Charity Law and Social Inclusion

Social inclusion for marginalized groups is among the most important challenges
facing western governments today. The existence of alienated groups within a
state impacts disproportionately on efforts to build and sustain civil society and
the difficulties are set to increase as population displacement continues to impact
upon developed nations.
Profiling national and international social inclusion agendas, Charity Law and
Social Inclusion examines the fit between the charity law framework and the needs
of the socially marginalized in some leading common law nations – the US,
England and Wales, Ireland, Australia, New Zealand and Canada. The book:

• examines the concepts of philanthropy, inclusion, alienation and justice;

• considers the competing claims of philanthropy, legal rights and politics as
appropriate methods of pursuing social justice;
• explains how weaknesses in charity law obstruct philanthropic intervention;
and
• makes recommendations for changes to the legal framework governing
philanthropy.

O’Halloran argues that our common charity law heritage must be updated and
co-ordinated to be capable of addressing social inclusion in the twenty-first cen-
tury. It will be of interest to academics and students in social policy, sociology and
law, as well as professionals in community and voluntary work.

Kerry O’Halloran is Adjunct Professor at the Centre of Philanthropy and

Nonprofit Studies, Queensland University of Technology, Australia.
Charity Law and Social
Inclusion

An international study

Kerry O’Halloran
First published 2006 by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
Simultaneously published in the USA and Canada
by Routledge
270 Madison Avenue, New York, NY 10016
Routledge is an imprint of the Taylor & Francis Group, an informa
business
This edition published in the Taylor & Francis e-Library, 2006.
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© 2007 Kerry O’Halloran

All rights reserved. No part of this book may be reprinted or
reproduced or utilised in any form or by any electronic,
mechanical, or other means, now known or hereafter
invented, including photocopying and recording, or in any
information storage or retrieval system, without permission in
writing from the publishers.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
O’Halloran, Kerry.
Charity law and social inclusion : an international study / Kerry O’Halloran.
p. cm.
Includes bibliographical references and index.
1. Charity laws and legislation. 2. Charitable uses, trusts, and
foundations. 3. Social service. 4. Social integration. I. Title.
K797.O353 2006
344.03′17–dc22
2006014251

ISBN 0-203-41352-0 Master e-book ISBN

ISBN10: 0–415–34722–X (hbk)

ISBN10: 0–415–34723–8 (pbk)
ISBN10: 0–203–64014–4 (ebk)

ISBN13: 978–0–415–34722–8 (hbk)

ISBN13: 978–0–415–34723–5 (pbk)
ISBN13: 978–0–203–64014–2 (ebk)
This book is dedicated to my mother Mavis Sancho
(15 August 1920–10 March 2000), whose balancing of
love, principles and authority was accompanied by a
wariness of all things political
Contents

Acknowledgements ix
Introduction 1

PART I
Philanthropy, social inclusion and the law 7

1 The gift relationship: charity and the law 9

2 Philanthropy and the challenge of social inclusion: the
contemporary issues 32

PART II
Charity law: the common law legacy 55

3 The common law: the emergence of principles, structures

and legal functions relating to charities 57
4 Alienation, philanthropy and the common law 82
5 The ‘public benefit’ test and social inclusion: the roles of
government and charity in a common law context 106

PART III
Legal rights and functions: a framework
for philanthropy 133

6 Legal functions relating to social inclusion in a modern

regulatory environment for charities 135
7 International benchmarks for charity law as it relates to
social inclusion 162
viii Contents

PART IV
Contemporary law and practice 189

8 Charity law and social inclusion in England and Wales 191

9 Charity law and social inclusion in Ireland 222
10 Charity law and social inclusion in Australia 251
11 Charity law and social inclusion in New Zealand 280
12 Charity law and social inclusion in the United States 310
13 Charity law and social inclusion in Canada 342
Conclusion 374

Notes 386
Index 432
Acknowledgements

Charity Law and Social Inclusion owes a great deal to Professor Myles McGregor-
Lowndes1 who not only wrote the chapter on Australia, read and made thoughtful
comments on all other chapters, but also provided a warm and generous
welcome for author and wife at the Centre of Philanthropy and Nonprofit
Studies. For his support and companionship and that of all other colleagues
at the Centre – particularly Anita Green Kellett, Rhonda Richards, Laloma
Dawn, Kym Madden, Ted Flack, Annie Liu, Peter Walsh, Dot Summerfield,
Dawn Butler, Margaret Steinberg and Wendy Scaife – I remain extremely
grateful.
The book itself leans heavily on the more scholarly work of Myles and of the
many others who have trudged this road before me, including Hubert Picarda,2
Gino dal Pont,3 Geoffrey Shannon,4 Diana Leat,5 and on the excellent charity law
reports commissioned and now published by several governments. The process of
writing benefited greatly from correspondence and conversations with a variety of
people too numerous to risk attempting to list here but to all of whom I acknow-
ledge a deep personal debt of gratitude. In particular, the charitable contribution
of several specialists, inveigled into reading and commenting on the jurisdiction-
specific chapters, has been most helpful in broadening my understanding of
variations in the way national law relates to social inclusion and this cannot be
allowed to pass without specific mention. Sincere thanks are due to Paul Bater6
and Gareth Morgan7 who kindly read and commented on the chapter dealing
with England and Wales. I am also most grateful to Bob Wyatt,8 Blake Bromley9
and Kathryn Chan10 for their similar contributions in respect of the chapter on
Canada. Michael Gousmett11 provided advice in relation to the New Zealand
chapter and his published articles on the charity law reform process in that
country were insightful. Jill Manny,12 very kindly and at short notice, read and
offered guidance on the US chapter. Without their generous help this would have
been a weaker book.
At this point it is customary and indeed standard practice to exonerate all the
aforementioned, and anyone else who may have been involved with the project,
from guilt by association with the views expressed by the author in the following
pages. In this instance it is perhaps particularly important to state that such
views and all other comments, points made, positions taken up, etc., are mine
x Acknowledgements

alone. Responsibility for such, and of course for all mistakes, inconsistencies and
omissions, etc., must unfortunately rest exclusively with me.
I am most grateful to Routledge for the vote of confidence that resulted in the
publishing of this book.
Finally, thank you, Elizabeth, for giving me the strength to see this through to
completion.
Introduction

Poverty and charity have an unequal relationship. Asymmetries of scale and

values have ensured the persistence of the former despite millennia of the latter.
For at least the past four centuries charity law has provided a frame of reference
for channelling charitable activity towards the alleviation of poverty in particular
and issues of social inclusion in general but it is no longer the primary frame of
reference for doing so, nor indeed has charity law ever been exclusively concerned
with such matters. Only good government can invest public resources on the scale
necessary to ensure that safety nets catch the vulnerable and the marginalized.
Moreover, charity law does not function in isolation. Social justice, human rights
and other perspectives are also clearly relevant while the benefits of charity are as
always left to fall in accordance with the whim of donors. So a sense of perspec-
tive is needed when considering the role of charity in relation to poverty and social
inclusion.
Charity, however, has its place and charity law more so than any other legal
framework is explicitly stamped with the obligation to address the needs of the
socially disadvantaged. If it’s not to fail in its central mission, the law governing
philanthropy in all its modern guises must now be made to fit contemporary
manifestations of need, domestic and global. The legal framework regulating the
philanthropic environment could facilitate a more effective contribution of char-
itable resources for the alleviation of poverty and the encouragement of social
inclusion. At the very least, existing obstructions should be removed. The result-
ing public benefit dividend in both the domestic and international arenas would
be considerable.
On the domestic front, the social inclusion agenda presents a fundamental
political challenge to the governments of modern western nations – how can our
concerns to give other countries the benefits of democracy be taken seriously
when after several centuries we have failed to deal with the poverty, racism,
discrimination and other indicators of social exclusion that are now manifestly
prevalent in all our democracies? As they pursue the probably ephemeral holy
grail of civil society, governments would now seem to be enthusiastically forging
partnerships with the third sector (voluntary and community sector, or not-
for-profit sector) of which charities form the cutting edge. In the common law
nations the terms of such partnerships are being set within the structure provided
2 Introduction

by a reformed charity law, and in some cases specific reference is made in that law
to the needs of the socially disadvantaged groups that typically feature on the
domestic social inclusion agenda of those nations (e.g. the poor, the mentally ill,
the disabled, the elderly, ethnic minorities, etc.). This partnership approach does
bring with it certain challenges, not least of which is the uncertainty surrounding
the principles that should govern the distribution of public benefit responsibilities
between government and charity. There can be little doubt, however, that these
new formal arrangements offer the best chance of building more stable, cohesive
and engaged societies within which the needs of the socially disadvantaged can
be readily acknowledged and accountability for failure to address them swiftly
ascertained.
On the international front also, the social inclusion agenda presents a funda-
mental political challenge to the same governments – how can we square the co-
ordinated investment of resources and the efficiency of our coercive intervention
in countries like Iraq with the inadequacy of our consensual intervention in places
like Kashmir? As legislatures make time to process rafts of anti-terrorism laws,
what evidence is there of a proportionate legislative interest in addressing
poverty? The current ‘global war against terrorism’ (GWAT) in conjunction with
the minefield of international trade has undoubtedly combined to constrain the
overseas activity of charities. Government pursuit of terrorists and maintenance
of subsidies for domestic produce, often in conjunction with other governments,
can result in charities being regarded with some suspicion; they may be viewed as
muddying the water at a time when governments are giving urgent priority to
safeguarding national interests. However, the presence of such third parties, as
they manoeuvre between polarized ideologies to reach the more vulnerable and
demonstrate good faith by their charitable activity, has perhaps never been more
necessary. Again there is some evidence that charity law reform together with
adherence to human rights provisions may prevail to allow charities the freedom
to go on developing their unique role as western ambassadors of goodwill.
Because they can go where governments often cannot and because of their
experience and credibility, sometimes earned over decades if not centuries, chari-
ties are well placed to build bridges with foreign cultures and perhaps forestall or
offset the alienation of marginalized groups such as the more radical adherents of
Islam.
Both domestically and internationally there are growing pressures on charity
law to provide an appropriate framework for modern philanthropy. Some of these
emanate from its essentially fiscally driven nature and push for greater regulatory
control in matters of transparency, accountability and effectiveness. Others press
for fiscal concerns to be balanced by mechanisms that facilitate a development of
charitable purposes in keeping with contemporary patterns of social need; a
function previously performed by the courts until factors of costs, delay and
adverse publicity fatally undermined their traditional role. There is also pressure
to develop legal structures that blend trust principles with company law and are
better fitted to strategically co-ordinate the resources of government, charities and
for-profit bodies.
 Introduction 3

Clearly any adjustment to the legal framework regulating the role of philan-
thropy on a national and international basis to ensure a better fit with contempor-
ary circumstances is the business of legislatures. This, however, is an area of law
where legislatures seldom venture. The fact, therefore, that the leading common
law nations – each wrestling with much the same agenda of social inclusion issues
and all doing so in a not dissimilar political context – are now committed to
charity law reform would seem to present a unique legislative opportunity.
Many of the world’s largest, most modern and powerful democracies including
the USA, and Commonwealth countries such as Australia, Canada and New
Zealand – alongside some of the smallest and most undeveloped such as the
Seychelle Islands and the island kingdom of Tonga – all share the same legacy of
institutional infrastructure, laws and legal principles inherited from Great Britain.
In particular they share the same charity law heritage. The Statute of Charitable
Uses 1601, the Preamble to it and an ever burgeoning body of related case law
have underpinned and guided the development of the legal framework governing
philanthropy in each of these nations. For 400 years they and some 60 other
members of the Commonwealth (and other post-empire nations such as Ireland)
have all found it equally unnecessary to introduce formative legislation to define
‘charity’ and broaden its purposes to meet contemporary patterns of need.1
Coincidentally, or not, many of these nations are now engaged at various stages in
charity law review processes designed to achieve that end.
This book asserts that the reviews do provide a window of opportunity. In the
aftermath of a sequence of natural disasters and acts of terrorism, in the shadow
of the unfolding tragedy of AIDS and poverty in sub-Saharan Africa and faced
with the violent consequences of cultural estrangement on a national and inter-
national basis, it is clearly time for the developed nations to pause and reflect. The
charity law framework that binds so many of the wealthiest nations in a shared
heritage of compassionate values could provide a basis for strategically addressing
issues of poverty and social inclusion both nationally and internationally. The
reviews offer a space and a platform for the governments of many modern west-
ern nations to co-ordinate their efforts and produce a concerted response to the
challenges presented by the contemporary social inclusion agenda.
Failure to co-ordinate, or at least to take fully into account, the law reform
processes of other nations will have consequences for all that share the same
common law legacy. The singular strength of this heritage, as a shared platform
for formulating and applying the principles that relate private resources to public
need, may not survive. As each nation translates its particular common law
experience into legislative parameters there is a serious danger that one or more
will put in place new definitions, or will otherwise structurally alter the common
law architecture, and so make it difficult if not impossible for the 400-year-old
web of judicial precedents to continue to loosely bind some 70 nations as they
develop a compassionate response to social need. The consequences of failure will
as always impact most grievously upon those already in need. Failure to make a
better fit between the shared charity law infrastructure of the developed nations
and their particular patterns of need and also with the greater need of those that
4 Introduction

remain underdeveloped is to risk further alienating those already marginalized by

poverty, cultural dissonance and other issues of social inclusion.
Charity Law and Social Inclusion takes an analytical look at the meaning of charity
and philanthropy within the common law tradition. It identifies and assesses the
functions of charity law and examines the appropriateness of the regulatory
framework as a means of giving effect to the new approaches of modern philan-
thropy. It considers issues of poverty and social inclusion on a national and
international basis and explores the nature and effect of the lack of fit between
contemporary social need and the charity law framework. It provides a compara-
tive evaluation of the current regulatory environment for philanthropy in a num-
ber of the more developed common law nations. As it holds focus on the functions
of charity law and their implications for issues of social inclusion within the
common law nations, it avoids the temptation to digress by exploring matters such
as governance, administration, company law and the wilder shores of modern
philanthropy. The book concludes with a summary of the main themes to emerge
and with some tentative suggestions for the future relationship between charity
law and social inclusion.
Part I, ‘Philanthropy, social inclusion and the law’, begins the book with two
chapters that consider some core concepts, basic parameters and fundamental
dilemmas. Using the Titmus theory of ‘the gift relationship’ as a touchstone, it
explores matters such as, Where did ‘charity’ come from? What is it for? How
does the law relate to it? How do charity, the law and social inclusion interrelate?
Where does philanthropy fit in?
Part II, ‘Charity law: the common law legacy’, consisting of three chapters,
examines in some detail the origins, characteristics and the regulatory framework
of charity law in a common law context. It provides a chronological overview of
the process whereby charity law emerged from the law of trusts in the courts of
Chancery and subsequently developed in England and Wales. It considers the
meaning, role and weighting of the ‘public benefit’ test in relation to other
important principles. Charitable status, as awarded by the State, is considered in
terms of the resulting profit and loss to the public. The various legal structures
available to give effect to charities are identified and explained, as is the related
institutional infrastructure. It identifies the distinctive hallmarks of this body of
law as formed in England and Wales and as they have transferred to and endured
in the common law nations.
Part III, ‘Legal rights and functions: a framework for philanthropy’, again
consisting of two chapters, identifies and considers benchmarks for an appropri-
ate, effective and sufficient charity law system and is central to the book. One
chapter formulates a template for identifying and assessing the functions of char-
ity law and for conducting the comparative jurisdictional analysis that follows in
Part IV. The other considers the provisions and related case law of international
conventions, particularly the European Convention for the Protection of Human
Rights and Fundamental Freedoms 1950, and assesses their significance for
charity law and practice.
Part IV, ‘Contemporary law and practice’, presents a jurisdiction-specific
 Introduction 5

profile of contemporary charity law in six prominent common law nations chosen
because they are each engaged in or have recently completed a process of law
reform. In template form, it provides an outline of law and the regulatory frame-
work, relates this to the social inclusion agenda of each nation, highlighting areas
of commonality and difference, thereby permitting a degree of comparative
analysis. Attention is paid to social inclusion as manifested in a nation’s domestic
agenda, in its policies toward indigenous people (where relevant), the threat of
terrorism and to international aid. It notes how the law measures up against the
benchmarks identified in Part III and it considers any implications arising for
interpreting and applying the ‘public benefit’ test. In broad terms, it identifies the
characteristic features of charity law in each jurisdiction.
Finally, Charity Law and Social Inclusion concludes with a brief summary of the
main points to emerge from the comparative survey. Central to the book’s thesis is
the assertion that having inherited the common law legacy from England and
Wales, and thereafter been guided by the precedents established by the judiciary
of that jurisdiction, the nations concerned (including India and others in the
Commonwealth) have perpetuated much the same legal framework for charity,
with similar structural faults, which may now be amenable to the same type of
adjustment, thereby permitting modern philanthropy to uniformly address con-
temporary social inclusion issues in the common law jurisdictions more appropri-
ately and effectively than they do at present. Accordingly, the conclusion focuses
on the following main areas of sensitivity in the relationship between the charity
law framework and social inclusion as these occur within the six common law
jurisdictions:

• partnership with government;

• restrictions on advocacy/political activity;
• human rights and anti-terrorism;
• international aid;
• issues relating to indigenous people/multicultural matters;
• fiscal issues, particularly tax orientation;
• roles of the court and Attorney General;
• forums for developing charitable purposes;
• legal structures; and
• public benefit issues.
Kerry O’Halloran,
White Park Bay,
Spring 2006