Preserving Charitable Assets within Charitable Purposes

 

Cy Pres (pronounced Sigh Pray) is not a phrase you hear often, and yet applications to the Court for a Cy Pres Order are increasingly common.

Cy Pres is a phrase we have adopted from the French meaning, “as near as possible” to the original intention. (Don’t believe us? Check it out!)

Most people are familiar with the concept of a trust – usually established when one person or entity (settlor / donor) gives money to another person (the trustee), and directs that they use it for a specific purpose (the terms of the trust) or for the benefit of a specific person or entity (a beneficiary).

A trust is a charitable trust when it is established for charitable purposes (objects).

A Charitable trust can be defined as, “A purpose trust that is directed to exclusively charitable purposes (Leahy v A-G (NSW) (1959) 101 CLR 611) and that exhibits public benefit (Attorney-General (NSW) v Perpetual Trustee Co Ltd (1940) 63 CLR 209).” (Encyclopaedic Australian Legal Dictionary, Lexis Advance)

A charitable trust may be quite general (for example for the relief of poverty) or highly specific (for example the care of the aged in a specific geographic region).

Charitable trusts need not have any vesting date, and may exist in perpetuity.

Things change. Charities cease to exist and sometimes specific charitable trust obligations become impossible to perform.

For example care facilities run by charities are sometimes sold to for-profit operators. These changes may make the original intended performance of the terms of the charitable trust impossible or impractical.

Sometimes the terms of the charitable trust have an express power of amendment but often they don’t (especially when the charitable trust is embedded in a Will, known as a testamentary charitable trust).

The law favours charities and seeks to save / uphold charitable trusts. And so, in such cases there is an ability to apply to the Court for an Order from the Court to apply the trust property “Cy Pres”, or as near as possible to the original charitable intent of the trust.

Section 105 of the Trusts Act 1973 (Qld) provides that the Supreme Court of Queensland may make orders allowing the trust property to be applied Cy Pres , including in circumstances where The original (charitable) purposes cannot be carried out, or can not be carried out according to the directions given.

In fact, the trustee of a charitable trust is under an obligation, where the terms of a trust cannot be carried out, to apply to the Court for an Order to enable property to be applied Cy Pres, or be at risk of personal liability by acting in breach of trust.

In Queensland, a Cy Pres application usually made by the trustee of a trust, application may also potentially be made:

• • by the Attorney-General or person authorised by the Attorney-General;

• • by the charity, or any trustee of the trust; and

• • by any person interested in the due administration of the trust.
    (Source: s 106(2) of the Trusts Act 1973 (Qld))

Here at Corney & Lind Lawyers, we have recently had the privilege of assisting a client with several Cy Pres applications in the Supreme Court in 2018 which have all resulted in successful orders being granted in the terms sought the preservation and protection of charitable assets within charitable purposes.

His Honour Justice Bond observed that he’d seen very few such applications over the course of his practice, and yet he had dealt with a number in the month prior to the hearing of these applications!

Although many decisions made as a result of applications for Cy Pres orders are not published by the Court, a brief look at the range of published decisions shows that there are a variety of applications coming before the Court for a wide variety of reasons.

These applications can be complex, but with a wealth of experience in both litigation and charity law, the specialist charity and NFP law team here at Corney & Lind Lawyers are well placed to advise and represent applicants in Cy Pres matters.