In the well-publicised case of Batson v Charity Commission for England and Wales, the High Court has highlighted the power that the Charity Commission has over trustees and presents a cautionary tale to trustees who challenge the Commission’s authority.
The case relates to an investigation by the Commission into the Professional Footballers’ Association Charity (PFAC) over serious concerns about the way the charity was being managed. This investigation resulted in the Commission proposing disciplinary action against one of the trustees, who has since been suspended and disqualified as a trustee (although this is subject to a separate legal challenge). The Commission is also considering a potential warning to the other trustees of the charity.
Concerned that a warning would create adverse publicity for them personally, four of the trustees, including former footballers Brendan Batson and Garth Crooks, applied for permission to seek a ‘negative declaration’ from the High Court, which they wanted to state that they had not been guilty of a breach of their duties as trustees, or of mismanagement.
In opposition, the Commission argued that such permission would undermine the regulatory regime under which it operates.
Permission for the declaration was refused by the court on the basis that allowing the Commission to continue with the statutory process was the ‘least unsatisfactory outcome’ for the charity, with the judge declaring that the proceedings were “putting the coach before the horses, or to use a footballing analogy, taking the free kick before it is even granted”.
This article considers the Commission’s powers over trustees; when the High Court may or may not use its inherent jurisdiction over charity proceedings; and the issues that can arise when challenging the Charity Commission.
In 2018, the Charity Commission opened a regulatory compliance case into the PFAC, apparently following a complaint by a whistle-blower, to explore concerns raised about the charity’s relationship with the Professional Footballers’ Association (the players’ trade union) and their management of conflicts of interest. In 2019, the Commission proposed to issue an Official Warning (OW) pursuant to s.75A of the Charities Act 2011. The Commission therefore initiated the first step and issued a notice that it had proposed issuing a warning against the trustees of the charity.
The PFAC appointed an independent reviewer who, after an investigation, concluded that while there had been breaches of trustee duties, they had been honest mistakes and there was no real reason for any further disciplinary procedures to be undertaken. However, the Commission reached the view that there was a need for further processes and procedures. It began disciplinary proceedings against one of the trustees which resulted in his suspension and disqualification. The Commission then issued a fresh notice to the charity under section 75A that it was considering issuing an OW in relation to the charity itself. This proposed OW is in very different terms to the original OW issued to the trustees, but it had not been issued at the time of the court judgment.
Amid concerns over adverse publicity surrounding them personally, the four trustees sought permission initially from the Commission to bring court proceedings for ‘declaratory relief’, whereby the court would make a declaration of non-liability. This was refused by the Charity Commission on the basis it would circumvent the process for issuing warnings.
The High Court case
The High Court retains inherent jurisdiction over charity proceedings under part 6, section 115(5) of the Charities Act 2011. Therefore, the trustees applied to the High Court for permission to seek a declaration of non-liability, or a ‘negative declaration’, that they were not guilty of a breach of duty or mismanagement; or alternatively, that if they had been guilty, the breach would have been waived on the basis they had acted honestly and reasonably.
In response to the application, the Commission argued that if the High Court granted permission, it would undermine the statutory regime regulating it. It was also argued that the Commission would not be able to pursue the on-going disciplinary proceedings against the single trustee, and would not be able to issue a warning to the charity in relation to the other trustees, if one were deemed necessary. In short, they would be prevented from doing their job.
On 6 July, the High Court refused permission for the trustees’ application. In doing so, the court had regard to the ‘least unsatisfactory outcome’ for the charity, as opposed to the individual trustees, by seeking to prevent the charity’s funds being frittered away on litigation. The application was considered premature as it was not yet certain the OW would be issued by the Commission. “One has to let the referee decide whether he is going to grant the free kick before Cristiano Ronaldo can curl the ball around the wall.”
The trustees therefore lost their case and, in doing so, were ordered to pay the Commission’s legal costs.
This case illustrates the power that the Charity Commission wields over trustees. It also demonstrates that the High Court will not necessarily intervene when trustees seek to challenge the Commission, especially if this would not best serve the interests of the charity. The court was clear that when a statutory process is ongoing, it needs to be allowed to take place, and that is because the statutory regime is far wider than the proceedings that may be before a court and different considerations come into play.
Trustees who are subject to particular scrutiny by the Commission should take heed. Given that the case was brought, at least in part, due to concerns that the OW was likely to attract a great deal of media, including tabloid, interest, if the charity may be the subject of criticism there is a question about whether bringing this case increased, rather than limited, that scrutiny.