Charitable Trusts - Irish Equity

Charitable Trusts

• The cy-pres doctrine applies where the original objective of the settlor of a charitable trust becomes impossible, impracticable or illegal to perform and allows the court to amend the terms of the trust so as to effect, in so far as possible, the original intention of the testator.

• Christ's Hospital v Grainger (Ch)

  • Provided it vests within the perpetuity period, a charitable gift may be perpetual in nature.

• Commissioners for Special Purposes of Income Tax v Pemsel

  • Lord Macnaghten: there are four categories of charitable trust:

    • Trusts for the relief of poverty

    • Trusts for the advancement of religion

    • Trusts for the advancement of education

    • Trusts for other purposes beneficial to the community

• Re the Trust of the Worth Library (HC)

  • The legal meaning of a charity (in the context of charitable trusts) is either a trust for the relief of poverty, advancement of education, advancement of religion and any other trusts for purposes beneficial to the community.

  • If a testator intends his gift to be for a charitable purpose recognised by law, it will be considered a charitable gift by the law.

  • If it falls in the fourth category, the fact that the testator's opinion of the public benefit of his object is not shared by most people will not of itself prevent it being a charitable gift in the eyes of the law, provided it is not illegal, irrational or contrary to the public good

  • This is obiter, because the two possible objects in this case (gift for learning or to a hospital) are recognised as a public good by a great number of people in society.

  • This case fell into the latter category – the gift was to a hospital and the public benefit arose from its providing a place of relaxation for the surgeon, physician and chaplain of the hospital.

• Delaney, Charitable Status and Cy-Pres Jurisdiction:

  • The traditional classification fails to make clear that the courts require evidence of public benefit in order to recognise a charitable trust.

• Brady, 1994 DULJ

  • Cy-prés doctrine: where a trust for a charitable purpose can no longer be put towards that purpose, it will be applied in so far as possible towards a similar charitable purpose.

  • The approach taken Re the Trust of the Worth Library is a victory of pragmatism over principles – Keane J refuses to allow the absence of a general charitable intention preclude the application of cy-prés doctrine, holding that where the property is given absolutely and perpetually to charity for a particular purpose and is vested in the charity, the fund can be applied cy-prés irrespective of the donor's intention.

• O'Halloran, 2001 DULJ

  • 'Public benefit' means that the trust must be of public character and of some benefit to the public generally – the first strand is satisfied if it is one of the four Pemsel categories, the second if it is bestowed on public beneficiaries.

  • Problems arise with public benefit tests: A) whether an object is of public benefit depends on social circumstances and thus the object may lose this status with time, B) there are jurisdictional difference – the test may subjective/objective, judicially/legislatively defined

Trusts for the relief of poverty

• Re Coulthurst (CA)

  • In this context, poverty does not mean destitution – it refers to people who have to 'go short' in the ordinary acceptation of that term, due regard being had to their life status etc.

  • Thus, a trust for the benefit of children and widows of deceased officers of a bank who, by reason of their financial circumstances, were the most deserving was a valid charitable trust.

• Re Scarisbrick (CA)

  • Trust set up 'for such relations of my said son and daughters as the survivor of the said son and daughters shall be in needy circumstances and for such charitable objects either in Germany or Great Britain...for such interest and in such proportions...as the survivor of my said son and daughters shall by deed or will appoint'

  • The general rule is that a trust that would be considered to be for charitable purposes were it made in favour of the public at large or a section thereof, will not be considered to be for charitable purposes if it is limited to an aggregate of individuals ascertained by some familial or contractual tie (e.g. relatives or members of a particular society)

  • An exception to the general rule is that where the trust is one for the relief of poverty – in such cases they will still be considered trusts for charitable purposes.

• Dingle v Turner (HL)

  • The testator left instructions for a trust to be administered so as to “apply the income thereof in paying pensions to poor employees of E Ltd”, a company jointly owned by him.

  • Re Scarisbrick upheld – although the exception for poor employees has a shorter history than the rule for poor relatives and members, it is better to keep the exception coherent and uphold the validity of the large number of such trusts which have come into being since its recognition.

  • Also, a charitable trust for the relief of poverty has less of an incentive effect for the employees of a company (as people are generally optimistic enough not to anticipate falling into poverty) than a trust for the advancement of education or other general purpose trust would.

• Re Segelman (Ch Div)

  • The testator provided that he wished his estate to be used for the benefit of poor and needy members of his family for a period of 21 years after his death and at the end of that period it should be applied in the same way to any poor and needy family members and then to charities at the trustee's discretion.

  • Dingle v Turner applied.

  • If the class of persons in whose favour the trust operates is too narrow, a trust for the relief of poverty among them may not be held charitable, despite their being relatives etc. - the test is whether the trust is really a gift to individual members of a class

  • In this case, although the beneficiaries of the trust were restricted to 26 family members on the testator's death, the class was not closed and new members of the family would be born and become part of the class – thus the trust is genuinely for a charitable purpose and not just a gift to individual members of the class.

Trusts for the advancement of education

• Re Shaw (Ch)

  • GBS instructed the executors of his will to use his residuary estate for research into the advantages of reforms of the alphabet.

  • Held that, if the object is simply the increase of knowledge that is not in itself a charitable object unless it is combined with teaching or education.

• Re Hopkin's Will Trusts (Ch Div)

  • The testator provided for a third of her estate to be dedicated towards finding the Bacon-Shakespeare manuscripts and in the event of the same discovered by the date of her death then for the general purposes of the work and propaganda of society

  • The word education must be construed in a broad sense – it as at least as wide as including research of educational value to the researcher, or generating knowledge which will come into the store of educational material or so as to increase the sum of communicable knowledge in an area which education may cover.

  • The gift in this case falls into this category.

• Oppenheim v Tobacco Securities (HL)

  • Trustees were were directed to apply certain income “in providing for the education of children of employees or former employees” of a British company.

  • Lord Simonds

    • A trust must be for public benefit to be charitable.

    • A trust established by a father for his son's education is not charitable for this reason, while one for the benefit of school is.

    • There is no justification in principle or authority for finding the requisite public benefit in a trust for the education of employee's children – claims for charitable status should be clearly established given the rare and increasing privileges available to charities.

  • Lord Normand

    • There is no general rule for establishing whether a trust in respect of a class of persons is beneficial to the community or a section thereof.

    • No community element arises out of the contractual nature of the relationships between employee and employer – although this classification of the present trust may over-refined and unpractical, this is a consequence of having to draw a line between public and private trusts.

  • Lord Oaksey concurred with the LC

  • Lord Morton concurred with Lord Simond and Norman

  • Lord MacDermott (dissenting)

    • The issue of public benefit in these cases is not decided by the application of general rule, but by the survey of the circumstances.

    • The size of the class and the objects of the trust extending to employees of any company that emerges from the amalgamation or reconstruction of the original company indicates that this trust was meant to advance the interests of a class rather than a collection of particular individuals.

• O'Connell v Attorney General (HC)

  • Whether a trust to enable the sons and daughters and male descendants of the testator's brothers to acquire professions was a trust for the advancement of education.

  • Held that, the trust here is too narrow, being really a trust for specific individuals – it is the extensiveness of a trust that makes it a public charity.

• Re The Worth Library (HC)

  • The library contained only a small number of books that were instructional in nature and was not intended to be for the benefit of the public – thus it was not a charitable trust for the advancement of education.

• Magee v Attorney General (HC)

  • Activities...