Title: Charitable Trusts
1Charitable Trusts
- Professor Cameron Stewart
2Introduction
- 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.
3Differences with other express trusts
- No beneficiary principle
- Public trusts
- Indestructible
- Courts nd AG have power of supervision
4Charitable 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
5Charitable 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.
6Charitable 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.
7Charitable 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
8Charitable 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.
9Reform
- Report of Inquiry Into the Definition of
Charities and Related Organisations 2001 - Charities Bill in 2003,
- Extension of Charitable Purpose Act 2004.
10Charities 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.
11Section 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
12Definitions
- The key elements of the definition are
- entity
- charitable purpose
- public benefit
- disqualifying purpose
- governmental entity.
13Public 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.
14Public 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.
15Public 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.
16Public 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
17Trusts 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.
18Trusts 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
19Trusts 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)
20Trusts for the Relief of Poverty
21Trusts 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
22Trusts 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.
23Trusts 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
24Trusts 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
25Trusts 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
26Enforcement and Administration of Charitable
Trusts
- General Administrative Schemes
- Cy-pres Schemes
- Initial Impossibility
- Supervening Impossibility
- Satisfaction of Original Purpose
- Statutory Powers
27Valid Non-Charitable Purpose Trusts
- Trusts for the maintenance of pets
- trusts for the construction and maintenance of
tombs unassociated with churchyards
28Problem
- 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).
29Problem
- 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.
30Problem
- 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.
31Problem
- 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.
32Problem
- 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..
33Answer
- 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.
34Answer
- 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