Could The National Fund Charity’s Funds Be Used For Other Charitable Purposes Instead Of Reducing The National Debt

Attorney General v Zedra Fiduciary Services (UK) Ltd [2022]

Case background

This case concerned the ‘National Fund’, which is a Trust created by a settlor in 1928 for the purpose of paying off the National Debt. The terms of the Trust were that the sums would be managed by the Trustees to accumulate income and profits until the funds were sufficient to discharge the National Debt, whether alone or when combined with other funds for the same purpose.

Administration of the Trust was previously brought before the Court so that a declaration could be obtained as to its terms and use. The Court confirmed that the National Fund formed a valid charitable trust with its purpose being to benefit the nation in paying off the National Debt. With the National Debt being well into the billions of pounds it was clear the money in the Trust would be nowhere near sufficient to discharge the debt in full. A more detailed summary of the outcome of the previous hearing can be found here.

Use of the National Fund was again put before the Court whereby the Attorney General sought a declaration that the National Fund could be used to reduce the National Debt. In defence, the Trustees sought to use funds for general charitable purposes through the use of grants made to other charities. The matter before the Court was therefore whether the National Fund should be used to reduce the National Debt or instead for general charitable purposes.

The Attorney General submitted paying off some of the National Debt formed a gift to the nation within its charitable purposes and its benefit would be an increase in the funds available for public spending or, be sufficient to afford a reduction in taxes.

The Trustees, on the other hand, pleaded that allowing the National Fund to make grants to other charities benefitted the nation as the receiving charities would use the sums to benefit others. The difficulty in interpreting the Trustee’s submission was that the only people benefitting would be those benefitting from the charities whom grants were provided, and therefore, the benefit was not for the nation as intended, but to an extent only select groups of the nation. The Court held payment to the National Debt was as close as it could get within the charity’s aim and was the appropriate use of the fund.

Comment

This case demonstrates how a charity’s purpose can change over time and in some circumstances, become almost impossible to achieve. The approach to be adopted in these circumstances is to use the charity in a way that closely meets its purpose so far as possible.