When observing relief of poverty, it can be established that the law concerning this head is quite controversial. The reason being that in some cases people who benefit from this head may in fact be well off. The courts have not attempted to define poverty in precise terms but have stated that it does not mean destitution. Therefore it is dependent on case law to establish whether or not trusts are valid charitable trusts. In Re De Cartaret, a trust was created for the annual allowances of £40 each to widows and spinsters whose income was between £80 and £120 a year. This trust was held charitable even though the minimum income of £80 a year was at the time a moderate rate.
Advancement of education is a head in which the law of charity has developed to some extent. For the advancement of education the preamble to the Act of 1601 speaks only of ‘schools of learning’ however, this category has grown to cover a wide range of education and cultural activities, such as drama, music, literature and fine arts. Museums, zoos and public libraries may also be educational for the public at large. The House of Lords in IRC v McMullen made it clear that the legal conception of charity was not static but changed with ideas of social values. Lord Hailsham in IRC v McMullen stated that
“both the legal conception of charity, and within it the educated man’s ideas about education, are not static but moving and changing…both have evolved with the years. In particular…the scope and width of education differed in the past greatly from those which are now generally accepted”.
This is a view shared by Lord Wilberforce in Scottish Burial Reform & Cremation Society Ltd v Glasgow Corporation in which he described charity law as a moving subject.
Lord Cross of Chealsea in Dingle v Turner however expresses an opposite view. He believes that the law on charity has not evolved and instead there has been very slight movement and development. He concludes that the fact that the law adopts the same test for the validity of trusts on the one hand and tax concessions on the other is the main source of criticism for present day charity law. Lord Cross stated that he would have preferred different tests. He confirmed that problems arise because the issues concerning fiscal privileges can not be ignored when answering questions on whether or not any given trust is charitable, as the recognition of any trust as a valid trust automatically offers the trust fiscal privileges. His concern was that when the validity of a trust was in question, if a judge decides that the trust is not charitable then he defeats the donor’s intention, and invalidates the trust. Whereas on the other hand if he gives effect to the donor’s wishes, he does not only grant the trust a charitable status but also with it offers tax benefits. Lord cross stated that due to this fact courts are reluctant to give a trust a charitable status. Lord Cross suggested that the decision in Re Compton and in Oppenheim v Tobacco Securities Trust Co, (Oppenheim case), were influenced by the consideration that if such trusts were held valid then they would enjoy undeserved fiscal privileges. He stated that
“it is noteworthy that most recent decisions in the higher courts limiting the scope of the charity have been ‘Revenue’ cases”.
In Re Compton the testator attempted to create a trust for the education of the descendants of her three relations. When the matter was addressed in court, it was established that by holding such a trust charitable it would mean that a man with young children could save income tax by creating a trust for his children. The House of Lords in the Oppenheim case approved this decision. It can therefore, be established that fiscal privileges has a great impact on charity law from developing. Lord Cross obviously believed that the trusts were worthy of a charitable status however they failed due to the fact that by granting them a charitable status the courts would also be granting it with a substantial annual subsidy in the expense of the taxpayer.
On the other hand, it is also important to note that although Lord Hodson, Lord Simon, and Lord MacDermott agreed with Lord Cross’s decision is Dingle v Turner, they did not share the same views regarding fiscal privileges. The three law Lords doubted whether fiscal considerations should be given any relevance in deciding whether a gift was charitable. However, in examining the decisions of Re Compton and Oppenheim there seems to be some doubt that they have often done so and instead it can be established that the courts have been astute to restrict the scope of charity.
The ‘Nathan Committee’ were appointed to consider and report on the changes in the law and practice relating to charitable trusts. When considering the meaning of the word charity, they came to the conclusion that the contents of term ‘charity’ were “neither too wide nor too narrow”. The committee expressed that they were satisfied with the meaning and believed that no problems concerning fiscal privileges should arise when deciding whether a trust is a valid. However they recommended that a new statutory definition should be enacted based on Lord MacNaughten’s classification; a recommendation which has not been implemented.
The Royal Commission on the Taxation of Profits and Income, also known as the ‘Radcliffe Commission’, expressed concerning views in relation to the contents of the term ‘charitable purpose’. The ‘Radcliffe Commission’ recommended that for the purpose of exemption from tax, charity should only mean the relief of poverty; the prevention and relief of distress; the advancement of education, learning and research; and the advancement of religion. The commission went on further to state that even when charities fall within this restricted definition, they should only be allowed partial exemption from tax. This is very similar to what Lord Cross proposed. Lord Cross stated that a logical solution would be to separate the two concepts and then also to say that only some charities should enjoy fiscal privileges
Whether the heads of charity are outdated is a contentious issue. It can be argued that the heads no longer reflect the needs of society. Gifts nowadays are often made to social welfare institutions, disaster appeals and pressure groups; and it is questionable whether the law has altered significantly to take account of these developments.
The fact that the Nathan’s Committee’s recommended that a new statutory definition should be enacted has never lead to a change in the law and was never implemented. This demonstrates the lack of extent to which charity law has moved on.
A recent example of how charity law does not meet the needs of the society today is in relation to Amnesty International. The Amnesty International group protects and promotes human rights around the world. The charity's commission has issued guidelines on promoting human rights as charitable purposes. Therefore the work done by the organisation is deemed to be charitable and of public benefit in a country that has adopted the relevant Human Rights. However, due to the decisions in the high court in the 1980’s, that does not allow charities to directly promote changes in law, government policy or administrative decisions of government authorities, it is not charitable to promote human rights in a country that has not adopted them into its domestic law.
Melvin Coleman in The Times has greatly criticised this:
“How daft is that? The very people whose human rights are most abused are often denied the protection of international conventions, yet it is not deemed charitable to campaign for that to change”.
If Amnesty International are widely recognised as a charity, the decision that it can not be granted a charitable status does not seem to be a sensible one.
It can be concluded that the law in relation to charities has not moved on and is no longer appropriate when dealing with charitable trusts and growing concerns over the legal definition of ‘charitable purposes’ are evident. The law of charity is criticised for the fact that charitable trusts enjoy two quite different sorts of privileges. A reasonable proposal would be to set aside all questions of fiscal privileges and simply consider in what circumstances the law should allow a valid charitable trust, taking into consideration the public benefit requirement. This would lead to trusts that were privileged under both tax and trust laws and public purpose trusts privileged only under trusts law. Such a notion would improve charity law to an extent in which charities that deserve a charitable status will gain one, however it would not completely disarm critics of present charity law, as the question posed by M.R. Cheresterman:
“at what level of public benefit would justify the necessary expenditure of public funds?”
would attract a variety of views, and lead to further criticism.
(WORD COUNT: 1928)
http://www.taxpolicy.ird.govt.nz/publications/files/html/ddcharities/c3.html
Todd & Wilson, (2003), Textbook on Trusts, (6th Ed): Oxford University Press, Pg. 309
Hanbury & Marshall, (1997), Modern Equity, (15th Ed): Sweet & Maxwell, Pg. 376
Appeal Cases (1981): IRC v McMullen Pg. 15
Some Recent Developments in the Law of Charity: The Law Quarterly Review (1956), Pg. 205
Some recent developments in the Law of Charity; The Law Quarterly Review 1956. Pg, 203
How daft can Charity Law get? Melvin Coleman. The Times: March 24, 2003. Pg 31
Hayton & Marshall (2001) Commentary and Cases on the Law of Trusts and Equitable Remedies (11th Ed): Sweet & Maxwell Pg.489