Opinion piece: Tom Murdoch on the Government’s response to the Law Commission’s recommendations in its Technical Issues in Charity Law report

We welcome the Government’s acceptance of the large majority of recommendations made by the Law Commission. As the Government acknowledges, the Law Commission’s review was admittedly somewhat “technical” in nature, but it included many possible improvements, for the benefit of those concerned with managing charities – ultimately, for the public benefit. It is therefore very good news for the sector that the vast majority of the Commission’s recommendations have been accepted. However, as we explain below, we are disappointed that a small number of recommended improvements to the law relating to charity litigation have not been accepted.

There are two main areas in which the Law Commission’s recommendations have been only partly accepted, or rejected, by the Government. These concern Royal Charter bodies and charity litigation, in particular in respect to the Charity Tribunal (First Tier Tribunal (Charities) of the General Regulatory Chamber) and we deal with each of these briefly, below.

Royal Charter bodies

We strongly approve of the proposed power to amend the charters of Royal Charter bodies without requiring a full Supplementary Charter. This will save charities significant time and expense. We also accept the arguments made by the Government about the rejected recommendations on Royal Charter bodies. In our view, it is not appropriate to apply a “one-size-fits-all” approach to what is a highly diverse range of charities. We are very appreciative of the role played by the Privy Council Office and in particular its preparedness to engage with charities and their advisers to assist them maintain and update their governing documents, for example, to introduce up-to-date provisions to support good governance.

Charity litigation

“Charity proceedings” are a subset of charity litigation, which commonly involve disputes between trustees. In a small number of cases, the Charity Commission is directly involved in the dispute in some way (for example, because it has taken regulatory action against one or more of the trustees involved). The Law Commission had recommended that, in such cases, where the Charity Commission is effectively “conflicted” (because of its prior involvement in the dispute), litigants should be able to seek the consent of the courts to pursue charity proceedings, rather than from the Charity Commission. Disappointingly, the Government has rejected this recommendation. It has done so on the basis that the requirement for the Commission’s permission prevents charity assets being expended on litigation where the Commission’s own regulatory powers could avoid or prevent that. In our view, in the rare cases in which the Commission is conflicted, the Court is better placed than the Commission to decide this. The Commission’s proposal, to manage such conflicts of interest through “information barriers” and the non-involvement of staff with a direct connection to the Commission’s prior involvement in the case is not ideal and may lead to distrust of decisions to refuse permission to litigate when the Commission has a perceived “interest” in the case.

Other recommendations concerning the Tribunal have been accepted and we welcome these. For example, providing the Tribunal with a power to make “Beddoes”-like orders (orders authorising the application of charity funds for approved Tribunal proceedings) will provide much-needed clarity and certainty for trustees seeking to challenge decisions of the Commission. No doubt the Tribunal will only authorise the use of charity funds in this way when the applicants have an arguable case.

Similarly, the recommendation that the Commission delays implementation of controversial decisions and those which are not time sensitive is broadly to be welcomed. Inevitably, however, this will be a matter of Commission discretion. Unfortunately, we have seen a number of cases in which the trustees’ ability to effectively challenge decisions of the Commission has been thwarted by the fait accompli effect of a hasty Commission decision. Therefore, we doubt that the implementation of the recommended policy will remove all difficulties. It seems inevitable to us that, in some cases, the exercise of the Charity Commission’s powers will compromise the rights of those who would want to challenge them. Nevertheless, the adoption of a suitable policy by the Charity Commission to reflect this recommendation is a positive step.

Finally, the Law Commission’s recommendation that the Charity Commission obtains the Attorney General’s (AG) consent to make a reference to the Tribunal has been rejected. The “reference” process is an important means by which charity law questions may be resolved. Facilitating the clarification and development of charity law is part of the Tribunal’s remit. The AG’s general role, in “parens patriae”, as the protector of the public interest in charities is highly important in this (and is reflected in the AG’s own powers to make references and to contribute to them). However, we do not see why the AG’s consent should be needed for the Commission to bring a reference. As the sector’s regulator, the Commission is well-placed to consider whether any aspect of charity law might require clarification. It is difficult to conceive any circumstance in which an application from the Commission should be refused (and therefore why the AG consent should be needed). If the AG did not share the Commission’s uncertainty about the law, then the matter should be resolved in the Tribunal as a reference, with the AG’s input. In our view, that would assist with transparency and public understanding of the law.

In other respects, we broadly welcome the Government’s responses and we look forward to the accepted recommendations being enacted in legislation shortly.

 

The law and practice referred to in this article or webinar has been paraphrased or summarised. It might not be up-to-date with changes in the law and we do not guarantee the accuracy of any information provided at the time of reading. It should not be construed or relied upon as legal advice in relation to a specific set of circumstances.

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