First Tier Tribunal – Dot Com Children’s Foundation

The First Tier Tribunal has refused appeals against disqualification orders which barred two individuals, Neil Evans and Sharon Evans, from acting as charity trustees for three and a half and four and a half years, respectively. Their disqualification also bars them from holding office or employment in a charity with senior management functions. Unusually, neither were trustees of the charity at the centre of the case, Dot Com Children’s Foundation, at the relevant time but the Tribunal held that they were responsible for the failings in the charity and had acted as de facto trustees. The case therefore throws light on the circumstances in which a non-trustee will be regarded as responsible for misconduct and mismanagement in a charity. 

Background 

The charity was founded in 2013 by Mr & Mrs Evans and, for a period, Mr Evans acted as a trustee. The minutes of the first meeting of the trustees recorded that Mr & Mrs Evans expected to earn a living from the arrangements between the charity and their private business. Mrs Evans became Chief Executive and Mr Evans the Chief Operating Officer. They were the signatories to the charity’s bank account. 

In July 2016 Mr & Mrs Evans produced a document setting out the business model for the operation of the charity and its relationship with them and their business. The charity would buy journals from the Evans’s business, then sell them to schools, with the proceeds being paid direct to the business. The price paid by the charity to the business was set at more than five times the cost of production to the business. However, the charity was to sell the journals to schools at below its cost price. The shortfall would be made up through fundraising organised by the business on behalf of the charity. The document also stated that Mr and Mrs Evans expected salaries of £40,000 pa from the charity.  A subsequent unsigned agreement dealt with the salaries from the charity and purported to restrict the charity to buying journals exclusively from the Evans’s business. 

Key findings from the judgment

The Tribunal upheld the Charity Commission’s finding of misconduct and mismanagement in the administration of the charity and agreed that the statutory conditions for disqualification relied upon by the Commission were met. This included the condition that, while the individual concerned was an officer, agent or employee of the charity, there was misconduct or mismanagement and that they were responsible for it, knew of it and failed to take any reasonable step to oppose it, or that their conduct contributed to or facilitated it. The Tribunal also found that the additional requirements for disqualification, of unfitness to be a charity trustee, of the orders being desirable in the public interest to protect public trust and confidence in charities, and of proportionality, were met. 

Mr & Mrs Evans had argued that they had no ‘ultimate’ decision making power or control over the charity. However, looking at all the evidence and on the balance of probabilities, the Tribunal found that Mr & Mrs Evans were de facto trustees and had general control and management of the charity, satisfying the Charities Act definition of charity trustees. The Tribunal therefore dismissed their argument that, as non-trustees, they were not under a duty to avoid conflicts of interest. The Tribunal found that, in essence and in fact, the charity was generally managed and controlled by them in their personal interests and/or the interests of their businesses. Although Mr & Mrs Evans had argued they had acted on delegated authority from the trustees and on professional advice, the Tribunal found that this did not excuse them adequately, or at all, from responsibility for the misconduct and mismanagement found in the charity in favour of their personal or business interests.

Whilst acknowledging the extremely valuable safeguarding work with schools as being the motivation of Mr & Mrs Evans, the Tribunal nevertheless referred to their role as agents or officers of the charity with “overarching influence and control” with an aim, to a very great extent, for the relationship with the charity to provide them with a living in the form of salaries.

The Tribunal also concluded that Mr & Mrs Evans were the persons primarily responsible for the charity’s mismanagement, due to their lack of understanding of proper charity management. The most significant issue leading to the finding of mismanagement was the relationship between the charity and Mr & Mrs Evans over a period of years. This relationship was inappropriate and should have been resolved long ago, for which responsibility particularly lay with Mr & Mrs Evans. 

The Tribunal was especially critical of the failure to manage conflicts of interest. It found that Mr & Mrs Evans showed no appreciation of the importance of a declaration or need to declare conflicts of interests. It was not acceptable, given their pivotal roles in the charity, for them to seek to rely on not being properly advised on this. 

In conclusion

The Commission’s disqualification powers where there has been misconduct or mismanagement in a charity extend not only to trustees but to agents, officers, and employees of the charity who are responsible for, facilitate or contribute to that misconduct or mismanagement. The Tribunal found that such a link existed in this case between the conduct of Mr & Mrs Evans and the failings in the charity. The Tribunal went beyond that, however, in deciding that they had acted as de facto trustees. 

There is a high bar to establish de facto trusteeship. In the Kids Company case, Official Receiver v Batmanghelidjh and others, the judge emphasised that the issue of de facto directorship of the charity had to be looked at in the round. It was held that significant influence is not sufficient where an employee is operating under delegated authority, subject to supervision and control and with no ability to participate in decision making at the highest level. These are essential safeguards in charity governance.

In this case, the Tribunal made a finding that Mr & Mrs Evans were de facto trustees given their ‘controlling influence’, ‘overarching influence and control’ and their ‘pivotal role’ in the affairs of the charity. Notwithstanding that they were employees of the charity, the Tribunal found that this level of influence and control was sufficient to establish that they were responsible for the ‘general management and control’ of the charity.