Charitable and purpose trusts — SQE1 Trusts question
A worked single-best-answer question on charitable and purpose trusts, with why each wrong option is wrong — the way SQE1 traps candidates.
Sir Vernon's will leaves £2 million to trustees 'to be applied for the education of the children of employees and former employees of Fairweather plc'. Fairweather plc employs about 110,000 people in the United Kingdom. The trust is not restricted to children in financial need. The residuary beneficiaries argue that the gift is not charitable.
Which of the following best describes whether the trust is charitable?
- AIt is charitable, because the large number of potential beneficiaries makes it a section of the public.
- BIt is charitable, because trusts for the advancement of education are presumed to be for the public benefit.
- CIt is not charitable, because the beneficiaries are defined by a personal nexus to a single employer and so are not a section of the public.
- DIt is charitable, because trusts for employees and their families fall within the poverty exception to the public benefit requirement.
- EIt is not charitable, because the advancement of education is not a charitable purpose unless it relates to schools or universities.
Show answer and reasoning
Rule: A class of beneficiaries defined by a personal nexus, such as employment by a particular company, is not a section of the public for charitable purposes other than poverty.
- A Numbers are not decisive; a large class defined by a personal nexus is still not a section of the public (Oppenheim). (wrong rule)
- B There is no presumption of public benefit for any purpose (Charities Act 2011, s 4(2)). (wrong rule)
- D The poverty exception (Dingle v Turner) applies to trusts for the relief of poverty, not to an education trust for children who need not be poor. (right rule, wrong facts)
- E The advancement of education is a charitable purpose under s 3(1)(b) and is not confined to formal institutions. (wrong rule)
Source: Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297; Charities Act 2011, ss 3-4; Dingle v Turner [1972] AC 601