Universities face difficulties modernising when trust deeds are old, unclear and specific, says expert

Out-Law Analysis | 27 Nov 2014 | 2:02 pm | 4 min. read

FOCUS: Universities are lucky in that assets of enormous value are often donated to them. But the sometimes very specific conditions laid down by donors can cause serious problems, especially when universities try to modernise their own practices. 

Entire libraries, collections or major assets are often donated to universities, often because the donor wants to see a collection kept together rather than sold off in parts. While this kind of wish preserves the cultural or historic value of a collection, it is also the kind of condition that can provide headaches for universities, sometimes decades down the line.

Universities are facing unprecedented financial pressures, and the increasingly digital world offers both threats and opportunities. Universities have to be nimble to find the best strategy to survive and thrive and many are overhauling the way they work.

But the conditions imposed by the special trusts set up to govern these major donations are not modern, flexible or even that clearly expressed, and that can cause problems for universities. How can they change the way they operate when such restrictions are in place?

We saw an example of this in a recent court case involving the University of London and the Warburg Institute, in which Pinsent Masons, the law firm behind Out-Law.com, acted for the University. This case demonstrated clearly the tensions between the modernising of processes and the restrictions imposed by a trust deed.

It is a vital question for universities. Trust deeds will often stipulate that a collection be available in a certain form or even in a certain location. But as universities adapt to online learning, is a book or work of art to be considered 'available' if a high quality digital copy can be seen? And can it count as being in a location if a digital copy can be accessed from there, or does it have to be physically present?

What if the demands of the trust, for example to use a particular space in a certain way, conflict with the university's view of the best and most productive use of that space? What if the demand is 20, 50 or 200 years old – should its space or resources demands still be met, even if to the detriment of the student experience?

These are hard questions, made harder because trust deeds are often very old, or are sometimes simply expressed in terms that are not sufficiently clear.

In the University of London case the conditions for the transfer of the Warburg Institute were very different to the present. The Institute was established in Hamburg by art historian Aby Warburg. Its 80,000 books were shipped to London in 1933 because the collection of the Jewish institution was under threat of destruction by the Nazis. The books, along with furniture, papers, photographs and even staff moved to London.

The University of London became trustee of the Warburg Institute in 1944 and the collection, which now consists of 350,000 books, is housed by the University under a deed of trust.

That deed set conditions about the staffing and equipping of the Institute as "an independent unit". When the University made changes to the funding of the Institute and increased the amount it charged it for its space, the Institute claimed that it was in breach of the trust deed.

The High Court found that the University could only charge the Institute costs that were directly incurred, rather than a standardised charge to cover all University property, but said that the governance arrangements for the Institute were in line with the 1944 deed.

The case highlighted a number of the most common problems universities face when dealing with funds or trusts. It had to deal with an old, unclear trust deed, and one that was created in very different times, when the funding and even the function of universities was different.

Changes in research methods and technology can fundamentally alter the purpose and nature of a library or collection. Documents used to have to be physically available to be analysed, but that is no longer the case.

To take another example, a university might want to use a prime central location for student facilities rather than book or document storage. If it can digitise a collection to make the documents more widely available than before and make better use of that location, should the terms of the original gift be able to stop them?

Universities increasingly have to make hard decisions in a competitive funding environment and against the backdrop of online materials and courses changing the entire purpose and role of universities. The conditions imposed by funders, regulators and donors are important in preserving the status of collections or funds, but there should be some recognition that the world can change in such a way as to make some aspects of trust deeds redundant or nonsensical.

Universities also have to consider the implications of their charitable status. They must adapt to modern times, but not in a way that ignores the original aims of the charity. And because charities don't have direct beneficiaries to hold the running of the charity to account this role is fulfilled by the attorney general, which can make it difficult to simply reach an agreed way forward. 

Specific conditions laid down in trust deeds are a vital way of protecting material and promoting their original purpose, but universities need to be able to change and adapt to a range of shifting pressures, and to do this properly they sometimes need to change the relationship with and use of organisations and collections.

We are seeing an increasing number of universities who are very concerned as to how they can maintain collections and libraries so as to fulfil the wishes of donors and the academic community but simply do not have the funds to do so. This issue needs to form the basis of a wide debate as to whether the public would support increased public funding for such purposes or whether there are modern donors willing to support the generous gifts of the donors of the past.

Janet Hoskin is a universities expert at Pinsent Masons, the law firm behind Out-Law.com