Cy-Pres and the Redistribution of Charitable Wealth

John Picton: Liverpool University

The charitable cy-pres doctrine permits the alteration of trust purposes. It is a complex and famously technical area of law. It was described as ‘arcane’ by Lord Diplock, and as ‘metaphysics’ by Lord Neuberger. But it is important. It permits trusts to be changed. It is also a powerful mechanism. Where once weak common law rules inhibited reform, under statute, it has real teeth. Since the enactment of pioneering legislation in the 1960s, it has been possible to reform trusts on the straightforward basis that they are unsuitable or ineffective. That broad and discretionary standard promotes active trust reform.

Yet there is something that the doctrine does not do. It does not unlock trusts simply because funds could be better spent. And so the rule is limited. It is not used to redistribute charitable wealth to where it is most needed in welfare terms. This is not for any reason related to statutory wording; the legislation is highly flexible. Rather, the cause might be historical, even the suggestion of redistribution would have been anathema to early lawyers. Or it might be due to the attitudes of trustees. Trusts are normally reformed upon the request of trustees, who may be wedded to the terms of a particular charity. At the least, they have no incentive to give up funds for alternative, but more socially useful, causes.

There are deeper reasons. Using cy-pres to redistribute charitable wealth on the basis of social need would have radical effects. It would lift funds out of those charities established for low utility or idiosyncratic purposes, so that they can be applied for social welfare. But therein lies the rub. It is not easy to identify without the most bitter of debates which charities should find themselves upon the chopping block. Should independent schools release their funds? Or art galleries? Nor is it straightforward to discover which charities are the most useful. Should charities concerned with the relief of poverty be the recipients? Or health? Or schools?

And then there is another layer to the problem. It has long been thought that if donors had a shrewd idea that their gifts might be applied to anything other than those which they intended, then they would be less likely to give in the first place. It at least seems clear that donors can’t all be assumed to care about welfare. Their gifts might be highly personal, particularly in the testamentary context. Wills cases are replete with gifts to parish churches (long attended), gifts to schools (once attended) and gifts to care homes and hospices (no longer needed). These gifts flow from donors’ personal experiences in the World. They are not motivated by broad concepts of social justice.

So perhaps the law, or the use of the law, is a compromise. It both avoids difficult and controversial issues (no low social welfare charities need be identified), and at the same time, avoids deterring donation. Even so, that feels like a cop-out. It is well acknowledged that certain areas of charity benefit greatly from voluntary donation, such as animal welfare and religion, while others, such as the protection of minorities and unpopular groups do not. To accept that cy-pres has potential help, but to also say the issues raised are too difficult, is unsatisfactory.

But of course, cy-pres is not the only mechanism of redistribution. We can (and we do) also look to the state, which has obligations to those most in need: both legal and political. It might favour social welfare through the direct donation of funds. Or more inventively, it might assemble the tax system so that certain charitable purposes are better favoured. In this context, cy-pres looks less important. Although it might still have a role to play – quite what is not clear – provided controversy is avoided and donors are not deterred.

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