Equity and Trusts: Analysis of Charitable Trusts in England and Wales

This essay provides a detailed analysis of charitable trusts within the context of Equity and Trusts law in England and Wales. It begins with an introduction to charitable trusts as social institutions designed to serve public interest, emphasizing the importance of public benefit. The main body delves into the historical development of charity law, the Charities Act 2006, and the essential requirements for an organization to be recognized as a charity. It explores the principles of public benefit, as outlined by the Charity Commission, and examines relevant case laws such as Oppenheim v Tobacco Securities and National Anti-vivisection society v IRC, highlighting the balance between benefit and detriment. The essay also discusses the two strands of public benefit, the removal of presumption of aspects of public benefits for trusts, and the evolution of legal interpretations regarding public interest and the impact of the law commission and how trusts should operate, culminating in a conclusion summarizing the key takeaways. The paper also makes reference to important legislations and case laws for a better understanding of the topic.

EQUITY & TRUSTS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Charities are social institutions that are created with an aim of serving the society in a
manner that a group of people can work for public interest. It is important that benefits to the
public are attached as the main principles so as to gather charitable status. The essay will
describe various principles and legislations followed under charitable trust. It will also help in
understanding the extensive case laws followed in England and Wales.
MAIN BODY
Charity trusts have been able to emerge during medieval period in order to encourage
good deeds for the society. It started from wealthy people who use to leave their legacies to the
Church on their death 1. With those funds, numerous schools and universities are created during
that period. Process intensified with time and generated the requirement of development of
legislation for same. Main objective behind same is to avoid any type of social disorder in the
country (Morgan and Fletcher, 2013).
To be a charity in England and Wales, it is important for the organization that it is able to
create and implement charitable aims that are for public benefits. The Charities Act 2006 was
able to be enforced on 1st April 2008. All the guidelines related to it were prepared and assessed
after certain consultation. The same was published by Charity commission which was prepared
after adequate amount of consultation and analysis of the law on public benefit requirements in
January 2008. Trust is required to perform various functions which can help in fulfilling the
basic objectives of advancement of religion, education and providing relief to poverty (Owen and
Taira, 2015). It helps in establishing the trust that set up has been designed to showcase public
benefit. It also assists in serving the requirements of public benefits that are included in section
3(2) of the act.
As per the requirements of section 1 of Charities Act 2006, an institution can be classed
as charity if it carries certain charitable purposes. It must be able to pass certain tests that have
been designed by the authorities so as to ensure that motive behind the set up genuine and to
serve the welfare of society. In the first test, it is important for the institution to have a purpose
that is already being mentioned in the list provided in section 3(1) (Connolly, Hyndman and
1 Moore, A., 2014. Rife with Latent Power: Exploring the Reach of the IRS to Determine
Tax-Exempt Status According to Public Policy Rationale in an Era of Judicial Deference.
S. Tex. L. Rev.. 56. pp.117.
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McConville, 2013). The second is conducted by the authorities where, it is important that the
objective being framed by the institution is for public benefit, if it is planning to set up for a
charitable purpose. It has also been made clear by the authorities that the team also measures and
prepare an assessment of proposed activities of the institution before charitable status is awarded
to it 2.
Before application of Charitable Act, there are various common law principles that are
generally applied to charity law. As per section 3(3) of common law, in reference to public
benefit, the term is understood for the purposes of law related to charities in England and Wales.
The Charity Commission guidance helps in setting out two principles with respect to public
benefit interest. The first principle is the benefits that can be raised out of institution must be
identifiable 3. The second principle is the benefit must be for the good of public or a certain
section of the society.
Considering the first principle, the benefits must be clear as well as measurable. The
institution must be able to provide evidence and illustration regarding that their aim will be able
to provide benefits to the society. However, in certain cases, the benefits can be so clear that its
evidence is not required by the team. As per the case of Oppenheim v Tobacco Securities, it was
actually claimed by the party involved that, the benefits out of objectives of institution are wider
in nature. It was ultimately stated that wider context benefits are not counted while deriving
charitable purposes. Hence, based on this context, charitable status cannot be provided to the
institution. It can be stated that the principle can sometimes act too restrictive in exploring
something new and innovation which can thereby be beneficial for the organization as well
(Alcock, 2012).
It is important for the setup, planning to get a charitable status, to be balanced with
respect to any harm or detriment. If the harm caused by is overw2eighed in comparison to the
benefits, then institution cannot be given charitable status. As per the case law, National Anti-
vivisection society v IRC [1948], it was held that, a trust cannot be held as charity due to an
unbalanced exercise of risk benefit ratio followed in it. Further, it was difficult to quantify the
2 Alcock, P., 2012. New policy spaces: the impact of devolution on third sector policy in
the UK. Social Policy & Administration. 46(2). pp.219-238.
3 Public benefit: rules for charities. 2018. [Online]. Available through
<https://www.gov.uk/guidance/public-benefit-rules-for-charities>
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benefits that could raise through the objectives. Hence, it stating the set up as charity would have
been quite biased.
Principle 2 of Charities Act states that the benefit raised out of the setup must be public
or a section of it and should not serve the personal requirements. In this scenario it is important
to form a specific aim and analyse the number of people who may potentially get benefitted from
the aim of charity4. Further, it is also substantial that the section, who will enjoy benefits is large
enough. Further, public benefits must not be unreasonably restricted 5. Hence, restriction must be
entertained only in the case where it is reasonable enough and it can lead to non-fulfilment of
objectives being framed for charities (Jones, 2013).
Analysing the two strands test described in the section 2(1), one of the area that has been
able to attract majority of the debate is related to assessment of the areas which are included in
public interest. Since, there certain other areas of public interest that are present as well,
however, these are not being included in the section yet. It reduced the overall scope being
covered in public interest. It generates the requirement of expansion of trusts and charities in
such a manner that better objectives of the society can be achieved (Charitable organisations in
the UK (England and Wales): overview, 2017).
Section 2(1) describes apparent removal of presumption of aspects of public benefits for
trusts. The main agenda of removal of presumption is advance religion and relieve poverty.
Charities Act 2006 have been amended and section 3 of this law is very controversial. Earlier it
was assumed that trust can work for the purpose to relief poverty, educate people and
advancement of religion. But solicitor journals states that it is essential to treat all charities
equally. Moore, (2014) argued that the main purpose of charitable organizations are of public
benefits. There are two main aspects: benefits aspect and public aspect. Benefit aspect of public
benefit ensure that charitable organization needs to work for the benefits of public. Legal
requirements of these organisations are that trusts have to fulfil public benefit aspect. They have
top continuously work to remove poverty and educate people so that welfare of these people can
be held.
4 Public benefit in charity law. 2013. [Online]. Available through
<http://www.pbookshop.com/media/filetype/s/p/1380953698.pdf>.
5 Brownridge, S. W., 2014. Canning Plum Organics: The Avant-Garde Campbell Soup
Company Acquisition and Delaware Public Benefit Corporations Wandering Revlon-
Land. Del. J. Corp. L. 39. pp.703.
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According to Oyegoke, (2014) public benefit test is the debate subject. There are
essential requirements that charitable firms work for the public benefits. They have to ensure
issue on the societies and they have to continuously work for minimizing these issues. Their
main agenda is to improve life of these people by removing poverty and educating them. Section
3(3) has not been actually altered, in the recent time old law is being used by the government in
order to describing benefits of public 6. Trusts those which are working for relief poverty do not
enjoy public benefit presumptions 7. Law describes that it is very important that there should not
be any kind of personal relationship or connection with the intended beneficiaries. These trusts
cannot be employed or rules by other companies. Charitable organization have to work
independently for the social welfare (Brownridge, 2014).
One of the major case is Oppenheim v Tobacco in which trust was working with the
intention to educate children but employees of these firm was former workers of British
American Tobacco Company 8. That is why this was not considered as charitable organization
because there was personal link between donors and persons those who getting benefited by
these services. Thus, there are personal relationship has been found between trust and employee
benevolent funds (Public benefit: rules for charities, 2018). On other hand principle of poor
relationship has been reflected through the case of Dingle v Turner. In this case law there was
personal relationship between both of them but as trust was working for the relieving of poverty
thus that was considered as charitable trust. There is essential to have public interest. If the trust
is working for the public interest and benefits then they are considered as charitable firms.
The law commission has given instruction in this respect that if there are poor relations
and employee benevolent funds then also firm is considered as charitable. Court has accepted
that there is also a public element because the actual agenda of this trust is to relief poverty from
the society (Public benefit in charity law, 2013). Commission is giving more attention to the
6 Oyegoke, A. S., 2014. Development of a sustainable business model for a third sector
organisation in achieving business excellence. International Journal of Business
Excellence. 7(6). pp.747-770.
7 Connolly, C., Hyndman, N. and McConville, D., 2013. UK charity accounting: An
exercise in widening stakeholder engagement. The British Accounting Review. 45(1).
pp.58-69.
8 Charitable organisations in the UK (England and Wales): overview. 2017. [Online].
Available through <https://uk.practicallaw.thomsonreuters.com/8-633-4989?
transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1>.
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principle 3(3) that if there is public interest then entity can work as trust. Earlier laws describe
that charitable trusts can charge for their services 9. Principles of this law describes that if trusts
are working for the benefit of public then opportunities needs not to be unreasonably restricted.
People those who are living in poverty they should be benefited from this opportunity. Law
reflects that people in poverty needs to get each benefit of opportunity they need not to be
excluded. But charitable trust are allowed providing services to population free of charge. They
cannot charge fees from the population (Moore, 2014).
One of the great example is of independent schools. These educational institutes have to
make sure that whatever funds they are receiving from trustees, all these financial resources need
to be used for public benefits 10. These funds need to be related with objective of charitable
trusts. Otherwise, they may get failed to follow principle and may get failed to fulfil the aim. It is
essential for the trusts that to follow principle of public benefit (Oyegoke, 2014). This aspect
needs not be restricted because the main agenda of these charitable trusts is to improve life of
population and they do not consider their welfare and do not work for their benefit then these
trusts will not be able to fulfil their objectives 11.
It is very essential for these firms that to fulfil their obligations, they have to follow
commission guidance carefully (Brownridge, 2014). Law commission needs to be devoted
towards public benefit. Trustees have to administer this thing that whether trust is working
according to guidance of law or not 12. There have been many changes have taken place in the
charitable laws but there is no requirement to make modifications in regulation 2008. This
regulation clearly describe requirements of public benefit and public benefit report. Provision of
Charities act 2006 and 2011 describes that these firms exclusively work for the public benefit.
9 Oyegoke, A. S., 2014. Development of a sustainable business model for a third sector
organisation in achieving business excellence. International Journal of Business
Excellence. 7(6). pp.747-770.
10 Owen, S. and Taira, T., 2015. The category of “religion” in public classification: Charity
registration of the Druid Network in England and Wales. Religion as a Category of
Governance and Sovereignty, pp.90-114.
11 Jones, M. G., 2013. The charity school movement: A study of eighteenth century
Puritanism in action. Cambridge University Press.
12 Morgan, G. G. and Fletcher, N. J., 2013. Mandatory public benefit reporting as a basis for
charity accountability: Findings from England and Wales. VOLUNTAS: International
Journal of Voluntary and Nonprofit Organizations. 24(3). pp.805-830.
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But 3(1) of CA 2011 does not clearly describe public benefit (Public benefit: rules for charities,
2018). Section 4(3) of this regulation defines public benefit interest which is the main agenda of
charitable trusts in England and Wales. All the benefits that are provided by trusts need to be for
the public welfare. There should not be own interest.
CONCLUSION
From the above study, it can be concluded that it is important for organization to create
and implement charitable aims that are for public benefits. Trust is required to perform various
functions which can help in fulfilling the basic objectives of advancement of religion, education
and providing relief to poverty. It is essential for set up, planning to get a charitable status, to be
balanced with respect to any harm or detriment. Oppenheim v Tobacco securities trust co Ltd,
verge v Somerville etc. are various causes which describe that public benefit aspect needs to be
more focused by the charitable organization.
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