For a trust to be charitable, it must satisfy three cumulative requirements. First, the trust must be for exclusively charitable purposes — it cannot have any non-charitable purpose mixed in (Charities Act 2011 s.2(1)). Second, the purpose must fall within one of the descriptions of charity listed in the Charities Act 2011 s.3. Third, the trust must satisfy the public benefit requirement — it must benefit the public or a sufficient section of the public (s.4). If any one of these elements fails, the trust is not charitable.
A trust that mixes charitable and non-charitable purposes will fail entirely unless the non-charitable purposes are merely ancillary or incidental to the charitable purposes. In Re Hummeltenberg [1923], a trust for "philanthropic and benevolent" purposes failed because these terms were too wide and included non-charitable purposes.
"For the purposes of the law of England and Wales, ‘charity’ means an institution which — (a) is established for charitable purposes only, and (b) falls to be subject to the control of the High Court in the exercise of its jurisdiction with respect to charities."
The modern statutory categories trace back to Lord Macnaghten's classification in Commissioner of Special Income Tax v Pemsel [1891] AC 531. He identified four "heads" of charity: (1) relief of poverty, (2) advancement of education, (3) advancement of religion, and (4) other purposes beneficial to the community. The Charities Act 2011 s.3(1) expands this list to 13 specific descriptions, but they all fall within these four broad heads.
Poverty does not mean destitution only. In Re Coulthurst [1951], a trust for persons "who have not sufficient means to meet the commitments which it is reasonable to expect them to meet" was held charitable. Importantly, the requirement of public benefit is presumed for poverty trusts — it need not be proved (Charities Act 2011, s.4(3)(a)). A trust can even be for a small, defined group if the members are poor. In Re Scarisbrick [1951], a trust for poor relations of the settlor was held charitable.
Education extends beyond formal schooling. In Re Hopkins [1965], the promotion of the art of ballet was held to be educational. In Re Pinion [1965], a collection of paintings for "educational purposes" failed because the collection was of poor quality and not genuinely educational. Research can be educational if it is useful and the results are made available to the public (Re Payton [1913]). Museums, art galleries, and institutions for the dissemination of knowledge all fall within this head.
Religion is broadly defined to include theistic and non-theistic faiths. In Re South Place Ethical Society [1980], the promotion of ethical and moral standards without reference to a deity was held not to be the advancement of religion. However, in Re Watson [1973], it was stated that religion involves faith in a supreme being and worship of that being. Under the Charities Act 2011 s.3(2)(a), a religion must involve belief in one or more gods or spiritual or non-secular principles. Trusts for maintaining places of worship, supporting ministers, and missionary work are all charitable.
This is the catch-all category for purposes that benefit the community but do not fall within the first three heads. The Charities Act 2011 s.3(1) provides a non-exhaustive list including: advancement of health, advancement of citizenship or community development, advancement of the arts, culture, heritage, or science, advancement of amateur sport, advancement of human rights, and prevention or relief of poverty. Recreational trusts are charitable if the recreation is available to the public or a sufficient section of the public (Recreational Charities Act 1958).
| Category | Examples | Public Benefit Presumed? |
|---|---|---|
| Relief of poverty | Almshouses, food banks, housing for the poor | Yes (s.4(3)(a)) |
| Advancement of education | Schools, universities, research, museums, scholarships | No — must be proved |
| Advancement of religion | Churches, mosques, missionary work, religious education | No — must be proved |
| Other beneficial purposes | Health, animal welfare, environment, amateur sport, human rights | No — must be proved |
In an SQE1 question, first identify whether the purpose falls within one of the four Pemsel heads. If it does, then consider whether public benefit is satisfied. Remember that poverty relief gets a free pass on public benefit — the court presumes it. For the other three categories, you must actively analyse whether the public benefit requirement is met.
Public benefit has two limbs. The first is the "benefit" limb — the purpose must be beneficial (not harmful). The second is the "public" limb — the benefit must be available to the public or a sufficient section of the public. Both limbs must be satisfied. In Re Diplock [1948], the Court of Appeal set out the general principles for determining whether a gift is charitable. The public limb requires that the beneficiaries must not be numerically negligible and that the class must be sufficiently open.
This is a leading case on public benefit in the context of religious trusts. The testator left property to a community of Roman Catholic nuns who lived contemplative lives of prayer and seclusion. The House of Lords held that although the advancement of religion is a charitable purpose, the particular activities of the nuns — praying in seclusion — did not provide any demonstrable public benefit. The court held that public benefit could not be presumed for religious purposes and must be proved on the facts.
An educational trust limited to descendants of three named persons was held not charitable because the class of beneficiaries was too small and personal. The personal nexus between the settlor and the beneficiaries meant the trust was not for the public benefit. This principle applies to all charitable purposes except poverty relief. Even where an educational trust is nominally open, if the class is defined by a personal connection to the settlor, it is not charitable.
If a trust is limited to a class defined by a personal relationship to the settlor (e.g., employees of a specific company, members of a particular family), it is generally not charitable because of the personal nexus. However, there is an important exception for poverty trusts — a trust for poor relatives or poor employees of a particular firm can be charitable (Re Scarisbrick [1951]; Re Koeppler’s Will Trusts [1986]). The rationale is that poverty is a social evil that justifies assistance regardless of the personal connection.
The Charity Commission, through the Registrar of Charities, is responsible for determining whether an organisation meets the public benefit requirement. Following the Charities Act 2006 (now consolidated in the 2011 Act), there is no presumption of public benefit for fee-charging charities (e.g., independent schools). The Charity Commission published guidance (CB2) setting out how fee-charging charities can demonstrate public benefit, such as by offering bursaries or sharing facilities with the wider community.
Students often assume that because a purpose is "good" it must be charitable. This is incorrect. A trust for the relief of a named individual, or for a small group of the settlor's friends, is not charitable even though the purpose may be benevolent. The public benefit requirement is a legal threshold, not a moral one. Distinguish between "charitable" and "benevolent" or "philanthropic" purposes.
The fundamental principle is that a trust must have identifiable beneficiaries who can enforce it (the "beneficiary principle" from Morice v Bishop of Durham (1805)). Non-charitable purpose trusts have no beneficiaries — they are for purposes, not people — and so there is no one with standing to enforce the trust. As a result, non-charitable purpose trusts are generally void. This was confirmed in Re Endacott [1960] Ch 232, where a trust for "such charitable institution or institutions or other charitable or benevolent object or objects" in the City of Exeter was held void because the purposes were too wide.
This is a key case that appears to create a further exception for purpose trusts. The settlor established a trust to maintain a sports ground for the benefit of employees of his company and their families. Goff J held the trust was valid, but not as a purpose trust. Instead, he reasoned that the purpose was indirectly for the benefit of identifiable individuals (the employees and their families). The beneficiaries had locus standi to enforce the trust. This is really a trust for persons, not a purpose trust — the purpose is merely the mechanism by which the benefit is delivered. This reasoning has been widely followed.
Where X lends money to Y for a specific purpose, and that purpose fails, a resulting trust arises in favour of X. In Quistclose itself, Quistclose lent money to Rolls Razor Ltd for the purpose of paying dividends to shareholders. The company went into liquidation before paying the dividends. The House of Lords held that the money was held on resulting trust for Quistclose because the primary purpose had failed. This is not strictly a purpose trust exception — it is a resulting trust that arises by operation of law when the primary purpose fails.
| Feature | Charitable Trusts | Non-Charitable Purpose Trusts |
|---|---|---|
| Beneficiary principle | Not required (Attorney-General enforces) | Generally fails for lack of beneficiaries |
| Perpetuity | No rule against perpetuities — can last forever | Subject to the perpetuity rules |
| Tax | Exempt from most taxes | No tax exemptions |
| Enforcement | Charity Commission / Attorney-General | No enforceability (generally void) |
| Cy-près | Available if purpose fails | Not available |
| Exceptions | N/A | Monuments, animals, masses, Quistclose |
The cy-près doctrine (from the French "cy-près que possible" — "as near as possible") allows the court to modify the purposes of a charitable trust when the original purpose has become impossible, impracticable, or has been exhausted. The court redirects the trust property to a purpose as close as possible to the original charitable intent. This is a unique feature of charitable trusts — non-charitable trusts simply fail if their purpose becomes impossible.
Step 1: The original purpose must have been charitable
Step 2: The original purpose has become impossible, impracticable, or superseded (e.g., the charity no longer exists, the purpose is fulfilled, or circumstances have changed)
Step 3: The settlor must have had a general charitable intent — meaning they intended to benefit charity generally, not just one specific charity
Step 4: The court (or Charity Commission) applies the property cy-près to a similar charitable purpose
The concept of general charitable intent is crucial. If the settlor had a specific intent to benefit one particular charity, and that charity no longer exists, the gift fails and the property results to the settlor or their estate. But if the settlor had a general intent to benefit charitable purposes in a particular field (e.g., "for the relief of poverty in my home town"), cy-près can be applied. In Re Faraker [1912], a gift "to such charitable institutions as my trustees shall select" showed general charitable intent. Contrast this with Re Best [1904], where a gift to a specific non-existent charity resulted back to the estate.
The Charities Act 2011 provides a statutory cy-près scheme. Section 62 allows the Charity Commission to apply cy-près when the original charitable purpose has ceased to be achievable or has been fulfilled. The Commission has broad powers to alter the charitable purposes of a charity by scheme. This statutory scheme operates alongside the common law doctrine and provides a more flexible, administrative mechanism for redirecting charitable funds.
Cy-près is exclusive to charitable trusts. If a non-charitable purpose trust fails because its purpose becomes impossible, the property results to the settlor (or their estate). There is no power to redirect it to a similar non-charitable purpose. This is one of the key practical differences between charitable and non-charitable trusts.
Look carefully at the wording of the gift. "I leave £10,000 to Cancer Research UK" — this is specific intent. If Cancer Research UK no longer exists, the gift results back. "I leave £10,000 for cancer research" — this is general charitable intent. Cy-près can be applied to redirect the money to another cancer research charity. The distinction is critical for exam questions.
The Charity Commission is the regulator of charities in England and Wales. Under the Charities Act 2011, most charities with an annual income of over £5,000 must register with the Commission. The Commission maintains the public Register of Charities and has a statutory duty to identify and investigate abuse and mismanagement in charities (s.15). Charities must file annual returns and accounts, and the Commission can request additional information at any time.
Under the Charities Act 2011 ss.117-122, charities generally require Charity Commission consent before disposing of or mortgaging charity land. The Commission must be satisfied that the transaction is in the best interests of the charity and that the charity is receiving adequate consideration. This is a significant protection for charity assets. Failure to obtain consent where required may render the transaction voidable.
The Commission has the power to make schemes under the Charities Act 2011 s.69. A scheme is a formal legal instrument that can alter the constitution, purposes, or administrative arrangements of a charity. Schemes are commonly used to apply cy-près, to amalgamate charities with similar purposes, to update outdated trusts, or to resolve disputes between trustees. The scheme-making power is a flexible and important tool for maintaining the effectiveness of charities over time.
For SQE1, remember that the Charity Commission is the primary regulator of charities. Know its key powers: registration, investigation, direction, removal of trustees, consent to land transactions, and scheme-making. The Commission acts in a supervisory capacity — it does not manage charities but ensures trustees comply with their legal duties. The Court also retains jurisdiction over charities and can intervene in serious cases.