Social Investment
“Social Investment by Charitable trusts are public trust designed to promote a purpose that is beneficial to society or the benefit of a particular charitable organization” (1). Considering retrospect, charitable trusts are regarded as a form of purpose belief. The enforcement of purpose trusts can occasionally impose difficulty, and generally concerning charities, and there will unlikely be straightforwardly recognizable human beneficiaries. In its 2014 consultation paper, the Law Commission notes that Charities inhabit a unique position in society and law. They emerged for the best interest of the public, and they are required to have exclusively charitable purposes. Following the coursework question, to determine to what extent the law ensures that philanthropic ventures meet the public benefit requirement. The Charities Act and its subsidiary institution will be discussed together with the significance of public benefit as a sine qua non of a Charitable Trust and the judicial interpretation and application of public interest.
As hereinbefore mentioned, trusts that embody charitable objectives are those which are considered to be of such value and importance to the community that they are provided with favorable treatment. Like this, since the early 17th century, the Attorney-General has undertaken the enforcement of charitable trusts as the representative claimant. Since 1960 the Charity Commissioners have been provided with supervisory authorities over charities. Section 17 (5) of the Act provides: “The charity trustees of a charity must have regard to any such guidance when exercising any powers or duties to which the guidance is relevant.” These guidelines are notably open to debate, as illustrated in the case of ISC v The Charity Commission (2011), which is concerned with the public benefit of independent schools. Appeals against the decisions of the Charity Commission are heard, in the first instance, by the First-Tier Tribunal (Charity). In the Commission’s perspective, sections 4 (1), 14, and 17 of the Charities Act 2011 must coincide. The definition in section 4 (1) of ‘the public benefit requirement’ is concerned with what is required to establish a charitable purpose. However, section 17 (5) indicates that Parliament intended the Commission’s statutory public benefit guidance to be a template to the execution of the powers and duties of charity trustees. Guidance reserved for the promotion and understanding of the requirement that a charitable purpose must be for the public benefit would have minimal relevance to the powers and duties of the trustees of a charity, once established. The Commission’s public benefit objective is not restricted to promoting awareness and understanding of the requirement that a charitable purpose must be for the public benefit but extends to fostering knowledge and understanding of the duty of charity trustees to further the objectives of the charity for the public interest, and their associated reporting obligations 10.
To be charitable, a trust must be for a charitable purpose, which is listed in S. 3(1) of the Charities Act 2011 (hereinafter referred to as “the Act”) and have a public benefit. In addition, the trust should also be exclusively for charitable purposes. This warrants that it is required to be of benefit to the public at large or a significant section thereof. In Re John Duffy (2013), a legacy to assist in funding an old people’s home for the general benefit of its residents and staff was held not to be charitable under Section 3(1)(j). The court held that a gift for the benefit of 33 residents at a particular care home could not be regarded as a public benefit requirement. Section 4(2) indicates that, in determining whether there is a public benefit, it is not to be assumed that a particular description is instinctively for the public benefit. Therefore, the requirement for public benefit is compelled to be demonstrated in all cases, however, what is expected can differ among the respective heads of Charity as henceforth discussed.
Section 3(1)(a) of the Charities Act confers the authority to establish a Charitable Trust for the prevention or relief of poverty. The public benefit precondition in connection to poverty is hardly challenging. This leniency is explained on the grounds that the relief of poverty is so altruistic that a public benefit element can be necessarily deduced. Correspondingly, a trust for a testator’s poor relations is charitable Isaac v Defriez (1754). Accordingly, in Re Gosling (1900) poor employees were qualified to benefit. It remains compulsory to decipher between a private trust and a charitable trust. In Re Scarisbrick (1951), the contrast was drawn between a trust to benefit a class of named poor relations i.e private trust and a trust to benefit unnamed poor relations i.e a public trust. The Court of Appeal held that a trust for the relief of poverty would not be charitable if the poor persons to benefit were members of a narrow class of close relatives.
Section 3(1)(b) establishes the advancement of education as a Charitable Trust. There ought to be a genuine public benefit in educational trust. In British Humanist Association v Richmond LBC (2012), the Roman Catholic Diocese of Westminster sought to establish voluntary aided Catholic primary and secondary schools. This was considered charitable as the schools were desirable, although there was no “need” for them. In the context of tuition institutions, it is for the institutions, not the Charity Commission to determine the measures it must take to demonstrate public benefit. Therefore, alternative measures inclusive of bursaries can be exhausted as seen in the case of ISC v The Charity Commission (2011).
Section 3(1)(c) provides the advancement of religion as a Charitable Trust. The religion must benefit a sufficient section of the community. This authority is demonstrated in Gilmour v Coates (1949) where the property was vested in trust for a Carmelite convent. The Carmelites are a contemplative order who do not venture outside the convent walls. It was determined that prayer and spiritual belief alone were of no tangible benefit to the public. Correspondingly, in 2009, the Gnostic Centre unsuccessfully sought registration as a Charity. The Charity Commission ruled that the organisation could not be registered as a religious charity as it was concerned with the spiritual interest of the individuals thusly there was no benefit for the public or a sufficient section of the public. In contrast, the Society of the Precious Blood (1995) concerned Anglican Nuns and this was held to be charitable. These Nuns were not isolated from society. They worked in the community and provided classes and forums. As opposed to Gilmour, this was assumed to have a Public Benefit.
In contrast with the first three statutory provisions (a-c), which cover purposes long deemed charitable under the common law, the remaining provisions gained their charitable notoriety by being “otherwise beneficial to the community” Pemsel’s Case (1891). Therefore, as regards these purposes a gift had to be for the potential benefit of the whole public or a sufficiently wide section of it. As to gifts for the benefit of the public, it does not matter, in practice, that not every member of the public will take advantage of the gift. A notable authority in relation to public benefit is the case of IRC v Baddeley (1955). In this case, a trust was formed to promote the moral, social, and physical wellbeing of residents in West Ham who were members of the Methodist Church. The House of Lords held that this was not of sufficient public benefit. Viscount Simmonds explained, “the beneficiaries are a class; they are those of the inhabitants of a particular area who are members of a particular area who are members of a particular church.” It is not, as yet, clear how the so-called “class within a class” test will apply in the future. The Charity Commission guidance merely states that “benefit” must not be unreasonably restricted by geographical or other restrictions”.
The law concerning public benefit evolves on a case-by-case basis. In consequence: “the authorities do not provide a comprehensive statement of the public benefit requirement but provide rather a series of examples of when the public benefit requirement is or is not satisfied. There is no application of some overarching, coherent, principle by which the Courts have been guided”14. In the landmark case of Re Compton [1945] Ch 123 ‘Compton test’ or the ‘blood and sweat test’ emerged as a template of principals concerning public benefit that has transcended along with latter cases. In this case, it was ruled that a trust for the furtherance of education is charitable if it is for the education of the public or of a section of the public, which is not selected on the premises of a direct connection, either with the donor or between themselves. Therefore, a trust for the education of selected persons, or descendants of selected persons is not charitable. (Notes). The Compton test was later applied in the case of Oppenheim v Tobacco Securities Trust Co. [1951] AC 297 where Lord Simonds stated:
“First, that the possible beneficiaries must not be numerically negligible, and secondly, that the quality that distinguishes them from the rest of the community must be a quality which does not depend on their relationship to a particular individual – the “personal nexus” test”.
Notwithstanding, the test does impose some difficulty determining whether or not the common characteristic which is shared by several persons is, or is not, such as to make them a section of the public (Notes). In the case of Re Mead’s Will Trust Deed [1961] 2 All ER 836 Cross J. noted that “despairingly not only that this was a difficult question, but that there appeared to be no principle by reference to which it could be answered”. Further affirmation was provided in the case of Dingle v Turner [1972] 1All ER 878 Lord Cross together with other Law Lords gave strong support to Lord MacDermott’s view. Despite the fact that those remarks were obiter dicta, Lord Cross affirmed that, in his opinion, the distinction between personal and impersonal relationships is unsatisfactory. Nonetheless, the application of the Compton test remains as a template for charities save for poverty relief. What accounts for a member of the public predominately depends on the provisions of the particular trust, and the courts are more likely to dismiss arbitrary restrictions that are irrelevant to those provisions, and which simply serve to exclude other sections of the public, as was found in Baddeley.
The legal notion of charity, inclusive of the concept of public benefit in charity law, is not static. Charity law is not “frozen at some time in the past” 11 As we [have seen], changing social perceptions have, in the past, resulted in changes in what is seen as for the benefit of society and, accordingly, of what is proper to be accorded charitable status. 12 An objective which was primarily recognised as being for the public benefit may cease to be recognised as such, and purposes which were not formally acknowledged as being for the public benefit may be recognised acknowledge as such. Accordingly, in National Anti-vivisection Society v IRC 13 Lord Simonds said: “If to-day a testator made a bequest for the relief of the poor and required that it should be carried out in one way only and the court was satisfied by evidence that that way was injurious to the community, I should say that it was not a charitable gift, though three hundred years ago the court might upon different evidence or in the absence of any evidence have come to a different conclusion.”
In conclusion, in conjunction with the Charity Commission together with case law, the requirement for the public benefit for the establishment of Charitable Trusts are