One of the most significant changes made by the Charities Act 2009 came in s.39 of that Act, which established a ‘Charities Regulatory Body’ to regulate charities. Case law still largely defines ‘charitable purpose’. The main advantage of being classified as a charitable purpose trust is that many of the disadvantages which would apply otherwise can be avoided; the rule against perpetuities doesn’t apply (although the trust must vest in a perpetuity period); the rule against having non-human beneficiaries can be ignored; and certain tax exemptions accrue. The case of Christ’s Hospital v Grainger was the case in which it was held that a gift over from a charity to a charity isn’t subject to the rules against perpetuities. The Cy-Pres jurisdiction of the Courts allows them to get involved to monitor charities so if their purpose changes or the charity comes to an end it allows orders to be made about the property so that it is used for a purpose as similar as possible to the purpose of the original charity.
Definition of ‘charity’: The old legislation in this area didn’t set out a definition, but the preambles set out examples of what might be considered charitable purposes; the Courts expanded this definition based on ‘the spirit of the preamble’. There are four categories of charitable trusts set out in Pemsel’s Case by Lord MacNaughton. These are trusts for: 1)
The relief of poverty;
The advancement of education;
The advancement of religion;
Other purposes beneficial to the community.
There was always a difficulty with the fourth factor given its possible very wide scope. Therefore the 2009 Act sets out a list of purposes that are encompassed in the fourth category in s.3(11) (e.g. protection of the environment). In Ireland and England, in order for a trust to qualify as ‘charitable’, it must not only serve one of the above purposes, but it must also serve the public benefit, and pass the ‘public benefit test’. The list is not intended to be exhaustive. In England they have s.2 of the Charities Act 2006 to define charitable purposes. The 2009 Act includes e.g. voluntary work, urban regeneration, advancement of art, culture heritage or sciences etc. which are clearly very broad categories.
Trusts for the Relief of Poverty: The obvious questions raised by this category are how poor must the beneficiaries be, and how many of them must there be. In this context, ‘poor’ is a relative term; in the Re Colthurst case, it was said that in this context, poverty doesn’t mean destitution, but instead the idea of people having to go short having regard to their status. This case concerned a trust for the benefit of orphans and widows of bank officials who were in poverty. In the case of Re Segelman, a trust in favour of ‘needy relatives’ was upheld as being charitable; it was acknowledged that most of the members of the class weren’t affluent but needed help from time to time. However, the Court did limit the number of beneficiaries here, since the class was not to be closed until twenty one years after the testator’s death, and although at the time of death there were only twenty six individuals in the class, in twenty one years it would expand greatly, and the Court found that it cannot have been the intention of the testator to give gifts to after-born issue. In the Histed Article, the author is particularly critical of this wide definition of ‘poor’, as it means that the Courts have come close to saying that an occasional problem of expenditure exceeding income qualifies someone as ‘poor’, which is not a good approach. It should be noted that these trusts must benefit a class of individuals, as if they benefit named individuals they qualify as private, and not charitable, trusts. In terms of the ‘public benefit test’ in the context of this category, the test has been reduced “almost to vanishing point” according to Hanbury, because of the advent of poor employee and poor relative cases....
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