EQUITY AND TRUSTS

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EQUITY AND TRUSTS. CHARITIES 1. In this section we will consider:. The structure of charitable organisations Advantages and disadvantages of charitable status Requirements of charitable status Charities and political activity The reform of the definition of charity The doctrine of cy-pres. - PowerPoint PPT Presentation

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  • EQUITY AND TRUSTS

    CHARITIES 1

  • In this section we will consider:The structure of charitable organisationsAdvantages and disadvantages of charitable statusRequirements of charitable statusCharities and political activityThe reform of the definition of charityThe doctrine of cy-pres

  • Structure Charities currently take one of the following forms:

    TrustsCharitable corporations (companies limited by guarantee)Unincorporated associationsProposed now to create a new legal form for charities: the charitable incorporated organisation.

  • Advantages of charitable trustsCharities may exist for purposes (as opposed to non-charitable purpose trusts see below)

    Charitable trusts can be enforced by the Attorney General (thereby avoiding the problem facing NCPTs of the lack of a human beneficiary to enforce the execution of the trust)

  • Advantages of charitable trusts certainty

    Validity of charitable trusts does not require certainty of objects (e.g. gifts to charitable purposes or just to charity would be valid)

  • Advantages of charitable trusts perpetuityCharitable trusts may be perpetual. Two aspects to this:

  • Advantages of charitable trusts perpetuity

    (1) The rule against perpetual trusts does not apply to charitable trusts

  • Advantages of charitable trusts remoteness of vesting2) The rule against remoteness of vesting applies to charities except for gifts over from one charity to another

  • Advantages of charitable trusts taxationCharitable status brings tax advantages:

    exemptions from income and capital gains taxgifts exempt from inheritance taxreductions in rates charges of up to 100%

  • Advantages of charitable trusts statusFundraising is aided:

    Status and credibility money is more readily given to registered charities

  • Advantages of charitable trusts assistanceAssistance is available to registered charities:

    (1)The Charity Commissioners are able to offer advice to registered charities

  • Advantages of charitable trusts cy pres(2)Under Cy Pres when property cannot be applied to the charitable purpose the donor intended the Commissioners can make a cy pres scheme

  • Disadvantages of charitable trusts

  • Regulationregulation by Charity Commissionersneed for accountsCC monitoring CC have powers to disqualify trustees

  • Other disadvantagesRestrictions on political activities will be dealt with below.

  • Qualifying for charitable statusMust be for one or more charitable purposes (Pemsel four heads)

    Must be for the public benefit (under test for each head)

    Must be wholly and exclusively charitable

  • Defining charityCurrently no statutory definition of charity:Section 96 of the Charity Act 1993: any institution which is established for charitable purposesSection 97 CA 93 charitable purposes mean purposes which are exclusively charitable according to the law of England and Wales See in particular the preamble to the Charitable Uses Act 1601 used by the courts to determine whether a given purpose fell within the spirit and intendment of the Act.

  • Defining charityIncome Tax Special Purposes Commissioners v Pemsel [1891] AC 531, HL set out four heads of charitable trust into which a trust must fall to be charitable:Relief of poverty Advancement of educationReligionOther purposes beneficial to the community not part of the above

  • RepealThe preamble to the CUA 1601 was repealed by the CA 1960

    BUT in Scottish Burial Reform and Cremation Society Ltd v Glasgow Corporation [1968] AC 138, the HL held that law remained the same since the preamble was embedded in case law and that the definition of charity remained the same (see in particular Pemsel head four)

  • Role of Charity CommissionersDecide which charities are given registration

    Have same powers as court in determining charitable status

    CC have own body of precedent governs registration unless challenged

    CC also looking at reviewing register of charities with view to development of law

  • Charitable trustsA public or charitable trust is a trust for a purpose regarded in law as charitable and for benefit of the public (or for a section of public).

  • Requirements of charitable statusMust be for one or more charitable purposes (i.e. within one or more of the Pemsel four heads)

  • (1) PovertyPoverty: relative not absolute but need is a crucial element. Not same as destitution but dependent on condition of life at time of difficulty.

  • Poverty contd.IRC v Baddeley [1955] AC 572 HL: relief means that there must be a need to be relieved Rowntree (Joseph) Memorial Trust Housing Association Ltd v A-G [1983] Ch 159 must be need attributable to the condition of the person that they are unable to relieve themselves.

  • Poverty contd.The rich should be expressly excluded from benefit because the court is reluctant to infer such exclusion.

    e.g. Re Gwyon knickers for boys but not expressly for poor boys and so not charitable under the poverty

  • Poverty contd.Re Sanders WT [1954] Ch 265 gift to working classes did not limit benefit to the poor so not charitable

    Re Nayazis WT [1978] 3 All ER 785Gift to construct working mens hostel was charitable.

  • Poverty contd.Charity Commissioners recently registered the AITC Foundation in 2004. Set up to help those impoverished by collapse of split level investment companies. See in particular CC booklet: Charities for the Relief of Financial Hardship and the decision in Re De Carteret [1933] Ch 103 Note also conditions for receiving help relating to income and capital.

  • Aged impotent and poor people Terms to be read disjunctively so trust can be solely for poor

    Trusts for sick and aged generally appear under Pemsel head 4.

  • (2) Advancement of education Definition of education wide:

    Not just classroom teaching case law has recognised the publication of law reports, establishing maintaining museums, chess playing, research (but compare Re Shaw [1951] 1 all ER 656 and Re Hopkins [1965] Ch 669).

  • Re Shaw [1957] 1 All ER 745

    Trust for research into new alphabet deemed a mere increase in knowledge by Justice Harman could not be educational without more.

  • Re Hopkins WT [1965] Ch 669

    Gift to Francis Bacon society to conduct research into authorship of Shakespeares plays considered by Justice Wilberforce to be charitable see judgement.

  • McGovern v A-G [1982] Ch 321Trust for research charitable only if:

    Subject matter is useful

    Knowledge acquired will be disseminated.

  • Education and sportPromotion of sport not charitable unless it is means to a charitable end e.g. as part of educationRe Marriette [1915] 2 Ch 284 provision of squash courts at specific school was charitableIRC v McMullen [1981] AC 1, HL FA Youth Trust for schools and universities generally was sufficient limitation to be charitable.

  • Sport as a charitable purpose?If not for the education of the young then sport must be for charitable end e.g. Pemsel head four:facilities for the disabledimproving police efficiency/armed forcesor under limited provisions of Recreational Charities Act 1958See applic of Re Nottage in North Taunton RUFC, Decs of CC Vol 15, Nov 1977 and recognition by CC of community participation in healthy recreation + extension of IRC McMullen and proposed recognition of advancement of amateur sport in Charities Bill.

  • (2) Education arts and cultureRoyal Choral Society v IRC [1952] 2 AC 378, PC trust to promote practice and performance of choralBut must be specific artistic pursuit: in Associated Artists artistic and dramatic works too vague.

  • Value judgementDoes the activity have any educational value?

    e.g. Re Delius [1957] Ch 299 merit of his work was crucial to the finding

    compare with Re Pinion [1965] Ch 85 where the art works had no educative value

  • Fee paying schoolsNot charitable if profit making unless profit is for school purposes only

    Are private schools worthy of charitable status see later for consideration of government proposals

  • Professional bodiesCharitable only if promoting education e.g. Royal College Surgeons of England v National Provincial Bank Ltd [1952] AC 631 HL

    Compare with General Nursing Council where aim to promote the profession rendered it uncharitable

  • (3) Advancement of religionThe meaning of religion. See Bowman v Secular Society Ltd [1917] AC 406, HL

    Any monotheistic belief will be recognised as religion

    Polytheistic beliefs now also recognised Hindu sect had divided but all parts were charitable.

  • Advancement of religion value judgements?Requires some religious belief rather than merely an ethical or moral position

    Re Southplace Ethical Society [1980] 3 All ER 918 essential characteristics are faith and worship.

  • Tolerance by courtsNo judgement is made as to the value of different religions see Neville Estates v Madden [1962] Ch 832.

  • Width of tolerationThis approach has allowed for eccentric beliefs to be found charitable

    Thornton v Howe (1862) 31 Beav. 14 trust recognised for publication of woman claiming to be pregnant by holy ghost.See also: Re Watson [1973] 3 All ER 678 Ch.D

  • Faith healingFunnel v Stewart [1996] 1 All ER 715 Ch.D trust for faith healing was upheld to be a religious purpose.National Federation of Spiritual Healers was registered as a charity in 2002 objects included promotion of practice of spiritual healing. See CC Decision, 15.08.02Compare