The Modern Cy-près Doctrine

Applications and Implications

Rachael Mulheron

• Publisher: Routledge-Cavendish
• Year: 2016
• ISBN:
  9781135392642
• Edition: 1
• Topic: Droit
• Subtopic: Théorie et pratique du droit

It is unusual, in the precise world of law, to find instances of where 'near enough is good enough'. This book explores when this is possible, referring to property and monetary transfers, under the increasingly important and influential cy-près doctrine.

The doctrine decrees that, when literal compliance is impossible or infeasible, the intention of a donor or testator should be carried out 'as nearly as possible'. Over the past thirty years, this doctrine has marched into other legal territory where 'as near as possible' is also considered sufficient, such as in class actions litigation and under non-charitable trusts.

Discussing and analyzing key developments across the Commonwealth jurisdictions and the USA, this book considers whether there is a new and overarching definition which can be attributed to the cy-près doctrine. It asks whether there is a doctrinal symmetry of analysis that truly renders it a body of 'cy-près law' in the modern context and whether the doctrine can be expected to play an even greater role in the future.

This book is of interest to researchers and practitioners working in trusts and charity law, property law, contract law, and class actions jurisprudence.

1

Introduction

A INTRODUCTION

1. The Cy-près Doctrine: Traditional Definition

TRADITIONALLY, AND STATED in its simplest of terms, the cy-près doctrine is the vehicle by which the intentions of a donor (settlor or testator) may be given effect ‘as nearly as possible’ in circumstances where literal compliance with the donor’s stated intentions cannot be effectuated. Accordingly, in the law of charitable trusts, the cy-près doctrine states that where a donor has directed a gift of money or property to a charitable object (purpose), but has expressed a general charitable intention that is impossible or impractical to effect, the courts will allow the intention to be carried out in an approximate fashion.

In this, its most traditionalist context, the doctrine has received widespread judicial recognition and adoption. Indeed, from the materials explored in developing this book, it could be said that the doctrine has virtual universal acceptance, at least in common law jurisdictions. This generalisation is evidenced by the referenced materials from a number of widespread and culturally-diverse jurisdictions. By way of introduction and illustration, examples are taken of the following: England,¹ the United States,² Australia,³ Canada,⁴ New Zealand,⁵ Ireland,⁶ Scotland,⁷ South Africa,⁸ India,⁹ Singapore,¹⁰ Malaysia,¹¹ Hong Kong,¹² Northern Ireland,¹³ and elsewhere.¹⁴

One of the most succinct, yet fulsome, definitions of the traditional cy-près doctrine is provided by the American Restatement of the Law (Second), Trusts:

If property is given in trust to be applied to a charitable purpose, and it is or becomes impossible or impracticable or illegal to carry out the particular purpose, and if the settlor manifested a more general charitable intention to devote the property to charitable purposes, the trust will not fail but the court will direct the application of the property to some charitable purpose which falls within the general charitable intention of the settlor.¹⁵

Such is the clarity of enunciation in this definition that it has been cited with approval by courts from New Zealand¹⁶ to Canada,¹⁷ and by leading academic charity texts.¹⁸ (The definition has since been redrafted by the American Law Institute,¹⁹ although not, in this author’s opinion, for the better.²⁰) Notably, current law dictionaries from several jurisdictions also define the doctrine singularly by reference to its charitable trusts genesis.²¹

2. Redefining the Cy-près Doctrine

Whilst historically (and ‘historical’ may be traced to ‘Roman law’) the doctrine has its roots, by and large, in the context of the law of charitable trusts, notably in the last three decades, the ‘cy-près doctrine’ has marched (both judicially and legislatively) into other legal territory where ‘as near as possible’ is considered appropriate for a wide range of circumstances. For example, the doctrine has been applied where court-awarded damages cannot be distributed to the particular victims who succeeded in litigation against the defendant. This has particularly (although not exclusively) occurred in the multi-party context in which the victims are not identifiable nor readily able to participate in the damages award. It has also been applied where fines have been awarded against corporate defendants in the quasi-criminal context of consumer protection, and where orders for specific performance cannot be carried out. The doctrine has lately traversed into even more uncharted territory; for example, it has been statutorily embraced in the context of non-charitable purpose trusts, vehicles that are commonly used to minimise tax liability.

Thus, with quiet benevolence, the ‘as near as possible’ decree has gained a legal foothold in circumstances pertaining to the transfer of property or money that extend far beyond its origins in charitable law. In this light, an overarching definition of the cy-près doctrine which both embraces its modern manifestations and encompasses its traditional application in charitable trusts law, could be framed as follows:

Where:

• property is (or is to be) given by A to B for a designated purpose, under a legally enforceable obligation (the ‘original transfer’); AND

• it is or becomes impossible, impracticable, illegal or infeasible for the designated purpose to be effected; AND

• in accordance with relevant objective factors, it is legally appropriate that the original transfer be carried out by approximation; THEN

• by court or other superior order, the original transfer can legally be altered in a material respect—namely, the designated purpose for which the property is given, or the nature of the property transferred for the designated purpose, or the recipients of the property, are altered—to approximate ‘as near as possible’ the original transfer.

This definition ties together the many applications of the ‘as near as possible’ legal mantra that will be discussed in following chapters. It approximates the sentiment used by the American Law Institute whereby the term can be used to refer to ‘reformations or judicial modifications … in which some modified effect is given to dispositions that would otherwise exceed what the law allows’.²² Notably, the definition is wider than the traditional charitable trusts definitions cited at the commencement of this chapter, yet it is narrower than the extremely wide ‘doctrine of approximation’ which some courts in the United States have coined as synonymous with the cy-près doctrine.²³ It is also narrower than a mere substitution of one mode of achieving a general intent by another mode of achieving that same intent, a further definition to be found in American legal sources²⁴ and in early English case law.²⁵ Specifically, the boxed definition adopted above pertains to property transfers, where some alternative purpose or recipients, or even the property itself, is amended ‘as near as possible’ to the originally contemplated transfer.

This definition does not, nor is it intended to, encompass scenarios where some courts (although English courts have indicated otherwise²⁶) have made reference to ‘cy-près’ in circumstances where statutes are ‘dynamically’ interpreted ‘as near as possible’ to their original wording (taking into account changed societal, economic, political or technological circumstances);²⁷ or where legal rules are applied, not directly, but as nearly as the nature of the circumstances permit;²⁸ or where covenants in leases have arguably become obsolescent and warrant redrafting.²⁹ In these instances, clearly ‘cy-près’ is being used synonymously with ‘as near as possible’, but in a context completely unrelated to property transfers. The use of the term in these respects is coincidental, bearing no relationship to the cy-près doctrine as redefined above, and will not comprise any further discussion in this book.

In that regard, the purpose of this book is threefold: first, to identify, in common law jurisdictions, the modern scenarios in which the cy-près doctrine has been applied or contended for, whether judicially, legislatively or by law reform; secondly, to critique the marked differentiation that exists between common law countries’ reception to cy-près in its various guises, and to explore the ways in which encroachment of the doctrine has generated different controversies and conundrums; and thirdly, to highlight that, whilst the doctrine is traditionally discussed in the context of trusts, succession and charity law, it occupies greater omnipresence in modern legal jurisprudence. This three-fold purpose provides the grounds for vigorous and lively debate about the requirements of legal accuracy, and whether ‘as near as possible’ might not mutate to ‘next best’ as the utility and wider opportunities from the doctrine become more refined in the future. It is intended that this book will inform that debate by identifying the theoretical and pragmatic underpinnings and policy of the cy-près doctrine in its modern applications.

B ORIGINS OF THE CY-PRÈS DOCTRINE

The derivation of the expression ‘cy-près’,³⁰ the doctrine’s historical development, and even the term’s pronunciation,³¹ are matters upon which there is some disagreement. Although this book concentrates upon the modern applications of the doctrine, both charitable and otherwise, a few words about its very beginnings may be instructive for an understanding of the doctrine’s continuing evolution.

Although most strongly associated with charitable trusts, it was not always so, as Justice Young described:

The earliest extant recorded use of the term [in English literature] was by Littleton on Tenures (1481) with reference to conditions precedent concerning legal estates. Then, in Fitzherbert’s La Grande Abridgment (1516) tit Subpoena there is reference to a decision where a settlor settled property on his daughters, but later had a son, where the court held that the son was the beneficiary on the basis that had the settlor known he was to sire a son, he would not have disinherited him, and the chancellor should carry out the settlor’s intentions.³²

Within the context of charitable trusts, the doctrine had religious origins, and was exercised by the ecclesiastical courts, as Sheridan and Delany describe:

there is little doubt that [the cy-près doctrine] came into the common law by way of the Court of Chancery, which in turn borrowed it from the ecclesiastical courts. The defective jurisdiction of the latter tribunals in the case of creditors led to an early intervention by the Chancellor in this field, armed with his power to direct account. Later, there came a parallel intervention on behalf of legatees, as more ...