University of London v Prag & anr [2014] EWHC 3564 (Ch)

Analysis

This decision concerned the construction of a trust deed dated 28 November 1944 (the deed) made between Eric Max Warburg on behalf of the Warburg family, Viscount Lee of Fareham on behalf of the Warburg Society, and the University of London (UOL). There arose questions about the scope of the deed, the ownership of property, the status of funding and the propriety of the administration by UOL under the deed. UOL brought a construction summons to determine these questions at the behest of HM Attorney General (the second defendant). The first defendant was Professor John Prag, of the University of Manchester, on behalf of the advisory council of the institute.

The questions related to a library (the library) granted to UOL by members of the Warburg family (or the Warburg Society). The devolution of the library was governed by the deed. The body of the deed provided, inter alia, that UOL was to ‘maintain and preserve the Warburg Library in perpetuity in accordance with this deed and will accordingly as soon as practicable house the same in a suitable building in close proximity to the University centre at Bloomsbury and will keep it adequately equipped and staffed as an independent unit the whole to be known as “The Warburg Institute” without regard to contributions from outside sources which shall not be taken into consideration’. The court was asked to determine various questions relating to the deed:

1. 1.1 The question of whether the collection of books and photographs (the collection) referred to were held by UOL as part of UOL’s corporate property or on a charitable trust.
2. 1.2 The question of the ownership of the land and buildings housing the institute and of accretions to the library:
3. (a) UOL contended that the land and buildings belonged to UOL. The defendants stated that they were subject to the trusts of the deed.
4. (b) As to additions to the collection acquired by purchase or exchange, UOL stated that they belonged to UOL, the defendants stated that they were subject to the trusts of the deed.
5. (c) As to additions acquired by purchase or exchange, UOL stated that that depended on the terms of the gift, whereas the defendant states that gifts which were merely to the library or to the institute were subject to the trusts of the deed.
6. (d) As to sums allocated annually by UOL to meet the expenditure of the institute, UOL contended that these belonged to UOL whereas the defendants stated that they were subject to the trusts of the deed.
7. (e) Other funds of the institute currently treated by UOL as part of its corporate property. UOL stated that they belonged to UOL, whereas the defendants stated that they belonged to the institute.
8. (f) Intellectual property rights arising out of the institute’s work. UOL argued that they belonged to UOL whereas the defendants stated that they belonged to the institute.
9. 1.3 Whether the terms of Ordinance 11 of UOL’s ordinance and a scheme dated 5 December 2006 (the scheme) made by the UOL for the institute were in accordance with the provisions of the deed. UOL contended yes, the defendants contended no.
10. 1.4 Whether policies expressed in UOL’s documents entitled Senate House Libraries Strategy 2011-13 and Statements of Operating Positions for the Senate House Libraries were in accordance with the provisions of the deed. UOL contended yes, the defendants contended no.
11. 1.5 Whether and to what extent the deed and the general law authorised UOL to manage the institute and the collection in common with other activities and to employ staff to perform functions both at the institute and elsewhere. The UOL contended for an affirmative answer to all of those questions, whereas the defendants stated that the deed did not prohibit UOL from employing staff in both capacities provided that the independence of the institute was not compromised. However, they further contended that all decisions had to be taken in the best interests of the institute thereby giving rise to an unmanageable conflict of interest for UOL.
12. 1.6 Whether and to what extend the deed and the general law authorised UOL to debit to the institute charges for services provided by UOL to the institute. UOL said it was so entitled, whereas the defendants contended that their method of doing so was not permitted. They argued that they could only reflect the costs of administering the trust property and could not include the costs of other activities.
13. 1.7 Whether the deed imposed any obligations on UOL to provide funding for the institute. UOL contended none, whereas the defendants stated that UOL was obliged to provide funds to enable the institute to carry out its purposes, and if that construction was not correct, then it should be rectified to give effect to the clear intention of the parties.
14. 1.8 Whether and to what extent the deed and the general law authorised UOL to seek funds to support the activities of the institute in common with UOL activities and thereafter to apportion the funds between the institute and other activities. UOL stated that the question should be answered in the affirmative, whereas the defendants stated that to do so would result in unmanageable and impermissible conflicts of interest for UOL.

Held:

1. 1) There was a preliminary question which affected all other questions as to the status of the institute. The institute was part of UOL but subject to the special trusts applicable to it by virtue of the deed. To that extent, and that extent only, it was a separate charity.
2. 2) The trusts applied to the collection as a whole and not just the collection given to UOL in 1944. It would be arbitrary under the circumstances to calcify the collection by limiting the trust to the 1944 collection. The deed was executed to secure the future of the institute and UOL accepted the gift on terms that the library would continue as a living institute.
3. 3) Additions to the collection purchased using funds from the University Grants Committee (the UGC), the Universities Funding Council (UFC) and the Higher Education Funding Council for England (HEFCE) were comprised within the trusts of the deed.
4. 4) All additions acquired by purchase or exchange were subject to the deed.
5. 5) Gifts to the institute or to the library were to be held on the trusts affecting the collection.
6. 6) There was no representation that the building would belong to the institute and nor should the deed be rectified.
7. 7) The sums allocated by UOL to meet the expenditure of the institute belonged to UOL. UOL’s funding was awarded to it because it was a university, not because it was a trustee of the deed. The deed provided further that the trust should be maintained out of non-trust property.
8. 8) Intellectual property rights arising out the collection followed the destination of the collection and were held on the trusts of the deed.
9. 9) The scheme was therefore in accordance with the provisions of the deed, though UOL was prohibited from integrating the library into another library or the institute into another part of UOL.
10. 10) UOL was authorised to employ staff who worked in the institute to perform other functions but the issue is always whether the institute was maintained as an independent unit and was adequately equipped and staffed.
11. 11) The deed and the general law authorised UOL to debit to the institute charges for services provided by UOL to the institute. However, the levying of space charges, debiting an estate-wide service charge to the income and expenditure account of the institute, was not permissible. The imposition of university-wide space charges flew in the face of the deed in the sense that the institute was an independent unit as opposed to a merely constituent part of UOL.
12. 12) UOL had an obligation to provide funding for the institute with the proviso that it could recover anything it spent specifically on the institute from the income and expenditure account of the institute, but not from the collection itself.
13. 13) UOL was the trustee for the institute, and not merely the 1944 collection, and it imposed a duty on UOL to manage the institute as an ‘independent unit’ having regard to its ‘special character’. The deed and the general law did not authorise UOL to seek funds to support the activities of the institute in common with other activities and thereafter to apportion the funds between the institute and the other activities.

Judgment PROUDMAN J: [1] I am asked to resolve a number of questions raised in a construction summons arising out of a trust deed (the deed) dated 28 November 1944 and made between (1) Eric Max Warburg ‘on behalf of the Warburg Family’, (2) Viscount Lee of Fareham ‘on behalf of the Warburg Society’ and …

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