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Charitable Trusts

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Title: Charitable Trusts


1
Charitable Trusts
  • Professor Cameron Stewart

2
Introduction
  • Charitable trusts are express trusts which exist
    for a purpose rather than for identifiable
    beneficiaries. In Attorney-General (NSW) v
    Perpetual Trustee Co Ltd (1940) 63 CLR 209 at
    222, Dixon and Evatt JJ stated
  • A charitable trust is a trust for a purpose, not
    for a person. The objects of ordinary trusts are
    individuals, either named or answering a
    description, whether presently or at some future
    time. To dispose of property for the fulfillment
    of ends considered beneficial to the community is
    an entirely different thing from creating
    equitable estates and interests and limiting them
    to beneficiaries. In this fundamental distinction
    sufficient reason may be found for many of the
    differences in treatment of charitable and
    ordinary trusts.

3
Differences with other express trusts
  • No beneficiary principle
  • Public trusts
  • Indestructible
  • Courts nd AG have power of supervision

4
Charitable Purpose
  • Statute of Charitable Uses 1601 (43 Eliz I, c.4)
  • the relief of poverty
  • care of aged persons and the sick
  • care of soldiers and mariners
  • advancement of education through universities and
    schools
  • repair of bridges, havens, ports, churches and
    highways
  • the care of orphans
  • the maintenance of prisons
  • the marriage of poor maids
  • support for young tradesmen and persons decayed
  • the relief or redemption of prisoners or
    captives and
  • relief for poor persons concerning the payment of
    taxes

5
Charitable Purpose
  • Gilmour v Coates 1949 AC 426 at 442-3 1949 1
    All ER 848 at 852, by Lord Simonds
  • From the beginning it was the practice of the
    court to refer to the preamble of the statute in
    order to determine whether or not it was
    charitable. The objects there enumerated and all
    other objects which by analogy are deemed within
    its spirit and intendment and no other objects
    are in law charitable. That is settled and
    familiar law.

6
Charitable Purpose
  • Royal National Agricultural and Industrial
    Association v Chester (1974) 3 ALR 486 a trust
    for the breeding and racing of pigeons failed
    because there was no analogous charitable purpose
    in the preamble.

7
Charitable Purpose
  • A trust for the not-for-profit publication of law
    reports was found to be charitable in
    Incorporated Council of Law Reporting (Qld) v
    Federal Commissioner of Taxation (1971) 125 CLR
    659 1972 ALR 127, on the grounds that the
    reporting of cases was fundamental to society in
    the same way that the maintenance of roads, and
    the promotion of agriculture were fundamental and
    within the spirit of the preamble

8
Charitable Purpose
  • Commissioner for Special Purposes of Income Tax v
    Pemsel 1891 AC 531 at 583. His Lordship stated
    at
  • Charity in its legal sense comprises four
    principle divisions trusts for the relief of
    poverty trusts for the advancement of education
    trusts for the advancement of religion and
    trusts for other purposes beneficial to the
    community, not falling under the preceding heads.

9
Reform
  • Report of Inquiry Into the Definition of
    Charities and Related Organisations 2001
  • Charities Bill in 2003,
  • Extension of Charitable Purpose Act 2004.

10
Charities Act 2013
  • Section 5 of the Act defines charity as an
    entity that is a not-for-profit entity in which
    all of its purposes are (i) charitable purposes
    that are for the public benefit or (ii)
    incidental or ancillary to, and in furtherance or
    in aid of, the entitys charitable purposes that
    are for the public benefit.
  • None of the entitys purposes can be a
    disqualifying purpose.
  • Finally, an individual, a political party or a
    governmental entity cannot also be a charity.

11
Section 10
  • The requirement of public benefit (the meaning of
    which is discussed below) mentioned above does
    not apply to an entity if
  •  
  • the entity is an association of individuals that
    has an open and non-discriminatory membership
    and
  • the entity is established for the purpose of
    assisting individuals affected by a particular
    disadvantage or discrimination, or by a need that
    is not being met and
  • the entity is made up of, and controlled by,
    individuals who are affected by the disadvantage,
    discrimination or need and
  • all of the entitys criteria for membership
    relate to its purpose and
  • the entitys membership is open to any individual
    who satisfies the criteria
  • Section 10(2) of the Act stipulates that the
    requirement of public benefit does not apply to
    an entity if the entity is a closed or
    contemplative religious order that regularly
    undertakes prayerful intervention at the request
    of members of the general public

12
Definitions
  • The key elements of the definition are
  • entity
  • charitable purpose
  • public benefit
  • disqualifying purpose
  • governmental entity.

13
Public benefit
  • The benefit must be for the entire public or for
    a significant proportion of it Ford Lee at
    19070. However, the purpose of the trust need
    not be effected in the jurisdiction for it to be
    of benefit to the public Kytherian Association
    of Qld v Sklavos (1958) 101 CLR 56.

14
Public benefit
  • To illustrate these principles, trusts for the
    advancement of religion have failed where they
    have the object of favouring cloistered or
    contemplative orders who have little contact with
    the outside world Gilmour v Coats 1946 AC 426.
    Trusts established to stop the practice of
    vivisection have also failed because there would
    be an overall detrimental effect to the public
    should such experimentation cease
    Anti-Vivisection Society v Inland Revenue
    Commissioners 1948 AC 31.

15
Public benefit
  • Re Compton 1945 Ch 123. Lord Greene MR stated
    at 131,
  • A gift under which the beneficiaries are
    defined by reference to a purely personal
    relationship to a named propositus cannot on
    principle be a valid charitable gift. And this, I
    think, must be the case whether the relationship
    be near or distant, whether it is limited to one
    generation or is extended to two or three or in
    perpetuity. The inherent vice of the personal
    element is present however long the chain and the
    claimant cannot avoid basing his claim on it.

16
Public benefit
  • The Compton test has been used to strike down
    charitable trusts when the potential recipients
    of the trust funds have been defined by reference
    to blood relation, employment or contract
  • BUT the requirement for public benefit does not
    apply to trusts for the relief of poverty Dingle
    v Turner 1972 AC 601 1972 1 All ER 878.
    Secondly, trusts for people from particular
    geographic locales do not offend the rule, as
    they can be applied regardless of inherent
    personal characteristics Re Tree 1948 Ch 325
    2 All ER 65. Thirdly, a request by the creator
    that family members, or others connected by
    association or contract, be given preference in
    the administration of the charity, will not
    invalidate the trust

17
Trusts for Political Purposes
  • Bowman v Secular Society 1917 AC 406 1916-17
    All ER Rep 1.
  • A trust will be deemed to be political when it
    has the primary purpose of changing the law
    Anti-Vivisection Society v Inland Revenue
    Commissioners 1948 AC 31.
  • Examples include a trust to establish a
    nationalised health service, Re Bushell (decd)
    1975 1 All ER 721, or to reform the alphabet,
    Re Shaw 1957 1 All ER 745.
  • Royal North Shore Hospital of Sydney v
    Attorney-General (NSW) (1938) 60 CLR 396
  • Santow J extra judicially
  • There is a crucial distinction, inhering in
    McGovern, between permissibly changing the law
    within the framework of its established policy
    and impermissibly reversing the law along with
    its established policy. Incremental change to the
    law consistent with its established direction may
    indeed be permitted today.

18
Trusts for Political Purposes
  • Attorney General (NSW) v The NSW Henry George
    Foundation Ltd 2002 NSWSC 1128
  • Aid/Watch Incorporated v Commissioner of Taxation
    of the Commonwealth of Australia (2010) 241 CLR
    539
  • Re Greenpeace of New Zealand Inc 2013 1 NZLR
    339

19
Trusts for the Relief of Poverty
  • In order to be valid as a gift for the relief of
    poverty the law does not require that the persons
    to be benefited should be destitute, or even on
    the border of destitution Re Gillespie (dec'd)
    1965 VR 402 at 406, per Little J. Rather a
    trust will relieve poverty when it provides money
    to those who would have to go short because of
    their financial status Re Coulthurst (dec'd)

20
Trusts for the Relief of Poverty
  • The Aged
  • The Impotent

21
Trusts for the Advancement of Education
  • It includes gifts to particular educational
    institutions, such as schools and universities,
    which, coming under the preamble, are prima facie
    charitable
  • Educational trusts can embrace specific purposes
    which are related, sometimes loosely, to
    education. Trusts for scholarships, buildings and
    the dramatic arts are all examples of valid
    educational trusts

22
Trusts for the Advancement of Religion
  • The definition of religion was provided by
    Mason CJ and Brennan J in Church of the New Faith
    v Commissioner of Pay-roll Tax (Vic) (1983) 154
    CLR 120 at 136
  • For the purposes of the law, the criteria of
    religion are twofold first, belief in
    supernatural Being, Thing or Principle and
    second, the acceptance of canons of conduct in
    order to give effect to that belief, though
    canons of conduct which offend against ordinary
    laws are outside the area of immunity, privilege
    or right conferred on the grounds of religion.

23
Trusts for the Advancement of Religion
  • Advancement of Religion Generally
  • Trusts for Buildings, Grounds and Cemeteries
  • Trusts for Prayers, Masses and Ceremonies
  • Gifts to Religious Office Bearers

24
Trusts for Purposes which are Beneficial to the
Community
  • Gifts to a Community
  • Public Works and Beautification Trusts
  • Animals and Wildlife
  • Protection from War and Disaster
  • Relief of Taxes
  • Public Recreation and Sport
  • Public Safety and Defence

25
Trusts with Mixed Charitable and Non-Charitable
Purposes
  • Compendious gifts include gifts for objects of
    benevolence and liberality, Morice v Bishop of
    Durham. Additionally, if the gift is worded to
    give the trustee a discretion to choose between
    charitable and non-charitable purposes, the gift
    will fail. An example of such a gift is a gift
    for charitable or benevolent purposes

26
Enforcement and Administration of Charitable
Trusts
  • General Administrative Schemes
  • Cy-pres Schemes
  • Initial Impossibility
  • Supervening Impossibility
  • Satisfaction of Original Purpose
  • Statutory Powers

27
Valid Non-Charitable Purpose Trusts
  • Trusts for the maintenance of pets
  • trusts for the construction and maintenance of
    tombs unassociated with churchyards

28
Problem
  • At the end of World War II, Pierre Culliford, a
    dentists assistant, left his birthplace in
    Belgium and emigrated to Australia. He settled on
    a farm he purchased near Sommersby. The farm was
    in a very run-down condition when he purchased
    it. Pierre devoted all his time, energy and
    resources to establishing his beloved farm, which
    he named Schtroumpfland (the name of the
    Belgian village in which he was born).

29
Problem
  • In 1989 Pierre contracted motor neurone disease.
    As a result of his affliction Pierre came into
    contact with the NSW Motor Neurone Disease
    Research Council, an unincorporated body, which
    was engaged in research for an effective cure for
    motor neurone disease, and which had its research
    centre and headquarters in Gosford.

30
Problem
  • In April 1990, the NSW Motor Neurone Disease
    Research Council was effectively dissolved, but
    its functions were taken over by a newly formed
    body called the Motor Neurone Disease Research
    Institute of NSW. At all relevant times the only
    other institution concerned with motor neurone
    disease in NSW was the Newcastle-based Motor
    Neurone Disease Sufferers Association.

31
Problem
  • As a result of Pierres disease he was unable to
    work his farm and the farm proceeded to decline
    rapidly. In May 1997 Pierre died. At the time of
    his death the Schtroumpfland farm was worth
    350,000, but had ceased to generate any income
    at all. It was estimated that the costs of repair
    would run into the millions.

32
Problem
  • In his will Pierre appointed his nephew Johan as
    executor and trustee as well as residuary
    beneficiary.
  • Consider the following provisions left by Pierre
    to his trustee in his will
  • a) 50,000 to the Anti-Motor Neurone Disease
    Centre.
  • b) The whole of my beloved Schtroumpfland farm
    for a training farm for orphan lads being
    Australians.
  • c) 5000 to provide a stone and marble memorial
    to past and present sufferers of motor neurone
    disease..

33
Answer
  • The first disposition suffers from an initial
    impossibility as the gift is to a non-existing
    institution. Such a gift will fail in the absence
    of a general charitable intention that can be
    effected cy-près. A general charitable intention
    is present, given that the gift appears intended
    to address the woes associated with motor neurone
    disease. Such a gift is clearly a trust to aid
    the impotent. A cy-près scheme could be ordered
    under the inherent power of the court.
  • The court will examine the evidence of the
    purposes of the association to see which
    association carries out purposes as near as
    possible to the intention of the testator.

34
Answer
  • The second gift fails because of initial
    impossibility. Here the initial impossibility is
    related to the fact that the trust is
    impractical, given the condition of the farm. The
    facts of this question are very similar to those
    in Attorney-General (NSW) v Perpetual Trustee Co
    Ltd (1940) 63 CLR 209
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