Charity Commission v Framjee [2015] 1 WLR 15

Facts

• The case concerned the management and distribution of funds where charitable and non-charitable assets had been commingled.
• The Charity Commission and trustees faced the challenge of identifying and allocating portions of such mixed funds for charitable purposes.
• There was a need to determine how to apply the cy-près doctrine, tracing principles, and apportionment where records were incomplete or origins of funds were unclear.
• The judgment was delivered by the Court of Appeal.

Issues

1. How should trustees allocate mixed funds containing both charitable and non-charitable assets?
2. Can the cy-près doctrine be applied where charitable funds are commingled with non-charitable ones?
3. What equitable principles should guide tracing and apportionment when the origins of funds in a mixed fund are hard to identify?
4. What are the duties of trustees and the Charity Commission in maintaining and overseeing separation and allocation of charitable assets?

Decision

• The Court of Appeal affirmed that the cy-près doctrine can apply to mixed funds if the charitable portion is identifiable and separable.
• The court emphasised trustees' duties to maintain accurate records distinguishing charitable from non-charitable assets.
• Tracing was recognised as an equitable remedy for identifying and separating mixed funds, provided that the charitable portion could be established.
• The court noted judicial discretion is required, especially where fund origins are unclear or records are incomplete, to achieve an equitable distribution in line with charitable intentions.
• The authority of the Charity Commission to approve schemes distributing mixed funds according to charitable purposes and donor intentions was upheld.

Legal Principles

• Trustees must comply with strict fiduciary duties, ensuring charitable assets are used for intended purposes and maintaining clear records of fund origins.
• The cy-près doctrine enables redirection of charitable funds where original purposes are impossible or impracticable, including in mixed-funds contexts.
• Tracing is an equitable tool allowing identification and recovery of charitable assets within commingled funds, requiring careful examination of fund history.
• Apportionment and distribution of mixed funds require a pragmatic, principled approach, balancing beneficiary interests and legal obligations.
• Regulatory oversight by the Charity Commission is essential to ensuring proper management and lawful distribution of charitable assets.

Conclusion

Charity Commission v Framjee [2015] 1 WLR 15 clarified modern legal approaches to managing and distributing mixed charitable funds, reinforcing fiduciary duties, the use of tracing and cy-près doctrine, judicial discretion, and the regulatory role of the Charity Commission in ensuring assets are applied to charitable purposes.