The Charity Commission has power under s181A of the Charities Act 2011 to disqualify a person from holding office as a charity trustee or being employed in a senior management position within a charity (or within charities generally). This is the power that was given to the Commission by the Charities (Protection and Social Investment) Act 2016.
In Lennox v Charity Commission for England and Wales CA/2021/0022, the Charity Tribunal dismissed Lennox’s appeal against his disqualification as a trustee of Thrift Urban Housing Limited. In this case, the High Court had already found sufficient grounds under the just and equitable test to wind up Thrift following the presentation of a petition by the Commission. This was the first exercise by the Commission of its power under s113 Charities Act 2011. This power allows it to apply to the High Court for a charity to be wound up under the Insolvency Act 1986.
Thrift was incorporated as a charitable company and registered as a charity in 1998. Its objects were “to relieve poverty by the provision of housing and other amenities to persons who are in need” and “to provide advice and help for impoverished elderly people, disabled people and homeless people”. It furthered these objects primarily by operating a handyman service to improve elderly people’s living conditions by carrying out necessary repairs and refurbishment to their homes. In 2014, following the presentation of a cheque from Thrift’s CAF bank account made payable to Lennox for £160,000 (about 86 per cent of the funds in the account at that time) of which Lennox was a co-signatory, the Commission opened a statutory inquiry into Thrift.
The irregularities uncovered during the Commission’s inquiry were substantial. Among other things, payments of around £350,000 had been paid by the charity to Lennox for his own benefit; the charity’s accounts and cheques bore signatures of a previous trustee who had died; and the charity had not kept any day-to-day accounting records. In the decision as to whether the charity should be wound up, Judge Jones found that there had been a catalogue of misconduct and / or mismanagement and was scathing of the role played by Lennox.
The Commission subsequently used its power to disqualify Lennox from being a trustee of a charity, or employee or manager of a charity for the maximum available term of 15 years. Lennox indicated that he wished to appeal the order to the Charity Tribunal but after much toing and froing failed to comply with the directions issued by the Tribunal. The Commission ultimately applied for his appeal to be struck out, which the Charity Tribunal did.
Refusal to exercise power to waive disqualification
In Blacker v Charity Commission for England and Wales CA/2021/0026, the Charity Tribunal had to decide whether or not the Commission had been right to refuse to grant a waiver to someone who was disqualified from trusteeship.
Dr Blacker was a solicitor, who had been struck off in 2016 after the Solicitor’s Disciplinary Tribunal found that he had breached the solicitor’s accounts rules, as well as making false statements about his qualifications (and other matters). In 2020, he was convicted for making a false statement or representation to obtain benefits and sentenced to nine months’ imprisonment, suspended for two years. His conviction means that he was automatically disqualified from charity trusteeship and senior management positions.
In September 2020, Blacker applied to the Commission to waive his disqualification. His application was refused, and the Commission upheld the decision on review. Blacker appealed to the Charity Tribunal.
Given that this was a first for the Charity Tribunal, Judge McKenna had to decide how to approach the issue. She took the view that the most closely analogous situation is the regime that allows disqualified company directors to apply to the Court (under s17 of the Company Directors Disqualification Act 1986) for permission to act as a director.
Blacker argued that his expertise was essential to JAFLAS (the charity of which he wished to become a trustee). The trustees of JAFLAS had sent statements of support to the Commission, but the Commission had noted that the trustees provided no evidence that they had carried out proper risk assessment procedures, which it had invited them to consider.
The Tribunal rejected Blacker’s claim that his conviction was the result of a bad faith prosecution, and noted that his sentence was not yet completed. It also rejected his claim that proceedings in the Solicitors Disciplinary Tribunal were unfair. The Tribunal accepted that he played a key role in delivering JAFLAS’s services, but was not persuaded that the trustees, as a whole, fully supported his waiver application. Moreover, it considered that Blacker could contribute to the charity’s work by working as a volunteer. The Tribunal held that the limited factors in favour of granting a waiver were outweighed by the factors weighing against it. On the question of whether public trust in charities would be harmed by granting the waivers, the Tribunal deferred to the Commission’s superior knowledge.
It seems likely, therefore, that it will continue to be difficult to persuade the Commission to grant a waiver where a conviction has not been spent and / or where the Commission considers that the waiver may harm public trust in charities.
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This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
Please note this content was originally published in the October 2022 edition of the Civil Society’s monthly newsletter, “Charity Finance”, and is reproduced with the kind permission of Civil Society.
© Farrer & Co LLP, October 2022