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Lord Phillips of Sudbury: My Lords, I am depressed. How the Minister can say that "social and economic" is a catch-all phrase is beyond my understanding. In an arts or theatre charity, cultural and artistic circumstances would be relevant. The delimitation of the words is contained in a subsection dealing with the needs of the relevant charity to have purposes which are suitable and effective. Those are intentionally general words because one is dealing with all kinds of charities. It would not be relevant for an animal charity to look at the social and economic circumstances. In any event, it is no good going on about it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Phillips of Sudbury moved Amendment No. 55:

After section 18(2) of the 1993 Act (power to act for protection of charities) insert—
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"(2A) The Commission must send a copy of any order made by it under subsection (1) or (2) above and particulars of the broad grounds of its satisfaction that the preconditions for making the same have been met—
(a) to the charity concerned (if a body corporate), or
(b) (if not) to each of the charity trustees.
(2B) The copy or copies and the particulars must be sent to the charity or charity trustees as soon as practicable after the making of the order.
(2C) The Commission need not, however, comply with subsection (2B) above as to the copy order or the particulars (or both) if it considers that to do so—
(a) would prejudice any inquiry or investigation, or
(b) would not be in the interests of the charity;
but, once the Commission considers that this is no longer the case, it must send the copy or copies or the particulars (or both) to the charity or charity trustees as soon as practicable.""

The noble Lord said: My Lords, the amendment is designed to ensure that where a manager or receiver is appointed by the commission, the charity should be informed of the appointment and of the broad grounds for it unless there are good grounds for withholding the information; for example, where there would be prejudice to the work of the manager or receiver or where it would not be in the interests of the charity.

When I looked at the matter in more detail, I discovered that although Section 18 of the 1993 Charities Act gives a whole tranche of fundamental powers for the Charity Commission to act in protection of charities, there was no comparable clause relating to the commission if it were appointing new trustees, vesting property in a custodian or ordering a debtor not to make payment to the charity to which the debt was owed and so forth. The amendment would require the commission to send a copy of the order to the charity concerned or, if it were a body corporate, to the charity trustees. At the same time, it must give particulars of the broad grounds upon which it has acted under Section 18.

It seems to me that on human rights grounds there is a severe injustice and probably a breach of human rights requirements if the trustees and the charity are unaware of the making of an order so pregnant for their own charity and custodianship of it. They should know the broad grounds on which the order has been made. I tabled the amendment in an attempt to bring the Charities Act 1993 up to date and in alignment with the amendment the Government are inclined to accept for managers and custodians. I hope that it commends itself to the Government. I beg to move.

Lord Bassam of Brighton: My Lords, we are grateful to the noble Lord for tabling the amendment and for his explanation of it. I hope that he will consider what I am about to say as a positive response.

We believe that the requirements of procedural fairness under the general law are likely to require the Charity Commission to supply reasons in such cases
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where it makes an order affecting a charity. As I have said on previous occasions, other than when it would prejudice an inquiry into a charity, it is the commission's usual practice to inform the trustees of why it has taken any significant action using its protective powers. The commission also provides the trustees with information about how to ask the commission formally to review a decision which it has made and about statutory rights of appeal.

I appreciate that several of your Lordships have pressed for a statutory requirement to give reasons in relation to several of the commission's protective powers. We tabled two amendments specifically in relation to the appointment of interim managers under Section 19 of the 1993 Act and the new power in Clause 20 of the Bill to give specific directions for the protection of the charity, the first of these specifically requiring the giving of reasons. We are therefore familiar with the territory.

However, after further consideration, we believe that it would be better to have a consistent statutory approach covering all the commission's protective powers in Section 18 of the 1993 Act and new Sections 19A and 19B inserted into that Act by this Bill. As a result we have withdrawn the proposed government amendments relating to the two specific powers. We propose to consider this further and return at Third Reading with a suitable amendment. That amendment would require the commission to give a copy of the order, and the reasons for making it, to the charity if incorporated or the trustees if unincorporated.

However, there should still be the caveat that the commission need not comply with either requirement so long as it considered that to do so would either prejudice any inquiry or investigation, or not be in the interests of the charity. That is quite an important further consideration. We also want to bear in mind that the Lord Chancellor's rules will provide the requirement for notification of appeal rights to the tribunal, and that this should work compatibly with any requirement to provide reasons.

I hope that the noble Lord accepts that as a positive response; I think it certainly is, and I think it probably satisfies what the noble Lord is after.

Lord Phillips of Sudbury: My Lords, I am most grateful and that indeed satisfies what I was getting at. I am sure that it will make for a much better Bill and an improvement to the 1993 Act. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 20 [Power to give specific directions for protection of charity]:

Lord Bassam of Brighton moved Amendment No. 56:

The noble Lord said: My Lords, Clauses 20 and 21 provide the commission with powers to give directions which it considers expedient in the interests of the charity and to direct the application of charity
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property. In an earlier discussion of these powers on 14 March we considered the effect that acts of trustees complying with such directions might have on third parties. The matter was raised, not unusually, by the noble Lord, Lord Phillips, and we agreed that the rights of a third party should not be adversely affected, notwithstanding that the commission must rightly be able to act effectively to protect charity and to direct the application of charity property. Having thought about this matter, we added a subsection to each of the new sections dealing with these powers—new Sections 19A(5) and 19B(5).

On reflection we see that those amendments did not quite achieve what we wanted them to. The intention here is to enable the commission to act when it needs to do so, to ensure that anyone acting in compliance of the commission's directions can do so, and to ensure that rights arising in connection with compliance with a direction are preserved.

We recognise that for these powers to be effective, the commission will in some cases make a direction which affects others. This is the intention. Those others may be the people required to act on the directions or any other third parties who may be involved either directly or indirectly. An example of a direct effect to a third party could be a direction to trustees to close a particular project because running that project was outside the purposes of the charity. If the charity employed staff in connection with the project, their contracts of employment would be affected. An example of an indirect effect would be where the commission directed that a particular asset be transferred from one charity to another. In both cases, contractual or other rights could arise in connection with compliance with the commission's direction.

As these examples show, situations arise when a particular action must be taken to protect a charity or its property. The consequences of that action, for all concerned, should be dealt with fairly.

These amendments will preserve the contractual and other rights which arise in connection with anything which has been done under the authority of a direction of the commission. These could be rights of the charity itself or of a third party. These amendments would preserve rights arising in the event that a contract were frustrated as a result of compliance with a direction of the commission. Where a frustrating event occurs, rights arising are mainly dealt with under the Law Reform (Frustrated Contracts) Act 1943, although some cases are dealt with under the common law. I would like to make it clear that where compliance with an order under either of these sections has the effect of discharging by frustration a contract to which the charity or its trustees are party, it is not the intention behind the amendment that the charity or its trustees should be treated as if it or they had been in breach of the contract.

I recognise that this is a rather detailed explanation and probably noble Lords will want to have another look at it in the Official Report. If upon reflection any
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noble Lord would like a further explanation on any point I should be more than happy to provide it. I beg to move.

9.45 pm

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