Equity and Trusts: Charitable Trusts and the Cy-près Doctrine

Definition and Advantages of Charitable Trusts

  • Definition: Under the Charities Act (Northern Ireland) 2008, a "charity" is an institution established for charitable purposes only and subject to the control of the Court.

  • Key Advantages

  • Beneficiaries: No specific beneficiaries are required; the Charity Commission enforces the trust.

  • Perpetuity: Charitable trusts are not subject to the standard perpetuity period unlike private purpose trusts.

  • Cy-près: Failed charitable trusts can be saved and applied to alternative purposes under specific legal requirements.

Criteria for Charitable Status

According to Hanchett-Stanford v Attorney General [2008], there are three cumulative criteria:

  1. Charitable Purpose: Must fall within the definitions in s2(2) of the Charities Act (NI) 2008.

  2. Public Benefit: Must satisfy the requirement defined in the Charities Act (NI) 2013, which removed any presumption that a purpose is for the public benefit.

  3. Wholly or Exclusively Charitable: Under s180(1), purposes must be exclusively charitable. Political purposes are excluded (McGovern v Attorney-General [1982]).     *

  4. Severance: If purposes are not exclusively charitable, the fund may be divided (e.g., Salusbury v Denton).

Categories of Charitable Purposes

Under s2(2) of the Charities Act (NI) 2008, recognized purposes include:

  • (a) Prevention or relief of poverty: Defined as providing for those who "go short" in an ordinary sense, not necessarily just the destitute (Re Coulthurst [1951]).

  • (b) Advancement of education: Construed broadly (IRC v McMullen [1980]).

  • (c) Advancement of religion: Includes belief in one god, multiple gods, or no god (s2(3)(a)).

  • Other Categories: Health or saving lives, citizenship or community development, arts/culture/science, amateur sport, human rights, environmental protection, and animal welfare.

Cy-près Doctrine

This doctrine applies when a charitable purpose becomes impossible or impractical to carry out.

  • Initial Failure: Occurs if the trust is impossible at the time of the testator's death.     * Requires finding a "paramount charitable intention" to apply funds cy-près (Re Wilson [1913]).     * Often involves defunct or non-existent charities (Re Harwood).

  • Subsequent (Supervening) Failure: Occurs after the trust has already taken effect.     * Funds are applied cy-près regardless of whether a general charitable intention exists (Re Dunwoodie [1977]; Re Wright [1954]).

  • Application Schemes: Under s29 of the Charities Act (NI) 2008, the Court or Commission considers:     * The spirit of the original gift.     * Applying property to purposes close to the original intent.     * Current social and economic circumstances.