Equity And Trust: The Preamble Of The Charitable Uses Act (Term Paper Sample)

EQUITY AND TRUST
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The word ‘charity’ has its origin from Latin, meaning ‘to care’; however, in legal terms, the meaning includes the purpose and the benefit of the entire community. The Charitable Purpose/Trust is a key area in common law, with attributes such as not allowing the payment of capital gain taxes on assets of disposal as long as they are exclusively for charitable purposes under the Chargeable Gains Act 1992. The only taxes that the charities are required to pay are the Value Added Tax on all the goods and services purchased. Charitable trusts have a distinct importance, which makes them distinct from other law of trusts, as they are considered public trusts that do not have beneficiaries. Generally, a trust for purpose will not be valid, however, equity has made a significant exception to this principle; charitable trusts are recognised as valid considering they are trusts for purposes as opposed to benefiting a particular and private individual. The law treats charities favourably as it provides a benefit to the publicand promotes purposes beneficial to the community.[Jill E Martin and Harold Greville Hanbury, Modern Equity (Sweet & Maxwell 2001).] [Martin and Hunbury] [Alastair Hudson, ‘Understanding Equity & Trusts’ (4thedn, Routledge 2013) 203] [Graham Virgo, ‘The Principles of Equity & Trusts’ (1stedn, Oxford University Press 2012) 166] [Graham Virgo, ‘The Principles of Equity & Trusts’ (1stedn, Oxford University Press 2012) 166] [Gaudiya Mission v Brahmachary [1998] Ch 341, 430]
Initially, the Preamble of the Charitable Uses Act 1601 did not recognise charities as charitable purposes. The enactment of the Charities Act 1993 did not clearly provide the needed clarity to the “charitable purposes”. The latest law that provided the clarity on Charities is the Charity Act 2006, which formed the basic arguments in Viscount Simmonds IRC v Baddeley. In the ruling, the judge asserted there is no enforced limit within which a person can seek to benefit from a fellow individual.[Michael A Haley and Lara McMurtry, Equity & Trusts (Sweet & Maxwell 2006).] [Haley and McMurtry]
The UK Prime Minister commissioned a review of the 1993 Act in 2001. The review resulted in a document titled “Private Action, Public Benefit”; this report analysed the weaknesses and the strengths of the regulatory framework within which charities exist. A charitable purpose must meet the requirement of public benefit; secondly, it must meet the judicial requirement of statutes and uses. The charity must also meet the disqualifying purpose and above all, it should not benefit an individual, government entity or political party. Charity law consists of both case law and statue.In the case of Commissioners for Special Purposes of Income Tax v Pemsel,Lord MacNaghten further developed the definition of charities through identifying the four heads. This consisted of the relief of poverty, the advancement of education, the advancement of religion and other purposes beneficial to the community.This checklist provided to be useful in testing whether the purpose was charitable but did not provide a precise definition.[Jean Warburton, ‘Charitable trusts- Unique?’ (1999)] [Commissioners for Special Purposes of Income Tax v Pemsel[1891] AC 531] [Commissioners for Special Purposes of Income Tax v Pemsel[1891] AC 531] [Graham Virgo, ‘The Principles of Equity & Trusts’ (1stedn, Oxford University Press 2012) 172]
Lord MacNaghten’s classification continued until it was developed and replaced by the Charities Act 2006, which provided the first statutory definition of ‘charity’ in reference to the previous law. Following this, the Charities Act 2011 came into force and amalgamated the various statutory provisions of charities into one statute but in the absence of altering any existing law.The 2011 Act also provided the definition of a charitable purposeas one that is for the public benefit falling any of the 13 descriptions under section 3(1).[Jamie Glister and James Lee, ‘Hanbury& Martin, Modern Equity’ (12thedn, Sweet and Maxwell 2015) 351] [Graham Virgo, ‘The Principles of Equity & Trusts’ (1stedn, Oxford University Press 2012) 172] [Charities Act 2011, s 2] [Charities Act 2011, s 3(1)]
All charities must fulfil the public benefit requirement. The key feature of the 2006 Act was that it removed the presumption of the relief of poverty, advancement of religion and advancement of education automatically fulfilling the public benefit. It further emphasised that all the purposes were to satisfy the public benefit requirement.[Charities Act 2011, s 4(2)]
In broad definition, equity is fairness; it addresses concerns that fall outside the jurisdiction of Common Law. Common Law had developed by the 12th century. During this period, civil actions had to be commenced by a writ outlining the cause of action or the necessary grounds for the claim presented. Consequently, diverse types of writ developed; therefore, litigants were forced to fit their circumstances to one of the available types of the writ, and if the case falls outside one of the available types of writs, there was no way of presenting the case in a Common Law court. With time, Common Law was developing some aspect of rigidity with one remedy being relayed. The disgruntled parties started to petition the king who was seen and thought of as a “fountain of justice”.[George Spence and Henry Maddock, The Equitable Jurisdiction Of The Court Of Chancery (Lea and Blanchard 1846)]
Afterwards, litigants approached the Chancellor, who would deliver a verdict based on his moral point of view depending on the question presented to him. Often, the court could demand disclosure of relevant documents alongside interviewing the parties involved in person, contrary to the courts, which did not admit oral evidence and had no way of extracting the truth from the litigants. Since, there were no binding rules followed in the court, entire reliance on the Chancellor's view of wrong and right seemed not to enforce right recognized by the Common Law . Precedent failing to incorporate the new circumstances restricted the right. The Court of Chancery offered whatever remedies best suited the case and as a result, this type of justice eventually came to be known as equity.[Harlan F. Stone and William W Billson, 'Equity And Its Relations To Common Law' (1918) 18 Columbia Law Review]
A charity is an institution that is established exclusively for charitable purposes and is subject to the jurisdiction of the High Court. A trust can be used as a mechanism to implement the charity purpose. The foundation is considered charitable if it satisfies three conditions:
* Must be established for the purpose that the law considers charitable.
* Its purpose must be to benefit the public or a sufficient section of the public.
* Must be wholly and exclusively charitable
The rule of perpetuity is the rule that limits the ability of owners to control future dispositions of their property. The law of equity and trust has the perpetual principle, which has two rules:
* No gift should fall outside the perpetuity period
* No gift should last for longer than the perpetual period (the person should be alive at the time of the gift).
Charities are exceptions to the rules of perpetuity for identifiable beneficiaries are not needed to enforce charitable trusts because a public official, Attorney General has the power to enforce the trust on behalf of the Crown. According to Grant MR, other than humanitarian institutions, an identifiable beneficiary is mandatory.
The humanitarian trust exists perpetually unlike private trusts, which have limited time. For example, King's School, Canterbury is one of the oldest charities, which was formed 1500 years ago. Rules of vesting property operate the same as that of private trusts. Regulations on certainty are more flexible in philanthropic duty as compared to private trusts. Reasonable certainty is not necessary as long the institution is wholly and exclusively charitable, if not the whole trust becomes void. Philanthropic foundations are subject to income and capital gains tax relief.
The Charities Act 2006 changed the perception of the charitable causes under the UK law. The need for guidance in understanding the operations of a charitable organization can be indicated by the assessment of the functions performed by the institution. After the publication of the Charities Act in 2006, various institutions strived to define the aspect of public benefit concerning the evaluation of the operations. The assessment of the benefit to the public has affected the operations of various charitable organizations, as they strive to prove to be beneficial to the public. The presumption of public benefit has affected the way objectives are set when initializing operations. The aspect has led to a significant impact on the registration process of the charities.
Charities in the UK have been affected by the clause for the public benefit, which has changed the definition of the institutions based on the operations. The Charity Commission in 2008 sought to provide the guidance that will affect the operations of the various organizations. The issue of public benefit, as Hon Justice Warren and Judges Ovey and McKenna, stated that the charitable institutions ...