Authorising legal expense

Should the charity tribunal be the arbiter of charity spending on the appeals it hears? Tribunal judge Alison McKenna has suggested it should adopt a 'Beddoe-type' role

Alison McKenna
Alison McKenna

In an article for the Charity Law and Practice Review two years ago, Alison McKenna, principal judge of the charity tribunal, said charities that wanted to use the tribunal to challenge decisions by the Charity Commission might have been discouraged from doing so "for fear that the commission would deem the expenditure of charity funds on the case to have been inappropriate and that they might be directed to reimburse the charity".

She suggested the answer could be to give the tribunal a "Beddoe-type role" - a reference to a 're Beddoe' order, which can be sought from the High Court to protect trustees of both charitable and non-charitable trusts from being held personally liable for legal costs if it is later claimed they were improperly incurred.

Trustees can at present take proceedings in the tribunal without authorisation from the commission, leaving themselves potentially at risk. Alternatively, they can seek advice from the commission and will be on safe ground if they follow it. The third option is a 're Beddoe' application - but this requires the commission's permission.

This is because the commission might be able to use its own powers to address the situation without litigation - by giving advice, for example. If it can, it has to refuse the application unless there are special reasons, which might include feeling conflicted because the application relates to its own decisions.

In his review of the Charities Act 2006 last year, Lord Hodgson argued that the existing system put unnecessary pressure on both the commission and charities. "A clear power for the tribunal to authorise expenditure on proceedings should be introduced to resolve this," Hodgson said.

Under his formulation, the commission would not be involved, and the delay, expense and formality of the High Court would be avoided. In a speech to Melbourne Law School in Australia shortly afterwards, McKenna said she supported Hodgson's view and, in June this year, the Law Commission said it was including the issue in its review of charity law.

The Charity Commission has now said that it supports Hodgson's recommendation as well. "We are not aware of any cases in which this has proved to be a problem," says a spokeswoman, "but we understand the concerns that have been raised and agree it would be helpful to remove any apparent conflict of interest".

It therefore seems highly likely that the proposal will be implemented in due course, although it will be some time before the Law Commission completes its work and the government decides how to respond.

Nicola Evans, a senior associate at the law firm Bircham Dyson Bell, says it seems sensible for the tribunal to be the forum for Beddoe-style applications where the action in question is against the commission: "In other cases, there seems to be no reason why the commission should not continue to be asked to give advice."

Tom Murdoch, an associate at the law firm Stone King, says that allowing the tribunal to authorise payments would benefit both charities and the commission by giving trustees access to justice and opening the commission up to scrutiny.

"If cases don't reach the tribunal, then the job of the commission and the tribunal to develop charity law hasn't been achieved," he says. "The sector desperately needs charity case law to catch up with our changing society."

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