Charities (Protection and Social Investment) Bill

Written evidence submitted by John Weth (CHB 04)

CHARITIES (PROTECTION AND SOCIAL INVESTMENT) BILL[HL]

SHOULD GREATER COMMISSION POWERS

REQUIRE STRONGER SAFEGUARDS?

"The greater the power, the more dangerous the abuse"

(Edmund Burke, 7th February 1771)

SUMMARY

This submission concentrates on drawing MPs’ attention to the importance of fair, effective and readily accessible appeal arrangements for charities and trustees, given evidence of the Commission’s use and misuse of regulatory powers over the past 20 years.

1 THE CHARITY COMMISSION AS REGULATOR 1993-2015

1.1 MPs’ attention is drawn to successive National Audit Office (NAO) (5 in 26 years) and Public Accounts Committee (PAC) reviews and reports (1990s – 2014), noting the Commission’s failings and failures as regulator – and the Commission’s apparent inability to learn from these. The admission by the Commission Chairman and Chief Executive at a PAC hearing in 2014 that they had not even read the PAC’s previous 2002 report, perhaps speaks for itself.

1.2 By the early 2000s Parliament’s and the Government’s concerns about the role, functions and performance of the Commission as regulator, led to a Strategy Unit report and recommendations in 2002, and the preparation of a Draft Bill published in 2004 for consideration by a Joint Parliamentary Committee. The Association for Charities prepared and submitted a report to the Joint Parliamentary Committee in June 2004, titled ‘Power Without Accountability: the Charity Commission as Regulator’ [1] . This report – available upon request via e-mail from the respondent – included 13 case studies from different charities, where the Commission failed to act either at all, or appropriately upon requests by trustees for help. This report was recommended to Parliament by spokespersons for the three major political parties and leading charity lawyers, and was extensively quoted from in debates in both Houses during the passage of the Bill.

1.3 MPs’ attention is drawn to a number of reports produced by the Commission’s Independent Complaints Reviewer (see for example a 2006 report) and certain cases heard by the Charity Appeal Tribunal (see for example the first Tribunal report CA2008/001 Nagendrum Seevaratnam) following its establishment in 2008 – reports which provide evidence of the Commission’s failure to act appropriately or effectively as regulator. Particular attention is drawn below to two published cases demonstrating Commission regulatory conduct.

1.4 In 2008, a Commission Senior Compliance Officer reported to Commission management evidence of fraud in the African Aids Action charity. The Commission management’s response to this turned out to be a payment to the founder trustee, whose fraudulent activity had been reported by the case officer. Some five years later, however, following an investigation by HMRC, that trustee was found guilty of fraud of the nature which had been reported to the Commission in 2008. The Commission’s treatment of their former Senior Case Officer, David Orbison, both during and after his service, does no credit to the Commission (see for example ‘Third Sector’ Editorial 17 October 2014).

1.5 The Commission’s handling of the Cup Trust case (2013/14), revealed initially by the Times newspaper, once again revealed major regulator failings, leading to critical reports by the NAO and PAC (see the NAO report ‘The Regulatory Effectiveness of the Charity Commission’ 21 November 2013).

1.6 Articles and editorials in the charity press over the past 20 years (Third Sector magazine and Civil Society) have drawn attention to regulatory performance issues, which serve to contradict repeated Commission press and public relation claims of sustained regulatory excellence.

1.7 Claims that poor regulatory conduct and performance are the result of inadequate Commission financial resources may perhaps be weighed against the fact that reductions of funding have been a feature only of more recent years. Together with others, this respondent has argued and campaigned for better and fairer funding for a regulator who now has greater responsibilities within the sector than in the past. MPs may wish to consider whether Commission top management weaknesses and a failure to apply regulatory principles of fairness, proportionality and transparency may be more closely connected to regulatory failures over the past 20 years.

2 WEAKNESSES IN APPEALS ARRANGMENTS 1993-2015

2.1 MPs’ attention is drawn to the evidence over this period of inadequate, unfair and difficult-to-access arrangements under which appeals against Commission regulatory conduct or Orders can be brought by trustees/charities; together with the widespread criticisms by leading charity lawyers, sector umbrella organisations and others with a concern for natural justice, and the damage to charity inherent within the present appeal arrangements.

2.2 One possible reason for this situation is that the Commission is able, under present legislation to act as judge, jury and executioner (by removing charities, and trustee status from individuals) – a situation which the evidence shows has led to severe damage to charity beneficiaries, charities, trustees, volunteers and the practice of charity.

2.3 The Charity Commissioners, prior to the Charities Act 2006, and the Commission, now as a ‘body corporate’, have enjoyed powers of the High Court in their dealings with charities and trustees.

2.4 Many charity lawyers have, over the past 20 years, drawn attention to the absence of a level playing field when charities and trustees have sought to appeal against Commission conduct or Orders. Amongst these, Robert Meakin, a former Commission lawyer observed ‘charities do not have effective access to justice, because the appeal process is unsatisfactory. When it comes to an appeal, the Commission is in a position of strength.’ He argues that ‘Currently natural justice does not offer any relief to appellants feeling aggrieved by the Commission acting as both judge and jury’ and concludes ‘Due to problems with the appeals system, charities do not have effective access to justice’ [2] .

2.5 Given the considerable practical and financial obstacles in the way of charity/trustee appeals, applications for judicial review, or common-law actions to challenge the Commission – together with the uncertainty of outcome – and the likelihood that the Courts might ‘expect the Charity Commission not to be wrong’ (an argument advanced by Counsel for the Attorney-General, standing in the shoes of the Commission in a trustee appeal against Commission Orders), it is not surprising that Court appeals are rare. Even so, judicial unease at the Commission’s regulatory approach and possible motives in removing a trustee, have, on occasion, surfaced in the High Court and Court of Appeal proceedings – despite the Court’s decision not to consider the Commission’s conduct by means of review [3] .

3 CONCLUSION

3.1 Members will have before them proposals for strengthened appeals safeguards in respect of individual Bill provisions from a number of sources, submitted by those with knowledge and experience of current appeals arrangements. This respondent’s hope and prayer is that Parliament will use this opportunity to consider and act upon the lack of fair appeals systems. Charity, charity beneficiaries, trustees and volunteers deserve better, fairer and more accessible access to justice.

3.2 Nearly 100 years ago, Lord Hewart observed ‘It is not merely of some importance, but of fundamental importance that justice should not only be done, but should be seen to be done.’ [4] Sadly, in 2015, justice cannot be seen to be done under existing appeals arrangements. Can Parliament help?

A PERSONAL NOTE

This submission arises from a strong and sustained professional and personal interest over a 20 year period on the role, functions and conduct of the Charity Commission as regulator, initially sparked by service as a charity trustee for a small, entirely voluntary charity which sought the Commission’s help as regulator, upon discovering serious financial and other irregularities in the conduct of the affairs of that charity, prior to the appointment of a new Trust Management Board.

Following on from this approach and Commission reaction, together with concerns developed by a number of trustees of different charities who attended various High Court and Court of Appeal hearings brought by the trustees against Commission Orders, these trustees came together as a group (The Association for Charities) to alert Parliament and the sector to problems experienced by a number of mainly smaller charities who had sought the Commission’s help, only to be disappointed by the Commission’s response. The Association for Charities role in helping to alert Parliament and the sector to deficiencies in Charity Law and the role, functions and conduct of the Commission as regulator, in the lead up to the Charities Act was recognised by a House of Commons Research Library report.

The respondent, a former public sector organisation Chief Executive in Local Government and the NHS, and former Research Fellow at Nuffield College, Oxford (Corporate Management in Government) has operated as an independent management and human resources consultant for Government and private sector organisations in the UK and abroad, with a special interest and involvement in organisational change and the improvement of organisational performance.

December 2015


[1] Power Without Accountability: the Charity Commission as Regulator, 2004

[2] The Law of Charitable Status: Maintenance and Removal, Robert Meakin, Cambridge University Press 2008 Chapter 8 ‘Grounds for appeal’ pages 171 - 193

[3] Weth v AG, 1997 – 2001 Various proceedings in the High Court and Court of Appeal

[4] Rex v Sussex Justices, 9 November 1923 (King’s Bench Reports, 1924, vol I, p 259)

 

Prepared 15th December 2015