Equity and Trusts: Charitable trusts - the basics

Legislation: Charities Act 2006 and 2011

Main case law:

- Morice v Bishop of Durham – origins of the various divisions

- IRC v Pemsel – Lord McNaghten's 4 divisions: poverty, education, religion, other – now consolidated in s.3

4 requirements: 

1) Public benefit – s.4 statutory test, Oppenheim case – no personal nexus, Dingle v Turner  - exception. – must be for the benefit of the public or a portion of it; 

2) Not for profit; 

3) Not political – Antivivsection Society –not allowed; Re Keoppler – allowed as long as the main purpose is not political;

4) Exclusively charitable - William’s Trustees v IRC – not allowed because one of the minor purposes wasn’t charitable, even though the majority were charitable, but Re Coxen – non charitable element allowed because it aided the primary purpose.

Section 3 heads of charity:

- Poverty: not defined in case law or statute but given poverty a very wide meaning, indeed in Re Young distressed gentile folk were deemed to be living in poverty. Re Coulthurst - need not mean destitution. Reform: previously only held trusts for the relief of poverty but now the prevention of poverty too.

- Education: Re Shaw – 40 letter alphabet research not allowed; Re Hopkins – Shakespeare monologue research was allowed. Physical education – IRC v McMullen – Lord Hailsham: wide definition of education which included moral, mental, physical and spiritual development.

- Religion: liberal definition including restoration and maintenance work on churches etc; trusts upheld because of the belief that any religion is better than no religion because it enforces moral standards. Previously required faith and worship in one god, but this ruled out religions such as Buddhism and Sikhism which either had no god, or many gods. Thornton v Howe – satanic groups not allowed because they’ve subversive of morality.

Cy Pres:

s.62 Charities Act 2011, attempts to redirect gift to charity with similar aims/intentions; only applies to deceased donors. 

Initial failure = gift never passed, ‘general charitable intention’ must be proved for cy pres to apply. Subsequent failure = gift had passed but later event caused it to fail, ‘general charitable intention’ is assumed and cy pres automatically applies. Re Faraker – if charity appears in different guise there is no cy-pres. Gift for purpose: Re Vernon’s WT – to crippled children,  Re Satterthwaite  – to animal welfare; or to specific charity: Re Spence – to specific old person’s home.