Changes to the Charities Act 2006 - Essay Example

158235 In order to be able to decide which of the above dispositions would succeed it is necessary to examine the latest changes that have been brought about by the Charities Act 2006. The starting point therefore is to look at the causes that are deemed to be for charitable purposes under the new Act. The Charities Act 2006 lays down at section 2 the definition of charitable purposes. Under s2(2) the Act lists the following as recognised charitable causes. (a) the prevention or relief of poverty; (b) the advancement of education (c) the advancement of religion; (d) the advancement of health or the saving of lives; (e) the advancement of citizenship or community development: (f) the advancement of the arts, culture, heritage or science: (g) the advancement of amateur sport; (h) the advancement of human rights, conflict resolution or reconciliation or the promotion of racial harmony or equality and diversity: (i) the advancement of environmental protection or improvement: (j) the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage: (k) the advancement of animal welfare: (l) any other purpose within subsection (4). This is a non exhaustive list and section 3 of the Act goes on further to state that for a charity to be recognised as a charitable purpose it must satisfy the public benefit test. In order to determine whether a charity can be recognised as a charitable purpose the Charities Commission must assess the charity to ensure it meets the criteria as laid down in the Act. The charities Commission has 5 objectives when deciding whether to grant charitable status to an organisation these are the public confidence objective, the public benefit objective, the compliance objective, the charitable resources objective and the accountability objective1. The public confidence objective as it suggests is designed to promote the confidence of the public for the charity. The public benefit objective is to promote the notion that there must be a public benefit for the charity to be recognised. The compliance objective is to ensure that trustees of the charity are aware of their legal obligations in the exercise of the control of the charity and administration of funds. The charitable resources objective is designed to promote effective use of charitable resources and the accountability objective makes the charities accountable to the donors. The duties of the commission are primarily to establish whether the institution can be classed as charitable and to investigate any reports of misconduct of the charity and give advice to the charity when required. Some of the above lists of recognisable charitable causes are obviously for the benefit of the public and therefore you would expect them to satisfy the public benefit test. Others are less obvious and have been further defined within the Act. In relation to the advancement of religion the Act defines religion as including a belief in more than one god as well as no belief in a god2. For a charity to be recognised for the advancement of health this can include prevention of illness as well as relief of sickness, disease or human suffering3. Citizenship or community development can include regeneration of areas of a community as well as promoting civic responsibility and the recruiting of volunteers to carry out work in the community to improve the general condition of the area4. If the charity is related to sport the sport involved must include physical exertion and skill5. Subsection (j) can include the provision of accommodation or care to those who are in need as described above. For recreational activities to be recognised as charitable two basic conditions are required6. Firstly the facilities are provided with the object of improving the conditions of the life of the person they are provided for and secondly those persons need the facilities either because of their age, youth, infirmity, disability, poverty or social or economic circumstances or the facilities are to be made available to members of the public at large. The categorisation of charitable purpose in existence before the Act was passed was based on the case of Pemsel (1891)7 and lists only four heads of charity these being relief of poverty, advancement of education, advancement of religion and other purposes beneficial to the community8. The Charitable Uses Act 1601 defines the advancement of education as the maintenance of schools of learning, free schools and scholars in the universities, as well as the education and preferment of orphans. It was held in Attorney General v Ross9 that a students’ union at a polytechnic was charitable as it furthered the educational function of the institution. Although it could be argued that the listing of any other purposes beneficial to the community gives the same scope as the new Act encapsulates, the lack of definition of purposes that are beneficial to the community has in the past meant that things such as charities for recreational activities have had difficulties in convincing the Charities Commission that they are charitable10. Under the 1993 Act any people affected by the registration of the institution as a charity could object to its inclusion or ask for the removal of it from the register. The new Act creates a wider range of institutions that are likely to be able to gain charitable status and clearly defines what is required of the organisation to prove charitable status which is likely to have the knock on effect of reducing objections for registration. Some argue that the new public benefit test has reduced the number of eligible organisations and that hospitals and schools that charge fees that once enjoyed charitable status might find themselves removed from the list11. The wording of the Charities Act 2006 seems to suggest that the presumption of public benefit for education will end12 and so institutions with charitable status under the presumption will be forced to demonstrate that they satisfy the public benefit test. The essential characteristics of the public benefit test to be met by all charitable organisations requires the institutions to show that the purposes of the institution will benefit the public in a manner that can be determined objectively13, the benefits will be available to a identifiable and sufficiently wide section of the community and the benefit to the public will not be outweighed by any private benefit to an individual. In order an organisation to be recognised as charitable as well as falling into one of the 3 categories listed above the organisation must also satisfy certain other criteria. The underlying emphasis is that to be charitable a purpose must be for the public benefit14. Legislation does not define charity but the courts approach to charitable status has been formulated through case law and for a purpose to be classified as charitable it must be beneficial in a way which is charitable and be shown to be available to the public15 or a sufficient section of the public and not merely to a private class of individuals16. When deciding whether the benefit is for the community at large the courts have on occasion adopted a subjective assessment. In doing this the court would look at whether the donor thought that the purpose was beneficial to the public. In Re Foveaux17 a gift to the International Society for the Total Suppression of Vivisection was held to be charitable on the principle that the donor has considered it to be so. Similarly in Re Cranston18 Fitzgibbon LJ took the view that it would be charitable provided the purpose was one which the founder of the society believed to be to public advantage. Sometimes the courts have adopted an objective assessment as in National Anti-Vivisection Society v IRC19 where the courts chose not to follow the decision of Re Foveaux20 and declared the society non-charitable. Lord Simmons made the observation that Where on the evidence before it the court concludes that, however well-intentioned the donor, the achievement of his object will be greatly to the public disadvantage, there can be no justification for saying that it is a charitable object. In according charitable status the courts have to determine whether the benefit to the general public is too remote. It was held in IRC v Oldham Training and Enterprise Council21 by Lightman J that these objects were non-charitable because the benefits to the community conferred were too remote. The association would need to benefit a significant amount of the public for it to be classed as for the public benefit22. Research work carried out for Universities is more closely scrutinised under the 2006 Act and in order to meet the public benefit test the work has to be calculated to advance and enhance knowledge and understanding; useful results have to be disseminated to the public; and the research has to be undertaken for the benefit of the public and not solely for self-interest or for private or commercial consumption23. The new Act has the effect of appointing a Principal regulator to ensure compliance with the Act which means that the charities are more closely supervised. Potential pitfalls surrounding the new Act are likely where the charity is selling items in line with its organisation, as the Regulator may decide that this makes them a trading company and not a charitable institution and the charitable status could be forfeited. The largest impact of the new Act is for those organisations that previously enjoyed exemption from the public benefit test24. This includes housing associations and Universities and colleges. The New Act recommends that exempt institutions would have to meet the same criteria as all other charitable organisations and would have to make public disclosure of all voluntary funds they have and how they use them. The new Act recommends that exempt organisations should have the same level of information about them disclosed as the non exempt organisations25. The new Act has also raised the threshold for compulsory registration to £5,00026 and any charities below that level now have the status of small charity. These small charities are not able to register as charities but will still enjoy the benefits of being able to make tax repayment claims and have acceptance of their charitable status acknowledged by the Inland Revenue. In defence of the new Act the government’s stance on the issue is that under previous legislation all organisations classified as charitable had to be established for exclusively charitable purposes. One element of this exclusivity is that those administering the charities were prohibited from receiving any personal benefit other than that which was deemed to be conducive to ensure the efficient administration of the charity. If the benefit exceeded the level then the organisation was deemed not to be exclusively charitable and could be removed from the register. Under the new Act the Charities Commission have an ongoing role to maintain checks on the status of the registered charities. This is be of particular importance with fee charging schools and hospitals to ensure that despite the fees usually applicable to persons attending these places there is provision for reduced fees or free treatment or provision of education for those who are unable to meet the fees27. Looking at the previous legislation regarding the regulation of charities there was a need to reform the previous law. The new Act, though criticised by those charities that at present are covered by the presumption of public benefit, appears to be a substantial attempt to regulate charitable organisations and make the process of applying for charitable status more equitable. In the long term there are likely to be more institutions that are recognised as charitable and as the list is more extensive there are likely to be more applications for charitable status as institutions may find that the services they offer are directly covered under the new Act28. Having established the rules for when organisations can achieve charitable status it is now possible to determine which of the above causes that Ivor wants to donate to will be classed as charitable and therefore be entitled to receive the money that Ivor has left for them and which will fail. Dealing first with the £25,000 to the School of Archaeology at the University of Camford to complete its work in translating the inscriptions on the tomb of the pharaoh Smenkhare, it has been stated in the problem question that the work was completed before Ivor died. As Ivor died before the Charities Act 2006 came into force the 1993 Act could be interpreted to recognise the University as a charity as it is for the advancement of education. This would in essence mean that the University would be entitled to the money. A slight problem may arise as the specific wording was that the money was to be used to complete the translating work and as this has been completed the courts might decide that the gift would fail. Under the 2006 Act the University would have to prove that the translation was for the public benefit and the results would have to be disseminated to the public. The research would also have to be shown to advance and enhance knowledge and understanding by the members of the public at large. In this particular case the University might have difficulty in proving that the research is for the public benefit although it could be argued that the translating of the inscriptions could enhance the understanding of the lives of the population at the time of the pharaoh. The £100,000 to Statuswatch might also face similar difficulties under the new Act as the organisation is working directly for the rights of asylum seekers. This could be viewed by the court as not being of a general interest to the public as it is specifically targeted at a particular element of the community, namely asylum seekers only. Under the 1993 Act it is possible that the organisation might be able to obtain charitable status on the grounds that the services it provides are beneficial to the community29.This could be advanced as an argument as the intervention by this group could help to dispel the animosity that frequently exists between ethnic minority groups and the natives of that country. Under the 2006 Act this organisation is more likely to gain charitable status then under previous legislation. The 2006 act recognises the advancement of human rights, conflict resolution or reconciliation or the promotion of racial harmony or equality and diversity30. The £200,000 for the reading room and library for the employees and ex-employees of Ivor’s company and other members of the local community is likely to succeed under either the previous legislation or the new Charities Act as it is for the public benefit and is open to all members of the public and not just a limited section of the public. If the wording of the will had stated that the money was for the benefit of the employees and ex-employees only then under the 1993 Act this may well have been upheld but under the 2006 Act it is likely to have failed as it might not have satisfied the public benefit test. If the money was left for the employees and ex- employees only the court may decide to treat the trust as a non-charitable purpose trust. In some cases such trusts are not deemed to be void if the disposition will benefit identifiable individuals who posses sufficient locus standi to enforce it. In Re Denley’s Trust Deed31 the court upheld a gift which appeared to be a purpose trust. In this case Charles Denley had transferred land to trustees to be maintained and used as a sports field for the employees of a company. Goff J held that although the trust was expressed to be for a purpose is was in fact for the benefit of individuals as they would benefit directly or indirectly from the carrying out of the purpose. He also stated that the employees were an ascertainable and certain class32 and would have locus standi to apply to the court to enforce the trust. The principle used in Re Denley’s Trust Deed33 has also been applied to unincorporated associations. An example of this is in Re Lipinski’s Will Trusts34 where Harry Lipinski left his residuary estate to the Hull Judeans (Maccabi) Association in memory of his wife to be used solely in constructing new buildings for the association. It was concluded by Oliver J that this gift35 was directly for the benefit of the members36 of the association and could be construed as a gift to them as individuals37. The final disposition of the £15,000 for the erection of a stained glass window in Ivor’s memory and the £25,000 for the maintenance of the window is likely to fail under both the 1993 Act and the 2006 Act. There have been several cases where the courts have held that such trusts are invalid as they do not satisfy the beneficiary principle38. In Re Astor’s Settlement Trusts39 Roxburgh J held that the trust was invalid because it offended against the beneficiary principle and the purposes were uncertain. He referred to Re Wood40 where Harman J asserted the position that a gift on trust must have a cestui que trust. In Astor’s case none of the exceptions to the beneficiary principle were satisfied and the trust was void. Similarly in Re Endacott41 Harman L J applied the beneficiary principle to a gift given by Albert Endacott to the North Tawton Devon Parish Council for the purpose of providing a useful memorial to himself. The court of appeal held that the gift was a non-charitable purpose trust which did not fall into the exceptions category. Although the above seems to suggest that non-charitable purpose trusts are void because they do not satisfy the beneficiary principle there are number of exceptions where non-charitable purpose trusts will be upheld despite the lack of beneficiaries42. In Re Endacott43 Harman L J spoke of these exceptions when he stated that they are decisions which are not really to be satisfactorily classified, but are perhaps merely occasions where Homer has nodded, at any rate these cases stand by themselves and ought not to be increased in number, nor indeed followed, except where the one is exactly like the other. Exceptions have applied where the money has been placed in trust for the maintenance of specific graves and monuments, as well as such things as saying masses for the dead. In these cases the courts have held that the trusts are valid so long as they fall within the perpetuity period44. In Re Hetherington45 the saying of masses for the dead was held to be a charitable activity for the advancement in religion provided the masses were celebrated in public. On some occasions were the trust falls within the exceptions it can still be invalid if it is deemed to be for useless purposes. An example of this was in Brown v Burdett46 where a trust to block up all the rooms of a house for twenty years was held to be void. Similarly in M’Caig’S Trustees v Kirk-Session of United Free Church of Lismore47 a trust to erect bronze statues of the testatrix’s parents and their children was void on grounds of public policy since it involved a sheer waste of money48. It could be argued in this instance that the window for the church is for the advancement of religion. Under the 1993 Act the courts may well not recognise the organisation as a church as the church was founded by fans of Star trek; however the 2006 Act defines religion as including a belief in more than one god as well as no belief in a god49. This would mean that the church could be classed as charitable despite there being no belief in a god. If the money had been set aside for the maintenance of the church or its upkeep the trust would have been more likely to succeed, but because the cause that the money is being donated for is frivolous then the trust is likely to fail. This would mean that the second part of the disposition would also fail as it is for the upkeep of the window. The conclusion that can be drawn from the above is that the money to the University is likely to fail as the will distinctly sets aside the money for the translation of the inscription which has already been completed. The money to Statuswatch would fail under the 1993 Act but is likely to be upheld under the 2006 Act. The disposition to the reading room is likely to succeed both before the 2006 Act and after, whereas the money for the window is likely to fail. 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Pemsel, [1891] A.C. 531 (H.L.) Cunnack v Edwards (1896) 2 Ch 679 Customs and Excise Commissioners v Bell Concord Educational Trust Ltd Christ’s College Cambridge (1757) Wm B1 90 Fine Lady upon a White Horse Appeals Application for Registration as a Charity [2006] W.T.L.R. 59 IRC v Oldham Training and Enterprise Council [1996] STC 1218 Lindsay’s Executor v Forsyth 1940 SC 568 M’Caig’S Trustees v Kirk-Session of United Free Church of Lismore 1915 SC 426 National Anti-Vivisection Society v IRC [1948] AC 31 Neville Estates v Madden [1961] 3 All ER 65 Pirbright v Salwey [1896] WN 86 Re Beadle (Deceased) [1974] 1 W.L.R. 417 [1974] 1 All E.R. 493 (1974) 118 Re Astor’s Settlement Trusts [1952] Ch 534 Re Badens Deed Trusts (No.1) [1971] A.C. 424 [1970] 2 W.L.R. 1110 [1970] 2 All E.R. 228 (1970) 114 S.J. 375 Re Bushnell (Deceased) [1975] 1 W.L.R. 1596 [1975] 1 All E.R. 721 (1975) 119 S.J. 189 Times, December 10, 1974 Re Cranston [1898] 1 IR 431 Re Denley’s Trust Deed [1996] Conv 24 (Jaconelli) Re Drummond [1914] 2 Ch 90 Re Endacott [1960] Ch 232 Re Foveaux [1895] 2 Ch 501 Re Grants WT [1979] 3 All ER 359 Re Hetherington [1989] 2 All ER 129 Re Hooper [1932] 1 Ch 38 Re Horley Town Football Club [2006] EWHC 2386 [2006] W.T.L.R. 1817 Re Kirkwood [1966] A.C. 520 [1966] 2 W.L.R. 136 [1966] 1 All E.R. 76 (1965) 44 A.T.C. 442 [1965] T.R. 425 (1966) 110 S.J. 17 Re Lipinski’s Will Trusts [1976] Ch 235 Re Watson (Deceased) [1973] 1 W.L.R. 1472 [1973] 3 All E.R. 678 (1973) 117 S.J. 792 Re Wood [1949] Ch 498 Table of Statutes Charitable Uses Act 1601 Charities Act 1993 Charities Act 2006 Read More