Memorandum from Wilson's Solicitors (DCH
128)
1. We are a firm of solicitors with a specialist
charities practice and represent a wide range of charity clients
across England and Wales. These include charitable independent
schools, museums and galleries, heritage property, military and
environmental charities, and many service delivery charities.
Our Head of Charities Practice, Alison McKenna, has what we hope
is a valuable perspective on the draft Bill, having been employed
for five years in the Charity Commission's legal division before
joining this firm two and a half years ago. Alison McKenna also
sits part-time as president of the Mental Health Review Tribunal
and therefore has useful experience in relation to the proposal
to create an independent charity appeal tribunal.
2. We would join with other legal professionals
and the sector in welcoming the publication of the draft Charities
Bill. Overall, this represents an important development for the
charitable sector and we strongly support the Government's proposal
to introduce new legislation as soon as possible. We do, however,
have some concerns regarding the content of the draft Bill, and
we concentrate here on the issues that particularly affect our
client base. Some of our clients have contributed their thoughts
on the draft Bill to this memorandum.
3. We have some concerns regarding the definition
of charity in clause 1 of the draft Bill. We would suggest that
the list of 12 charitable purposes is inadequate in several respects.
Firstly, the Strategy Unit Report suggested that the definition
of "religion" in the then. proposed legislation should
make clear that non-theistic and multi-theistic religions would
be included within the definition of religion. However, clause
2(ii)(c) does not have an accompanying definition which would
permit this.
Secondly, we note that clause 2(ii)(f) no longer
includes the advancement of "culture" amongst its charitable
purposes, and we are concerned by this amendment. We cannot see
any reason for leaving the advancement of culture out of the list
and would suggest it be re-introduced.
Thirdly, as we indicated in our previous submission
in relation to the Strategy Unit Report, it seems to us that the
advancement of military efficiency should be included in any list
of charitable purposes so as to make absolutely clear that this
is a recognised charitable purpose.
Fourthly, we would very much support the belated
inclusion of paragraph (k), the advancement of animal welfare
in the list as a well-known and much-supported charitable purpose.
4. Clause 3 of the draft Bill imposes a
"public benefit" test. We are concerned about this because
of the potential impact on charities currently falling under the
first three heads of charity, which will need to demonstrate public
benefit in every case as a result of the loss of the presumption.
If there is to be an express public benefit requirement for the
definition of charity, we would suggest that it be clarified that
the provision of education in itself, and the advancement of religion
in itself, would qualify as having the requisite public benefit
unless there were compelling reasons to the contrary. It is of
further concern, that the Charity Commission is to be asked to
carry out "public benefit checks" on charities when
the criteria to be used by the Commission in inking this assessment
is not only unclear, but also not clearly defined in the relevant
case law. Whilst we would not support a statutory definition of
public benefit, we believe that the criteria to be used by the
Charity Commission should be subject to wide consultation prior
to the implementation of the programme of checks.
5. We would generally support the reform
of the Charity Commission into a statutory corporation. However,
the regulatory objectives, general functions and duties of the
Commission proposed in the draft Bill are, in our view, insufficiently
clear. In particular, the objective of "enabling and encouraging
charities to maximise their social and economic impact" seems
to us to risk placing the Commission in the shoes of charity trustees
in a way which is inappropriate for a regulator. How is the Commission
to determine how any particular charity may maximise its social
and economic impact?
6. Furthermore, the additional powers to
be granted to the Charity Commission represent a general cause
for concern amongst our clients. In particular, the proposed power
for the Charity Commission to enter premises in order to search
and seize evidence (clause 21 of the draft Bill) seems to us to
be misconceived. Is it proposed that the Charity Commission should
have guidance along the lines of the Police and Criminal Evidence
Act in order to ensure that individual's rights to privacy and
quiet possession of their property is protected? Are Commission
staff going to be trained in methods of collecting evidence so
that it is admissible in any subsequent proceedings? It seems
to us that it would be more appropriate for such matters to be
left with the police, so that appropriate safeguards are in place.
7. We are also concerned regarding the power
of the Charity Commission to relieve trustees from liability for
breach of trust (clause 29 of the draft Bill). As we pointed out
in our previous submission, it seems to us incompatible with ECHR
Article 6 for the Charity Commission to be the body which investigates
the breach of trust, and which also has the power to absolve charity
trustees from liability for such breaches. Is it proposed that
there should be a Chinese Wall within the Commission, so that
an independent decision-maker can determine whether to grant equitable
relief? It does not seem to us that this could ever be achieved
in practice.
8. The relaxation of the rules regarding
the remuneration of charity trustees for providing services to
their charity are generally welcome. However, it seems to us that
there is an element of double jeopardy for charity trustees in
the precise manner in which the proposals have been drafted (clauses
27 and 28 of the draft Bill). In particular, the net effect of
the proposals is that charity trustees could both be directed
to repay funds to the charity and be guilty of a criminal offence
by acting whilst disqualified in relation to a remuneration decision.
Whilst the Charity Commission would, under the proposals, have
power to relieve a charity trustee of the financial penalty, there
does not seem to be any similar defence to the criminal charge,
so that a charity trustee who acted honestly and reasonably would
not have a defence to criminal liability. It seems to us that
the imposition of criminal liabilities in this area will serve
to discourage private individuals from taking on the already onerous
responsibilities of charity trusteeship.
9. We were surprised by the proposals to
amend Section 13 of the Charities Act 1993, given that these were
not trailed in the Strategy Unit Report or the Government's response
thereto (clause 12-15 of the draft Bill). It does not seem to
us that the Charity Commission is the appropriate authority to
consider the "social and economic circumstances prevailing
at the time of the proposed alteration of the original purposes"
or that it will be competent to judge the ability of the recipient
charity "to be able to make a significant social and economic
impact". The Strategy Unit Report and the Government's response
thereto does not deal with the complicated legal question of what
happens to the assets of charities which lose their charitable
status. Clearly, this is of concern to charities such as independent
schools and private hospitals, in view of the proposed public
benefit checks. In the circumstances, it seems to us that there
should have been a consultation regarding any proposed amendments
to the cy-pre"s doctrine, as this is likely to affect this
question. We would suggest that these proposals be deleted from
the draft Bill in the circumstances.
10. We would broadly welcome the introduction
of a dedicated incorporated vehicle for charities. The creation
of the Charitable Incorporated Organisation (clause 26 of the
draft Bill, together with Schedule 6 thereto), appears to be a
sensible way forward, although we would not endorse any proposal
to make this constitutional format compulsory.
11. The establishment of the Charity Appeal
Tribunal (clause 6 of the draft Bill and Schedule 3 thereto) is
generally to be welcomed although, in our view, the proposals
do not go far enough. In particular, there is no reference to
the availability of public funding or to the award of costs for
charities wishing to access the Tribunal, and we would suggest
that this is a crucial factor in ensuring that there is a high
standard of decision-making in the Tribunal process. The circumstances
in which an appeal may be made to the Charity Appeal Tribunal
(Schedule 4 to the draft Bill) are, in our view, too tightly circumscribed.
Of particular concern is the provision at paragraph 4 of Schedule
4 that an appeal may only be brought against a decision to open
a section 8 inquiry on the grounds that the institution concerned
is not a charity. Given the extensive powers which become available
to the Charity Commission upon the opening of a section 8 inquiry,
we would argue that the reasonableness or otherwise of a decision
to open an inquiry should be subject to the jurisdiction of the
Tribunal. This is especially the case in view of the Commission's
policy of publishing the statements of a result of an inquiry
so that the charity's reputation can be significantly affected
by the decision to open an inquiry itself.
12. It seems to us that the draft Bill presents
an opportunity to make further amendments to Charity Law which
would further enhance the efficiency and effectiveness of the
charitable sector. We have in mind in particular the current difficulties
concerning the application of section 36 of the Charities Act
1993 to the administration of legacies. In our experience, there
is concern within the sector regarding the requirement to comply
with section 36 when personal representatives appropriate interest
in land to charitable beneficiaries. It should be a relatively
straightforward matter either to disapply the section 36 requirement
in those particular circumstances, or to at least make clear that
where there are multiple charity beneficiaries, that they may
jointly instruct a surveyor to prepare the section 36 report,
rather than feeling required to obtain separate reports. We would
refer you to the Institute of Legacy Management's helpful guidance
in this area.
We anticipate that we may make further representations
in due course, however we have attempted to provide you with an
initial statement of our views in time for them to have some impact
on the oral hearings.
Please do not hesitate to contact us if we can
be of any further assistance.
June 2004
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