Update: charity

Public benefit

The Attorney General's second reference on public benefit in relation to institutions for the relief of poverty with a restricted pool of beneficiaries defined by reference to their relationship with either one or more entities or one or more individuals will be heard over approximately four days from 14 November 2011.

The reference is to determine whether institutions for the relief of poverty among a restricted pool of beneficiaries defined by a relationship to an individual (poor relations charities) or an employer (company employee charities) or membership of an unincorporated association (membership charities) satisfy the public benefit test.

At the time of writing, 18 organisations have been given permission to make written representations to the First-tier Tribunal (Charity). However, the tribunal rejected an application by the Association of Charity Officers (ACO) to be joined as a party but has granted the organisation a right to make written submissions instead. In coming to this decision, the tribunal has narrowly interpreted the statutory test for permission to be joined as a party (set out in paragraph 2(3) of schedule 1D of the Charities Act 1993). The phrase 'likely to be affected' was tightly construed meaning that only organisations whose objects or activities can be said to be affected by the subject of the reference will satisfy the test to be parties to the reference (subject to the permission of the tribunal).

The rationale behind this narrow construction is perhaps an attempt to limit the number of parties becoming involved in such references to prevent them from becoming large and unmanageable and limiting such parties to participation as 'interveners' providing written submissions. However, the principal judge, Alison McKenna, did acknowledge that 'it may be that parliament should consider widening the eligibility test in view of the undoubted assistance and expertise that charitable umbrella bodies could bring to reference proceedings'. ACO has 28 days from the date of the ruling within which to exercise its right of appeal to the Upper Tribunal '“ it will be interesting to see if it decides to exercise that right.

Permission to appeal in Catholic Care

It has been reported that the Upper Tribunal (Tax and Chancery Chamber) has granted Catholic Care (Diocese of Leeds) permission to appeal the First-tier Tribunal's decision dated 26 April 2011. The decision appealed against was the commission's refusal of its consent, under section 64 of the Charities Act 1993, for the charity to amend its objects clause. The charity had sought permission to make the amendment so as to permit it to refuse to offer adoption services to same-sex couples.

On 7 June 2011, the First-tier Tribunal refused to grant Catholic Care permission to appeal the April decision. The charity's grounds of appeal were divided into 13 sections which described alleged errors of law in the decision of the FTT(C). The principal judge, Alison McKenna, concluded that no 'errors of law' were identifiable in the decision (as required by rule 42 of the Tribunal Procedure (First-tier Tribunal)(General Regulatory Chamber) Rules 2009). There was therefore no power for the tribunal to review its decision in the case and the appeal was refused. The reasons for refusing the appeal state that the appeal contained 'a roving selection of the evidence coupled with generalised assertions that the tribunal's decision was wrong' and that none of the alleged errors of law set out the four stages of argument necessary to advance an appeal on the basis that a tribunal's findings of fact cannot reasonably be supported, thereby giving rise to questions of law (Georgiou v Customs and Excise Commissioners [1996] STC 463; Smith v HMRC FTC/47/2010).

An appellant must:

1. identify the finding which is challenged;

2. show that it is significant in relation to the conclusion;

3. identify the evidence, if any, which was relevant to that finding; and

4. show that that finding, on the basis of that evidence, was one which the tribunal was not entitled to make.

Further information is awaited from the Upper Tribunal (Tax and Chancery) in relation to reports that it has granted permission for Catholic Care to appeal.

Appealing a rejected application

The First-tier Tribunal (Charity) has dismissed an appeal by Full Fact against the Charity Commission's decision not to register it as a charity on the basis that the purposes of Full Fact are not exclusively charitable.

The case is particularly interesting because it is the first instance of a rejected application for registration being appealed to the tribunal. Many thousands of applications for registration are processed by the commission every year; until now, applicants have effectively accepted the Charity Commission's decision even if they did not agree with it.

While, in this instance, Full Fact's appeal was not successful (it did not result in the commission's decision being 'quashed' and sent back to the commission for reconsideration, as it theoretically might), the case nevertheless does offer an insight into the ways in which the tribunal will consider a challenge to the commission's assessment of a proposed charity's purposes and activities '“ and, as such, is a helpful case for charities and legal practitioners alike.

Full Fact is an organisation that checks the accuracy of statements made by politicians and journalists. Its work includes publishing reports on the accuracy of public statements. The commission refused to register the organisation because although it accepted, in principle, that verifying the accuracy of information and facts used in public debate to an objective standard using a non-partisan and non-political methodology might be capable of furthering the advancement of citizenship for the public benefit, it concluded that the organisation was not able to demonstrate that its methods and processes were sufficiently robust, neutral, independent and authoritative.

The FFT(C) held that while the organisation's first object '“ 'promoting the advancement of citizenship and community development' '“ was capable of being charitable, the second object '“ 'civic responsibility and engagement' '“ was ambiguous and unclear in the absence of any further definition or qualification, and that the fourth object '“ 'to promote informed public discourse and debate on matters of public concern in relation to the forgoing by making available full, accurate and relevant facts concerning the same' '“ introduced further ambiguity and uncertainty in the objects. It was therefore appropriate to examine the activities of the organisation to establish whether its purposes would provide a public benefit.

The tribunal concluded that on proper interpretation of the objects together with the consideration of the activities and proposed activities of the organisation, the second purpose of promoting 'civic responsibility and engagement' was not exclusively charitable as reference to 'engagement' permitted a range of charitable and non-charitable activities to be carried out. Reference to 'engagement' in the organisation's third and fourth objects meant that they were not exclusively charitable. In addition, the activities that the organisation has carried out and was proposing to carry out were broader in scope than those permitted on a proper interpretation of its objects. All matters of political or public debate appeared to be within the scope of the organisation's activities.

The decision in this case illustrates how the use of ambiguous words such as 'civic engagement' in an organisation's objects is likely to lead to a rigorous analysis of the organisation's proposed activities and may well cause an application to the Charity Commission for charitable status to be refused.

However, this decision does leave the door open for the organisation to amend its objects and adjust its activities so that they are pursued in accordance with the standards and with the methodology appropriate to the advancement of education. The organisation could then re-apply for registration with the commission (although with no guarantee of success). This demonstrates that an organisation providing full, accurate and relevant facts to the public on matters of public concern, thereby promoting public discourse and debate, is capable of advancing education for the public benefit.

Unincorporated associations cannot go into liquidation

The High Court has held, in the matter of Panter v Rowellian Football Social Club and Ors [2011] EWHC 1301(Ch), that an unincorporated association such as a non-charitable social club, is not a company for the purposes of section 111(1A) of schedule B1 of the Insolvency Act 1996 and therefore cannot enter administration. The club was an insolvent unincorporated association and one of its unsecured creditors had applied to court for an administration order.

The judge commented that the club had none of the normal attributes of a company: 'The membership rules, the provision of subscriptions and expulsion are those of a club not a company. If, as it seems to me, the club is not susceptible to compulsory winding up it is difficult to see why parliament should have intended it to be subject to the administration regime.'

The court said that parliament's intention in passing section 111(1A) was to allow the court to make administration orders in respect of foreign companies, not to allow unincorporated entities to enter administration. It concluded that there was there was no jurisdiction to appoint an administrator over such an entity. It followed that the application for an administration order was dismissed.

Independent Schools Council judicial review

It is worth mentioning the much anticipated outcome of the Independent Schools Council's judicial review of the Charity Commission guidance relating to charitable independent schools and the Attorney General's reference which were heard together by the Upper Tribunal (Tax and Chancery Chamber) over six days in May 2011. The decision is expected by the early autumn and is likely to impact not just upon independent schools but also on the wider fee-charging charitable sector.