Charitable Trusts PDF

10/17/24 We need to think about the policy debate around charities and what are the sort of organisations that end up being charities. Sometimes they also are reaching out to those that are already well established such as private schools...

10/17/24 We need to think about the policy debate around charities and what are the sort of organisations that end up being charities. Sometimes they also are reaching out to those that are already well established such as private schools that are already well resourced. Charitable Trusts LAWS2500/8010 DR MICHAEL NANCARROW In the Church case (provided) 1 J Leeming comments on Charitable trusts and also the role of legislation and we're going to see that the sources that inform the regulation of charitable trusts are broader and more diverse than what we've seen up until now. Overseen by the Charities and NFP Commission. We've also seen Federal legislation such as the Bankruptcy Act. We've seen the policy debate around charities. Introduction Exception to the rule = trusts General rule = private trusts for (i) a valid charitable cannot be for a purpose. Must purpose which are also (ii) for be for people the benefit of the public. All other rules in relation to private trusts apply. (beneficiaries/objects) who are Certainty of object is irrelevant; enforced able to enforce the trust by AG Charitable trusts can last indefinitely Significant state and federal tax advantages for charitable trusts = less money for public Private law always involves choices about what are and coffers for roads, schools, are not legitimate claims in a hospitals etc. and so the legitimacy of the charitable liberal, democratic state. purpose matters. OFFICE | FACULTY | DEPARTMENT 2 2 A charitable trust will be enforced by the Attorney General (no emphasis on certainty of object). 1  10/17/24 The charities have been set up but has anything changed? We have homeless charities but still have homelessness in Australia. Also, fraud is a massive problem. Just because we have a regulator it doesn't mean that we have a strong regulator- the regulator may be under resourced. De Maria, Trouble in the Land of Giving ONLINE EXTRACT ON ILEARN Conclusion to the book – you can get the gist of what has been discussed in the rest of the book from this 1. Link between charities and government assistance – charities initially existed because there was no gov assistance; rise of the post-WWII state = acceptance that we pay part of our income for basic gov services for all – health, education and housing 1980s neoliberal retreat from gov services funded through tax 2. Public perception of ‘charity’ does not match the legal definition; it does not mean poverty e.g. Uni of Melb has charitable status and a $2.3 billion revenue 3. Charities do not seem to be effective – there are 50,000 that purport to address homelessness and yet homelessness is a growing problem 4. Fraud is a major problem – charismatic leaders/celebrities and insufficient gov oversight. 5. Tax deductions for charity take $1.3 billion out of gov revenue; could that money be better spent on gov on social support and services OFFICE | FACULTY | DEPARTMENT 3 3 St Vinnies are multi-million businesses and we run up against regulatory capture. Statute of Charitable Uses THE STATUTE OF ELIZABETH People put money in charitable uses for the same reason they do today: To provide for people in need and Use = the original word for trust To avoid taxes, then ‘feudal dues’ owing to next person up in feudal pyramid. The Preamble listed purposes regarded as charitable; not exhaustive so that other purposes The state wanted to limit tax that were analogous could be minimization to genuine charities. charitable. Included marriage of poor maids, help of young tradesmen, repair of bridges, ports etc. OFFICE | FACULTY | DEPARTMENT 4 4 2  10/17/24 Four categories of a charity Pemsel’s Case Summary of the Preamble into: 1. Relief of poverty 2. Advancement of education 3. Advancement of religion 4. Other purposes beneficial to the community not falling under any preceding heads. 4 can include things that are analogous to the Elizabethan Preamble e.g. a free local car park. OFFICE | FACULTY | DEPARTMENT 5 5 The Federal legislation does not apply as a blanket across the board. Meaning that legislation only gets involved if it has jurisdiction. The Charities Act doesn't apply unless you're talking about commonwealth legislation or a commonwealth agency. But it broadens the de nition of what is a charitable purpose. Charities Act 2013 (Cth) While these definitions do not apply directly to the general law on what is a charitable purpose – which will be relevant to state law, e.g. whether an Read s12 – it defines charitable purpose for the purposes of Cth legislation (e.g. institution does not have to pay local tax legislation). rates – the Cth definitions are modern conceptions of charitable purposes and are likely to influence the general law e.g. protecting and promoting human rights or advancing the environment. OFFICE | FACULTY | DEPARTMENT 6 6 3  10/17/24 You'd be surprised which orgs are NFP organisations. They promote their NFP status widely- how are they NFP? It's all being returned back to members and that doesn't mean that it's not a hugely successful business organisation. Just have an awareness to see the sort of things that the ACNC does. National Regulator of Charities Australian Charities and Not for Profit Commission (ACNC) https://www.acnc.gov.au/ OFFICE | FACULTY | DEPARTMENT 7 7 What do we mean by community? Is it the collection of multiple homogenous groups in Australia? Trusts for the aged, poor and impotent POVERTY Poverty means more than destitute, and not limited to food and housing E.g. Trustees of Indigenous Barristers’ Trust for books, living expenses, chamber leases etc. It did not matter that practising as a barrister was not a necessity, it was still charitable because Indigenous barristers may still need assistance. Poverty = relative to rest of the community, not simply poor per se nor with reference to world poverty. Trusts for ‘the amelioration of the condition of the dependents of servicemen and ex-servicemen’ = trust for relief of poverty. Poverty does not have to be destitute. ‘Amelioration’ suggest some need: Downing v Comm of Taxation If for the relief of poverty, public benefit is presumed (because the public would otherwise have to relieve that poverty). OFFICE | FACULTY | DEPARTMENT 8 8 4  10/17/24 AGE AND IMPOTENCE Age = generally those above retirement age Impotence = lack of power, including sick Impotence and poverty are read disjunctively – e.g. sick do not need to be poor too Private hospitals – Le Cras v Perpetual Trustee Co – Sisters of Charity & St Vincent’s Private Hospital; private fees but all used for public and private hospital and Sisters. Charitable trusts for the sick do not have to be for the poor sick; private hospital relieves beds and staff in public hospital. Bryan says it is not clear if age without poverty is charitable though – conflicting case law on whether retirement villages can be charitable if residents are not poor. In reality, it is clear that many retirement villages are not charitable. They are operated by commercial entities, not charities or not-for-profits, and are simply occupied by people as residential accommodation, often privately owned strata title lots. They do not have charitable status. But if a registered charity operates a retirement village, they will get the benefits of being a charity e.g. no GST on the supply of meals and accommodation. OFFICE | FACULTY | DEPARTMENT 9 9 Advancement of Education Education is broad = scholarships, prizes, facilities, equipment (e.g. private school building funds), research, training, vocation, cultural. Public benefit usually assumed, but if questioned, court will determine if there is any educational value e.g. Re Pinion, court held that artist’s studio and work that had little merit was not educational and not charitable. Re Shaw (deceased) trust to investigate and encourage new 40 letter alphabet increased knowledge but that did not make it charitable because it was not combined with teaching or education. OFFICE | FACULTY | DEPARTMENT 10 10 Shaw decision; where Bernard Shaw the author had set up a trust to investigate and encourage a new 40 letter alphabet to increase the knowledge of that but the Court said it wasn't charitable because it wasn't combined with teaching or education. This case indicates that there are limits. 5  10/17/24 Additional readings on education ON ILEARN 1. Policy arguments are based on evidence with reference to the entire community – how should we fund education? Should all societies provide free education to all children up to 17? If they do, what role do non-government schools serve? How are non-government schools funded? If they receive substantial private income through fees how much public support should they receive in terms of direct funding, and indirect funding through tax relief? Tax relief = less money for government funding of roads, hospitals and public schools. What is the best way to collect and distribute limited tax money in our community? 2. All of the above is determined by law and policy – our question is ‘what is the best law and policy to produce optimal community outcomes, including outcomes for individuals (but not ourselves personally)?’ OFFICE | FACULTY | DEPARTMENT 11 11 Harding, ‘Should wealthy private schools and hospitals have charity status in Australia?’ THE CONVERSATION, ILEARN All education is for the benefit of society, and so private schools which put their profit from fees and investments back into education are valid charities. But if they promote a form of elitism and assist people who already have significant financial advantage, is that ultimately in the public benefit? In UK, private schools have been made to demonstrate public benefit with means tested scholarships, sharing facilities with local community etc. But, ‘is it the job of private schools to improve the educational opportunities of those whose families cannot afford their fees? Or is it the job of the state? If it is the job of the state…why can’t the state show its commitment to improving the public school system by withdrawing tax exemptions from private schools?’ (All of which presupposes public schools need improving. However, the best HSC results consistently come from no-fee public schools). But being a charity does not have to mean tax exemption for the institution or for the people who give to it (donations to building funds are tax exempt). It can have other ‘benefits’ like exemption from antidiscrimination legislation. OFFICE | FACULTY | DEPARTMENT 12 12 6  10/17/24 Advancement of religion ILLIBERALISM IN THE LIBERAL STATE The more homogenous a community, the easier it is to define ‘religion’. Our community is diverse and so defining religion can be difficult. Judges are acutely aware that countless wars have been fought and millions of people have died as a result of state intolerance of religion. Only Protestants were able to own land, go to university, hold particular jobs, be elected to Parliament etc. But today, should the liberal state provide financial support to organisations that promote illiberal values? We give preferential tax treatment to organisations that teach children and followers that same sex marriage is wrong (and have an express exemption from antidiscrimination law to do so) when the acceptability of same sex marriage is a clear value of the wider community i.e., it is legal. But how can we be a plural and tolerant society if we have no plurality of beliefs to be tolerant about? This is the dilemma of illiberalism in liberal societies. OFFICE | FACULTY | DEPARTMENT 13 13 Advancement of religion Church of the New Faith v Commissioner for Pay-Roll Tax Facts: was Scientology a religion? It is based on writing of Ron L. Hubbard, a 20th c science fiction writer. Held: Sourcebook 16.5a – three different approaches by judges. Roman Catholic Archbishop of Melb v Lawlor Catholic daily newspaper = advancement of religion? Held: Sourcebook 16.5b OFFICE | FACULTY | DEPARTMENT 14 14 7  10/17/24 We go into a search online to nd reported decisions. Now one of the interesting manifestations of this is that we have a national archive that keeps a store of the narrative of how we have evolved as a society but one of the things about websites is that there are not there inde nitely. Now that everything is stored electronically, none of this is actually going to be stored anywhere. It could arguably disappear. Purposes beneficial to the community Judged according to the spirit and intent of the Preamble and will change over time. What the community considers beneficial is different at different points in history and in different communities e.g. the environment, animal welfare. Incorporated Council of Law Reporting v Comm Taxation Facts: Was the production of law reports a purpose beneficial to the community? Ie within 4th head of Pemsel’s case. Held: Sourcebook 16.6a Validating a gift for charitable purposes, you need heads of charity public purpose (some have a presumption of this) OFFICE | FACULTY | DEPARTMENT 15 15 They're saying that this is at the core of our constitutional arrangements in Australia and therefore it does have a public bene t and therefore this can be a trust for a charitable purpose- which is di erent to the English position. Political purposes In England, trusts that promote aims of political parties, promote amendment of the law or agitate for change in gov policy are not charitable purposes – a very clear value judgement on the part of private law that has public effects. Aid/Watch Inc v Comm of Taxation (Cth) Facts: Aid/Watch sought to influence gov policy on the nature, extent and delivery of foreign aid. Was this a charitable purpose? Held: Sourcebook 16.7b The HC held that Aid Watch was not disquali ed from charitable status for political purposes and the core of the reasoning (joint judgement on page 417) was that the system of law that applies in Australia postulates for its operation the very agitation for legislative and political change of which Dixon spoke in Royal Northshore Hospital case. OFFICE | FACULTY | DEPARTMENT 16 16 8  10/17/24 ‘Public benefit’ Charities Act 2013 has a number of (badly drafted!) UK case doubts that provisions on public prayers of closed order of Benefit: nuns was for public benefit. benefit. These will only apply to Cth laws but may Not the law in Australia. be influential in relation to general law. positively assumed for presumed for education must be positively proved and religion but can be poverty negatived for 4th head of Pemsel. OFFICE | FACULTY | DEPARTMENT 17 17 Public or section of the public Charitable trusts are not for individuals or small Where is the line between Public or a section of groups of individuals; they groups of individuals and public: are for the public or a a section of the public? section of the public. Facts: Trust for education of children of employees Oppenheim v Tobacco and former employees. Securities Trust Co Ltd Cf Dingle v Turner: Potentially 110,000 Sourcebook 16.8b people. Section of the public? OFFICE | FACULTY | DEPARTMENT 18 18 There's a dilemma of where do we draw the line between a small group of individuals and a section of the public? It turns out that the case of Oppenheim v Tobacco Securities Trust Co Ltd becomes relevant here because there was a trust for the education of children for employees and former employees which amounted to almost 110,000 people. Did that constitute a section of the public? The HOL held that because all of the potential bene ciaries were linked by the parents' common employer meant that the trust did not meet the public bene t test in the end. Notice that this is an English case- not an Australian case. 9  Contrast the outcomes of Oppenheim v Tobacco with Dingle v Turner 10/17/24 AC 601. He left part of his estate to pay pensions to poor employees of his company (1000 part-time to full-time employees). It was put before the HOL (by the trustees) to see if the trust was valid and they determined that it was for the public bene t even though employment by one employer led to all bene ciaries. Problems with charitable trusts 1. Trusts for charitable and non-charitable purposes – used to be wholly invalid, but now Charitable Trusts Act 1993 (NSW), s23 allows severance 2. Charitable purpose no longer exists e.g. trust for TB hospital when TB largely eradicated or trust for student accommodation when it is not possible to provide on campus: apply cy-pres doctrine. Cy-pres = close by i.e. a purpose close to the original trust. In NSW, now governed by Charitable Trusts Act 1993 (NSW), ss 9-11, not general law. OFFICE | FACULTY | DEPARTMENT 19 19 Cy-pres schemes Sometimes testators who have drafted their own wills or had a friend do so, do not manage to identify an actual charity e.g. Re Marks. In those cases: If they have just gotten the name and/or address wrong, but it is clear the charity they intended, the gift can be made; If it is impossible to identify a specific charity, the Ct must decide if there was a ‘general charitable intention’ or if there was a specific charitable intention that cannot be realized; If general, cy-pres ordered; if specific, gift fails and goes to residuary beneficiaries General charitable intention presumed unless evidence to the contrary: s10(2). If trust has been applied to charity and then fails, cy-pres must be ordered. Once applied to charity, the fund must always be applied. OFFICE | FACULTY | DEPARTMENT 20 20 Charitable Trusts Act 1993 10  10/17/24 In the matter of the New South Wales Rural Fire Service & Brigades Donations Fund; Application of Macdonald & Or NSWSC 604 LINK ON ILEARN Facts: 2019-20 NSW bushfires. Plea made by Celeste Barber on FB: “Please help anyway you can. This is terrifying.” Her appeal employed PayPal, an internet payment service. Ms Barber nominated, and PayPal published, the RFS Fund as the proposed recipient of the appeal donations. She did not speak to RFS first. She used PayPal, which has a Giving Fund Trust that passes money on to other charities. $51m was donated, which was then given by PayPal to RFS. RFS sought court’s advice about the wishes of the donors and Ms Barber in relation to their powers under the trust deed. They wanted to be sure they did the right thing. Lots of people had posted messages on FB about what they hoped would happen with their donations (fun fact: annexure to judgment complied partly by MQ grad). The trustees looked at these messages and the trust deed and then distilled 4 questions for the court about what they were allowed to do. OFFICE | FACULTY | DEPARTMENT 21 21 What section of the Trustee Act will they be seeking? It will be s 63, the advice section. Which allows them to seek the advice of the Court and they were seeking this advice to how they could pay monies to other charities. S63 advice sought by trustees UNDER THE TERMS OF THE TRUST, COULD THEY… 1. pay money to other charities or rural fire services, whether in New South Wales or other Australian states or territories, to assist in providing relief to persons and animals affected by bushfires; 2. set up or contribute to a fund to support rural firefighters injured while firefighting, or the families of rural firefighters killed while firefighting; 3. provide: physical health training and resources, mental health training and resources, or trauma counselling services, to volunteer firefighters (as defined in Rural Fires Act, s 8), who require them in connection with performing the functions of the New South Wales Rural Fire Service, as defined by Rural Fires Act, s 9; or 4. set up or contribute to a fund to meet the costs for volunteer rural firefighters, as defined in Rural Fires Act, s 8, to attend and complete courses that improve skills related to the volunteer-based fire and emergency services activities of the brigades, established under the Rural Fires Act. OFFICE | FACULTY | DEPARTMENT 22 22 11  10/17/24 PayPal had the right Slight complication in not to pay to that that the payments were charity (logically, they made via PayPal and would want to reserve there were published the right not to pay if terms of the PayPal the named charity turned out not to be a PayPal Giving Fund Giving Fund, which was itself a trust. Those charity or had an complied with the terms said that any recommendations and improper purpose). gave the money to the donation was to the Donors were assumed to have read the terms RFS. PayPal Giving Fund only with a and to have agreed to ‘recommendation’ to them, despite any pay to a particular specific wishes they charity. expressed when donating. OFFICE | FACULTY | DEPARTMENT 23 23 RFS Trust Deed TRUSTEES’ FIRST DUTY IS TO OBEY TERMS OF TRUST “2.3 Purpose of Trust The purpose of the Trust is to pay or apply the income from the Trust Fund, and such parts of the capital from the Trust Fund as the Trustees at any time and from time to time think fit as follows: (a) to or for the Brigades in order to enable or assist them to meet the costs of purchasing and maintaining fire-fighting equipment and facilities, providing training and resources and/or to otherwise meet the administrative expenses of the Brigades which are associated with their volunteer-based fire and emergency service activities; (b) for Authorised Investments which are consistent with carrying out the purpose in paragraph (a) above; (c) to meet the reasonable costs of the current and continuing operation and management of the Trust.” “3.3 Limits on use of Gift Fund The Trustees must use the following only for the Purpose of the Trust: (a) all gifts and contributions made to the Gift Fund; (b) any money or Property received by the Trustees in connection with those gifts and contributions. No payments from or distributions of the Gift Fund may be made directly or indirectly by the Trustees at any time otherwise than in accordance with this Deed.” Did this, for example, allow payment to animal rescue charities? OFFICE | FACULTY | DEPARTMENT 24 24 12 Because the organisation is a statutory body you need to consult the act as 10/17/24 well, not just the trust instrument. Let's be clear about what the trustees are required to do- let's not be confused by assertions of donors who haven't actually understood what they're donating for and the people that were responding to the emotional plea. At the end of the day the Court will look at what underpins the decision by the trustees by looking at the trust instrument. Held: At , ‘The various public The purpose of the RFS and perhaps private Fund, particularly the statements made by Ms At , ‘Any funds purpose of “providing received by the trustees in Barber or any of the that capacity must be training and resources” is Rural Fire Act creates donors do not bind the to be construed by Rural Fire Service made trustees’ application of the applied only for the reference to the statute, up of Command and funds that they have purposes set out in the the Rural Fires Act, that received from the PayPal RFS Trust Deed. Any other creates the command and volunteers. application of the funds Giving Fund. The terms of would be a breach of operational structure of the the RFS Trust Deed that brigades that the RFS establishes the RFS Fund trust.’ Fund supports. binds the trustees.’ OFFICE | FACULTY | DEPARTMENT 25 25 We have seen as well that if they seek advice under s 63 of the Trustees Act, and apply advice under that provision from the court then they are protected against breach of trust. Trustees cannot use the donated money to give to other charities, or to donate interstate, or to help people or animals affected by bushfires. None of these are within the trust deed, which requires money to be used for NSW brigades. The uses to which the trustees can put the donated money are those specified in the RFS Trust Deed, clause 2.3. To the extent Ms Barber identified using the money for the purpose of preventing future fires and resourcing the brigades, to that end, the purposes are permissible. But purposes which are directed to ameliorating the consequences of the fires, are more problematic. Payment can be made for ‘resources’ for brigades, including human resources. But they cannot be paid directly to people who are affected. The trustees could pay money to brigades in order for them to purchase and transport food and water to areas and people effected by fires, and to provide temporary accommodation to those who require it as a result of fires as the trustees have submitted OFFICE | FACULTY | DEPARTMENT 26 26 13  10/17/24 Catholic Metropolitan Cemeteries Trust v A-G (NSW) NSWCA 30 LINK ON ILEARN Facts: In August and September 1862, the Crown reacquired some 200 acres of land at “Haslem’s Creek” (now known as Rookwood). Under the authority of the Necropolis Act 1867 (NSW) (replaced by an Act of the same name in 1901), by proclamation dated 17 April 1868, the Governor dedicated the land to be used as a burial ground and vested a portion of the land in trustees of the Roman Catholic Church “for the purpose of [the land] being used as a Burial Ground for burying the dead of such denomination”. Additional land was set apart in 1889 for the Roman Catholic denomination for the same purpose, and, in the same year, the additional land was also vested in the same trustees. From 1988, a series of legislative amendments had the effect of treating land at Rookwood Cemetery as a “reserve” subject to the operation of Crown lands legislation. The Necropolis Act 1901 was repealed by virtue of legislation enacted in 2004 and 2009, and in 2013 a new regulatory regime for cemeteries and crematoria was established by the Cemeteries and Crematoria Act 2013 (NSW). OFFICE | FACULTY | DEPARTMENT 27 27 Catholic Metropolitan Cemeteries Trust v A-G (NSW) NSWCA 30 LINK ON ILEARN 4 Issues: (1) Whether the enactment of the Necropolis Act 1867 and proclamations in 1868 created a charitable trust. Held: Yes the Necropolis Act 1867 (NSW) created a charitable trust recognised by equity. (2) If there was a charitable trust, whether or not legislative action in 2004, 2009 or 2013 abolished any charitable trust. Held: Charitable trust of the Catholic portion of land at Rookwood Cemetery continued in existence notwithstanding legislation enacted between 1901 and 2013. (3) If there was a charitable trust which survived subsequent legislative action, then insofar as the trust property was other than land at Rookwood, would it survive the changes effected by the Crown Land Management Act 2016. Held: The approximately $160 million in proceeds of CMCT was subject to the same charitable trust as the land (4) If there continues to be in existence a charitable trust, what is the charitable purpose. Held: charitable purpose of the trust did not change upon the enactment of the Necropolis Act 1901. The purpose of the trust thus remains the use of the land as a burial ground for burying the dead of the Roman Catholic denomination. OFFICE | FACULTY | DEPARTMENT 28 28 14  10/17/24 Don't get confused here because Leeming JA has stated that the trust has legal personhood but that's only under a legislative instrument (legislation) but Trusts do not have legal personhood in Equity. Leeming JA A trust as recognised in equity is not a legal person, but a “reserve trust”, constituted under the provisions of the Crown Lands Act 1989, including (by statutory deeming) the first plaintiff “Catholic Metropolitan Cemeteries Trust”, is a legal person. A charitable trust exists when a trustee owns property held for a purpose recognised by the law as charitable. Charitable trusts are also known as public trusts, in contradistinction with private trusts which are trusts for beneficiaries or objects… Charitable trusts have a complex relationship with statute. The preamble to the Statute of Elizabeth 1601 (43 Eliz I c 4, a statute which was probably never in force in New South Wales) continues to exercise a decidedly odd lingering effect upon the law of charity in Australia OFFICE | FACULTY | DEPARTMENT 29 29 Leeming JA The contribution to the Australian law of charity indirectly made by ancient statutes which were never in force in this country, a different dimension of complexity is introduced because different Australian States have altered the law of charity in different ways by their Charitable Trusts Acts (in New South Wales, the Charitable Trusts Act 1993 (NSW)). Federalism introduces further complexity. The Charities Act 2013 (Cth)… Aid/Watch Inc v Federal Commissioner of Taxation (2010) 241 CLR 539; HCA 42 illustrates that the law of charity in Australia must accommodate constitutional considerations; it is a rare example of a constitutional implication altering a rule or principle of judge-made law. The law of charity is an example par excellence of how “[t]he interrelation and interaction between common law and statute may trigger varied and complex questions”: Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49; HCA 67 at. The subtleties of the interaction can be easily overlooked. OFFICE | FACULTY | DEPARTMENT 30 30 15