Solicitor Harriet Parfitt, in our Charities & Education team, looks at some of the key judgments in charity law over the last three years, and highlights the main takeaways for trustees in England and Wales.
A cautionary tale of legal standing: Mermaids v Charity Commission for England and Wales [2023] UKFTT 563 (GRC)
Case summary:
In this case, Mermaids (the Appellant) wanted to challenge the Charity Commission’s decision to register the LGB Alliance (the Respondent) as a charity.
By way of brief background, the Appellant was a charity set up to promote gender diversity, whereas the Respondent was a charity designed to celebrate sexuality, in all its forms. The Appellant alleged that the Respondent’s mission was “anti-trans”, and in turn, directly harmed the Appellant’s cause.
Importantly, this was not a public interest test which questioned the rights of the LGBTQIA+ community. This instead was a case concerned with a much narrower issue: the proper interpretation of standing to challenge a decision made by the Commission to register any charity in England and Wales.
Legal background:
Under the Charities Act 2011, those with standing to bring an appeal against a decision made by the Commission are defined as persons who are:
(a) the persons who are or claim to be the charity trustees of the institution;
(b) (if a body corporate) the institution itself; and
(c) any other person who is or may be affected by the decision.
Accordingly, the Appellant put forward the argument that it was ‘affected’ by the decision.
Key findings:
The Tribunal found that:
(a) The law of England and Wales does not provide a charity with the right to prevent another charity promoting views different to its own.
(b) Similarly, a charity is not entitled to block another charity acting contrary and to the negative effect of its own objects.
(c) Article 10 ECHR (freedom of thought or expression) extends protection to charities, as well as individuals.
Consequently, the Tribunal did not find in favour of the Appellant, who had not been affected by the decision to register the Respondent as a charity to the extent that it had sufficient standing to challenge it.
Balancing fiduciary duties with ethical investing: Butler-Sloss & Others v Charity Commission [2022] EWHC 974
Case summary:
The powers of investment held by trustees are governed by their charity’s trust deed or governing document, alongside the Trustee Act 2000.
Conventionally, it has been common practice of trustees to use these powers solely for the purpose of obtaining the best return on their investments that they can, in furtherance of their objects (their primary fiduciary duty).
In this case, Butler-Schloss and others alleged that it would be against the objects of their charity to include in their portfolios investments that were profitable but did not align with the Paris Agreement (a legally binding international treaty on climate change).
Legal background:
As was enshrined in the Bishop of Oxford case, trustees must seek permission from the Commission should they wish to exclude profitable investments because these investments could conflict with their charitable purposes.
Key findings:
The Court found that where trustees are of the reasonable view that investments may conflict with their objects, they are given a discretion to exclude such investments. In making any such decision, they should balance: the likelihood and seriousness of the potential conflict and the likelihood and seriousness of any potential financial effect from the exclusion of such investments, amongst other factors.
Importantly, trustees need to be careful when making decisions regarding investments on purely moral grounds, recognising that among the charity's supporters and beneficiaries there may be differing legitimate moral views on certain issues.
The Commission has since confirmed via its website that charities should continue to rely on previously published investment guidance when making informed decisions regarding their portfolio: https://www.gov.uk/government/publications/charities-and-investment-matters-a-guide-for-trustees-cc14.
Exercising ‘public benefit’: London Borough of Merton v Nuffield Health [2023] UKSC 18
Case summary:
The second limb of the definition of a charity, i.e. the public benefit test, has been subject to significant interpretation since the Charities Act 2011. In this case, the London Borough of Merton argued that Nuffield Health, a gym and wellness centre, did not meet this test, and as such, should not be eligible for charitable business rate relief.
Legal background:
This test is applicable to a charity’s objects only (and not the activities that it carries out), as was identified in Independent Schools Council v Charity Commission for England and Wales and others [2011].
A business with charitable status which holds property is eligible for mandatory business rate relief of 80% on the amount payable for the property, if the building is being wholly or mainly used for charitable purposes within the requirements of section 43(6)(a) Local Government Finance Act 1988, with local authorities having the discretion to increase this relief up to a value of 100%.
Key findings
a) Throughout a series of appeals in this case, the courts made clear that charitable status alone will determine whether business rates apply: provided the objects of the charity are being carried out sufficiently, there does not need to be an individual assessment of each premises that the charity operates out of.
b) However, considering that the charity in this case was deemed not to provide public benefit on this specific site – in fact, it was said that the provision of services outside the membership fee that the charity charged its members for use of the facilities would be insufficient to meet the requirement for charitable use, this serves as a warning to charities who charge fees for their services. If charities providing services to paying members want to ensure they satisfy the test, they will need to ensure that their non-membership options are more than just tokenistic.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
