Nearly There!

Kevin Modiri
Protecting Children From Sexual Predators

What is a Cy-pres Scheme?

The French term Cy-pres translates to English as ‘as near as possible’. Whilst this blog is not intended to be a French lesson, the translation is useful in understanding the use of the words Cy-pres in respect of charity law.

Charities when they are formed have specific charitable purposes that they must comply with but what happens when those purposes are not possible anymore? This is where the Cy-pres regime can be applied, when deciding an alternative path for charity property that is ‘as near as possible’ to the original purposes of the charity. The factors that the Charity Commission/Court has to take into account when deciding if a Cy-pres scheme is appropriate are set out in Section 67(3) of the Charities Act 2011, which confirms that the matters to be taken into account are:

“(a) the spirit of the original gift,

(b) the desirability of securing that the property is applied for charitable purposes which are close to the original purposes, and

(c) the need for the relevant charity to have purposes which are suitable and effective in the light of current social and economic circumstances.”

The First Tier Tribunal has recently considered an appeal in respect of a proposed Cy-pres scheme in the case of Miller and another v The Charity Commission for England and Wales and The London Borough of Ealing.

Miller & Anor v The Charity Commission for England and Wales & Anor [2023]

Background

The charity in that case was a relatively old charity, having been established in 1893. The purpose of the charity on creation was noted in the judgment as:

meetings, entertainments and other activities listed in the Trust document with any profit generated by use for such purposes to be applied, after deduction of expenses, to any charities in the district of the then Ealing Local Board (the predecessor in title to the Second Respondent)’.

For a significant period, the Second Respondent had not recognised that the property belonging to the charity was independent of the Second Respondent, and as such the lines between the Second Respondent’s assets and those of the charity became blurred.

The charity has no resources of its own and relies entirely upon the Second Respondent in terms of maintaining the property owned by the charity. There was no dispute and therefore it was a finding of the Tribunal that the charity in its current guise was not financially viable and accordingly the criteria for a Cy-pres scheme had arisen. The question for the Tribunal was then whether the scheme that the Second Respondent had proposed was suitable and appropriate.

The scheme involved an agreement with a developer, Mastcraft. The scheme was described in the judgment as follows:

The Scheme, that is complex, authorises the property of the Charity to be leased to Surejogi, the company established by Mastcraft to redevelop the Second Respondent’s Town Hall, for 250 years, allowing for an up-front premium to be paid to and received by the Charity (after deduction of transactions costs) and subject to a Community Use protocol, with the repair and maintenance obligations for the property of the Charity to be the responsibility of Surejogi. The income from the community hiring of the Victoria Hall, part of the property of the Charity, will go to Surejogi, while income from community hiring of other premises, known as the Queen’s Hall, will go to the Charity, of which the Second Respondent is the sole trustee.    

The Tribunal found that the scheme in its current form was not appropriate and, whilst accepting that the change proposed by the Second Respondent was appropriate, ordered that the Second Respondent reconsider the scheme taking into account the following factors:

  1. It is essential to properly consider and, to the extent possible, manage any actual, or perceived, conflict of interest between the Charity and Ealing Borough Council, as owner of the Town Hall, in respect of the property of the Charity’;
  2. the new Scheme must show adequate regard for the Charity’s property and beneficiaries. In order to achieve this to the fullest extent possible, the Second Respondent (as Trustee) must, from a governance perspective, recognise this, and act only in the best interests of the Charity, when agreeing to the terms and conditions finalised with Mastcraft / Surejogi (or another)’;
  3. Boundaries of the property belonging to the charity must be properly defined; and
  4. The timing of reviews as to the reasonable and proper charges of community users, being set at 10 years in the current scheme, could result in community users being priced out of the market.’

Comment

This case provides useful guidance on how a Cy-pres scheme should be approached. The primary focus of the Tribunal was plainly on the best interests of the charity, having in mind the original charitable purposes, and the desire to protect charitable assets as far as possible. Whilst the above criteria identified by the Tribunal might seem relatively minor, they are fundamental to preserving the charity’s independence and property. It is therefore fair to say that the scheme was nearly there but not quite finished sufficiently to be appropriate and suitable.

How can Nelsons helpcy-pres

Kevin Modiri is a Partner in our expert Dispute Resolution team, specialising in charity law, civil disputes, insolvency, inheritance disputes, data breach claims and defamation claims.

If you have any questions concerning the subjects discussed in this article, please do not hesitate to contact Kevin or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online enquiry form.

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