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