Memorandum from Hubert Picarda QC (DCH
297)
BACKGROUND
Author of Picarda Law and Practice Relating
to Charities (3rd edn 1999, 4th edn commissioned and in preparation)
848 pp. President of Charity Law Association (1992-2004). Managing
Editor Charity Law and Practice Review 1992-2002. Specialist charity
practitioner.
RECITED GOVERNMENT
AIMS: AGENDA
Strategy Unit Report Private Action Public
Benefit: "to maintain their charitable status independent
schools which charge high fees have to make significant provision
for those who cannot pay full fees and the majority probably
do so already" (emphasis added).
Fiona Mactaggart ( Charities Minister) "The
Bill will force charities including private schools
such as Eton to demonstrate public benefit and would face
for the first time a public character test carried out by a beefed
up Charity Commission" (emphasis added).
Stuart Etherington (NCVO) "If the Charity
Commission is saying it's unable to carry out a public character
test to existing charities then that is quite a serious issue
The draft legislation would have to be amended if this was the
case, otherwise there would be no point in having the bill".
THE COMMON
LAW OF
CHARITIES
1. A contemporary definition. There are
four heads of charities listed by the House of Lords in Pemsel's
case (the fourth head being subdivided by textbook writers
into subcategories). Far from being "archaic" (as untutored
critics have zealously suggested), the case law and the analogising
technique has developed a contemporary flexible evolutionary definition
accepted throughout the common law world. Australia has just scrapped
its new Charities Bill leaving its common law definition in place.
Significantly, apart from highlighting altruism as a constituent
of public benefit, none of the Commonwealth reviews has gone down
the path of constructing a policy driven and politically controversial
redefinition of public benefit.
2. Schooling and learning. The advancement
of education through the medium of schools universities and medical
and law schools has always been treated as self evidently charitable.
This was not a case of some artificial presumption but of common
sense. "Education, education, education", learning,
literacy, numeracy, and like skills altruistically taught in schools
and colleges as preparation of the young for the work of life
have been respected for centuries as having the necessary element
of public benefit or, as was said by the Court of Appeal in relation
to a law school (see Smith v Kerr [1902] 1 Ch 774,
affirming the decision in the court below) as having the necessary
"public character" to be a charitable object.
3. Public benefit may be direct or indirect.
4. There are variations in the standard
of public benefit within each of the heads of charity reflecting
the differing aims of for example religion and education and the
courts have not sought to harmonise or make logically consistent
the degree of public benefit in each case. You cannot "logically"
harmonise unlikes.
"PRIVATE"
SCHOOLS: A
"THORN IN
THE SIDE
OF THE
LAW"
5. The position of fee paying schools, not
run for profit has been misdescribed as an anomaly (a "thorn
in the side of the law" as one recent hyperbolist put it).
The 10th Report of the House of Commons Expenditure Committee
(1975) recommended that all charities including those charities
formerly admitted under the heading of education should continue
to qualify only if they met a statutory "overriding criterion"
of "purposes beneficial to the community". The better
informed Goodman Report (1976) scotched this by recommending the
continuation of charitable status of the independent schools because
of the very considerable and beneficial contribution in the field
of education. The TUC and Labour party document A Plan for
Private Schools (1981) recommended the ending of charitable
status for independent schools other than those for the handicapped
and the ending of the assisted places scheme. The NCVO initiative
of 1998 did not canvass the views of independent schools but the
agenda now in the Bill incorporates the dodge (as Professor David
Daube was wont to describe legal artifices) of reversing any relevant
"presumption" and giving public character a new meaning
as a test licensed by the recently devised "social and economic
impact" objective. The new statutory requirement of demonstrating
public benefit is to override any previously accepted and acceptable
indirect benefit which was compared derisively to a "trump
card" whose trumping quality should be removed or diluted
by the ingenious "presumption reversal" dodge and a
newly blessed but unenacted public character test.
PUBLIC BENEFIT
6. Charities are not "equal" animals.
And a new definition of overriding criterion of benefit to the
community, social value or the like goes counter to the common
law and was not needed. The evidence of such a need, significantly
undiscovered in any other jurisdiction, is slim unparticularised
and implausible.
7. The definition of public benefit can
no doubt for the future be statutorily reversed or negatived and
replaced but such a fundamental legislative step requires measured
legal consideration. Such consideration is incompatible with the
haste enjoined by the NCVO.
8. Demonstration of public benefit in the
case of education within the formal structure of schools and colleges
not run for profit is not required according to the common law
since it is self evident. The undoctrinaire common law accepts
that the benefit element in public benefit can be a direct or
an indirect benefit. If demonstration or proof of the provision
of public benefit is intended to be replaced the common law decisions
on this area (schools having a public character) as a matter of
law it would require a new explicit definition which overrides
the common law decisions affecting existing charities and would-be
charities falling within the governing decisions.
9. Mere reversal of the "presumption"
of public benefit cannot change the declared law on this point.
Public benefit has a consistent meaning throughout the Commonwealth
and is not synonymous with the malleable word "public interest"
"social value" or a benefit having the necessary "social
and economic impact" fulfilling "social justice".
PUBLIC CHARACTER
TEST
10. The term "public character",
as tentatively proposed by the Charity Commission, is no more
than a recently assembled patchwork criterion for which there
is no precedent or rationale in the cases (cf Smith v Kerr referred
to in paragraph 2 above). The special meaning given to public
character by the Strategy Unit is about as relevant as the famous
and diverting definition attributed to the word "glory"
("a fine knock down argument"). Fees high or low in
relation to schooling and university education ("serving
to exclude" as it is tendentiously and innovatingly put)
were, in the common law, never either a badge of public character
or a mark of Cain signifying a denial of public character.
11. To leave the Commissioners in charge
of administering a novel generalised public character test would
run counter to well established principle (see paragraph 2 above)
at any rate in relation to registered and registrable independent
schools and educational institutions.
CONSTITUTION OF
THE CHARITY
COMMISSION: LAW,
POLICY AND
THE JUDICIARY
AND THE
CHARITY SECTOR
12. By identifying social and economic impact
as an objective of the Commission the legislature appears to be
providing that a "beefed up" Charity Commission is to
be an instrument of policy. Until now the Commission has been
applying relatively simple legal criteria and factual analysis,
promoting effective use of charitable resources by encouraging
better methods of administration, giving information and advice,
investigating and checking abuses, and by so acting as best to
promote and make effective the work of the charity in meeting
the needs designated by the trusts of the charity and not by some
outside political criteria.
13. The objective of "social and economic
impact" as a golden met-wand, whether of public character
or of the appropriateness of new cypres scheme objects, imports
vague factors falling within the fields of government policy.
Judges remain involved in the construction of wills and governing
documents of charities. They too will be confronted by, and embrangled
in, the introduction of social policy decisions of the Commission
effectuating Government policy. Such decisions are likely to engage
judges in an unenviable quasi-executive task. The objective should
be jettisoned.
14. Enforced contributions by independent
sector to state sector The advancement of of literacy has escaped
the attention of ad hoc caucuses (or "focus groups")
and "coalitions" advocating reform of public benefit.
Increasing deplorable illiteracy and plummeting academic standards
in the ailing state sector should not through the engine of charity
law and re-definition enable a stealth tax to replace the abandoned
assisted places scheme, in the form of enforced levies and compulsory
contributions from the independent sector. This seems to be envisaged
by some of the hostile questions raised by certain members of
the Joint Parliamentary Committee and read by me on the internet.
My concern as a charity lawyer is for the integrity of charity
law.
15. Debasement of jurisprudence and the
common law by policy. Neither judges nor the Charity Commission
should be called on to grapple with this slippery fudged new test
with its tendentious invocation of a "serving to exclude"
criterion.
BENEFITS AND
COSTS OF
THE BILL
16. The cost to the charity sector is not
analysed by the Bill or the Strategy Unit Report. Red tape, increased
bureaucracy, interventionism and prolonged costly arguments, of
which I have long experience, about unclear tests (activities
tests and new calls to "demonstrate" public benefit
and public character) are likely to benefit ingenious lawyers
rather than advance the interests of charity.
July 2004
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