DCH 175 Charity Law Association paper
on public benefit (Supplementary)
Public benefit and independent schools
Submitted by the Charity Law Association
1. This paper addresses the question of whether
the existing law on public benefit, if preserved in its current
state, will prevent the application of the proposed public benefit
tests which it is intended the Charity Commission will carry out
under Charities and Not-For Profits: A Modern Legal Framework,
The Government's Response to 'Private Action, Public Benefit'.
It also sets out how the Charity Commission might apply the public
benefit test to independent schools in practice.
2. The charitable status of independent schools
reflects the fact that they are considered under the current law
to provide public benefit. We would emphasise however that this
charitable status is due to the fact that they do in fact provide
benefit to a sufficiently large class of the public as required
by case law.
3. Current law on public benefit is that in order
to be charitable, a trust must have purposes which fall under
one of the four heads of charity and must be shown to promote
a public benefit of a nature recognised by the courts as being
such
4. Further, the benefit must be available to
all of the public or to a sufficiently large section of the public.
In order to constitute a sufficiently large section of the public
the class of possible beneficiaries must not be numerically negligible.
Further, the quality which distinguishes them from other members
of the community, so that they form by themselves a section of
it, must be a quality which does not depend on their relationship
to a particular individual.
5. Education is and remains a head of charity
and so there can be no doubt that independent schools fall within
the four heads (and will also fall within the twelve heads proposed
by the Bill).
6. The question is
therefore whether the fact that independent schools charge fees
means that the charitable benefits they provide are not available
to a sufficiently large section of the public. The fact that a
school charges does not itself preclude charitable status. Re
Resch makes it clear that a charitable trust (in this case
a trust for the provision of medical facilities) will not necessarily
fail to be charitable merely because it charges fees for the services
or facilities it provides which may have the effect of limiting
use of those services or facilities to people 'of some means'.
This is not, however, the end of the matter. Re Resch makes
it very clear that public benefit - in the sense of benefit to
a wider section of the community, both direct and indirect - is
a requirement and looks at the facts to determine whether the
requirement is met in this case.
7. Thus in order to determine whether the requirement
that the benefit be available to a sufficiently large section
of the community is met, it is necessary to look at the context
and the facts of each individual case. In the case of independent
schools, this is likely to involve looking at factors such as
whether bursaries and scholarships are made available and application
for those bursaries and scholarships is open to all, the extent
to which the facilities of the school are made available to others
in the wider community, and other arrangements that the school
may have in place for working with schools outside the independent
sector.
8. It may be worth pointing out in this context
that the Charity Commission do accept that part of the role of
independent schools in the modern world is to engage with the
community and that part of the charitable benefit of independent
schools lies in them making their facilities available to the
wider community.
9. The Charity Commission appear to take the
view that a line of three cases (ending in 1951, prior to Re
Resch) undermine the authorities cited below and establish
that a narrow beneficiary class will constitute "the public"
for the purposes of public benefit when the charity in question
is an independent school. This would have the effect of meaning
that educational benefits confined to those who are relatively
well-off would, with no further public benefit to a wider class,
none the less be charitable.
10. The Charity Law Association do not accept
that these cases have the effect the Charity Commission believes
them to have.
11. The first case cited by the Charity Commission
is The Attorney General v The Earl of Lonsdale. The Charity
Commission claim that this case is authority for the proposition
that a school is a charity without further ado on the basis that
the Vice Chancellor said that the activities referred to in the
preamble to the Statute of Elizabeth all fall under heads of charity.
In fact, it is only authority for the proposition that charity
in law is to be interpreted as reflecting the preamble to the
Statute of Elizabeth rather than the everyday meaning. The case
simply does not discuss the issue of public benefit at all. Further,
interpreting it as having any bearing on the public benefit issue,
if taken to its logical conclusion, would have profound implications
for the applicability of the public benefit test across the board.
In effect, it would suggest that the public benefit requirement
does not apply to any of the heads contained in the preamble.
This cannot possibly be the case.
12. The Charity Commission's
attempt to expand what the Vice Chancellor said in Lonsdale
is not acceptable as a means of developing case law. As Peter
Gibson J said in Joseph Rowntree Memorial Trust Housing Association
Ltd v Attorney General, a judge's remarks must be understood
in their limited context.
13. The Charity Commission claim that Brighton
College v Marriott is further authority for the same proposition.
Again, this case simply does not relate to the public benefit
issue. The issue in the case was whether, by charging fees, the
College was liable for tax. The case cites Lonsdale as
authority for the fact that an institution does not lose its charitable
character, nor do its activities become a trade occupation or
business merely because fees are charged. This is of course correct
(see Re Resch discussed above). However, Lonsdale was certainly
not authority for this point. Furthermore, the Brighton College
case simply does not discuss the public benefit requirement.
This is evident in the way in which the case has
subsequently been applied or cited. For example, Scottish Burial
Reform and Cremation Society applies the Brighton College
case as authority for the point that making a charge for services
does not render an organisation non-charitable. The case is cited
as authority for the same point in the Rowntree case. The
Brighton College case thus appears to be an authority on
charging and not on the issue of narrowness of the beneficiary
class in the context of the public benefit requirement.
14. The third case cited by the Charity Commission
Abbey, Malvern Wells Ltd v Ministry of Local Government and
Planning again does not discuss public benefit but also relates
to whether charging precludes charitable status.
15. Re Resch is more recent than all three
of the cases cited by the Charity Commission and provides clear
authority on the requirement for public benefit in the sense of
benefit to a wider section of the community rather than just the
relatively well-off.
16. The Charity Law Association is therefore
of the view that the necessary public benefit tests are present
within the existing case law and that the case law cited by the
Charity Commission does not prevent the tests being applied to
independent schools in the same way as they will be applied to
all other charities. There is therefore no need for any further
provisions on this matter to be included in the Bill.
How will the Charity Commission apply the public
benefit test to independent schools in practice?
The following are examples of the considerations
the Charity Commission may bring into play when assessing whether
an independent school provides benefit to a sufficiently wide
section of the community, assuming that the level of fees charged
by the school is deemed to be such that it excludes all but the
relatively well-off. Given the huge variety in the independent
school sector there are likely to be many more such examples.
It is therefore not possible to list, or indeed anticipate, all
the possibilities. It is likely that independent schools will
be imaginative in the ways in which they provide public benefit
given their particular circumstances.
a. Whether the school makes provision for access
to education for children from less affluent backgrounds in the
form of scholarships and bursaries as a matter of policy and the
amount of financial help provided to such children in any given
year.
b. Initiatives to make educational provision
available to children in the maintained sector such as tuition
provided at the school to children in the maintained sector in
particular subjects and summer schools.
c. Initiatives to provide other forms of support
to children in the maintained sector to maximise their potential
in terms of university applications, such as study groups for
pupils from the maintained sector drawing on the experience of
independent schools of university applications by their own pupils.
d. Initiatives to make education materials available
to children in the maintained sector and to the general public
including, for example, materials posted on the school's website
and accessible by any member of the public, distance learning
and interactive-web-based tuition.
e. Initiatives to make facilities or equipment
at the school available to local schools and communities such
as sharing sports facilities with local maintained schools and
other members of the general public.
f. Initiatives that the school has in place for
working with schools outside the independent sector and contributions
to raising standards across the educational sector.
g. Community service initiatives for pupils at
the school which provide both direct benefits to the section of
the community served (e.g. the elderly, the homeless etc.) and
also benefit the individual pupils involved, helping them to develop
values such as social responsibility and good citizenship.
h. Whether the school audits the public benefit
it provides on an annual basis and takes steps to identify and
address any areas where improvements could be made.
i. Extent of relief of the public purse by virtue
of children being educated at the school as opposed to in the
public sector.
j. The fact that for anyone anywhere to be better
educated is itself a benefit to the public at large.
It will then be up to the Charity Commission to assess
whether in each instance the provisions in question taken together
widen access sufficiently so that the potential beneficiaries
of the provision constitute a sufficient section of the public.
It is worth making the point that the pupils of the school do
themselves constitute a section of the public, even if, standing
alone, an insufficiently large one. In making this assessment
the Charity Commission will be guided by the case law on the question
of what is, or is not, a sufficiently large section. For example
in Neville Estates v Madden, the members of the Catford
Synagogue were deemed not to be a sufficiently large section of
the public (though public benefit was established on the basis
that members of synagogue interacted with their fellow citizens
such that the benefit did in fact extend to the wider public).
In Oppenheim the beneficiary class was deemed to be sufficiently
large in numerical terms (but the fact that the class was defined
in terms of relationship to a particular employer meant that it
did not in fact constitute a sufficient section of the public
for the purposes of the test).
It may be worth pointing out in this context that
the relevant section of the public is the entire class to which
such provision is open rather than the class of people who actually
take up the provision. So in the context of scholarships and bursaries,
the relevant section of the public is everyone who could potentially
apply for the scholarship or bursary, rather than the number of
people who actually take up or receive such bursaries. Similarly,
when an independent school makes its educational provision or
facilities available for use by the general public, the class
of potential beneficiaries is the public at large rather than
the people that actually take advantage of the provision.
We have addressed these issues by reference to education
as were asked, but we should point out that the removal of the
presumption of public benefit will have profound implications
for charities falling under the other two heads of charity from
which the presumption is removed, and particularly for religious
charities. If the Committee would find it helpful for the CLA
to produce a paper on these issues we would be pleased to do so.
A letter from Christopher McCall which he has kindly
provided pro bono and which supports this opinion is attached
by way of further evidence. We are aware that he has also suggested
some amendments to the draft Bill as follows:
1. at the end of 3(2) add
"and in the application of precedent and otherwise
in determining whether the requirement of public benefit is satisfied
full account shall be taken of changes in social and other relevant
circumstances"
2. add new sub-section (5)
"It shall be the duty of any charity trustee
so to execute the trusts of his charity as to secure the fullest
public benefit consistent with the terms of his trust and furthermore
to seek a scheme for the modification of any term which may reasonably
be regarded as preventing him from securing that public benefit
to a material degree".
The Charity Law Association thoroughly endorse these
suggestions.
© Charity Law Association
25 June 2004
| 
