I CHARITABLE TRUSTS

Charitable trusts are trusts that hold assets for a purpose rather than for persons.[1] The rule against perpetuities has no application to charitable trusts, and trustees need not act unanimously.[2] There are four traditional categories that may deem a trust charitable, namely, for the relief of poverty, for the advancement of religion, for the advancement of education, or for other purposes beneficial to the community.[3] This has been expanded to include advancing health, social or public welfare, religion, culture, the security or safety of the Australian public, the natural environment and promoting reconciliation, mutual respect and tolerance between groups of individuals in Australia, promoting or protecting human rights, preventing the suffering of animals and any other purpose beneficial to the general public within the spirit of any of the aforementioned purposes.[4]

II ADVANCING EDUCATION

The 2021 Australian Charities Report found that the most common charitable purposes were religion and education.[5]The case of Kearins v Kearins sheds light on charitable purposes for the advancement of education.[6] In Kearins, the testator died and left money in their will to the treasurer of a football club, which was found to be a valid charitable gift.[7] The sport was part of university education, differentiating it from merely a gift primarily used for enjoyment.[8]Several cases provide support for this decision. Re Nottage; Jones v Palmer confirmed that promoting mere sport for entertainment is not charitable even if it has some public benefit.[9] Inland Revenue Commissioners v Baddeley held that a charitable purpose, such as education, can be achieved in part by promoting sport.[10] Additionally, a trust to provide for or encourage a sport, or recreation that is incidental to or promotes an accepted charitable object may be valid.[11]

III ADVANCING RELIGION

The advancement of religion depends on beliefs, practices and observances.[12] There must be a belief in a supernatural being, thing or principle,[13] a belief relating to man’s nature and position in the universe and a relationship with the supernatural,[14] that the adherents accept the canons of conduct of their belief,[15] that the adherents constitute an identifiable group,[16] and that the adherents perceive their beliefs as constituting a religion.[17] If the gift fails to advance religious doctrine or teaching, it will not be permissible as a grounds for a charitable trust.[18] Additionally, it will fail if the trust is meant to be for the advancement of religion and some other purpose that is non-charitable.[19]

IV RELIEF OF POVERTY

Under charitable trusts, poor does not necessarily mean that the person is destitute; rather, they need relief from distress caused by a lack of sufficient money.[20] Consideration may be given to the social standing of such persons[21] and trusts for the relief of poverty are not subject to the public benefit requirement.[22] A gift for disadvantaged and underprivileged children is treated as a gift for the relief of poverty,[23] while a gift for orphans is interpreted as one benefiting poor or otherwise deserving orphans; thus, this form of relief can be indirect.[24]

V PURPOSES ‘BENEFICIAL TO THE PUBLIC’

The final traditional category of charitable trusts is trusts for other purposes beneficial to the community not falling under any of the preceding heads. While its intention is to conform beneficially to the community within the purpose and guiding principles of the Preamble to the Statute of Elizabeth of 1601, the ambiguity of the statute remains. The complicated propagation of arts as a ground for charitable trusts extends to the distribution and reprinting of works of an established poet,[25] yet neglects the promotion of meritorious journalists.[26] Further, an institution shall not be precluded from charitable statute solely because its objects include recreation, where recreation is incidental to its main purpose. The uncertainty prevails. What happens when someone leaves a charitable trust to a club for the advancement of education, which amalgamates with one that has a non-charitable trust, such as a profit-making Rotary Club? To adequately find a solution to questions such as these, we must analyse what ‘public benefit’ means.

VI PUBLIC BENEFIT

In Re Income Tax Acts (No 1), Lowe J held that large groups defined by a common calling, faith or geographical location would constitute a section of the public.[27] Groups that imposed a bar to membership, such as clubs, literary societies and trade unions, would not constitute a section of the public despite large numbers.[28] Similarly, in Oppenheim v Tobacco Securities Trust Co Ltd, even though the pool of potential beneficiaries was the children of over 110,000 employees and former employees, the limitation to the single tie (the company) prevented the group from being regarded as a section of the public.[29] The size and importance of potential beneficiaries cannot give it any different character.[30]The Victorian Women Lawyers’ Association was found to be charitable because its principal purpose, reflected in its constitution, was to remove barriers and increase opportunities for women in the legal profession in Victoria.[31]

The public benefit needs to be ‘improving the moral condition of the public, rather than members of a particular club’.[32] Dillon J has held that public benefit requires ‘that [the organisation] must not be merely a members club or devoted to the self-improvement of its own members.’[33] In Rotary Club of Melbourne Inc v Commissioner of State Revenue, it was accepted that the purpose was not charitable because it was directed to members of the applicant rather than the business and professional community generally.[34]

VII CY-PRÈS SCHEME

The cy-près scheme ensures that trust property is redirected towards purposes consistent with, and as close as possible to, the trust’s original purpose, where a charitable trust’s purposes have failed.[35] There are 3 possible criteria for this scheme to be applicable, namely, there is a case of initial impossibility, combined with either an outright intention to benefit charity or a general charitable intention, with a possible means of giving effect to that intention;[36] or there is a case of an unforeseen event that changes the course of events;[37] or there is a case where a trust has exhausted its original purpose and a surplus remains.[38] The courts will apply a test to determine the intention of the gift, considering the terms of the relevant instrument.[39]

The previously stated issue related to the amalgamation of trusts leads to the testator having to carry out the purpose of the trust and the intentions of the donor as close as practicably possible.[40] In these circumstances, the scheme will be determined by the court.[41] While a failed gift must have a general charitable intention,[42] if a charity has since combined to form one organisation, it will be entitled to the gift.[43] The purposes of a charitable trust may be altered and the property applied cy-près where the original purposes have become wholly or partly ineffective, having regard to the spirit of the trust.[44] If the charities amalgamated before the date of the testator’s death, the charity is still extant, and the gift is payable;[45] however, in an informal amalgamation, there is a risk that the new charity doesn’t properly reflect the original charitable purpose.[46] For example, if a church amalgamates and the doctrines of the pre-existing church are not the same, they cannot lawfully claim the property left in wills[47] unless the original churches’ constitutions explicitly allow for a very broad power of change that is wide enough to unite with another denomination and adopt the beliefs of a new, merged church.[48]

Modern law has expanded the traditional four categories of charitable trusts. Recreation or other purposes can be an accepted charitable object, where they are incidental. A charitable religious purpose requires belief in a supernatural being or principle, a coherent belief system, standards of conduct, an identifiable group of adherents, and recognition by those adherents as a religion. Trusts for the relief of poverty consider social standing and are exempt from the public benefit requirement. Ambiguity often arises when charitable and non-charitable purposes overlap for the head of ‘purposes beneficial to the community.’ To be charitable, a purpose must benefit the public or a section of the public and the cy-près doctrine allows courts to redirect charitable gifts that would fail as close as possible to the original purpose as per the instrument.

VIII FOOTNOTES

[1] Aboriginal Housing Office v Jacky [2022] NSWSC 916, [34], [37].

[2] Re Whiteley; Bishop of London v Whiteley [1910] 1 Ch 600, 608.

[3] Commissioners for Special Purposes of the Income Tax v Pemsel [1891] AC 531; Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297; 1 All ER 31; Thompson v Federal Commissioner of Taxation (1959) 102 CLR 315.

[4] Charities Act 2013 (Cth) s 12.

[5] Australian Charities and Not-for-profits Commission, Australian Charities Report, (Report, 7th ed, 17 May 2021) 1, 7.

[6] (1956) 57 SR (NSW) 286, 289.

[7] Ibid 289,

[8] Ibid 291.

[9] [1895] 1 All ER Rep 1203, 1204-1205..

[10] [1955] AC 572.

[11] Mellody, In re, Brandwood v Haden [1916-17] All ER Rep 324, 325.

[12] Church of the New Faith v Commissioner of Pay-roll Tax (Vic) (1983) 154 CLR 120, 136.

[13] Ibid 171-2.

[14] Ibid.

[15] Ibid.

[16] Ibid.

[17] Ibid.

[18] Re Thackrah; Thackrah v Wilson [1939] 2 All ER 4, 4-5.

[19] Charitable Trust Acts 1993 (NSW) s 23(2).

[20] Ballarat Trustees Executors & Agency Co Ltd v FCT (1950) 80 CLR 350, 355.

[21] Re Niyazi’s Will Trusts [1978] 2 All ER 785, 788.

[22] Re Gillepsie (dec’d) [1965] VR 402, 413.

[23] Public Trustee (Qld) v Neale [2008] QSC 343, [31].

[24] NSW Masonic Youth Property trust A-G (NSW) (2009) 3 ASTLR 520, 552.

[25] Re Hamilton-Grey Perpetual Trustee Co Ltd v Melville (1938) 38 SR (NSW) 262, 276.

[26] Perpetual Trustee Co Ltd v John Fairfax& Sons Pty Ltd (1959) 76 WN (NSW) 226.

[27] [1930] VLR 211, 222-3.

[28] Paul Harpur, ‘Charity Law’s Public Benefit Test: Is Legislative Reform in the Public Interest?’ (2003) 3(2) QUT Law Review 1, 4.

[29] [1951] AC 297.

[30] Bicycle Victoria Inc v  Commissioner of Taxation (2011) 55 AAR 203, 272-273.

[31] Victorian Women Lawyers Association Inc v Commissioner of Taxation (2008) 250 ALR 516, 548.

[32] Re Cranston [1898] I IR 431; Re Wedgwood [1915] 1 Ch 113.

[33] Re South Place Ethical Society [1980] 1 WLR 1565, 1570.

[34] (2018) 58 VR 70, 85-86.

[35] Re Findlay’s Estate; Tasmanian Trustees Ltd v Launceston Girls’ Home (1995) 5 Tas R 333, 341.

[36] Re Cain (dec’d); National trustees; Executors and Agency Co of Australasia Ltd v Jeffrey [1950] VLR 382.

[37] Re Slevin; Slevin v Hepburn [1891] 2 Ch 236.

[38] Aboriginal Hostels Ltd v Darwin City Council (1985) 55 LGRA 414, 427.

[39] Re Campden Charities (1881) 18 Ch D 310, 328; Phillips v Roberts [1975] 2 NSWLR 207, 220.

[40] Attorney-General (NSW) v Walker (1903) 31 WN (NSW) 59; Royal North Shore Hospital of Sydney v A-G (NSW) (1938) 60 CLR 396.

[41] Kytherian Association of Queensland v Sklavos (1958) 101 CLR 56.

[42] Re Rymer [1895] 1 Ch 19.

[43] Re Faraker [1912] All ER Rep 488, 494.

[44] Charitable Trusts Act (n 19) s 9.

[45] Re Lucas (dec’d); Sheard v Mellor [1948] Ch 424.

[46] Re Wedgewood; Sweet v Cotton [1914] 2 Ch 245, 250.

[47] Re Dawson Will Trusts; National Provincial Bank Ltd v National Council of YMCA Inc [1957] 1 All ER 177.

[48] General Assembly of Free Church of Scotland v Lord Overtoun [1904] AC 515, 667-71.