Authored By: Eva Kelly
Queen’s University Belfast
Abstract:
This article analyses how the ‘public benefit’ test, found in section 3 of the Charities Act (Northern Ireland) 2008[1], may be seen as slightly weaker than the other factors necessary for the establishment of a charitable trust. The Charities Act 2008[2] governs the use of charitable trusts in Northern Ireland, and enclosed are three sections which specify the criteria needed for the building of a successful charitable trust: s.2, s.3, and s.180. The following article will discuss at length the possible interpretations of the wording of section 3 of the Charities Act 2008, as well as dissecting different judicial interpretations throughout the years, and suggesting reforms for not only s.3, but of the Charities Act itself. A proper conclusion to come to would be that reform, in any regard, is necessary, to avoid future potential gaps in such legislation.
Introduction:
A charitable trust is one defined by section 1 of the Charities Act (Northern Ireland) 2008[3] [shown in this article as the ‘2008 Act’] as being, ‘for charitable purposes only’, which provides a broad scope under which a trust may be charitable. However, within this scope, there are also smaller categories in which a charitable trust may fall; for example, if it was established for the relief of poverty, or the advancement of education. The definition of public benefit may not be found in statute; it is simply referenced in s.3 of the 2008 Act[4]. Public benefit is one of the key criteria that must be satisfied in order to determine whether or not a trust is charitable, and since it has no statutory definition, it may be more difficult for the courts to define in case law alone. The following essay will examine the case law, as well as any academic commentary, before concluding on whether or not public benefit can be viewed as an insufficient condition for determining the charitable status of a trust.
‘Public’ definition:
The first step to examining whether or not public benefit is insufficiently defined to be a criterion for a valid charitable trust is to analyse the common law definitions of both the words ‘public’ and ‘benefit’. The definition of ‘public’ has been in debate for quite some time, with even the judiciary struggling to define it. In the case of Oppenheim v Tobacco Securities Trust Co Ltd [1951][5], even though 110,000 employees would have benefitted from the trust, it was not deemed to be ‘public’. Lord Simmons highlighted a potential solution to this problem in Oppenheim[6]; he concluded that ‘public’ would mean that the trust was affecting beneficiaries which formed a section of a community. However, discourse continued within the common law, as the case of Dingle v Turner [1972][7] conflicted with Lord Simmons’ judgement in Oppenheim[8]. In the case, it was ruled that employees may benefit from a trust left for them, as this was based on the relief of poverty. While the judiciary in Dingle v Turner [1972][9] saw some form of merit to Lord Simmons’ logic in Oppenheim, they did not deem it fit to handle a case such as this. A conflicting conclusion was drawn: that the distinction between personal and impersonal relationships was not enough in order to satisfy the undefined public benefit test. One could argue that, within the common law, whether the ‘public benefit’ is satisfied may fall on the facts of the case, which again presents the conclusion that it is not defined enough to be considered a condition for charitable trusts. However, this case law predates the 2008 Act by forty or so years, and therefore, must be considered under the lens of the law at the time, instead of being compared to the law of the modern day. While it is possible to take a critical view of the conflicting standpoints of the judiciary in Oppenheim and Dingle, it must also be remembered that this was a time before statute may have further defined public benefit, and made this sufficiently clear.
‘Benefit’ definition:
Much like the controversial and seemingly unclear definition of what constitutes as ‘public’, the definition of ‘benefit’ has also been contested by academics and the judiciary alike. For example, whether or not feecharging independent schools that relied heavily on charitable status could be classified as having a ‘benefit’ if they insisted on charging for attendance. This can be shown in ISC v Charity Commission for England and Wales [2011][10], which showed that trustees must go beyond the ‘token effort’ to those in need, however, they do advance education, and therefore may not be ignored. The following logic can also be seen in Re Resch [1969][11], which highlights that charities, while they may charge for services, cannot make a profit that does not directly feed back into the charity itself. Many academics, on the other hand, have decided that fee-charging schools should not even be considered to be under the public benefit, as they are exclusive and only available to a certain percentage of the population, and therefore cannot be considered charitable. Alison Dunn discusses such an argument in the journal article, ‘Using the Wrong Policy Tools: Education, Charity, and Public Benefit’. It is stated that, ‘At a policy level, the contradictions of fee-charging schools extend beyond the social-justice norms of charity… At the voluntary sector and service-delivery level too, fee-charging charity schools are at variance with the traditional model…’[12]. This line of argument contrasts directly with the common law view, and the reason for such contrast may be found in a lack of statutory definition. Such a contrast can serve to create confusion, not only amongst the judiciary, but also amongst legislators. The lack of definition of ‘benefit’ even in later statute (the 2008 Act) can be said to have led to such a conflict of opinions. This is yet another argument for why the 2008 Act should either undergo reform and include a definition of public benefit, or potentially remove public benefit altogether, as it could be seen as insufficiently clear when it comes to defining charitable trusts.
Answers within statute?:
While there may not be a clear statutory definition of public benefit, within s.3 of the 2008 Act, a ‘public benefit test’ is defined, linking clearly with s.2(1) of the 2008 Act[13], which highlights all of the purposes which may be deemed charitable. Some may argue that the fact that s.3 must rely so heavily on another section of the 2008 Act entirely to support itself and help define its contents, is quite frankly enough to deem it insufficiently defined for its purpose. The 2008 Act may have been seen by academics and judges alike as a chance to accurately and appropriately define public benefit; however, it can be argued that it instead did the opposite. An argument within the same line as this is the fact that before statute, there was an automatic presumption of public benefit for certain categories of charitable trusts called ‘Pemsel heads’, which are explored below. This automatic presumption severely weakened the definition of public benefit, as, until statute was enacted, it had no real definition, either within the case law or within prior statute. The information mentioned previously therefore suggests that not only is ‘public benefit’ difficult to define, but that it suffers from almost an impartial view within the judiciary, as this presumption existed long before statute, allowing public benefit to go undefined within the case law for so long. Another argument that must also be considered is the other two criteria in determining whether or not a trust is charitable: that the trust must have a charitable purpose (section 2 of the 2008 Act), and that it must be wholly and exclusively charitable (s.180(1) of the 2008 Act)[14]. Both of these criteria shall be examined at length in the following two paragraphs, as they are compared to the seemingly undefined and insufficient criteria of public benefit.
Trusts having a ‘charitable purpose’ (s.2):
Trusts needing to have a ‘charitable purpose’ was something first examined in Commissioners for Special Purposes of Income Tax v Pemsel [1891][15], which defined charitable purposes as falling under the following four categories: the relief of poverty, the advancement of education, the advancement of religion, and any other purposes beneficial to the community. These categories were known as ‘Pemsel heads’, which made a reappearance in s.2 of the 2008 Act. S.2 also helped to broaden the categories for what was known as ‘charitable’, including examples such as the advancement of sport or arts, culture, and heritage. One could argue that the ‘Pemsel heads’ were clear enough in their definition before the implementation of the 2008 Act, but not only did the Act broaden the definition of ‘charitable’, but it further defined what may fall under such a word. This line of argument can be seen again in cases such as Re Coulthurst [1951][16] and Re Young [1951][17], where one of the categories that fit under the ‘Pemsel heads’, relief of poverty, was accepted as sufficient and clear to satisfy the charitable purposes criterion. This can be directly contrasted with s.3 of the 2008 Act, as not only is the definition of public benefit not clearly defined, but, as previously mentioned, it also relies heavily on s.2 to define itself, showing clearly that an argument can be made for insufficient definition.
Trusts being ‘wholly charitable’ (s. 180(1)):
While the definition of ‘wholly charitable’ can now be seen in the 2008 Act, it was first defined by Slade J in McGovern v Attorney General [1982][18]. It was alluded to that organisations with political cores or organisations with plans for the reform of laws could not be considered wholly charitable; in other words, the core of the charity must be wholly charitable. One could argue that since most countries already have political parties and lobbyists for change, that it is not the place of the charity to get involved, others argue that their key purpose (helping others) makes them well-suited to be involved with politics. However, despite the controversy surrounding this criterion, the controversy does not lie within its definition, but within the scope. Some academics, such as G.F.K. Sandow in the journal article, ‘Charity in its Political Voice: A Tinkling Cymbal or a Sounding Brass?’ argue that this broad scope is deliberate, and was intended to extend human rights within charities and charitable trusts, ‘It was earlier encouraged by the Charity Commissioners’ more permissive contemporary approach to trusts to remove racial discrimination… recognise that society’s circumstances do not stay static; for the law of charity ‘is a moving subject’… the courts and the Commissioners have indeed long recognized that limited campaigning for political change may be permitted…’[19]. This academic’s point of view contrasts greatly with the common law viewpoint, as was previously seen for public benefit, simply due to differing opinions on human rights and politics, and how the two intertwine with charities and charitable trusts. Therefore, can it really be said with certainty that public benefit is the only thing that is insufficient and needs reform within the 2008 Act?
Deliberate broad scope? A view from the modern era and whether it requires reform:
An argument that may be used in favour of public benefit may be that legislators deliberately left it undefined in order to allow the judiciary a broader scope, so that they could deal with each case as the facts fell. But, as has been seen in the previous paragraphs, there has been an increasing amount of discourse over the exact definition, with common law conflicting (as was seen with Oppenheim and Dingle) and academics then disagreeing with the judiciary on certain areas. However, there may be a solution. In the journal article, ‘The Development of the Public Benefit Requirement for Charitable Trusts in the Nineteenth Century’, Matthew Mills explores the fact that public benefit may have been a requirement of the past, but may not be so useful or relevant in a modern-day society. It is stated that, ‘… the public benefit requirement for charitable trusts was the result of four coinciding factors: (1) increased religious pluralism, (2) the birth of state education, (3) the birth of regular income taxation, and (4) the formalization of the doctrine of legal precedent…’[20]. This suggests that the public benefit requirement may have been a thing of the past, and might not fit in with the current era and modern law. That is not to say that public benefit no longer fits in the current law at all, for if not, there would be no need to debate it within even recent common law, but this does highlight a potential need for reform. I, personally, would also include reform of section 180 of the 2008 Act within this, as it has been shown that differing common law and academic principles have created as much confusion around the definition of ‘wholly charitable’ as there has been about the public benefit requirement. Any step that can be taken to eliminate confusion within the law should be taken, especially especially where there are gaps such as these within legislation.
Conclusion:
To conclude, while I believe that the public benefit requirement may be flawed, and therefore can be seen as insufficient to be a criterion for the validity of charitable trusts, I also believe that eliminating public benefit altogether may not be advantageous, and that potential reform of both sections 3 and 180 of the Charities Act (Northern Ireland) 2008 may be the way forward for the judiciary, in order to decrease confusion and discourse. Therefore, at the moment, public benefit may be seen as insufficient, but it may be of some use to the judiciary, or else it would not be discussed or debated within the common law, and it would be of little sense to abolish the rule entirely, as this judicial debate and development of common law would not happen without such deliberate gaps in legislation.
Bibliography:
Case law:
- Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297 HL.
- Dingle v Turner [1972] UKHL 2.
- ISC v Charity Commission for England and Wales [2011] EWHC 2604.
- Re Resch [1969] 1 AC 514.
- Commissioners for Special Purposes of Income Tax v Pemsel [1891] UKHL
- Re Coulthurst [1951] Ch 661.
- Re Young [1951] 1 Ch 344.
- McGovern v Attorney General [1982] Ch 321.
Journal Articles:
- Dunn, ‘Using the Wrong Policy Tools: Education, Charity, and Public Benefit’ [2012], Journal or Law and Society, Vol. 39 (4), p.491-514.
- F.K Sandow, ‘Charity in its Political Voice: A Tinkling Cymbal or a Sounding Brass?’ 1999, Current Legal Problems, Vol. 52 (1), p.255-285.
- Mills, ‘The Development of the Public Benefit Requirement for Charitable Trusts in the Nineteenth Century’ 2016, Vol. 37 (3), p.269-302.
Legislation:
Charities Act (NI) 2008.
[1] Charities Act (Northern Ireland) 2008.
[2] Ibid.
[3] Charities Act (Northern Ireland) 2008, section 1.
[4] Ibid, section 3.
[5] Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297 HL.
[6] Ibid.
[7] Dingle v Turner [1972] UKHL 2.
[8] Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297 HL.
[9] Dingle v Turner [1972] UKHL 2.
[10] ISC v Charity Commission for England and Wales [2011] EWHC 2604.
[11] Re Resch [1969] 1 AC 514.
[12] Alison Dunn, ‘Using the Wrong Policy Tools: Education, Charity, and Public Benefit’ [2012], Journal or Law and Society, Vol. 39 (4), p.491-514.
[13] Charities Act (NI) 2008, s.2.
[14] Ibid, s. 180(1).
[15] Commissioners for Special Purposes of Income Tax v Pemsel [1891] UKHL 1.
[16] Re Coulthurst [1951] Ch 661.
[17] Re Young [1951] 1 Ch 344.
[18] McGovern v Attorney General [1982] Ch 321.
[19] G.F.K Sandow, ‘Charity in its Political Voice: A Tinkling Cymbal or a Sounding Brass?’ 1999, Current Legal Problems, Vol. 52 (1), p.255-285.
[20] Matthew Mills, ‘The Development of the Public Benefit Requirement for Charitable Trusts in the Nineteenth Century’ 2016, Vol. 37 (3), p.269-302.
