Charitable Trusts in Ireland
One of the most significant changes made by the Charities Act 2009 came in s. 39 of that Act, which established a ‘Charities Regulatory Body’ to regulate charities. Case law still largely defines ‘charitable purpose’. The main advantage of being classified as a charitable purpose trust is that many of the disadvantages which would apply otherwise can be avoided; the rule against perpetuities doesn’t apply (although the trust must vest in a perpetuity period); the rule against having non-human beneficiaries can be ignored; and certain tax exemptions accrue.
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The case of Christ’s Hospital v Grainger was the case in which it was held that a gift over from a charity to a charity isn’t subject to the rules against perpetuities. The Cy-Pres jurisdiction of the Courts allows them to get involved to monitor charities so if their purpose changes or the charity comes to an end it allows orders to be made about the property so that it is used for a purpose as similar as possible to the purpose of the original charity.
Definition of ‘charity’: The old legislation in this area didn’t set out a definition, but the preambles set out examples of what might be considered charitable purposes; the Courts expanded this definition based on ‘the spirit of the preamble’. There are four categories of charitable trusts set out in Pemsel’s Case by Lord MacNaughton. These are trusts for: 1)The relief of poverty; 2)The advancement of education; 3)The advancement of religion; 4)Other purposes beneficial to the community. There was always a difficulty with the fourth factor given its possible very wide scope.
Therefore the 2009 Act sets out a list of purposes that are encompassed in the fourth category in s. 3(11) (e. g. protection of the environment). In Ireland and England, in order for a trust to qualify as ‘charitable’, it must not only serve one of the above purposes, but it must also serve the public benefit, and pass the ‘public benefit test’. The list is not intended to be exhaustive. In England they have s. 2 of the Charities Act 2006 to define charitable purposes.
The 2009 Act includes e. g. voluntary work, urban regeneration, advancement of art, culture heritage or sciences etc. hich are clearly very broad categories. Trusts for the Relief of Poverty: The obvious questions raised by this category are how poor must the beneficiaries be, and how many of them must there be. In this context, ‘poor’ is a relative term; in the Re Colthurst case, it was said that in this context, poverty doesn’t mean destitution, but instead the idea of people having to go short having regard to their status. This case concerned a trust for the benefit of orphans and widows of bank officials who were in poverty.
In the case of Re Segelman, a trust in favour of ‘needy relatives’ was upheld as being charitable; it was acknowledged that most of the members of the class weren’t affluent but needed help from time to time. However, the Court did limit the number of beneficiaries here, since the class was not to be closed until twenty one years after the testator’s death, and although at the time of death there were only twenty six individuals in the class, in twenty one years it would expand greatly, and the Court found that it cannot have been the intention of the testator to give gifts to after-born issue.
In the Histed Article, the author is particularly critical of this wide definition of ‘poor’, as it means that the Courts have come close to saying that an occasional problem of expenditure exceeding income qualifies someone as ‘poor’, which is not a good approach. It should be noted that these trusts must benefit a class of individuals, as if they benefit named individuals they qualify as private, and not charitable, trusts.
In terms of the ‘public benefit test’ in the context of this category, the test has been reduced “almost to vanishing point” according to Hanbury, because of the advent of poor employee and poor relative cases. The case of Re Scauisbrick concerned a small class, which were the needy relations of the testator’s sons and daughters. Lord Evershead said that the cases concerning ‘poor relations’ can be justified on the grounds that the relief of poverty, no matter whose poverty it is, is an altruistic act and is thus of public benefit.
In the case of Dingle v Turner, a trust had been established to benefit the poor retired employees of a firm. The House of Lords upheld this trust as charitable, with Lord Cross saying that a class of over six hundred individuals was not too small to qualify as a charitable trust. However the issue with this case was that the issue of the definition of ‘poor’ wasn’t addressed. The important thing therefore when setting up a charitable trust for the relief of poverty is to benefit a class, not individuals.
Issues with the area are still the fact that ‘poverty’ is ill-defined, and the public benefit test is not rigidly applied. The advent of the Charities Act 2009 has altered the position in Ireland in relation to poor relatives and employees cases, since it specifies that trusts will not be upheld as charitable where there is a close connection between potential beneficiaries and the testator; this close connection includes where they are close relatives and employees, and so in Ireland it is doubtful that such trusts will be upheld in future. Trusts for the advancement of education:
The concept of what is ‘educational’ in order to qualify a trust as legally charitable has often been debated. In England there are two possible approaches. The first can be seen in the case of Re Shaw, which concerned the will of George Bernard Shaw. It stated that the trustees have to provide for research inter alia into the advantages of reform of the alphabet. Harman J stated that “if the object be merely the increase of knowledge that is not in itself a charitable object unless it be combined with teaching or education” so the gift was not upheld.
The second can be seen in Re Hopkin’s Will Trusts a more expansive interpretation of ‘education’ was put forward by Lord Wilberforce. A gift to a society to help them search for the Bacon-Shakespeare manuscripts was held to be valid. Lord Wilberforce disagreed with Harman J saying that the word ‘education’ should be extended beyond teaching, although he did accept that research of a purely private matter would not be educational. In this jurisdiction in In re the Worth Library Keane J commented that he felt the approach in Hopkins was a lot more reasonable.
This case concerned a library in a hospital. The Court rejected the idea that it fell under the category of educational as only three people had access to it and so this is taking this beyond the already liberal meaning. However, it was still upheld as charitable as it was adjudged to come under the fourth Pemsel category of other purposes beneficial to the community. The case of Oppenheim v Tobacco Securities Trust Co. Ltd concerned a trust for the education of children of all of the employees and former employees of a company.
This case was a very important one in clarifying the public benefit aspect of charities for the advancement of education. It was held that the trust must fail because the distinguishing quality of the class of beneficiaries was a relationship with a named propositus, and they were not a section of the public per se. This has been a heavily criticised decision. It was noted by Lord Cross in the later Dingle v Turner case that the motivating factor behind the decision might be the ‘undeserved fiscal immunity which would be the result of finding charitable status’.
Quite possible this issue will be reassessed in the next appropriate case. The case of O’Connell v Attorney General concerned a trust to give money to the male descendants of the testator’s brother to obtain professions (through university education). It was held not to be charitable, because it clearly failed the public benefit test, nor could it be upheld even to a limited extent as it breached the rule against perpetuities as no beneficiary may have been alive at the testators death, and they could stay in education ‘to obtain a profession’ as long as they wanted, and there was no limit to the number of them there could be.
In Magee v Attorney General High Court a broad approach towards the meaning of education was taken by Lavan J. Lavan J stated that the activities carried on in the local community school which largely consisted of the running of self-help groups must be deemed educational in nature. Trusts for the advancement of religion: This is a very complex and uncertain area, dealing with such a sensitive issue. Section 3(4) of Charities Act 2009 provides that “it shall be presumed, unless contrary is proved, that a gift for the advancement of religion is of public benefit’.
Section 3(5) provides that Charities Regulatory Authority can’t make a determination that gift for advancement of religion is not of public benefit without the consent of the Attorney General. Section 3(6) provides that a charitable gift for advancement of religion shall have effect and shall be construed in ‘accordance with the laws, canons, ordinances and tenets of the religion concerned’. Finally, section 99 provides that a person who sells mass cards other than according to an arrangement with recognised persons shall be guilty of offence.
Gifts to ecclesiastical office holders: The important distinction to draw in this area is that a gift for the benefit of the incumbent of an ecclesiastical office for the time being is charitable, while a gift to the particular individual who happens to hold that office will not be. In the case of Gibson v Representative Church Body, a bequest to the chaplain of the Rotunda Hospital and his successors was upheld as charitable; however, a bequest in a codicil to that same will for the chaplain’s personal benefit was not charitable.
In Donnellan v O’Neill a bequest to a cardinal absolutely and for his own benefit was held to be a gift to him in his private capacity, and thus not a charitable gift. The test was described by Kindersley VC in Thornber v Wilson as being “whether the testator designates the individual as such, or as being the person who happens to fill the office“. Gifts for the celebration of masses: This was a particularly common area of benevolence in Ireland over the centuries, and thus there is a fairly large body of case law concerning it.
It is certainly a charitable purpose, and was designated as such by s. 45(2) of the Charities Act 1961, but it is an area which for a long time provoked considerable uncertainty and controversy. Historically the legal principles applicable differed considerably between England and Ireland. The question of the charitable nature of the gifts for the saying of masses, and whether it was necessary to specify that they be said in public, was resolved by the Irish Court of Appeal in the case of O’Hanlon v Logue.
Here, a testatrix devised and bequeathed her property on certain trusts and then on trust to sell it and invest the proceeds and pay the income thereof from time to time to the Roman Catholic Primate of all Ireland for the time being for the celebration of masses for the repose of the souls of her late husband, her children and herself, the will containing no direction that these masses be said in public. The Court of Appeal upheld the charitable nature of the gift and made it clear that a bequest for the saying of masses, whether in public or not, constituted a valid charitable gift.
This decision has been followed on a number of occasions, and the issue was put beyond any doubt by the enactment of s. 45(2) of the Charities Act 1961. In England, the law in this area was clarified by the case of Re Hetherington. Here, Browne-Wilkinson VC confirmed that gifts for the saying of masses are prima facie charitable, since it is for a religious purpose and contained the necessary elements of public benefit because in practice the masses would be celebrated in public.
While he stressed that the celebration of a religious rite in private would not contain this essential public element, the Vice Chancellor made it clear that where either construction was possible, the gift was to be construed as one to be carried out only by charitable means (i. e. celebrated in public). Trusts for the Other Purposes Beneficial to the Community: Examples of the types of charitable purposes were set out recently in the new Charities Acts, which is a new departure. Prior to the 2006 Act in England and the 2009 Act in Ireland, this was regarded as a residual catch-all category.
Interpretation of what it meant varied over the years. There were two main approaches. In the Attorney General v National Provincial and Union Bank of England case, the point was made that not all trusts beneficial to community are necessarily charitable, and you also have to show a charitable purpose, which is quite a rigid approach. A more flexible interpretation of this point was applied recently. In the case of Incorporated Council for Law Reporting for England & Wales v Attorney General, it was suggested that the purpose of the trust possibly fell under education as well as the fourth category.
Russell LJ held that if a purpose is shown to be of sufficient benefit to the community, it is prima facie charitable; here it was held to be so by the Court of Appeal. This was a much less strict approach, which made it easier to qualify. A case which is helpful in setting out the scope of this area is the Northern Irish case of Re Dunlop. It should be noted that in England and Northern Ireland, the 1st category of poverty relief included the purpose of ‘help of the elderly’ with it, as happened in this case.
It involved a request to found a home for elderly Presbyterians; the Court concluded that this was a charitable purpose, and the fact that the beneficiaries were only allowed to be Presbyterians didn’t negative the fact that this was still of public benefit. The judge seemed to be taking view that it’s actually quite difficult to qualify under the 4th category, and made obiter statements that to qualify, there should be no limitations to the gift that would prevent the public as a whole from benefiting. Therefore, in this fourth category, the public benefit test seems to be tricter than in any of the other categories. Is the test for ‘public benefit’ objective or subjective?
The Courts in Ireland have generally held that it is subjective, with due weight given to the viewpoint of the donor, provided it is not illegal or immoral, while the Courts in England and Northern Ireland have held it’s an objective test. In the important Irish case of Re Cranston, Lord Justice Fitzgibbon and a majority of the Court of Appeal held that it should be a subjective test, based not on the view of the judge, nor on general public opinion.
Instead, the benefit must be one the founder believes to be of public advantage, but it must be rational, and not contrary to law or morality. In the English case of Re Hummeltenberg, a gift was made to a College for the training of Mediums, which was held not to be a charitable purpose. The Court looked at the Irish case law, but said that it should be a matter for the Court to decide, which is an objective approach.
The Irish approach was reaffirmed in the case of In re the Worth Library. Important legislative changes took place with the coming into force of the Acts…s. (11) lists purposes ‘a’ to ‘l’ under the fourth category, but it is not an exhaustive list. It included two factors which hadn’t arisen in case law: the protection of the natural environment; and the advancement of environmental sustainability. It contains no mention of the advancement of human rights after much debate on this topic during its drafting, especially since this is a factor in the English equivalent of this legislation, which contains these factors in s. 2(2). Subsection (h) in the English legislation discusses human rights.
A purpose included in the English Act, but not in the Irish Act, is (g), the advancement of amateur sport, which is proving very controversial. The areas mentioned in the Irish Act are: (a)Gifts for the elderly and sick: In the case Re Robinson a gift for people over the age of sixty five in a certain area, was upheld as charitable; (b)Gifts for the sick and hospitals: In the case of Re McCarthy’s Will Trusts, Budd J upheld as charitable gifts to a charity promoting trips to Lourdes for sick people.
An important Supreme Court decision was given in Barrington’s Hospital v Valuation Commissioner, in which a hospital sought to challenge the loss of its exemption from ratings tax, saying it was charitable. Kingsmill Moore J said that these trusts are charitable, and it didn’t matter that the hospital charged some people. In the case of In re the Worth Library, the library facilities were only available for three people, but Keane J said it as still charitable because it gave them a haven in which to relax, and that meant the whole hospital benefited. (c)Gifts for sporting and recreational purposes:
In Common law jurisdictions, gifts to promote a sport are not charitable usually, but providing general recreational facilities can be charitable sometimes. In the 1950’s in England, the Recreational Charities Act was introduced, which deemed as charitable recreational facilities provided in the interest of social welfare; this legislation spawned many cases.
In Guild v IRC, a testator left a gift to be used in connection with a sports centre, and the House of Lords said that this was a charitable gift; they said that the facilities for recreation did improve people’s quality of life, even if the people who benefited were not in a position of relative social disadvantage. There was a Northern Irish decision along same lines in Springhill Housing Action Committee v. Commissioner of Valuation, in which a community centre was upheld as charitable.
There was only one Irish case until recently which was Shillington v Portadown UDC, where it was held that it was a valid charitable gift to give money to the local council to build facilities to encourage healthy recreation. In the relatively recent case of National Tourism Development Authority v Coughlan, there was a gift to a golf club, but this was for the promotion of a particular sport, and so was not charitable according to Charleton J, who held that the more exclusive the enterprise, usually the less likely it is to have as its sole purpose the betterment of society in general. d)Gifts for the benefit of animals:
The case of Armstrong v Reeves concerned a gift to a charity for the abolition of vivisection, which was regarded as a charitable purpose under the fourth miscellaneous charitable purpose; this case was decided in the late 19th century. The issue was seen again in the 1940’s in the National Anti-Vivisection Society v IRC case, but here the House of Lords performed a balancing exercise, and said that the benefit to humanity outweighed the cruelty to the animals, and thus the purpose of the trust was held not to be charitable. e)Gifts for political purposes:
It has long been established that a gift for an existing political party is not charitable; in Re ni Brudair, a gift to the benefit of ‘Republicans to advance their cause as it was between the years 1916 to 1920’ was too vague, and the Court said that it had a political objective and thus was not charitable. There is a grey area in the area of human rights. The case of McGovern v Attorney General is an important one in this area.
Here, Amnesty International was trying to set up another organisation to promote human rights in other countries through diverse political means. The Judge said that this new organisation couldn’t be charitable because they were going to try to achieve their goals by changing other countries’ laws. He said that using such methods could not be charitable. This approach has been criticised because it constitutes a very broad ban on any donations to political organisations constituting charitable gifts.
This decision had also been criticised in the Hanbury and Martin textbook, since it introduces double standards, as existing charities already campaign for political change, but ones seeking charitable status to do so cannot; this is an inconsistent approach.