Report No. 70
26.21. Poverty and public benefit.-
Poverty is the major anomalous head of charity for which the requirement of public benefit is not essential, or is, at least, greatly modified. The law of charity in relation to poverty has followed its own line, and a series of cases beginning with Isaac v. Defriez, Petit Equity and Trusts : (1754) 2 Amb 595; A.G. v. Price, (1810) 17 Ves 571, has established the validity of trusts for "poor relations", or other groups of persons who are not normally regarded as forming for this purpose a section of the community.
Thus, a trust for the relief of poverty was held to be charitable in Gibson v. South American Stores (Gath and Chayes Ltd.), (1949) 2 All ER 985: 1950 Ch 177 CA; Coulthurst's Will Trusts (in re:), (1951) 1 All ER 774: 1951 Ch 661 CA where the beneficiaries were selected by the tie of common employment, and in Re Young's Will Trusts, (1955) 3 All ER 689 where there was a gift to the trustees of the Savage Club "upon trust to be used by them as they shall in their absolute discretion think fit for the assistance of may fellow members by way of persons or grants who may fall on evil days."
The existing cases on this matter were considered by the Court of Appeal in Re Scarisbrick, (1951) 1 All ER 822: 1951 Ch 622. Cohen (in re:), (1973) 1 All ER 889, where, following life interests to her children, a testatrix gave half her residue to such relations, i.e., relations in any degree, of her children as should be in needy circumstances. It was held that the exceptional rule in relation to trusts for the relief of poverty applied just as much to a trust for immediate distribution as to a perpetual trust.
It was pointed out, however, that it would be different where the trust was not for the relief of poverty, albeit among a class not normally regarded as forming a section of the public, but an ordinary gift to some particular individual or individuals, even though limited to the amount required to relieve his or their necessities if in necessitous circumstances-such as gifts to named persons in needy circumstances, or to a narrow class of near relatives, for example, such of a testator's statutory next of kin as at his death should be in needy circumstances.
Most of the cases were reviewed by the House of Lords in Dingle v. Turner, (1972) 1 All ER 876: 1972 AC 610 HL where the validity of the property exception was confirmed. Their Lordship agreed that it was a natural development of the "poor relations" decisions to hold as charitable trusts, for "poor employees" of an individual or company (the case before the House), or poor members of a club or society, and they held that it would be illogical to draw a distinction between different kinds of poverty trusts.
"Education" has furnished a useful ground for controversy-we are dealing with the cases relating to education though the expression used in section 18 is "knowledge".
Schools of learning, free schools and scholars in universities are specifically mentioned in the Statute of Elizabeth, and many other educational purposes have been held to come within its spirit and intendment.
Education is not restricted to the narrow sense of a master teaching a class, but includes the education of artistic taste,1 the promotion or encouragement of those arts and graces of life which are, perhaps, the finest and best part of the human character.2
Education includes the improvement of a useful branch of human knowledge and its public dissemination.3 As Farewell, J. observed-"a ride on an elephant may be educational. At any rate it brings the reality of the elephant and its uses to the child's mind, in lieu of leaving him to mere book learning. It widens his mind, and in that broad sense is educational."
1. Royal Choral Society v. I.R. Commrs, (1943) 2 All ER 101 CA.
2. Per Vaisey, j. Shaw's Will Trusts (in re:), (1952) 1 All ER 49 (55): 1952 Ch 163 (172) (the wife of G. Bernard Shaw).
3. Incorporated Council of Law Reporting for England and Wales v. A.G., (1971) 3 All ER 1929 (1046): 1972 Ch 73 (102) (CA) (per Bucklay, Lj.).
It has since been explained1 that education was used here in a wide sense "certainly extending beyond teaching, and that the requirement is that, in order to be charitable, research must either be of educational value to the researcher or must be so directed as to lead to something which will pass into the store of educational material, or so as to improve the sum of communicable knowledge, in an area which education may cover-education in this last context extending to the formation of literary taste and appreciation." It is not enough, however, that the object should be educational in the sort of loose sense in which all experience may be said to be educative.2
1. Hopkins' Will Trusts (in re:), (1964) 3 All ER 46 (52): 1965 Ch 669 (680), per Wilberforce, J. See (1965) 29 Con 368 (M. Newark and A. Samuels).
2. I.R. Commrs. v. Beddelep, (1955) 1 All ER 525 (529): 1955 AC 572 (585) (H.L., per Lord Simonds).
Advancement of religion is a separate head of charity, and this obviously is not confined to any particular religion. Even in England, it was not so confined. Romilly, M.R. observed in Thornton's case,1
"It is generally accepted that the Court of Chancery makes no distinction between on religion and another (or one sect and another (unless) the tenets of a particular sect inculcate doctrines adverse to the very foundations of all "religion and subversive of all morality. If the tendency were not immoral and although this Court might consider the opinions sought to be propagated foolish or even devoid of foundation, the trust would nevertheless be charitable."
Of course, though prima facie, there is a presumption that religious purposes are charitable, in English law they are not regarded as so if they lack the vital element of public benefit. Apart from the probably anomalous case of relief of poverty, it is well settled in England that a trust will not be legally charitable unless it is for the benefit of the community or public or an appreciably important section of the community or public.
1. Thornton v. Howe, (1862) 31 Bear 14 (19) (Romilly, M.R.); Gilmour v. Coats, (1949) 1 All ER 848: 1949 AC 427 (HL); Watson (in re:), Hobbs v. Smith, (1973) 3 All ER 678.
26.25. Other objects.-
Besides the objects specifically enumerated, other objects of public benefit fall within charity. These cannot be exhaustively enumerated, but the most important ingredient is of public benefit.
26.26 and 26.27. Public benefit.-
The question that usually presents some difficulty is one relating to the aspect of "public benefit". As Lord Gross pointed out in Dingle v. Turner, (1972) 2 WLR 523 (535)
"After all, either a part of the public is composed of individuals and is susceptible of increase or decrease. No doubt, some classes will be more naturally described as sections of the 'public' than as private classes, while other classes are more naturally described as private classes rather than a section of the public. For example, the blind can naturally be described as a section of the public and not as a private class.
On the other hand, the descendants of Mr. Gladstone might more reasonably be described as a private class. It is when one turns to large companies employing thousands of men and women, that difficulty arises. In Truth, then the question whether or not the potential beneficiary of a rust can fairly be said to constitute a section of the public is a question of degree.
Much must depend on the purpose of the trust. It may well be that, on the one hand, a trust to promote some purpose, prima facie charitable, will constitute a charity even though the class of potential beneficiaries might fairly be called a private class and that, on the other hand, a trust to promote another purpose, also prima facie charitable, will not constitute a charity even though the class of potential beneficiaries might seem to some people fairly describable as a section of the public.
In answering the question whether any given trust is a charitable trust, the courts-as I see it-cannot avoid having regard to the fiscal privileges accorded to charities. As Counsel for the Attorney-General remarked in the course of the argument, the law of charity is bedevilled by the fact that charitable trust enjoy two quite different sorts of privilege.
On the one hand, they enjoy immunity from the rules against perpetuity and uncertainty and though individual potential beneficiaries cannot sue to enforce them the public interest arising under them is protected by the Attorney-General. If this was all, there would be no reason for the courts not to look favourably on the claim of any "purpose" trust to be considered as a charity if it seemed calculated to confer some real benefit on those intended to benefit by it whoever they might be and if it would fail if not held to be a charity.
But that is not all. Charities automatically enjoy fiscal privileges which with the increased burden of taxation have become more and more important and in deciding that such and such a trust is a charitable trust the court is endowing it with a substantial annual subsidy at the expense of the tax-payer. Indeed, claims of trusts to rank as charities are just as often challenged by the revenue as by those who would take the fund if the trust was invalid.
It is, of course, unfortunate that the recognition of any trust as a valid charitable trust should automatically attract fiscal privileges, for the question whether a trust to further some purpose is so little likely to benefit the public that it ought to be declared invalid and the question whether it is likely to confer such great benefits on the public that it should enjoy fiscal immunity are really two quite different questions.
The logical solution would be to separate them and to say-as the Radcliffe Commission proposed-that only some charities should enjoy fiscal privileges. But, as things are, validity and fiscal immunity march hand in hand and the decisions in the Compton, 1945 Ch 123 and Oppenheim, 1951 AC 297 cases were pretty obviously influenced by the consideration that if such trusts as were there in question were held valid, they would enjoy an undeserved fiscal immunity."
26.28. Public benefit.-
Benefit to the community is a very wide category. Law reporting has been held to possess public benefit in the context of charity.1
It must be agreed that law reporting could fall into the residual head of charity. Barwick, C.J.'s broad ground for so holding is-"in modern times without the availability of law reports in book form the law could not be adequately administered. The production of law reports is beneficial to the whole community because of the universal importance of maintaining the socially sustaining fabric of the law."
1. Incorporated Council of Law Reported Queensland v. commissioner of Taxation, (1971) 45 ALJR 552 (555C).
There has been considerable discussion about the precise meaning of the word "dharma" which unfortunately, was misconstrued by the Privy Council.1 Classical Sanskrit texts would seem to use this word-so far as proprietary disposition for dharma are concerned-as comprising both the types of charity-ishta and poorta. There are, in fact, two verses of Manu2 in support of this statement. One of these verses3 has been thus translated by Dr. Buhler:
"Let him always practise, according to his ability, with cheerful heart, the duty to liberality (dandharma) both by sacrifice (ishta) and by charitable works (poorta) if he finds a worthy recipient (of the gift)."
Then, it was pointed out by Subramania Iyer, J. in his dissenting judgement in a Madras case4 that the principle of the injunction as to poorta works is service to fellow-beings, though some of the forms in which each service is rendered are peculiar to this country-"charity, like water, taking its colouring from the soil through which it flows."
1. Ranchoddas v. Parvati Bai, 26 Indian Appeals 71 (PC).
2. Manu, Chapter 4, Verses 226 and 227.
3. Buhler Sacred Books of the East, Vol. XXV, p. 164, verse 227.
4. ILR 30 Mad 340.
26.30. Amendments needed.-
This brief survey was intended to bring out certain aspects of the law. While no changes of substance are needed in section 18, a few additions and modifications and amendments are required. In the first place, it is appropriate that the subject of "relief of poverty" should find a specific mention in the section. Relief of poverty has, not only in England but also in India, always been regarded as one of the paramount heads of charity and even though there may be no controversy on the subject, yet, having regard to the fact that all other heads are specifically mentioned in section 18, it is, in our view, necessary that this object should find mention in section 18.
26.31. Recommendation to substitute "education for knowledge".-
As to the word "knowledge" which occurs in section 18, the word currently in use in judicial parlance is "education".1 The statutory precedents have already been cited.2 Education is obviously a much wider term than "knowledge"; and instead of leaving it to be covered by the residuary words in section 18 which embraces other objects beneficial to mankind, it is appropriate that the expression currently in use should be inserted. It could hardly be the intention of the legislature that education which is not "knowledge" should be excluded from the ambit of the beneficial provision in section 18. We recommend that "knowledge" should be replaced by "actionable claim".
Reasons restated-This recommendation3 is subject to reservation by Shri Dhavan and Shri Sen-Verma. The recommendation is based on several considerations based on the fact that-(i) Indian legislative precedents all use "education"; (ii) judicial decisions generally in the field of the law of charity employ, or confirm the use of, the expression "education"; (iii) "education" is not construed narrowly in the judicial decisions; (iv) to use both the expressions "education" and "knowledge" would be inappropriate, because it would cast a doubt on the other statutory precedents; (v) still, if any case is left out, the residuary words in section 18 will cover it.
1. Paras. 26.22 and 26.23, supra.
2. Paras. 26.7 and 26.10, supra.
3. Reservation of Shri Dhavan and Shri Sen-Varma, as to section 18.
26.32. Recommendation to revise section 18.-
In the light of the above discussion, we recommend that section 18 should be revised as follows:
Revised section 18
"The restrictions in sections 14, 16 and 17 shall not apply in the case of a transfer of property for the benefit of the public in the relief of poverty, the advancement of religion, education, commerce, health, safety, or any other object beneficial to mankind."