WEEK NINE

CHARITABLE TRUSTS
 OVERVIEW
Definition of a Charitable Trust
Advantages of a Charitable Trust over a Private Trust
Categories of Charitable Trusts
The Cy-pres Doctrine
 Definition of a Charitable Trust
• Trust whose aim is to promote a specific purpose & it doesn't benefit
specific individuls.
• However, in furthering a specific purpose, the performance of a trust
may result in individuals/members of the public deriving some direct
benefit.
• It seeks to benefit the society as a while/a sufficiently large section of
the community.
• NB: Charitable trust is subject to the same requirements & has similar
x-tics like those for a private trust.
 Advantages of a Charitable Trust over a Private Trust
1. Certainty of Objects
• The rules relating to certainty of objects do not apply to charitable
trusts. With a few exceptions, private trusts must be set up for the
benefit of identifiable human beneficiaries. Charitable trusts, on the
other hand, are created for approved public purposes, not for
individual beneficiaries.
2. Perpetuity
• Once the vesting rules for perpetuity have been satisfied, there is no
restriction on the duration of a charitable trust. A private trust, on the
other hand, cannot endure beyond the perpetuity period, because it
must vest in an individual.
 Advantages of a Charitable Trust Contd...

3. Cy-près doctrine
• Unlike private trusts, charitable trusts are amenable to the cy-près doctrine. If
an express trust cannot be carried out, or if a surplus remains after the trust has
been executed, that surplus will pass to the settlor pursuant to a resulting trust.
If, however, a charitable purpose cannot be carried out, the cy-près doctrine
allows the court to direct the property to be applied to the nearest and most
suitable analogous purpose.
4. Taxation Advantages
• Gifts for charitable purposes also enjoy substantial tax advantages, particularly
with respect to income tax and rating relief.
 Categories of Charitable Trusts
Trusts have been categorised into four:
 Trusts for the relief of poverty(Re Coulthurst [1951] Ch 661)
 Trusts for the advancement of education(IRC v McMullen [1980] 1 All ER
884) e.g. The Madivani Foundation
 Trusts for the advancement of religion(Bowman v Secular Society [1917]
AC 406)
 Trusts for other purposes beneficial to the community.(Re Smith [1932] 1 Ch
153) e.g. The Mityana Foundation.
 See also Commissioners for Special purposes of Income Tax v Pemsel (1891)
 Cy-Pres' Doctrine
• It enables a court to authorise an alteration of the purposes of a trust
to produce a valid charitable trust.
• In applying the doctrine, court should apply the trust property for a
purpose as near as possible to the purpose stipulated by the settlor in
the initial gift.
• The aim is to ensure that the settlor's primary intention of giving
charity is upheld as opposed to using the gift for some private
purpose.
 Application of Cy-pres' Doctrine
• Initial Impossibility-Where its impossible/Impractical from the outset
to carry out the terms of the trust.
• See Attorney-General for New South Wales v Perpetual Trustee
(1940)
• Supervening Impossibility- Here the gift takes effect according to
terms but it later becomes impossible/aimpractical to enforce the trust
according to its terms.
• See Re Dominion Students Hall Trust (1947)