Charitable gifts and the cy-près doctrine
In a recent article, we discussed the Supreme Court decision of Re Graham (deceased)1 in which the Court determined that a charitable gift in a Will should be applied cy-près where the charity named in the Will had ceased to exist after the Will-maker’s death.
In the subsequent cy-près application,2 the Court made orders permitting the gift in the Will to the (now extinct) Stroke Association of Queensland Inc. (SAQ) to be distributed to Synapse Australia Ltd (Synapse) (as to 45%), the National Stroke Foundation Ltd (NSF) (as to 45%) and the Stroke Recovery Trial Fund Ltd (SRTF) (as to 10%).
While a detailed examination of the cy-près doctrine is beyond the scope of this article, it is in short an equitable doctrine that enables the Court to vary the original purposes of a charitable trust (including a trust created in a Will) either because those original purposes cannot be carried out for some reason (due to initial impossibility or supervening impossibility)3 or because the original purposes have been exhausted and a surplus remains. The term “cy-près” derives from the French language and means “as near as possible”.
In cases of initial impossibility (e.g. where a named charity in a Will ceases to exist before the Will-maker’s death), provided that the terms of the gift clearly show a general charitable intention, the Court will give effect to that intention by applying the gift cy-près. If however there is nothing in the wording of the gift to show that there was a general charitable intention or if there is a gift-over to non-charitable objects where the charitable gift fails, the cy-près doctrine cannot be applied.
In cases of supervening impossibility (e.g. where a named charity in a Will ceases to exist after the Will-maker’s death – this being what happened in Re Graham), the gift cannot fail because it has already taken effect. Therefore, irrespective of whether the Will discloses a general charitable intention, a purpose which is cy-près may be nominated by the Court.
In Queensland, section 105 of the Trusts Act 1973 (Qld) empowers the Court to make orders allowing for the original purposes of a charitable trust to be altered to enable the trust property to be applied cy-près. The task for the Court is to endeavour to give effect to the Will-maker’s intention and to apply the fund to a scheme which most closely correlates with the intention of the Will-maker. Mr Graham’s executor sought orders pursuant to this section in respect of the gift to the SAQ.
In order to try and give effect to Mr Graham’s intention of benefitting a stroke charity (which in turn benefitted the Queensland community), it was necessary for the Court to consider the work or purpose of each of the proposed beneficiaries of the cy-près scheme, namely Synapse, the NSF and the SRTF, to determine which (one or more of them) had objects as near as possible to the objects of the (now extinct) SAQ.
The Court considered the objects of the three competing charities by reference to their respective constitutions. Although all three charities had stroke-related objects, two of the charities had much broader objects than the SAQ and one had much narrower objects than the SAQ. Ultimately, orders were made that the gift be divided among all three charities in different shares.
The Court subsequently ordered that each of the three charities bear their own legal costs out of their respective shares of the gift (as opposed to ordering their costs be paid out of the estate). The executor’s costs were otherwise ordered to be paid out of the estate (that is, before the three charities received a distribution).
Court applications carry considerable cost, delay and risk and, where possible, they should be avoided. This is even more significant in the current economic climate when charities are likely receiving less donations than usual.
Particularly in the more common scenario of initial impossibility affecting a charitable gift in a Will, one way of helping avoid a Court application is to ensure that the (actual or suggested) wording of the gift is drafted widely enough to cover the situation where, for example, a charity changes its name, amalgamates with another charity or even ceases to exist prior to the Will-maker’s death.
If you work with a charity looking to review its suggested Will clauses (or which is needing assistance in relation to a deceased estate) or if you are an individual wishing to benefit one or more charities in your Will, please contact our experienced Estates and Succession team for advice.