Courts and Statute Seek to Uphold
In contrast to the position with a private trust, a charitable trust for undefined beneficiaries or broadly defined purpose will be readily upheld and given effect. When a trust/gift is made for the benefit of a charity and it is impossible and impracticable to discern the intention of the donor, the court on the applications of the charity may remake the gift for the purposes of giving effect to the charitable purposes as near as possible to those intended by the donor.
Where the original purposes cannot be fulfilled or cannot be carried out according to the directions given or provide for part of the assets or use of part of the assets only or where they can be used more effectively or the original purpose has ceased or have been adequately provided for then the gift may be altered and the assets applied “cy-pres” for similar purposes, as nearly as possible.
Clarity of Beneficiaries
Charitable purposes and objects may be more flexibly defined that those permitted under a trust for private benefit. The trustees may be given wide discretion, in relation to the choice of whom they will benefit. In contrast, in the case of a (private) discretionary trust, it must be at least possible to list or define the potential beneficiaries.
If there is a charitable intention which fails because of change in circumstances, lack of clarity or otherwise, there are mechanisms for preparation and approval of a scheme to apply the trust fund for charitable purposes, as near as may be, to the original intention.
Formerly it was problematic if a trust was created for both charitable or non-charitable purposes. However, the Charities Act has largely removed the difficulties which formerly applied. Formerly, where the trustees had a right to apply the trust assets and funds for a purpose which did not qualify as charitable, the entire trust may fail and be invalid.
The Charities Act provides that where any of the purposes of a gift include or could be deemed to include both charitable and non-charitable objects, its terms are to be interpreted and given effect so as to exclude the non-charitable objects, and the purposes shall take effect accordingly.
These provisions do not apply, where the terms of the gift make or provide for the making of an apportionment between charitable and non-charitable objects, provided that the non-charitable objects are identifiable from an express or implied description. In this case, the non-charitable objects may fail if they do not meet the requisite standards of certainty and formerly limitations on durations etc.
Objectives Redundant or Frustrated
If the institution or body to whom the gift is made has ceased to exist, or the particular purpose no longer exists, e.g., the purpose has been satisfied, then the courts may exercise so-called cy-pres jurisdiction. Where a gift is made for a charitable intention, but the failure of a particular purpose ensues, the courts will not allow it to fail. If the charity can be administered according to the directions of its founder, then the courts will endeavour to secure that this be done.
The purpose of this jurisdiction is to carry out the donor’s intentions in a manner which seems to closely resemble his intentions although it is no longer possible to carry out the particular purpose concerned. The jurisdiction seeks to ensure that a charitable intention will not be frustrated by the change of circumstances.
If on the other hand, the intention is to benefit a particular charity or purpose and none other, the gift will fail as the intention is no longer capable of being satisfied. It cannot be rescued as this would be contrary to the donor’s/ deceased’s intentions.
Upholding Charitable Trusts II
There have long existed powers for Courts to make and vary charitable trusts and purposes so that the original broad intention of the trust is fulfilled even in modern and updated circumstances.
It is a principle of charities law, that a trust should not fail where it is intended that the assets be applied for charitable purposes. There is court jurisdiction, by which a trust, which by its terms is impossible or impracticable to carry out, can be revised. This may happen with trusts, created many years ago, (in some cases hundreds of years ago) for purposes which are of no longer applicable or relevant.
Where the Courts can discern a general charitable intent on the part of the person creating the trust, the subsequent failure, or the fulfilment of the charitable purpose, will not terminate the trust, where trust assets remain. Under the Charities Acts, the former Charity Commissioners (now Charities Regulatory Authority ) may frame a scheme to remake the original charitable intention into a similar as may be (“cy pres”) scheme.
The Charity Commissioners (now the Charities Regulatory Authority) may draw up a scheme:
- where the original charitable purposes have been fulfilled and have used, part only of the trust assets;
- where the assets may be used more effectively in another context;
- where conditions originally imposed by the person creating the trust have ceased to be suitable or practical;
- where the original purposes have been adequately provided for by other means;
- where the original purposes have ceased to be a suitable and effective means of using the property.
Under this provision, a trust may be varied even if the original scheme has not failed totally or has not been totally fulfilled.
Statutory Saving I
The court or the Charities Regulatory Authority subject to certain limits, may make a scheme to give effect to the intentios of the deceased in a manner as closely as possible to the original gift.
The Charities Act provides that the original purposes of a charitable gift may be altered to allow the property given or part of it to be applied cy-près in the following cases
- where the original purposes, in whole or in part have been as far as may be fulfilled; or cannot be carried out, or cannot be carried out according to the directions given and to the spirit of the gift; or
- where the original purposes provide a use for part only of the property available by virtue of the gift; or
- where the property available by virtue of the gift and other property applicable for similar purposes can be more effectively used in conjunction, and to that end can suitably, regard being had to the spirit of the gift, be made applicable to common purposes; or
- where the original purposes were laid down by reference to an area which then was but has since ceased to be a unit for some other purpose, or by reference to a class of persons or to an area which has for any reason since ceased, either to be suitable, regard being had to the spirit of the gift, or to be practical in administering the gift; or
- where the original purposes, in whole or in part, have, since they were laid down been adequately provided for by other means; or ceased, as being useless or harmful to the community or for other reasons, to be in law charitable; or ceased in any other way to provide a suitable and effective method of using the property available by virtue of the gift, regard being had to the spirit of the gift.
Statutory Saving II
This does not affect the conditions which must be satisfied in order that property given for charitable purposes may be applied cy-près, except in so far as those conditions require a failure of the original purposes.
References to the original purposes of a gift are construed, where the application of the property given has been altered or regulated by a scheme or otherwise, as referring to the purposes for which the property is for the time being applicable.
A trust for charitable purposes places a trustee under a duty, where the case permits and requires the property or some part of it to be applied cy-près, to secure its effective use for charity by taking steps to enable it to be so applied.
There must generally be a general charitable intention. It is sufficient that there is a perpetual gift to the charity, and the impossibility arises only after the given gift has taken effect. Where trustees have been appointed and the charitable purposes are redundant in the above sense, an application may be made.
Where there is no trustee but a general charitable intention can be found in the will, the state may ensure administration of the charitable gift under the sign manual procedure. This is relatively rare.