The International Journal
of Not-for-Profit Law
VOLUME 11, ISSUE 1, NOVEMBER 2008
By Nuzhat Malik
Charities are a part of every society. The word “charity” is derived from a Latin word “caritas,” meaning care. In ordinary term it means no more than generosity to the poor and needy. The legal meaning of word is much wider. It incorporates other purposes for the benefit of the community as a whole.
Charitable trust is a significant area of law in the United Kingdom, as charitable trusts enjoy some advantages over other trusts. Above all, UK charities do not pay income tax on their investment income devoted solely to charitable purposes under s505 of the Taxes Act 1988. Charitable trusts do not pay capital gains tax on the disposal of assets provided they are devoted to charitable purposes only, under s256 of the Taxation of Chargeable Gains Act 1992. However, charities are required to pay Value Added Tax on goods and services purchased.
The problem with the law on charities is that it does not define “charitable purposes.” This article attempts to clarify the reforms recently made to the law and to determine the extent to which the Charities Act 2006 clarifies the definition of charitable purposes. The definition of charity2 is “any institution, corporate or not, which is established for charitable purposes and is subject to the control of the high court.” The Charities Act 1990 defines charitable purposes in s46 as “purposes which are exclusively charitable according to the law of England and Wales.” This leaves us in very unclear situation.
Some background is helpful. The preamble to the Charitable Uses Act 1601 never defined “charities” or “charitable purposes.” The Charities Act 1993 then came into force. This statute did not significantly clarify “charitable purposes” within the act. The Charities Act 2006 is the latest law on charities. I will examine the extent of its clarity in due course. One might object to a statutory definition on the ground that it would be too restrictive. Viscount Simmonds in IRC v Baddeley3 stated, “There is no limit to the number and diversity of ways in which a man will seek to benefit his fellow men.”
In 2001, the Prime Minister’s strategy unit commissioned a review of law and regulations of charities and not-for-profit organisations. Following the review, a document entitled “Private Action, Public Benefit” was published in September 2002. This assessed strengths and weaknesses of the legal framework of charities.
My aim is to consider how precisely the law defines “charitable purposes.” I do not examine charities law in detail, but simply attempt to clarify the reforms to the Charities Act 1993 in respect of the definition of “charities” or “charitable purposes.”
First, I analyze the Charitable Uses Act 1601. This focuses on the intentions of the legislation and what definition, if any, is provided. Second, I explain the cy-près doctrine. Trusts for political purposes are discussed next. The fourth section details the Charity Commission and its functions along with the role of Charity Commissioners. Section five examines whether the Charities Act 1993 significantly changed the law. Along with the 1993 legislation, it also considers any developments of case law and the judicial definition of “charities.” The sixth section focuses on the Charities Act 2006. It analyzes how clear it is compared to its predecessors. I investigate the difficulties this new legislation is trying to overcome and its objective and purpose. Finally, the last section provides an overview and conclusion.
1. THE LEGACY OF CHARITABLE USES ACT 1601
Charity is a deep-rooted element of human behavior. It aims to provide emotional, spiritual, and material comfort to those in need as taught by many religions and communities. The development of the law on charities has been uneven for over several centuries. In medieval times, the ecclesiastical courts had a policy of upholding gifts for pious and charitable purposes whenever possible. Such gifts were restricted by legislative policy, because they placed land in mortmain and disinherited gifts, resulting in the loss of the incidents of tenure to the lords and increasing the power of the religious institutions. However, the need to regulate in a more systematic manner resulted in a change of legislative policy. The statute of Charitable Uses Act 1601 came into force. It is referred as the Statute of Elizabeth I.
CHARITABLE USES ACT 1601 (STATUTE OF ELIZABETH I)
The preamble statute, the Charitable Uses Act 1601 gives guidance as to what purposes are charitable and it lists:
the relief of aged, impotent, and poor people; the maintenance of sick and maimed soldiers and mariners; schools of learning; free schools and scholars in universities; the repair of bridges, ports, havens, causeways, churches, sea banks, and highways; the education and preferment of orphans; the relief, stock, or maintenance of houses of correction; marriages of poor maids; support, aid, and help of young tradesmen, handicraftsmen and persons decayed; the relief or redemption or prisoners or captives; and the aid or ease of any poor inhabitants covering payments of fifteens, setting out of soldiers, and other taxes.
Although there is no set definition provided for charitable purposes, before any institution can be accepted it must meet the three requirements:
- The purpose of the institution must be within the spirit and intendment of the preamble to the Charitable Uses act 1601.
- The institution must exist for the benefit of the public.
- The institution must be exclusively charitable.
For more than 200 years after the enactment of the statute, no attempt was made to classify the objects or purposes held to be charitable as within the spirit and intendment of the preamble. In Morice v Bishop of Durham,4 Sir Samuel Romilly put forward a classification of charities under four heads: relief of the indigent, advancement of learning, advancement of religion, and advancement of objects of general public utility.
The charitable uses Act 1601 was repealed by the Mortmain and Charitable Uses Act 1888. Section 13(2) of the 1888 act expressly preserved the preamble to the former statute. On the basis of its continued existence, Lord Mac Naughton laid down the most influential classification of charitable purposes in Commissioners of Income Tax v Pemsel.5 He accepted Sir Romilly’s first three categories—relief of the indigent—advancement of learning, and advancement of religion—but changed the fourth category to encompass other purposes beneficial to the community that do not fall in the other categories.
Public Benefit Test
The public benefit test distinguishes public trusts from private trusts. The first prong of the two-part test involves the usefulness of the activity to the society. If the purpose falls within the first three heads of the Pemsel classification, then prima facie it satisfies the first prong. If it falls within the fourth head, then it must benefit the public under the judicial definition of charities.
The second requirement of the public benefit test is the identification of the public to be served. It should be a large section of the society or even the public at large. However, trusts for relief of poverty are an exception. The satisfaction of the test is the question of law for the judge to decide.
The public element test will fail if there is a personal bond between the donor and the beneficiaries. The public must be the community, and not persons with family or blood relationships. In Re Compton,6 the Court of Appeal decided that the test was not satisfied where the gift was on trust for education of the children of three named relatives. Lord Greene MR stated, “I come to the conclusion, therefore, that on principle 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 . . .”
Where the donor sets up a trust for the benefit of the public at large but expresses a preference, not an obligation, in favor of specified individuals, the gift is capable of satisfying the public element test. Lord Simonds laid down the requirements to satisfy the test in Oppenheim v Tobacco Securities Trust Co Ltd7:
- The beneficiaries are not numerically negligible; and
- The beneficiaries have no link in contract or blood between themselves or with the narrow group of individuals.
It is a question of degree as to whether the beneficiaries constitute a section of public adequate to satisfy the public element test. In Gilmour v Coats and Others,8 the test for public benefit failed because the gift was made to a Carmelite Convent which consisted of 20 cloistered nuns.9 However, in Neville Estates Ltd v Madden & Others,10 the members of the Catford Synagogue were held to satisfy the public element test because the objects of the gift were not numerically negligible and were integrated with the rest of society.
Trusts for the relief of poverty are not subject to the public element test, and a contractual bond between donor and donees does not invalidate the gifts. The courts reviewed the authorities and decided that gifts to relieve poverty amongst employees of a company were charitable in Dingle v Turner.11
The Relief of Poverty
Just like “charities” and “charitable purposes,” “poverty” has never been defined by the courts or the statute. Poverty is a question of degree depending on the circumstances. In Re Coulthurst’s Will Trust,12 Lord Evershed established that “poverty does not mean destitution; it is a word of wide and somewhat indefinite import; it may not unfairly be paraphrased for present purposes as meaning persons who have to ‘go short’ in the ordinary acceptation of that term, due regard being had to their status in life, and so forth.”
The trust for relief of poverty is also based on the words in the preamble “the relief of aged, impotent, and poor people.” In the case of Re Glyn,13 it was decided that the words should be construed disjunctively. Thus, a trust for the relief of the aged or impotent will held to be charitable regardless of the existence of poverty. As for poverty, a gift under this head of Mac Naghton’s classification must provide the basic necessities of human existence, such as food, shelter, and clothing. Gibson J in Joseph Rowntree Memorial Trust Housing Association Ltd v AG14 stated, “The word ‘relief’ implies that the person in question have a need attributable to their condition.…The word ‘relief’ is not synonymous with benefit.”
Case outcomes vary. In Re Sanders,15 the gift was held not to be charitable because members of the working class are not necessarily in poverty. On the other hand, Re Niyazi’s Will Trusts16 construed a gift for the construction of a “working men’s hostel” as charitable.17
The Advancement of Education
The origins of this classification are found in the preamble Statute of Elizabeth: “the maintenance of schools of learning, free schools, and scholars in universities” and “the education and preferment of orphans.” “Education” has been given a broad interpretation; courts require some evidence of “instruction” to uphold such a trust. Research was also held to qualify as education in Re Hopkins.18 The trust money was to be used to search for the manuscripts of plays commonly ascribed to Shakespeare but believed by the society to have been written by Bacon. Wilberforce J stated, “The discovery of such manuscript, or of such manuscripts, would be of the highest value to the history and to literature.” In McGovern v AG,19 Slade J summarized the principles concerning research and charities for advancement of education as follows:
(1) A trust for research will ordinarily qualify as a charitable trust if, but only if (a) the subject matter of the proposed research is a useful study; and (b) it is contemplated that knowledge acquired as a result of the research will be disseminated to others; and (c) the trust is for the benefit of the public. (2) In the absence of a contrary context, however, the court will be readily inclined to construe a trust for research as importing subsequent dissemination of the results thereof. (3) Furthermore, if a trust for research is to constitute a valid trust for the advancement of education, it is not necessary either (a) that a teacher/pupil relationship should be in contemplation, or (b) that the persons to benefit from the knowledge to be acquired should be persons who are already in the course of receiving education in the conventional sense.
Mere acquisition without dissemination or advancement will not fall under the classification according to Re Shaw, Public Trustee v Day.20 Gifts upheld as charitable for the advancement of education include inter alia trusts for choral singing,21 the diffusion of knowledge and training of students in Egyptology,22 encouragement of chess-playing among young people,23 and the publication of law reports that record the development of judge-made law.24 By contrast, training spiritualistic mediums was held to lack educational value to the public in Re Humeltenberg.25
Promotion of sports is not considered charitable in itself. However, trusts to promote sports and related activities connected with educational institutions do qualify as charitable. In IRC v McMullen,26 a trust to provide facilities for football and other sports for pupils at schools and universities was held to be charitable. The court emphasized that the concept of education changes over time, so activities formerly not considered to fall in the category of advancement of education may well qualify now.
The Advancement of Religion
The charitable Uses Act 1601 refers to “the repair of . . . churches.” The Oxford Dictionary defines religion as “recognition on the part of man of some higher unseen power as having control of his destiny and as being entitled to obedience reverence and worship.” It is stated in Charities: A Framework for the Future27 that “the present position is that any religious body is entitled to charitable status . . . so long as its purposes are directed to the benefit of the public.” The court of chancery makes no distinction between any religions and this was upheld in Thornton v Howe.28 Although the preamble only refers to the repair of churches, regulations under the Charities Act 1993 treat non-Christian religions as charitable.29
In order to establish a charity for the advancement of religion, two elements must be satisfied: the religion must be recognized as a religion by the courts and the activities of the charity must promote or advance that religion. All the world’s main religions and many individuals’ sects are accepted under the first criterion. In Re South Place Ethical Society,30 it was established that the study and dissemination of ethical principles could not constitute religion. The society was held to be charitable for the advancement of education but not religion. Dillon J stated, “Religion, as I see it, is concerned with man’s relation with God and ethics is concerned with man’s relations with man . . . their beliefs may be to them the equivalent of a religion but viewed objectively they are not religion.” Hinduism and Buddhism do not involve belief in God but because they are universally regarded as religions they may be accepted as exceptions to the usual rule. The Charity Commission rejected the application for the Church of Scientology31 to registered as a charity for the advancement of religion on the grounds that although the church believed in a supreme being, the belief did not find expression in conduct indicative of reverence or veneration for the supreme being; study and therapy or counselling did not amount to worship.
Religion may be advanced in many ways such as maintenance of places of worship, gifts for the clergy, and the active spread of religion. In United Grand Lodge of Freemasons in England and Wales v Holborn BC,32 Donovan J said, “To advance religion means to promote it, to spread its message ever wider among mankind; to take some positive steps to sustain and increase religious beliefs . . . [or] religious supervision to see that its members remain active and constant in the various religions they may profess.”
Other Purposes Beneficial to the Community
This covers a range of undefined objects deemed to be charitable taking account of social realities. The Elizabethan Statute refers to a list of miscellaneous purposes as charitable and this head covers them. Although there is a wide scope, not every purpose beneficial to the community qualifies as charitable. To qualify under this head, the purpose must be beneficial to the community in a way that the law considers charitable—that is, the purpose must fall within the spirit and intendment of the preamble, according to AG v National Provincial and Union Bank of England.33 Viscount Cave held, “Lord Mac Naughton did not mean that all trusts for purposes beneficial to the community are charitable . . . it is not enough to say that the trust in question is for public purposes beneficial to the community, or for the public welfare; you must also show that it is a charitable trust.” Thus, charitable trusts under this head of classification are limited to purposes that are
- Beneficial to the community
- Not within any of the other three heads, and
- Recognized by the law as charitable.
In Incorporated Council for Law Reporting v AG,34 the court took a very liberal approach. It suggested that when a purpose is beneficial to the community, it raises the presumption of a trust; then the question is whether there are any grounds for holding it to be outside the scope of the 1601 statute. The approach has not been widely followed. Therefore it seems that there is merit in Lord Reid’s more constrained interpretation in Scottish Burial Reform and Cremation Society Ltd v Glasgow Corporation.35
It is not possible to list all purposes that fall under this fourth head. Those that have been upheld by the courts include trusts for animals36; relief of aged, sick, and disabled people37; and recreational facilities.38
Purposes Must Be Exclusively or Wholly Charitable
A gift to charity must be devoted wholly and exclusively to charity. If the gift does not confine itself to charity or it aims to benefit an object that is not charitable then the trust will fail. Trusts with purposes such as “for worthy causes,” “for benevolent purposes” or “for charitable or benevolent purposes”39 are not exclusively charitable and thus are void. The courts have the power to sever the offending objects from the charitable ones but problems may arise where there is competition between main and subsidiary objects, and where disjunctive instead of conjunctive language is used to link charitable and non-charitable purposes in the same instrument.
Main and Subsidiary Objects:
Where a charitable gift confers a private benefit to a non-charitable purpose at the same time, it may be void under the rule that the trust must be wholly and exclusively charitable. Such trust can only be valid if those non-charitable purposes are entirely subsidiary to the main charitable purposes. Lord Cohen in IRC v City of Glasgow Police Athletic Association40 stated a test: “the main purpose of the body . . . is charitable and the only elements in its constitution and operations which are non-charitable are merely incidental to that purpose.” A gift beneficial to surgeons was upheld as a gift for the advancement of surgery.41
Disjunctive and Conjunctive Language:
On the construction of the clause, the courts may decide that the word “or” ought to be interpreted disjunctively and the word “and” conjunctively. Where disjunctive language is used, the charity is likely to fail. For example, in a trust for “charitable or benevolent purposes,”42 it is up to the trustee to devote the funds to charitable purposes or to benevolent purposes that are not charitable; the trust would therefore fail. However, where conjunctive language is used, such as a trust for “charitable and benevolent purposes,” the gift will be valid for benevolent purposes that are charitable. This was held in Re Best.43
There are some exceptions to the rule that the purposes must be wholly and exclusively charitable. They are incidental purposes and severance.
If the main purpose of the trust is charitable and the non-charitable purpose is incidental, then the gift is valid. This approach is illustrated by Jenkins’s44 judgment in Re Coxen.45 He says that where the amount applicable for non-charitable purposes cannot be quantified, the gift as a whole fails for uncertainty.
Where the funds are payable partly for the charitable purposes and partly for non-charitable purposes, the courts are entitled to intervene and order apportionment. A court will divide the funds equally between charitable and non-charitable objects in accordance with the maxim “equality is equity.” In Salusbury v Denton46 the fund was divided equally into two parts and one portion was devoted to the charitable purposes.
2. THE CY-PRÈS DOCTRINE
The expression originated from ici-près (near here) or aussi près (as near as possible). The doctrine is applicable to gifts for charities that fail owing to impossibility or impracticality. The court of chancery exercised jurisdiction over this matter; however, the power now resides with the Chancery Division of the High Court and the Charity Commissioners. The principle requires two conditions to be satisfied: (a) it has become impossible or impracticable to carry out the original charitable purpose; and (b) the donor has manifested a general charitable intention. It has also been extended to charitable purposes that, though not impossible or impracticable, are unsuitable. The funds will be used for a purpose as near as possible to the original purpose stated by the settler; where the failure arises at the outset, the settler’s original trust will not be created.
On the birth of the cy-près doctrine, Lord Eldon in Moggridge v Thackwell47 said:
I have no doubt, that cases much older than those I shall cite may be found; all of which appears to prove, that if the testator has manifested a general intention to give to charity, the failure of the particular mode, in which the charity is to be effectuated, shall not destroy the charity: but, if the substantial intention is charity, the law will substitute another mode of devoting the property to charitable purposes, though the formal intention as to the mode cannot be accomplished.
This is in accordance with the rule that the intention of the donor must be carried out, for the donor’s intention was to benefit his soul by charitable works.48 If the initial gift is not charitable as defined by the law, or if there is no initial or subsequent failure, the cy-près order will not be made. Provided that the testator has shown general charitable intentions, there could be an initial failure where on the death of the testator it is impossible or impracticable to carry out the specific charitable intentions.
The test of “impossibility” was construed broadly in Re Dominion Student’s Hall Trust,49 where Evershed J stated, “The word ‘impossible’ should be given a wide significance.” The most striking English case on the need for impossibility is Re Weir Hospital.50 The decision shows where the boundary between difficulty and impossibility lies independently of legislation, although the scheme rejected in this case could be made under the Charities Act 1993.51 Cozens-Hardy MR said, “But there can be no question of cy-près until it is clearly established that the directions of the testator cannot be carried into effect. . . It is contrary to principles that a testator’s wish should be set aside, and his bounty administered not according to his wishes but according to the view of the commissioners.”
Where the charitable bodies exist at the date of vesting but cease to exist subsequently, it becomes impossible or impracticable to carry out the testator’s intention. This is called subsequent failure of the charitable gift. The cy-près is applied in this case regardless of any initial general charitable intentions shown by the testator. Once the gift vests in the charity, the donor himself or his heirs cannot benefit on a subsequent liquidation of the charity, under Re Wright.52 The Court of Appeal rejected the argument that the date for deciding whether the charitable purpose was practical was the trustee’s death and concluded that it was the death of the testatrix. The cy-près rule was applied to the funds. For example, in AG v City of London,53 the trust funds were to be used for the advancement of the Christian religion among the infidels in Virginia. The cy-près orders were made when it became clear that there were no “infidels” in Virginia any longer.
3. TRUST FOR POLITICAL PURPOSES
Trusts for political purposes are not charitable. Political purposes include gifts to the political parties or funds that are to be used to support them or to attempt to change the law. The trust in McGovern v AG54 failed because the trust was not exclusively charitable and some of its purposes were political. Slade J held,
The court will not regard as charitable a trust of which a main object is to procure an alteration of the law of the United Kingdom for one or both of two reasons: first, the court will ordinarily have no sufficient means of judging as a matter of evidence whether the proposed change will or will not be for the public benefit. Secondly, even if the evidence suffices to enable it to form a prima facie opinion that a change in the law is desirable, it must still decide the case on the principle that the law is right as it stands, since to do otherwise would usurp the functions of the legislature.
Trusts for political purposes are not charitable even though they are for public benefit independent of any political party, under Re Bushnell.55 In Re Hopkinson56 it was held that the trust was not charitable because it was not only for adult education but the purpose behind it was political based on the memorandum of Labour Party.57 Vaisey J stated, “Political propaganda masquerading—I do not use the word in any sinister sense—as education is not education within the Statute of Elizabeth.” The classic illustration on this point is National Anti-Vivisection Society v IRC.58 The House of Lords held that the society concerned did not fall within the fourth criterion because it was not beneficial to the community. One of its objects was held to be political, as it was advocating the change in the laws. On this basis the House overruled Re Foveaux.59 Lord Simonds stated, “We are satisfied that the main object of the society is the total abolition of vivisection. . . . It can only be by Act of Parliament that that element can be supplied.”
Bodies not registered as charities include the National Anti-Vivisection Society, the National Council for Civil Liberties, the Campaign Against Racial Discrimination, the Martin Luther King Fund, the Human Rights Society, the United Nations Association, Amnesty International, and the Disablement Income Group.
Promoting good race relations, endeavoring to eliminate discrimination on racial grounds, and encouraging equality of opportunity between persons of different racial groups are considered to be of public benefit since the Race Relations Act 1976. In the 1984 Annual Report, the commissioners said they now consider such purposes as charitable, whereas they were formerly deemed political under Re Starkosch.60
Although a political purpose cannot be charitable, political activity may be permissible if undertaken in furtherance of some charitable purpose. CC9 Political Activities and Campaigning by Charities (September 1999) has guidelines for trustees in engaging in such activities. If trustees engage in any political activity, it must be in furtherance of and ancillary to the charity’s main objects. The trustees must be able to show that this activity will be aid the actual purpose of the charity and benefit its beneficiaries.
Generally, a charity may engage in the following activities unless its governing instrument precludes it from doing so, under the Commissioners’ Annual Report for 1981, paragraph 55:
- Where the government or a governmental agency is considering or proposing changes in law and invites comments or suggestions from charities, they can quite properly respond.
- Where a Green or White Paper is published by the government, a charity may justifiably comment.
- Where a Parliamentary Bill has been published, a charity is justified in supplying to Members of either House such relevant information and arguments to be used in debates as it believes will assist the furtherance of its purpose.
- Where a bill would give charity wider powers to carry out its purpose, it can quite properly support the passage of the Bill; and it can support or oppose any Private Bill relevant to its purposes, since private legislation does not normally have a political character.
- Where a question arises as to whether a government grant is to be made or continued to a particular charity, the charity is entitled to seek to persuade Members of Parliament to support its cause.
- Where such action is in furtherance of its purpose, a charity may present to a government department a reasoned memorandum advocating changes in the law.
Since the essence of any living law and of any healthy democracy is change, it is difficult to see why trusts for political purposes should not be capable of being valid trusts, though not charitable trusts with fiscal advantages.61 The argument on the contrary could be that it is not safe to do so. It might become common that a few individuals would form an association asking for some change in the law, and then would be accorded the financial advantages of other charities. Giving such advantages to political purpose trusts would mean promoting them and encouraging more such groups in the society.
4. THE CHARITY COMMISSION
The Charity Commission was established by the Charitable Trusts Act in 1853. The purpose of its creation was to provide inexpensive and simple means of dealing with problems encountered by charities. Until then, they were dealt with by the Court of Chancery. The constitution of the Charity Commission is now governed by the Charities Act 1993.
The Charity Commissioners and Their Functions
The commissioners are appointed by the Home Secretary. There are five commissioners and two of them have to be lawyers. The commissioners are seldom personally involved in a particular case; generally they act as a board and are subject to the jurisdiction of the High Court in the exercise of their quasi-judicial powers. Appeals from their decisions may be made to the High Court. Although the Home Secretary appoints the Charity Commissioners and answers questions in relation to charity matters, in Parliament he has no jurisdiction over them. If the Charity Commission is criticized in the Parliament, the Home Secretary can only advice and influence them to take whatever remedial action is necessary.
Section 1(3) of the Charities Act 1993 states that the general function of the commissioners shall be “to promote the effective use of charitable resources by encouraging the development of better methods of administration, by giving charity trustees information or advice on any matter affecting the charity and by investigating and checking abuses.” The Commissioners have the right to advise but they cannot intervene directly unless the trustees are in breach of their duties.
The commissioners retain the power to take action to protect the charity property without establishing that misconduct and maladministration has occurred. Such actions include suspending trustees, freezing the charity’s bank accounts and properties, and appointing a receiver to run the charity’s affairs for a period.
The Charities Act provides that the commissioners may sue and can be sued in the name of the Charity Commissioners for England and Wales. Any proceedings will not be affected by change in their membership. The Charities Act 1993, section 32, empowers the commissioners to exercise equal powers as the Attorney General in respect of taking, avoiding, or ending legal proceedings. Section 33(1) of the same act lists the persons who may bring proceedings in respect of charitable matters.62 The High Court has jurisdiction only over charities registered in the UK, as decided by the Court of Appeal in Gaudiya Mission v Brahamchary.63
The Charities Register
The commissioners are required to maintain a register which is open to the public. Exempt charities and excepted charities need not be registered. Exempt charities include the British Museum, the Victoria and Albert Museum, and registered Friendly Societies; excepted charities are the Boy Scouts and Girl Guides Association and certain charities connected with promoting the efficiency of the armed forces. Religious organizations and places of their worship need not register. Charities that have neither any permanent endowment nor the use or occupation of any land and whose total income does not exceed £1,000 per annum need not register.
5. THE CHARITIES ACT 1993
As has already been examined, “charities” and “charitable purposes” have never been defined by the law. There have been classifications through the development of the case law but no statutory definition. The Charities Acts 1960 and 1992 did not take the position of the preamble any further. In 1993, legislation was passed which was to provide better guidance. Section 96(1) of the Charities Act 1993 lays down that “charity” means a body or trust that
- is established for charitable purposes only, and
- falls subject to the control of the High Court in the exercise of its jurisdiction with respect to charities.
Charities Act 1993, Part X, section 97 states that “charitable purposes” means purposes that are exclusively charitable according to the law of England and Wales. But what is exclusively charitable under the law of England and Wales? This has been the ambiguity since the preamble of 1601. Amendments to the 1960 act are set forth in the Charities Act 1993, Schedule 6. However, the 1993 Act did not make any substantial change as to the definition of charitable purposes.
The Charity Commission and its functions were among the main changes brought by this Act. Sections 3 and 4 deal with the registration of charitable bodies with the Charity Commissioners. Section 13 extends the occasions when the cy-près doctrine may be available. Both were discussed above.
6. THE CHARITIES ACT 2006
The Charities Bill was published on 20 December 2004. This was the result of a review carried out by the Prime Minister’s Strategy Unit in September 2002. The review was entitled “Private Action, Public Benefit,” involving strengths and weaknesses of the framework of charities. Before responding to these recommendations, the government sought views on them through an open public consultation from September 2002 to January 2003. The results of the Strategy Unit’s recommendations were summarized in a report called “Charities and Not-for-Profit: A Modern Legal Framework.” The Charities Bill 2004 contained most of these recommendations and received Royal Assent on 8 November 2006.
Part 1, section 1 of the Act gives the meaning of “charity.” It reads:
(1)For the purposes of the law of England and Wales, “charity” means an institution which—
- Is established for charitable purposes only, and
- Falls to be subject to the control of the High Court in the exercise of its jurisdiction with respect of charities.
Section 2 provides the meaning of “charitable purposes”:
(1) For the purposes of the law of England and Wales, a charitable purpose is a purpose which—
- Falls within the subsection (2), and
- Is for the public benefit (see section 3)
(2) A purpose falls within this subsection if it falls within any of the following descriptions of purposes—
- The prevention or relief of poverty;
- The advancement of education;
- The advancement of religion;
- The advancement of health or the saving of lives;
- The advancement of citizenship or community development;
- The advancement of the arts, culture, heritage or science;
- The advancement of amateur sports;
- The advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity;
- The advancement of environmental protection or improvement;
- The relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage;
- The advancement of animal welfare;
- The promotion of the efficiency of the armed forces of the crown, or of the police, fire and rescue services or ambulance services;
- Any other purposes within the subsection (4)
The law has defined the purposes of charity for the first time. The preamble to the 1601 statute has formed the foundation of the modern definition of the “charitable purposes.” This is also a reflection of the development of the case law. The list above is intended to be comprehensive. All these purposes were charitable under the old law with the exception of (g) the advancement of amateur sports. Section 5 (2) of the section amends section 1 (2) of the 1958 Act so that facilities made available to men only are to be regarded as charitable on the same basis as facilities made available to the public or women only.64 The previous provisions are now thought to be incompatible with the European Convention on Human Rights.
All these purposes have some resemblance to the preamble or the earlier cases. As Lord Wilberforce summarized in Scottish Burial Reform and Cremation Society v City of Glasgow Corp65: “The purpose in question, to be charitable, must be shown to be for the benefit of the public, or the community, in a sense or manner within the intendment of the preamble to the [Charitable Uses Act 1601] . . . [and] decisions which have endeavoured to keep the law as to charities moving according as new social needs arise or old ones become obsolete or satisfied.”
On the list in s2 (2) above, each head covers a range of purposes that fit the description but are purposes in their own right. It is very broad and covers more or less everything that is to be a charitable purpose.
Sections 6 and 7 of Chapter 1 of the Act establish the Charity Commission and deal with the Commission’s objectives, functions, and constitution. Section 6 (1) inserts a new section into the 1993 Act creating a body corporate called the Charity Commission for England and Wales. The Commission will be a Non-Ministerial Government Department and subsections (4) and (5) ensure that it will have a significant degree of independence from Ministers and Government Departments in the performance of its functions.
Sections 15-18 cover changes to the rules governing the application of the cy-près doctrine. Section 15 amends section 13 of the 1993 Act. There have been other amendments in relation to cy-près schemes, application cy-près of gifts by donor unknown or disclaiming, and application cy-près of gifts made in response to certain solicitations, but they fall outside the scope of this article.
The legal redefinition of “charity” and “charitable purposes” in the 2006 legislation has consolidated the law. The position of the law of charities is much clearer than the past. Although it is the first attempt of the legislature to provide a legal definition, it has covered purposes within the “spirit and intendment” of the preamble. This statute has shaped the whole law of charities according to the developing needs of the society.
The Charities Act 2006 identifies a wide range of purposes as charitable. This encourages the establishment of charities, which benefits the public at large. However, it must be remembered that charitable trusts enjoy fiscal advantages. If every small institution starts registering as a charity, then the economy is likely to suffer. Therefore, I suggest that there must be strict brackets so the trusts registering as charitable have real charitable purposes and are beneficial to the public.
The topic warrants further research because of potential ambiguities and issues not identified here.
2 L.B.Curzon, Dictionary of Law,6 th Ed, Pearson Longman
3 (1955) AC 572
4 (1805) 10 Ves. 522, 531
5 (1891) A.C 531
6 (1945) Ch 123, CA
7 (1951) AC 297, HL
8 (1949) 1 All ER 848, HL
9 The nuns devoted themselves wholly to prayer and did not engage in any activity outside the convent. The community of nuns was held to be insufficiently integrated with society. Lord Simonds stated, “A gift to two or ten or a hundred cloistered nuns in the belief that their prayers will benefit the world at large does not from that belief alone derive validity any more than does the belief of any other donor for any other purpose.”
10 (1962) 1 Ch 832, HC
11 (1972) AC 601, HL
12 (1951) Ch 661, CA
13 (1950) 2 WLR 1150
14 (1983) 1 All ER 288
15 (1954) 1 Ch 265, Ch D
16 (1978) 3 All ER 785, HC
17 Megarry VC stated, “The connotation of lower income is, I think, emphasised by the word ‘hostel.’ The word hostel has to my mind a strong flavour of a building which provides somewhat modest accommodation for those who have some temporary need for it and are willing to accept accommodation of that standard in order to meet the need.”
18 (1964) 3 All ER 46, HC
19 (1981) 3 All ER 493
20 (1957) 1 All ER 745, HC
21 Royal Choral Society v IRC (1943) 2 All ER 101
22 Re British School of Egyptian Archaeology (1954) 1 All ER 887
23 Re Dupree’s Trusts (1944) 2 All ER 443
24 Incorporated Council of Law Reporting for England and Wales v AG (1972) Ch 73
25 (1923) 1 Ch 237
26 (1981) AC 1
27 (1989) Cm 694, para. 2.20
28 (1862) 31 Beav 14
29 Also see The Goodman Report (National Council of Social Services, Charity Law, Voluntary Organisations, 1976, London: Bedford Square Press)
30 (1980) 1 WLR 1565, HC
31 R v Registrar General, ex p Segerdal (1970) 2 QB 697. Buckley LJ: “Worship I take to be something which must have some . . . prayer or intercession.”
32 (1957) 1 WLR 1090, HC
33 (1924) AC 262, HL
34 (1972) Ch 73
35 (1968) 3 All ER 215, HL
36 Re Wedgwood, Allen v Wedgwood (1915) 1 Ch 113, CA
37 Joseph Rowntree Memorial Trust Housing Association v AG (1983) 1 All ER 288, HC
38 Guild v Inland Revenue Commissioners (1992) 2 All ER 10, HL. The gift was held to be charitable under the Recreational Charities Act 1958.
39 Chichester Diocesan Fund v Simpson (1944) AC 341
40 (1953) AC 380
41 Royal College of Surgeons v National Provincial Bank Ltd (1952) AC 631. Also see Re Coxen (1948) Ch 747
42 AG v National Provincial and Union Bank of England (1924) AC 262, HL
43 (1904) 2 Ch 354, HC
44 “The result of the authorities appear to be: (a) that where the amount applicable to the non-charitable purpose can be quantified the trust fail quoad that amount but take effect in favour of the charitable purpose as regards the remainder; (b) that where the amount applicable to the non-charitable purpose cannot be quantified the trusts both charitable and non-charitable wholly fail because it cannot in a such a case be held that any ascertainable part of the fund or the income thereof is devoted to charity . . . in which case amount set free by the failure of the non-charitable gift is caught by and passes under the charitable gift.”
45 (1948) Ch 747, HC
46 (1857) 3 K & J 529, HC
47 (1803) 7 Ves 36, 69
48 Tudor, Charities, 7 th ed, p229
49 (1947) 1 Ch 183, HC
50 (1910) 2 Ch 124, CA
51 Section 13 (1) (a) – (e), which re-enacts s13 of the Charities Act 1960
52 (1954) Ch 347, CA
53 (1703) 3 Bro CC 171
54 (1981 3 All ER 49, HC
55 (1975) 1 WLR 1596
56 (1949) 1 All ER 346
57 The memorandum of the Labour Party was headed “A Note on Education in the Labour Party”
58 (1948) AC 31
59 (1895) 2 Ch 501
60 (1949) Ch 529
61 Chapter 7, pp 439 Sweet & Maxwell, The Law of Trusts and Equitable Remedies, 11 th Ed.
62 The charity, any charity trustees, any person interested in the charity, in case of local charity any two or more inhabitants of the local area. Attorney General is always required to be included as a party to legal proceedings.
63 (1997) 4 All ER 957, CA
64 The Recreational Charities Act 1958, s1 (2) provides that “It is a charitable purpose to provide, in the interest of social welfare, facilities for recreation or other leisure-time occupation where those facilities are available either to the public as a whole or to women only.”
65 (1968) AC 138