective
The whole of charity law before 1946 was judge made.. judicial creation before so why not be able to change it now?
Even if the courts we re to recognise it, it is not CHANGING the law. Just saying that someone should be able to put the law out there and parliamnent can look at it. Campaigingn to be changesd, not changinging!
Other rationales for having this rule:
The rule as currently applied by charity commission allows some campaigning, the fact u have a political purpose doesn’t mean u cant campaign. But u may over step it as Oxfam did.
Another – greenpeace --- not a chaitrty, idnepednent non profit organsiaiton. But has set up a subsidiary trust.. purposes of edication, relieveing suffering, .. so these are charitable but orgnsaition is not.

Or is it a consittiunal statemtn about the role of courts? Judicially should not?

Getting towards end of this part of the module.
Residicual dualism in the law – is it both flexible and restrictive?
As far as flexibility is concerned, can be argues that this current application of reasoning by analysis is not much of a hindrance to new purposes beign recognised
So – prima facie test dressed up in sprit and intendment language.. and your purpose is likely to be charitable as long as not private benefit or political
By way of contrast --- restrictiveness is most evident in series of HL cases between 1945 and 1955:
IRC v Williams 1947
IRC v national anti-vivisection society 1948
Gilmour v coats 1949
Oppenheim 1951
City of Glasgow police athletic association v irs 1953
IRC v baddelely 1955
All of these cases (except Gilmour) involve IRc.
Left untouched by charities act 2006, is TAX RELIEF. Nothing in legislation deals with question of tax reliefs.
Its not as though it has not been a running issue
The pemsel minortity wanted relief for releieving poverty
Demos in 1995 –
Lots of groups and indivvilas feel there should be severance for the availability of tax reliefs in charity
Still where we are with pemsel in 1981!!! EXCEPT
Is tax relief in reality still a player when it comes to teh definition?
Revisit last week – quite from lord cross in dignle and turner case:
When asnweing whether a trust is a charity ... fiscal priviledeges relevant

(dicta of cross)

Saying: lets not pretentd that tax is nothing to dow tih definition, courts are influenced by availability of tax reliefs. Two of the judges specifically distanced himself.. silent.
‘the fiscal privileges may be material on the question of whether what is alleged to be a charity is sufficiently altruistic to qualify as such’. Lord M.... in Dingle.
Meaning: hinting at, when it comes to section of public part of test, tax relif may be relevant btu not when it comes to general definsition.
Slde – there is a grid. GET IT FROM THE WEBSITE. It is titled public benefit. ‘beneficial’ and ‘section of the public’.
IRC BADDELELY –class within a class..
Plethora of choice as to what section of the public is. See grid
See bit written underneath
Reinforce that proposition in section 3 of charities act.. section 3 (the public befieit test).. section 3 THREE.
Left with common law test we already have! Well, tests/ not one.
This approach by givenremt prompted this response from JL lord PHIllips during passage of charities act – ‘ it seems that teh governemtn want the appearance of a change without the substance and want to satisfy critics of the status quo without arousing the middle classes. They want credits without any opprobrium
About fee charging and section of the public test. Charitable commission left with – required to givce guidance what public benfiet means.
See websites on lecture outline.. can see what the charity commission has done in 2009. Eg. Required two schools to do more to satisfy the public befniet requiremtn. Also same for elderly peoples organisaioions. So it is looking at fee charign instutuins.
The latest position in this area/ the independent schools council is considering a legal challenge on fee charging
Not heard the last of re resch.
Oddstoccks private care limited --- unquestiobaly a charitable purpose. Fee charging isntituions.. fees are £8063 for knee replacenmnt (example)// the internal decision making body said: the poor would be excluded. Response --- insurance???
Say this --- clear warning that the charity commission is looking at the level of fees.
Coventry boot fund – provides free shoes for disadvantaged.
Next week