Section 110 Charities Act 2011 – "power to give advice"

Section 110 Charities Act 2011 provides (in summary) that:

  • the Charity Commission may on the written application of a charity trustee give that applicant its opinion or advice in relation to the performance of any duty of the applicant as charity trustee or other matters relating to the proper administration of the charity of which they are a trustee
  • a charity trustee who acts on such advice (whether given to them or to another trustee of their charity) is to be treated as having acted in accordance with their trust (unless that charity trustee knew or had reasonable cause to suspect that the opinion or advice was given in ignorance of material facts, or a court or tribunal decision has been obtained on the matter or proceedings are pending to obtain one)

Caroline Dewar v Sheffield City Council (2019)

Background

The case was brought by the trustees of a "Friends of" group in relation to the sale by Sheffield City Council (in its capacity as charity trustee) of part of a local park held on charitable trusts under a Charity Commission Scheme.

The Scheme provided at clause 4 that the object of the charity was "the provision and maintenance of a park and recreation ground for use by the public with the object of improving their conditions of life" and also stated that subject to another provision of the Scheme (which authorised disposal of land in exchange for replacement land to be held for the same charitable object) the land "must be retained by the trustee for use for the object of the charity".

There were certain historical factual reasons for the inclusion of these provisions, which, along with the court's assessment of whether or not the land was designated land, we will not be dealing with here.

However, for the purposes of this article what is also relevant is clause 10 of the Scheme, which provided that:

"The Commission may decide any question put to it concerning:

  1. the interpretation of the Scheme
  2. the proprietary or validity of anything done or intended to be done under it"

The Council, in making a decision as charity trustee to sell a cottage and garden (forming part of the park, but lying outside the park's boundary wall) on the basis that the cottage had been vacant since 2006 and its upkeep to a habitable standard was not economically feasible/affordable, duly sought advice from the Charity Commission (the "Commission").

Correspondence with the Commission

In summary the correspondence was as follows:

  1. the Council emailed the Commission setting out the relevant background and asked the Commission whether the Council had power to dispose without the need for a Scheme on the basis that the transaction fell within paragraph B 5.2 of the Charity Commission's official guidance OG548, to the effect that disposal of only a small part of designated land where there would be little or no effect on the charity's ability to carry out the purposes for which the remainder of the land is held and where there was no express prohibition in the trusts of the charity would be permitted under statutory powers without the need to apply for a scheme.
    The Commission confirmed this was correct and that their consent was not required
  2. the Council sent a further email to the Commission specifically referring to the part of clause 4 of the Scheme which talked about the land being retained by the trustee for use for the object of the charity and checking whether this changed the position. The Commission confirmed that it did not
  3. the Friends organisation (which subsequently brought this case) wrote to the Commission enclosing a copy of advice that they had received stating that the Council did not have power to sell.
    In the light of this the Commission changed its mind and wrote to the Council reversing its previous advice and saying that a scheme was needed
  4. but when the Council then formally applied for a scheme, the Commission then definitively reiterated its original advice to the effect that no scheme was required and the Council had power sell the property without one while complying with the usual provisions relating to disposals of charity land
  5. the Council duly sold the property at auction

Result in the case

The case considered the legal status of the land, and the validity of the Commission's advice, in some detail, and we will not be dealing with those questions here.

For our purposes, the Council was held not to have acted in breach of trust and one of the main reasons for this conclusion was the application of clause 10 of the Scheme and section 110 of the Charities Act 2011 in the context of the advice given by the Commission.

It was held that (notwithstanding the wobble at point 3 above), the Commission's final advice at point 4 above was definitive and the effect of clause 10 of the Scheme, whether or not the Commission's advice was right or wrong, was that the Commission's advice that the proposed transaction would not be in breach of trust "is final on the issue … [the Council] did not act in breach of trust [in selling Cobnar Cottage], since the Charity Commission decided before the sale proceeded that it would not be a breach of trust".

The Judge said "if necessary I would have reached the same conclusion as a result of section 110. In my judgment the Council's emails discussed above contained written applications for advice about the proper administration of the Charity, and the Council acted in accordance with the advice which was given" (i.e. the Council was to be treated as having acted in accordance with the trusts of the charity in having followed that advice).

Conclusions

In the past, the Commission has sought on occasion to differentiate between "formal" advice under section 110 of the Charities Act, and less formal guidance. 

However in this case the Court did not hold that it was necessary for the Council to have framed its questions with direct reference to either clause 10 of the Scheme or section 110 of the Charities Act for those two things to nevertheless come into play. 

This decision therefore casts doubt on whether the Commission, if given the appropriate factual background and asked for advice, would be doing anything other than providing advice under section 110 (or a power in a scheme as the case may be), with charity trustees therefore being able to rely on the Commission's determination accordingly.

In many cases the Commission is already reluctant to give any advice and often refers charity trustees back to their own constitution and general common and statute law, suggesting it is a decision for trustees to take with the assistance of paid legal advisors. 

It may be that this case will deter the Commission further from providing advice, given that the consequence of reliance by charity trustees on that advice is likely to be regarded as conclusive and the Commission might be blamed for that result. 

This would be an unwelcome consequence for those charities of limited means faced with complex legal situations where the cost of such advice may be difficult to accommodate.