PUBLIC PURPOSE TRUSTS
| DOI | http://doi.org/10.1111/j.1468-2230.1977.tb02431.x |
| Date | 01 July 1977 |
| Published date | 01 July 1977 |
PUBLIC PURPOSE TRUSTS
(1)
INTRODUCTION
MUCH
has been written
on
the correlation between the validity of
trusts for charitable purposes and the fiscal privileges afforded to
such trusts; and despite recent recommendations to the contrary,‘
opinion has been overwhelmingly in favour of the separation of the
two issues. Perhaps the most compelling statement of this viewpoint
is contained in the judgment of Lord Cross in
Dingle
v.
Turner
:
“
It is of course unfortunate that the recognition of any trust
as a valid charitable trust should automatically attract fiscal
privileges, for the question whether a trust to further some
purpose is
so
little likely to benefit the public that it ought to be
declared invalid and the question whether it is likely to confer
such great benefits
on
the public that it should enjoy fiscal
immunity are really two quite different questions. The logical
solution would be to separate them.”
That passage does, however, reveal
a
potential ramification of the
proposed reform
on
which conclusions have differed
:
namely, the
extent to which the reform should and could lead to the validation
of trusts for purposes which fall outside the four traditional heads
of charity. Furthermore, remarkably little space has been afforded
to
consideration of the question of whether
any
such development is
supported
on
grounds of principle or
on
the authority of case law;
almost all discussion of the proposed reform has centred exclusively
on
issues
of
policy, and indeed it is arguable that that fact has been
the principal cause of the divergence of views.
In
short, the problems of the validity of charitable trusts and fiscal
immunity
on
the one hand, and the validity of non-charitable purpose
trusts
on
the other hand, have invariably been considered in complete
isolation, although, it is submitted, the latter is the logical develop-
1
10th Report
of
the House of Commons Expenditure Committee
(1974-75
H.C.
495)
advocated that all charities should continue to enjoy automatic fiscal privileges
(paras.
86-90).
More
recently, the Report
of
the Goodman Committee on Charity
Law and Voluntary Organisations (National Council
of
Social Service,
1976)
not
only endorsed the view
of
the
House
of
Commons Expenditure Committee but
recommended that charities should enjoy
more
extensive
privileges in respect
of
value added tax and rate relief (paras.
107-136).
The Report concluded that
“
if a
balance were drawn the advantages to the community derived from charitable funds’
services would far outweigh the cost
of
the taxes and rates forborne” (para.
112).
Those who take the contrary view, however, argue that such
a
conclusion fails to
take account
of
two factors: first, there are under the present law some charities
which confer no substantial advantages on the community and yet which enjoy
fiscal privileges
;
secondly, there have been purported purpose trusts calculated to
confer substantiah advantages on the community which have been denied charitable
status and the privileges of such status because they do not fall within the tradi-
tional heads
of
charity. It is the view of the present writer that insufficient attention
has been paid
to
the wider iegal context
of
trusts for purposes inherent in this
counter-argument.
3
Ibid.
at p.
624.
2
[1972]
A.C.
601.
397
398
THE
MODERN
LAW
REVIEW
[Vol.
40
ment from the proposed reform of the former. In consequence the
possibility of extensive reform in relation to non-charitable purpose
trusts has not been widely re~ognised.~ This article seeks to remedy
that approach, and to see the solution to each of these issues rather as
two aspects of the same problem-the implementation of purposes
calculated to confer benefit
on
the public.
The essential distinction, already alluded to above, between policy
considerations and arguments of principle must be drawn at this point.
When reform of a particular area of the law is under discussion, the
arguments may be of two kinds: first, the most important are con-
siderations of social, economic and /or political expediency which,
assuming the possibility of the attainment of ideals, and irrespective
of any relevant legal rules, lead in the direction of
a
particular
reform; such considerations are questions of policy and it is these
arguments, primarily, which support legal reforms to meet the chang-
ing conditions and needs of society. Arguments of the second kind
appeal to those established legal rules and principles which are dis-
regarded for the purposes of policy considerations. Instead, the
advocate of a proposed reform points to
a
particular legal rule and
argues that it is
no
less applicable to the new situation than it is to
the established area of its operation. Such arguments are clearly of
considerable weight since law reform which is consistent with estab-
lished rules tends to be more acceptable to a conservative legal
profession than reform which is contrary
to
long-standing rules of
law.
Arguments of principle, however, are not frequently available;
but it is submitted that the present case is one of the exceptional
situations where they are not only available but also of considerable
importance. For it will be argued that, with the exception of fiscal
privileges, the rules which afford other concessions to charitable
trusts cannot logically be confined to such trusts but must be extended
to the limit
of
their application and fundamental rationale.
It is not suggested that the proposed reform will require
no
legis-
lation, but this should be confined to the discontinuation of automatic
fiscal privileges; once that initiative has been taken, the only question
which remains is the extension of the other concessions (immunity
from pre-conditions of validity) presently afforded to charitable trusts
to a wider range of purpose trusts. This reform, it will be argued,
is
not
only socially desirable (policy consideration) but also unobjec-
tionable and indeed logical in terms of current legal rules (argument
of principle).
4
Almost all discussion on the validity
of
non-charitable purpose trusts has con-
centrated on the developments
of
private trust principles (especially the principle in
Re
Denley’s
Trust
Deed
[I9691
1
Ch. 373), rather than on potential developments
of
the
principles relating to charitable trusts
:
(1970) 34 Conv.(N.s.) 77 (Lovell);
(1971)
87
L.Q.R.
31
(Harris); (1973) 37 COnv.(N.S.) 420 (McKay);
cf.
(1956) 72 L.Q.R.
187 (Cross).
The
Report
of
the Goodman Committee in fact recommended (para.
24) that the validity
of
non-charitable purpose trusts should be examined, but it
is submitted that the perpetuation
of
automatic fiscal privileges to charitable trusts
effectively eliminated the most practicable means
of
achieving that
result.
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