A tough Act to follow

Can a poverty charity be a charity if it only helps a restricted class of people defined by their relationship to one another – for example, the employees or a certain company, the relatives of an individual or the members of a private organisation? Is the public benefit requirement met in these cases?

That question is currently being considered by the Upper Tribunal after the Attorney General made a reference, having been approached by the Charity Commission. The reference asked for clarification as to the impact of the 2006 Charities Act on the law of charity, which had held that such trusts were indeed charities.

Case law dating back to the 18th century confirms the general principle that, to be charitable, a trust must be “for the benefit of the community or an appreciably important section of the community”. It is well established as a general rule that relations of an individual, employees of a particular employer and members of a society are not a sufficient section of the public to comprise a beneficial class for a charity.

Outside of this general rule, judges in a series of cases have ruled that trusts established for the benefit of a restricted group of people can be charitable, so long as any benefit is granted only when and if members of that group are in poverty. In Re Scarisbrick, Jenkins LJ said that “there is an exception to the general rule, in that trusts or gifts for the relief of poverty have been held to be charitable even though they are limited in their application to some aggregate of individuals… and are not trusts or gifts for the benefit of the public or a section thereof”. The legal authorities differed in their approach, some suggesting that public benefit as laid down by the general rule was not required, others that the public benefit requirement was in fact met. The Court of Appeal and the House of Lords continued to accept this exception to the general rule on the basis that these were long-established legal precedents.

The 2006 Act made it clear that, to be charitable, a trust had to be established for the public benefit. It did not set out any exceptions to this rule. However, the Act also provided that the reference in the Act to public benefit means public benefit as understood in law before the Act. Does that then mean that these exceptional cases survive the 2006 Act? That depends on the interpretation of the case law before the 2006 Act, which remains unclear.

It is this apparent contradiction that the tribunal judges will have to navigate. And, like the judicial review brought against us by the Independent Schools Council, this case requires a nuanced interpretation of charity law. In that case the tribunal had concluded that the removal of the presumption of public benefit applied to the benefit aspect of public benefit, so this is not an issue here.

The commission itself does not have an established view either way. Our aim in raising this issue was to ensure that we, and charities, fully understand the implications of the Charities Act 2006 on the law of charity, so that we can apply the law properly. We would therefore be satisfied with any outcome – so long as it is clear.