Cayman Islands: Charity Law

INTRODUCTION

This is intended to be a brief summary of the basic principles of Cayman Islands' charity law. In the absence of any authority to the contrary, principles of Cayman Islands Charity Law are likely to follow English law principles.

DEFINITION OF CHARITY

English Charitable Uses Act 1601

There is no statutory definition of "charity". English case law has established four "heads" of charity. The purposes will be treated as charitable in that if they fall within one or other of those heads and are within the "spirit and intendment" of the preamble to the English Charitable Uses Act 1601. The purposes set out in that preamble (being examples but not the only objects of charity) are:

The four "heads" of charity

It is generally accepted that the current statement of English law is set out by Lord MacNaghten in the 1891 case of Commissioners for Special Purposes of Income Tax v Pemsel, namely:

A Cayman Islands' Grand Court decision (subsequently upheld by the Privy Council on appeal in Attorney General v Wahr-Hansen [2000] CILR 391) has held that this 1891 classification will apply in the Cayman Islands.

CHARITABLE ACTIVITIES

The law on what is charitable, within the four heads of charity is continually evolving to meet the changing needs of society. In the UK, the Charity Commission which is responsible for the registration and regulation of charities in England and Wales has a key role in defining what activities are to be considered charitable in the twenty-first century within the legal principles laid down by the Courts. To this end they are carrying out a review of the register of charities to consider, within the law, whether those organisations which currently benefit from charitable status should continue to do so and whether there is scope to develop further the boundaries of charitable status.

Further principles which can be extracted from English case law as applied by the Charity Commission are set out below.

Benefit to public

The four heads of charity each require that there should be a benefit to the public from the activities of the charitable body. In the case of the relief of poverty, there does not have to be a general public benefit: it can be limited to a very narrow section of the community. Public benefit will be presumed for the first three heads of charity but will have to be proved for the fourth.

Political purposes

Trusts for political purposes are non charitable, since the courts have no means of judging whether a proposed change in the law is for the public benefit or not. Political purposes include attempts to change the law by legislation and attempts to influence government policy. For example, in England the National Council for Civil Liberties and Amnesty International are not considered to be charitable. However, a body which exists for wider charitable purposes but incidentally puts pressure on the public and politicians may well be considered to be charitable. The Charity Commission have also recently indicated a willingness to register organisations which promote human rights either in England or abroad.

Religion

The head of religion now extends to any religious body so long as it is not morally subversive and its purposes are directed to the benefit of the public. Notably, the House of Lords in England has held that a trust for the contemplative order of nuns who did not leave their cloisters was not charitable, since there was no tangible benefit to the public involved.

Other purposes beneficial to the community

The fourth head of charity covers purposes not falling within the previous three categories but which are beneficial to the community in a way recognised by the law to be charitable.

Charity operating overseas

The English Charity Commissioners' previous view was that a gift under the first three heads of charity (namely, trusts for the relief of poverty; trusts for the advancement of education and trusts for the advancement of religion) may be charitable even though it may benefit foreign persons, institutions, cities or countries but a gift within the fourth (and more general) category (namely, trusts for other purposes beneficial to the community, not falling under any of the preceding heads) was not charitable if carried out overseas unless there is some benefit, albeit indirectly, to the local community. The Charity Commissioners now take the view that, in the case of an institution falling under the fourth head which operates abroad, one should first consider whether it would be regarded as a charity if its operations were confined to the UK. If it would, the Charity Commissioners consider that such an institution should be presumed to be charitable, even though operating abroad, unless it would be contrary to public policy to recognise it. The institution will not, however, be considered charitable if its objects are contrary to the laws of the foreign state in which it would operate. English law and practice as interpreted by The Charity Commission would be persuasive authority in the Cayman Islands.

CHARITY OUTSIDE THE CAYMAN ISLANDS

Section 71 of the Trusts Law (2001 Revision) states as follows: "A Trust shall not fail to qualify as a trust for charitable purposes only because those purposes may in part benefit the public or a section of the public outside of the Islands". To date, there has not been any Cayman Islands judicial interpretation of section 71 so it is not known whether or not the Cayman Islands courts could render void a trust for charitable purposes for the benefit in whole of the public or a section of the public outside of the Cayman Islands. Until such time as there is Cayman Islands judicial interpretation of section 71, it is recommended that a trust for charitable purposes benefits at least in part (albeit that such part may be nominal in nature) the public or a section of the public in the Cayman Islands.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.