Discounting Fiscal Privilege - A More Charitable Solution to the Public Benefit Question Lord MacDermott's Dissent in Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297
| Author | Tara Dugdale and Neal Geach |
| Pages | 195-212 |
Lord MacDermott’s Dissent in
Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297 Tara Dugdale and Neal Geach11.1 Introduction 195
11.2 Wider context of charitable status 198
11.3 Relevance of the size of the class 199
11.4 Lord MacDermott’s dissent 204
11.5 Influence of fiscal privilege on the decision of the majority 209
11.6 Conclusion 212
11.1 INTRODUCTION
In recent years, the law on charities has come sharply into focus. Not only with the passing of the Charities Act 2006 and the resultant changes which that brought; a highly significant change being the removal of the presumption of public benefit for trusts for the advancement of education.
196 Part III – Equity and Property Law
personal vision during the election campaign was the creation of a ‘Big Society’, which includes the voluntary and private sectors stepping in to perform some of the previous functions of the state. While the voluntary sector does not solely consist of charities, they are an important element.
attempting to implement this vision, there is now a government commitment to facilitate the running of charities and a specific departmental team tasked with supporting charities.
The determination of whether or not, and in what circumstances, a trust for the charitable purpose of the advancement of education will satisfy the public benefit requirement was put before the House of Lords in the case of Oppenheim v Tobacco Securities Trust Co Ltd.
Consequently, the trust would be void for offending the rule against perpetuities unless it could establish charitable status. To do so, it would be necessary to establish that the trust was of sufficient public benefit; and thus the hurdle facing the appellants in this case was the existence of a personal nexus between employer and employee. Previous case law set a precedent whereby if the circumstances were such that the beneficiaries of a trust were defined by a personal relationship, such as in the case of relatives, any such trust would lack the quality of being a public trust, as required to establish charitable status.
The appellants argued that in the case of a large undertaking there is no significant private relationship. Ultimately, the question facing their Lordships was whether to continue to apply the personal nexus test advocated in earlier authorities
As Lord Simmonds noted:
My Lords, once more your Lordships have to consider the difficult subject of charitable trusts, and this time a question is asked to which no wholly satisfactory answer can be given.
The question, of course, was how should the requirement for a charitable trust for education to be in the public benefit be assessed? His Lordship later accepted as well that:
No one who has been versed for many years in this difficult and very artificial branch of the law can be unaware of its illogicalities
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The truth of the first of these comments by Lord Simmonds was shown by Lord MacDermott in his dissenting opinion where he acknowledged that the process which he was following had ‘imperfections’ and ‘uncertainties’.
and Lord MacDermott’s opinion was less ‘imperfect’ than the majority’s and thus would have been more satisfactory than the majority decision. The majority may have been correct in their ultimate decision as to whether the trust in Oppenheim should have been deemed a valid charitable trust, but due to the reasoning adopted, it was at the expense of logic in this area of the law. Arguably, a more restrictive approach to determining public benefit by narrowly and solely applying the personal nexus test, originally from In re Compton, was adopted in Oppenheim due to the influence of the fiscal advantages that charities benefit from. This chapter seeks to argue how Lord MacDermott’s dissenting opinion, when coupled with his opinion in Dingle v Turner, will protect the public purse at this time but avoid the illogical negative consequences for the creation of trusts for the advancement of education, arising from the majority’s decision, at a time when such trusts should be being encouraged.
11.2 WIDER CONTEXT OF CHARITABLE STATUS
Naturally, the main reason for a trust acquiring charitable status is to ensure its validity as otherwise it will be most likely be a prohibited private purpose trust.
It must not, I think, be forgotten that charitable institutions enjoy rare and increasing privileges, and that the claim to come within that privileged class should be clearly established.
For example, charitable institutions are exempt from income tax and capital gains tax, if applied for charitable purposes.
[1969] 1 Ch 373.
purposes enjoy similar exemptions and are also entitled to gift aid relief and exemptions on...
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