I am extremely sorry that difficulties with my time table left me unable to accept your formal instructions to prepare an Opinion on behalf of the Charity Law Association on the above issue; a commitment to have an Opinion ready in due time was simply one which I could not properly have offered.

I am happy to say, however, that as things have developed it is now possible for me to do informally what I could not commit myself to do on a formal basis; and you will be well aware that like many others engaged in this field I regard the subject as one of consuming importance.

I hope therefore that you will allow me to take a moment of your time to express my views, and invite you to use this letter if and so far as you think fit to communictae my views to others.

I have seen the Charity Commissioners' Briefing Paper DCH 13 for the Joint Committee. In very large measure I view that paper as being (as one would expect) entirely correct in law. In particular I agree that with limited exceptions charities must display a public benefit, and that if the Bill is passed in its present form charity law will have to be addressed on the basis that public benefit is demonstrable regardless of any presumptions in that behalf.

I do, however, feel very considerable concern about the proposition that existing case law has laid down exceptions to the principles of public benefit within the specific field of education which would "probably" not be changed by the removal of the presumption of public benefit, and which would, it seems, presuppose a continuation of a supposed principle that the provision of education however limited is for the public benfit per se.

I am startled by this assertion. It seems to me that the Briefing Paper implies that the Charity Commission would feel obliged to register a school whose pupils were limited to the sons of millionaires. I cannot believe that that is correct or that they would so assert; if they did so act I am in no doubt at all that the Attorney-General and/or the Revenue would appeal against such registration, and would succeed in that appeal. I question whether the Charity Commission would say otherwise.

It seems to me that the case law demonstrates that in certain charitable circumstances it has been accepted that an element of apparently private benefit does not exclude the conclusion that there is a public benefit; I have in mind the "poor relations" and "founder's kin" cases to which the Charity Commission refer. I agree that the removal of the presumption would not change this; this is because the law has determined that the private element is not inconsistent with finding a public benefit in a trust which (in the one case) does indeed relieve an element of poverty and (in the other case) does indeed seek to meet an educational need albeit in an idiosyncratic way. These are cases where the common law principles of public benefit have been clarified by the cases, and I agree that the Bill as drawn would not change the position.

What I do not find in the cases is any statement that there is always a public benefit in providing education even to a narrow class. That is inconsistent with the Oppenheim case to which the Charity Commission paper draws attention.

I do not therefore agree with paragraph 11, and the implication of paragraph 15 that the Bill would not allow the Charity Commission to call into question the operation of a school restricted to a narrow class of beneficiaries.

My detailed analysis of the cases is set out in two Schedules to this letter, for I am well aware that many readers might not wish to be burdened with a detailed analysis of the cases.

But I think a few broad principles can usefully be stated:-

(i) as elsewhere in the common law, concepts derived from the common law for the purposes of the operation of charity law have to be ready to "move with the times". Thus, for example, it would two hundred or more years ago doubtless have been perfectly acceptable to operate a school within the law of charity on the basis that it was primarily concerned to teach Latin. It would not be acceptable now; if a school had a constitution which required it so to operate then the constitution could be modified by application of the "cy-pres" doctrine, while if it chose without being bound so to operate then the trustees could be called to account by the Attorney-General and/or the Charity Commissioners for not making proper use of their charitable resources.

(ii) charity law is not bound (as has sometimes been suggested) to require benefits to be conferred by bounty and not by contract involving payment for the services in question; but that is not because provision of charitable services for fees is automatically acceptable, but because in certain circumstances persons may be in need of assistance in an area where charity law recognizes the need for relief, but relief in exchange for payment may be the appropriate manner in which to provide that relief as best achieves the public benefit.

(iii) charity law is a branch of trust law. It normally involves the conferring of discretions on the trustees. It is of the essence of trust law that trustees must act in the exercise of any discretion in a reasonable manner. Charity trustees who are not able to act in a reasonable manner consistent with the performance of their trusts ought to seek a scheme for the application of their funds in a manner which does not require them to use those funds unreasinably. Those who do have a discretion must be ready to use it reasonably.

(iv) cases on charity have, precisely because of the fact that charity law moves with the times, to be read in their context; and a conclusion that something was a sensible or permissible (or indeed reasonable) method of relieving a specific need in one context does not necessarily mean that it would remain so in a totally different context - compare the Latin school example cited above.

(v) relief of need in the field of charity is not limited to the relief of the poor; for example the elderly have needs which require relief, e.g. by the provision of sheltered housing, and it would be no objection to a trust designed to meet that need that some residents would pay for their benefits because what they needed was the physical amenity but not an economic subsidy.

(vi) In answering the question whether the public benefit is achieved by a given trust it is relevant to ask whether there are direct benefits or indirect benefits; both are capable of being taken into account, but as every charity trustee has a duty to maximize the public benefit which is secured by his trust a trustee of a trust so operated as to only create an indirect benefit may well have to face the criticism that it could reasonably be expected to do more.

(vii) The crucial question in terms of the public benefit is two-fold: have the assets in point been dedicated to the public benefit (if not they are not charitable) and if so is the mode in which they are being used a reasonable manner in which so to use them for that public benefit (if not they are either being used in breach of trust or a scheme is required).

Against this background I address the specific case of the fee-charging school which has been established as a charity. There are, I think, two questions to be addressed:-

(a) does the existing law enable trustees to be criticized who use such a charity for the purpose only of providing education for the narrow class of those who can afford to pay and does it permit trusts to be registered as charities with that narrow educational objective?

(b) will the enactment of the Bill enable educational trustees to be called to acount if they fail to provide wider public benefits than those which are secured by mere provision of education to fee-paying pupils?

As to the first, it is my view that limiting access to any charitable resource to those of ample means is highly likely to put in question the supposed element of public benefit which the trust must profess if it is to make good its claim to charitable status.

The Charity Commission say that in the educational context special rules apply, and they rely on re Lonsdale, Brighton College v Marriott, and The Abbey Malvern Wells Ltd v Minstry of Local Government. I do not agree. My reasons appear in the first Schedule.

If it were otherwise there would of course be no need for the founder's kin cases to be limited to cases where founder's kin had only a degree of recognition as possible beneficiaries rather than rights as such; for if Lonsdale meant what it is said to mean a school for the ten children of the founder would be a charity.

The concept that providing education for a limited class can be charitable is in fact not so very startling; university education in past times was plainly open to the very limited number of persons capable of aspiring to a university degree and paying the inevitable price of attending at Oxford or Cambridge, but that did not mean that it was not a species of charity.

The crucial fact is that times change and with them there must equally change the concept of public benefit. That is as far as I am aware no less true in the case of educational charity than any other field of charity

I therefore do not accept that a school could be registered which sought to limit its benefits to a narrow class (unless the limitation was defined by a special category of need). I do accept that a school which sought to limit its benefits to a narrow class could be criticized unless it could be shown that it had no other means by which it could reasonably be expected to achieve its charitable purposes. I consider that even as the law now stands a school could probably be faulted if it allowed its resources to be underused; I am in no doubt that that will be so in the future if the Bill is passed as proposed.

Exactly what benefits could be sought is a difficult question, and it is precisely for this reason that I for my part am wholly opposed to any form of statutory definition of the public benefit. It will amount of necessity to the replacement of a travelling concept of benefit with a defined concept; and this is for that very reason likely in the long run to impose a restriction on the law of charity rather than to enhance it; it is a commonplace of charity that it must always look for new methods of achieving the public benefit. To limit the benefit to concepts of access may therefore not be appropriate, given that there are alternative modes by which schools may achieve a benefit, such as sponsoring other educational providers or sponsoring benefits to other educational providers. A school may share its advantages in many ways beyond merely that of opening its own doors to additional pupils.

The difficulty that remains, however, is how the law of charity is to deal with the case of the charitable school which claims that it cannot offer any additional benefits over and above those secured by the provision of its fee-charging education. This would be the case if say a preparatory school could show that it had no facilities or advantages which it could share with others and it could not properly increase its fees to enlarge that surplus which it could put into other forms of educational charity apart from the mere provision of education for fees. This must be an exceptional case; it would normally be possible even in such circumstances to lift the fees to that level which would be charged by a profit making entity and to divert the resultant surplus into other forms of educational provision; but if the case arises it would, I think, be necessary to address the question whether to pursue the indirect benefits of securing an extra educational resource to a limited number not identifiable by need could be regarded as a reasonable means of putting the assets of the charity to best use. It is in my view possible to envisage schools in less prosperous parts of the country where constraints may exist both on the public funding of edcuational facilities and the level of fees that can be charged by any school in respect of which it could be said that the indirect benefit of assuming what would otherwise be a public burden was all that the trustees could reasonably be expected to achieve. I think that that is likely to be a rare case.

I hope that thse comments may be of some assistance.

Yours sincerely

First Schedule - cases relied on by the Charity Commissioners in the educational context to suggest that any school is as such charitable even though it has a limited pupil class.

1. Lonsdale was a decision that a school for the sons of gentlemen could be recognized as a charity, but it was decided at a time in the early nineteenth centruy when schools were few and far between, and just as a Latin school could not have been faulted because it did not teach other subjects which we would now expect to be taught, so it is not surprising that the provision of education was considered beneficial ipso facto even though not everyone could enjoy the benefits as we would now expect - it is demonstrable that any extension of the supply of education at a time when education was limited would have served the public benefit. I do not think Lonsdale decides any more than that, even though in his judgment Leach VC stated "all schools of learning are. . . to be considered [as charitable in the legal sense]".

2. It is true that Lonsdale waws echoed with apparent approval in Brighton College in the speech of Lord Blanesburgh when he said that "Brighton College is none the less in legal language a charity, because it was established [in 1845] as a school for the sons of noblemen and gentlemen"; but - it was not there in issue whether the College was a charity; the Crown conceded that it was, so the statement is not part of the decision as such

- Lord Blanesburgh was of course referring back to the act of foundation of the charity, and not to the operation of the school in modern times.

3. But most significant is the use which Danckwerts J made in The Abbey Malvern Wells of the quoted passage from Lonsdale; he introduced qualifications on Leach V-C's statement which are plainly an indication of his belief that the statement had to be seen by reference to the changing circumstance with the passage of times, in so far as he said that Lonsdale indicated that

"all schools of learning are to be considered charities unless they exist purely as profit-making ventures such as certain preparatory schools, and those institutions known sometimes as "cramming establishments"".

Lonsdale of course included no such qualification, which is merely the product of a reflection of the Lonsdale approach in the light of changing circumstances.

4. Thus it is not the case that there is any decision that the provision of education for a limited class of persons, e.g. the limited class of persons able to afford high fees, is ipso facto for the public benefit regardless of the radical change in circumstances as compared with the position at the time of Lonsdale (when it could legitimately be said that the public benefit would be achieved by any increase in the supply of what was then an acutely limited resource).

5. The most that can be said is that in principle the creation of a school of learning is charitable, but (as implicit in Dackwerts J's qualification of Lonsdale) care must be taken to see that the school is structured for the public benefit not for private benefit.

1. Two important decisions in modern times illustrate the ambit of charging in charity, re Resch [1969] 1 AC 514 and Joseph Rowntree Trust v Attorney General [1983] Ch 159. Resch as a Privy Council is of substantial persuasive authority, given that the advice to Her Majesty was prepared by one of the greatest equity lawyers of the modern era, Lord Wilberforce; but it is true to say that it does not in terms draw on the educational cases. Rowntree is admittedly only a first instance but nonetheless of direct authority as it governed an English charity.

2. Out of these cases there emerges a clear recognition that charity can be pursued through the medium of meeting needs even though the beneficiary pays for the provision made. Rowntree specifically cites the example of "fee-paying schools".

3. There also emerges a clear recognition that the question is whether the provision being made against the relevant charitable need is such as to secure a proper element of benefit. There is no warrant for saying that that proposition that public benefit is required only applies in certain forms of charity. Paragraph 12 of DCH 13 seems to suggest that Resch implies that questions of public benefit only apply to "fourth-head" cases of charity and thus not to educational charities; but that is not reconcilable with Oppenheim v Tobacco Securities Trust Co. Ltd [1951] AC 297.