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

[2014] EWHC 3564 (Ch)Case No HC13B03473
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 06/11/2014
Before
MRS JUSTICE PROUDMAN
Between
UNIVERSITY OF LONDONClaimant(1) Professor JOHN PRAGDefendants(2) HER MAJESTY’S ATTORNEY GENERALDefendant
Robert Pearce QC and Nathan Wells (instructed by Pinsent Masons LLP) for claimantSimon Taube QC and Matthew Smith (instructed by Bates Wells and Braithwaite London LLP) for 1 st defendantAmanda Tipples QC (instructed by The Treasury Solicitor) for 2 nd defendantHearing Hearing dates: 01/02/06/07/08/09 May and 17/18/19/20 June 2014
JudgmentMrs Justice Proudman :
[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(3) the University of London (“UOL”). Questions have arisen in the events which have happened as to 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, who is the second defendant to this action.[2]Mr Pearce QC and Mr Wells appeared before me for UOL, Mr Taube QC and Mr Smith for Professor Prag and Miss Tipples QC for the Attorney General. Between them they produced three ring binders of detailed skeleton arguments and written submissions. I fear I have not done justice to them in this judgment although I have considered them all with some care. Mr Taube and Miss Tipples broadly adopted a common stance but parcelled out the arguments between themselves.[3]UOL is a body incorporated by Royal Charter established for exclusively charitable purposes, (an exempt charity for the purposes of s.22 of, and Sched 3 para 2 to, the Charities Act 2011) although it is commonly seen as a federation of numerous institutions which have varying degrees of autonomy.[4]The first defendant is Professor Emeritus at the University of Manchester, a member of the Advisory Council of the Institute and a descendant of its founder, Professor Aby Warburg. He has been joined to represent a sub-committee of the Advisory Council.[5]The questions relate to a collection of books, photographs and the like given in their original state to UOL in 1944. The question of who were the then owners of the Warburg Library (which I shall where appropriate simply call “the Library”) was deliberately left vague in the Deed. Members of the Warburg family (that is to say Aby Warburg’s four brothers Felix, Fritz, Max and Paul, or their children, principally Max’s son Major Eric or Erich Warburg) were apparently reluctant to be named as owners of the collection both for fiscal and for political reasons. However it seems to have been clear that the owners were members of the Warburg family, or just possibly the Warburg Society, a charitable association whose stated aim under its founding Deed of 17 May 1934 was to “house and maintain in England all or some part or parts of the library and collection of photographs hitherto held by the Warburg Institute at Hamburg and to cause such library and collection to be exhibited studied and enjoyed…” The details of ownership do not matter as it has never been doubted that the Deed governs the devolution of the Library.[6]The Deed is an admirably short document. It recites:
“(1) The Warburg Library containing about Eighty thousand books and a large collection of photographs [I will describe the books, photographs, manuscripts and the like which are currently and from time to time held in the Library, compendiously as “the Collection” and the books and photographs specifically donated at the time of the Deed as “the 1944 Collection”] are dedicated to the study of the classical tradition in European culture and are available for research into this subject on comparative lines and (2) The Warburg Society being desirous of providing for the preservation maintenance use and further development of the Society and its Library offered to hand over the Library to the University upon the terms hereinafter set forth (3) The University recognising the world wide reputation in its special fields of culture and research which the Warburg Library has already established accepted such offer and having received delivery of the Library is desirous of declaring in conjunction with the donors the trusts upon which it is to be held”
[7]The body of the Deed provides, after the rubric “NOW IT IS HEREBY AGREED AND DECLARED as follows:-”, “A. THE University will 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 for the purposes of this Clause.”[8]Pausing there, there is a question as to what “it” is that is to be kept adequately equipped and staffed, namely, the Library, the suitable building or the Institute (as I shall again call it). It would be odd to speak of a collection of books and photographs being “adequately equipped and staffed”, so that the first of these three options would at first blush appear to be incorrect. However it is common ground that the Library was thought of as an entity comprising more than merely the Collection. Recital (1) describes the Library as “containing” (rather than comprising) the books and photographs and it is grandly (or more likely just mistakenly) treated as a plural:
“The Warburg Library…are dedicated… and are available…”
If I had to choose, I would say that although the nearest word is the “building”, “it” is the Library. The “independent unit” is undoubtedly the Institute as a whole.[9]Going on with the Deed, “B. THE management and control of the Institute (and Library) shall be vested in the University and the University shall appoint to advise it on all matters connected therewith a Committee of Management which shall include so far as reasonably appropriate two representatives of the Warburg Family [(which, despite the capital letters is not a defined expression)] and in the constitution whereof the University shall have regard to the special character of the Institute as a body dependent on the collaboration of persons of goodwill living in this country or abroad whose interests lie in the direction of the fields of study and research to which the Institute is dedicated. C. SUBJECT to the regulations made by the University and for the time being in force Members of the University together with all persons engaged in research or in any branch of public administration or genuinely interested in the objects of the Warburg Institute shall have access to and be at liberty to use the Institute and Library. D. THE present Director of the Institute and his successors shall be of professorial standing in the University.” C. SUBJECT to the regulations made by the University and for the time being in force Members of the University together with all persons engaged in research or in any branch of public administration or genuinely interested in the objects of the Warburg Institute shall have access to and be at liberty to use the Institute and Library. D. THE present Director of the Institute and his successors shall be of professorial standing in the University.”[10]Professor Charles Hope (Emeritus Professor of the History of the Classical Tradition at UOL and the Director of the Institute between 2002 and 2010) has provided a witness statement dealing in considerable detail with the negotiations and other matters leading up to the Deed. Such negotiations are irrelevant to its construction, save where they can properly be said to constitute part of its factual matrix. They are only relevant to the question of rectification or in circumstances in which the University is accused of breach of trust. All parties, particularly Mr Taube and Miss Tipples, however rely on the documents leading up to the Deed (which are remarkably full and detailed) andProfessor Hope is adamant as to his view of the intentions of the persons concerned with the Deed and the establishment of the Institute.[11]UOL is equally adamant that it cannot fund the Institute separately from the UOL as an entity and Mr Pearce says on instructions that the Institute must “move on…into the 21st Century”. If I were to find against him he says that UOL would probably have to apply for a cy-près scheme. I am not concerned with the application for a scheme made in the Claim Form. Questions arising[12]The questions asked in the construction summons and the answers proffered by the parties are as follows: Qu 1(1) raises the question whether the collection of books and photographs referred to in the Deed is held by UOL as part of UOL’s corporate property or on a charitable trust. All parties agree that the 1944 Collection is held on the charitable trusts of the Deed. Qu 1(2) raises the question of ownership of the land and buildings housing the Institute and of accretions to the Library.(a) The land and buildings. UOL says they belong to UOL, the defendants say they are subject to the trusts of the Deed. Prof Hope says, “Since the University’s signing of the Deed was conditional on the UGC [the University Grants Council] having first agreed to provide a suitable building, it would seem that the Institute’s present building is an asset of the Trust, because the University obtained it in its capacity as Trustee.” Mr Taube and Miss Tipples have clarified that they do not allege that UOL does not own the land and buildings, merely that for proprietary estoppel and constructive trust reasons UOL cannot treat them as its own to do with as they like as they are held on the trusts of the Deed.(b) Additions to the Collection acquired by purchase or exchange. UOL says these belong to UOL; the defendants say they are subject to the trusts of the Deed.(c) Additions to the Collection acquired by gift. UOL says the answer depends on the terms of the gift in question, the defendants again say that (subject to any trusts specifically declared in the gift) gifts which are merely to “the Library” or “the Institute” are subject to the trusts of the Deed. UOL says that the issue, as with (b), is purely hypothetical and should not be answered at present, since UOL has no intention of treating the Collection other than as a whole. Prof Hope says, “…given that the signing of the Deed by the University was…conditional on an undertaking by the UGC to pay the Institute’s running costs, which included sums for books and photographs, all additions to the Institute’s collections since 1944 acquired with funds provided by UGC or its successor, HEFCE, could… be considered assets of the Trust, as of course are additions by gift or exchange [on the same basis as the ownership of the building, i.e. because UOL obtained them in its capacity as trustee].”(d) Sums allocated annually by UOL to meet the expenditure of the Institute. UOL says these sums belong to UOL, the defendants say that they are subject to the trusts of the Deed.(e) Other funds currently treated by UOL as part of its corporate property. These include what Prof Hope calls the Institute’s reserves, made up of past surplus from the annual funding grants and gifts to the Institute from benefactors. There is little left in the way of such reserves because of UOL’s system of recharges and service or “space” charges, but UOL says they belong to UOL, whereas the defendants say they belong to the Institute.(f) Intellectual property rights arising out of the Institute’s work. Again UOL says these belong to UOL, while the defendants say they belong to the Institute.(g) A catch-all provision. Question 1(3) asks whether (a) the terms of Ordinance 11 of UOL’s Ordinances and (b) a scheme dated 5 December 2006 made by UOL for the Institute are in accordance with the provisions of the Deed. UOL says yes, the defendants say no. Question 1(4) asks whether the policies expressed in UOL’s documents entitled Senate House Libraries Strategy 2011-13 and Statements of Operating Positions for the Senate House Libraries are in accordance with the provisions of the Deed. Again, in essence UOL says they are, the defendants say they are not. However it is now agreed that those documents are not being put forward by UOL as its proposed policy so that there is nothing on which I can make a declaration. It is common ground that the question does not arise. Question 1(5) asks whether and to what extent the Deed and the general law authorise 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. UOL gives an affirmative answer to all these questions. The defendants say that the Deed does not prohibit UOL from employing staff who work at the Institute and perform other functions at UOL, nor does it prohibit the administration of the Library from being conducted in a way that complements UOL’s other activities, provided that the independence of the Institute is not compromised. However, the defendants also say that all decisions have to be taken in the best interests of the Institute so that there is an unmanageable conflict of interest for UOL. It is said that UOL cannot consider any such matters properly as a trustee of the Deed in the best interests of the Deed’s charitable purposes. Question 1(6) asks whether and to what extent the Deed and the general law authorise UOL to debit to the Institute charges for services provided by UOL to the Institute. UOL says it is so entitled. The defendants say that UOL’s method of doing so, levying charges across the board and then deducting a proportion to the account of the Institute, is not permitted. They say that charges on the Institute can only reflect the costs of administering the trust property and cannot include the costs of other activities. Question 1(7) asks whether the terms of the Deed impose any, and if so what, obligations on UOL to provide funding for the Institute. UOL says none, the defendants say that UOL is subject to an obligation under the terms of the Deed to provide funds to enable the Institute to carry out its purposes. If that is not correct, the defendants say that the Deed should be rectified to give effect to what is said to have been the clear common intention of the parties to the Deed. Question 1 (8) asks whether and to what extent the Deed and the general law authorise UOL to seek funds to support the activities of the Institute in common with other UOL activities and thereafter to apportion the funds between the Institute and the other activities. Again UOL says the question should be answered in the affirmative whereas the defendants say that to do so would result in unmanageable and impermissible conflicts of interest for UOL. History of the Institute[13]The Library was established in Hamburg as the Kulturwissenschaftliche Bibliothek Warburg in about 1900. It was founded by Professor Aby Warburg with the financial support of his four brothers. It had the object of promoting research on comparative lines into European cultural history. The Collection was idiosyncratic in that it was always, and remains, on open shelves in order to encourage the reader to look at adjoining subjects and thereby widen the scope of his or her researches by suggesting new lines of inquiry. A fascinating and comprehensive article was written in 1934 about the history of the Institute and the Warburg method by Dr Gertrud Bing, then the Assistant Director and later the Director of the Institute. The Library is integral to the Institute’s academic activities. Although that is true of all the institutes comprised in UOL that have libraries it is particularly the case with the Institute. The staff of the Library are senior academics who run the Institute.[14]In 1933, because of the rise of Nazism, the Library and some of its staff moved to London at the invitation of certain individuals, including Lord Lee and Samuel Courtauld, who provided funds to support it until December1943. The terms “Warburg Library” and “Warburg Institute” were both in use before the Deed was contemplated. Indeed, the German versions of those expressions were in use from the inception of the Collection. Although sometimes the former expression is used to describe the Collection and the latter to describe both the Collection and the activities associated with it, there are countless examples of the terms being used interchangeably. That is accepted.[15]By a deed dated 13 May 1934 an unincorporated body, the Warburg Society, was constituted. Its first members and first committee were the parties to the deed including Lord Lee and Eric Warburg, although it seems from a letter from Lord Lee written in 1944 that the Society actually did very little. The general purpose of the Society was the promotion of science, literature and fine arts, but the specific purpose can be gleaned from the deed where it says, “…the first work of the Society shall be to house and maintain in England all or some part or parts of the library and collection of photographs hitherto held by the Warburg Institute at Hamburg and to cause such library and collection to be exhibited studied used and enjoyed for purposes and in manner consistent with the above stated general purposes of the Society.”[16]That first work was in the event the only work of the Society, which as I have said, did very little as a Society although Lord Lee and Eric Warburg were active in their individual capacities. Those involved plainly considered that the Society was only brought into existence as a vehicle to secure the future of the Institute.[17]At first the Collection was accommodated in London in premises at Thames House provided by the Society. In 1936 an agreement was entered into between Lord Lee and Max Warburg on behalf of the Warburg family whereby it was agreed that the Institute would remain in London for a further seven years on “permanent loan” to UOL. On 16 December 1936 the Senate resolved to accept the loan and provide accommodation for it subject to certain conditions. In 1937 the Institute had to vacate Thames House. The books comprising the Library were packed up and not unpacked until 1938, although in July 1937 the Institute was accommodated in the Imperial Institute Buildings in South Kensington part of which was at that time occupied by UOL. In 1938 the Institute apparently moved within the Imperial Institute Buildings and the Collection was unpacked. Funding from Samuel Courtauld was due to end on 31 December 1943.[18]When in 1941 the librarian of the Institute was killed by a German bomb the staff, equipment and some of the Collection (card-indexes, the photographs and “a small working library”) were evacuated to a country house, The Lea, near Denham in South Buckinghamshire.[19]Thereafter negotiations began for the Collection to have a permanent home with UOL. By 1943 the Board of Education (RA Butler was the president) was anxious to retain the Institute in England rather than, as was mooted at that time, losing it to the USA. Initially it was to be associated with the Victoria & Albert Museum, but the plan soon became one whereby, if sufficient funding was provided, it was to become associated with UOL. On 18 May 1943, Harold Claughton, the Principal of UOL, wrote to the University Grants Committee (“the UGC”) in terms which included the following passage, “My own view, and here I can commit nobody on the University side, is that if the financial problem could be solved it would be far more suitable that the Warburg should become a University institution than an institution financed direct by a Government Department.”[20]The UGC replied that loss of the Institute to the USA would be very serious and recommended, “…incorporation of the Institute in London University if on academic and other grounds this would be held by the University to be desirable”. and, if so, “the question of an appropriate increase in the grant to the University would receive sympathetic consideration.”[21]Accordingly, the Senate resolved on 27 October 1943 that it was of the opinion that it was desirable on academic grounds that the Institute should be more closely associated with UOL and the Academic Council of the Senate appointed a special sub-committee to consider the question.[22]At the first meeting of the sub-committee of the Academic Council the sub-committee considered that the Institute should be a separate “Central Activity” (a term of art) of UOL, managed by a committee appointed by the Senate. At the second meeting, attended by Mr Courtauld, Lord Lee, Dr Saxl and Dr Wolf, Eric Warburg read a statement. He said, “…the members of the Family responsible for the Institute have on principle agreed to present London University with the Institute’s properties, provided that its adequate maintenance will be guaranteed for the future in legal form…From our previous talks with the Principal we understand that London University will hold itself responsible for adequate housing, equipment and staffing of the Institute as an independent unit…”[23]On 1 February 1944 the Court resolved that a supplemental grant be made to the Senate for payment of the Institute staff, “pending settlement of the questions relating to its incorporation into the University” and on 15 March 1944 a further supplemental grant was made to provide for the Institute’s running costs to the end of the year. At the same meeting the Court resolved to forward the Institute’s estimates to the UGC, and that the UGC, “be informed that, subject to a satisfactory agreement being reached with the remaining members of the Warburg family, the University is prepared to take over the Warburg Institute and Library as a Central Activity on the understanding that the expenditure involved is met by way of additional grant from the University Grants Committee.”[24]On 12 April 1944 Mr Claughton wrote to the UGC informing it of the Court’s resolution, that the expenditure of the Institute was likely to approach £20,000 per annum and that, “The architect is at present working out plans for a building which will provide the accommodation needed…” On 17 April 1944 the UGC told Mr Butler that as UOL was shouldering the burden of the Institute, the UGC would provide UOL with a maintenance grant of £10,000 and an unspecified amount for the provision of accommodation for the Institute in the Bloomsbury building scheme. The original plan was to house the Institute and the Courtauld Institute on different floors in the same building.[25]On 28 April 1944 Mr Claughton (apparently personally) produced a draft deed which was submitted to the Warburg family. He read it over the telephone to Professor Hughes Parry who said he was satisfied with it, having formed the view that the draft produced by UOL’s solicitor (which has never come to light) was unsuitable. There was then what was in effect a travelling draft. I should say that all the parties’ representatives went through the documentation in some detail. I raised with them the issue of whether this was permissible, but they all insisted that the history was part of the factual matrix.[26]On 24 May 1944 the Court resolved as follows:
“subject to Clause 3 (f) reading “the Director of the Institute shall be of professorial standing,” the draft trust deed, as amended, be approved as the basis for arranging the transfer of the Warburg Institute to the University.”
The Court further resolved that the Courtauld and Warburg Institutes be allocated a site on its Bloomsbury estate, namely part of the site north of SOAS as far north as 23 Woburn Square and 29 Torrington Square.[27]On 30 May 1944 the UGC wrote to the Treasury with a full account of the financial situation and estimates. The Treasury responded by telling the UGC to increase the grant for UOL by £10,000 and to make a non-recurrent grant of £5,000 for the current year. This was then communicated to UOL by letter dated 28 June 1944. The Court “agreed that the proposals for meeting the recurrent expenditure of the Warburg Institute were satisfactory.”[28]On 16 August 1944 the UGC gave UOL a “general assurance” that, “the Committee are mindful of the special circumstances which have led to the acquisition of the Institute by the University and that any application for capital assistance which the University might in due course find it necessary to submit, would receive very sympathetic consideration”.[29]On 4 October 1944 the Chairman of the Court said that he had authorised Mr Claughton to inform the UGC that the Court would sign the Deed, “in the light of this assurance.”[30]The Warburg Society also resolved to approve the terms of the draft Deed, authorising Lord Lee to execute it on behalf of the Society. It then resolved to dissolve itself. Douglas Logan’s report of his attendance at this meeting was set out in a memorandum sent to Mr Claughton. It raised the question of specific sums which Eric Warburg had asked to be mentioned in the Deed. It said, “I told Major Warburg that I thought it very inadvisable for him to press this point as the Court at their meeting on 3 May took a very strong line on this matter, and if a request was made for such written assurance it would almost certainly be refused, principally on account of the implication that without such a written assurance the University did not mean to carry out its obligation to maintain and preserve the Warburg Institute adequately. I added that the Trust Deed made provision for representation of the Warburg family on the Committee of Management, and that any dissatisfaction with the sums allocated for the maintenance of the Institute could be ventilated by those representatives.”[31]The two crucial dates for present purposes are 27 and 28 November 1944. On the first of those days delivery of the 1944 Collection took place. Dr Saxl handed to Mr Claughton two volumes at the Senate House, accompanied by a memorandum signed by Dr Saxl and Mr Claughton saying, “The Warburg Society being desirous of providing for the preservation, maintenance, use and further development of the Warburg Institute and its Library…has decided to hand over the Library and collection of photographs to the University of London, so that they may be available for research into this subject on comparative lines…”[32]On 28 November the Deed was sealed by UOL in the presence of Mr Claughton and Mr Logan.[33]The following day the Secretary to the Senate wrote to Mr Claughton saying that he saw no reason why the model scheme of management used for other institutions at UOL should not be used for the Institute. In January and February 1945 a Scheme of Management was drafted and approved. On 13 December 1950 a new Scheme of Management was approved by the Senate.[34]Meanwhile, plans were being drawn up for the new building. A paper was submitted to the UOL Architect and on 2 June 1954 the Court resolved that, “application be made to the University Grants Committee for a building licence and a capital grant for the Warburg Institute section of the new Courtauld-Warburg Building at an estimated cost of £420,000 [subsequently revised to £267,000] plus fees and equipment, as a charge against the special allocations to be made in connection with the expansion of Imperial College”. On 15 November 1954 the UGC told UOL, “We have now heard that the Treasury have agreed to make available to the Committee further special resources in respect of the following replacement schemes in Bloomsbury:- (a) the clearance of the Warburg site and the erection on it of a new building for the Warburg Institute at an estimated cost of £267,000. This figure relates, of course, to the Warburg part of the building which will also include the Courtauld Institute…” On 2 November 1955 the Court resolved to pay the Architect’s fees and on 10 October 1956 the Court noted that, with the approval of the UGC, a contract had been entered into with J Jarvis & Sons at a cost of £322,224 (increased the following year to £357,084) for the erection of the first stage of the Warburg part of the new building. In the spring of 1958 the Institute moved into six floors of the building and the first meeting of the Committee of Management at the Institute building took place in May 1958.[35]From 1945 until 1986 the Institute received funding on the basis of estimates which, in advance of each year, the Committee of Management submitted to UOL. The UGC made a block grant to UOL, and academics within UOL allocated a vote of these funds for each of its separate activities, including the Institute. The Institute then drew down on the vote to discharge the costs of running the Institute during the year. Thus in practice UOL received a specific funding stream from the UGC for the Institute.[36]However in about 1986 the UGC introduced so-called formula and non-formula funding. Formula funding was determined by standard criteria, while additional or non-formula funding was allowed for so-called “special factors”. The Institute was recognised as a special factor by the UGC, which was included in a category for which provision was described as, “Level funding in terms of the forecast level of general inflation specifically in order to protect present levels of activity at centres of outstanding excellence with a clear national role.” This arrangement continued when UGC was replaced by the Universities Funding Council (“the UFC”) in 1989, established under the Education Reform Act 1988.[37]Professor Hope says that the Deed was not considered and indeed was forgotten about. All the Senate Institutes were to be subject to a similar governance, namely that each Institute would have a Director responsible for their academic development (accountable only to the OUL Vice-Chancellor) as well as for general financial and administrative development, and the Board of Management of the Institute would have a purely advisory role. This was, says Professor Hope, contrary to the Deed which specified that the Institute should be an independent unit and required it to have a Committee of Management.[38]On 1 May 1989 all the Senate Institutes, including the Institute, were grouped together as the University of London Institutes for Advanced Study (“ULIAS”) and the Committee of Management of the Institute became known as the Board of the Warburg Institute.[39]In 1992 the UFC was replaced by the Higher Education Funding Council for England (“HEFCE”), established by the Further and Higher Education Act 1992. Thereafter there were major changes to funding. In particular,• UOL submitted a case to HEFCE in the autumn of 1992, which provided for a new School of Advanced Study (“SAS”), which was to be funded in such a way that it paid UOL for centrally provided services. On this basis HEFCE agreed to provide non-formula funding to the proposed SAS.• From 1994 UOL ceased to receive funding from HEFCE for the Colleges, which thereafter received funding directly from HEFCE. The University continued to receive funding directly from HEFCE for Central Activities such as the Institute.• ULIAS was replaced by SAS.• In 2001 UOL and HEFCE, after the Harris Committee had reported, agreed to treat UOL’s special funding as an overall block grant, rather than as a collection of hypothecated sums for individual purposes.[40]On 19 March 2003 UOL’s Council passed a resolution that, “(i) the University Library, the seven libraries within the School of Advanced Study, and the University of London Computer Centre be brought together in a new Division of Library and Information Services. (ii) A new post of Director of Library and Information Services be established and advertised in due course and the posts of University Librarian and director of ULCC be abolished…”[41]The plan was to converge the Senate House Library and the Institute libraries under the auspices of a new organisation, University of London Research Library Services (“ULRLS”) (now replaced by Senate House Libraries, (“SHL”)). In consequence, from 1 August 2005 the special funding allocated to the SAS was divided into library and non-library funding, and the library funding was transferred to ULRLS. The proportions were: library funding 45.56% and non-library funding 54.44%.[42]Thus the special funding hitherto awarded to five individual institutes including the Institute was rolled up into a block grant to SAS. Again the defendants say that UOL rearranged the funding stream for the Institute for the benefit of UOL’s other activities.[43]UOL decided to combine the Institute with other institutes within the SAS to enable the SAS to make joint applications for funding. The defendants say that UOL’s true purpose was to improve the chances of obtaining funding for the weaker institutes of UOL by making a combined application for funds through the SAS with the stronger institutes such as the Institute.[44]In February 2007 it was agreed that the library budget of the Institute of Advanced Legal Studies and of the Institute would continue to be regarded as outside the converged ULRLS budget and managed locally within those Institutes. Of the ten member-institutes of the SAS, three have no separate libraries. Of the remaining seven, five are now located in Senate House. There are, says UOL, no plans to relocate the libraries of the Institute or of the Institute for Advanced Legal Studies.[45]Thus from 1 August 2005 the Institute’s non-library income and expenditure has been dealt with in the SAS accounts but its library income and expenditure has been dealt with in the accounts of ULRLS or SHL, although the Institute’s library budget has been managed by the Institute. However there is a proposal to manage both categories within the SAS.[46]In December 2006 a new Scheme of Management was applied to the Institute. This is the subject of the question I am asked at 1(3)(b) of the Claim Form.[47]In 2007-2008 UOL revised and substantially increased the space charges, imposed by the UOL on its constituent parts towards the running of the estate, charged to each of the institutes. These charges are treated as a debit from the funding income allocated by SAS to each institute. In 2006-2007 the defendants say that the space charge levied on the Institute was £283,040 but the following year it was raised to £711,610. UOL’s figures are however different. It says that in 2006-7 the figure was £278,015 but the following year it was raised to £643,017.[48]It is the defendants’ position that the Dean of the SAS decided not to change the 45.56% percentage of special funding available for library expenditure, despite the substantial space charges. The space charges had a significant impact on the Institute’s open access library for which, says the Institute, special funding had in large measure been intended.[49]So UOL applied for a block grant of funds to HEFCE on behalf of all the ten institutes within the SAS and other eligible activities of UOL. UOL then allocated the block grant between the SAS and other activities, and the SAS allocated the part of the grant allocated to it among the institutes. The defendants say that the SAS has adopted an arbitrary formula of allocation, namely the division of 45.56% into library funding and 54.44% into non-library funding. This division is based on past historical figures without reference to current costs. However it ignores the increase in space charges introduced by UOL in 2007-2008.[50]In his witness statement Professor Hope says as follows:
“the division [i.e. the 45.56%/54.44 split] took no account of the great increase in space charges introduced by the University which came into effect in 2008-2009. There is no indication that Crewe was aware that such increases were pending, and the figures for the costs of SAS that he used were all based on the situation before the increase.”
[51]The reference to Crewe is to Sir Ivor Crewe’s two reviews in 2007 and 2008 of HEFCE funding for research libraries. He recommended that the part of the special funding allocated to Senate House Library should be transferred to the special funding for the SAS. He pointed out in the first review that the SAS had, “…a unique role in fostering national subject communities in the humanities through its libraries and research facilitation activities.” He highlighted, “…the exceptional quality of the collections and generally the research services of the Institutes’ seven libraries. Many respondents clearly regarded the libraries as the heart of the Institutes and the jewel in the School’s crown…”[52]He recommended, “that HEFCE provides the School, including its libraries, with a stable and long term funding environment by means of special funding. Specifically, it is recommended that that funding be provided from 2008 to 2013. It is for national research promotion and facilitation, and it should be renewable for five year periods.” He also considered the income and costs of the SAS in some detail and recommended that the funding for Senate House Library be withdrawn. He implicitly criticised the level of estate service charges levied on the SAS, saying, “These charges are based on TRAC full economic costs principles, but HEFCE may wish to satisfy itself that this level of charging is reasonable compared with other appropriate HEI [Higher Education Institutions] and to be assured that special funding for SAS is not being used inadvertently to support high cost University of London services.” Again he emphasised, “HEFCE will wish to be assured… that special funding explicitly for the purposes of research facilitation is not unduly subsidising other loss making enterprises in the School”.[53]UOL regarded the recommendation to withdraw funding for Senate House Library as a setback. UOL obtained a report from consultants, CHEMS Consulting, which stated that the current deficits in the costs of the Institute of Advanced Legal Studies and the Institute had, “to be addressed for the sake of SAS, ULRLS, or both”.[54]The defendants regard the increase in space charges added to the loss of funds resulting from the library allocation as making the Institute’s position untenable and not in accordance with the terms of the Deed. The defendants believe that UOL wants to see the gradual integration of the Institute into ULRLS. UOL wishes to make a cy-près application to the Court to alter the terms of the Deed, to quote Mr Pearce’s skeleton argument, “preserving the ethos of the Institute while enabling UOL to implement its desired management solutions”.[55]However, Sir Ivor Crewe described the basis on which UOL earmarks the portion of its special funding for the SAS as “opaque”, the basis on which that portion of special funding is given to individual institutes as “equally obscure”, and recommended that the SAS needed integration of the institutes. Professor Hope maintains that the Report was prepared in ignorance of UOL’s interpretation of and attitude to the Deed or of the dispute as to its construction between UOL and the Advisory Council. However, Sir Ivor’s report is only tangentially relevant to the issues I have to decide. That question is whether the Deed prohibits integration of the Institute with other institutes. Status of the Institute[56]Although the matter was not presented in this way, it seems to me that there is a preliminary question, which affects all the other questions I am asked, as to the status of the Institute. Mr Taube referred to the Institute at one point as being a separate charity. Mr Pearce said this is quite wrong. UOL is the trustee of the trusts declared by the Deed. That is a separate charity, but it is not, says Mr Pearce, a trust of the Institute at all but merely of the 1944 Collection and any further property given to UOL specifically to be held on the trusts of the Deed. The Institute does not have a separate legal personality but is merely a department or administrative division of UOL.[57]Mr Pearce pointed out that prior to the transfer of the Institute to UOL, UOL’s Court resolved on 15 March 1944 to make it a Central Activity. UOL’s Central Activities were all University departments with no separate legal personality. There was already in existence an administrative and financial structure for such Central Activities.[58]The fact that the Institute was part of UOL is beyond doubt, says Mr Pearce. He referred to numerous matters, such as,• The letter from the UGC dated 12 July 1943 which referred to “incorporation of the Institute in London University”.• The letter from Dr Saxl to Max Warburg dated 1 October 1943 in which he said there would be no question of rent as, “…we shall be a University institution housed in a University building”.• Eric Warburg’s speech on 13 January 1944 in which he referred to “a useful sister institution to the Courtauld and other bodies of London University”.• Mr Claughton’s letter dated 4 May 1944 to Eric Warburg (the Institute to become “part of the University Commonwealth” and to rank for the same consideration as “other members of our family”).• The implication in the Deed Clause C, where it says, “SUBJECT to the regulations made by the University and for the time being in force…”• The letter from Dr Saxl dated 27 November 1944 to Mr RA Butler in which he said “The Warburg Institute has today become part of London University”.[59]The issue is whether, as a matter of construction of the Deed, the trust applies, as Mr Pearce maintains, only to the 1944 Collection, or whether it applies generally to the Institute. Can the trust fairly be described as applying to the Institute overall?[60]The first matter with which I have to deal is that Mr Pearce maintains on behalf of UOL that neither of the defendants have any standing to contest UOL’s position because all positive non-trust obligations undertaken by UOL take effect (if at all) as covenants between the parties to the Deed. The defendants are not in a position to enforce any such covenant.[61]Mr Pearce accepts that UOL is the trustee of the charity constituted by the Deed and the property of that charity is held by UOL on trust, not as part of its corporate charitable functions. However, according to Mr Pearce, the trust obligations comprise the restrictions on what UOL can do with the property, but in so far as the Deed requires UOL to incur expenditure (from sources other than the trust property) it takes effect as a contractual obligation only. That is emphasised by the word “agree” in “agree and declare”. As none of the original parties to the Deed is before the court, those obligations are unenforceable. Although the Deed concerns the Institute as a whole, the only trust declared is that of the library described in recital (1), that is to say, the 1944 Collection.[62]Nevertheless it is a term of the trust that the library be used in connection with the Institute, which is to have specified attributes. Thus the trust on which the Library is held indirectly regulates the management of the Institute because, if the Library ceased to be used in connection with the Institute (having the specified attributes), UOL would no longer be carrying out the purposes of the trust. In that event, but only that event (which has not arisen) Mr Pearce says that the Attorney General could enforce the purposes of the trust. The relief obtained would only be negative in nature because the obligation being enforced would be the obligation of UOL as trustee to administer the trust property in a particular manner. Under the terms of the trust the trustee is not permitted to have recourse to the trust property to meet expenditure. Thus it follows, says Mr Pearce, that the Attorney General could obtain an injunction restraining UOL from selling the library, but could not obtain an injunction requiring UOL to employ a librarian with its own money.[63]He also contends that as the Institute has no separate legal personality, any gifts to it are necessarily gifts to UOL, of which it forms part.[64]The defendants’ case is that the trust contained in the Deed comprises, as a matter of construction and consideration of the factual matrix, all relevant matters, including the Collection, that is to say, the Library from time to time, the building and the obligation to expend money other than that comprised in the trust property.[65]Mr Pearce relied on Liverpool City Council v. Attorney General (The Times 1 May 1992), in which Morritt J said, “The legal obligations, subject to which the City Council holds the Allerton Hall Estate are those imposed by the covenants and those imposed by the statute on its corporate property. Attorney General v. Poole Corporation [which he had considered in the previous paragraphs] is a decision of the Court of Appeal binding on me that the Attorney General cannot sue on the covenants… In charity proceedings, the Attorney General represents the Crown as parens patriae and enforces charitable obligations on behalf of the public, who are objects of the charity and are not normally entitled to enforce them personally. But the status of the Attorney General in this respect does not enable him to create legal obligations in favour of the public where none exists. It is true that when property is effectively dedicated to charity the law regards the charity as an abstract conception distinct from the institutional mechanism provided for holding and administering the funds of the charity… But the ability of the Attorney General to intervene depends upon such dedication. I have already concluded that there was no such dedication but a gift to the Corporation subject to the covenants in favour of the donees. The Attorney General cannot sue on the covenants…”[66]It seems to me that Liverpool is distinguishable as in that case there was purely a contractual arrangement. In the present case, all relevant matters are set out in a Deed. Recital (2) to the Deed states that the Warburg Society, offered to hand over the Library to UOL “upon the terms hereinafter set forth”, and Recital (3) states that UOL, having accepted such offer and having received delivery of the Library, “is desirous of declaring in conjunction with the donors the trusts upon which it is to be held”. Accordingly, it is unduly artificial to separate out that part which is agreed and that part which is declared in the manner contended for by UOL. It is both agreed and declared that “it” (whatever “it” may be) should be “adequately equipped and staffed as an independent unit the whole to be known as “the Warburg Institute without regard to contributions from outside sources”. The provisions about the Institute are part of the trust itself and cannot be separated out as merely an agreement with the Society and the Warburg family.[67]Accordingly in my judgment the provisions as to maintenance and preservation of the Library, as to keeping “it” adequately equipped and staffed as an independent unit and the administrative provisions as to management and control are trusts on which the Institute is held and the Attorney General is entitled to enforce them.[68]Thus the position is as follows. The Institute is indeed 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 is a separate charity. The Collection/the 1944 Collection[69]I turn first to the Collection. The first matter to be considered is the construction of the Deed. I agree with Mr Pearce that on a literal reading the Deed appears to refer only to the 1944 Collection. This is particularly because of the words, “having received delivery of the Library [which could only be delivery of the 1944 Collection] is desirous of declaring…the trusts upon which it is to be held”.[70]However, it seems to me plain that the trusts are to apply to the Collection as a whole and not merely to the 1944 Collection. This is because of the words in recital (2) (my emphasis), “…providing for the preservation maintenance use and furtherdevelopment of the…Library…” 71. and the words in clause A, “The University will maintain and preserve the Warburg Library in perpetuity in accordance with this Deed…and will keep it adequately equipped and staffed…”[71]When one looks at the factual context in which the Deed was executed (see ICS v. West Bromwich Building Society [1988] 1 WLR 896 at 912H-913G) this is put beyond doubt. The reason for the emigration to London in 1933 was to “avoid the library [becoming] a dead institution”.[72]I agree with the defendants that it would be arbitrary in these circumstances to calcify the Collection by limiting the trust to the 1944 Collection. The trusts relate to the Institute and Library, a world renowned academic institution providing lectures, seminars, publications and exhibitions. The Deed was executed to secure the future of the Institute and the UOL accepted the gift on terms that the Library would continue as a living institution.[73]Books have always been purchased for the Library and Dr Saxl regularised the acquisition policy, as explained by Gertrud Bing in 1934 in her article. She said that the administration of the Library was governed by two principles: keeping the main sections up to date and supplementing missing works; with the other sections it is a matter of buying the most important works and keeping them well equipped with books of reference. The detailed estimates prepared by Dr Saxl for the “annual cost of maintenance of the Warburg Institute and library if transferred to the University as a separate Central Activity” included express provision for the purchase of books.[74]Thus additions to the Collection acquired by purchase using funds from the UGC, UFC and HEFCE are in my judgment comprised within the trusts of the Deed. Thus I answer Question 1(2)(b) in the Claim Form in the sense that all the additions acquired by purchase or exchange are subject to the Deed.[75]As I have said, Mr Pearce asked me not to decide this question. He said that UOL has no intention of treating the Collection differently from the 1944 Collection and said that any such decision on my part could have a destabilising effect on the Institute. However, UOL as claimant did not withdraw the question, Mr Pearce saying that the claim form was a negotiated document and he did not feel in those circumstances that he should. While insisting that UOL had no present intention of splitting up the Collection he also said (and I quote), “The University’s property is held for charitable purposes just as much as property held on the trusts of the Trust Deed. If a situation were ever to arise, which does not arise at the moment, where any question arose as to whether the Library should be dealt with in a different way to the way it is now being dealt with, it would practically be necessary to apply to the court for a scheme to deal with that issue.”[76]While the question remains in the Claim Form, and the defendants wish me to deal with it, it seems to me that I should decide it. The defendants mistrust UOL’s approach and do not want the door left open to any argument by UOL in the future that UOL owns such additions free from the trusts of the Deed. They are apprehensive that (as was said in a recent newspaper article), “If the University were to succeed, many Warburg supporters fear that the Institute’s volumes would be divided up among Senate House Library shelves.”[77]Question 1(2)(c) addresses the issue of additions acquired by gift. This depends upon the terms of the gift in each case. I therefore deal only with gifts made, “to the Warburg Library” or “to the Warburg Institute” where there are no other indications as to the recipient. The Institute has received numerous donations large and small since 1944 to further the purposes of the Institute.[78]I accept Mr Pearce’s submission that the Institute, let alone the Library, has no legal personality other than as a charitable trust limited to the trusts of the Deed. However, in my judgment gifts to the Institute or to the Library, without more, are plainly in my view intended to be held on the trusts affecting the Collection and I would therefore answer this question in the same way as 1(2)(b), namely in the affirmative, unless (as is common ground) the wording of the gift indicates otherwise.[79]Mr Pearce valiantly tried to persuade me that, a gift, “to be added to the Library”, involved a construction question of whether there was an accretion to the existing trust or whether, as the Institute had no legal personality, beneficial ownership was vested in the UOL. However as a matter of such construction it is in my judgment plain that a gift to the Institute or to the Library would be construed as a gift to be held as an accretion to the property held under the Deed. The Building[80]The building is in a different category. The only reference to a building contained in the Deed is in clause A, as follows, “THE University will 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 for the purposes of this Clause”.[81]The principal thrust of the trust is the Collection. The obligation is to “house the same” in a “suitable building in close proximity to the University centre at Bloomsbury”. Thus UOL is under an obligation to house the Collection, the building must be suitable bearing in mind the peculiar attributes of the Collection and the building must be close to the University centre.[82]As a matter of construction, the obligation is only to accommodate the Collection, not to hold the building in which the Collection is to be housed upon a trust to use it in perpetuity only for the purposes of the Institute. I agree with Mr Pearce that, as a matter of construction, there is neither certainty of intention nor of subject-matter. At the time the Deed was executed, not only did the land belong to UOL but in 1944 the plan was to build on a different plot from that eventually used for the Institute. I again agree with Mr Pearce that if UOL complies with its obligation to “house” the Institute in a building in which it retains full legal and beneficial ownership untrammelled by any trust, the Deed authorises UOL to do so. The defendants do not put their case as a matter of pure construction of the Deed but it is nevertheless an appropriate starting point.[83]Secondly, Mr Taube submits that as the capital grant was obtained from UGC after UGC had become aware of the terms of the trust, the building, when built, was impressed with the trust. However, again I agree with Mr Pearce that the terms of the grant did not impose any restrictions on UOL’s use of the building other than those specified above. Of course UOL could only have expended the grant on construction of the building, and the Deed imposes certain obligations on UOL so that UOL cannot simply turn out the Institute at its discretion, but nevertheless, apart from the obligations detailed above there are no restrictions on ownership.[84]The first defendant also relies on the “no profit” principle enshrined in such cases as Boardman v. Phipps [1967] 2 AC 46. He says that UOL is precluded from asserting a beneficial interest in grant funding applied for the benefit of the Institute, in particular for the building, on the ground that UOL obtained the grants as trustee.[85]Mr Pearce contends that by necessary implication the Deed authorises UOL to retain after-acquired property which it acquired to discharge its functions. The Institute was to become a Central Activity of UOL and the transfer of property for use in connection with that new Central Activity does not imply any wider change to the arrangements UOL made for the conduct of its activities.[86]Mr Taube contends that “necessary implication” requires an implied term. He cites the decision of the Privy Council in Attorney General of Belize v. Belize Telecom [2009] 1 WLR 1988 in which Lord Hoffmann said (at [21]), “It follows that in every case in which it is said that some provision ought to be implied in an instrument, the question for the court is whether such a provision would spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean…There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?”[87]Mr Taube submits that there is no basis for implying such a term in the Deed. It is a strong thing to say that a Deed contains an implied term that the parties intended the trustee to be permitted to retain benefits or other profits from the trust. There is nothing in the Deed, or the background, suggesting that the parties intended UOL to be permitted to retain after acquired property for itself or its other corporate charitable activities.[88]However, UOL does not obtain grant funding by virtue of its position as trustee. The funding is not provided because UOL is the trustee of the Deed but to support UOL’s function as a provider of higher education: see for example the letters from HEFCE of 1 October 2010 and 29 July 2013. Thus the funding is provided to UOL beneficially and not as trustee of any of its constituent parts, notwithstanding that the calculation of the amount of the funding takes account of how UOL proposes to spend it.[89]Thirdly the Attorney-General submits that the doctrine of proprietary estoppel applies so as to prevent UOL from asserting that it holds the building other than on the trusts of the Deed.[90]Miss Tipples submits that UOL represented to the transferors that the Institute would have a permanent home in a permanent building on UOL’s Bloomsbury site free of rent. The transferors have acted to their detriment in reliance on that representation by giving the 1944 Collection to UOL. Accordingly it is submitted that UOL is estopped from asserting that it is free to move the Institute to another building.[91]Miss Tipples relies for the relevant representation on the Minutes showing the procedure whereby estimates were generated within the Institute for the forthcoming year and formed the basis of an allocation of funding out of the grant made to the Senate by the Court. Miss Tipples submitted that when the Senate allocated a sum to the Institute for its recurrent expenditure that sum became held on the trusts of the Deed. I also note the February 1944 estimates of future expenditure prepared by Dr Saxl dealing with expenditure on three different bases, A during the war, B after the war and C once the Institute was in its new building.[92]However I do not believe that Miss Tipples’s submission can be right for a number of reasons. First, I cannot find any such express representation. The obligation to “house” the Collection is merely an obligation to house it in a University building. To say that there was an express representation involves deployment of the matter which the defendants seek to prove.[93]Secondly, the original scheme required money received for the Institute to be paid into the Senate bank account, a procedure that would be inappropriate if there were a trust of the money since it would be mixed with UOL’s other funds. Thus the submission that income allocated by the Senate was impressed with the trusts of the Deed is not supported by the arrangements at the time. Thirdly, the Deed envisages that UOL will be using its own money to support the Institute. Again, this is inconsistent with an impressed trust of the recurrent funding.[94]Thus I do not find that there was any representation that the building would belong to the Institute. Nor do I consider that the Deed should be rectified.[95]If I am wrong about that (and I do not believe I am) the claim would nevertheless fail. Proprietary estoppel is a branch of estoppel by representation which can only be enforced by the representee. Neither defendant is a representee. The Attorney General’s position as protector of charity does not enable him to stand in the shoes of the representee in this context: see the passage quoted above from Morritt J’s judgment in Liverpool.[96]Mr Pearce propounded two other arguments. First, that with dealings between two charities it is inappropriate to resolve an argument as to what property is comprised in each by application of the doctrine of proprietary estoppel when the court has other powers to do so by virtue of its administrative jurisdiction over charities. Secondly, the conduct of UOL cannot be described as unconscionable in the required sense, having regard to the lapse of time, some 70 years, since the alleged representations were made. Those two submissions do not arise in the events that I have found and I do not deal with them as they seem to me to raise novel points.[97]I would therefore answer question 1 (2) (a) in the negative. Benefit and burden[98]All the questions in the claim form depend on UOL’s basic contention that, other than in relation to the 1944 Collection, the obligations imposed by the Deed are contractual rather than by way of trust so that in line with Liverpool City Council v. Attorney-General they cannot be enforced by the Attorney General. I have already found against UOL on that matter.[99]The defendants also say in this context that UOL’s position is inconsistent with the basic principles of benefit and burden. They rely on Messenger v. Andrews (1824) 4 Russ 478, Jay v. Jay [1924] 1 KB 826 and Re Hodge [1940] Ch 260 for the following propositions:• Where a donor gives specific property to A, to be used by A for A’s benefit, but he imposes a condition on A to make financial provision for B,• And where A accepts the benefit of the disposition,• A cannot take the benefit without accepting the burden, even if that burden exceeds the value of the donated property. In other words, A is not permitted to fail to give effect to the burden of performing the condition in favour of B. B may obtain an order of the court to compel A to give effect to the condition, even though he was not a party to the gift.[100]UOL, while accepting the proposition as a matter of principle, says it does not apply in the present case for the following reasons:• There is no English case in which A takes property as a trustee rather than beneficially and, a fortiori, no such case in which B is a beneficiary of a trust.• There is no English case in which the principle has been applied to an inter vivos transaction. Mr Pearce says that there is no conceptual difficulty in UOL assuming contractual obligations and to construe the Deed as creating the obligation would be inconsistent with principles of privity of contract.• Because the benefit in both cases is to a charity, A and B are in substance the same person.[101]I see no reason why the principle should not apply equally to the situation where A is a trustee and B a beneficiary. Nor do I see why the principle should not apply to an inter vivos transaction, provided that the trust can fairly be described as applying to the matter overall. I agree with Mr Pearce that the matter is essentially one of construction but I have already decided that as a matter of construction the trust applies to the Institute.

(d) )

[102]The defendants rely on the principle that a trustee must not profit from his trust. This is relevant to all the property issues raised in question 1 (2). The defendants accept that the rule is modified where the trust instrument either contains express authority to take a profit or where there is an implied term to that effect. The defendants say that there is nothing in the wording of, or background to, the Deed to suggest that UOL was intended to retain property it came to hold by virtue of its trusteeship.[103]However, this fails to recognise that it was understood at the time of the Deed that the Institute would be incorporated into and become part of UOL (see paragraph 58above) as a Central Activity.[104]As I have said, UOL’s funding was awarded to it because it was a University, not because it was a trustee of the Deed. I reject the test put forward by Mr Taube, as to whether the UGC would have provided funding if UOL had not entered into the Deed. The correct test is whether UOL made a profit “by reason or in virtue of the fiduciary office or otherwise within the scope of that fiduciary office”, as in Boardman v. Phipps. Thus the test is whether UGC would have provided funding whether or not the transfer to UOL was as a trustee. The answer to that question is plainly yes. In any event the Deed provides that the trust should be maintained out of non-trust property.[105]Lastly, Mr Taube says that it is not enough to oust the equitable rule that the donors appointed UOL as trustee in the first place. He says that if that contention were right any original trustee would be free to breach the disabling rules of equity as he thought fit. However, it seems to me that Sargeant v. National Westminster Bank Plc (1990) 61 P&CR 518 and Edge v. Pensions Ombudsman [1998] Ch 512 are authority for the proposition that where the appointors know and understand the position before appointment, the trustee can retain profits. In this case the Warburg family and the Warburg Society were well aware of the funding situation relating to UGC and in my judgment UOL is not accountable for the benefits it has received under this head.[106]For what it is worth, I also agree with Mr Pearce that although the UGC’s letter of 16 August 1944 was written after receipt of a copy of the draft Deed, the UGC regarded itself as already committed to funding the Institute.[107]I therefore answer the question at 1(2)(d) in the negative.

(f) intellectual property rights

[108]Intellectual property rights arising out of the Collection, or arising out of lectures given in respect of the Collection or for the Institute in my judgment follow the destination of the Collection and are held on the trusts of the Deed. Question 1(3). Whether the terms of Ordinance 11 of UOL’s Ordinances and the Scheme of Management dated 5 December 2006 for the Institute are in accordance with the Deed[109]The provisions of the Deed relating to the Institute’s management are contained in Clause B, reproduced above. Thus the management and control of the Institute “(and Library)” are to be vested in UOL, although UOL is to “appoint to advise it on all matters connected therewith” a Committee of Management “which shall include so far as reasonably appropriate representatives of the Warburg Family”. Importantly, Clause B also provides that, “…in the constitution whereof [i.e. the Committee of Management] the University shall have regard to the special character of the Institute as a body dependent on the collaboration of persons of goodwill living in this country or abroad whose interests lie in the direction of the fields of study and research to which the Institute is dedicated”. There is also the provision that the Director of the Institute and his successors should be of professorial standing.[110]The defendants contrast the 2006 Scheme of Management with that of 24 April 1945. In particular, the 1945 Scheme of Management provides for the administration of the Institute to be vested in the Management Committee. As to financial functions, paragraph 4 of the 1945 Scheme provided, “All moneys received by or on behalf of the Institute shall be paid into the Senate Banking Account. Subject to the authority of the Finance and General Purposes Committee of the Senate, the Management Committee shall regulate and control the finance of the Institute in accordance with the Standing Orders of the Senate relating to finance; they shall be responsible for the submission of estimates and for the supervision and control of expenditure within the limit of their votes.” By contrast, the 2006 Scheme of Management provides for the Advisory Council’s functions to be advisory only, the Director being accountable to the Vice-Chancellor of UOL for the “academic, administrative and financial business of the Institute within financial guidelines laid down by the University”. Paragraphs 7 and 8 of the 1945 Scheme provide, “7. In addition to the general powers exercised by the Management Committee under clause 2, they shall have power to draw up regulations for the admission of students and for other purposes of the Institute; such regulations shall not become operative until approved by the Senate. 8. This scheme is subject to modification from time to time by the Senate on the advice of the Academic Council after report by the Management Committee.”[111]The defendants maintain that the 1945 Scheme gave the Management Committee much greater powers than the 2006 Scheme. I was taken to the Statutes of 1928, purporting to show that an Advisory Council is just that, whereas a Management Committee actually managed. The remit of the Advisory Council is to advise the Director and make recommendations to the Board of the SAS.[112]Key changes relied upon in Ordinance 11 are that certain powers are now reserved to the SAS, namely,• To approve the annual operating statement with targets.• To approve the annual budget for all 10 institutes comprised in the SAS.• To approve the annual allocation of HEFCE funds to each institute and the SAS’s libraries.• To consider and make recommendations to the UOL Board of Trustees for changes in the configuration of existing institutes, such as winding them up or transferring all or any part of their activities to a third party body.• To approve Schemes of Management of the institutes.[113]Accordingly, the defendants submit that UOL no longer manages the Institute as an “independent unit” as required by the Deed. It is said that UOL faces impossible conflicts of interest in its allocation of funding. Also the separation of the budget for the Library from the rest of its budget is inappropriate since the structure and cultural history of the Institute means that curators and staff of the Library are often professors and are always heavily involved in teaching, research and publications.[114]However it seems to me plain, because of the fact that every management function of the Management Committee is expressly made subject to the approval of the Senate, that there is no difference in principle, whatever may have been the difference in practice, between the 1945 Scheme and the 2006 Scheme. Representatives of the Warburg Family are required as the Deed specifies to be members of the Advisory Council.[115]Ordinance 11 relegates the Institute to being a member of the SAS. I do not see this as prohibited in itself and UOL is certainly permitted to conduct the administration of the Institute in a way that complements the work of UOL’s other institutes and activities. However, the Deed obliges UOL to, “keep it [for this purpose the Library] adequately equipped and staffed as an independent unit”. I therefore agree with Mr Taube that UOL is prohibited from integrating the Library into another library or the Institute into another part of UOL. At present it is not doing so, but the earlier plan for library convergence in the ULRLS could have had such a result.[116]I answer question 1(3) in the affirmative, but subject to the immediately preceding paragraph. Question 1 (5), namely whether the terms of the Deed permit UOL to manage the Institute in common with other activities and employ staff to perform functions both at the Institute and elsewhere.[117]I would answer this question in the same way as the previous one. UOL is authorised to employ staff who work in the Institute to perform other functions but the issue is always whether the Institute is maintained as an independent unit and is adequately equipped and staffed. This is a question of degree to which there is no yes or no answer. Questions 1(6) and (7), namely whether the Deed authorises UOL to debit the Institute for charges for services provided by UOL to the Institute or whether the terms of the Deed require UOL to fund the Institute. This is bound up with Question 1 (8), whether the terms of the Deed and the general law authorise UOL to seek funds to support the activities of the Institute in common with other activities for which UOL is responsible and thereafter to apportion those funds between the Institute and those other activities.[118]Again, the defendants pray in aid the principle that a trustee may not put himself in a position where his interest and duty conflict. Mr Taube says that the Deed imposed an obligation on UOL to keep the Institute adequately equipped and staffed in order to enable the Institute to carry out its purposes. This was the price that UOL agreed to pay for the transfer in 1944, the prestige that the Institute brought to UOL and the ability to attract funds to UOL.[119]He submitted that this is contained in the Deed’s provisions, as follows,• Recital (2):
“the preservation, maintenance use and further development of the Society and its Library”; • Recital (3): acknowledgment of “the world wide reputation in its special fields of culture and research which the Warburg Library has already established”; • Clause A: UOL “will maintain and preserve the Warburg Library in perpetuity…and will keep it adequately equipped and staffed as an independent unit…”; • The reference in Clause A to keeping “it” “adequately equipped and staffed” is followed by the words, “without regard to contributions from outside sources which shall not be taken into consideration for the purposes of this Clause”
. This indicates, submits Mr Taube, that there must be a funding obligation as there is a specific exclusion of contributions from outside donors; • Clause B: UOL shall have the management and control of the Institute and the constitution of its Committee of Management “shall have regard to the special character of the Institute…”; • Clause D requires UOL to accord the Director of the Institute “professorial standing in the University”. Mr Taube submits that it is implicit that the costs of complying with clause D must represent part of the costs of the obligation to keep the Institute adequately staffed within clause A.[120]Thus under the Deed UOL is bound to maintain and preserve the Institute in perpetuity, to house the same in a suitable building and to keep “it” adequately equipped and staffed as an independent unit. UOL is, it must follow, not allowed to dispose of the Collection. Therefore UOL is bound to fund the Institute out of other resources available to it, not out of the principal items subject to the Deed.[121]Owing to the space charge, the proportion of UOL’s total estate expenditure charged to the Institute (comparing open library stacks with closed stacks) is eight times the rate applied to other libraries forming part of UOL’s other property. Thus in 2008-9 the charges for the maintenance of the Institute’s premises and central services for the Institute rose to 62% of the funds allocated to it by the SAS although, down to 1986, the costs of those charges represented only 20% of the grant received by the Institute from UOL.[122]Between 2007-8 and 2012-13 £858,310 has been debited by UOL against the Institute’s reserves (including sums derived from gifts) to cover the non-library deficits caused by the space charges. In order to reduce its deficit the Institute had to give up the use of parts of its building.[123]The defendants’ case is that levying space charges on the Institute is impermissible. This is either because UOL is obliged by Clause A of the Deed to fund the Institute without reimbursement or because UOL only has a right to be indemnified in respect of the actual, properly incurred expenditure on the trust property, not in respect of UOL’s costs on its other property.[124]The defendants base their case on two grounds, first, construction of the Deed and, secondly, breach of the principle that a trustee must not put himself in a position where his interest and duty conflict.[125]They say that UOL has placed itself in a conflict position: see Lord Herschell’s well-known formulation in Bray v. Ford [1896] AC 44. They accept that at the time when the Deed was entered into it was contemplated that UOL would apply for UGC funds not only for the Institute but also for the rest of its activities. However, at that time the manner in which UOL applied for and allocated funds meant that there was proper management of potential conflicts of interest and duty. It is accepted that in the early years after 1944 UOL acted in the best interests of the Institute.[126]However, it is said that UOL’s current approach gives rise to unmanaged and unauthorised conflicts of interest and duty. The distribution by SAS is by reference to a range of criteria which benefit other activities of UOL to the prejudice of the Institute. Allocation takes no proper account of the substantial space occupied by the open shelves library system of the Institute or the space charges unconnected with the actual costs of the space. Over 60% of the HEFCE funds allocated to the Institute are applied in space charges and central services rather than for the Institute’s core activities.[127]The answer to the conflict point is that the parties must always have intended that UOL would apply for funding in two capacities, as UOL and as trustee for the Institute and it was a fundamental purpose of bringing the Institute within the umbrella of UOL that it would be funded by UGC as part of UOL. Clause B of the Deed provided that the management and control of the Institute and Library should be vested in UOL.[128]The estate wide service charges do not however chime with the Deed. UOL’s current method of obtaining special funding from HEFCE and then obtaining an allocation from SAS is, provided it is fair, unobjectionable. Mr Pearce has drawn my attention to Statutes 38 and 39 of UOL’s Statutes of 1928, providing that the Court (on behalf of UOL) should determine the allocation of all funds at the disposal of UOL and that all recurrent grants allocated by the Court for expenditure by the Senate upon Central Activities should be made in the form of block grants.[129]Statute 39 also provides that, “Unless for special reasons the Court otherwise determine, all recurrent grants allocated by the Court towards the purposes hereinafter mentioned shall be made in the form of block grants, that is to say: (i) For expenditure by the Senate upon those central activities of the University for which the University is wholly responsible, classified under such heads and sub-heads as the Court, after consultation with the Senate, considers convenient;…” (i) For expenditure by the Senate upon those central activities of the University for which the University is wholly responsible, classified under such heads and sub-heads as the Court, after consultation with the Senate, considers convenient;…”[130]However, the levying of space charges, debiting an estate-wide service charge to the income and expenditure account of the Institute is not to my mind permissible. There is an actual conflict of interest between UOL’s duties to manage the university and its duties under the Deed. The new arrangements mean that UOL is in a position of actual conflict which was not anticipated at the time the Deed was entered into. The affairs of the Institute are run in a wholly understandable attempt to save expense. But UOL only has a right to be indemnified in respect of the actual, properly incurred expenditure on the Institute, (that is to say in fulfilling its duties under the Deed to maintain, preserve and house the Collection) not in respect of UOL’s costs on its other property.[131]How can I reconcile my finding that UOL does not obtain grant funding by virtue of its position as a trustee with the Statutes and other matters referred to by Mr Pearce in his written submissions of 29 October 2014? The answer lies in the construction of the Deed. The charity established by the Deed requires the Institute to be equipped and staffed “as an independent unit”, having regard to its “special character”. The imposition of university-wide space charges flies in the face of this provision as it merely treats the Institute as a constituent part of UOL without regard to its special character or its position as an independent unit under the Deed.[132]It seems that from the start UOL was indemnified for the charges which it actually incurred for the Institute: see Re Grimthorpe [1958] Ch 615 per Danckwerts J at 623 and Lewin on Trusts (18th Ed 2008) [21-03]. I therefore propose to answer question 1(6) of the claim form in the affirmative. I also would answer question 1(7) in the affirmative but subject to the proviso that UOL can recover anything it spends specifically on the Institute from the income and expenditure account of the Institute, but not from the Collection itself. The obligations to maintain and preserve the Library in perpetuity, and to keep “it” adequately equipped and staffed as an independent unit, impose on UOL an obligation to provide funds for that purpose.[133]As I have found that as a matter of construction UOL is the trustee for the Institute, and not merely the 1944 Collection, and as, again as a matter of construction, the Deed imposes a duty on UOL to manage the Institute as “an independent unit” having regard to its “special character”, I would answer Question 1(8) in the negative.