Corporate Restructuring: On Foreign Direct Investments
If the source of beneficial funds—such as financial injections or investments into companies or corporations like the London City Corporation—originates from a foreign source, as indicated by the name and confirmed through evidence (e.g., wire transfer records or withdrawals from identifiable funds/assets), then no fraud can be found, as no charity formation rules have been breached.
The donor’s intent should prevail: if he or she intended to donate to the donee named in the financial instrument, investment fund, or injection, that intention should be honored.
For example, Qatari donations to the London City Corporation did not contravene UK charity laws.
If client funds sourced from a charity are involved in litigation, investigation, or allegations of fraud, then the entire trust may fail—rather than only a portion of the donation. However, in the present example, the trust as a whole has not failed. Donations or investments made to a business client or acquaintance, which are then later allocated or redonated to other trusts or advisory boards (for instance, X’s family trust appointing Y as chairman), do not, in themselves, cause the trust to fail. Furthermore, the role of chairman is a position of trust, and as long as the chairman fulfills the duties arising from that position, the trust remains intact.
In UK trust law, equity prevails—it cannot and will not be overridden by black-letter law or statutory provisions.
Case citations: Stack v Dowden, Oxley v Hiscock, Barlow Clowes v Eurotrust, Abou Rahman v Abacha, Attorney General for Zambia v Meer Care & Desai, Horley Town Football Club, Re Loftus, Templeton Insurance v Penningtons Solicitors.
If the above argument fails, it may be argued under the principle of the Quistclose trust. A Quistclose trust arises where a creditor lends money to a debtor for a specific purpose; if the debtor uses the money for any other purpose, it is held on trust for the creditor. Any misapplied funds can be traced and recovered by the creditor.
Case citation: Barclays Bank Ltd v Quistclose Investments.
