University of London v Prag & Anor

A trust deed establishing a university institute may impose trusts extending beyond property initially transferred, where the instrument and its context show an intention to preserve and develop the institution as a continuing charity. The trustee may administer the institute alongside other university activities, but must preserve it as an adequately equipped and staffed independent unit having regard to its special character. Property acquired for the trustee’s general institutional functions is not necessarily trust property merely because its allocation reflects the institute’s needs. However, the trustee cannot charge trust property for costs relating to its other property or activities where this creates an actual conflict of interest and duty. The trustee must fund the institute’s proper maintenance from non-trust resources, subject to recovery of properly incurred expenditure on the institute itself.

The University of London sought declarations concerning the construction and administration of a 1944 trust deed relating to the Warburg Institute and its Library. The issues included the scope of the trust, ownership of later acquisitions, the status of the Institute’s building and funding, the validity of governance arrangements, the use of university-wide charges, and the University’s obligations to maintain and fund the Institute.

The Attorney General and Professor Prag contended that the trust applied to the Institute and Library as continuing entities and that the University’s management and funding arrangements breached the deed. The University contended that the trust was confined substantially to the 1944 Collection and that wider obligations were merely contractual.

1. Status and scope of the trust. The provisions concerning maintenance, preservation, adequate equipment and staffing, independent status, management and control formed part of the trust and were enforceable by the Attorney General. The Institute was part of the University, but to that extent was subject to special charitable trusts and constituted a separate charity for those purposes.
2. The trust applied to the Collection as a whole, not merely the books and photographs delivered in 1944. Later additions acquired by purchase or exchange, and gifts to the Institute or Library without contrary wording, were held on the trusts of the deed. Intellectual property arising from the Collection or from lectures concerning it followed the destination of the Collection.
3. The University’s building was not itself held on trust. The deed required the Collection to be housed in a suitable building near the University centre, but did not impose a trust over the University’s land or building. Funding supplied to the University for its higher-education functions was received beneficially and not by virtue of its trusteeship.
4. The benefit-and-burden principle could apply where the trustee received property subject to obligations benefiting the charity. The trustee could retain funding where it would have received that funding whether or not it had undertaken the trust, consistently with Boardman v Phipps [1967] 2 AC 46.
5. The 2006 governance arrangements and Ordinance 11 were valid insofar as they preserved University management and family representation, but the University was prohibited from integrating the Library into another library or the Institute into another part of the University. Staff could perform functions elsewhere, provided the Institute remained adequately equipped and staffed as an independent unit.
6. The University could seek and apportion general funding fairly, but university-wide space charges could not be debited to the Institute. They created an actual conflict between the University’s general duties and its duties under the deed. The University could recover actual, properly incurred expenditure on the Institute, but not costs relating to its other property or activities.
7. The deed imposed an obligation to provide funds for maintaining and preserving the Library and keeping it adequately equipped and staffed. Such expenditure could be recovered from the Institute’s income and expenditure account, but not from the Collection itself. Question 1(8) was answered in the negative.