OG2 Application of property cy-pres

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Policy Statement/Overview

 

IMPORTANT NOTE

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  • The guidance has not undergone an extensive review at this stage; it will be reviewed and renumbered at a later date.
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Summary of the guidance

Casework Guidance

Please read the IMPORTANT NOTE on the front page

OG2 A1 14 March 2012

OG2 A1 The law and how it should be applied 

1. Circumstances for cy-près

 

1.1 The legal framework

This guidance explains the Commission’s powers to alter the purposes of a charity by Scheme where there is no other suitable power of amendment in law or in the charity’s governing document.

 

lawyer_refer

Section 62(1) of the 2011 Act sets out the circumstances in which the purposes of a charitable gift can be altered so that it may be applied cy-près. These are:

(a) where the original purposes, in whole or in part:

(i) have been as far as maybe fulfilled, or

(ii) cannot be carried out, or not according to the directions given and to the spirit of the gift,

(b) where the original purposes provide a use for part only of the property available by virtue of the gift,

(c) where –

(i) the property available by virtue of the gift, and

(ii) other property applicable for similar purposes,

can be more effectively used in conjunction, and to that end can suitably, regard being had to the appropriate considerations, be made applicable to common purposes,

(d) where the original purposes where laid down by reference to -

(i) an area which then was but has since ceased to be a unit for some other purpose, or

(ii) a class of persons or an area which has for any reason since ceased to be suitable, regard being had to the appropriate considerations, or to be practical in administering the gift’ or

(e) where the original purposes, in whole or in part, have, since they were laid down -

(i) been adequately provided for by other means,

(ii) ceased, as being useless or harmful to the community or for other reasons to be in law charitable, or

(iii) 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 appropriate considerations.

(Section 62 refers to the ‘original’ purposes of the charity, but s.62(4) explains that this means the existing or current purposes if the original purposes have already been amended.)

The ‘appropriate considerations’ mentioned in s.62(1)(c), (d) and (e) are defined in s.62(2) as (on the one hand) the spirit of the gift concerned, and (on the other) the social and economic circumstances prevailing at the time of the proposed alteration of the original purposes.

The ‘spirit of the gift’ in the context of s.62 means the basic intention underlying the original gift as a whole: Re Lepton’s Charity [1972] Ch 276. The intention may be clear from the terms of the governing document of the charity: if not, records available at the time the charity was established, or even the way in which the charity has been administered and managed over the years, may be relevant.

The meaning of ‘social and economic circumstances prevailing at the time of the proposed alteration’ is not defined, but is about evaluating the ongoing usefulness of the charity’s trusts. This provision enables the Commission to consider other relevant factors alongside the spirit of the original gift in deciding whether a cy-près occasion has arisen, placing equal emphasis on the wording of the original purposes and the needs and circumstances of current beneficiaries. It is clear from the Parliamentary debates on the Charities Bill that the phrase ‘social and economic circumstances’ is intended to be interpreted broadly, and to encompass all relevant circumstances that the trustees or the Commission might need to take into account when deciding how or whether the purposes of the charity should be altered. Other authorities have suggested that this could therefore include environmental, legal, scientific or technological considerations.

We might take into account, for example, the following:

  • In some cases the provision of specific articles such as food or fuel may no longer be the most practical means of relieving financial hardship or other forms of disadvantage.
  • Provision of care for people with disabilities is now generally based around enabling them to live in their own homes rather than housing them in institutions.
  • In some cases the social or economic circumstances that led to the setting up of a charity (e.g. to provide education or housing) for members of one sex only may have changed over time.
  • The objects of some charities may imply outdated social or moral judgements about potential beneficiaries, such as ‘deserving poor’ (historically, poor people who could work but didn’t were officially classed as ‘idle’ and therefore undeserving). These may unnecessarily restrict the beneficiary class. Some objects contain language that could now be offensive or off-putting to potential beneficiaries or donors, such as ‘crippled’, ‘handicapped’, ‘invalid’ or ‘insane’.

Current social and economic circumstances are not an entirely new consideration in charity law. In the case of Re Hanbey [(1956) Ch 264], which is set out in more detail in OG2 B2 and OG2 B3, the court considered the ‘social utility’ of the charity’s objects as well as the intentions of the founder.

consultlawyer_referConsult Legal Services if you are unsure what the ‘spirit of the gift’ is or what ‘social and economic circumstances’ to take account of in a particular case.

 

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1.2 Failure of objects not always required

As explained above, a cy-près occasion would arise under section 62(1)(a) if the charity’s purposes failed. The term ‘failure’ has often been used as convenient shorthand to refer to any of the circumstances set out in section 62(1). However, it is important to note that the circumstances which permit a cy-près application of a charity’s property are not restricted to ‘failure’ and therefore the trustees do not necessarily have to demonstrate that the charity’s purposes are incapable of being carried out or wholly impracticable, particularly when current social and economic circumstances are also taken into account.

In some cases a cy-près application may be justified under the other provisions of section 62(1), even though the purposes of the charity can still be carried out. For example, we can make cy-pres Schemes without the current objects ‘failing’ under:

  • s.62(1)(b), where a charity’s objects may be completely workable but do not provide a use for all of the available income or property;
  • s.62(1)(c), where a charity is proposing to amalgamate with another charity with similar objects; the question of ‘failure’ is irrelevant; or
  • s.62(1)(e), which may allow a charity to make a case that the purposes have ceased in any way to be a suitable and effective method of using the charity’s property (bearing in mind the spirit of the gift and current social and economic circumstances).

 

For example, an almshouse charity for ‘poor persons with a preference for a poor gentlefolk couple’ could merge with another almshouse charity in the same geographical area whose beneficiaries are ‘poor persons who (except in special cases to be approved by the Commission) have been resident in the area of benefit for not less than five years’. In this example, the trustees of both charities were the same, and in practice, administered together. The aim of the merger was to provide greater efficiency and effectiveness in the administration of the charities. Although the first charity does not specify an area of benefit, the objects are sufficiently similar for a merger under s.62(1)(c). In practice the area of benefit for the first charity would be similar to the second charity. In this example, the merged charity’s beneficiaries were amended to ‘poor persons in particular, but not limited to, those resident in the area of benefit’.

Further information on issues which arise specifically in relation to the merger of almshouse charities may be found in OG 65 B3.

An example where section 62(1)(e) has been used to enable a cy-près application is where the purposes of an education charity were to hold land to be used as a school. The school is now being run by the local education authority on a different site and therefore a cy-près Scheme was appropriate because the charity’s purposes had adequately been provided by other means.

Further examples, looking in particular at consideration of social and economic circumstances, are given in the Annex below. We will interpret broadly any consideration of the social utility of a charity’s purposes in considering whether a cy-près occasion has arisen.

Given the breadth of s.62(1)(e)(iii) (‘ceased… to provide a suitable and effective method of using the property available by virtue of the gift’), considering social and economic circumstances is likely in many cases to strengthen the case for a cy-près application.

We cannot alter the objects of a charity simply because the trustees would like to use the funds for some worthy but different purpose without one of the factors listed in section 62(1) being present.

In addition to the powers in s.62(1) of the 2011 Act, s.62(5) gives the court and the Commission power to make a Scheme to enlarge a charity’s area of benefit within the guidelines set out in Schedule 4 of the 2011 Act. These are additional powers and in no way restrict our ability to enlarge a charity’s area of benefit under our other Scheme-making powers. To use s.62(5), it is not necessary to show that any of the conditions in s.62(1) apply, only that the enlargement is in the interests of the charity  

 

Existing area Permissible enlargement

1. Greater London

Any area which includes Greater London.

2. Any area in Greater London and not in, or partly in, the City of London..

(i) Any area in Greater London and not in, or partly in, the City of London;

(ii) the area of Greater London exclusive of the City of London;

(iii) any area which includes the area of Greater London, exclusive of the City of London;

(iv) any area partly in Greater London and partly in any adjacent parish or parishes (civil or ecclesiastical), and not partly in the City of London

3. A district

Any area which includes the district
4. A Welsh county or county borough Any area which includes the county or county borough
5. Any area in a district   

(i) Any area in the district;

(ii) the district;

(iii) any area which includes the district;

(iv) any area partly in the district and partly in any adjacent district or in any adjacent Welsh county or county borough.

6. Any area in a Welsh county or county borough

(i) Any area in the county or county borough;

(ii) the county or county borough;

(iii) any area which includes the county or county borough ;

(iv) any area partly in the county or county borough and partly in any adjacent Welsh county or county borough or in any adjacent district.

7. A parish (civil or ecclesiastical), or two or more parishes, or an area in a parish, or partly in each of two or more parishes.   

Any area not extending beyond the parish or parishes which

(i) includes, or include, the area in column 1, or

(ii) is, or are, adjacent to the area in column 1.

8. In Wales, a community, or two or more communities, or an area in a community, or partly in each of two or more communities.Any area not extending beyond the community or communities which –

(i) includes, or include, the area in column 1

or

(ii) is, or are, adjacent to the area in column 1.

Any area not extending beyond the community or communities which –

(i) includes, or include, the area in column 1

or

(ii) is, or are, adjacent to the area in column 1.

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2. Trustees’ duty

If any of the circumstances set out in s.62(1) of the 2011 Act arise, the trustees must do whatever is necessary to ensure that the charity's property is used effectively and appropriately by taking steps to have it applied by cy-près (s.61(5) of the 2011 Act).

Trustees should regularly review their charity’s governing document and ensure that the charity’s objects continue to be practical and relevant to its beneficiaries’ needs, and that the charity’s assets are being effectively applied.

 

3. Application of cy-près doctrine

3.1 The legal framework

 

lawyer_referSection 67 of the 2011 Act sets out how the Commission’s and the court’s power to make schemes to apply charity property cy-près is to be exercised.

 

In deciding how to apply charitable property cy-près, the Commission (or the court) must take into account:

  • the spirit of the original gift;
  • the desirability of securing that the property is applied for charitable purposes which are close to the original purposes; and
  • the need for the charity (or the receiving charity in the case of a transfer) to have purposes which are suitable and effective in the light of current social and economic circumstances.

Section 67(4) permits that where a scheme transfers property to another charity, the scheme may place a duty on the trustees of the receiving charity to ensure that the property is applied for purposes which are as similar as reasonably practicable to the original purposes.

Section 67(5) defines such property as including any property derived from the property subject to the scheme (e.g. proceeds of sale, substituted or exchanged property).

 

3.2 Our policy

We should be flexible and imaginative in applying the cy-près doctrine, balancing usefulness and practicality with respect for the existing purposes and beneficiaries. The purpose of making a cy-près Scheme is to enable a charity to continue being effective, useful and relevant to its beneficiaries’ needs in modern society, where without our intervention it would not be. We should, however, exercise caution where a proposed change might be a significant departure from the founder’s intentions or might exclude existing beneficiaries (unless, for example, the problem is that the existing beneficial class has ceased to exist). We should always take account of the trustees’ views when deciding how to amend a charity’s objects.

Section 67(3) directs us to take account of three factors. Generally we should give equal weight to these factors, but there may be circumstances where it is reasonable to emphasise one factor over the other two. For example, if a charity for the relief of poverty operates in an area where poverty is no longer an issue, it would be reasonable to focus almost entirely on finding purposes that are relevant to the current issues in the area of benefit. If on the other hand there is evidence that the values of the founder and of all those associated with the charity mean that the spirit of the gift is important to the future existence of the charity, we should consider how we can ensure that the new objects continue to reflect those factors.

Careful thought should be given to identifying the spirit of the original gift. Understanding the real purpose of the charity should give us greater flexibility. It would be reasonable to assume that the founder(s) of the charity would be more concerned about who they wanted to benefit, and the kind of charitable benefit provided (e.g. relief of poverty, education generally or in a particular subject, religious belief, recreational or community facilities) than any specific method of delivering that benefit.

We have applied the following principles in making cy-près Schemes since at least 1989 when they were published in the Commission’s annual report, and they are still relevant. The changes introduced by the Charities Act 2006 and carried forward into the 2011 Act, give us even greater flexibility:

 

  • Descriptions or classifications of charitable purposes should not be treated as rigid or mutually exclusive. This was particularly important before the 2006 Act, when charities were classified within four ‘heads’ (the Macnaghten classification), but the principle should still be upheld. There is considerable scope for overlap between many of the 13 descriptions of charitable purposes in the Charities Act 2011 and it is acceptable to include new objects which bring in additional purposes as defined within the Act. For example, we could agree new objects for a charity for the relief of poverty that deal with related issues, for example, prevention of poverty, advancement of education, advancement of health or community development (including regeneration). Alternatively, if the charity’s income is more than sufficient to relieve poverty in the area we could provide an additional object for surplus income to be applicable for any charitable purpose.  The key consideration is to find new objects that serve existing beneficiaries in an up-to-date and appropriate way and which enable the charity to use any surplus funds effectively having regard to the spirit of the gift and current social and economic circumstances.
  • Legal points should be balanced by practical considerations. For example, in the case of a proposed merger, the purposes of the merging charities are required to be similar, not identical. Or taking too narrow a view of what is similar to existing purposes may limit a charity’s future usefulness. This principle is all the more important when considering the social utility of new purposes; we should consider carefully the views of the trustees as to what will be useful to beneficiaries and allow the charity to be effective in view of current social and economic circumstances.
  • Care should be taken not to place undue emphasis on one part of a charity’s trusts over another. Where the beneficiaries of a charity are defined by reference to a number of elements (for example poor women resident in a particular locality) care should be taken not to give greater emphasis to one element than another without good reason for doing so. (For example, the charity's foundation or governing document might indicate whether any element is particularly important.)
  • In some circumstances it may be acceptable to exclude part of a charity’s existing purposes. For example, a merger of charities should not be discounted because part of the area of benefit or beneficiary group of one charity would be lost as a result.
  • No part of a charity’s trusts is unalterable. There is no point in trying to preserve a particular aspect of a charity’s trusts if the new purposes would not, as a result, be suitable and effective in the light of current social and economic circumstances.

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4. The use of the cy-près principle doctrine where there are secondary trusts

Charities will often be established with a primary trust and a provision that in the event that the primary trusts cannot be fulfilled, or the trustees feel that they should not go on fulfilling them, the property of the charity should be applied for purpose X, or passed to charity Y. Where trustees come to us to request a Scheme to amend the primary trust the question arises as to whether or not we amend that primary trust, given that to do so would postpone the implementation of the secondary trust. There is legal authority to support our view that we have the discretion to provide new cy-près trusts where any of the circumstances in s.62(1) arises, even if that involves causing a failure or postponement of the secondary trusts which remain workable. Equally, we can decide not to make a Scheme, and allow a secondary trust to take effect. For further guidance, see OG2 B2.

 

Annex – Further examples of application of the cy-près doctrine

1. Finding new ways of delivering charitable benefits

2. Spirit of the gift difficult to identify

3. Parallels with the Reverter of Sites Act

4. Changing social values

5. Identifying the real purpose of the charity

 

1. Finding new ways of delivering charitable benefits

The trusts of some charities (e.g. for the relief of poverty or sickness) specify that the charity must provide particular goods or services (e.g. food, fuel, clothing or medical equipment). By taking account of social and economic circumstances (for example, changes in welfare provision) trustees could demonstrate a cy-près occasion if providing those goods or services was no longer the most practical method of achieving the charity’s real purpose; they would not necessarily have to demonstrate that the trusts prevented or restricted them from applying the charity’s income (although many charities have been able to make a case on that basis).

Some charities have suggested to us that the provision of a school in a particular building is no longer a suitable and effective means of advancing the education of their beneficiaries and requested instead power to use the resources available to provide internet-based education. This is something that we could consider in the light of current social and economic circumstances.

 

2. Spirit of the gift difficult to identify

Some charities have outdated purposes where there may be no straightforward modern analogy, such as ringing a curfew bell (a warning to put out lamps and fires, dating from times when houses were often built of wood). In such cases it can be difficult to identify the spirit of the original gift or what would be close to the original purposes (a curfew bell is a civil purpose, but usually a church bell was rung and so the trusts would often provide for maintenance of the church building). Taking account of current social and economic circumstances might enable us to be more pragmatic in agreeing new charitable purposes. It would not, however, prevent us from preserving traditions that were valued by a community.

 

3. Parallels with the Reverter of Sites Act

At the time when the Reverter of Sites Act 1987 was first made (see OG 27), it gave us greater flexibility to interpret the founder’s intentions and make Schemes to apply property for new charitable purposes. For example if there was no longer a need for a school in a particular locality we could give the property new purposes which did not have to be educational, such as a community centre, or use the proceeds of sale as an endowment fund for a charity for the benefit of the community. Cy-près applications of this kind are now possible under the 2011 Act as we take account of current social and economic circumstances. (For guidance on the Reverter of Sites Act see OG 27).

 

4. Changing social values

Charities have been established to relieve poverty amongst relations and descendents of the founder. We have received legal advice that, where such charities were founded in past centuries, it would not be consistent with the founder’s intentions (or the spirit of the gift) to enable illegitimate descendents to benefit. Taking account of current social and economic circumstances, where views on marriage and illegitimacy have changed, would allow us to make such an alteration to the trusts.

 

5. Identifying the real purpose of the charity

In some cases it can be difficult to identify the spirit of the gift where there are a number of elements to the qualifications of beneficiaries, for example poor elderly women who are members of the Church of England who have lived in the parish for at least ten years. There are a number of elements that we would need to consider:

 

  • financial hardship;
  • age-related need;
  • disadvantage linked to gender;
  • religious belief or affiliation; and
  • a wish to benefit residents of a particular locality.

Relief of poverty, relief of needs linked to age or other disadvantage (including gender) and the advancement of religion are all charitable purposes.

Whilst the law now requires us to also take account of current social and economic circumstances, we should be careful not to judge the spirit of the gift or the founder’s intentions by our own standards.

We should look for any indications of the founder’s intentions in the governing document or the administration of the charity (e.g. trustee appointments). If there are links to a particular church or churches, or an indication that the founder held and wanted to express or promote particular religious beliefs (for example, the qualification implies active membership of a church), we might place more emphasis on this element of the trusts. Conversely, if the evidence doesn’t suggest that the founder wanted to directly encourage religious belief or practice (but was merely following social or moral norms of the time) and the trustees don’t consider the religious qualification important, we might consider other elements of the trusts more important. Obviously, we should exercise care in relation to dealing with such issues.

We should also consider whether elderly people or women continue to experience particular disadvantage in comparison to other members of society in financial need, either in the locality or more generally.

In some communities there may be a strong wish to benefit established members of the local community rather than new arrivals. If the charity has more resources available than are needed to benefit established members of the community, it would nevertheless be reasonable to shorten or remove the residential qualification or enlarge the area of benefit.

We might decide to preserve the original beneficiary class and introduce a ‘secondary’ beneficial class who could benefit from surplus income, or demote one of the qualifications to a ‘preference’. This would still involve deciding which of the beneficiary qualifications was least important and could be relaxed in order to define the wider group.

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OG2 B2 14 March 2012

OG2 B2 The use of the cy-pres doctrine where there are secondary trusts 

1. Introduction

Charity trustees have the duty to hold property for a particular purpose - the primary trust. Sometimes the governing document of the charity will indicate that if the primary trust becomes unworkable for any reason, the property should be used for a gift over; that is, a secondary trust.

An example of a primary trust is one for the distribution of coal to three poor widows in the parish of X. In the event of the trustees not being able to distribute the coal, or not able to find three poor widows, the primary purpose would fail. If there is a secondary trust, the trustees would have the duty to apply the trust fund for whatever purpose is stipulated for that secondary trust.

However, in situations where the primary trust has failed, trustees may ask us to make a cy-près Scheme under s.62(1) of the 2011 Act to change the objects, even though there are secondary trusts which are still workable. We should consider such a request very carefully, as we have to weigh up whether the intentions of the founder, and social utility, are better served by modifying the primary trusts, or by requiring the beneficiaries of the secondary trust to be preferred.

We should consider whether, for this or any other reason, the Scheme may be controversial and whether the trustees or representatives of the beneficial class under the secondary trust should be given the opportunity to comment on any changes through formal publication of the scheme. The options and considerations for publishing our intention to make a scheme are set out in section B8 of OG500.

In assessing cases where there are secondary trusts, the Commission has applied the principles of Re Hanbey (1956) Ch 264. These principles are modified by s.62(2) of the 2011 Act, as explained below. It is clear from Re Hanbey that we have the discretion to substitute new cy-près trusts for unworkable primary trusts, even if that involves causing a failure or postponement of secondary trusts which remain workable. We also, of course, have the discretion to refuse to make a Scheme, thereby simply allowing the secondary trusts to take effect. (This was, in fact, what the court decided to do in the particular circumstances of Re Hanbey, but the principles of the case demonstrate the different options that we have discretion to consider in each case.)

Re Hanbey identified two significant factors to bear in mind:

  •  the intentions of the founder; and
  • social utility.

 

lawyer_referIn addition to the principles of Re Hanbey, Sections 62 and 67 of the 2011 Act also direct the Commission to take into consideration both the spirit of the original gift and current social and economic circumstances (which is analogous to social utility), in deciding whether a scheme is needed and in deciding how to alter trusts (for further detail see OG2 A1).

This widening of the triggers for a cy-près occasion may allow trustees and the Commission to consider the need for a Scheme at an earlier stage.

Ascertaining the intentions of the founder (the spirit of the original gift) may be complicated where there are secondary trusts.  It might appear that simply allowing the secondary trust to take effect would always be more consistent with the intention of the founder, rather than allowing the primary trust to continue in a different form. But normally, the founder would be more concerned with the primary trust than with the secondary one. If the primary trust could be amended without altering it in any real substance, that might seem more consistent with the founder's intentions than allowing the secondary trust to take effect, particularly if the secondary trust was substantially different to the primary one.

These considerations must of course be balanced by social utility. As explained in OG2 A1, there is no point in preserving trusts that will not allow the charity’s property to be applied suitably and effectively in the light of current social and economic circumstances.

We also, of course, have the discretion to alter the primary trusts cy-près, and (if those altered trusts are susceptible of failure) to preserve the secondary trusts so that they arise on the occasion of the failure of the altered trusts, instead of on the occasion of the failure of the original primary trusts.

If the Scheme is to be fully regulating, but not in fact overhauling the objects, it needs to make it clear whether or not the secondary trusts will still apply. See OG500 Schemes.

consultlawyer_referIn all cases, consult Legal Services before making a decision.

 

The next three sections describe some situations which caseworkers may encounter.

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2. Both the primary trusts and the secondary trusts are impracticable

In this situation, the primary trusts should be altered cy-près.

consultlawyer_referConsider the need for advice from Legal Services on what the most appropriate cy-près application should be - for example, should it reflect more closely the primary, or the secondary trusts, or both?

 

3. The trustees want to change the primary trust before the condition terminating that trust has taken effect

If the trustees are aware that the primary trust is still viable, but will become unworkable in the near future (eg because, in the example given in section 1 above, they cannot find any more poor widows to replace their beneficiaries when they die, or because they are becoming aware that people do not use coal any more), they may apply to us for a Scheme to amend the primary trust before it becomes unworkable.

The making of a Scheme cannot itself terminate the primary trust, and the objects of a charity cannot be altered simply because the trustees would like to use the funds for some worthy but different purpose without one or more of the factors in section 62(1) of the 2011 Act existing. However, trustees of failing charities should be encouraged to look for a more beneficial use of their income, and if a case for making a Scheme altering the primary trust has been made to us before the terminating event has occurred, we should consider making the Scheme, taking account of current social and economic circumstances which the trustees have brought to our attention.

Any change we might agree to before the primary trust fails should continue to ensure that the dwindling/failing class of beneficiaries continues to have priority.

The effect of making the Scheme may be that the terminating event can never occur, and any secondary trusts will therefore be destroyed.

consultlawyer_referIn all cases, consult Legal Services before making a decision.

 

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4. The condition which gives rise to the secondary trust is not necessarily linked to the failure of the primary trust

An example of this situation is the nationalisation or municipalisation of the service to which the primary trust is connected. So trusts for the benefit of hospitals sometimes had secondary trusts which took effect on the transfer of the hospital from trustees to the NHS, or as a result of redundant hospital buildings, ie nurses' homes being sold off, or demolished.

In such a case, the normal approach would be to let the secondary trust take effect. Indeed, there may be no cy-près occasion at all in relation to the primary trust, where the terminating event is not linked to the failure of the primary trust. Here, letting the secondary trust take effect is the only option available.

consultlawyer_referIn all cases, consider the need for advice from Legal Services before making a decision.

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OG2 B3 15 August 2002

OG2 B3 Re Hanbey's Will Trusts, Cutlers' Company v President and Governors of Christ's Hospital, London 

This transcription is taken from the Chancery Division Law Reports, 1956 [1955 H. 1480].

The testator, who died on December 25 1786, by his will dated January 12 1782, bequeathed the sum of £8,000 to the Cutlers' Company [of Sheffield] upon trust to apply the annual income thereof in perpetuity for divers charitable purposes set out with great particularity, with a gift over in favour of Christ's Hospital in the event of the company at any time failing to distribute the income of the trust fund in the manner, and according to the directions prescribed by the will.

Since the year 1917 the company had found itself no longer able to comply strictly with the terms of the bequest in respect of the mode of the annual distribution of the fund.

In 1955 the company issued a summons to determine, inter alia, the question whether the gift over had or had not taken effect, and the Court treated the summons as though it were amended to include a request for a settlement of a Scheme to preserve the original trusts in an amended form:-

Held:

that the Court had power to direct a scheme continuing the original trusts in a different form;

  • that the effect of such a scheme, if directed, would be to defeat the gift over;
  • that the Court had a discretion as to whether or not a scheme should be directed; and
  • that in the exercise of this discretion and taking into consideration all the circumstances of the present application - in particular, the fact that the company had been committing breaches of trust (albeit in good faith) for a considerable period of time without the authority of the Court or of any other body with jurisdiction over charities, and the fact that it would be difficult to settle a scheme which would apply the property cy-près with the testator's objects - the Court was of the opinion that this was not a case in which a scheme ought to be directed, and that, accordingly, the gift over took effect.Top of page