Charity Law & Social Policy Library of Public Policy and Public Administration Volume 10 General Editor: DICK RUITER Faculty of Public Administration and Public Policy, University of Twente, Enschede, The Netherlands For other titles published in this series, go to www.springer.com/series/6234 Kerry O’Halloran • Myles McGregor-Lowndes Karla W. Simon Charity Law & Social Policy National and International Perspectives on the Functions of the Law Relating to Charities Kerry O’ Halloran Myles McGregor-Lowndes Adjunct Professor Professor and Director Australian Centre for Australian Centre for Philanthropy and Nonprofit Philanthropy and Nonprofit Studies, QUT, Brisbane Studies, QUT, Brisbane QLD, Australia QLD, Australia Karla W. Simon Professor of Law and Co-Director Centre for International Social Development Catholic University of America, USA ISBN 978-1-4020-8413-3 e-ISBN 978-1-4020-8414-0 Library of Congress Control Number: 2008927743 © 2008 Springer Science + Business Media B.V. No part of this work may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, microfilming, recording or otherwise, without written p ermission from the Publisher, with the exception of any material supplied specifically for the purpose of being entered and executed on a computer system, for exclusive use by the purchaser of the work. Printed on acid-free paper 9 8 7 6 5 4 3 2 1 springer.com Acknowledgements Charity Law & Social Policy had its genesis in discussions among colleagues in the Australian Centre for Philanthropy and Nonprofit Studies at QUT. Thereafter, until completion, the Centre provided a safe home for gathering in material, sorting out ideas and slowly shaping it all into a form that its three authors could live with. Karla Simon would also like to acknowledge the financial support provided by research funds from the Catholic University of America’s Columbus School of Law and the able research assistance of Stephen Young, of the Law Library. The resulting book owes a great deal to the many academics and practitioners who commented on early draft chapters. Their contributions have spared readers from encountering even more mistakes, inaccuracies, gaps and inconsistencies. Responsibility for those that will undoubtedly still be found and for all views expressed must, unfortunately, rest exclusively with the authors. While it is not possible to render a full account for a debt owed to many it would be quite wrong not to acknowledge the particular contribution of a few. Thanks are due to Ter Kah Leng1 and Barnett Baron2 who kindly read and com- mented on the chapter dealing with Singapore. Thanks too to Bob Wyatt3 for his similar contribution in respect of the chapter on Canada. We are also most grateful to David Robinson4 and to Michael Gousmett5 who provided advice in relation to the New Zealand chapter and the latter’s published articles on the charity law reform process in that country were insightful. We abjectly and unreservedly apologise to our spouses (Elizabeth, Jenny and Leon), families and friends for time taken up with such self-indulgence, thank them for their understanding, encouragement, forbearance, occasional clean clothes, hot meals and wine and promise never to do this again. We are sincerely grateful to Springer and to Natalie Rieborn, Commissioning Editor, for the vote of confidence and ongoing support that has resulted in this book. 1Associate Professor, NUS Business School, National University of Singapore. 2 Executive Vice President of The Asia Foundation. 3Executive Director of The Muttart Foundation, one of Canada’s largest private foundations and until recently the voluntary-sector co-chair of the Joint Regulatory Table. 4 Director of the Social and Civic Policy Institute at Victoria University. 5General Manager, Pacific Leprosy Foundation. v Contents Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Part I Charity, the Law and Social Policy in the UK 1 Charity: Concept Parties and Governing Principles . . . . . . . . . . . . . 7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Concepts, Parties and the Gift Relationship . . . . . . . . . . . . . . . . . . . . . . 7 The Key Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Charity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Benevolence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Philanthropy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Need. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 The Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 The Donor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 The Charitable Organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 The Recipient. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 The State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 The Gift Relationship. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 The Giver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 The Gift . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 The Recipient. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 The Charitable Organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 The State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Charitable Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Objective/Subjective Test. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Benignant Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Exclusively Charitable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Public Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Public. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 vii viii Contents Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Independent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Non-governmental. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Non-profit Distributing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Non-political . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Distinction Between Charities and Other Not-for-Profi t Organisations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Types of Organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 A Charity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 An Industrial and Provident Society . . . . . . . . . . . . . . . . . . . . . . . . . . 24 A Friendly Society. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Co-operatives etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Hybrids. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Structures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 A Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 An Unincorporated Association. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Other Structures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Brief History of Charity and Its Social Role in England & Wales . . . . . 28 The Elizabethan Poor Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 The Statute of Charitable Uses 1601. . . . . . . . . . . . . . . . . . . . . . . . . . 29 The Preamble. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Judicial Classification of Charitable Purposes. . . . . . . . . . . . . . . . . . . 29 Development of a Modern Role for Charities . . . . . . . . . . . . . . . . . . . 30 Health Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Community Solidarity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Public Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 New Forms and Functions for Charities . . . . . . . . . . . . . . . . . . . . . . . 34 Leaders of Voluntary Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 The Welfare State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 The Realities of Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Recreation and Social Welfare. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 2 Charity, the Law and Politics: The Emergence of Contemporary Social Policy Issues in England & Wales. . . . . . . . . . . . . . . . . . . . . . . 41 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Charity, the Law and Evolving Social Policy in England and Wales . . . 41 The Preamble and the Foundations of Government Social Policy . . . 42 Judicial Development of Charity Under the Four Pemsel Heads . . . . 42 The ‘Spirit and Intendment’ Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 The Relief of Poverty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 The Advancement of Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Contents ix The Advancement of Religion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Beneficial to the Community, Not Falling Under Any of the Preceding Heads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Emerging Social Policy Themes and Dilemmas . . . . . . . . . . . . . . . . . 51 Consolidation of Preamble Themes. . . . . . . . . . . . . . . . . . . . . . . . . . . 51 The Doctrine of Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Creation of New Charitable Purposes . . . . . . . . . . . . . . . . . . . . . . . . . 52 Emerging Social Policy Dilemmas . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Charity, Public Benefi t and Politics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Politics, Rights and Charity Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Charity Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Legal Rights and Charity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Public Benefit Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 The Broadening of Public Benefit Provision. . . . . . . . . . . . . . . . . . . . 56 Public Benefit Provision: The Roles of Government and Charity. . . . 56 Government and Charity in a Contemporary Policy Context . . . . . . . . . 57 Government Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Reduced Government Spending. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Increased Supervision of Non-government Organisations . . . . . . . . . 59 Facilitating the Building of Social Capital. . . . . . . . . . . . . . . . . . . . . . 60 Increased Involvement of Private Finance. . . . . . . . . . . . . . . . . . . . . . 60 Promoting Partnership Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . 60 The Charitable Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Government Grants and Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 The National Lottery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Social Policy and Charity Law Reform in England & Wales . . . . . . . . . 63 The Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Changes to Definitional Matters and Legal Structures . . . . . . . . . . . . 64 Charitable Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Public Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Legal Structures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Primary Regulatory Body . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Social Policy and Charity Law Reform. . . . . . . . . . . . . . . . . . . . . . . . 66 The Legislative Broadening of Charitable Purposes . . . . . . . . . . . . . . 66 The Public Benefit Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Part II A Functional Approach to the Law as It Relates to Charity in the UK 3 Law and Its Functions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Law and Its Role in Society. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 x Contents Legal Positivism and Natural Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Justice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Law and Society. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Social Cohesion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Continuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Social Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Legal System and Social Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Legal System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Social Policy, Law and Legal Function . . . . . . . . . . . . . . . . . . . . . . . . 81 Sources of Law: The Common Law and Statute Law. . . . . . . . . . . . . . . 82 The Common Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Judge Made Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Emphasis on Rights and Duties of the Individual . . . . . . . . . . . . . . . . 84 Extension of Status by Analogy Rather Than Principle . . . . . . . . . . . 84 Respect for Social Institutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Enforcement by Financial Penalties. . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Statute Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Formative Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Vesting Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Sources of Law: Fundamental Human Rights and Charity Law. . . . . . . 86 Charities and the European Convention. . . . . . . . . . . . . . . . . . . . . . . . 87 Public Bodies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 The Public Benefit Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Convention Rights and Charity Law . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Freedom of Association. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Freedom of Expression . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Freedom from Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Freedom of Thought, Conscience and Religion . . . . . . . . . . . . . . . . . 93 Access to Justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Due process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 The Right to Respect for Private and Family Life. . . . . . . . . . . . . . . . 95 Convention Benchmarks and Legal Functions. . . . . . . . . . . . . . . . . . . 97 Benchmarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Relevance for Legal Functions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 Functions of the Law as They Relate to Charities. . . . . . . . . . . . . . . . . . 99 Charity and the Role of Legal Functions. . . . . . . . . . . . . . . . . . . . . . . 99 Protection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 Policing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Mediation and Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Support. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 A Template of Legal Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104