Charitable trusts

Charitable trusts occupy a distinctive position in English trust law. They are trusts for purposes, not for persons; yet, unlike ordinary non-charitable purpose trusts, they are valid, enforceable and institutionally privileged. The explanation is not that the beneficiary principle has disappeared, but that it is satisfied differently. In an ordinary private trust there must be identifiable beneficiaries who can enforce the trustees’ duties. In a charitable trust, enforcement is public: the Attorney General and the Charity Commission stand behind the trust. The law therefore tolerates an absence of ascertainable private beneficiaries because the purpose is one which the legal order regards as sufficiently public.

For Durham students, this topic should be read as the first major qualification to the private-law account of the trust developed in Weeks 1–7. Certainty of intention, subject matter and objects remains relevant, but the object is a purpose rather than a class of persons. Formalities and constitution may still matter, but the crucial questions are different: is the purpose charitable under the Charities Act 2011 and the inherited case law; is it exclusively charitable; and is it for the public benefit? The topic also connects with constitutional and public-law instincts acquired in Year 1: the definition of charity is partly a matter of judicial technique, partly statutory classification, and partly regulatory supervision by the Charity Commission.

The modern definition is found in the Charities Act 2011. A charity is an institution established for charitable purposes only and subject to the High Court’s charity jurisdiction. A charitable purpose must fall within one of the statutory descriptions in section 3(1) and must be for the public benefit under section 4. The familiar older classification from Commissioners for Special Purposes of Income Tax v Pemsel remains doctrinally important: relief of poverty, advancement of education, advancement of religion, and other purposes beneficial to the community. The 2011 Act does not abolish that tradition; it organises and modernises it.

The main privileges of charitable status are threefold. First, charitable trusts are exempt from the rule against inalienability which invalidates non-charitable purpose trusts of excessive duration. Secondly, they receive favourable treatment in tax and regulation. Thirdly, the court may apply property cy-près where the original charitable purpose cannot be carried out, or cannot sensibly continue to be carried out. These advantages explain why courts police the boundary carefully. A settlor cannot obtain charitable privileges by wrapping private benefit, political agitation or personal preference in benevolent language.

Examiners usually test charitable trusts by problem questions involving gifts to schools, churches, campaign groups, hospitals, clubs, closed employee funds, research bodies, animal welfare organisations or politically controversial movements. The best answers avoid list-learning. They ask: (1) what is the institution or trust purpose; (2) is it exclusively charitable; (3) within which statutory head does it fall; (4) does it satisfy public benefit in both senses — beneficial effect and public class; (5) is any private benefit merely incidental; and (6) if the original gift fails, can it be saved by construction, severance or cy-près? This is a topic in which precision matters: ‘good’, ‘benevolent’ and ‘charitable’ are not synonyms.

The modern law of charitable trusts is the product of a long accommodation between equity, religion, taxation and public administration. Its historical starting point is usually taken to be the preamble to the Statute of Charitable Uses 1601. The preamble listed examples of purposes then regarded as charitable: relief of the aged and poor, maintenance of schools, repair of bridges, aid for prisoners, marriage portions for poor maids and similar objects. Although the 1601 Act has been repealed, its preamble exerted a formative influence for centuries. Courts reasoned by analogy from its examples, gradually producing a body of case law in which charity was not confined to almsgiving.

This historical method is important. Charity in English law has never simply meant moral generosity. It is a legal category, developed by analogy and controlled by courts. A gift to a deserving individual may be generous but not charitable. A gift to promote education or relieve poverty may be charitable even if the donor’s motives are mixed. A gift to change the law may serve a sincere public ideal yet fail as charitable because the court cannot determine its public benefit in the required legal manner. The boundary is legal rather than sentimental.

The great nineteenth-century synthesis came in Pemsel. Lord Macnaghten’s fourfold classification supplied the language still used by courts and textbooks: trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community. This was a classification of legal doctrine, not a philosophical definition. It created an organising structure through which new purposes could be assessed by analogy. The fourth head, especially, allowed development but also required caution: not every purpose beneficial in a lay sense qualified as charitable.

The twentieth century added two major pressures. The first was the beneficiary principle. In Morice v Bishop of Durham, Sir William Grant MR insisted that there must be someone in whose favour the court can decree performance. Charitable trusts survived this principle because the Attorney General could enforce them on behalf of the Crown as parens patriae. The second pressure was the growth of public administration and welfare provision. Education, hospitals, poverty relief and social services were increasingly delivered by the state. The question therefore became whether private institutions providing public goods should continue to receive charitable status, and if so on what terms.

The Charities Act 2006, consolidated by the Charities Act 2011, attempted modernisation. It replaced the presumption of public benefit formerly associated with the first three Pemsel heads. It set out a statutory list of charitable purposes, including health, citizenship, arts, amateur sport, human rights, environmental protection and animal welfare. But the statute deliberately retained continuity with the older law. Section 4 defines public benefit by reference to the understanding developed in charity law. Section 3 preserves analogical reasoning. Thus modern charity law is neither purely statutory nor purely common law. It is a statutory framework filled with equitable and common-law content.

Durham students should notice the methodological significance. This is not an area where one can solve questions by quoting a single section. Nor is it safe to recite nineteenth-century authorities without locating them within the 2011 Act. The law is cumulative. Older cases continue to guide the meaning of poverty, education, religion, public benefit, personal nexus, political purpose and incidental private benefit. The statute supplies the modern entry points, but the case law supplies much of the doctrine.

The first principle is that a charitable trust must be exclusively charitable. A trust for ‘charitable and benevolent purposes’ may fail if ‘benevolent’ permits non-charitable objects. The court’s task is one of construction. If the wording can be read as confined to legally charitable purposes, it will usually be upheld; if the trustees are given a power to apply property to non-charitable purposes, the trust is not exclusively charitable. In problem questions, this is often the first hidden issue. Words such as ‘worthy’, ‘public-spirited’, ‘philanthropic’, ‘socially useful’ or ‘for the benefit of the neighbourhood’ do not automatically mean charitable.

The second principle is that the purpose must fall within a recognised charitable description. Under the Charities Act 2011, section 3(1) lists purposes including prevention or relief of poverty, advancement of education, advancement of religion, advancement of health, citizenship or community development, arts and science, amateur sport, human rights, environmental protection, animal welfare, and certain services. This list is wider than the old Pemsel wording, but the older heads remain interpretively important. The law continues to reason by analogy, especially when dealing with new social purposes.

Relief of poverty is the most generous category in relation to public class. Poverty does not mean destitution; it includes persons who have to ‘go short’ in the ordinary requirements of life. The class must normally not be wholly private, but poverty cases have long been treated differently. Trusts for poor relations or poor employees may be valid even though the class is connected by blood or employment. This exceptional treatment was confirmed in Dingle v Turner. The exception should not be generalised. It is a special rule for poverty, not a licence to evade the public benefit requirement in education or recreation.

The leading cases form a coherent doctrinal sequence. Pemsel supplies the classification. Although the statutory list has replaced the four heads as the formal starting point, Pemsel remains the grammar of the subject. It explains why the law treats poverty, education, religion and community benefit as distinct categories, each with its own tendencies and limits.

Re Compton and Oppenheim develop the public class requirement. They show that public benefit is not satisfied simply because a class is numerically large. A class may be large yet private if membership depends on personal relationship, employment connection or descent from named individuals. Oppenheim is especially important because it concerned education, a purpose ordinarily charitable. The vice was not the educational object but the class defined by relationship to employees of a particular company.

Dingle v Turner marks the poverty exception. A trust for poor employees was upheld despite an employment nexus. Lord Cross accepted that this is historically anomalous, but preferred continuity to rational tidiness. The case is valuable because it warns students not to apply Oppenheim mechanically to poverty trusts.

Gilmour v Coats illustrates public benefit under religion. The House of Lords refused charitable status for a gift to a closed contemplative order. The issue was not hostility to religion; it was the legal inability to identify public benefit where the asserted benefit consisted of private prayer within an enclosed community. The case remains controversial because it treats spiritual benefit as insufficiently demonstrable unless externally manifested.

Re Resch is the principal hospital case. A private hospital charging fees was charitable because it contributed to the relief of sickness and conferred public benefit. The fact that patients paid did not necessarily make the benefit private. The relevant question was whether the institution formed part of a public provision of medical benefit and whether any private benefits were incidental.

National Anti-Vivisection Society and McGovern define the political purposes rule. The first concerned a society seeking abolition of vivisection; the second concerned Amnesty-style purposes directed at legal and governmental change. Both show that courts distinguish charitable relief or education from political objects. An organisation may educate the public about human rights or relieve victims of oppression; it may not be charitable if its central object is to change law or policy.

Independent Schools Council is the modern authority on public benefit after statutory reform. It rejected a rigid view that fee-charging schools are charitable only if they provide a prescribed level of bursaries. But it also confirmed that trustees must ensure real public benefit beyond the fee-paying class. The case is important for exam technique: public benefit is not a slogan but a practical evaluation of access, provision and incidental private benefit.

See practice questions section below.

See further reading section below.