EQUITY AND TRUSTS 2.3 CHARITABLE TRUSTS
Charities are immune to perpetuities and the requirement of specifically identified beneficiaries (i.e. certainty of object)-Morice V Bishop of Durham. in this case, charitable trust was defined as those within the spirit and intendment of the Elisabeth Act (Statute of Charitable Uses 1601). In the event of serious uncertainty, the Cy-pres doctrine comes in. Charitable trusts are comparatively rare in Nigeria because many of their functions are performed by the extended family system or have been prevented by the various customary systems of inheritance. The AG can enforce this although in present England, enforcement is done by the Charity Commissioners. Charities enjoy a reasonable amount of tax privileges.
The medieval churches provided most of the services that we nowadays regard as charities. With the beginning of 17th century, The Statute of Charitable Uses 1601 was enacted now repealed by the Charities Act 1960 which has been repealed by the Charities Act 2006 of England.
NOTE: From the Nigerian perspective, we would limit ourselves to the discussion based on the 1601 Act. Remember the SOGA restriction Nigeria has. So we keep applying old English Statutes (many of) which have been repealed.
Flowing from the list contained in the preamble to the statute of Elizabeth 1601 (Statute of Charitable Uses 1601) which listed certain charitable trusts (Very important READ THE PREAMBLE) we can see various classifications like Trusts for:
– The Relief of the aged.
– The impotent and poor.
– Trust for the maintenance of sick, maimed soldiers and sailors… etc. The list goes on and on.
The Court in Commissioner of Income Tax V Pemsel gave their own classification of charitable trusts which include Trusts for:
- Relief of poverty.
- Advancement of education.
- Advancement of religion.
- Other purposes beneficial to the society.
The Charities Act of 2006 makes 12 heads which (in addition to the above listed) includes; advancement of health, saving of lives, conflict resolution, environmental protection, animal welfare, and so on. This shows that the list is not exhaustive.
What we can say is that Charitable purposes connotes endeavours which are usually for public benefit. But we shall take some of the categories.
- Relief of Poverty: the beneficiaries under this head do not need to be destitute. So long as they are needy. Section 3 of the Charities Act of England 2006 provides that people on low income must be able to benefit. Examples of trusts that were allowed under this category include; -trust for ladies of limited means (Re Gardom), -to provide flats at economic rents for aged persons (Re Cottam) and so on have been validated.
- Advancement of Education: Not only universities but intellectual property and industrial activism. Like art, music, drama and so on. -Trust for encouragement of choral singing (Royal Choral society V IRC), -foundation of professorship and scholarship in a university (AG V Margaret and Regius Professors at Cambridge), -support of a zoo (Re Lopes) and so on have been validated. Provided the research can be communicable to the general public-Re British School of Archaeology. The following have been held uncharitable; Promotion of political education in connection with a political party-Bonar Law Memorial Trust V IRC, preserving the testator’s studio for exhibiting old furniture painted by himself which the court held to be of no educational value-Re Pinion. In Mcgovern V AG, the court disallowed Amnesty International’s Trust for the release of prisoners of conscience and research into human rights as it had a political (as opposed to an educational) undertone.
- Advancement of Religion: provided the religion is not subversive of morality- Romily MR in Thornton V Howe. In this case, trust dealing with scientology was denied charitable status. In Re Hummeltenberg, trust for founding of a college for the training of spiritualistic mediums was voided. Section 6 of the Charities Act 2006 does not permit religions that believe in multiple gods or no god. The following have been held charitable under this head: trust for mission work (Re moon’s Trust), -for a church choir-(Re Royce), -for saying masses for the dead- (Re Obabunmi Pedro).
- Other Purpose Beneficial to the Community: provided they are public spirited/ come within the spirit of the preamble to the statute of Elizabeth. Some of them may include; -trust for provision of hospitals (Re Smith). Provision of fire Brigade (Re Wokingham Fire Brigade Trusts), Encouragement of good domestic servants, and so on. but surprisingly in IRC V Baddeley, the HOL disallowed a trust for the provision of facilities for the moral, social and physical training and recreation of members of the Methodist church. Trusts for animal welfare has also been allowed in recent times in Re Douglas (for lost dogs). Just note that it depends on the facts of each case.
Note that it is not compulsory for a charitable trust to be provided to the beneficiaries for free. It may be subsidised or costs reduced. In Scottish Burial Reform and Cremation Society V Glasgow Corporation, provision of cremation services (i.e. another form of burial by burning) for a cost but at no profit was held to be charitable since it was for the benefit of the public.
It is important that the trust is for the benefit of the public and they should have access to the trust. i.e. the trust should not discriminate (i.e. it should not be providing service to only private persons rather; members of the public/society who fall within the ambit of the trust/its protection should be able to benefit). In Iyanda V Ajike, maintenance of the family prayer room as a private mosque was held not to be charitable. In Catholic Care (Diocese of Leeds) V Charity Commission, catholic care was a charitable adoption agency where gave children to couples who wanted to adopt them. A gay/homosexual couple wanted to adopt a child from them but the CC refused because they were not heterosexual. In court they argued that their refusal accorded with their right of religion but the court held that their refusal amounted to discrimination and such discrimination could disentitle them from being termed charity as their services was not readily accessible to the members of the public therefore not for public purposes. See also Corporation of Foreign Bondholders V IRC where a trust for the protection of private investors was also held not charitable
Although the courts have relaxed their position on the requirement of public nature.
The following cases constitute an exception to the requirement that the trust should be of public nature; -saying masses for the dead whether public or private (Re Obabunmi Pedro and Re Caus), -trust for the relief of poverty (even though confined to donor’s relations or employee or members of a club (As was done in these cases; Re Young. Gibson V South American Stores.
Note also that Public does not mean the whole world. A Section of the public can suffice.
A third point to note is that a trust must be exclusively charitable-Re Diplock and not for such charitable purposes as the trustee shall select. A trust shall not be invalidated merely for incidentally promoting some other purpose not charitable.
A question that usually arises is whether gift to officials can be regarded as charitable: in these sense are those whose normal functions are regarded as charitable. E.g. bishops, parish priest and so on. E.g. 300 million to Bishop Adedapo for him to use and perform his calling (i.e. mission work). Take another example; Tayo sets up a trust for purchase of Reverend Fathers’ Cars or Building of Bishops House, etc. The rules are thus:
- Where official has absolute discretion as to how to apply the property, a valid charitable trust will have been created as was done in Re Garrard.
- Where the donor gives the property for a specified charitable purpose(s), such gifts would be charitable and trust would be valid. In Re Bain where “gift to the vicker for such objects connected with the church as he shall think fit” was held to be charitable.
- Where the donor gives to official for purposes which are not exclusively charitable then it would fail as charitable trust. See Bishop SC Phillips V RT Phillips. E.g. “I give 400 million Naira to Holy Bishop Alaye to throw a party”.
ADVANTAGES OF CHARITABLE TRUSTS.
- Unlike private trusts, they do not fail for uncertainty of objects. In England, Charity Commissioners (established by the Charities Act 1993 of UK) sue on behalf of the Attorney General.
- Trusts of imperfect obligations are usually void for not having human beneficiaries but where they are charitable, they would not fail. In Iyanda V Ajike, the trust for maintenance of private mosque failed for not being charitable.
- Charitable trusts are immune to the rule against perpetual trusts and may exist for an indefinite period of time. A private trust must be limited to the perpetuity period (lives-in-being and 21 years).
- Immune to perpetuities proper: which mandates that property must be vested in the donee within the perpetuity period else void. Under charitable trusts there can be a gift over to another charity. Check the relation of perpetuities to maintenance of tombs-Re Hooper. A trust for the maintenance in perpetuity of all tombs in a church is a valid charitable trust but where it is for a single tomb, it is void but may be valid if subject to the perpetuity period-Re Hooper.
- The Cypress Doctrine: if a private trust is impossible to carry out or a surplus is left, it results. But in the case of a charitable trust, instead of resulting, the money/funds can be applied to a similar purpose (to reflect as far as possible the settlor’s original intention). This is done through the cypress doctrine. In Re Spence (Deceased), the testatrix left money for the old folk’s home. When the home was closed, the charitable gift was reassigned to another charity. If the property or fund has been provided by numerous subscribers, who cannot be identified and the trustees are confused as to the next step, they should pay the money to the court.
You may ask yourself; why so much fuss about charities and trusts? Whats the big deal. The truth is that in practice, charities enjoy various tax privileges under various tax legislations. In addition to this, look at the various advantages of trusts highlighted earlier.