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Lord Phillips of Sudbury: The noble Lord, Lord Hodgson of Astley Abbotts, has, as usual, put the case succinctly and clearly. The only point I wish to make in addition is to emphasise what has been said about the appointment of receivers and managers to a charity, which can be utterly devastating. There have been a number of examples over the past two years of charities which have suffered—and I use the term advisedly—a financial disadvantage consequent upon the appointment of a receiver and manager—and not only in terms of their fees, but generally—in excess of seven figures. As all the costs have to come from the charity's assets, it can completely derail a charity's purposes and activities.

Of course, the commission will not put in a receiver and manager unless it believes that there are good and weighty grounds why that should be done in the interests of the charity. None the less, to take that step without the trustees and charity knowing why it is being taken is rather like arresting someone and taking him before a court without telling him of what crime he is accused. This is the civil equivalent of someone charged with a criminal offence knowing what it is all about. It is not as technical as that, but the amendment would give the trustees the ability to adjudge what it is that the receiver or manager will be particularly looking at.

It is a thoroughly sensible and fair amendment. Given the spirit with which the Government have accepted earlier amendments, I hope that they will accept this one in principle if not in terms of its wording.

Lord Swinfen: The noble Lord, Lord Phillips of Sudbury, referred to the issue of the cost to the charity. At the other end, the appointment of a receiver or manager could very often make it virtually impossible for a charity to raise the necessary funds to undertake its charitable work. My noble friend's amendment is extremely sensible. I cannot see a good reason why the Government should refuse it.

Lord Bassam of Brighton: I have listened very carefully to the comments of the three noble Lords who have supported the amendment. We are not a million miles apart in what we expect the law to do. However, we have to consider carefully what receiver and manager appointments are all about and what they are a part of.
 
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In general terms, I am sure that noble Lords will accept that in most cases—and these cases do not arise very often, thankfully—this approach is adopted for very good reasons. When the Bill was in Grand Committee during the last Session I said that the appointment of a receiver and a manager—to be known as an "interim manager" under the Bill—is action undertaken by the commission only where it is absolutely necessary and in the bests interests of the charity to do so.

It ought to be remembered that in order to appoint a receiver and manager under Section 18(1)(vi) and in accordance with Section 19 of the 1993 Act, the commission must first open an inquiry under Section 8 of that Act. It must have good reason to do so, particularly now that the Bill places it under a duty to carry out its functions with due regard to the principles of what the noble Lord, Lord Hodgson, described as best regulatory practice, which is what it should be.

The grounds on which the commission can make such a decision to appoint a receiver and manager are limited to cases where the commission is satisfied that there is or has been misconduct or mismanagement—both of which are pretty profound for any charitable organisation to suffer—in the administration of the charity, or that it is necessary or desirable to act for the purposes of protecting the property or assets of the charity, or securing the charity's property for the proper application of the charity's purposes. As I said, such cases are rare.

In some cases notification and giving the reasons for exercising the power would not be in the best interests of the charity, particularly where assets are at risk. We discussed those sets of circumstances in earlier debates. Except when it would prejudice an inquiry into a charity, it is the commission's usual practice to inform the trustees within a reasonable time-frame why it has taken any significant action using its powers of investigation and remedy. In most cases, the commission will advise the trustees and take them carefully through the process, explaining exactly why the strategy has been adopted.

Lord Swinfen: The Minister used the term "reasonable time-frame". How long is that?

Lord Bassam of Brighton: In most circumstances, we would be talking about a matter of days. However, the commission has to consider what is reasonable in the circumstances. It is in the spirit of the way in which the commission works that its members would want to conduct these things at a fair pace so that people have some certainty and proper understanding of why particular actions have had to be adopted.

It is also the case that trustees will be given information about how to ask the commission formally to review a decision which it has made and about statutory rights of appeal. The commission's usual practice when appointing a receiver and manager is to inform the trustees on the day of the appointment and to ensure that reasons are given for that appointment. It is the usual practice that, on the
 
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day on which an appointment is made, trustees will be informed and the process will be explained to them. That is best regulatory practice. In addition, the reasons why a receiver and manager were appointed will be included in the inquiry report. It will be set out in no uncertain terms.

The current legal framework allows the commission to inform trustees in accordance with its usual practice, as I have described above, while providing flexibility for the particular cases when the commission must have discretion to act in the best interests of the charity. It is usually the case that trustees are informed on the day and in extreme circumstances in a matter of days, and in any event reasons will have been set out and carefully explained to those trustees. That is why I said that, in spirit, there is not a great deal of distance between us. However, because of the need to protect the charity—its assets and property and the way it is managed—we do not think that we can accept this amendment.

Lord Phillips of Sudbury: The Minister said a minute ago that the grounds for putting in a receiver or manager will be made explicit in the inquiry report. Of course, that is all very well, but that is after everything is done and dusted. The trustees of the charity want to know at the beginning.

Lord Bassam of Brighton: I also said that on the day of the appointment trustees will be advised and will be given reasons for the appointment. It is there at the outset and at the conclusion.

Lord Phillips of Sudbury: I am coming to that. The noble Lord went on to say that they will be told at the Beginning, or quickly, unless there is a good reason otherwise. That is the point. I would concede that this amendment should have latitude for the commission not to inform the trustees of the company if they would be prejudiced to the appointment of the receiver and manager in so doing. Amendment No. 39, which we are coming to in a minute, states:

If one had a similar caveat here, one has the spirit of the amendment in a way that meets the one good point that the Minister is making.

However, it is not fair that we have been driven to legislating detailed statutory stuff in relation to charity law with all the rights on the one side. We have the entitlement of the commission to do this and that, how it does it and why it does it, but when it comes to the issue of the protection of the trustees of the charity we say, "Well don't worry old chap because normally this is what we do".

At this juncture in the Bill, which runs through vast numbers of pages and schedules, the rights of the trustee and the charity need to be expressly included. This is not a "way out" right. It is fundamental that the trustees should know what is alleged against them unless telling them would, to give the Minister's example, endanger charitable assets. I agree that there is not much distance between the noble Lord, Lord Hodgson, myself and the Minister, provided that
 
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that change can be made. It is obvious that we cannot do it here and now, but there is no reason why it should not be done prior to the next stage.

5.45 pm

Lord Hodgson of Astley Abbotts: I accepted the Minister's strictures on Amendment No. 35, but I thought that those on Amendment No. 36 were slightly weaker. To say that this is usual practice or best practice on one side and have statutory requirements on the other is not a fair balance. Clearly, we do not want to be in a position where we prejudice charitable assets. However, in the situation that the Minister raises with us—that a set of trustees is playing fast and loose with charitable assets—if the communication has to be made within seven days of an appointment, and within those seven days the receiver manager has not secured the assets, he has not done his job very well.

We had the opportunity to include seven days to button things down and after that period the individuals involved had to be told. I do not find the Minister's answer very satisfactory and we may want to return to the amendment at a later date. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 20 [Power to give specific directions for protection of charity]:


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