Memorandum from Alan Bartley (DCH 130)
1. Re: Inadequate consultation period. In
a sector where Trustees and other interested parties have only
their spare time to devote to this kind of activity it mitigates
against genuine consultation to expect responses within a month.
This does not take into account that the voluntary sector needs
three to six months for informed criticisms to be generated through
the infrequent publications and meetings of this sector. This
time is particularly bad for those involved in religious Charities
with their AGM's at this time of the year, not to mention that
I only obtained the Bill on 11 June after by an indirect reference
having made numerous attempts to find it on www.gov.uk.
2. The Creeping Hand of State Control. The
desire for centralist control of this sector by the state seems
to be motivated by the need to create mega-charities to take up
social purposes as agencies of the state. Such state control is
necessitated by being more and more funded by the state and less
and less answerable to individual donors at general meetings.
2.1. The first point to make is that over-control
by bureaucrats will be as destructive of the spirit of individual
initiative in this sector as was the case in nationalised industries
after the war.
2.2 That self-regulation ought to be tried
where still possible. Large unaccountable charities might need
close supervision by the Charity Commission, however, self-regulation
by councils of established charities should be tried. In outline
this would allow established charities operating in the same area
with same ethos to be formed and licensed by the state with statutory
powers to regulate and arbitrate their members, and to supervise
new charities wishing their supervision in preference to that
of the Charity Commission. Perhaps after 10 years a new charity
would be able to become part of such a governing council.
2.3 The civil establishment and recognition
of the Christian religion was an unalterable condition of the
Union of Parliaments in 1707. Included in this was the recognition
and respect of the Church of England as an Estate of the Realm
with a certain degree of self-government and freedom. Also guaranteed
under the 1689 Act of Toleration was a lesser freedom given to
Nonconformists. It was this freedom of religion from State interference
which was the foundation of the exclusion of nonconformist chapels
and charities from the remit of the Charity Commission under the
1853 Charities Acts and other similar Acts. There is clear evidence
in court decisions against the Charity Commission that they have
never been happy with this situation of self-regulation, and have
always attempted to expand their remit to include these intentionally
exempted charities. It shows an unwillingness to trust people
to regulate themselves.
2.3(a) The Charitable Trusts Act 1853 under
section 62 did not extend to "any institution, establishment,
or society for religious or other purposes, or to the auxiliary
or branch associations connected therewith, wholly maintained
by voluntary contributions, or any book selling or publishing
business carried on or by or under the direction of any society
wholly or partially exempted from this Act . . ." [Case Law:
Tudor on Charities, 1929, pp. 538-547]. This exemption was fully
carried forward by the Charities Act 1960 Schedule 2(a), and the
Charities Act 1993, Schedule 2(a).
2.4 One of the key arguments in favour of
state control of Anglican and Nonconformist Charities is that
they now through gift aid and other tax relief get a great deal
of financial support from the state—at best this is of a
recent date and much of the accumulated wealth was given without
such state support. Even these tax breaks are simply encouraging
people to give to such causes free-of tax. In the context of Charities
the Queen is simply the Protector of Charities—not the owner
or controller. So why should a state which has given only one-third
of the property have a major say in how it is to be used?
2.5. May I suggest that those Anglicans
and Nonconformists who wish to remain fully exempt of Charity
Commission control should be allowed to be so, so long as from
the time of the passage of the Bill they forego state support
in the form of reclaiming income tax, though I would ask that
other tax and local rates exemptions should be allowed them.
3. That justice needs to be done and seen
to be done.
3.1. The bill mainly has in mind the interests
of the Charity Commission and the trustees of Charities and I
believe it is against the interests of justice that many present
decisions of the Charity Commission are reached behind closed
doors without public scrutiny, without any scrutinising of the
evidence. I could give a number examples of where the Charity
Commission has failed to searchingly question Trustees and where
it has been clear that the Trustees have deliberately misled the
Commission to either cover up a past failure, or get permissions
or schemes which were not really justifiable.
3.2. Because of this I oppose the increased
powers of the Charity Commission and request that decisions be
made in public after public scrutiny of the facts. I ask that
all interested parities should be allowed representation when
such decisions are being made, and by interested parties I mean
donors, members or subscribers, beneficiaries and those who but
for geographical considerations or discretion or abuse of power
by the "charitable trustees" would be beneficiaries,
subscribers or members.
3.3 I also point out the injustice when
the Charity Commission fails to use its discretionary powers to
investigate and point out that such a failure to act is not a
decision in the legal sense of the word and therefore this has
and will continue to have no appeal. For this reason I would ask
that it be made clear in the Bill that the Commission's decisions
and failures to act should be open to Judicial Review.
3.4 One effect of bringing exempt Charities
under the Charity Commission will be the need to obtain the permission
of the Charity Commission to bring a legal action against trustees
(1993 Act, 33(2)) for breach of trust. For the most laudable reasons
of protecting charitable funds the Commission is reluctant to
allow such actions—however the result is the denial of justice
to injured donors and beneficiaries. While I would welcome statutory
backed reasoned arbitration or a system small claims charity courts
to deal with disputes I object to the Commission to having this
veto over such matters as unjust and arbitrary.
3.5 Often outsiders can sense from a series
of actions or inactions that there is maladministration or breach
of trust—but they can neither get the Charity Commission
to investigate, nor easily get any substantial evidence of maladministration
or breach of trust. As Trustees are supposed to be acting for
the public good, it would be useful if outsiders could have the
right to view the minutes and accounts of charities for the payment
of a reasonable fee set by a Statutory Instrument. I believe that
the possibility of such close scrutiny by an outsider would do
much to curb Trustee abuse. In one case, even when a diocesan
solicitor saw a trail of events that convinced him of a breach
of trust, the Charity Commission could not be induced to use its
powers of investigation despite a letter from a knowledgeable
solicitor.
4. The Bill makes no attempt to deal with
the anomalies arising from making all who have some final control
of charitable funds "Charity Trustees" in Section 97
of the 1993 Charities Act. In fact it seems to compound the problems
caused by this definition.
4.1 One of the purposes of Parliament on
allowing the incorporation of charities as companies limited by
guarantee at the beginning of the twentieth century was to allow
the office bearers to avoid strict liability as Trustees. This
was to overcome the reluctance of people to become formal Trustees
because of the onerousness of the personal liability. The 1993
Act and the draft Bill reverse this.
4.2 Further, Directors of such Companies
limited by guarantee often have one set of accounts for the purposes
of the Charity Commission and Company Law and sign not as "Directors"
but as "Trustees".
However they are not formal Trustees and others,
not Directors, such as Company Secretaries, co-opted Finance Committee
members etc. may be included in this flexible term Trustees or
"Charity Trustees" and this leaves indeterminate in
law exactly who has approved the Company Accounts.
4.3 Prior to 1993 churches and societies
which were democratic unincorporated associations would have Trustees
for the buildings but would not need Trustees for the association
funds as this was owned in common. Thus the minister and/or other
officer was not a Trustee and could be paid out of the common
fund what the church or society determined. Following 1993 such
an officer having discretion to control and spend the charitable
funds became a "charity trustee" in the terms of the
1993 Charities Act and in theory could not be paid unless the
original governing document gave permission—despite this
document having been drawn up at a time when no such explicit
permission was required.
4.4 Under the draft bill these officers
of an unincorporated association or the directors of a company
limited by guarantee as "Charity Trustees" are to be
given statutory powers which are to take precedence over what
is in the governing document of these bodies and in strict law
this seems to mean they can do certain things without needing
to abide by the provisions of their governing documents.
4.5 Those drafting the draft Bill seem not
to have considered the possibility that a viable unincorporated
charitable association might exist below the £10,000 threshold
of Chapter 10(30) introducing the replacement to section 74. Yet
providing the association is run from the homes of a volunteer
Committee or Council many such bodies do exist. A rogue or aberrant
Committee, perhaps elected at an unrepresentative Annual General
Meeting, seem to be empowered by the draft Bill to do the following
without obtaining the normal democratic mandate required by the
contract or constitution of such an association. They may transfer
the funds to another charity of their choice and effectively close
the charity. They may vary the administrative provisions of the
association to ensconce themselves in power and replace the purposes
of the charity at will.
5. Powers of Trustees to Change Administrative
Procedures (Chapter 10), Charitable Companies—alteration
of memorandum etc. (Chapter 7) and Mergers (Chapter 11). Constitutions
are the fundamental contract of the Trustees with the original
donors or members. It is as wrong to allow one party to a Charity
Governing Document to unilaterally change the terms of the contract
as to allow a unilateral change by one party to a commercial contract.
This is both immoral and lawless.
5.1 With, and sometimes even without the
Commission's approval Charity Trustees are to be allowed to Change
their administrative provisions on a simple vote. I have already
referred to one problem with this above, but now raise a few more
general points. Does this include removing the provision to open
an Annual or all Trustee Meetings with prayer to safeguard the
ethos of a religious charity? Does it allow the varying of a rule
as to who is to be made a trustee—or who has the right to
appoint trustees (which might not the existing trustees)? Without
careful qualification this provision seems quite dangerous.
5.2 Allowing Companies to Change their Memorandum.
Once no company could do this, now only charities have this limitation.
At present the Memorandum is the fundamental and unalterable basis
of agreement—why should this now be alterable? One provision
required by the appropriate department of state on the transformation
of an unincorporated association to a company limited by guarantee
was the insertion of a Memorandum clause that continued to give
all members of the society the right to inspect all the fundamental
accounting documents of the society. It would be wrong to allow
this and other provisions to be changed.
5.3 I have not time to digest the sections
on Mergers, but for Mergers to take place their must be changes
both to objects and administration of charities which will trample
on the rights of individual members of such charities that are
to be merged. This goes against the fundamental principles of
Common Law of England, (Northern) Ireland, and Scotland relating
to Charities as clarified in the House of Lords Free Church of
Scotland Appeals case of 1903-04 which is applicable to England.
6. Cy-Pre"s doctrine. I understand
that the draft bill is to allow schemes even when the original
intended purpose of the donor has not failed and that the application
will not be the closest viable purpose but will
insist on a beneficial social and economic impact
of the property.
6.1 There seems to be a difference of principle
between the attitude of the Charity Commission and the drafter's
of the draft Bill and those who hold the older view on the doctrine
of Cy-Pre"s. The old doctrine of Cy-Pre"s
held it immoral to divert property from the original intended
purpose of the donor unless there had been a complete failure.
In effect the contact between the original donors and society
is being torn up. Not only that but it is unclear how strict the
test of a social or economic impact test will be applied and this
could easily rule out most traditional religious purposes, which
to secularised minds, have no significant social or economic impact.
6.2 There was an outcry in the 1840s and
subsequent modification of the Dissenting Chapels Bill of 1844
to insist that dissenting chapels should be applied to the religious
opinions of the original donors. The force of this can be seen
in the speeches of Churchmen such as the Bishop of Exeter and
the petitions of most nonconformist bodies—the Wesleyan
Methodists, the Independents, the Baptists etc who saw it as fundamentally
wrong to allow a congregation to hijack property for their own
purposes if it had been given for a different purpose. The same
was concluded on the general principles of Common Law for Scotland,
Ireland and England by the House of Lords in the Free Church of
Scotland Appeals case of 1903-04.
6.3 In recent years I have seen all kinds
of stratagem used to defeat the older doctrine by Trustees who
wish to have the liberty to apply funds to alternative purposes
against the clear intention of the original donors. This may be
the secretive abuse of trust by Trustees who take liberties with
the provisions of their governing documents. Those who obtain
schemes after losing old governing documents or after managing
the trust into failure by neglect or breach of trust and then
argue for a Cy-Pre"s application.
6.4 The Charity Commission seems to have
neither the resources nor the desire to investigate such breaches
of trust and always seem to give the benefit of the doubt to the
erring trustees, preferring to believe their assurances to those
of those who inform against them. Often outsiders are rightly
convinced they could put the property to its original intended
use simply by putting the time and effort in to manage the trust
and promote its purpose while the ensconced trustees, being out
of sympathy with the original intended use refuse to apply themselves.
6.5 There is no effective remedy for such
abuse in the present or envisaged law due to the lack of any system
of charity small claims court system or statutory arbitration
aided by the Charity Commission veto on non-exempt cases, cost
of litigation, and the exclusion of outsiders from bringing cases.
Obviously some system of effective arbitration or courts is needed.
6.6 As mentioned at the outset, I have grave
misgivings at the rule that a charity needs to show a social or
economic impact. It is implied that this is a positive and beneficial
impact—however what one generation sees as negative the
next may see as positive. The religious motive can give an incentive
to learn to read, to be a leader of men in both religious and
civil society, bringing an incidental social and economic impact.
In the case of Parliamentary Reform and Trade Unionism many saw
this impact as undesirable though most today would see these reforms
as beneficial. Today, the abuse of power in the Penal Transportation
of the Tolpuddle Martyrs, who were Methodists, is universally
condemned.
6.7 Karl R. Popper has shown that it is
humanly impossible to predict the progress of history and to me
it seems inimicable to attempt to decide what traditionally charitable
purposes will be beneficial to society. Provided people direct
their own property in a selfless direction we should encourage
it—for even this example of selflessness can be said to
have a socially desirable effect in encouraging similar behaviour.
Hence I object to any form of social or economic impact test—as
prejudicial to encouraging charity. If there is to be such a test—let
it be limited to being a qualification to receiving the benefit
of income tax relief.
6.8 In conclusion I prefer the older and
stricter rule of Cy-Pre"s to be restored and oppose
any further relaxation.
7. Power of Charity Commission to relieve
Trustees, Auditors etc. for Breach of Trust (29).
The Charity Commission seems fearful of dissuading
people from being trustees should they enforce the liability of
trustees for breach of trust. They too often, and unreasonably
to my mind give the benefit of the doubt to the explanation of
Trustees. I believe this laxness is encouraging dishonest trustees
to trample on the rights of donors and beneficiaries and therefore
must oppose the giving of this power to the Charity Commission
unless such cases are heard publicly and the record made public.
8. Collections in Public Places (37-41).
etc. For historic reasons any meetings for public worship have
to be open to the public and I would assume this implies such
a place being a public place. Further many new churches hire and
use public places. Would you clarify this to ensure that normal
collections of Churches do not require to be licensed.
9. Power to Spend Capital (33: new section
75B) Often there will be two or more major donors while to create
a 19th century conveyance the trustees will pay a nominal amount
to transfer the property. In either of these cases the safeguards
of 75B(4)(a) will not apply.
10. Powers of Reversion. Where there is
no provision for the use of Charitable property on the failure
of a Charity I believe there has to be a clear duty on Trustees
to contact major donors or their heirs or successors for directions
as to the return or future use of the donated property. I believe
this should go beyond simply advertising for people to contact
them but where it is practical and reasonable, the Trustees should
be obliged to seek to find and contract the original donors of
significant amounts of property.
10.1 Quite recently I was told by a charity
that had made an appeal for gifts of £1,000+ for a capital
project that failed that they had consulted with the Charity Commission
who had agreed they could use the Capital fund as revenue without
contacting original donors such as myself to see whether I wanted
the money back or wished to direct it to some other charitable
purpose. I suspect there may have been a deliberate miscommunication
of the details of the case to the Charity Commission. This is
despite myself and no doubt the other major donors being continually
known to this charity and not difficult to contact.
10.2 Due to this and other experiences I
believe the duty of Charities to keep records of original donors
and make reasonable efforts to contact them when alternative uses
have not been agreed or specified. I believe that this should
be made clearer and better enforced.
11. The Internet and/or its successors.
I would have liked to see an obligation for the Charity Commission
to put all public notices regarding changes to Charities together
with the associated proposed schemes on an easily searchable Web
site. Such a site should be indexed or searchable on the name
of the charity, its geographic area, its objects, etc. This is
applicable to new Section 20, 20A, 20B etc.
11.1 I believe the full text and other details
of all new Schemes and governing documents should be made public
in the same way. Also, any forgiven breaches of Trust (29) should
be documented that others might learn form such mistakes and those
injured may know what has been done and forgiven and have a right
of Judicial Review or other appeal against such action.
12. Conclusion. The above is my brief response
to my partial reading of the draft bill which I believe to have
significant shortcomings and flaws. Should my comments be aside
of the mark due to not having had time to read the whole bill
I apologise.
12.1 I would welcome the Committee seeking
my further views when I have had more time to digest the text
of the draft Bill and would happily give oral evidence of known
or suspected abuses encouraged or at least not discouraged by
the current regulatory regime and the present attitudes and policy
of the Charity Commission.
June 2004
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