Equity and Trusts/Cy-près

CY-PRÈS

In situations where a charitable purpose proves to be impossible to complete or it fails, there are special rules for the trustees to follow. The basic rule is that any surplus will be used to fulfil as much of the original purpose, but this requires permission from a court. If the trust fails from the start, the cy-près rules cannot be used unless there was a ‘general charitable intent’ i.e. the donor would have donated to charity anyway, and was not tied to a specific charitable purpose.

The situations where the trust fails at or near the start are that: it is impossible e.g. the purpose has been fulfilled as much as is possible; the purpose cannot be achieved in a manner that is consistent with the spirit of the gift; ineffectiveness; there is surplus property; the purpose is unsuitable or impractical. the purpose breaches the Human Rights Act.

If a charity has been operating successfully but suffers a failure, the courts will be more willing to apply the cy-près rules because once property is transferred to charitable purposes, it remains charitable permanently. In these situations the courts will not look for evidence that there was a general charitable intention. The effect of the rules will be that the charity might be overhauled or updated. The cy-près rules can be applied to excess funds donated to collecting boxes without having to request permission from the donor(s) per section 14 of the Charities Act 1993.