Harrow’s application for cy-près scheme denied by the High Court
The charity which operates Harrow School has had an application denied by the High Court to amend and update its charitable objects. The charity had applied for a cy-près scheme, which is a document that amends provisions in the governing document of a charity. In addition, the judge found that the charity could not use powers in the Public Schools Act 1868 to widen its objects.
Summary
It is becoming increasingly rare for charities to seek cy-près schemes, but this judgment shows the limits on the powers of the Charity Commission and the courts to allow amendments to charitable objects under this statutory power. The judgment may affect how charities and their legal advisers navigate applications for future schemes.
Background
The full name of the charity (originally established in 1592) is The Keepers and Governors of the Possessions, Revenues and Goods of the Free Grammar School of John Lyon. The charity operates Harrow School, the prestigious independent boarding school for boys, and John Lyon School, which is an independent (now co-educational) day school also based in Harrow-on the Hill.
The charity applied for a cy-près scheme to amend its objects, in particular to allow the charity to operate without geographical restrictions. According to the judgement, the charity had argued that its current Latin objects are “archaic and limit its ability to operate outside Harrow”.
Cy-près schemes
Applicant charities are required to make the case that a “cy-près occasion” has occurred, under section 62 Charities Act 2011.
Such schemes are usually granted by the Charity Commission, but the court also has jurisdiction to approve and make schemes (for circumstances such as these, where the Charity Commission appears to have denied a request).
The Charity Commission or court are limited in respect of how far they can go with any changes to charitable objects when exercising the relevant powers. The meaning of cy-près is essentially “near to”, and they are required to have regard to particular matters when making a scheme including “the desirability of securing that the property is applied for charitable purposes which are close to the original purposes”.
Why a scheme?
Most charities do not need to apply for a cy-près scheme from the Charity Commission in order to amend their objects. The Charities Act 2011 includes statutory amendment powers that can generally be used by charitable companies and unincorporated charities to amend their objects (subject to Charity Commission consent). The charity in this case was originally established under a Royal Charter, and later incorporated under statute in the nineteenth century, meaning the statutory options would not have been available.
The judgment
The charity was denied its request for a scheme, as the court found that a cy-près occasion had not occurred. The charity had sought to rely on a number of grounds, including section 62(1)(b) “where the original purposes provide a use for part only of the property available by virtue of the gift”. On this point:
- The judge did not accept that the charity had identified adequate surplus or unused property for the purposes of this cy-près occasion.
- The charity had referred to its “its valuable brand and the international recognition of it as a first-class educational institution, the staff and other educational resources which are not exhausted by the current objects”.
- The judge suggested that under these grounds, property “must mean property in the sense of a property interest recognised by the law which is capable of ownership”.
- The judge did not accept that fluctuating surplus capacity in staff or the latent potential in its brand, reputation and know-how fulfilled the definition of property.
The court’s view regarding unused “property” may be vulnerable to challenge, although it is also likely to affect future applications for cy-près schemes. If the charity’s application pointed to a surplus of quantifiable property, the judge may have taken a different view.
The judge also found that powers in the Public Schools Act 1868 did not permit amendment of the objects as set out in the charity’s Royal Charter.
Geographical restrictions
The judge noted that the wording of the proposed new objects involved a fundamental change (shifting to the advancement of education) and did not just loosen the perceived geographical restriction, which may have affected the ability of the court to decide in favour of the charity.
Interestingly, the judge considered the limits of the geographical restriction in the current objects, which require the charity to operate the schools in Harrow. The judge explored the idea that expenditure and philanthropic activity outside of Harrow may be permissible and appropriate “if it is nevertheless for the purposes of the Schools”.
The judgment appears to suggest that the objects of the charity might permit involvement in projects in Lancashire and London, “by enhancing their reputation and inculcating by example appropriate values in the School’s community”.
This may give some confidence and boldness to charities that wish to test a geographical restriction in their objects, although the judgment recognises that such actions would involve risk, and another judge or the Charity Commission may take a different view as to whether the activity is permissible.
The court’s jurisdiction
The judgment also noted that the court may not have had jurisdiction to grant a scheme, as Acts of Parliament and Royal Charters are treated as matters specified by a “higher authority” than the court. This matter was not considered further however as the court took the view that a cy-près occasion had not occurred.
It will be interesting to see what steps are taken next by this charity, and how other charities governed by centuries-old governing documents will approach the issue of trying to modernise and update their objects.
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