Trusts and Charities: Validity of Ivor Fortunes Provisions in his Will - Essay Example

Trusts and Charities: Validity of Ivor Fortune’s Provisions in his Will Introduction: Gifts which are intended to be for the benefit of mankind as distinct from for the benefit of individuals are characterised as charities. However, such gifts may or may not be regarded as charities depending upon the status of the recipient of the gift. Any gift which is given to charity is treated as having been given to charity as a whole. The donor may specify a particular charity or type of charity, but even if that particular charitable body ceases to exist after the donation, the gift will be given to another similar charity. Once property has been donated to the ‘common pot’ of charity it can never be removed from the pot and applied for non-charitable purposes. There are many advantages being enjoyed by organisations having a charitable status, including fiscal advantages like exemption from payment of Income Tax, Inheritance Tax, Capital Gains Tax, Stamp Duty, VAT and Certain Local Taxes; of course all of these subject to the fulfilment of certain terms and conditions. Most of the rules regarding the administration of charities are now to be found in the Charities Act 1993 as amended by the Charities Act 2006. This paper intends to make an analysis of the gifts and donations made by one Ivor Fortune to certain charitable purposes through his will as to the validity of the gifts being of charitable nature based on the purposes and the proposed recipients before and after the enactment of the Charities Act 2006, which has made various amendments in this regard. General Provisions: Until the enactment of Charities Act 2006, the preamble to the Charitable Uses Act 1601 (the Statute of Elizabeth) which established that certain purposes were to be construed as charitable, remained the source of the modern definition of charity. For any trust to be charitable it must be within the “spirit and intendment” of the statute. (Morice v. Bishop of Durham (1805) 9 Ves 399) Lord Macnaghten in the case of Income Tax Special Purposes Commissioners v. Pemsel [1891] AC 531 has categorised the charitable purposes under four heads. The headings are: a) trusts for the relief of poverty; b) trusts for the advancement of education; c) trusts for the advancement of religion; d) trusts for other purposes beneficial to the community. This paper will examine the different provisions of the will of Ivor Fortune under these heads as well as the relevant provisions of the Charities Act. 1. £25,000 to permit the School of Archaeology, University of Camford to complete its work in translating the inscriptions on the tomb of the pharaoh Smenkhare: “schools of learning, free schools and scholars in universities”; “the education and preferment of orphans” and “the supportation, aid and help of young tradesmen, handicraftmen, and persons decayed” were considered to be for charitable purposes by the old Act. In this respect the interpretation of education includes all forms of education and training which ensures some benefit to the public. Even though there is no contact with the public through teaching etc. the educational activity may solely consists of research. Thus the courts adopt a wide interpretation of education and trusts formed for the purpose of even upkeep of schools and museum is considered as charitable, however subject to their non-profit making nature. Examples of more unusual charitable educational objects may be found in the trust to finance the search for the Bacon/Shakespeare manuscripts (Re Hopkins WT [1965] Ch 669); the promotion of the music of Delius (Re Delius [1957] Ch 299); and the publication of the Law Reports (Incorporated Council of Law Reporting for England and Wales v. A-G [1972] Ch 73). On these grounds the donation of ₤ 25,000 to School of Archaeology may be considered solely for charitable purposes. But the fact that shortly before Ivor died, the School completed the translation of the Smenkhare inscriptions, and has now started work on the translation of inscriptions on other tombs, gives rise to a situation of cy-près scheme to be adopted when it becomes “impossible” or “impracticable” to carry out the purposes of the trust. Section 13 (1) (e) of the Charities Act 1993 provides that where the original purposes in whole or in part, have, since they were laid down, (i) been adequately provided by other means; or (ii) ceased, as being useless or harmful to the community or for other reasons, to be in law charitable; or (iii) ceased in any other way to provide a suitable and effective method of using the property available by virtue of the gift, regard being had to the spirit of the gift. The section is largely self-explanatory. Its importance lies largely in the power which it gives to the court to apply property cy-près when the purpose of the trust has become obsolete since it is no longer is possible or practicable to apply the donation for the purpose for which it was intended. The commissioner may appropriate the funds for a cy-pres (.as near as possible) as has been decided in the case of Peggs v. Lamb [1994] Ch 172. Position under Charities Act 2006: Under the Charities Act 1993, Charities occasionally run appeals that fail to get enough money to meet their original aim and funds can exist for which there are no longer any beneficiaries. The restrictions placed on the Commission’s and the Courts limited the flexibility to use these ‘failed’ funds under cy-près (literally ‘near to’) doctrine for various other charitable purposes. The New Act of 2006 allows the Commission and the Courts to take into account current social and economic circumstances when approached by charities seeking more freedom in how they can use these funds. This will give charities greater flexibility in how they can use donated money when they can’t use it as they originally planned, but it will also take into account the spirit in which the original donation was made. 2. ₤ 100,000 to Statuswatch for the furtherance of their objectives: It is observed that Statuswatch is an organisation campaigning for human rights of asylum seekers and changes in the law to safeguard the same. In the case of McGovern v. A-G [1982] Ch 321 Slade J identified 5 political purposes: 1. to further the interests of a particular political party; 2. to procure changes in the laws of this country; 3. to bring about changes in the laws of a foreign country; 4. to bring about a reversal of government policy; 5. to bring about a reversal of government policy in a foreign country and donations or gifts to organisations pursuing any of these purposes cannot be regarded as being for charitable purposes since the court will have no adequate means of judging whether a proposed change in the law of a foreign country will or will not be for the public benefit. The Judge further observed that there would arise a substantial prima facie risk that such a trust, if enforced, could prejudice the relations of this country with the foreign country concerned. Similarly in the case of National Anti-Vivisection Society v. IRC [1948] AC 31 HL; the NA-VS was held not to be charitable because its aims would involve a change in the law. Lord Normand in this case considered that only when a change in the law is the predominant object should charitable status be refused. Lord Simomds in the same case observed that the court has no means of judging whether the proposed change in the law will or will not be for the public benefit and the main object of the society is for political and for that reason the society is not established for charitable purposes only. By virtue of these decisions the ₤ 100,000 donation to Statuswatch can not be held to be for charitable purposes. Position under Charities Act 2006: Under Section (2)(h) of the Charities Act 2006 (advancement of human rights), examples of the sorts of charities and charitable purposes falling within this description include: Charities concerned with the promotion of human rights, at home or abroad, such as relieving victims of human rights abuse, raising awareness of human rights issues, securing the enforcement of human rights law; Charities concerned with the promotion of restorative justice and other forms of conflict resolution or reconciliation; Charities concerned with the resolution of national or international conflicts; Mediation charities; Charities promoting good relations between persons of different racial groups; Charities promoting equality and diversity by the elimination of discrimination on the grounds of age, sex or sexual orientation; Charities enabling people of one faith to understand the religious beliefs of others Hence in view of the above new provisions the donation of ₤ 100,000 may qualify to be considered for charitable purposes. 3. £200,000 for the building of reading room and library for the employees and ex-employees of my company Fortuna Ltd and other members of the local community: As per the decision in the case of Verge v. Somerville [1924] AC 496 in order to be charitable a trust must be “For the benefit of the community or an appreciably important class of the community”. In order to decide on whether a trust is of sufficient public benefit to be charitable the House of Lords adopted the ‘personal nexus’ test (which had been used in Re Compton [1945] Ch 123), in the case of Oppenheim v. Tobacco Securities Trust Co. [1951] AC 297. This is the test which is being adopted till today to decide the whether a trust is of sufficient public benefit. In Oppenheim income from a trust fund was to be used for the education of the children of employees and former employees of the British-American Tobacco Co. Ltd. It was held that, even though the potential beneficiaries numbered over 100,000, they were “neither a community nor a section of the community for charitable purposes.” The reason for this decision was that there was a personal nexus between the company and the beneficiaries. The case was followed in IRC v. Educational Grants Association Ltd [1967] Ch 993 when a similar trust for the education of the children of the employees of the Metal Box Co. Ltd was held not to be charitable. In the words of Harman LJ, “It is an admirable thing that the children of employees should have a higher education, but I do not see why that should be at the expense of the taxpayer.” By reason of the foregoing judgements the proposed donation of £200,000 for the building of reading room and library for the employees and ex-employees of Fortuna Ltd and other members of the local community will not be considered for charitable purposes. However the mention in the will that the library can be used by other members of the local community does not alter the situation because of the following position of law. Gifts for ‘charitable’ purposes must be exclusively for charitable purposes. The significance of this distinction is shown most obviously in the and/or cases. In the given situation the employees and ex-employees, being a part of the beneficiaries are not considered to be the recipients of the charitable purpose but may be for a benevolent object. The general rule is that the word ‘or’ is to be interpreted disjunctively. Thus a gift “for charitable or benevolent purposes” will generally not be construed as a charitable gift because it is possible for the gift to be applied for objects which are benevolent but not charitable (Chichester Diocesan Board of Finance v. Simpson [1944] AC 341). Whether an organisation is charitable or not depends upon its objects and how those objects are construed. If the organisation has any objects which are deemed to be non-charitable the organisation cannot itself be charitable unless those objects as purely ancillary to its charitable aims. Position under Charities Act 2006: Under the Charities Act 1993 which has inherited the ambiguous preamble and other provisions of the 1601 Act, the question of public benefit requirement differs between the four heads of charity. However the new Act of 2006 has put an end to this situation by clearly defining the purposes and also by prescribing the test for identifying the public benefit. The Act has also abolished all the presumptions and made the law as simple as possible. Under the amended provisions this donation may qualify for being for a charitable purpose. 4. £15,000 for the erection of a stained glass window to my memory in my local Church of the Divine Visiting Aliens, Mansfield and £25,000 for the maintenance of said window The additional factor to be considered in this case is that the Church was founded and maintained by subscription of devoted (if misguided) fans of the T.V. programme “Star Trek” The courts have always maintained that ‘religion’ means the belief in a divine being. However contradicting judgments have been delivered over the period in this issue. In Thornton v. Howe (1862) 31 Beav 14 Romilly MR made the observation that the Court of Chancery makes no distinction between one religion and another. The court decided that the trust will be considered charitable so long as the beliefs are not adverse to the very foundations all religions and subversive of all morality. With these guidelines in mind the Commissioners have registered as charitable to trusts for the advancement of the beliefs of the Unification Church [the Moonies]. But the Commissioners have however refused register the Church of Scientology because there is no belief in a divine being, despite the fact that it has been held charitable in both Australia and New Zealand [R. v.Registrar General ex parte Segerdal [1970] 2 QB 697] In contradiction to the above the Charity Commissioners have registered trusts for the advancement of Hindu, Sikh, and even Buddhist religions. (e.g. Varsani v. Jesani [1999] Ch 219, Muman v.Nagasena [2000] 1 WLR 299))The inclusion of Buddhism leads to the conclusion that a belief in a divine being is not necessary for an organisation to be deemed charitable on religious ground. On the above grounds the donation to the church of ₤ 15,000 for the erection of a stained glass window and ₤ 25,000 for the maintenance thereof may well be treated for charitable purposes. However when the purpose of the gift is analysed it may not really be regarded as being for the public benefit and hence will not be regarded as for charitable purposes. On the consideration that, the gifts for the repair of churches and church property, the support of the clergy, and possibly missionary work may be construed as charitable; donations to organisations ancillary to the church (e.g. the Salvation Army) may also be charitable. The trust must be for the benefit of the public however, and the gift to the Carmelite priory in Gilmour v. Coats [1949] was seen as non-charitable because it was given to a closed order devoted to prayer and contemplation. Generally trusts for the advancement of religion will be charitable provided that there is some contact with the public. Gifts for the saying of masses in public are charitable (Re Hetherington [1990] Ch 1). If the masses are said in private the trusts are not charitable, but may still be valid (though unenforceable) trusts of imperfect obligation. Under these grounds the donation to the church does not qualify for being a charitable purpose. Position under Charities Act 2006: Now, under Section 3(a) of the Charities Act 206 religion is redefined as; (i) a religion which involves belief in more than one god (ii) a religion which does not involve belief in any god Hence there may not be any problem with regard to donation to the church to be considered as charitable as such. However the purpose for which the donation was made still needs to be justified as being for charitable purpose even under the new Act. Conclusion: The Charities Act 2006 received the royal assent after a two year passage through parliament. The Act defines a charity as a body or trust which is for a charitable purpose, and is for the public benefit. It also includes a wide range of descriptions of the main purposes which are charitable. However it cannot be taken for granted that such wide coverage will solve all the doubts that may arise as to the application of the purpose of the gifts and donations as to whether they are for charitable or not and the courts will have to make several rulings in the future also on the basis of the circumstances of each case. Read More