FEDERAL UNIVERSITY OYE- EKITI
FACULTY: LAW
COURSE TITLE: LAW OF TRUST
GROUP: GROUP 1
TOPIC: CHARITABLE TRUSTS
NAMES MATRIC NO:
1. Abolusoro Rosemary Olayinka LAW/2020/1001
2. Abraham Precious Oluwakemi LAW/2020/1002
3. Adebayo Praise Olatomiwa LAW/2020/1003
4. Adebisi Fahad Adetunji LAW/2020/1004
5. Adedeji Ayomiposi Boluwatife LAW/2020/1005
6. Adefisayo Deborah Adeshola LAW/2020/1006
7. Adejobi Samuel Ayomide LAW/2020/1007
8. Adejumo Tomiwa LAW/2020/1008
9. Adekanbi Divine Boluwatife LAW/2020/1009
10. Adekunle Folashade LAW/2020/1010
11. Adeleke Subomi LAW/2020/1011
OUTLINE
INTRODUCTION
1
DEFINITION OF CHARITABLE TRUSTS
FEATURES OF CHARITABLE TRUSTS
CLASSIFICATION OF CHARITABLE TRUSTS
THE CY-PRES DOCTRINE
REQUIREMENTS OF THE CY-PRES DOCTRINE
ADVANTAGES OF CHARITABLE TRUST
DISADVANTAGES OF CHARITABLE TRUST
CONCLUSION
INTRODUCTION
Charitable trusts unlike private trusts have as their objects, the benefit of
the general public or a significant portion of it. Despite the common use of
charitable trusts in England and the tax advantages given to this class of
trusts, the use of it has been at a slow pace in Nigeria. The reason for this
can be attributed to the great difference in the cultural and social life or
orientation of the people in England and Nigeria. Also, the economic situation
in Nigeria has to some extent limited the setting up or donating to charities
in Nigeria. Notwithstanding, the use of charitable trusts has witnessed a
steady growth especially with respect to the advance of education in Nigeria.
It is thus important for you to be familiarized with the law and practice of
charitable trusts in Nigeria.
DEFINITION OF CHARITABLE TRUST
The definition of charitable trust is best discerned by examining the purpose
or objects of charitable trusts, as defining the word 'charity' or 'charitable'
like most legal terms will be a difficult task. This difficulty was acknowledged
in Re Nottage1 as the legal meanings of the said words are different from
those ascribed to them in common usage. It could have been possible to
define charitable trust as a gift for public benefit, but courts have held that
this definition is too wide2
The provision of statutes have generally served as the relevant guide as to
what can be regarded as charitable. Of great importance in this regard is the
Charitable Uses Act, 1601 commonly referred to as the Statute of
Elizabeth, an Act of parliament.3 The preamble to this Statute contained a
catalogue of objects that can be regarded as charitable. The list is as follows:
1
(1895) 2 Ch. 649
2
J.O, Fabunmi, Equity and Trust in Nigeria, 2nd ed. (O.A.U. Press, Ile-Ife, 2006) 249.
2
"The relief of aged, impotent and poor people: the maintenance of sick and
maimed soldiers and mariners, school of learning, free schools and scholars
in Universities; the repair of bridges, ports, havens, causeways, churches,
sea-banks and highways..."4
The list is not exhaustive and it has been extended by analogy to cover
situations which are slightly connected to it. Although, the Statute of
Elizabeth has been repealed by the Mortmain and Charitable Uses Act,
1888, Section 13(2) of the latter Act preserved the provisions of the said
preamble to the Statute of Elizabeth.
FEATURES OF CHARITABLE TRUST
Before a trust can qualify as a Charitable Trusts, there are certain essential
features that must be present and they include:
1. Element of Public Benefit: A trust must be for the benefit of the
community or a significant portion of it, for it to pass the public benefit test.
In the case of Verge v. Somerville,5 a trust created for the training and
education of the grandchildren of the testator and other child, was held not
to be a charitable one. Also, in Re Crompton,6 a trust created for the
education of the descendants of three named individuals only, failed the test
of public benefit.
2. Impersonal Beneficiaries: This simply means that the class of the
intended beneficiaries must not be on the basis of personal relationship. In
Oppenheim v. Tobacco Securities Trust Co. Ltd., 7 where in spite of a
trust for the education of children of employees and ex-employees of a
particular company with the number of intended beneficiaries running into
over a hundred thousand people, the court held that it was not a charitable
trust, based on the personal relationship between the settlor and the
potential beneficiaries.
3
43 Eliz I, c.4
4
R. Megarry & P.V. Baker, Snell's Principles of Equity, 27th ed., (Sweet &Maxwell Ltd, London, 1973) 144.
5
[1924] A.C. 496
6
[1945] Ch. 299
7
[1951] A.C. 297
3
3. Enforcement by Attorney General: Since charitable trusts serve the
public, their enforcement is usually overseen by a government authourity.
That is, it is the power of the Attorney General to enforce such trusts.
4. Perpetual Existence: Unlike private trusts, charitable trusts can exist
indefinitely, as long as they fulfill their charitable objectives and they are
inalienable.
CLASSIFICATION OF CHARITABLE TRUST
According to Lord Macnaghten in Commissioners of Income Tax v.
Pemsel,8 charitable trusts are generally classified into four categories:
1. The Relief of Poverty
2. The Advancement of Education,
3. The Advancement of Religion, and
4. Other Purposes Beneficial to the Community:
This classification is based on the Statute of Elizabeth and has been adopted
in many subsequent judicial decisions to guide the legal interpretation of
charitable purposes. They are duly discussed below:
1. Relief of Poverty: The relief of poverty does not require the beneficiary
to be destitute. Rather, it is sufficient that the individual is in need when
measured against the general standard of life of a specific profession, class,
or community section. This means that a person may still benefit from a
charitable trust under this head even if they are not completely
impoverished, as long as they are unable to maintain a modest standard of
living.
Examples of charitable trusts that fall under this category include:
i) A gift for ladies of limited means9
ii) A trust to provide flats at economic rents for aged persons 10
8
[1891] AC 531 at 583
9
Re Gardom [1929] 1 Ch. 662
10
Re Cottam [1955] 1 WLR 1299
4
iii) A trust for poor employees or the widows and orphans of deceased
officers11
However, for such a trust to be valid, it must fall under the designation
“poor.” In Re Sanders’ Will Trust,12 a gift for the “working classes” was not
held to be charitable under this head because the term did not necessarily
imply poverty.
2. Advancement of Education: Education in this context is not limited to
formal classroom instruction. Courts have recognized a broader
interpretation that includes activities that promote learning, improve
branches of human knowledge, and disseminate such knowledge.
Examples of trusts under this classification include:
i) Gifts for the support of schools or colleges,
ii) Trusts supporting chess-playing among boys and youths 13
iii) Trusts supporting zoological gardens14
iv) The funding of professorships and lectureships 15
3. Advancement of Religion: Religion is defined thus:"any form of
monotheistic theism will be recognized as a religion. Religion requires
spiritual belief, a faith, and recognition of some higher unseen power which
is entitled to worship. It may include, but is greater than morality or a
recommended way of life."16
Thus, the court will neither enquire into the value of the religion nor will it
consider numerical strength of the followers provided the religion is in
existence. Religion includes Christian and non-Christian religion. This head
covers any religion in so far as it is not contrary to public morality. 17
11
Re Coulthurst [1951] Ch. 661
12
[1954] Ch. 265
13
Re Dupree’s Trusts [1945] Ch. 16
14
Re Lopes [1931] 2 Ch. 130
15
A.G. v. Margaret and Regius Professors at Cambridge (1682) 1 Vern. 55
16
Lord Parker in Bowman v Secular Society (1917) A.C. 406
17
A Taiwo & O Akintola, Introduction to Equity & Trusts in Nigeria (Princeton Publishing Co Ltd, 2016) 231
5
In Fatumola v Ogundimu,18 it was held that in order to qualify as charitable
trust,it is an essential element that they should benefit the public at large
and not a section of it and not only members of a religious sect. Trusts held
to be charitable under this head include the following: trust for mission work,
trust for God's work, trust for the increase of salaries of the clergy. Trust for
the fitting of a stained glass window in a church, trust for all the graves in a
church-yard, etc. However, in the case where there is only a trust for the
upkeep of only one or some selected graves, it will not be deemed as
charitable.
In Gilmour v Coats,19 it was held that the element of public benefit is
essential to the validity of a religious trust for the purpose of charity. Thus, in
Iyanda v Ajike,20 the testator directed his trustees to let one of his houses
and use the income for the maintenance and upkeep of a "mosque" attached
to the family house. The so-called mosque was however found to be private
to be a private prayer room attached to the testators family house. The court
held that the trust was not charitable as its lacked the necessary element of
public benefit.
4. Other Purposes Beneficial to the Community: This expression is
vague, however it must not be taken to include every general public utility.
The object must come within the spirit and intendment of the Statute of
Elizabeth.21 It is the residual category in Lord Machnaghten's classification,
and include a variety of trusts. It is impossible to define a defined or delimit
accurately the extent of this category of charitable trust. Examples of trust
health charitable under this head are; provision of hospital, provision of fire
brigade, protection and benefits of animals, provision of prizes for sport in an
army regiment.
According to Professor Jegede22, it is a group of charitable proposes which
cannot conveniently fit into any of the three enumerated heads of charities
in Pemsel's case. Instead, it's more of a blanket word that accommodates all
conceivable public purposes.
THE CY-PRES DOCTRINE
18
(1977) 12 CCHCJ 298 at 299.
19
(1949) A.C. 426
20
(1948) 19 N.L.R 11
21
A Taiwo & O Akintola, op. cit., at 232
22
M.I. Jegede, Law of Trusts, Bankruptcy and Administration of Estate (MIJ Professional Publishers, Lagos, 1999) 168-169
6
Cy pres is a legal doctrine that means "as near as possible.” It is relevant to
discuss this doctrine due to its usefulness in the case of failed or ineffective
charitable trusts. When a person creates a charitable trust , the express
charitable purpose of the trust may become impossible to fulfill. Rather than
terminating the trust, the courts may alter the purpose of the charitable trust
in order to allow it to continue, while keeping it as closely to the original
intention of the settlor as possible. Although, what constitutes a charitable
intent has not been determined by the courts yet, it was held in Re Davis23
that the inclusion of the gift in question among other gifts which are charities
is an indication of the intent.
The cy pres doctrine is a legal principle used to modify the terms of a
charitable trust, will, or gift when the original purpose becomes impossible,
impractical, or unlawful to fulfil. Originating from the Norman French phrase
cy pres comme possible (“as near as possible”), it allows courts to adapt the
terms of the trust or gift while preserving the donor’s general charitable
intent. Instead of allowing the trust to fail, courts redirect its assets to
purposes that align closely with the original intent.
The doctrine of cy pres originated in ecclesiastical law and was later
incorporated into trust law. Its primary purpose is to preserve the intentions
behind charitable trusts and gifts. If unforeseen circumstances make the
literal application of a donor’s instructions impractical or impossible, courts
invoke this doctrine to redirect the trust’s assets toward a purpose that
aligns as closely as possible with the donor’s original intent.
For instance, consider a trust established to fund research for a specific
disease. If the disease is eradicated, the trust’s purpose becomes moot.
Instead of dissolving the trust, courts may redirect the funds to research
related to other diseases or healthcare initiatives, honouring the donor’s
broader philanthropic goals.
REQUIREMENTS OF THE CY-PRES DOCTRINE
There are two major requirements to be satisfied for the doctrine of Cy-press
to apply:
1. Charitable Intention: The original trust or gift must be for a charitable
purpose. The cy-pres doctrine applies only to charitable trusts, which are
established for the benefit of the public or a segment of the public. The court
must be convinced that the donor wanted to benefit charity broadly, not just
23
[1902] 1 Ch. 876
7
a specific institution. In determining the donor's intention, the operative date
of the gift is material. If it is by will, the operative date will be at the death of
the testator. However, if inter vivos, the date will be when the will comes into
effect.
Determining intention is also by a matter of interpretation by the courts. For
example, if the gift is made to a charitable institution that is not in existence,
generally, intention is implied. In Re Hardwood,24 it was held that a gift to
the 'peace society of Belfast' which had never existed, should be applied Cy-
Pres, as there was manifested general charitable intention to benefit
societies whose object was the promotion of peace
2. Impossibility or Impracticality: The original purpose of the trust must
have become impossible or impractical to achieve. This can be at the outset
(initial failure) or occur after the trust has taken effect (subsequent failure)
and it could could be due to changes in circumstances, such as the
dissolution of the charity, changes in law, or the unavailability of the
intended beneficiaries.
There can be other circumstances that would lead to the application of the
doctrine of Cy-pres. For example, in Re Lysaght,25 a gift was made to Royal
College of Surgeons on trust for the establishment of studentship for non
Jewish people or persons of the Roman Catholic faith. The college refused the
gift on the basis that the trust had a discriminatory clause and the principal
of Cy-press was applied. The principal can be flexible in it's application,
however, it cannot remake the original trust of a donor.
There are also other requirements which may be applied by the courts and
they include:
3. General Intent of the Donor: The court must determine the general
intent of the donor or testator. The cy-pres doctrine can only be applied if it
is clear that the donor intended for the trust to be modified rather than
completely fail. The court will look for evidence of the donor's intention to
support a similar charitable purpose. If the donor specified that the gift must
only go to a particular purpose or institution and not be used otherwise, the
doctrine may not apply.The court will not apply cy-près if a specific intent is
shown and the condition fails.
24
(1936) Ch.285
25
(1966) Ch. 191
8
4. Similarity of Purpose: The alternative purpose to which the trust is
redirected must be similar to the original purpose. The new purpose should
align closely with the spirit of the original intent of the donor.
5. Judicial Discretion: The application of the cy-pres doctrine is at the
discretion of the court. The court will consider the specific circumstances of
the case and the interests of the beneficiaries when deciding how to apply
the doctrine.
ADVANTAGES OF CHARITABLE TRUSTS
1. Tax Benefits: Charitable trusts may be exempted from income tax on
rents, interest, dividends and annual payments provided that the income is
applied for charitable purpose only.26
2. Perpetual Existence: Charitable trusts are exempted from the rule
against perpetual trusts. That is, they can exist in perpetuity, ensuring long-
term support for charitable causes.
3. Flexibility: Charitable trusts can be structured to support various
charitable purposes, such as education, healthcare, or poverty alleviation.
4. Asset Protection: Charitable trusts can protect assets from creditors and
ensure they are used for their intended charitable purpose. Additionally,
charitable trusts are less likely to be challenged or fail due to uncertainty of
objects, providing greater stability and security for the assets.
5. Family Involvement and Philanthropic Legacy: Charitable trusts can
help donors establish a lasting philanthropic legacy. They can also involve
family members thus, promoting a sense of social responsibility.
6. Community Benefits: Charitable trusts can provide essential support to
communities, addressing social needs and promoting positive change.
DISADVANTAGES OF A CHARITABLE TRUST
1. Strict Regulation and Compliance: Charitable trusts are heavily
regulated. They must comply with laws regarding their purpose, operation,
and reporting. Failure to meet these can result in penalties or even loss of
charitable status.
2. Loss of Control: Once assets are placed in a charitable trust, the donor
often loses direct control over how they are managed or distributed. Trustees
26
G. Kodilinye, An Introduction to Equity in Nigeria (Spectrum Law Publishing, Ibadan 1975) 107-109
9
must act according to the trust’s terms and the law, not necessarily
according to the donor’s changing wishes.
3. Administrative Costs: Setting up and maintaining a charitable trust can
be expensive. Legal fees, trustee fees, accounting costs, and compliance
expenses can be significant.
4. Permanence: Charitable trusts are often irrevocable, meaning once you
set them up, you can’t easily change your mind or retrieve the assets.
Changing or dissolving a charitable trust can also be a slow, complicated
process, often requiring court approval.
5. Public Disclosure: In many jurisdictions, charitable trusts must file public
documents, meaning financial and operational details may become
accessible to anyone.
6. Potential for Mismanagement: If trustees are careless, inefficient, or
corrupt, the trust’s assets could be misused, and it’s often difficult and costly
to take legal action against them.
CONCLUSION
Charitable trust is an important class of trusts as a result of the public
benefit they offer. However, it is crucial to the validity of this trust that the
class of the intended beneficiaries must not be one based on personal
relationship. Thus, Charitable trusts have to be carefully drafted or worded in
order to ensure that they incorporate its essential features. Otherwise, the
trust will fail and result to the residuary estate of the settlor or testator.
10
