DECEMBER 8 — If a website is maintained by a charitable organisation to channel donations from the public to charities, what is the relationship between the donors and the organisation?

Do the arrangements under which the website is operated give rise to a trust or to separate trusts for each donation?

Do the arrangements give rise to a contract between each donor and the organisation?

Let’s look at the English case of Charity Commission for England and Wales v Framjee & Ors which was decided in July 2014.

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The case concerns the Dove Trust (the Trust), which was established on June 16, 1983 by a declaration of trust made between the settlor and two individual trustees, one of whom was the settlor’s son.

The trust was registered as a charity by the Charity Commission of England and Wales on July 12, 1983.

'Donors parting with their money on the understanding that it would be dealt with in accordance with the specified procedure for the benefit of the nominated charity or good cause’. — Picture by Miera Zulyana
'Donors parting with their money on the understanding that it would be dealt with in accordance with the specified procedure for the benefit of the nominated charity or good cause’. — Picture by Miera Zulyana

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The Trust was established to hold funds on trust "for such charitable purposes as the Trustees with the consent of the Settlor during his life shall in their discretion from time to time think fit".

In practice, the Trust operated a website through which members of the public could make donations for the benefit of charities or good causes of their choice.

The donations were made to the trustees of the Trust as principal and not as agents for the intended ultimate recipients. The "terms and conditions" section of the website said nothing expressly about the nature of the legal relationship between the donors and the Trust.

The website was used in complete good faith by donors as a convenient method of charitable giving.

Concerns began to be expressed about the administration of the Trust and the Charity Commission began a statutory inquiry. This found serious grounds for concern and an interim manager was appointed.

He reported that there was a substantial shortfall between the amount of donations not yet passed on to the intended beneficiary and the amount of money available for distribution.

The Charity Commission took action against the former trustees of the Trust and preliminary issues were identified for the court to determine. These were:

(a) did the arrangements under which the website was operated give rise to a trust or to separate trusts for each donation, and (if so) of what nature?

(b) did the arrangements give rise to a contract between the donor and the trust, and (if so) what were its terms?

(c) how should the remaining funds referable to donations made through the website for specified charities or good causes be distributed among the recipients nominated by the donors?

In answers to the above issues, Justice Henderson, sitting in the Chancery Division, ruled as follows:

(1) The terms of the website indicated that donations had been received by the Trust subject to a trust to ensure that the donations were passed on to the nominated recipients; they were not merely the subject of contractual obligations. The idea that the trustees retained any general discretion as to the destination of the donations was wholly contrary to the way in which the scheme had been presented to intending donors. A global trust of this nature was preferable to thousands of separate trusts created by each donation.

(2) The existence of a trust did not preclude the simultaneous existence of a contract between the donors and the trustees of the Trust. The terms of the website constituted an offer or at least an invitation to treat and evinced an intention on the part of the Trust to enter into legal relations with the donors. The contract purported to confer a benefit on the nominated ultimate recipient and there was nothing to indicate that it was not intended to be enforceable by the ultimate recipient which was therefore able to enforce the contracts.

(3) The fairest solution was to distribute the funds available to the intended recipients pari passu – a Latin term which means “ranking equally and without preference.” All the unpaid recipients were participants in a common misfortune brought about by the way the scheme was managed by the trustees. There was no strong reason to differentiate on the basis of when donations were made or to engage in a minute examination of changing beneficial entitlements as and when funds were removed.

In his judgment, the learned judge said:

“There is no reason in principle why a single transaction cannot give rise to both a trust and a contract .... The existence of a trust in the present case does not preclude the simultaneous existence of a contract between the donor and the trustees of the Trust.”

On the terms of the website, the learned judge said:

“In my view, there can be little doubt that the terms of the Website constituted an offer by the trustees to enter into legal relations with potential donors, which matured into a concluded contract as and when a donor made a payment to the Trust in accordance with the specified machinery, thereby accepting by conduct the offer made on the Website.

“The service offered by the Trust was one of convenience and value to users of the Website, and it was one for which the Trust made a charge if the donation qualified for gift aid. The terms and conditions section of the Website was framed in legal language, and clearly evinced an intention on the part of the Trust to enter into legal relations with donors.

“The governing law clause even refers to ‘this agreement’. From the point of view of donors, they were parting with their money on the understanding that it would be dealt with in accordance with the specified procedure for the benefit of the nominated charity or good cause; and even if the donation was one which was processed free of charge, the donor would in my judgment reasonably have expected to be entitled to hold the trustees to proper performance of the terms on which the gift had been solicited.” (Emphasis added)

The case may be instructive for the courts in Malaysia as the law governing charity follows the English law.

The Editors’ Note to the case report has the following remarks:

“An interesting case highlighting the need for a clear appreciation and application of trust law principles in the context of online charitable giving.”

I couldn’t agree more.

*This is the personal opinion of the writer and does not necessarily represent the views of Malay Mail.