DCH 47 Independent Schools Council
Independent Schools Council
Grosvenor Gardens House
35-37 Grosvenor Gardens
London
SW1W 0BS
Tel: 0207 798 1590
Fax: 0207 798 1591
Independent Schools Council
Grosvenor Gardens House
35-37 Grosvenor Gardens
London
SW1W 0BS
Tel: 0207 798 1590
Fax: 0207 798 1591
Andrew Kennon
Clerk to the Joint
Committee
Scrutiny Unit,
Room G10
7 Millbank, London
SW1P 3JA
15 June 2004
Dear Andrew
Joint Committee
on the Draft Charities Bill
It was good to
meet, however briefly, at the end of the Joint Committee hearing
on Wednesday 9th June, and I look forward to giving
evidence, if called, on 30th June. May I through this
letter correct one statement made during the course of Wednesday's
hearing, and also comment on one major issue of substance raised
during the hearing.
The statement
In a necessarily
brief preamble to a question, Lord Phillips indicated that independent
schools were saying, in their written evidence, that indirect
public benefit - i.e. saving money to the taxpayer - was enough
to secure charitable status. That is not the view of the Independent
Schools Council. Our written evidence contains a long list of
reasons which support the charitable status of independent schools,
of which indirect public benefit, though a very large benefit,
is only one.
Indirect public
benefit is not conclusive in either direction. It is entirely
possible for an institution which increases the
cost to the taxpayer to be charitable. An example would be a new
venture, established under one of the heads of charitable activity,
which operated for the public benefit and was funded by the taxpayer.
Conversely, an institution which restricted its benefits solely
to a narrow class (either by status or by wealth), and without
allowing the chance of participation beyond that class, would
not be charitable, regardless of the saving to the taxpayer.
Applying the principles
of Re Resch [1969 1 AC 514], which is the leading case on this
area of charity law, indirect public benefit is a factor to be
taken into account, but, as I have said earlier, is not conclusive
in either direction.
The issue
It is probably
simplest if I set out the relevant section of a short briefing
paper to the Governing Council of the Independent Schools Council.
The section sets out the issue and our view of the issue. The
Joint Committee is of course welcome to see the full document.
"The main
issue
The main issue
for all charitable sectors is whether "public benefit"
should be defined on the face of the Bill. The Draft Charities
Bill adds new heads of charitable activity; removes the presumption
of public benefit; and requires all charities to be for the public
benefit. In the Draft Bill as published, the meaning of "public
benefit" is expressed rather than defined: the Bill says
that the meaning of public benefit shall be as the term is understood
for the purposes of the law in England and Wales. In brief, that
means case law. The choice, therefore, is either starting from
existing case law, which can be allowed to develop, or introducing
a definition on the face of the statute.
NCVO were very
clear that a statutory definition could quickly become "sclerotic",
and that there should therefore be no statutory definition. Their
view was that case law provided flexibility to adapt to changing
circumstances. The same view is held by ISC.
Andrew Phillips
(Liberal Democrat Peer; distinguished charity lawyer) then read
- without either approving or disapproving - extracts from a briefing
from the Charity Commission, in which the Commission expressed
doubts as to their ability, because of existing case law, to review
the public benefit of independent schools even after the removal
of the presumption of public benefit. Stuart Etherington of NCVO
questioned whether Home Office lawyers shared that view: our understanding
is that they do not. Nor indeed, so far as I am aware, has the
view now being expressed appeared at any time in the Charity Commission's
own publications.
Andrew Phillips
asked whether, if the Charity Commission were correct in their
view, there would need to be a public benefit definition on the
face of the statute. Stuart Etherington said yes, otherwise there
would be no point in the Bill.
The Charity
Commission argument
The Charity Commission
argument is flimsy in the extreme. It is based on an 1827 case
(Earl of Lonsdale's case [1 Sim 105]) in which the Vice Chancellor
said that a school for the sons of gentlemen could be charitable.
The Charity Commission are saying that this means that a school
limiting its intake solely to a narrow class, whether by rank
or wealth, will be charitable despite the removal of the presumption
of public benefit, and that therefore the Commission will be unable
to perform its regulatory function of reviewing public benefit.
There are a number of reasons why the Charity Commission argument
is weak. Taken together, the argument does not carry any weight
at all:
- The Lonsdale
case comes from early in the 19th Century, before charity
law had properly developed to the point at which charitable objects
were treated as distinct from public benefit. For that reason
alone, the issue of public benefit was not even discussed and
accordingly the case is weak
- The statements
about charitable status are obiter dicta. Obiter dicta
are statements in a judgment which are not central to the decision
in the case, do not form part of the decision, and are not authority
- The statements
are ambiguous. As I read them the Vice Chancellor is doing no
more than referring back to the preamble to the Statute of Elizabeth,
which lists objects deemed to be charitable at that time. He was
not altering or developing the law, and indeed could not be doing
so through obiter dicta
- The issue of
charitable status was not argued before the court: the lack of
argument weakens the already obiter dicta still further
- There are only
two later cases which refer to the Lonsdale case. In neither of
those cases are the issues fully discussed. In both cases, although
the question of whether the school was a charity was relevant,
the issue before the court was a different one and the question
of public benefit was simply not explored. Very significantly,
the Lonsdale dicta have not been mentioned at all (in court) since
Re Resch [1969 1 AC 514], which is the leading case on this area
of charity law
- It is in the
highest degree unlikely that dicta from the Lonsdale case would
stand against the Privy Council judgment in Re Resch. Lord Wilberforce
gave the judgment of the court (i.e. there is a single judgment
expressing the decision of all the judges). His judgment carefully
reviews charitable law, including the requirement of public benefit,
and makes it clear that limiting benefits solely to a narrow class
would not be charitable. Resch is the leading case on this area
of charity law and there no real doubt that Resch would beat Lonsdale,
not on a points decision but by a walkover.
The Joint Committee
will be promoting legislation for the real world rather than for
a parallel and hypothetical universe. At the very most, in the
real world, a school determined to provide no public benefit beyond
a narrow class (and no such schools exist) could just about get
a case on its feet which raised Lonsdale as a very feeble defence
against regulation by the Charity Commission. No competent lawyer
would advise trustees to make this attempt. For any case to get
anywhere near the door of the court you would need trustees with
deep enough pockets to pay, out of their personal wealth, the
costs of a case which was doomed to failure. Personal wealth would
be needed because trustees could not use charitable assets on
such a frivolous exercise. Kenneth Dibble, Director of Legal Services
at the Charity Commission, has expressed the clear (and accurate)
view that the Commission would win any such case. Precisely so.
It would be regrettable if, for the sake of a vanishingly remote
possibility, hypothetical to the point of non-existence, the Joint
Committee replaced the flexibility of case law with the sclerotic
alternative of statutory definition."
Could I perhaps
add two sentences from the Charity Commission's publication RR8
- The Public Character of Charity. They run as follows,
and are on page 2 in bold type:
"The public
character of charity is upheld by ensuring that an organisation
benefits the public as a whole, or a sufficient section of it.
Whether this is the case can only be decided on a case by case
basis."
Please could you
treat this letter as part of the written evidence from the Independent
Schools Council and bring it to the notice of the Joint Committee.
Yours sincerely,
Jonathan Shephard
General Secretary,
Independent Schools Council
|
