Charitable trusts (Pre 2006)

Charitable trusts (Pre 2006)

1. What are charitable trusts?

   • Charitable trusts are public purpose trusts. These trusts have purposes that had an advantage/benefit to the community.
   • Due to their benefits, charitable trusts have a number of advantages. These include not having to have a comply with the beneficiary principle (no need for human beneficiary) or with the perpeituity period. They are also subject to tax exemptions.

2. Law before the Charities Act 2006

   • Before the CA 2006 was introduced, there was no definition or guidance as to the definition of charitable purpose or regarding charitable trusts.
     • IRC v Braddeley
     • Mourice v Bishop of Durham
   • Pemsel - established requirements for this trust
     • The trust must come within the spirit of the preamble of the Statute of Uses 1601
     • Must come under one the recognised charitable heads
       • Relief of poverty
       • Advancement of education
       • Advancement of religion
       • For some other purpose beneficial to the community
     • Must be for the public benefit

3. What was meant by public benefit?

   • For a charitable purposes to be valid, it had to be established that the trust benefited the general community or a section of the community. Establishing whether there was a public benefit differed depending on the charitable head.
     • Relief of poverty - Did the trust benefit a class of poor individuals?
       • Re Segelman
       • Dingle v Turner
     • Advancement of education - There had to be no nexus (whether by blood or contract) between the beneficiaries and any given individual.
       • Oppenheim v Tobacco Securities
         • Criticism - LORD MACDERMOTT - Held that the nexus test was illogical. Did not distinguish between those employed in an industry before it was nationalised and those employed once it had been nationalised. Argues test should be one of fact and degree, considering size and number of beneficiaries.
           • Dingle v Turner - Lords agreed (obiter) with MacDermott
         • Criticism - DUGDALE AND GEACH - Argues that the nexus test is highly illogical.
     • Advancement of religion - Members of religion have contact with the community (everyday contact)
       • Gilmour v Coats
       • Versani v Jersani
     • Trusts for other purposes beneficial to the community - Did NOT have presumption of public benefit. Involved a double test of nexus test and a class within a class test

4. Exclusively charitable

   • A gift could not qualify as charitable unless its objects or purposes were exclusively charitable
     • IRC v Baddeley