Fractal Myth

The Legal Definition of Charity.

[Michelle Chapman ©2003]

Introduction.

The legal definition of charity rests on a desire for certainty which, in this area, remains unfulfilled, largely due to judicial apprehension of tension between the technical term and its popular meaning. At law, a 'charity' must be for the relief of poverty, the advancement of education or religion, or for other purposes beneficial to the community, providing the purpose in question falls within the spirit of the preamble to the Statute of Uses 1601. A charity must also be for the public benefit. The legal definition excludes popular conceptions of charity as altruistic, benevolent or philanthropic, but such notions remain to trouble judges. The case law reveals considerable judicial confusion and frustration, suggesting legislative reform is needed. Legislation could provide a revised, contemporary definition for judicial interpretation, and incorporate the principles implied in charity's popular meanings, producing greater certainty for all concerned.

Development of legal definition.

The legal definition of charity has developed through more than four hundred years of judicial interpretation. The Statute of Uses 1601 sets out, in its preamble, examples of charitable purposes under the law. In 1891, these were categorised into "four principle divisions: trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community, not falling under any of the preceeding heads." (1) Lord Macnaghten dismissed "popular or vulgar" ideas of charity on the grounds that "no one as yet has succeeded in defining the popular meaning of the word 'charity'." (2) Within the legal definition, gifts for benevolent (3) or philanthropic (4) purposes were not classified as charitable.

Despite this, cases from the time reveal judicial attempts to identify and import elements of charity's popular meaning into the law. This included purposes for the public good which were not harmful or immoral (5) and unselfish public generosity "dictated by a desire to do good ... without contravening law or morals." (6) Notions of altruistic, benevolent or philanthropic motives also informed judicial interpretation of Lord Macnaghten's fourth head of charity, (7) though this still came down to a two-stage test: i) was the purpose beneficial to the community, and ii) did it fall within the spirit of the preamble to Elizabeth I's statute?

The requirement of public benefit appeared in both legal and popular concepts of charity. At law, this was defined to mean "the benefit of the community or an appreciably important part of the community." (8) It did not include fluctuating bodies of private individuals (9) or artificial entities existing for the benefit of their members, (10) and the group to be benefited could not be "numerically negligible" or dependent on relationship to a particular individual or entity for their group status. (11) By legally defining charity as distinct from the perceived ambiguity of its popular meaning, the courts aimed to produce rules capable of certain application to any fact situation.

Practical application of legal definition.

As the majority of cases reveal, certainty about the legal definition of charity was the ideal rather than the rule. This was particularly true of cases involving the fourth head: "other purposes beneficial to the community." In Incorporated Council of Law Reporting for the State of Queensland v Federal Commissioner of Taxation, (12) Barwick CJ found a benefit of "universal importance," but still felt constrained to prove that "that benefit is charitable in the Elizabethan sense." Under these principles, "promotion of the efficiency of the armed forces," including care for the welfare of their dependents, "is a good charitable purpose," (13) whereas a fund for the benefit of doctors' widows is not "an exclusive application for charitable purpose" as it can "extend beyond relief from need." (14) A trust for the benefit and protection of animals was held to be charitable "to promote feelings of humanity and morality generally, repress brutality, and thus elevate the human race", (15) but a trust for Amnesty International to promote world observance of human rights was not charitable, because their purposes included advocating political change, and the court could not judge whether this would benefit the public. (16) In Royal National Agricultural and Industrial Association v Chester, (17) the High Court expressed "sympathetic understanding" with those who disagreed with charity's legal definition, and regretted their inability to give effect to the testator's intention, concluding the breeding and racing of pigeons did not fit "within the intendment of the preamble."

The cases also disclose the importance of exact wording, as gifts have been overturned for technical non-compliance with charity's legal definition. In Roman Catholic Archbishop of Melbourne v Lawler, (18) a bequest to found a catholic newspaper failed because there were "no expressions referring to the purposes of religion. It is only such expressions which should be presumptively construed as charitable." In Re Ashton, (19) the NZ Court of Appeal held that a gift to a church in general terms, "to help in any good work," did not qualify as a charitable trust, but since the words included both charitable and non-charitable purposes it could be saved by the 'mixed purposes' legislation. (20) The predecessor to this legislation in NSW (21) was discussed in Leahy v Attorney-General (NSW), (22) where the Privy Council stated: "the misuse of the words 'benevolent' and 'philanthropic' has more than any other disappointed the charitable intention of benevolent testators ... the section is clearly designed to save such gifts." In this case, the testator had failed to distinguish between active orders of nuns (which are considered legally charitable) and contemplative (which are not). (23) In Congregational Union of NSW v Thistlethwayte, (24) the High Court distinguished between the Union's primary charitable purpose of advancing religion, and its ancillary 'uncharitable' purposes of philanthropy and the promotion of civil liberty. In Chicester Diocesan Fund and Board of Finance Inc v Simpson, (25) the testator's bequest failed, since his phrase "charitable or benevolent objects" was "too vague to give the necessary certainty." The phrase 'charitable and benevolent objects' would have succeded, by construing the benevolent objects as ancillary to the charitable ones. This semantic quibbling was justified by Tipping J in Re Beckbessinger, (26) who stated "[t]he testator must be shown to have had a substantially charitable mind but to have fallen foul of the law of uncertainty by including either actually or potentially a non-charitable element or purpose." As Lord Wilberforce commented in Ashfield Municipal Council v Joyce (27) there has been such "fluctuation in the trend of decisions ... that each side is able to point to authority in its favour. ... [W]hile an individual promblem can be resolved, it is difficult to state general principles which can be guides in the future." These religious cases demonstrate that despite attempts to confine themselves to the legal definition, the judiciary are consistently faced with the need to reconcile it with charity's popular meaning.

Moves towards legislative reform.

The history of the legal definition of charity in the courts exposes considerable judicial frustration and confusion. In 1923, Lord Sterndale lamented the "tangle of cases ... in an artificial atmosphere", (28) while in 1924, Lord Wrenbury recommended dismissing "the popular meaning from the mind as misleading" (29) before attempting to fit the facts into the legal definition. In 1946, Sir James Andrews CJ lamented the baffling and chaotic state of the authorities, concluding that "[t]he test is not whether the objects or purposes aimed at are beneficial to or receive the general acceptance of the community. It is simply whether they conform or not to the requirements and essentials of a legal charity." (30) In 1997, Santow J pointed out problems with rejecting trusts "whose objects included political change for an otherwise charitable purpose." (31) Young CJ in Equity agreed, in 2002, arguing that "under 21st century Australian standards the average person in the street would acknowledge that [such trusts] were right and proper and indeed the obvious way in which the law had to be amended." (32) In this case, Young CJ also drew attention to the current move towards legislative reform, as expressed in "the recent Sheppard Report following the enquiry into the definition of charities and related organisations (June 2001)."(33)

Under their terms of reference, (34) the 'Inquiry into the Definition of Charities and Related Organisations' was charged with bringing the legal definition of charity into line with its popular meanings, by examining existing definitions of "charitable, religious and community service not-for-profit organisations ... in the light of the current social expectations and experiences", as well as current definitions in legislation, common law and popular usage, "current use of the concepts for social, economic, legal, regulatory, statistical or academic purposes," definitions drawn from international jurisprudence, and submissions from the charitable sector. (35) The purpose of the inquiry was to suggest options for "enhancing the clarity and consistency of the existing definitions" (36) in order to arrive at a legal definition of charity which is "appropriate for, and adapted to, the social and economic environment of Australia." (37)

In its report, the three member Inquiry recommended an approach which followed and expanded the common law definition of charity, addressing many of the concerns raised by the judiciary in the cases surveyed in this essay. Under its suggested definition, a charity is a not-for-profit entity (excluding individuals, partnerships, political parties, superannuation funds, State and Commonwealth government bodies, and bodies controlled by foreign governments), with a charitable dominant purpose, or purposes, for the public benefit. The public benefit requirement is waived in relation to open and non-discriminatory self-help groups, and contemplative religious orders which "regularly undertake prayerful intervention at the request of the public." The charitable entity must not engage in illegality, and any political activity must be ancillary to its charitable purposes. 'Charitable purposes' in this context expands Macnaghten's four heads of charity to seven: the advancement of health, education, social and community welfare (including "care, support and protection" of children and young people, and the provision of child care services), religion, culture, the natural environment and other purposes beneficial to the community. This enlarged definition is much closer to contemporary notions of charity than the archaic preamble to the Statute of Uses 1601 (UK). 'Public benefit' is also redefined, requiring a charitable purpose to be "aimed at achieving a universal or common good", to demonstrate "practical utility", and to be directed towards the benefit of the general community or a "sufficient section" of it. The Inquiry's revised legal definition of charity has been adopted by the Treasurer, and the legislation is expected to be enacted and commence operation on 1 July 2004. The new administrative scheme for charities will include endorsement by the Australian Taxation Office to minimise abuse of tax concessions for charities, and the endorsed status of the charity will be attached to its Australian Business Number, publicly accessible through the Australian Business Register. While it is too early to say whether this legal definition of charity will be productive of greater certainty, and although it avoids the language of benevolence, philanthropy and altruism, the Inquiry's suggestion is much closer to these concepts than the historical common law definition.

Conclusion.

Charity is an ambiguous term, capable of being interpreted to cover many different circumstances. In order to promote certainty in its application, the confusion of four hundred years of judicial interpretation needs to be clarified by the legislature, bringing the definition into line with contemporary Australian social standards. The new definition proposed by the Inquiry into the Definition of Charities and Related Organisations implicitly incorporates the popular meaning of charity as benevolent, philanthropic and altruistic, and addresses the anomalies (such as the position of contemplative religious orders) which made the old definition seem so artificial. The new definition is not a magic formula and will still require interpretation by the courts as they apply it to new fact situations, but the judiciary will no longer need to search for analogous situations in an ancient and obsolete statute in order to classify a purpose as charitable.

Footnotes.

1. Income Tax Special Purpose Commissioners v Pemsel [1891] AC 531, 583: Lord Macnaghten.
2. Ibid.
3. Morice v Bishop of Durham (1805) 32 ER 947.
4. Re Macduff [1896] 2 Ch 451.
5. Re Foveaux [1895] 2 Ch 501.
6. Re Cranston 1 IR 431, 446: Fitzgibbon LJ.
7. Barby v Perpetual Trustee Co Ltd (1937) 58 CLR 316, 324: Latham CJ.
8. Verge v Somerville [1924] AC 496, 499: Lord Wrenbury.
9. Ibid.
10. Thompson v Federal Commissioner of Taxation (1959) 102 CLR 315, 223: Dixon CJ.
11. Oppenheim v Tobacco Securities Trust Co Ltd [1951] 1 All ER 31, 34: Lord Simonds.
12. (1971) 125 CLR 659.
13. Downing v Federal Commissioner of Taxation (1971) 125 CLR 185: Walsh J.
14. Re Petit [1988] 2 NZLR 513: Chilwell J.
15. Re Wedgwood [1915] 1 Ch 113, 122: Swinfen-Eady LJ.
16. Mc Govern v Attorney-General [1982] Ch 321, 334: Slade J.
17. (1974) 3 ALR 486, 489: Mc Tiernan, Menzies and Mason JJ.
18. (1934) 51 CLR 1: Dixon J.
19. [1955] NZLR 192.
20. Charitable Trusts Act 1957 (NZ) s61B (a similar provision is found in Charitable Trusts Act 1993 (NSW) s23).
21. Conveyancing Act 1919 (NSW) s37D.
22. [1959] AC 457.
23. Re Delaney [1902] 2 Ch 642, 648-9: Farwell J; Gilmour v Coats [1949] AC 426, 446: Lord Simonds.
24. (1952) 87 CLR 375.
25. [1944] AC 341.
26. [1993] 2 NZLR 362.
27. [1976] 1 NSWLR 455, 459.
28. In Re Tetley [1923] 1 Ch 258, 266.
29. Verge v Somerville [1924] AC 496, 502.
30. Londonderry Presbyterian Church House Trustees v Inland Revenue Commissioners [1946] 27 Tax Cas 431, 446.
31. Public Trustee v Attorney General (1997) 42 NSWLR 600, 619.
32. Attorney-General for NSW v The NSW Henry George Foundation Ltd [2002] NSWSC 1128, paragraph 61.
33. Ibid., paragraph 23.
34. Inquiry into the Definition of Charities and Related Organisations, Issues Paper, 10 November 2000, Commonwealth of Australia 2000, view (copy on file with author).
35. This included submissions from the National Council of Independent Schools' Association (view), the Council on the Ageing (view), the Aged Care Society of Australia (view), the Australian Council of Social Service (view), the Council of Social Service of NSW (view), Community Aid Abroad/Oxfam Australia (view), Anglicare Australia (view) the Institute of Public Affairs (view), and Philanthropy Australia (view).
36. Issues Paper, op cit. n.34.

Bibliography.

Texts:

Dal Pont, G. & Chalmers D.
Equity and Trusts in Australia and New Zealand
(2nd edition, LBC Information Services, Australia, 2000).

Dal Pont, G., Chalmers, D. & Maxton, J.
Equity and Trusts: Commentary and Materials
(2nd edition, LBC Information Services, 2000).

Heydon, J. & Loughlan, P.
Cases & Materials on Equity and Trusts
(5th edition, Butterworths, Australia, 1997).

Table of Cases:

Ashfield Municipal Council v Joyce (1976) 10 ALR 193; [1976] 1 NSWLR 455 PC.
Attorney-General for NSW v The NSW Henry George Foundation Ltd [2002] NSWSC 1128.
Attorney-General (NSW) v Perpetual Trustee Co Ltd (1940) 63 CLR 209; [1940] ALR 209.
Baddeley v IRC [1935] 2 All ER 233.
Barby v Perpetual Trustee Co Ltd (1937) 58 CLR 316.
Chicester Diocesan Fund and Board of Finance Inc v Simpson [1944] AC 341.
Congregational Union of NSW v Thistlethwayte (1952) 87 CLR 375.
Downing v Federal Commissioner of Taxation (1971) 125 CLR 185.
Gilmour v Coats [1949] AC 426.
Income Tax Special Purpose Commissioners v Pemsel [1891] AC 531.
Incorporated Council of Law Reporting for the State of Queensland v Federal Commissioner of Taxation (1971) 125 CLR 659.
In Re Tetley [1923] 1 Ch 258.
Leahy v Attorney-General (NSW) [1959] AC 457.
Londonderry Presbyterian Church House Trustees v Inland Revenue Commissioners [1946] 27 Tax Cas 431.
Mc Govern v Attorney-General [1982] Ch 321.
Morice v Bishop of Durham (1805) 32 ER 947.
Oppenheim v Tobacco Securities Trust Co Ltd [1951] 1 All ER 31.
Public Trustee v Attorney General (1997) 42 NSWLR 600.
Re Ashton [1955] NZLR 192.
Re Beckbessinger [1993] 2 NZLR 362.
Re Cranston [1898] 1 IR 431.
Re Delaney [1902] 2 Ch 642.
Re Foveaux [1895] 2 Ch 501.
Re Macduff [1896] 2 Ch 451.
Re Petit [1988] 2 NZLR 513.
Re Wedgwood [1915] 1 Ch 113.
Roman Catholic Archbishop of Melbourne v Lawler (1934) 51 CLR 1.
Royal National Agricultural and Industrial Association v Chester (1974) 3 ALR 486.
Thompson v Federal Commissioner of Taxation (1959) 102 CLR 315.
Verge v Somerville [1924] AC 496.

Legislation:

Charitable Trusts Act 1957 (NZ) s61B.
Charitable Trusts Act 1993 (NSW) s23.
Conveyancing Act 1919 (NSW) s37D.
Statute of Uses 1601 (UK).

Other sources:

Aged Care Society of Australia,
Submission to the Inquiry into the definition of Charities and Related Organisations,
January 2001,
http://www.agedcare.org.au/projects/aubmissions/cdisubmissionfull.htm (copy on file with author).

Anglicare Australia,
Submission to Definition of Charities Inquiry,
15 January 2001,
http://www.anglicare.asn.au/NewAnglicareSite/NARU/Issues/CharitiesSubmission.pdf (copy on file with author).

Australian Council of Social Service,
Inquiry into the definition of charities and related organisations submission,
ACOSS Paper 110 - January 2001,
http://www.acoss.org.au/papers/2001/paper110.htm
110.pdf (copy on file with author).

Charities Definition Inquiry,
Inquiry into the Definition of Charities and Related Organisations,
Issues Paper, 10 November 2000, Commonwealth of Australia 2000,
http://www.cdi.gov.au/html/issues_paper.htm
charities.rtf (copy on file with author).

Community Aid Abroad/Oxfam Australia,
Submission to the Government Inquiry into the definition of Charities and Related Organisations
18 January 2001,
http://www.caa.org.au/campaigns/submissions/charity/Inquiry into the definition of Charities and Related Organisations.htm (copy on file with author).

Council of Social Service of NSW (NCOSS),
Inquiry into the definition of charities and related organisations,
January 2001,
http://www.ncoss.org.au/campaigns/submissions/charity/charities_inquiry.pdf (copy on file with author).

Council on the Ageing
Submision to the Inquiry into the Definition of Charities and Related Organisations,
January 2001,
http://www.cota.org.au/charities.htm (copy on file with author).

Institute of Public Affairs (Jim Hoggett, Director of Economic Policy),
Inquiry Into the Definition of Charities and Related Organizations,
19 January 2001,
http://www.ipa.org.au/Speechesandsubmssns/jimcharitiessub.html (copy on file with author).

National Council of Independent Schools' Association,
Submission to the Inquiry into the Definition of Charities and Related Organisations,
December 2000,
http://www.ncisa.edu.au/html/sub_charities.pdf (copy on file with author).

Philanthropy Australia Inc,
Submission to the Inquiry into the Definition of Charities and Related Organisations
19th January 2001
http://www.philanthropy.org.au/advocacy/11-02-inquiry.htm
submission-to-inquiry.pdf (copy on file with author).

The Commonwealth Treasurer,
Government Response to Charities Definition Inquiry [29/08/2002], Press Release, no. 049, http://www.treasurer.gov.au/tsr/content/pressreleases/2002/049.asp (copy on file with author).

Marker's comments.

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