The Charity Commission for England and Wales v Framjee & Ors

Donations received through a charitable giving website may be held on trust even where the website does not use formal trust language. The court must assess objectively whether the arrangements show that donated money is to be applied only for the donor’s specified charitable purpose. A trust may coexist with a contract requiring the operator to process the donation and pay it, with Gift Aid where available, to the nominated recipient within a reasonable time. Where a blended fund is insufficient and all recipients share a common misfortune, distribution should ordinarily be pari passu. A selective or partial application of the rolling charge method is impermissible where it lacks a principled basis.

The Charity Commission sought directions concerning donations received by the Dove Trust through its CharityGiving website. The Commission had appointed the first defendant as interim manager after concerns about governance, financial mismanagement and a substantial shortfall between donations received and payments due to nominated charities and good causes.

The parties asked the court to determine general issues only: whether the arrangements created a trust, whether they created contractual rights, and how the remaining blended funds should be distributed. The principal distribution alternatives were the rule in Clayton’s Case, a single pari passu distribution, and a simplified two-pool version of the rolling charge method.

1. Trust. The website arrangements impressed donations with a trust. The court preferred to characterise this as a global sub-trust established under the Dove Trust, rather than thousands of wholly separate trusts. Each donor nevertheless remained a separate settlor in relation to the donor’s funds, which had to remain identifiable within the common fund and be applied to the nominated recipient, subject to limited residual discretion where payment could not properly be made. The trustees had no general discretion to redirect donations to their own charitable purposes. The trust arose from the substance of the arrangements, not the use of formal trust terminology.
2. Contract. The website terms constituted an offer, or at least an invitation to treat, which became contractual when a donor paid in accordance with the stated procedure. The Dove Trust undertook to process the donation and, so far as reasonably possible, pay it, together with available Gift Aid, within a reasonable time to the nominated charity or good cause. The disclaimers did not exclude those basic obligations. The nominated recipient was an intended beneficiary with enforcement rights under section 1 of the Contracts (Rights of Third Parties) Act 1999.
3. Distribution. The rule in Clayton’s Case was rejected as arbitrary and prohibitively expensive to reconstruct. It could readily be displaced where a fairer solution was available. A single pari passu distribution was preferred because all unpaid recipients were victims of the same mismanagement, and donors received the same presentation of the scheme before and after the interim manager’s appointment.
4. The proposed two-pool method was rejected. It applied the rolling charge principle only to the last payment-out date, without justification for treating that date differently from earlier dates. The court held that, in normal circumstances, the choice was between a complete rolling charge method and pari passu distribution; there was no principled half-way house.