Charitable Fund Of £600m To Be Transferred To The Government To Reduce National Debt

In previous blogs, the case of Attorney General v Zedra Financial Services (UK) Ltd has been discussed. Those blogs can be read here and here for a more detailed analysis of the background of the case.

Summary

In summary, however, in 1927 a charitable trust was created by a wealthy banker with the primary purpose of extinguishing the National debt, which at the time had enormously increased due to the First World War.

By the time this matter came before the Courts, notwithstanding the fund now being worth around £600m, it was accepted by all parties and both experts that the charitable fund would never be sufficient to extinguish the National debt. At a second hearing, the Court therefore needed to decide on what alternate purpose the fund could be used for.

At the second hearing, the judge needed to decide whether the Attorney General’s position that the fund should be used towards the National debt should be the purpose or whether the Trustees’ position that the sums should be used for general charitable purposes. The judge, in finding in favour of the sums being used towards the reduction of the National debt, concluded that:

Decision appealed

The Trustees appealed the decision. Whilst the appeal Court questioned the sustainability of some of the comments made by the judge in his original judgments, in particular where parts of the second judgment conflicted with the first judgment given in this matter, it was found that the judge was entitled to reach the conclusion that he did and accordingly the appeal was dismissed.

Given that the criteria applicable to establishing what alternate purposes should be applied to a charitable trust that has failed contains a significant amount of judicial discretion, the decisions reached in such cases would be very difficult to appeal. Given that the finding in this case results in the Charitable trust itself ceasing to exist, this may have been the motivation of the Trustees when appealing the original decision.

Indeed, this is supported by the fact that one of the submissions made on behalf of the Trustees was that the trust would disappear but for an accounting entry in the Government’s books. This was not enough to persuade the appeal Courts to intervene, not least because that was always the intention of the original trust once the sums contained therein had become sufficient to extinguish the National debt.