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22.10.2015 02:49 Age: 2 days

Charity regulator had no power to fetter trustees' decision, says High Court


The Guardian newspaper reports that the Charity Commission has been 'forced' to concede that it had no authority to order charity trustees to stop funding an organisation of which it disapproved.

The case was a judicial review brought in the England & Wales High Court by the organisation CAGE and one of its former charitable supporters, the Joseph Rowntree Charitable Trust (JRCT).

It originated with some public statements made by a CAGE spokesman in February this year - the spokesman suggested that the actions of Jihadi John (a UK citizen believed to be one Mohammed Emwazi) had been in part provoked by the British security services.

The Charity Commission intervened. It contacted the two charities that had funded CAGE - the Joseph Rowntree Charitable Trust and the Roddick Foundation, which between them had donated approximately GBP400,000 to CAGE - and demanded assurances that they were no longer funding the organisation and had no intention of doing so in the future.

The Commission claimed its purpose was to 'protect the public trust and confidence in charity and to ensure that the trustees of the charities concerned were complying with their legal duties'. At the same time it issued guidance telling charities to 'exercise greater vigilance [to] ensure that funds are used only for charitable activities which further the purposes of their charity'.

At the time, the two charities complied following what JRCT called 'intense regulatory pressure', but later CAGE, backed by the JRCT, launched a judicial review of the Commission's conduct. Among other things, it claimed that the Commission had acted beyond its powers, and that it had no right to give instructions restricting trustees' discretion on the causes that they fund.

The judicial review was heard this week by Lord Thomas, Lord Chief Justice, sitting with Mr Justice Ouseley. The Commission told the court that it had only issued the charities with 'advice and guidance' rather than a requirement or direction, but CAGE and JRCT contended that it was unacceptable even for the Commission to offer advice, because that required the trustees to fetter their own discretion, which they are not permitted to do by law. They also pointed out that the Commission itself had stated at the time that it 'required unequivocal assurances' from the two charities that had supported CAGE.

Ultimately, the Commission provided the review hearing with an agreed statement to the effect that trustees must be free to exercise their fiduciary duty: 'The Commission recognises that it has no power to require trustees to fetter the future exercise of their fiduciary duties under its general power to give advice and guidance', said the statement. 'In consequence, there is no obligation on the trustees of [Joseph Rowntree] to fetter the proper and lawful exercise of their discretion in future.'

The proceedings were then dropped by mutual agreement. CAGE said the outcome was 'a relief to the whole charity sector'. JRCT said it welcomed the clarification that the Commission does not seek to direct charities outside the scope of a formal statutory inquiry.

'This case was always about defending our responsibility for protecting the public trust and confidence in charity. It was on that basis we sought assurances from trustees about the funding of CAGE', said the Charity Commission. 'It has always been clear that trustees have the right to exercise their discretion when acting exclusively in the best interests of their charity and within the objects and powers, subject to the appropriate supervision by the commission as the charity regulator.'

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Charity regulator had no power to fetter trustees' decision, says High Court