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Charitable Trusts The beneficiary principle: Trusts must be in favour of identifiable beneficiaries; a trust for a purpose rather than a person will be invalid Not the case for valid charitable purposes for the public benefit (since the Elizabethan Statute of Charitable Uses) 1. Introduction Enforced by the Attorney-General Need to work out what the settlor’s intention was, that is, the purpose for which the money can be applied. Certainty tests don’t apply to charitable trusts; validity depends on purpose and public benefit. But make sure you go through certainty of object first Charitable trust can be varied under doctrine of cy-près Not subject to the rule against perpetuities (can exist for longer than 80 years – can go forever so long as there is still trust property available) Tax deductible status Must be for o Charitable purpose (Pemsel); and o Public benefit (Re Shaw) 2. Heads of charity – Must be for charitable purpose 1 of 4 categories - Pemsel Charitable purpose is one which falls within the spirit and intendment of the Statute of Elizabeth and is for benefit of the public o Relief of poverty § Trust does not need to use the word poverty or poor but some sense of assisting those in need must be found Downing v FCT E.g. “Knickers given to boys in the area so long as not getting assistance” did not imply a relief of poverty as it could equally apply to rich boys Re Gwyen § People are in need of relief if their lot needs improvement; they don’t need to be destitute Downing Poverty is a relative concept, you need to be poor relative to the majority of the community § Can target a small group of people; it is in the public benefit as it relieve the strain on the public purpose Re Segelman But make sure the trust is a gift for the relief of poverty, not a gift to particular poor persons connected to the settlor, the relief of poverty being the motive of the gift. § Examples: Poor and needy persons of testator’s family Re Segelman “Poor former employees” of a company Dingle v Turner § Does not need to benefit the public or a section of the public Dingle v Turner Laura 13/9/14 2:05 PM Comment [1]: Shaw left a will with one provision that wished some money be put in to promote his new English alphabet of 40 letters. This included moneys for research into the number of living English speakers and the time and money that would be saved by adopting this new alphabet, and translation and distribution of his plays using the new alphabet. That was not a valid charitable purpose therefore invalid. The reason it was not a valid charitable purpose included: The proposed research tended to increase knowledge rather than education. It was not beneficial to the community; and It amounted to propaganda concerning a controversial matter, which was not charitable by analogy with trusts for political purposes (political purposes are no longer automatically invalid in Australia) Laura 13/9/14 2:31 PM Comment [2]: A trust for the ‘amelioration of the conditions of the dependants’ of servicemen and ex-servicemen was a trust for the relief of poverty, although the word poverty was not used”. Aim of relieving poverty need not be spelt out. Laura 13/9/14 2:30 PM Comment [3]: A will established a discretionary trust for 21 years for the “poor and needy of the persons set out in the Second Schedule still living”. The second schedule listed six named members of the testator’s own family, and the issue of five of them, the issue being unnamed. Was this a trust for certain persons, or a valid charitable trust for the relief of poverty. If you make your trust for core relatives so small, and you get the feeling they should be able to enforce the trust as beneficiaries, then would cease to be a valid charitable trust. Linked to the one person (testator). It was a relatively small group of people. In this particular case they would enforce it as a charitable trust. Court had to decide whether this was. A gift for the relief of poverty amongst poor people of the particular description OR A gift to particular poor persons, the relief of poverty among them being the motive of the gift. At the basis for disqualification as a charitable gift must be that the restricted nature of the class leads to the conclusion that the gift is really a gift to the individual members of the class. The trust here is not of that character. The class of those eligible to benefit was not closed upon the testator’s death. It remained open for a further period of 21 years. During that period issue of the named individuals born after the death of the testator will become members of the class.

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  • Charitable Trusts

    • The beneficiary principle: Trusts must be in favour of identifiable beneficiaries; a trust for a purpose rather than a person will be invalid

    • Not the case for valid charitable purposes for the public benefit (since the Elizabethan Statute of Charitable Uses)

    1. Introduction

    • Enforced by the Attorney-General • Need to work out what the settlor’s intention was, that is, the purpose for which the money

    can be applied. • Certainty tests don’t apply to charitable trusts; validity depends on purpose and public

    benefit. But make sure you go through certainty of object first • Charitable trust can be varied under doctrine of cy-près • Not subject to the rule against perpetuities (can exist for longer than 80 years – can go

    forever so long as there is still trust property available) • Tax deductible status • Must be for

    o Charitable purpose (Pemsel); and o Public benefit (Re Shaw)

    2. Heads of charity – Must be for charitable purpose 1 of 4 categories - Pemsel

    • Charitable purpose is one which falls within the spirit and intendment of the Statute of Elizabeth and is for benefit of the public

    o Relief of poverty § Trust does not need to use the word poverty or poor but some sense of

    assisting those in need must be found Downing v FCT • E.g. “Knickers given to boys in the area so long as not getting

    assistance” did not imply a relief of poverty as it could equally apply to rich boys Re Gwyen

    § People are in need of relief if their lot needs improvement; they don’t need to be destitute Downing

    • Poverty is a relative concept, you need to be poor relative to the majority of the community

    § Can target a small group of people; it is in the public benefit as it relieve the strain on the public purpose Re Segelman

    • But make sure the trust is a gift for the relief of poverty, not a gift to particular poor persons connected to the settlor, the relief of poverty being the motive of the gift.

    § Examples: • Poor and needy persons of testator’s family Re Segelman • “Poor former employees” of a company Dingle v Turner

    § Does not need to benefit the public or a section of the public Dingle v Turner

    Laura � 13/9/14 2:05 PMComment [1]: Shaw left a will with one provision that wished some money be put in to promote his new English alphabet of 40 letters. This included moneys for research into the number of living English speakers and the time and money that would be saved by adopting this new alphabet, and translation and distribution of his plays using the new alphabet. That was not a valid charitable purpose therefore invalid. The reason it was not a valid charitable purpose included: The proposed research tended to increase knowledge rather than education. It was not beneficial to the community; and It amounted to propaganda concerning a controversial matter, which was not charitable by analogy with trusts for political purposes (political purposes are no longer automatically invalid in Australia)

    Laura � 13/9/14 2:31 PMComment [2]: A trust for the ‘amelioration of the conditions of the dependants’ of servicemen and ex-servicemen was a trust for the relief of poverty, although the word poverty was not used”. Aim of relieving poverty need not be spelt out. Laura � 13/9/14 2:30 PMComment [3]: A will established a discretionary trust for 21 years for the “poor and needy of the persons set out in the Second Schedule still living”. The second schedule listed six named members of the testator’s own family, and the issue of five of them, the issue being unnamed. Was this a trust for certain persons, or a valid charitable trust for the relief of poverty. If you make your trust for core relatives so small, and you get the feeling they should be able to enforce the trust as beneficiaries, then would cease to be a valid charitable trust. Linked to the one person (testator). It was a relatively small group of people. In this particular case they would enforce it as a charitable trust. Court had to decide whether this was. A gift for the relief of poverty amongst poor people of the particular description OR A gift to particular poor persons, the relief of poverty among them being the motive of the gift. At the basis for disqualification as a charitable gift must be that the restricted nature of the class leads to the conclusion that the gift is really a gift to the individual members of the class. The trust here is not of that character. The class of those eligible to benefit was not closed upon the testator’s death. It remained open for a further period of 21 years. During that period issue of the named individuals born after the death of the testator will become members of the class.

  • o Advancement of Education § For court to decide if it is educative, not the settlor Re Shaw § Can’t be for the benefit of a private class Opeenheim § Must have an educative value; for the court to decide Re Pinion; Re Shaw § Factors:

    • Dissemination of knowledge/educative value/must be some element of teaching, increasing public knowledge is not enough (e.g. propaganda – Re Shaw)

    • Research – must be disseminated or otherwise contribute to public knowledge Re Hopkins Will Trusts

    o Can’t just be research for researches sake o Must be of educational value to the researcher so as to lead to

    something which will pass into the store of educations material, or improve knowledge in the area Re Hopkins Will Trust

    § Examples: • Displaying worthless personal belongings - NO (Re pinion) • Mainstream academic research – YES (Re Hopkins) • Includes formal and informal education, scholarships and prizes,

    educational facilities, drama, fine arts, and moneys for research o Advancement of religion

    § Is it a valid religion? • Expansive view of the concept of religion Church of the new faith

    o Mason CJ & Brennan J: belief in a supernatural thing, being or principle; the acceptance of canons of conduct give effect to the belief. Almost every known religion will fall within this definition

    o Murphy J: anything which gives meaning to the person’s life; vague, suggests absurd beliefs such as cults can be included. Not up to court to decide whether the doctrines were true.

    o Wilson & Deane JJ: collection of ideas and/or practices involving belief in the supernatural; the ideas relate to man's place in the universe; the ideas are accepted by adherent; the adherent constitute an identifiable group, adherent have to see it as constituting a religion

    • Masons o Not a religion as there was no religious test of membership, no

    missionary element and no steps taken to increase belief • Re Watson

    o A sect of 2 people constituted a religion § Does it advance religion?

    • Includes support of clergy, buildings, sermons, missionary work etc • To promote, spread its message, take steps to sustain and increase

    religious belief (Holborn) • Cannot be for religious organisations themselves; must be for

    advancing the religion McCraken v AG Victoria o A newsletter wasn’t enough Re Lawler

    • Building a masonic lodge was not advancing the religion. To promote good citizenship, honest work, morality and wisdom, brotherly love, compassion, charity to the poor, and belief in a supreme architect of

    Laura � 13/9/14 2:37 PMComment [4]: Man set up trust, tried to leave his studio to national trust to be kept as a museum. National trust gave evidence that the contents were worthless, court agreed. No public utility nor educative value

    Laura � 13/9/14 2:39 PMComment [5]: The commissioner levied payroll tax on the church of scientology, and they claimed they were a religion. Trial judge held that scientology was not a religion. Also be hold in the UK not to be a religion. They appealed to HC Held: they were a religion

    Laura � 13/9/14 2:42 PMComment [6]: Can't be for an ancillary purpose. Testator left money for such Christian organisations as my trustees see fit. But how is that promoting the religion? Not stated purpose about promoting the religion. Really a gift for the organisations themselves. Referred back to case called Lawler (testator left money to fund a catholic daily newspaper – that wasn’t a trust for the advancement of religion either as it was a secular activity, even if it had a link to a religious activities or was inspired by religion)

  • heaven and earth is not advancement of a religion. No promotion United Grand Lodge of Ancient Free and Accepted Masons

    o Other purposes beneficial to the community (must positively demonstrate it is for public benefit)

    § Must be beneficial to the community; and § Within the preamble of the Statute of Elizabeth

    • relief of aged, impotent and poor • maintenance of sick and maimed soldiers and mariners • schools of learning, free schools and scholars in university • repair of bridges, ports, havens, causeways, churches, seabanks and

    highways Bathurst City Council • education and preferment of orphans • relief, stock and maintenance of houses of correction • marriages of poor maids • support aid and help for young tradesman, handicraftsmen and

    persons decayed • relief or redemption of prisoner and captives • aid and ease of any poor inhabitants concerning payment of fifteens • setting out soldiers • Relief of human distress after natural disasters

    § Sport • Trusts solely for the purpose of sport and recreation are not for a

    charitable purpose Chester • However, if a trust for spot is valid if it is attached to another charitable

    purpose Kearins v Kearins • Might also be for benefit of public if it helped those enrolled in formal

    course of study (linked with advancement of education) IRC v McMullen

    • Example: o Pigeon racing purely recreational Royal National Agricultural

    and Industrial Assoc v Chester o Show jumping purely recreational Strathalbyn Show Jumping

    Club Inc v Mayes § Political purposes

    • Original position: political purposes are never charitable as they lack a public benefit (North shore – still valid in UK)

    • Current position: trust for political purposes do not automatically fails as they are for the public benefit (Aidwatch)

    o They generate meaningful public debate o Crucial in a democratic society o Contribute to the people’s direct choice

    • If you can generate debate about changing the law in respect to an identifiable head of charity, then it is a valid charitable purpose. Unsure as to whether all political purposes are valid, or only those discussing another established head of power

    • Minority in Aidwatch: Aid/Watch’s activities did not seek to generate debate on relief of poverty; did not have the goal of relieving poverty.

    Laura � 13/9/14 2:23 PMComment [7]: The preamble is interpreted liberally. The council wanted to provide free car parking in the centre of the town. HC said that it matched the spirit and intendment of the statute of Elizabeth (talks about repair of bridges, highways etc)

    Laura � 13/9/14 2:50 PMComment [8]: The money was left on trust to promote playing of rugby union at Sydney university. Valid as they were able to link it to the educational aspects. Participation in the sporting activities of the university was an important element in the development of well-balanced students at the university. Extra curricular activities were part of going to university. If you can tie your purpose to another head

    Laura � 13/9/14 2:51 PMComment [9]: Trust “to organise or provide or assist in the organisation or provision of facilities which will enable and encourage pupils at schools and universities in any part of the UK to play football or other sports to assist in ensuring due attention is given to physical education” Held: has to be regarded as advancing education. Mere promotion of sport not enough. Improving facilities does qualify. Here it was to improve facilities for students undergoing formal courses of education. It is charitable.

    Laura � 13/9/14 2:52 PMComment [10]: Why were they previously invalid? Any purpose which is contrary to the law cannot be the subject of a charitable trust. They do not contribute to society. A system of law can’t admit that objects that are inconsistent with its own provisions are in the public welfare. The court has no means of judging whether a proposed change in the law will or will not be for the public benefit and therefore cannot say that a gift to secure the change is a charitable gift

    Laura � 13/9/14 2:54 PMComment [11]: •AW set up to lobby the government about effective methods of delivering aid in third world countries. Engaged in researching, monitoring and campaigning on the delivery of foreign aid, and sought charitable status for the purpose of exemption from taxation. Some doubt in HC about exactly what their role is (lobbyists or encouraging debate?) Part of their project is to encourage government to change their policy Anything that called for a change in government policy was automatically political. Held: Majority: 4th head. No longer an exclusion. Constitution postulated for legislative change. Our system must allow for the change of law. A court is not there to determine the merits of any particular course of legislative change.

  • Thought AW was a pressure group. Assertion of views shouldn’t be assumed to generate public debate.

    § Precedent setting Council of Law Reporting Qld v FCT

    3. Must be for Public benefit (not for poverty) • Qualitative: must be for public benefit

    o Conclusively presumed for trusts for relief of poverty o Assumed for trusts for advancement of education and religion but can be

    negatived § However something that is a valid charitable purpose might not always

    contribute to public welfare Aidwatch e.g. a trust set up to promote spread of Islam using violent jihad. Spread is advancement of religion. Yet violence would not contribute to public welfare. Violent means wouldn’t justify the end.

    o must be positively established in other cases e.g. Alphabet example might not give much benefit

    o Religion: § May need a connection with the public Examples:

    • Neville Estates Ltd v Madden, attendance at a synagogue was advancement of religion as it was showing a good example to others in the community

    • A priest can be paid for mass, as this was open to the public. Funding a contemplative order was for the public benefit, as people in society felt better having nuns pray for them (Crowther – VIC)

    § Nuns in a convent who never left is not for the public benefit, as it cannot simply benefit the community spiritually (EG by being prayed for) (Gilmor – UK)

    § Trust for attendance at a synagogue valid, as the people who went would be able to spread their message to the world (Neville)

    § If it is too wide, and allows for a contemplative order, it may fail the public benefit test Leahy v AG NSW

    • Quantitative: must also benefit the public or a section of the public (not required for poverty – ok to have a trust for a very small group of people)

    o A trust to educate one person will satisfy the first but not the second element o Not necessary that all of the public benefit o Re Incomes Tax Acts (No 1) 1930

    § Except in cases concerning poverty, very small groups are unlikely to qualify

    § Members of groups such as clubs, societies and trade unions will not qualify because of their membership rules

    § Large groups of persons linked by common falling e.g. faith, residence can be

    § If the reason for attracting assistance from the charity is the person’s relationship to an individual, those objects will not be ‘a section of the public’ Re Compton

    • Can be the relationship between a company too Oppenheim v Tobacco Securities Trust Co Ltd CF Dingle v Turner

    § You can have them linked by common experience e.g. Victims of bushfires

    Laura � 13/9/14 2:48 PMComment [12]: The council prepared law reports from superior court judgments in Qld. The council was a not for profit organisation, and if they did make any profits they gave it to the Supreme Court library. FCT claimed that this was liable to be taxed. Council said it was a valid charitable purpose. Justice Windeyer said it was a trust for the advancement of education, but majority said they weren’t educational, even if law students read them. What was for the public benefit was the fact that they were of assistance in our administration of law i.e. the doctrine of precedent.

    Laura � 13/9/14 2:46 PMComment [13]: Trust “upon trust for masses to be said for my soul, and the souls of my said sisters…and for monastery”. Held: contemplative life might convey sufficient elements of public benefit to make assistance for the pursuit of such life a charitable purpose People find comfort and peace of mind in their resort to intercessory prayer Comfort and encouragement to the congregation and all faithful Christians

    Laura � 13/9/14 3:00 PMComment [14]: Order of nuns” too wide- failed public benefit test. Could have included a contemplative order of nuns

    Laura � 13/9/14 2:19 PMComment [15]: Trust set up to educate the children of three families, the Compton, Powell and Montague children. If the potential recipient of assistance were defined by their relationship to a particular person then that wouldn't be a valid charitable purpose. Even if you had a very large family, the fact you link it to a name means it's not a section of the public

    Laura � 13/9/14 2:20 PMComment [16]: Trust set up to educate employees and former employees of British American Tobacco (110,000 at the time). Held: Group of beneficiaries couldn't be numerically negligible, but nor could the point of distinction between those who will benefit and those who didn't be their relationship with a particular company Even though it was large, wasn't a section because of its nexus with BAT

    Laura � 13/9/14 2:21 PMComment [17]: Relief of poverty extends to “poor employees”. Trust for support of employees and former employees. Was valid because it was for the relief of poverty. Distinction between Oppenheim and Dingle v Turner: never want to be in the position where the fund is helping you out. The opposite is the case with the Oppenheim trust, it is a fringe benefit, not the relief of poverty

  • 4. Trusts for Mixed Purposes o Invalid at common law Chichester Diocesan Fund v Simpson

    § Unable to be severed, and whole gift void (“appoint money to whichever charitable or benevolent purposes they like”)

    § If it was too wide, it would fail the public benefit test. And gift may be void if can’t be severed Leahy v AG NSW

    o S7M Charities Act; can sever a charitable purpose from a non-charitable purpose, giving effect to the trust

    § (1) A trust is not to be held to be invalid by reason that some non-charitable and invalid as well as some charitable purpose or purposes is or are or could be deemed to be included in any of the purposes to or for which that trust directs or allows the trust funds or any part of the trust funds to be applied

    § (2) A trust referred to in subsection (1) is to be construed and given effect to in the same manner in all respects as if no application of the trust funds or any part of the trust funds to or for the non-charitable and invalid purposes had been or should be deemed to have been so directed or allowed.

    5. Doctrine of Cy-près o When is this relevant?

    § Trust it impossible to administer from the outset • the residue of an estate was left to a tuberculosis hospital which, prior

    to the testatrix’s death, had closed due to lack of demand for a dedicated family (initial failure) Re Slatter’s Will Trust

    § Trust fails subsequently o S 2 of the Charities Act 1978 (Vic) allows for cy-près schemes to overcome these

    problems § cy-près means ‘close by’, which indicates the general nature these scheme

    often take. The general policy is to replace the original charitable purpose with one which is broadly similar

    o For initial failure: § Find a general charitable purpose (look to words of settlor – more specific,

    less likely they have a general charitable intention) • The focus is one the general nature of the settlor’s or testator’s

    charitable intention, rather than on its charitable aspects • E.g. remove conditions from a scholarship to see the general intention

    as giving money for a scholarship Re Lysaght o For subsequent failure

    § no need to show general charitable intention before a scheme can be implemented

    § The fund has already been the subject of a charitable trust and can no longer be applied to another purpose

    § Sometimes, it is not possible for the scheme in such cases to bear much resemblance to the original purpose, due to the ‘passage of time and other social changes’. Try to get as close as possible Re Anzac Cottages Trust 2000. Trust to TB to go to the other diseases once TB was cured Re Slatter’s

    Laura � 13/9/14 3:05 PMComment [18]: Lady in England left money to Royal College of Surgeons to set up scholarship so long as it wasn’t given to Jewish, Roman Catholic applicants. GCI? Unless a cy-pres scheme was ordered, the testator’s paramount intention would be frustrated and the trust would fail. Her paramount intention as to provide a scholarship, thus a general charitable intention was able to be found. She had. Her GCI was to create a scholarship for surgeons. They took the gift without any barriers on it.

    Laura � 13/9/14 3:06 PMComment [19]: Once money is used for a charity, becomes public money, and must be used for charity in future In this case, people collected money for Anzacs when they returned, built cottages for them Anzac’s died and the cottages were uninhabitable Court ordered cypres so remaining properties be sold and money split between legacy and RSL

  • o S2 Charities Act: applies where § (1)(a)(i): the charitable goals have been as par as may be fulfilled or § (ii): When the charitable goals cannot be carried out § (d) Where the original purpose/person is not longer suitable § (e) where the original purpose has been adequately provided for by other

    means, or has ceased being harmful to the community and is no longer charitable, or ceased from being a suitable way of using the trust property

    § (4) Must go to the court for an order