THE PRIVATE LAW OF PUBLIC TRUSTS
| Author | Helen Beynon |
| Date | 01 May 1982 |
| DOI | http://doi.org/10.1111/j.1468-2230.1982.tb02480.x |
| Published date | 01 May 1982 |
THE
PRIVATE
LAW
OF
PUBLIC TRUSTS
I. INTRODUCTION
THE
Charity Commission, in one of its annual reports informed
us of the substance of its memorandum of evidence submitted in
response to the Law Reform Committee’s Consultative Document
on The Powers
and
Duties
of
Trustees.a
In
this memorandum, we
are told, the Charity Commission
“
emphasised the essential dif-
ferences between charities and non-charitable trusts, and identified
the Consequences in law for charity and other trustees.”S An
admirable approach, as most people will surely agree. The distinc-
tion between the private and public domain is immanent
in
the law
of trusts
if
in no other area of English law.4
As
the Charity Com-
mission explains,
“
charities exist to benefit a public class. . . and
not private individuals, as in the case of a private trust; benefit is
at the discretion of the trustees and no eligible person can claim
benefit as of right; and charities may exist in perpetuity and do not
fail when their objects can no longer be carried out.”
But there is one subject
in
which the Charity Commission does
not seem to have emphasised the differences between charities and
non-charitable trusts, and identified the consequences in law for
charity and other trustees: trustee investments. Indeed, the Charity
Commission, in the very Annual Report in which it remarks on
the desirability
of
drawing this distinction, reproduces its standard
guide for trustees on trustee investments in which the significance
of charitable status hardly obtrudes at all (with the obvious excep
tion of the common investment scheme); and the summary the
Charity Commission gives
of
its memorandum of evidence refers
only to the possibility of widening the range
of
authorised trustee
investments. In other words, the Charity Commission seems to have
assimilated the rules
on
investments in private and public trusts
without much reservation.
11.
INVESTMENTS
BY
CHARITABLE
TRUSTS:
TWO
ISSUES
However, questions are now being posed about charitable invest-
ments which challenge this apparent assumption. These questions
concern both when charities may invest, and how they may invest.
Professor Chesterman presents both of these questions in his stimu-
1
Annual Report
of
rhe Charity Cornmission for
1978.
H.C. 94 (1979-80) paras.
2
Law Reform Committee. Sub-Committee on the
Powers
and
Duties
of
Trustees.
8-10.
Consultative Document (1978). The final report is expected in the autumn.
Annual Report,
p. 7.
4
Cl.
C. Harlow,
‘‘
’
Public
’
and
‘
Private
’
Law: Definition without Distinction
”
6
Annual Report,
pp.
52-59, Appendix
C
by
the Official Custodian.
(1980) 43
M.L.R.
241-265.
268
May
19821
PRIVATE
LAW
OF
PUBLIC TRUSTS
269
lating book on charities.' He is prompted to ask the first question-
when may charities invest-partly because of a general trend for
an increasing proportion of charitable funds to be invested,' and
partly because of the particular instance of a charity known as St.
Dunstan's which had what has been regarded as an exceptionally
high ratio of investment to expenditure, namely,
E14t
million cur-
rent assets as opposed to
fl$
million current expenditure.8 The
second issue-how should charities invest-is raised by his com-
ments on the investment policies of the Church Commissioners.
The Church Commissioners, who have
a
share portfolio of about
€300
million, announced that they would boycott companies directly
or indirectly connected with South Africa, involved in the arms
trade, gambling, distilling, tobacco, newspapers, publishing, broad-
casting, theatre and films.9 Quite a sizeable blacklist. It prompts
us
to ask: what is the legal position of charitable trustees who wish to
take non-commercial considerations into account in making
investments?
Professor Chesterman canvasses three possible sanctions against
excessive investment-cy-prPs, investigation by the Charity Com-
mission and withdrawal of fiscal relief. (The
"
law against accumu-
lations" is of no real help. Although it applies just as much to
charities as to private trusts, it only prohibits accumulations that
go
on for too long, not
a
disproportionate amount of accumulation.)
In relation to the second issue, ethical investment, Professor
Chesterman simply remarks that trustees may not be able to make
investments that are incompatible with their charitable object. But
in neither case does he make any dogmatic statement of what the
law is. Perhaps the law on both issues is unclear because it has
taken insufficient account of the significance of charitable status;
and perhaps its clarification will require a precise answer to the
broad question indicated by the Charity Commission, namely, how
far can and should rules on private trusts be stretched
to
cover
public trusts as well? It is in the hope of demonstrating this that
these two issues relating to charitable investments are discussed
below.
1.
The Balance between Investment and Expenditure
What holds the balance between the investment and distribution
of
charitable funds? The rules are complex, but the main consideration
is the settlor's intentions. Intention is relevant at two stages.
Trustees are under a basic duty to invest capital and spend income.
Intention is relevant here, because it is used to draw the vital
distinction between capital and income. But the basic duty to invest
a
M.
Chesterrnan,
Charities,
Trusts
and Social Weliare
(1979).
f
Ibid.
at
pp.
94-95.
8
Ibid.
at
pp.
376-381.
*
Ibid.
at
p.
291.
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