CHARITABLE TRUSTS

•3 element, wholly exclusively

rd

charitable purpose.
 EXCLUSIVELY CHARITABLE

• In order for a trust to be regarded as charitable, it

must be exclusively charitable.
• The leading case is Chichester Diocesan Fund
and Board of Finance Incorporated v Simpson
[1944] AC 341.
 EXCLUSIVELY CHARITABLE
• The testator, Caleb Diplock, directed his executors to apply the residue of his estate
“for such charitable institution or institutions or other charitable or benevolent
object or objects in England” as they should in their absolute discretion select.

• The trust was held to be invalid as a charity by the House of Lords because of the
availability of “benevolent” objects. Nor could the disjunctive “or” be read as a conjunctive
“and”.
 EXCLUSIVELY CHARITABLE
• This decision led to much litigation (apparently at least 123 actions were filed and 20
brought to trial) involving both the trustees of the trust as well as charities (mostly hospitals)
which had received donations from the trustees.

Caleb Diplock Ward, Guy’s Hospital

(1950s)
 EXCLUSIVELY CHARITABLE
• The most famous of these cases is Re Diplock [1948] Ch 465, on
appeal sub nom Ministry of Health v Simpson [1951] AC 251.
• The stress of the litigation appears to have caused two trustees their
lives: CE Morris, “The Testament of Caleb Diplock” (1948) 65 S
African LJ 578.
• In response to the litigation surrounding Caleb Diplock’s will, the
Nathan Committee recommended reforming the law via the
Charitable Trusts (Validation) Act 1954.
• The Act only applies to imperfect trusts set up before 16 December
1952.
 EXCLUSIVELY CHARITABLE
• The Act validates certain such imperfect trusts by treating them “as if
the whole of the declared objects were charitable” for the period
before the Act’s commencement (s 1(2)(a)) and “as if the provision
had required the property to be held or applied for the declared objects
in so far only as they authorise use for charitable purposes” for the
period after its commencement (s 1(2)(b)).
• The retrospective effect has been much criticised: Geoffrey Cross,
“Some Recent Developments in the Law of Charity” (1956) 72 LQR
187; PS Atiyah, “Charitable Trusts (Validation) Act 1954” (1955) 18
MLR 152.
 EXCLUSIVELY CHARITABLE
• In various Commonwealth jurisdictions, e.g. Singapore (s 64 Trustee Act (Cap 337)), similar
legislation was passed:
“(1) No trust shall be held to be invalid by reason that some non-charitable and invalid
purpose as well as some charitable purpose is or could be deemed to be included in any of the
purposes to or for which an application of the trust funds or any part thereof is by such trust
directed or allowed.
(2) Any such trust shall be construed and given effect to in the same manner in all respects as
if no application of the trust funds or any part thereof to or for any such non-charitable and
invalid purpose had been or could be deemed to have been so directed or allowed.
(3) This section shall not apply to any trust declared before or to the will of any testator
dying before 14th July 1967.”
 EXCLUSIVELY CHARITABLE
• No reform appears to have been made in Hong Kong.
• There remain two possible avenues to avoid failure on this count.
• First, if a non-charitable purpose is only incidental to the main charitable purpose, it will not
prevent the trust from being charitable.
• As Lord Millett explained in
• Latimer v The Commissioner for Inland Revenue [2004] 1 WLR 1466:
“The distinction is between ends, means and consequences. The ends must be exclusively
charitable. But if the non-charitable benefits are merely the means or the incidental
consequences of carrying out the charitable purposes and are not ends in themselves, charitable
status is not lost.”
 EXCLUSIVELY CHARITABLE
• As his Lordship explained:
“Trustees of a charitable trust may be authorised to charge
their own fees and expenses to the trust without causing the
loss of the trust's charitable status.
It cannot be said to be a purpose of the trust to enable the
trustees to charge fees and expenses; such expenditure may
be justified only if it helps to further the trust's charitable
purpose, and may accordingly be classified as ancillary to
that purpose.”
 EXCLUSIVELY CHARITABLE
• As his Lordship explained:
“[S]ome trusts for charitable purposes cannot help but confer incidental
benefits on individuals; they do not thereby lose their charitable status:
Royal College of Surgeons of England v National Provincial Bank Ltd
[1952] AC 631 provides a good example of this.

The college was established to promote and encourage the study and
practice of the art and science of surgery. The professional protection of
members of the college (not a charitable purpose) was held to be ‘an
incidental though an important and perhaps necessary consequence of the
work of the college in carrying out its main object’.”
 EXCLUSIVELY CHARITABLE
• Alternatively, and more rarely, it may be possible to divide a
fund into parts, with some applied to exclusively charitable
purpose, and the rest separately dealt with.
• However, this solution is only possible if the trust instrument can
be construed as directing a division.
• For example, in Salusbury v Denton (1857) 3 K & J 529, a fund
to be used to found a school or to provide for the poor, with the
remainder to be used for the benefit of the testator’s relatives was
held to be so divisable. (Severance)
 SUMS UP
3 possible ways to save the clause that failed for want of
wholly exclusively charitable purpose.
• Benevolent construction (interpretation)
• Incidental to the charitable purpose- outworking to the
main purpose.
• Severance: Salusbury v Denton
 POLITICAL PURPOSES
• Another prohibition found in the law relating to charitable trusts is the
prohibition that the trust be used to advance political purposes.

• Most famously, in 1948, the House

of Lords stripped the National Anti-
Vivisection Society of its charitable
status in National Anti-Vivisection
Society v Inland Revenue
Commissioners [1948] 1 AC 31
because its objectives were political.
 POLITICAL PURPOSES
• The leading judgment was delivered by Lord Wright, who cited with approval Lord
Parker in Bowman v Secular Society Ltd [1917] AC 406:

“The abolition of religious tests, the disestablishment of the Church, the secularization of
education, the alteration of the law touching religion or marriage, or the observation of the
Sabbath, are purely political objects. Equity has always refused to recognize such objects as
charitable … [A] trust for the attainment of political objects has always been held invalid,
not because it is illegal, for every one is at liberty to advocate or promote by any lawful
means a change in the law, but because the Court has no means of judging whether a
proposed change in the law will or will not be for the public benefit, and therefore cannot
say that a gift to secure the change is a charitable gift.”
 POLITICAL PURPOSES
• In Australia, the political purposes restriction was abolished by the High Court in Aid/Watch
Incorporated v Commissioner of Taxation 8 (2010) 241 CLR 539.
• Aid/Watch sought to promote the more efficient use of Australian and multinational foreign
aid directed to the relief of poverty and its activities included research and public campaigns
intended to generate public debate and to bring about changes in government policy and
activity relating to the provision of foreign aid.
 POLITICAL PURPOSES
• The majority of the High Court held:
“[T]he generation by lawful means of public debate … concerning the efficiency of foreign
aid directed to the relief of poverty, itself is a purpose beneficial to the community within the
fourth head in Pemsel.”
• They further observed:
“The system of law which applies in Australia thus postulates for its operation the very
‘agitation’ for legislative and political changes … There is none of the ‘stultification’ of
which Tyssen wrote in 1888. Rather, it is the operation of these constitutional processes
which contributes to the public welfare. A court administering a charitable trust for that
purpose is not called upon to adjudicate the merits of any particular course of legislative or
executive action or inaction which is the subject of advocacy or disputation within those
processes.”
 POLITICAL PURPOSES
• The Law Reform Commission
of Hong Kong, in its report on
Charities noted the Australian
decision but appears to take
the view that the political
purposes limitation ought to
still be retained.

• This despite the acknowledged difficulty of drawing a fine distinction between

campaigning and political purposes, particularly in relation to the proposed new
head of charity on “the advancement of human rights, conflict resolution or
reconciliation.”
 POLITICAL PURPOSES
• To be fair to the Hong Kong Law Commission, despite reforming its
charitable purposes in 2006 and 2011, the UK has retained the political
purposes limitation.
• It is for this reason that in England, Amnesty International is divided
into Amnesty International, which is a registered charity with non-
political purposes, and Amnesty International Ltd, which is not
registered as a charity and which pursues political objectives.
 MCGOVERN V A-G [1982] CH. 321
• McGovern v A-G [1982] Ch. 321, per Slade J at 340 – Amnesty International

• “a trust for political purposes… can never be regarded as being for the public benefit in
the manner which the law regards as charitable.
• (2) Trusts for political purposes falling within the spirit of this pronouncement include,
inter alia, trusts of which a direct and principal purpose is either (i) to further the
interests of a particular political party; or (ii) to procure changes in the laws of this
country; or (iii) to procure changes in the laws of a foreign country; or (iv) to procure a
reversal of government policy or of particular decisions of governmental authorities in
this country; or (v) to procure a reversal of government policy or of particular decisions
of governmental authorities in a foreign country”
 CHARITABLE PURPOSE TRUSTS

Charitable purposes Public Benefit Wholly Exclusively

 LAW REFORM
• On the subject of law reform, the most significant reform that could
have been undertaken, the setting up of a Charity Commission, was
not recommended “at this stage” by Law Reform Commission of
Hong Kong in its Final Report.
• This had been initially proposed by the Charities Sub-Committee of
the Law Reform Commission of Hong Kong in its Consultation Paper
but the proposal met with strong opposition.
• This leaves Hong Kong quite unique in this respect as most common
law jurisdictions have set up Charity Commissions to monitor and
supervise all charities irrespective of their purpose or their particular
vehicle (e.g. trust, company, unincorporated association).
 LAW REFORM
• According to a report in Forbes (Is Hong Kong A Paradise For Charity Fraudsters?
It Surely Could Be, 17 Sep 2015), a critic of the reform remarked:

“I have no idea about the intention of the government, but if there is no specific,
clear scope, and roles or responsibilities of the proposed Charity Commission, it
could be threatening to the autonomy and freedom of expression and the
participation of civil society”, says Linda To. “There are a lot of controversial
issues in the Law Reform Commission’s report and the NGO sector has raised
many concerns regarding those issues, such as the definition of ‘charitable
purpose’, the roles and responsibilities of the Charity Commission and whether the
commission’s power would be too big, overruling the autonomy of civil
organisations”.
 LAW REFORM
• The situation appears to be less than ideal, with the SCMP reporting in 2018 that “Charities
in Hong Kong forced to reveal finances – but critics say new measures don’t go far enough”
(2 August 2018).

• Meanwhile, absent a Charity Commission,

we are dependent on individuals, such as
Mary Jane Reimer (better known to most as
Yung Jing-Jing 翁 靜 晶 ) to expose
wrongdoing among charities as she did in
the case of Sik Chi Ding, the abbess of Ting
Wai Monastery in Tai Po, who allegedly
pocketed millions in donations.
 CY-PRÈS
• The cy-près (law French for “so near”) doctrine allows funds applied
for charitable purposes to be repurposed for other charitable purposes
when the original charitable purposes fail because of either
impossibility or impracticability.
• If cy-près does not apply, then the remaining funds will be held on
resulting trust for the settlor(s).
• The cy-près doctrine applies differently depending on whether the
failure of the charitable purpose occurs at the outset (initial failure) or
subsequently (subsequent failure).
 CY-PRÈS
Failure of Charitable Purpose

Initial Failure Subsequent Failure

General Charitable Intent? Express Provision?

Yes No Yes No

Cy-près Resulting According to Cy-près

Trust Terms
 INITIAL FAILURE
• Cases of initial failure tend to be found among cases of testamentary
charitable trusts. A charity that exists at the time the will is made
ceases to exist by the time the testator passes away.
• For example, in Re Rymer [1895] 1 Ch 19, a legacy of £5,000 was
left “to the rector for the time being of St Thomas’s Seminary for the
education of priests for the diocese of Westminster.
• By the time the testator dies, the Seminary had ceased to exist and the
students had been transferred to a Seminary in Birmingham.
• As this was a case of initial failure, and being unable to identify a
general charitable intent, the Court of Appeal held that the gift failed.
 INITIAL FAILURE
• Not every case of a charity’s cessation will involve a failure of the gift.
• Exceptionally, the court may regard a defunct charity as continuing in
another form.
• Thus, in Re Faraker [1912] 2 Ch 488, a gift of £200 was left by the
testatrix to “Mrs Bailey’s [sic] Charity, Rotherhithe”.
• A charity had been founded by Hanah Bayley’s in 1756 for the benefit
of the poor widows in 1756.
• However, in 1905, the Charity Commissioner consolidated various local
charities for the poor in Rotherhithe
 INITIAL FAILURE
• The Court of Appeal declined to find that the gift failed.

• As Cozens-Hardy MR explained:
“Hannah Bayly’s Charity is not extinct,
it is not dead … it cannot die.”
 INITIAL FAILURE
• Where the charity concerned never existed, the cases suggest that it is easier
to find a general charitable intent on the part of the testator.
• In Re Harwood [1936] Ch 285, the testatrix left £200 to the Wisbech Peace
Society and £300 to the Peace Society in Belfast by will.
• By the time she passed away in 1934, the Wisbech Society had ceased to
exist but there was no evidence that the Peace Society of Belfast ever
existed.
• In the circumstances, Farwell J found that the £200 gift to the Wisbech
Peace Society failed but he found a general intent to “benefit societies
whose object was the promotion of peace” in respect of the £300 gift so that
cy-près applied to that gift.
 INITIAL FAILURE
• The significance of incorporation or otherwise of a charity was starkly
demonstrated in the case of Re Finger’s Will Trusts [1972] Ch 286.
• The testatrix left her estate to a number of charities.
• Among these were the National Radium Commission (which was
unincorporated) and the National Council for Maternity and Child Welfare
(which was an incorporated charity), both of which ceased to exist before
the testatrix’s death.
• Owing to prior judicial authority, Goff J upheld the gift to the National
Radium Commission as a valid charitable purpose trust but found that the
gift to the National Council for Maternity and Child Welfare failed.
 INITIAL FAILURE
• Goff J reached this conclusion reluctantly:
“If the matter were res integra I would have
thought that there would be much to be said
for the view that the status of the donee,
whether corporate or unincorporate, can make
no difference to the question whether as a
matter of construction a gift is absolute or on
trust for purposes. Certainly drawing such a
distinction produces anomalous results.
In my judgment, however, on the authorities a
distinction between the two is well
established, at all events in this court.”
 INITIAL FAILURE
• But being so constrained, Goff J concluded:
“Accordingly I hold that the bequest to the National Radium
Commission being a gift to an unincorporated charity is a purpose
trust for the work of the commission which does not fail but is
applicable under a scheme, provided (1) there is nothing in the
context of the will to show … that the testatrix's intention to make
a gift at all was dependent upon the named charitable organisation
being available at the time when the gift took effect to serve as the
instrument for applying the subject matter of the gift to the
charitable purpose for which it was by inference given, (2) that
charitable purpose still survives;”
 INITIAL FAILURE
But being so constrained, Goff J concluded:
“but that the gift to the National Council for Maternity
and Child Welfare 117 Piccadilly London being a gift to
a corporate body fails, notwithstanding the work
continues, unless there is a context in the will to show
that the gift was intended to be on trust for that purpose
and not an absolute gift to the corporation.”
 INITIAL FAILURE
• Despite the absence of a separate legal personality and hence lacking
mortality (in the sense that a company can be wound up), it has
controversially been suggested in Re Slatter’s Will Trusts [1964] Ch 512
that an unincorporated charity can be considered to have ceased to exist
if its funds no longer remain in existence.

• This conclusion has been criticised by Jill Martin, in “The Construction

of Charitable Gifts” (1974) 38 Conv (NS) 187, on the ground that the
question should not have been whether the funds continued to exist but
whether the charitable purpose continued to exist.
 INITIAL FAILURE
• Where there is an initial failure, then cy-près can only apply if the
settlor had a general charitable intent .
• This means that the settlor was more concerned that the funds be used
for charity generally than that they benefit the specific charity
identified.
• If a general charitable intent is found, the funds will be applied cy-près.
• If not, then the funds will be held on resulting trust/accrue to the
residuary estate.
 SUBSEQUENT FAILURE
• Once a trust fund has been dedicated to a charitable purpose, subsequent failure
of that purpose will generally not invalidate the trust.
• Regardless of whether or not a general charitable intent can be found, the courts
will apply the doctrine of cy-près: Re Wright [1954] Ch 347.
• It is only if the settlor expressly provides for how the fund is supposed to be
disbursed in the event of failure of the particular purpose that cy-près will be
precluded.
• In this respect, whether a case is one of initial or subsequent failure depends on
whether the charity exists at the time of the testator’s death and not whether the
funds have been vested with the charity.
 SUBSEQUENT FAILURE
• In Re Slevin [1891] 2 Ch 236, the testator made a gift to
an orphanage that was in existence at the time of his
death but which ceased to exist soon thereafter and
before the legacy was paid to it.

• The gift was applied cy-près on the basis that this was a
subsequent failure.
 SUBSEQUENT FAILURE
• Likewise, in Re Wright [1954] Ch 347, a testatrix left her
residuary estate subject to a life interest to be held on trust for
a convalescent home.
• When she died in 1933, this purpose was capable of being
carried out, but by the time the life tenant died in 1942, it was
no longer practicable.
• As this was also regarded as a case of subsequent failure, cy-
près applied regardless of general charitable intent.
 STATUTORY REFORM
• Although the cy-près doctrine can save many a charitable gift, the
common law doctrine is subject to significant limitations.
• It is only applicable where the purposes are impossible or
impracticable in whole or in part, a very strict threshold.
• The doctrine has been used to excise conditions attached to charitable
gifts which would make it impossible to achieve the main purposes of
the gift.
• For example, in Re Lysaght [1966] Ch 191, the Royal College of
Surgeons refused to accept a benefaction towards medical studentships
because it was subject to a condition that excluded Jewish or Roman
Catholic students.
 STATUTORY REFORM
• This had the effect of rendering the fulfilment of the charitable
purpose impossible because the testatrix wanted only the Royal
College of Surgeons to be trustee of the funds.
• The court excised the offending condition by applying the gift
cy-près.
• However, the cy-près doctrine is not available where the
fulfilment of the purpose remains possible but is no longer
useful or convenient, such as where property has been left for
use as a hospital but which site was not suitable, as was the
case in Re Weir Hospital [1910] 2 Ch 124.
 STATUTORY REFORM
• This limitation was overcome in England by virtue of s 62 of the Charities Act
2011, which relaxes the requirement of impossibility and impracticability.
• The circumstances under which the new statutory cy-près jurisdiction can apply
include (s 62(1)):
(a) where the original purposes of the gift have been wholly or partly fulfilled or
cannot be carried out or cannot be carried out according to the directions
given and the spirit of the gift;
(b) where the original purposes provided a use for only part of the property
given;
(c) where the property given and other property applicable for similar purposes
can be used more efficiently together for common purposes having regard to
“the appropriate considerations”;
 STATUTORY REFORM
(d) where the original purposes referred to an area that has ceased to be
a unit, such as a parish, or by reference to a class of persons or to
an area that has ceased to be suitable, having regard to “the
appropriate considerations”; or
(e) where the original purposes have wholly or partly:
(i) been adequately provided for by other means;
(ii) ceased to be charitable in law, because for example they are
useless or harmful to the community; or
(iii)ceased to provide a suitable and effective method of using the
property having regard to “the appropriate considerations”.
 STATUTORY REFORM
• Section 62(2) defines “the appropriate considerations” as “(on
the one hand) the spirit of the gift concerned” and “(on the
other) the social and economic circumstances prevailing at the
time of the proposed alteration of the original purposes.”
• Reform along the lines of the English model, which broadens
the cy-près doctrine and provides a statutory basis for it was
recommended by the Hong Kong Law Reform Commission in
its report on Charities in December 2013 but this reform was
eventually not passed.
Core Readings:
• Graham Virgo, The Principles of Equity & Trusts, (5th edn OUP 2023)
Additional Optional Readings:
• Nigel P Gravells, “Public Purpose Trusts” (1977) 40 MLR 397
• Joyce Chia, Matthew Harding and Ann O’Connell, “Navigating the Politics of Charity: Reflections
on Aid/Watch Inc v Federal Commissioner of Taxation” (2011) 35 MULR 353
• The Law Reform Commission of Hong Kong Charities Sub-Committee Consultation Paper,
Charities (June 2011)
• The Law Reform Commission of Hong Kong Report, Charities (December 2013)
• M Hsiao, ‘The beginning and the end of an era of charitable public benefit in Hong Kong’ (2012) 76
(3) The Conveyancer & Property Lawyer 228-242
 COMPUTER LAB EXAM
• Students will receive the question paper in hard copy,
• type their answers in a Microsoft WORD document on the desktop computer,
• and upload the document to the Canvas Assignment box after the exam ended
with the internet connection resumed in the lab.
• Remember to save your answer in a Word document under your student ID
number 6705463454.
• Remember to save your answer from the first 5 minutes of the exam. Any
unsaved answer and subsequent collapse of the file or computer will not give
you extra time as you will be warmed to save from the beginning of the exam,
you undertake to take such risk.
• Choose any 2 out of 4 Questions, no section, all problem questions.
• Please do not exceed the necessary word limit for both.