Batson v Charity Commission – The best interests of the charity prevail
Last year, the High Court in Batson v Charity Commission for England and Wales (Batson or the Case) showed the power the Charity Commission has over trustees. It also showed the court’s commitment to preserving this power in order to allow the Charity Commission for England and Wales to operate effectively and best serve the interests of the charity. Charities and charity trustees should therefore remain wary of the Court’s commitments before deciding to challenge the Charity Commission.
Background to Batson
In 2018, the Charity Commission started a regulatory compliance investigation against the Professional Footballers’ Association Charity (PFAC or the Charity) after concerns were raised about the Charity’s relationship with the players’ trade union and its management of conflicts of interest. The Commission proposed to issue an official warning against the trustees of the charity under section 75A of the Charities Act 2011, in pursuit of which if then issued a notice that it had proposed issuing a warning.
In response to the notice, the PFAC conducted its own investigation and concluded that although trustees had breached their duties, these breaches were unintentional honest mistakes, which rendered further disciplinary procedures unnecessary. The Commission disagreed and raised disciplinary proceedings against one of the trustees who was ultimately suspended and disqualified from acting as a trustee.
A second notice was then issued against the charity, expressing that the Commission has proposed issuing an official warning against the charity itself. The trustees including former footballers Brendan Batson and Garth Crooks, sought permission from the Commission to raise court proceedings in pursuit of the court making a declaration of non-liability which would state that they had not been guilty of a breach of their duties as trustees. However, the Commission refused on the basis that this would circumvent the process for issuing warnings.
The High Court Judgment
The PFAC trustees applied to the High Court for permission to seek a declaration of non-liability stating they were not guilty of a breach of duty or mismanagement, or alternatively if there had been a breach, the trustees had acted honestly and reasonably, which warranted the breach to be waived.
The Commission argued that if the Court granted permission, the statutory regime regulating the Commission would be undermined and the Commission would not be able to pursue the ongoing disciplinary proceedings against the individual trustee, nor would it be able to issue a warning to the charity if one were deemed necessary. In this regard, the Court would be preventing the Commission from doing their job.
The High Court rejected the trustees’ request for the application and highlighted having to the ‘least satisfactory outcome’ for the charity. The Court deemed the application had been brought too early and it was not clear at this stage if an official warning would even be issued by the Commission. The trustees lost the case and were ordered to pay the Commission’s legal costs.
What does this mean for you?
Albeit, this concerns a decision in E&W and the Commission rather than OSCR who regulates charities in Scotland, it is a very interesting decision of how the regulatory decision making is seen by the courts. The High Court’s decision showed: (1) the power that the Charity Commission has over trustees; and (2) the Court is unlikely to intervene in a challenge against the Commission, especially if this would not best serve the interests of the charity.
Driving these, the Court aims to uphold the Commission’s power against trustees in order to allow the Commission to do its job and ultimately best serve the interests of the charity.
It is crucial, therefore, for charities and trustees to ensure they are acting to best serve the interests of the charity at all times. It is also important for charities to consider whether a decision by the Commission would serve the interests of the charity as a whole before deciding whether to challenge the Commission.
If you have any questions about your duties as a trustee or how you can ensure that you are meeting your general governance obligations, please contact our Charities & Third Sector team and we would be delighted to help.
This article was co-written by Ussamah Nasar, Trainee Solicitor.
