The Legal Definition of Charity - Case Study Example

In advising William as to whether Tom’s legacies in his will are valid, it will be necessary to consider whether the legacy may take effect as a valid trust for charitable purposes, or if not as a non-charitable purpose trust1. The principle distinction between the two types of trusts is that the former is prima facie valid and as a general principle of law, non-charitable purpose trusts “are void however, outward-looking and beneficial the purposes might be2” and a “trustee must be subject to the supervision of a human beneficiary with a legal interest in performance of that duty3”. However, there have been a limited number of cases in which purpose trusts without human beneficiaries have been upheld4. The legal definition of charity for the purpose of charitable trusts has developed on an ad hoc basis and has been criticised as being “riddled with anomalies” with no statutory definition of charity5. The general principle established by Lord Macnaghten in Commissioners for Special Purposes of Income Tax v Pemsel6, highlights four divisions of charitable trusts as: “trusts for relief of poverty; trusts for the advancement of education, trusts for the advancement of religion and trusts for other purposes beneficial to the community”7. However, due to the piecemeal application of the definition of charity, the validity of such trusts has often been dependent on the facts of each particular case and I shall evaluate each purpose trust in turn. A) £20,000 to “Care” a society which spreads messages about human rights; It is possible that this may be considered charitable under the heading of being for “other purposes beneficial to the community”. However, in order to do so the purpose must benefit the community at large and in the case of ReCranston8 it was asserted that the benefit must not be too small or obscure. If we apply this by analogy to the current scenario, Care is an organisation dedicated to spreading messages about human rights and does not appear to be limited to a specific area. As such, it is arguable that the community targeted is large enough to establish public benefit. However, in the case of Oppenheim v Tobacco Securities Trust9, it was held that the issue of “public benefit” is ultimately a question of fact and in this case the educational trust failed on the public benefit factor notwithstanding a benefit to 11,000 people on the basis of the personal nexus test10. According to this test, a trust will not be for a public purpose if all the beneficiaries are defined by their association with some person or organisation11. In the Oppenheim case, the beneficiaries were all children of the employers of the same company. However, in the current scenario, the beneficiaries appear to be the public at large, which will operate in favour of validity as a charitable purpose trust. Moreover, the implementation of the European Convention of Human Rights (the Convention) via the Human Rights Act 1998 into UK law enables individuals to assert and protect their “fundamental” human rights as defined in the Convention. This will therefore further support the fact that the trust is charitable in being for the public benefit. Alternatively, it is possible that spreading messages about human rights may fall within the charitable category of being a “trust for the advancement of education” as the courts have adopted a broad interpretation of the rule regarding education12. For example, in the case of the Royal Choral Society v Inland Revenue Commissioners13 it was held that a choir was charitable as it furthered the society’s educational function. In the case of Attorney-General v Ross14 it was held that a student union was charitable as it furthered the university’s educational function. Furthermore, in the case of ReHopkins15it was determined that with regard to research activity, provided the research is useful and of some benefit to the public, it will be charitable. If we apply this by analogy to the current scenario, it is highly possible that as Care spreads messages about human rights, improving awareness of human rights (particularly in light of the implementation of the Convention) will constitute a charitable trust providing an educational function to the public. B) £40,000 to the Order of the Holy Lunar Temple Prima facie, this trust falls under the charitable heading of being a “trust for the advancement of religion”. It is important to note that the “advancement of religion” category does not require a belief in God as asserted in the case of ReSouthPlaceEthicalSociety16. Accordingly, the fact that the Holy Lunar Temple believes in one supernatural being and a new moral code will not impact the ability of this trust to be one for the advancement of religion per se. However in the case of Blair v Duncan17, it was asserted that all purposes to which trust monies are applied must be charitable. Accordingly, it may be difficult to argue that the half of the legacy intended to be used towards the hosting of events at the Temple where members can make speeches on any topic of their choosing will constitute a charitable purpose. Alternatively, whilst the hosting of the Temple ceremonies at the Holy Lunar Temple site may constitute a charitable purpose, the trust itself must have a public benefit18. Whilst the advancement of religion trust will generally pass the public benefit test,19 it was asserted in the case of Gilmour v Coats 20that secluded religious orders will not generally be charities, due to the lack of engagement with the general public. Moreover, the personal nexus test in the Oppenheim case highlights that the trust must benefit the public at large. If we apply this to the current scenario, the primary beneficiaries under this trust are the members of the Temple and therefore it is unlikely to pass the public benefit test and will be invalid as a charitable purpose trust. C) £30,000 To publish Tom’s two books “Collecting Paperclips” and “Appreciating Art”. As stated in the case of Blair v Duncan21, the purpose of the trust must be charitable and prima facie this appears to be a private purpose trust. Alternatively, it may be arguable that the publication of the books falls within the heading of being “for other purposes beneficial to the community”. As stated above, case law demonstrated a broad interpretation of “other purpose” and it may be arguable that books on collecting paperclips and appreciating art will benefit the public at large. However, the fundamental rule is that the trust must not distribute profits22. As such, profits from the sale of the books will presumably vest in Tom personally and therefore the trust will not satisfy the requirements of a charitable purpose trust. D) £50,000 for the maintenance of Tom’s Aunt Mary This again prima facie appears to be a private purpose trust. However, it may alternatively fall within the category of “trusts for the relief of poverty”. In the preamble to the 1601 Statute of Charitable Uses, the definition of poverty is expressed as being “aged, impotent and poor people”. In the case of ReLewis23 it was asserted that it is not necessary to establish all three of the criteria cited in the Statute and it was sufficient that one condition was satisfied. Moreover, as evidenced by the decision in Joseph Rowntree Memorial Trust Housing Association Limited v Attorney General24the courts have generally adopted a liberal interpretation under this heading due to the social welfare element. In determining whether a beneficiary is poor, the general approach is to consider the facts of every individual scenario. For example, in the case of ReCoulthurst25, it was held that having inadequate weekly income or “going short” would suffice. Additionally, it was asserted in the case of ReSegelman26that poor was “anyone who cannot afford the normal things in life which most people take for granted”27. However, even if Aunt Mary’s financial circumstances can satisfy the definition of “poor”, the difficulty is whether the trust itself satisfies the requirement of being for the public benefit. The courts have been inconsistent on this point. For example, in the case of ReScarisbrik28, a trust was set up for the benefit for specified relatives in certain circumstances of need, however the public benefit test was held to be satisfied. In the case of ReSegelman, the position was clarified and it was held that a trust for the benefit of family members was permissible provided that they were poor and needy and that the group of beneficiaries was not too small. If we apply this to the current scenario, the trust is not specified to be applicable in the event that Aunt Mary is poor. However, the main stumbling block is the fact that the trust is not stated to be for the benefit of various relatives and Mary is the sole beneficiary of the trust. As such, the category of beneficiaries is likely to be too small to be a valid charitable purpose trust. E) £10,000 to the “Fluffy Kitten Preservation Society”, a home for unwanted kittens which closed five years ago. The general presumption is that trusts for private purposes are void save for some exceptions29. One exception is the maintenance of a particular animal or group of animals30. In the case of Re Astor Settlement Trusts31, it was asserted that trusts for such non-charitable purposes of the care of animals would fail unless falling within strict confines of narrow principles. For example, an annuity of £50 for maintenance of the testator’s favourite black mare was held valid in the case of Pettinghall v Pettinghall.32 Accordingly, the legacy to the Society cannot constitute a charitable trust as it is for the benefit of an animal and therefore confers no public benefit33. Alternatively, the legacy is likely to fall under the ReDean34 definition of a private purpose trust with imperfect obligation. In this case, a gift of £750 for 50 years was upheld for the maintenance of the testator’s horses and hounds. It was held that trust was valid “provided …. That it is not to last for too long a period”35. Accordingly, this has been cited as authority for the principle that trusts stated to be for the upkeep of specific animals are valid for the perpetuity period provided someone interested in the money under the legacy is willing to carry out the trust36. In the current scenario, the legacy was to the Fluffy Kitten Society which at the time of entering into the legacy would clearly satisfy the requirement that someone interested in the money under the legacy is willing to carry out the trust. With regard to the period of validity of such legacies, the decision in Pirbright v Salwey37 establishes that the gift in such cases is valid for 21 years. However, a degree of discretion is permitted to take account of the longevity of the animals in an attempt to preserve the gift38. Accordingly, the legacy itself is prima facie valid as a private purpose trust with imperfect obligation, however will be limited in perpetuity under the section 15(4) of the Perpetuities and Accumulations Act 1964. However, although the legacy was valid at the time it was created as a private purpose trust, the home closed five years ago, therefore there longer exists a valid intermediary interested in the legacy money willing to carry out the trust, which renders the legacy invalid. BIBLIOGRAPHY Alistair Hudson (2007). Equity and Trusts. 5th Edition Routledge-Cavendish. John Duddington., (2006). Essentials on Equity and Trusts Law. Pearson Education. Hudson, A.,(2005) Equity and Trusts. 4th edition Cavendish Publishing Limited Ramjohn, M., (2005). Unlocking Trusts. 4th Edition Hodder Arnold. Todd and Wilsons (2005). Textbook on Trusts. 7th Edition Oxford University Press. Moffat, Graham (2005). Trust Law Text and Materials. Cambridge University Press. Bright., (1989). Charity and Trusts for the Public Benefit. Conv 28 Mckay., (1973). Trusts for Purposes. Conv 420. Read More