WRITTEN BY: SAMUEL WALPOLE
Christina Walton
This week on Pandora’s Blog, contributor and former Pandora’s Box Editor Samuel Walpole speaks with Christina Walton, Lecturer in Law at the University of Exeter, on the development of charity law in England. In particular, they discuss Christina’s current research on the charitable status of political trusts, and the intersection of private and public law concepts within this debate.
PB: Christina, thank you for joining us.
CW: Thank you very much for having me.
PB: Would you say that ‘charity law’ now exists as a distinct area of the law? Or, is it a subset of the law of trusts?
CW: Yes, I would say that charity law is a distinct area of the law. Charity law is governed by a statute called the Charities Act 2011 (UK), which was previously the 2006 Act. The Act defines a charity in s 1 as an institution established for exclusively charitable purposes. Later on in the Act we have a definition – or something approaching a definition – of an institution, which is very broad and specifically encompasses incorporated associations, unincorporated associations and trusts. So a trust is merely one institution which can be legally designated a charity; a company or unincorporated association can likewise achieve charitable status.
PB: Charities are an integral part of Western civil society. Pragmatically, however, why is it so important to be considered a ‘charity’ under the law?
CW: If you can prove that you are legally a charity, you can take advantage of special legal treatment. The most significant aspect of this from a practical perspective is the various tax breaks that apply to charities. Charities are fully exempt from income tax, corporation tax, capital gains tax and stamp duty, and partially exempt from VAT. Gifts to charities have tax relief through gift aid. Furthermore, a body called the Charity Commission – provided by the State at public expense – governs charities and their operation. Trusts granted charitable status are exempt from the rule against perpetuities, the rule against inalienability and the beneficiary principle.
Samuel Walpole
PB: I noticed that the definition of a ‘charity’ is contained within the Charities Act 2011. How, if at all, did this Act change the definition of “charity” or “charitable purpose”? In Australia, where most of our readers are located, the Federal Government recently passed the Charities Act 2013 (Cth) which, on my reading, appears to define the key terms in a similar way.
CW: I do not think that statutory reorganisation has changed the definition of what it is to be a charity, or that of charitable purpose, hugely. How the Act works is that s 1 defines “charity” as an institution established exclusively for charitable purposes. Then, s 2 defines what a “charitable purpose” is. There are two elements to the latter definition: a purpose must fall within the catalogue in s 3 and be for the public benefit. The catalogue of purposes which the Act recognises as charitable in s 3 is very similar to the purposes recognised as charitable in judicial decision.
PB: Like those in Pemsel?[1]
CW: Exactly. It all started off in Pemsel and then, by analogy, other purposes began to be recognised as charitable over the course of time. There is not a huge amount of innovation in s 3. One possible innovation is the inclusion of the advancement of amateur sport. There is also innovation in terms of s 3(2)(a)(ii) which includes, within the advancement of religion category, advancing a religion which does not involve belief in a god. Broadly speaking, however, the catalogue in s 3 is a reiteration of the catalogue contained in case law.
Public benefit is the second requirement for a purpose to be charitable. Explicitly, in s 4, we are told that in understanding public benefit we are to consider the previous case law. So there has been no change in this regard.
What might be a change – and what a lot of academics are interested in – is s 4(2). This tells us that there is no longer a presumption that a purpose within s 3 is beneficial. This is presented, at least in the Act itself, as being a departure from the previous law. Whether it is or not is debatable. The thought is that, prior to statutory reorganisation in 2006, the Court presumed the benefit of any purpose that fell within the catalogue. This presumption could, of course, be rebutted, but if unrebutted would dictate a conclusion of benefit. Under the statute, it is clear that the benefit of any given purpose must be positively demonstrated in order to establish charitable status. Hence, at least prima facie, s 4(2) represents a change in the law. However, as I say, this is contentious. Academics are not in agreement as to whether the Courts were in fact utilising a presumption prior to the 2006 Act and, therefore, whether s 4(2) represents a legal change or not.
Interestingly, this links into my research on political trusts. Historically, the judiciary has held that political purposes cannot be charitable because of their inability to judge the benefit of such purposes. However, were the courts presuming a purpose falling within the catalogue to be beneficial prior to 2006, this inability to judge benefit would have left the presumption unrebutted and yielded a conclusion of benefit and, all other things being equal, charitable status.. That this was not the courts’ approach in the political trusts case law indicates that, at least in these cases, the courts were not applying any presumption of benefit.
Thus, s 4(2) is presented as a departure from the law prior to the Act, but I am not so sure that it is.
PB: Notably, I observed that the charitable purposes listed in s 3 of the 2011 Act include ‘human rights’, ‘environment protection’, ‘animal welfare’ and so on. Does the express inclusion of these in the Act reflect contemporary policy emphasis?
CW: That is an interesting question. For sure, the express inclusion of these purposes is an explicit recognition that these kinds of purpose are a good thing and, therefore, that an institution dedicated to these purposes should be capable of being legally designated a charity and enjoying the various benefits of this legal status. I am not so sure, however, whether the purposes you note have an especial contemporary relevance. Crucially, these purposes have been included in the judicial catalogue of charitable purpose for many years. For example, the case of Anti-Vivisection[2] and the much earlier 1895 case of Re Foveaux[3] recognised animal welfare as charitable. Human rights was recognised in McGovern v Attorney-General[4] in 1982. So Parliament has, in the main, simply picked up on the various charitable purposes recognised in judicial decision and has made these purposes explicit in the Act. This links in with what I said about the s 3 catalogue being more about reaffirmation than recognition of novel purposes.
PB: The charitable status of trusts for a political purpose is a particularly vexed issue. I realise that this is one of your particular interests, so I thought we might spend some discussing it. The traditional rule is, of course, that political purposes are not charitable. Why have the Courts reached that conclusion? Or, perhaps more accurately, how has the case law been interpreted?
CW: The courts tell us that a political purpose is not a charitable purpose and so an institution aimed at such a purpose cannot be a charity. The headline explanation for why that is so is that the Court cannot judge the benefit of such purposes and so cannot hold them to be beneficial as is necessary in order to satisfy the “public benefit” test in s 2. All academics, I think, agree that this is a fair reading of the case-law, in particular Bowman v Secular Society[5] and McGovern[6]. Disagreement arises, however, in interpreting the notion that the Courts are unable to judge benefit. Most academics – including a number of high profile Cambridge academics – consider this to mean that the Court is for some reason or another simply unable to identify the benefits and detriments flowing from a political purpose and unable to weigh up where the balance of advantage lies. On this understanding, they consider the supposed inability to judge unconvincing. They cannot understand why the Court is unable to engage in this balancing process.
But on a closer reading of Slade J’s judgment in McGovern v Attorney-General,[7] which is the leading judgment in this area, I do not think this a fair interpretation of “inability of judge”. Slade J explicitly acknowledges that there is nothing to prevent the Court identifying the benefit and detriment of a purpose directed at bringing about legislative change, and undertaking a balancing of the one against the other. He says, in his judgment, that the Court may well come to a ‘prima facie opinion that a change in the law is desirable'’.[8] Slade J acknowledges that the Court is capable of making such a judgment.
The problem for Slade J, I believe, lies not in the court reaching an opinion on the issue of benefit, but rather in the court then using this opinion as the foundation for a legal conclusion. As Slade J says, were the court to use its opinion on whether a change in the law is a good or bad thing in order to found a legal opinion, it would usurp the legislature’s function (i.e. to assess the need for legal change). Judicial reticence in this context therefore stems from a reluctance to come out and say 'we think the law is wrong', or ‘we think an executive decision is wrong’. That, in turn, boils down to the judiciary’s view as to the relationship it has with the other branches of state. We are being told that the job of the Court is to apply, not question, the law; the judiciary cannot, therefore, use its view on the merit of legislation as the foundation for a legal conclusion.
PB: And I think that is quite interesting, given that judicial review has continued to grow and, particularly in areas such as tort, influence doctrines in private law.
CW: Yes; it could be that the goal posts have shifted. Charity law may be lagging behind other areas of law in which we do see the judiciary becoming more activist. However, such developments are controversial, and there is a lot of commentary on this in the public law scholarship. There is a huge overlap between what I am researching and public law developments; greater judicial boldness in that sphere may herald greater boldness in my sphere.
PB: Charity law is also unique as it involves private law principles but has a very public effect. Yet, in many ways, even with the expanding scope of public law dimensions, many private law doctrines have remained quite separate.
CW: Yes. It is interesting that while charity law is indisputably part of private law, one’s take on its interaction with political purpose is unavoidably predicated on a constitutional law position. Therefore, in this context one cannot avoid discussing public law. When I started researching this area I should have, but didn’t, anticipate this, perhaps because other academics are not recognising the relevance of public law to this aspect of charity law.
PB: The issues surrounding political trusts was recently considered by the High Court of Australia in Aid/Watch Inc v Federal Commissioner of Taxation[9] (2010) 241 CLR 539.
Aid/Watch was a charity concerned with the distribution of foreign aid to other countries and part of its activities involved advocacy toward legislative change and change in government practice.
The High Court of Australia held that this political purpose did not preclude Aid/Watch being a charity. The Court held, for the purposes of Australian law, that ‘…there is no general doctrine which excludes from charitable purposes “political objects” and has the scope indicated in England by McGovern v Attorney-General’.[10]
Instead, the Court said that the test is a general one as to whether the aim of the organisation was for a purpose beneficial to the community.[11]
Does this represent a sharp divergence in charity law between Australia and England?
CW: My first caveat is that I have come across Aid/Watch in academic commentary but am yet to read it – I need to do so soon. Judging by what you have told me, it appears that the Court in Aid/Watch has said that the political purposes rule, if such a rule exists, is independent of the public benefit requirement, and therefore lacking any justificatory force. My understanding of the political purposes rule is that it is an aspect of the public benefit rule. The reason a political purpose cannot be charitable is because the Court cannot determine whether such a purpose is for the public benefit. The Court in its reasoning in Aid/Watch, appears not to connect the political purpose rule with the public benefit requirement.
I would rationalise the decision in Aid/Watch with domestic charity law in this way: Australia has a different constitutional structure. Peter Turner (Cambridge University) emphasises that the Australian constitutional system postulates for its very existence an agitation for legislative change.[12] There is an ability to amend the Constitution by referendum and an implied freedom of political communication.
Aid/Watch makes sense in light of this. As I said, my understanding is that political purposes in the UK cannot be charitable because of a judicial squeamishness in saying that a law or executive policy/decision is wrong; the same squeamishness does not hamper the Australian courts on account of the different constitutional system in play. So Aid/Watch is actually very helpful to my approach to this area of law. It fits in perfectly to my thesis i.e. that the courts’ approach to political purpose is predicated entirely on a constitutional law position.
PB: And the High Court of Australia, in Aid/Watch, certainly makes explicit reference to the Australian Constitution’s system of representative government and the implied freedom of political communication that derives from this.[13] Yet, it is interesting, given our earlier discussion about the growth of judicial review in the public law sphere, as the Australian Constitution actually provides judges with quite limited grounds for rights-based intervention. Compared at least to the UK’s, albeit statutory, Human Rights Act.
CW: There is a lot to discuss, and I think Aid/Watch will be very significant to the article I am writing at the moment. I will certainly incorporate it.
PB: We have focused on one of the key controversies in charity law at present, relating to the public benefit test. What are other issues do you foresee, as charity law continues to develop?
CW: In the future I would like to continue to think about the public benefit requirement; it is extremely interesting as there are so many lenses through which to look at it. At the moment, I am looking at political purposes and their relationship to the public benefit requirement, but an equally interesting area is religious purposes and their relationship to the public benefit requirement. How can a Court hold a body aimed at promoting a particular religion beneficial? What type of benefit is the Court looking for? Downstream benefits? An inherent benefit in the religion itself? There are questions to be asked, also, about radicalised religions that deliver disbenefit as well as benefit. It is something for me to think about in the future.
PB: Christina Walton, thank you for speaking to Pandora’s Blog.
Christina Walton is a Lecturer in Law at the University of Exeter. She achieved a Double First in Jurisprudence and was awarded the Martin Wronker Prize for Trusts at Lincoln College, Oxford. She subsequently completed an MA in Philosophy at King’s College London with Distinction. Ms Walton previously taught Land Law and Trusts for a number of Oxford and Cambridge Colleges. This interview was conducted by Samuel Walpole at the University of Exeter in Exeter, Devon on 27 March 2015. Thank you to Balawyn Jones, Jocelyn Bosse and Tristan Pagliano for their, as always, excellent editorial assistance.
[1] Income Tax Special Commissioners v Pemsel [1891] AC 531.
[2] National Anti-Vivisection Society v Inland Revenue Commissioners [1940] AC 31.
[3] [1895] 2 Ch 501
[4] [1982] Ch 321.
[5] Bowman v Secular Society [1917] AC 406.
[6] [1982] Ch 321.
[7] [1982] Ch 321.
[8] Ibid 337.
[9] (2010) 241 CLR 539.
[10] Ibid [48].
[11] Ibid [46]-[47].
[12] Quoting the High Court in Aid/Watch at [45]:
‘The provisions of the Constitution mandate a system of representative and responsible government with a universal adult franchise, and s 128 establishes a system for amendment of the Constitution in which the proposed law to effect the amendment is to be submitted to the electors. Communication between electors and legislators and the officers of the executive, and between electors themselves, on matters of government and politics is "an indispensable incident" of that constitutional system. While personal rights of action are not by these means bestowed upon individuals in the manner of the Bivens action known in the United States, the Constitution informs the development of the common law. Any burden which the common law places upon communication respecting matters of government and politics must be reasonably appropriate and adapted to serve a legitimate end in a manner which is compatible with the maintenance of that system of government.’
[13] Ibid.
Images are from http://pixabay.com/. Licensed for use under Creative Commons (CC0 Public Domain).