Until the charity tribunal was set up by the Charities Act 2006, charities could feel very much at the mercy of the Charity Commission. If they wanted to challenge its decisions, they could use its internal review process - but beyond that the only redress was in the High Court, with all the attendant delay, formality and expense.
The tribunal, one of the most significant provisions of the act, was intended to offer a low-cost, user-friendly way for charities and individuals to challenge commission decisions, with an emphasis on informality and encouragement for appellants to represent themselves. It was also intended as a forum for clarifying or developing important points of charity law.
But the tribunal's first five years have not been easy. The Charity Commission was initially wary of it, some lawyers said during one of its first cases that it was not up to the job, and only a year after its establishment it became part of the complex structure of the new Tribunals Service and was renamed the First-Tier Tribunal (Charity). But despite all that, has it achieved its declared aims?
The answer appears to be: yes, up to a point. Only a few appellants have represented themselves, and many have spent thousands of pounds on legal representation, so costs have not gone down as much as some hoped. The tribunal has heard an average of only seven cases a year, compared with the 50 that were predicted, but that still amounts to double the number of charity appeals heard previously in the High Court.
Its decisions - especially its reinstatement in 2009 of a trustee who had been removed by the Charity Commission - have prompted the commission to improve its decision-making and internal review arrangements. The tribunal has also - especially in cases escalated to the Upper Tribunal - helped to develop charity law on equality legislation and on the public benefit of private schools and benevolent societies (see Key cases).
Francesca Quint, a barrister at Radcliffe Chambers specialising in charity law, says the tribunal has succeeded in many ways, not least because it has caused the Charity Commission to tighten up its procedures and take more steps to ensure that it considers everything relevant before making a decision. She says the tribunal has brought fresh thinking to questions that arise in charity law - including what a charity is.
Ann Phillips, chair of the Charity Law Association and a partner at the law firm Stone King, agrees that the tribunal has to some extent helped the charity sector keep pace with changing times by enabling the development of charity law. But it has not yet been able to provide "an inexpensive means of resolving matters with minimum legal representation", she says - adding that it is perhaps not realistic to expect charities to present their cases on often complex points of charity law without specialist legal representation.
In June this year the Public Administration Select Committee also said that the tribunal had failed to reduce the costs of cases. But Alison McKenna, principal judge of the First-Tier Tribunal, has pointed out that most of the costs are the fees charged by lawyers. In a lecture given last year, she said that in the early years there was a reliance on barristers by both charities and the commission, but a lower-key approach was developing gradually.
The tribunal cannot insist that appellants do not engage lawyers, but McKenna believes lawyers should be a rarity in the First-Tier Tribunal. She agrees with Phillips that charity law can be complex, but notes that in other complicated areas, such as tax, it is usual for people to represent themselves in the tribunal system. Moves to encourage charities to represent themselves include a guide published in February 2013 by the National Council for Voluntary Organisations, How the Charity Tribunal Works.
Dominic Fox, chief executive of the Association of Charitable Associations, which was involved in the benevolent funds case in the Upper Tribunal with its more formal procedures (see Key cases), says the total legal costs for the benevolent funds that participated in the case was about £500,000. "There was a great deal of angst and thought by our members before they decided to pay for legal representation, but they did so because it was a very important legal issue," he says.
But some individuals, especially in the First-Tier Tribunal, have represented themselves. For example, Roger Thomas won a case against the commission's decision to allow trustees of a Shropshire charity to bid to rent the charity's land for grazing. His experience of using the tribunal was positive and he is keen to promote the use of it by others (see Interview below).
Another point of contention is that access to the tribunal is governed by a 13-page schedule that lays down what kind of commission action can be challenged by whom. Seven of the 41 cases that have gone to the tribunal have been struck out because they were outside its jurisdiction. Last year, a review of the Charities Act 2006 by the Conservative peer Lord Hodgson said this schedule should be abolished and access to the tribunal simplified.
The schedule, which can be amended by ministerial regulations that must be approved by both Houses of Parliament, does not form part of the review of charity law that is currently being carried out by the Law Commission. But this review is considering whether the tribunal should have the power to authorise trustees to fund legal costs at tribunal cases: at the moment it is feared that charities that do this could be deemed by the Charity Commission to have misapplied charitable funds.
Quint's prediction is that the First-Tier Tribunal is likely to become more recognised and more widely used. Meanwhile, the Charity Commission's early wariness of the tribunal has faded to some extent. Sam Younger, chief executive of the commission, has said it should be relaxed about challenges to its decisions in the tribunal.
The commission's chief legal adviser, Kenneth Dibble, says: "The commission regards the tribunal as an indispensable part of charity regulation in ensuring the commission is accountable for its decisions. It is an effective avenue for redress and aids the clarification of charity law. We believe that, as time goes on, the work of the tribunal will be shown to be of great value to the commission as regulator and to charities and the public alike."
KEY CASES: A HEADY MIX OF POLITICS, RELIGION AND PUBLIC BENEFIT
In 2011 the Independent Schools Council claimed victory in a long-running battle against the Charity Commission over what such schools should do to enjoy charitable status. The case was heard by the Upper Tribunal at the same time as a reference by the Attorney-General, Dominic Grieve, asking it to consider how the public benefit requirement should operate in relation to fee-charging charitable schools. The ISC argued that the commission, in its guidance to private schools, had put too much importance on bursaries to poor children. The tribunal's decision, published in October 2011, concluded that in all cases there must be more than de minimis or token benefit for the poor, but that trustees of charitable independent schools should decide what was appropriate in their particular circumstances. Benefits could be provided in a variety of ways.
Reinstatement of a trustee
In its second case, the tribunal in 2009 quashed the commission's decision to remove a trustee of Sivayogam, a Hindu temple in south London. It rejected all seven of the commission's reasons for removing Nagendram Seevaratnam and ruled that he should be reinstated immediately. The reasons included claims that he had failed to take sufficient steps to dissociate himself and the charity from the proscribed Tamil Tigers insurgency group in Sri Lanka. The tribunal said that rumours about links had not been in wide circulation and the commission had failed to show it would be reasonable for anyone to believe them. It also found that although there was evidence of misconduct it was not enough to justify his removal.
The tribunal said it was "most concerned" to hear that Seevaratnam's evidence to the commission, which demonstrated that he had implemented adequate procedures for selecting and monitoring recipients of funding in Sri Lanka, had not even been translated.
In an important clarification of charity law, the Upper Tribunal ruled in 2012 that benevolent funds met the public benefit test and could keep their charitable status. The ruling also encompassed other charities engaged in relieving poverty but with beneficiaries drawn from restricted groups.
The case was heard after a reference by the Attorney-General, which asked the tribunal to determine whether "a trust for the relief of poverty" could be charitable if those who benefited could be defined by their relationship to an individual, company or unincorporated organisation.
Local authority's sale of charitable land
In 2009 the tribunal ruled against a commission decision, following the sale of a small section of land to a property developer by Dartford Borough Council in Kent, which was the sole trustee of a local charity, Kidd Legacy Being a Part of Central Park. The commission had ruled in 2008 that the council had breached charity law but accepted that it had acted in good faith. It had approved a proposal to replace the sold land with other land of lower value and provide £270,000 towards the maintenance and improvement of the charity land.
Two local residents appealed to the tribunal, which accepted two of their four objections. The tribunal said it could not reverse the sale, but imposed adjustments to the governance of the charity, including the introduction of independent trustees and reinstating the charity's objects. The tribunal also required the trustees to put a policy in place for managing conflicts of interest. The case had important implications for other charities in which local authorities were trustees.
In 2012 the Leeds-based adoption agency Catholic Care failed in its final appeal at the Upper Tribunal against the commission's refusal to allow it to amend its charitable objects so that it could restrict its services to heterosexual couples, in accordance with Catholic doctrine.
The court ruled that the charity did not qualify to benefit from exemptions in the Equality Act 2010. The case was a landmark in clarifying charities' responsibilities under equality law. Patrick McCurry and Catherine Lafferty
INTERVIEW: ROGER THOMAS
Last year, Roger Thomas, a contract manager who lives near Knighton on the Powys-Shropshire border, appealed to the charity tribunal against a scheme made by the Charity Commission that allowed the trustees of the Llanfair Waterdine Charities to lease grazing rights from the charity.
At the hearing, the commission argued that the sums of money involved were small, the leases were short and there were public auctions that maximised income for the charity.
Thomas, who represented himself, said it was wrong in principle for trustees to benefit and that the scheme had damaged the reputation of the charity locally.
The tribunal dismissed for lack of evidence the commission's argument that the arrangement maximised revenue, declared that it was not in the interests of the charity to depart from the general prohibition of trustee benefit and quashed the scheme.
Thomas, one of the six trustees, thinks the tribunal dealt with the case "carefully and insightfully" and put its finger on a "blindingly obvious mistake". He says the effect was to remind the commission to adhere to basic principles in its decisions.
"I was delighted that the tribunal existed because without it I'd never have been able to get the issue resolved, given that I'd exhausted the Charity Commission review process," he says. "Not having legal representation meant I had to do a lot of preparation, but the tribunal was supportive of me representing myself."
Money played a part in his decision to represent himself, he says, but the main factor was his close knowledge of the facts and of the effect of the commission's decision. "I didn't feel I needed a lawyer to tart it up," he says.
Thomas says the barrister representing the commission posed an awkward question towards the end of the hearing. "He brought up a 19th century case," he says. "I think he was hoping to catch me out because I was representing myself. But I'd done my research and actually used that case to support my argument, so it fell flat for him."
After the case three other trustees resigned, including those who had leased the charity's grazing rights. "There's been a bit of grumbly ill-feeling in the background," says Thomas.
The current trustees are now reviewing the activities of the charity, an amalgamation of charities dating back to the 18th century. Its purposes are relief of need, education and general benefit in the local parish, where about 200 people live. "There's about £50,000 waiting to be distributed," says Thomas.
INTERVIEW: JACK SPARROW
Jack Sparrow is one of three Bath residents who are appealing to the charity tribunal against a Charity Commission scheme intended to settle a complex dispute over Bath Recreation Ground, an area of charity land near the centre of the city that is partly occupied by Bath Rugby Club.
Sparrow says he has felt frustrated in his dealings with the tribunal so far, not least because the judge in the case has told him it cannot rule on one of his key contentions - that the lease granted to the club by the trustees of the land is not legal.
"We were told we'd have to go to the High Court for that, which I would find difficult to do as an individual," he says. "All the judge can do is amend, quash or do something with the commission's scheme."
He says that before the recent directions hearing he received information explaining that legal representation was not necessary and that the hearing would not be as formal as a court case, so he decided to represent himself.
"But at the hearing the commission had lawyers, so I felt it was a bit uneven," he says. "I'm determined to fight on, though." Sparrow says the judge suggested to the individual appellants that they could seek legal representation through the Bar pro bono scheme, but he has not yet explored this option. "To be honest, I'm a little sceptical about things that are offered free," he says.
Sparrow's appeal against the commission scheme will be heard jointly with those of two other citizens, Rosemary Carne and Nigel Websper, on a date yet to be decided early next year. Under the scheme, new trustees would be appointed to resolve a breach of trust that the commission said took place in 2007, when the trust built a leisure centre on part of its land near the centre of the city and granted a new 75-year lease to the rugby club, which has used part of the trust's land since 1894.
The trust has proposed a trade-off in which the club would continue to use the land and be allowed to use another piece of trust land to redevelop the ground. In return, the club would lease to the trust its former training ground at Lambridge, on the outskirts of the city, which would be used for "a wide range of recreational activities".