Authored article

Standing on Firm Ground

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Kenneth Dibble explores how the First Tier Tribunal’s decision in respect of Bath Rec recognises the important role the Commission has in providing for the effective regulation of charitable community assets.

Open spaces for public recreation are an integral part of our towns, cities and villages.

Very often these are held on charitable trusts and their management is entrusted to charity trustees.

Commonly those trustees are the local authorities for the local area.

Occasionally some event overtakes the trusts and the trustee needs some new power to manage the charity. The trustee can apply to the Commission for the charity to be administered in accordance with a scheme. That is what Bath and North East Somerset Council did in respect of the Bath Recreation Ground Trust.

Under section 69 of the Charities Act 2011, the Commission shares the High Court’s jurisdiction to make schemes. Broadly there are two scheme making powers: one to change the purposes of a charity under the cy pres doctrine and one to change administrative. In this article I look at the Tribunal’s approach to both these aspects.

In relation to cy pres schemes, the Tribunal accepted that in circumstances where a breach of trust had been committed which could not immediately be remedied, the trusts of a charity could be temporarily varied under Section 62(1)(e)(iii)Charity Act 2011 to permit other purposes close to the original purposes. In doing so the Tribunal accepted that part of the Commission’s scheme which permitted continued use of the Sports and Leisure Centre for indoor recreation for the useful life of the building.

In relation to administrative schemes, the Tribunal confirmed the Commission’s view that the appropriate legal test for making a scheme for administrative provisions was that it is “expedient to regulate the administration of the Charity” (see endnote 1).

What is expedient depends on the circumstances of the charity including purposes and powers. Since 1993 (see endote 2), it had been understood that trustees of charitable recreation grounds had wide implied powers to exchange their original site for a replacement site where the particular piece of land was not integral to the charities purposes. The Commission’s scheme sought, as a matter of expediency, to give expression to that power but subject to a suite of new safeguards.

The Tribunal did not agree that the trustee had a power to exchange land in the current circumstances. It considered the trusts to preserve open space and the location of the land in the heart of Bath and distinguished Oldham. It concluded that the purposes required the trustee to preserve the original site as open space. The trustee’s powers could only be exercised consistently with that purpose.

In terms of governance, the Tribunal recognised that the local authority had conflicts of interest with the charity. The conflicts were particular to the case, but reflected three broad categories which are likely to be of wider relevance: the local authority providing or negotiating to provide services to the charity; potential liability for past administration; and broader corporate aspirations of the local authority which might have some bearing on future use of the charity’s land.

The Tribunal supported the Commission’s robust approach of replacing the local authority trustee with individuals in order to make the decision-making independent of the local authority and its interests. The Tribunal though went further. It stressed the importance of transparency and of the charity being managed independently and being seen to be managed independently.

The Tribunal reduced the number of trustees that the local authority appointed under the scheme from two to one (who could not become the trustees’ chair). It required three trustees to live locally, ensuring local representation. It increased transparency, requiring the trustees to account for themselves annually at a general meeting.

The Commission’s scheme making jurisdiction over charities is an important function particularly in circumstances where a charity faces a number of intractable problems which otherwise could only be dealt with great expense through the court. In being prepared to exercise its jurisdiction even in difficult circumstances, as in this case, the Commission hopes to facilitate the effective application of important charitable assets for community use.

This article was first published in Solicitors Journal in June 2014.

Endnotes

  1. C J W Laing Stewards and Attorney General [1984] 1 All ER 50
  2. Following the Court of Appeal’s decision in Oldham BC and Attorney General [1993] 2 All ER
Published 1 June 2014