Charitable Trusts as One of the Types of Equity - Research Paper Example

“Equity” The possible issues that can be construed from the facts are the possible failure of the testamentary gifts made to the charities and the unincorporated association. A general outline of the law on charities and unincorporated association will be given and then the application will be discussed. Charitable trusts are trusts which are set up for the purpose which are beneficial to the public and are on authority of statute and common law considered to be “charitable”. Therefore not all beneficial purposes to the public are construed to be charitable. The question of ‘what is a charitable purpose’ has been of considerable scrutiny and has been subject to case law and reform proposals including the charities Act 2006. Charitable trusts do not require the beneficiary principle and so they are treated as valid purpose trusts which are enforced by the Attorney General (Penner, 2006). A purpose trust is found to be charitable if it is construed that the main aim of the trust was charitable; beneficial to the general public rather than being detrimental; it benefits the general public rather than focusing on collective private citizens; further it has to be proved that the purpose was solely charitable and neither political nor profit distributing. Public purpose trusts has been immensely scrutinized by courts and statutes and the new charities act 2006 has greatly reformed the law. However the old case law still remains to be of relevance, because of the fact that there has not been much judicial scrutiny after the new Act. The preamble to the Charities Uses Act 1601 provides a list of purposes which were said to be charitable; this has been reformed by the new act (Oakley & Parker, 2003). The preamble was used as a guide by Lord Mcnaughten in Income Tax Special Purposes Comrs v Pemsel for producing his four fold characterization of what is to be construed as charitable. The divisions were trusts for the relief of poverty; trusts for advancement of religion; trusts for advancement of education; and trusts for other purposes beneficial to the community (Hayton, David, Charles & Oshley, 2005). The fourth head is by far the broadest and relevant to the facts of the question. It has been stated to be the most difficult as it is quite complicated to classify what comes under the head of charitable. Lord Simmonds in A-G v National Provincial and Union Bank of England stated that a general public purpose benefitting the society will not suffice; it must be shown that that the trust was charitable (Penner, 2006). In Williams Trustees v IRC, here was a gift on trust to establish and maintain an institute, to be known as the London Welsh Association, the purposes of which included maintaining an institute for the benefit of Welsh people in London and promoting their language culture. The various activities of the institution included lectures, dances and provisions of facilities for clubs. The trust failed since these purposes were not exclusively charitable. Trust which have been set up for the welfare and preservation of wildlife have been judicially scrutinized. Trusts for the Prevention of Cruelty to Animals ( Tatham v Drummond (1864) and preservation of wildlife by means of animal sanctuaries have been held to be charitable. In Re Wedgewood it was held that trusts for animals will be charitable if they ‘tend to promote and encourage kindness towards animals and … to stimulate humane and generous sentiments in man towards lower animals.’ However a gift to an animal sanctuary which expressly excluded humans, so as to prevent animals from being molested as found not to be charitable, as it would not be of any public benefit (Court Of Appeal in Re Grove Grady (1929)).In A-G for New South Wales v. Sawtell(1978) the courts found that there has been a change in the opinion of public and so the inherent values for preservation of animals had been recognized and so the gift was held to be charitable. The decision of Re Grove Grady does not prevent trusts for animal sanctuaries to be set up, but suggests that such purposes should be construed either under the head of education or environmental protection rather than being specifically for the purpose of benefitting wild animals or for their preservation. If it is found that the charitable purpose would be a failure because the means for its implementation as chosen by the testator are either impractical or impossible to carry out then the doctrine of cy-pres or ss13 and 14 of the Charities Act 1993, can be applied so that it would not fail. The cy-pres doctrine allows the courts to direct that the trust property be applied to a purpose as close as possible to the one intended by the settler. Cy-pres can save charitable trusts from failure at the outset or from subsequent failure when carrying out the purpose becomes impossible or impractical. The doctrine only applies to a purpose which already counts as a charitable purpose. In order for the courts to re-direct trust money intended for charitable purposes, the courts must find that the donor manifested a ‘general’ or ‘paramount’ charitable intention. If the intention was to give only to the specific charity or charitable purpose and the charity is defunct or the purpose impossible to carry out, then the gift fails. This is known as particular charitable intention. The distinction between the two was drawn by Buckley J in Re Lysaght. In this case the testatrix gave funds to Royal College of Surgeons to fund medical education. The gift was subject to restrictions in that the students were to be male and not of Jewish or Roman Catholic faiths. The RCS declined to take the gift on these terms. It was held that there was a paramount charitable intention to benefit the College and that the conditions were not fatal to such construction. A scheme was thus ordered whereby the religious disqualifications were omitted. In contrast, if it appears that the donor wanted to benefit a particular body only, then the courts will be left with no choice but to hold the gift invalid. In Re Rymer, there was a legacy of 500 pounds to the rector for the time being of St Thomas seminary for the education of priests. At the time of the testators death, the seminary had ceased to exist and the students has been transferred to another seminary in Birmingham. The Court of Appeal held that the gift failed as ‘it was a gift to a particular seminary for the purposes thereof. There was no wider intent.’ Paramount general intention may be deluded where the charity intended to be the recipient of the gift did not exist. The argument is that since the charity never existed, the settlor must have had a general intention to benefit on those lines. In Re Faraker (1912) there was a gift to Mrs. Bayley’s Charity, Rotherhithe. A charity had been founded by Mrs. Bayley in 1756 for the benefit of poor widows in Rotherhithe. This, with a number of other local charities had been amalgamated under a scheme by the Charity Commissioners in 1905, and the funds were held in various trusts for the benefit of the poor in Rotherhithe. Court of Appeal held that the Bayley trust had not been destroyed by the scheme and that the consolidated charities were entitled to legacy. So if the charity although not existing as envisaged, continues in some amalgamated or reconstituted form, the gift takes effect in favour of the body administering the assets of the old charity. This is so even in the circumstances similar to Faraker, where the continuing charity has substantially different overall purposes(Martin, Jill & Handbury, 2005). If a charity only wound up subsequently, the ‘general paramount charitable’ intention to benefit may be difficult to be assumed. In Re Harwood (1936), the court held that ‘if a particular institution is correctly identified, then it is that institution and no other which is intended.’ In this case the testatrix, who died in 1934, left 200 pounds to Wisbech Peace Society and 300 pounds to the Peace Society in Belfast. The Wisbech Society has existed prior to 1934 but had ceased by that date to exist. There was no evidence that the Peace Society of Belfast ever existed. The former trust failed, but in respect of the latter an intention was found to benefit societies whose object was the promotion of peace. Where a particular charitable institution named to be the recipient of gift no longer exists, the gift will not fail if on the true construction of the testator’s intentions, he intended to create a charitable purpose trust and merely indicated this institution to serve as a trustee. Since a trust will not fail for want of a trustee, the court will find another trustee to carry out the charitable purpose. This construction is much more likely in the case of a gift to an unincorporated charitable body than an incorporated one. In Re Vernon’s Will Trust (1972), Buckley J stated that every bequest to an unincorporated charity by name must take effect as a gift for a charitable purpose. No individual or aggregate of individuals could claim to take such a bequest beneficially. A bequest to a corporate body, on the other hand, takes effect simply as a gift to that body beneficially, unless there is contrary evidence. This reasoning is inventive and unpersuasive. Surely most testators do not know whether the institution to which they give are unincorporated or not. Nevertheless the distinction is good law and it was applied in Re Finger’s Will Trusts so that a gift to a now defunct unincorporated association was a valid as a purpose trust, whereas a gift to a defunct incorporated body failed (Martin, Jill & Handbury, 2005). When a charitable trust has been effectively carried out for sometime, but then its purpose becomes impossible or impractical to carry out, the courts may modify the purposes, on the basis that they are giving effect to the settlor’s intention to give ‘out and out’ to charity. The cy-pres doctrine is this regard was very narrow until the Charities Act 1960 and was available only where it was impossible or impractical to carry out the purposes of the trust. Thus, trusts for the distribution of loaves of bread to the poor or stocking for poor maid servants continued until modern times. Their performance was cumbersome, uneconomical and inconvenient but not impossible or impractical. Section 13 of the Charities Act 1960 states that the cy-pres doctrine would apply where original purposes have been fulfilled or cannot be carried out, the gift can be used more effectively for other common purposes, the purpose has ceased to be suitable, if in the present circumstances the purpose of the charitable gift is being adequately provided for by other means or if the purpose has become useless or harmful to the community (Moffat, Graham, Gerard & John, 2005). Section 14 of the Act allows property given for specific charity which fails to be applied cy-pres doctrine as if given for charitable purposes generally, provided the donor can be traced or has disclaimed his right to have the property returned. Some modest reforms to the law of charity were made by the Charities Act 2006. While not providing a statutory definition of charity, s.2 extends the fourfold categorization in Pemsel to 12. Charitable trust for advancement of animal welfare have been recognized under s. 2(2)(k). By analysing the facts of the question it can clearly be said that the gift by henry to Huddersfoed Fox Sanctuary would have been considered to be for a charitable purpose and further there would be no difficulty in finding that the sanctuary was for a charitable purpose, because of the change in approach of courts which allowed for preservation of animal trusts. However the main issue that remains is that the sanctuary has closed and if it is interpreted by the courts that Henry only intended the specific charity to be the beneficiary then the gift would be a failure as stated in Re Lysaght. However if it is found that a general intention was what Henry had in mind then it can be said that the gift would be upheld. There still remains the possibility of a failure of the gift and this can be said after looking at the constitution of the sanctuary which allows members to transfer assets to the sick chickens charity; if the court finds that the sick chickens was not what Henry had intended then it woul be be a failure. Further the case of Re Finger’s can be sighted which clearly stated that a defunct incorporated charity would lead to a failure of the testamentary gift. Further Holmbridge home for dogs, which is an unincorporated association has the issue of proving that the association was only intended to be a trustee rather than the beneficiary. If it is found that the beneficiary was the association then there is the possibility of the gift being a failure. However if it is found by the courts that the trust was set up making the unincorporated association a trustee then the testamentary gift would be upheld. Finally the issue of Netherton animal clinic would be looked into; it is a charity which had never existed and so was mistakenly chosen by the testator. The doctrine of Cypres will not save the gift and the courts would find the gift to be a failure because of the non-existence of the clinic and so the gifts would result back or in other words spring back to the testators estate, this is what is known as the resulting trust which accounts for the failure of testamentary gifts. Bibliography Verbeke, Alain. Property and Trust Law. International encyclopaedia of laws. The Hague: Kluwer Law International, 2000. Hudson, Alistair. Understanding Equity and Trust Law. London: Cavendish, 2001. Hayton, David J., Sebastianus Constantinus Johannes Josephus Kortmann, and H. L. E. Verhagen. Principles of European Trust Law. Law of business and finance, v. 1. The Hague: Kluwer Law International, 1999. Waters, D. W. M. The Common Law Trust in the Modern World. Deventer, Netherlands: Kluwer Law and Taxation Publishers, 1984. Wilson, Sarah, and Paul Todd. Todd & Wilson's Textbook on Trusts. Oxford: Oxford University Press, 2005. Hudson, Alastair. Equity and Trusts. London: Routledge-Cavendish, 2007. Wilkie, Margaret, Rosalind Malcolm, and Peter Luxton. Equity & Trusts. Oxford: Oxford University Press, 2006. Keeton, George Williams. Modern Developments in the Law of Trusts. Belfast: (Faculty of Law, Queens University, Belfast), Northern Ireland Legal Quarterly, 1971. Watt, Gary. Trusts and Equity. Oxford: Oxford University Press, 2006. Waters, D. W. M. The Constructive Trust: The Case for a New Approach in English Law. University of London legal series, 8. London: University of London, Athlone Press, 1964. Ramjohn, Mohamed. Cases and Materials on Equity and Trusts. Abingdon, Oxon [England]: Routledge-Cavendish, 2008. Oakley, A. J., and David B. Parker. Parker and Mellows: The Modern Law of Trusts. London: Sweet & Maxwell, 2003. Pettit, Philip Henry. Equity and the Law of Trusts. Oxford: Oxford University Press, 2005. Hayton, David J, Charles Mitchell, and Oshley Roy Marshall. Commentary and Cases on the Law of Trusts and Equitable Remedies. London: Sweet & Maxwell, 2005. Moffat, Graham, Gerard M. D. Bean, and John Dewar. Trusts Law Text and Materials. Law in context. Cambridge: Cambridge University Press, 2005. Norway. Om stiftelser: utredning. Norges offentlige utredninger, 1998:7. Oslo: Statens forvaltningstjeneste, Statens trykning, 1998. Thomas, Meryl. Property Law 2008-2009. Blackstone's statute books. Oxford: Oxford University Press, 2008. Penner, J. E. The Law of Trusts. Oxford: Oxford University Press, 2006. Martin, Jill E., and Harold Greville Handbury. Hanbury & Martin Modern Equity. London: Sweet & Maxwell Ltd, 2005. Read More