Fiona McKechnie Trust Deed Is for a Purpose - Research Paper Example

?Memorandum Law Firm Re: Fiona McKechnie’s Trust Deed, Paragraph 3(a)-(f). Paragraph 3(a The gift described in paragraph 3(a) of Fiona McKenchnie’s trust deed is for a purpose rather than specific individuals. Therefore it will only be valid if it satisfies the requirements of a charitable trust. Otherwise it will be deemed an ordinary trust and may fail for certainty of objects.1 The trustees are instructed to use the shares allocated to this part of the trust for the purpose of providing hot meals to Darwin’s homeless in the evening. The question is therefore whether such a gift is charitable. Lord Parker’s observation in Bowman v Secular Society Limited it therefore instructive. According to Lord Parker, a gift is charitable if it is for the “benefit of the public and recognized as “charitable in the legal” sense rather than in the “popular sense”.2 A trust is legal if it is for at least one of four identified purposes: “relief of poverty; advancement of education; advancement of religion; and for other purposes beneficial to the community”.3 A gift to the homeless can thus be said to be for the relief of poverty. According to Kitto J. poverty exists with an individual cannot afford the bare necessities “for a modest standard of living in the Australian community.”4 Being homeless would certainly meet the criteria of poverty and thus is a legal charitable trust and as such is a valid trust. Moreover, a gift for the relief of poverty does not have to be specifically for the benefit of the public. It can be for any number of individuals. The rationale is that relief of the poor is beneficial to the public in general.5 Paragraph 3(b): The gift described in Paragraph 3(b) must likewise meet the legal charity requirement in order to be a valid gift. The only category that this gift can fall under is for the advancement of education. In order to be a legal charitable trust for the advancement of education the gift must be for the decimation of knowledge. In this regard, education is broadly construed and is not confined to mere teaching and learning in the traditional sense.6 Unlike a charitable gift for the relief of poverty, a charitable gift for the advancement of education must confer a benefit on the public.7 In order to qualify as beneficial to the public the gift is required to be for either the public or for a section of the public and must not be associated with a particular private organization so as to make it a group of private individuals.8 The gift in Paragraph 3(b) does not identify or favour a specific company or organization or individuals. It provides for the briefing of any business people participating in the North Australian export market with East and South Asia. Thus the gift is for a public class of beneficiaries rather than a private class and therefore is a legal charitable trust for the advancement of education.9 Paragraph 3(c): The trust described in paragraph 3(c) appears on its face to be a charitable trust for the advancement of education. The trust speaks to spending the trust funds designated for this gift on a charitable organization that educates the public relative to the desirability of amending the Northern Territory (Self Government) Act. However, such a gift will not likely be regarded as a legal charitable trust since it seeks to support a cause directed at changing a legislative provision. It was held in National Anti-Vivisection Society v Inland Revenue that a gift designed to support of make changes in the law is not a charitable trust.10 Thus this particular gift will fail as a charitable purpose trust. The only way for the gift to succeed is if it meets the requirements of an ordinary trust. The gift described in paragraph 3(c) does not specify a group for the purpose of an ordinary trust. It is not definitive enough for the court to execute and would only survive if it were a charitable gift.11 As a result, the shares designated to paragraph 3(c) will be regarded as an undisposed of gift and will fall to Foina McKenchie’s estate to devolve “to those, to whom the law gives ownership in default of disposition by the former owner.”12 In all the circumstances, the gift described in paragraph 3(c) will therefore fail as both a charitable trust and an ordinary trust. As such it will devolve to McKenchie’s estate and will be distributed as if she had died intestate with regard to this particular gift. Paragraph 3(d): On its fact, the gift described in paragraph 3(d) is for a charitable purpose as it is specifically calls for the construction of a bridge. The construction of bridges has been deemed a charitable purpose trust as it benefits the public at large.13 Moreover it is specifically listed in the preamble to the Charitable Uses Act 1601 as a charitable gift.14 A charitable gift for purposes beneficial to the public does not have to necessarily be of benefit to all the members of the public. It is enough for the gift to benefit a significant portion of the general public.15 The construction of bridge will be certainly benefit a significant portion of the public, if not the public as a whole. The difficulty with this gift however, is that it is an expectancy gift to a certain extent. Although specific shares have been designated to the trust, it is insufficient to construct the bridge and the trustees are therefore directed to combine the capital and interests until such time as it is sufficient to construct the bridge. In general property that is not yet in existence cannot form a part of a trust.16 The gift described in paragraph 3(d) however appears to be mixed in that the capital is already in existence while the interests is not yet in existence. Similar gifts have been tested by the courts. For example in Williams v Commissioner of Inland Revenue, a gift was made of an assignment of the net income on an actual equitable interest in property. The gift was therefore held to be of property that would accrue and whether or not those funds would come into existence at some later date was uncertain. Therefore the gift failed.17 Looked at in this way, the gift for the construction of a bridge is based on the expectancy that at some time in the future, the accumulation of interest would increase the capital so that it becomes sufficient to construct the bridge. However, whether or not the interest will be sufficient or exceed expectations is entirely uncertain. Therefore the gift is an expectancy and as such is administratively impossible. It therefore follows that the gift in paragraph 3(d) will fail and the shares assigned for this purpose will devolve to the testator’s estate under the laws of intestacy.18 Paragraph 3(e): The gift described in paragraph 3(e) appears to fall within the range and spirit of charitable gifts. It has already been determined that charitable gifts can be for the “relief of poverty; advancement of education; advancement of religion; and for other purposes beneficial to the community”.19 The gift in paragraph 3(e) is for community safety in that it directs the shares to be invested for the purpose of safeguarded the community in North Australia and Darwin in particular from crocodile attacks. Such a gift would not fall under the relief of poverty, nor the advancement of religion or education. It must therefore be considered under the fourth category: purposes beneficial to the community. Although it has been held that not all gifts claiming to benefit the community are charitable are actually charitable. If this was permitted it would offend the trust laws against perpetuity. Therefore the gift must be charitable in nature.20 In order to be accepted as a charitable trust, the gift must have a public element to it and this means that it cannot have a private character.21 The trustees are instructed to use the gift described in paragraph 3(e) by investing it in any organization that actively works with keeping the community safe from crocodile attacks. Thus the gift is entirely public in nature and does not attempt to benefit private individuals or individuals on a discriminatory basis. All individuals who may come into contact with a crocodile or somehow be at risk of crocodile attacks will benefit from the trust funds. As it is, the instructions in paragraph 3(e) direct the trustees to invest in an organization that meets the intended purpose. Therefore, paragraph 3(e) is a legal charitable trust as it is public in character and is intended to serve a purpose beneficial to the public. Paragraph 3(f): The trust funds designated in paragraph 3(f) are for the advancement of education as it specifically directs the trustees to use the funds to establish scholarships. A scholarship would certainly meet the criteria of the advancement of education which is stated to be for the decimation of knowledge.22 Regardless, in order to be charitable trust, the education provided for in the trust must be capable of benefiting some portion of the public.23 The question then is whether or not young Australians who are descendants of people who migrated to Australia from East Timor from 1975 to the present are public in nature. What constitutes a public benefit was discussed at length in Oppenheim v Tobacco Securities Trust Co. Ltd. Essentially it was held that, reference to a specific group that could not be clearly described as sufficiently public in nature would not give rise to a legal charitable trust for the advancement of education. Although the trust called for the education of children of employees or previous employees of group of employees was not public because the companies were private.24 Descendants from East Timor can be distinguished from employees of private companies. East Timor is not a private company and certainly denotes members of the public not connected by a private entity. In Public Trustee v Young a gift for the education of persons residing in a specific town was upheld as a charitable trust.25 This gift was decidedly for a section of the public and therefore not private in nature. The description of the beneficiaries of the trust in paragraph 3(f) may pose some difficulties. The difficulties are demonstrated in the case of Caffoor v Commissioner of Income Tax, Colombo. In this case the gift was for an educational trust fund for the settlor’s brother and sister and if that failed then the educational trust would be for young Islamic people in Colombo. The Privy Council held that the gift was not charitable because it did not have a public benefit. This was because the only criteria was that the beneficiaries be young and that they belong to a specific faith.26 The facts of this case are quite similar to paragraph 3(f). The only requirements are that the recipients of the scholarship be young and descendants of East Timor. Therefore, this trust will not likely be regarded as sufficiently public or charitable in nature. Bibliography Attorney-General v National Provincial and Union Bank of England [1924] AC 262. Ballarat Trustees Executors and Agency Company Limited v Federal Commissioner of Taxation [1950] 80 CLR 350. Bowman v Secular Society Limited [1916] AC 406. Caffoor v Commissioner of Income Tax, Colombo [1961] AC 584. Charitable Uses Act 1601. Commissioners for Special Purposes of the Income Tax v Pemsel [1891] AC 531. In re Crompton [1945] 1 Ch 123. In re Scarisbrick [1949] Ch 622. Lloyd v Federal Commission of Taxation [1955] 93 CLR 645. National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31. Norman v Federal Commissioner of Taxation [1963] 109 CLR 9. Ong, D. Trusts Law in Australia. Annandale, NSW: The Federation Press 2008. Oppenheim v Tobacco Securities Trust Co. Ltd. [1961] AC 584. Public Trustee v Young [1980] 24 SASR 407. Taylor v Taylor (1910) 10 CLR 218. Williams v Commissioner of Inland Revenue [1965] NZLR 395. Read More