The next question to ask is whether the three certainties concept is applicable to a charitable trust. The first certainty is satisfied since the person making the donation to a charity is in a way declaring their intention. The second certainty is also satisfied, since the donation given will be of a specified amount or type. The third certainty is not satisfied, since it is difficult for the charity themselves to know who will specifically benefit from the trust fund. This certainty does not comply with the beneficiary principle since there is no one to enforce the trust and so the trust would fail. However in charitable trusts the Attorney General has the duty to enforce a trust. So although the beneficiary principle is not satisfied the element of the Attorney General enables the enforceability of the trust. So it can be gathered that the first two certainties are satisfied and the third certainty is satisfied by having the Attorney general to enforce the trust and hence a valid trust.
A difficulty arises where a trust is created not for the benefit of ascertainable people but for a stated purpose which is not charitable. The general rule is that the trust will fail since there are no beneficiaries to enforce it. However such trusts can be valid if they satisfy the three exceptions listed in Re Endacott. These exceptions are it must be a purpose previously upheld, satisfy the perpetuity rule which suggests that there must be a time period within which the trust can end (otherwise it will last forever) and someone to execute the trust. In relation to the purpose which is previously upheld an exception will be made for trusts for the maintenance of tombs and monuments, the performance of religious ceremonies, the benefit of specific animals which have all been held to be valid trusts of imperfect obligations.
Trusts of imperfect obligation are non charitable trusts where the settlor for sentimental reasons created a trust. In relation to the first exception, money left for the maintenance of a family monument was held valid so long as it did not exceed the perpetuity period. However where money is an issue (i.e. large amounts of money left) then the trust will not be valid. The court did not allow a £20,000 trust for a monument in remembrance of the testator in a local parish. In relation to the second exception, money given for prayers to be said in church is chartable if open to public is valid. However prayers said in private are not charitable but maybe an imperfect obligation so valid. In relation to the third exception, money left for animal is charitable however money left for specific animal is not valid unless it satisfies perpetuity provision.
The problem of whether a trust or gift is for a purpose or for persons is particularly important where property is given to an unincorporated association which does not have charitable purposes. An unincorporated association exists where two or more persons are bound together for one or more common purpose by mutual undertakings, each having mutual duties and obligations, in an organization and its funds is vested, and which can be joined and let at will. Such a gift maybe construed as giving rise to a trust for the association’s purposes, in which case it is liable to fail as a non charitable purpose trust. Alternatively the gift may be construed as one to the members who collectively make up the association with the result it will not fail for want of beneficiaries. As a rule, however the individual members do not thereby acquire immediate distributive shares in the property given; rather it will be treated as an accretion to the association’s assets to be applied for the benefit of the members.
The main differences between private and charitable trusts are the advantages enjoyed by charitable trusts only. The Attorney General is relied on in order to enforce the trust whereas in private trusts, the beneficiary enforces the trust. Charitable trust does not fail if there is uncertainty of object. The beneficiary does not need to be known; only the first two certainties need to be met. Charitable trusts are not subject to perpetuities rule with the same degree as private trusts. Charitable trusts are exempt from certain taxes (such as capital gains tax, income tax, corporation tax and so on). The cy pres doctrine (cy pres means near to) gives permission that if purpose of a trust is out of date; the trustees are allowed to change it for another purpose, similar to the original purpose. This provision of the doctrine prevents charity money from being wasted. Charity trustees are allowed to act by majority rather than a unanimous decision.
The first source of law for charities was the Statute of Charitable Uses 1601. This legislation was introduced as a result to prevent charity money from being used wrongly or corruptly. The statute suggested was to limit the ways in which money (trust property) could be used. In addition a preamble was established which listed things which were deemed to be charitable. The courts used this preamble as a guideline to help them decide what was charitable. Anything listed in the preamble or similar to the list was regarded to be charitable. Although the statute is repealed the preamble is still deemed to be influential even today.
In order for a trust to be charitable in law it must satisfy three requirements. The first requirement is that it must fit within one of the four classes of charity defined in Pemsel’s case, secondly it must have the required element of public benefit(unless it is for the relief of poverty) and thirdly it must be exclusively charitable.
Firstly the four classes are for the relief of poverty, the advancement of education, the advancement of religion and other purposes beneficial to the community. In relation to poverty, a person can be regarded as poor if he has to go short in the ordinary acceptance of the word, regard being had to his status in life and so forth. So where there is a clear intention that the purpose is to relief poverty it will be valid, even if explicit words are not used. However a trust will not be valid if the benefits are not exclusively reserved for the poor even though it appears so. In relation to education it is not restricted to the process of formal learning in a classroom environment. It encompasses a wide range of other activities which contribute to the improvement of a useful branch of human knowledge and it’s public dissemination. These activities include trusts for research, educational publications and sports, hover for sports there is a difficulty in deciding whether sports are educational or not. In relation to religion, religion is concerned with one man’s relation to God; the two essential attributes of religion are faith and worship. So gifts for a wide range of purpose connected with Christianity will be held to be charitable. These activities include choral singing, saying masses, making gifts to clergyman in terms which limit the scope of the gift to donee’s religious functions.
In relation to other purposes beneficial to the community, these purposes are listed in the Statute of Charitable Uses 1601. Lord Simmods stated that in order for such purpose to be charitable under this head; it must not only benefit the community but must do so in a manner that is within the spirit and intendment of` the above statute. These purposes include animal welfare, welfare of the aged/sick, recreational pursuits, public amenities and defence of the realm.
Secondly the charitable status of such trust depends on whether the benefits which they provide are available to the community at large or an appreciable section of the community. There is a test laid down in Oppeheim v Tobacco Securities Trust (1951) where it was made clear that must no personal nexus ( relationship) by the employment or otherwise, however such rule does not apply to trusts for relief of poverty
Thirdly, difficulties arise on the drafting of the trust where the word charitable is linked with other expressions. Although words such as benevolent and philanthropic have same concept of charity they are regarded as a wider importance. So when the connecting word is ‘or’ then the trust will not be valid however if it is ‘and’ then it will be a valid trust. The word ‘and’ suggests that the word charity has to be included. Also where the trust is of a political purpose (i.e. purpose to change law or government policy) it will not be exclusively charitable, since it is not the job for the courts to change but to apply law and court cannot change if it would not benefit the public.
Proposals for reform of the Law of Charities can be seen in the form of Charities Bill 2004. Part 1 seeks to amend the definition of charity and part 2 seeks to modernize the regulation of charities. The term charitable purpose has more categories which would have been excluded from being charitable. The administration of charities includes a change in the cy pres doctrine. The new reform suggests that the advantages enjoyed by charitable trusts should not apply to all charities. The trusts for the relief of poverty should get tax relief but not for the advancement of education since fee paying schools benefit the individual paying not the public, they are private institutions. However it could be argued that fee paying schools can have charitable status so long as they can prove they are for the benefit of the public. The fees can contribute more teachers and better teaching. The category of charity should not be widened since people who should not be benefiting will and vice versa.
In conclusion, since charitable trusts enjoy more privileges than private trusts it could be said that stricter laws apply to them and should continue to do so (this can be seen visibly through the Charities Bill 2005) to prove the validity of the trust. Although the main aim of such trusts is to benefit the public, some people may misuse the concept of public benefit to fit their own purpose and abuse the whole aim of charities. In regard to private trust, since they benefit specified individuals the laws are not that strict as compared to charitable trusts. However the laws are strict in that they allow the safeguard of private people, by allowing failed express trust to result back to the settlor as a resulting trust so the courts have provided for future provisions. So in both trusts Parliament has provided for the necessary provisions to take place for the validity of both trusts to prevent corruption and unfairness.
WORD LIMIT 2263
BIBLIOGRAPHY
HUDSON, A: Equity & Trusts (4th edn Cavendish Publishing Limited 2005)63-124, 125-170 and 857-899,
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Jeffrey Lever “Charity Law,” Ch 3, in Voluntary Matters: Management & Good Practice in the Voluntary Organisation, (P. Palmer & E. Hoe eds), Media Trust & Directory of Social Change, London, 1997
Charities Bill 2005
