Clause 38

Charities Bill [Lords] – in a Public Bill Committee at 4:45 pm on 11 July 2006.

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Power of Commission to relieve trustees, auditors etc. from liability for breach of trust or duty

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I beg to move amendment No. 28, in clause 38, page 37, line 25, at end insert—

‘(d) a trustee or auditor of a charitable incorporated organisation.’.

Photo of Joan Humble Joan Humble Labour, Blackpool North and Fleetwood

With this it will be convenient to discuss the following amendments:

No. 132, in clause 38, page 38, line 10, at end insert—

‘(7) Any prosecution of a trustee of an unincorporated charitable trust under section 3 of the Health and Safety at Work etc Act 1974 (c.37) shall require the consent of a law officer and the Charity Commission and must satisfy the public benefit test.

(8) A law officer has the power to stop the prosecution, under this Act or the Health and Safety at Work etc Act 1974, of a trustee of an unincorporated charitable trust if it is in the public interest to do so.’.

No. 122, in clause 38, page 38, line 21, at end insert—

‘73F Court jurisdiction

The court shall have parallel jurisdiction with the Commission under section 73D in respect of the relief of charity trustees of Charitable Incorporated Organisations.’.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

Amendments Nos. 28 and 122 might simply arise from further misapprehension as to the position of a charitable incorporated organisation. New section 73D does not appear to provide for a trustee or an auditor of a charitable incorporated organisation to be relieved from liability—in other words, to be insured—which I believe is the purpose of the clause. That is the purpose of amendment no. 28.

Amendment No. 38 goes in the same direction. The Charity Law Association has said that:

“the Charity Commission has power to relieve charity trustees and auditors”— of charitable incorporated organisations—

“but the Court power has not been extended to allow for the relief by the Court of charity trustees of a Charitable Incorporated Organisation.”

In contrast, the court has already power to relieve trustees and company directors of corporate charities under the Trustee Act 1925 and the Companies Act 1985.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I am impressed by the hon. Member for Isle of Wight’s search for loopholes in the legislation, and I am quite impressed that the Government are still finding one or two typos in the legislation, despite 70 hours of parliamentary scrutiny, and scrutiny by some of the most eminent charity lawyers in the land. One of the hon. Gentleman’s two amendments may deal with a loophole, but not amendment No. 28. I cannot understand why the additional power is needed for charitable incorporated organisations, as all charitable incorporated organisations are charities. By definition, therefore, the powers set out in new section 73D of the Charities Act 1993 will also apply to charity incorporated organisations, and they will not have different books to  be audited. As far as I can tell, amendment No. 28 is unnecessary, but I look forward to the Minister’s comments on it.

The hon. Member for Isle of Wight may well have found a loophole with amendment No. 122. I look forward to the Minister’s comments on it, because at the moment the commission seems to be the sole holder of the power to relieve trustees and auditors from breach of trust or duty on the part of CIOs. The courts may well have been missed out of that process. I view that amendment sympathetically.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

I shall speak to amendment No. 132. Clause 38 is about the power of the commission “to relieve trustees, auditors etc. from liability for breach of trust or duty”. It says:

“After section 73C of the 1993 Act (inserted by section 37 above) insert—

73D Power to relieve trustees, auditors etc. from liability for breach of trust or duty”

I do not expect the Minister to be able to give a detailed response, and it would not necessarily be proper for him to do so, but it is proper for me to raise these issues in Committee and to expect to a response, in time, from Government. “Government” includes Law Officers, the Department for Work and Pensions, which is responsible for the Health and Safety at Work etc. Act 1974, and the Minister’s Department, which has responsibility for charities.

My concern is relatively narrow; it is about trustees of unincorporated charities. If I described a situation in less detail than I might, it is because I am describing circumstances in which it is probable that there will be a prosecution. There is no prosecution at the moment, so I am within parliamentary conventions, but I do not want to go so far as to prejudice in any sense what might properly follow. Also, if I may interrupt myself, when I was Minister in the Department of Employment—with responsibility for legislation on health and safety at work and for the Health and Safety Commission, which supervises the Health and Safety Executive—almost my first responsibility was to go to a residential property in Putney that was the site of a gas explosion, in which people had died. When people ask me whether I am aware of what happens when unauthorised work or incompetent work takes place in relation to gas, my answer is yes, I do. I met the survivors and relatives of those who died.

If there has been an apparent breach of health and safety regulations, the Health and Safety Executive has various responsibilities. The people who do not live up to their responsibilities are liable to prosecution. It is quite possible that an incorporated body would be liable to prosecution, too, in certain circumstances. The Health and Safety Executive is open about its procedures and codes, and I pay tribute to it for that. In a letter of 10 July to those of us who do some research on the subject, Geoffrey Podger, the chief executive, lays out what is available—and it is well known, in any case—so I pay tribute to the HSE for that.

It is open to the Health and Safety Executive—it may, in a sense, be its responsibility—to consider prosecuting not only the workers and those who supervise them, but the body that is in effect the employer. Were a charity to be incorporated, individual trustees would not be open to individual prosecution unless they had done something so negligent or so deliberate that they opened themselves up to that possibility. Normally, it would be an incorporated body that would be exposed to the risk. There are a large number of unincorporated trusts around the country. Many of those trustees would probably understand that they could be regarded as employers. They might think that they have a chief executive and that the chief executive is the person who provides the employment role, but in fact the trustees do. If the charity is incorporated, they are exposed to risk.

That is why I think that amendment No. 132, having two points, properly comes under clause 38. The first provision that it would insert is:

“(7) Any prosecution of a trustee of an unincorporated charitable trust under section 3 of the Health and Safety at Work etc Act 1974 (c.37) shall require the consent of a law officer and the Charity Commission and must satisfy the public benefit test.”

Mr. Podger helpfully points out that the Attorney-General would have the power to discontinue an action by directing that a nolle prosequi be entered

“in any proceedings upon indictment at any time after the bill of indictment is signed and before judgment but not before the bill of indictment has been preferred. The effect is to put an end to the prosecution but it does not equate to a discharge or an acquittal and the accused can still be re-indicted.”

He advises me by extension that the use of the power is rare and that it is up to me if I want to pursue the matter with the Attorney-General.

Graham Zellick, former vice-chancellor of the university of London, made a similar point in a letter to a law officer, saying that a prosecution by the Health and Safety Executive is not currently a matter for the Attorney-General but deserves consideration in the future. The Attorney-General has power to halt prosecutions, and the particular matter that I am concerned about has been drawn to his attention.

Graham Zellick and I are trustees of a trust that had almshouses. With the Charity Commission’s permission, we sold the almshouses and put the money into another charity, and homes are now provided to twice as many people. The events that took place did not take place in one of the homes that we as trustees had effectively helped to fund.

I turn to the Charity Commission’s leaflet “Responsibilities of Charity Trustees: A Summary”. I emphasise that it is a summary, and so would the Charity Commission if it had the chance. The leaflet, CC3(a), is dated January 2002, and says:

“If your charity needs to employ staff, you should give each employee a proper contract of employment and a written job description making clear the extent of his or her authority to act on your behalf.”

The charities with which I am mainly involved—those associated with the drapers’ livery company—go through a risk assessment. Each year, we review our responsibilities to see whether any changes are necessary with the help of our staff. One of the issues with almshouses is breach of regulations. Under  “Almshouses: Health and Safety” in the risk assessment, the consequences of failure to comply with legislation are a risk of

“Death or permanent disability, significant harm or lasting effects” and could involve

“Moderate to severe injury to individuals” or

“Financial penalties”.

Then it lists actions and controls currently in place.

I am not one of the trustees involved in the incident about which I shall not go into great detail to put it in a roundabout way, but I could have been. In some sense, perhaps I should have been. I believe that if trustees openly and explicitly approve health and safety procedures that include, for example, giving the instruction that any gas work be done by a Corgi-registered gas fitter, reasonably practical measures have been taken. If it then turns out that work within the organisation is done by someone who is not a Corgi-registered gas fitter, the only way that the trustees will know that is if they are actually present to supervise the work or when an employee gives an instruction to someone not qualified to carry it out. I do not believe that that falls within what is reasonably practical.

I am not asking the Minister to respond to that, but I hope that what I have said will be shared, if necessary by a case conference, with the Attorney-General, a Minister responsible for charities, a Minister from the Department for Work and Pensions, someone from the Health and Safety Executive and, I hope, someone from the Health and Safety Commission as well. In my view, if a charity explicitly approves a method of working that is required by law and safe and it then does not happen, the fact that there are unincorporated trustees should not make it open to prosecution unless there is a special reason.

I could read out the whole of Geoffrey Podger’s helpful letter, and there is other correspondence but I do not think that the Committee needs to be troubled with it. However, I will make the information available to anyone who is interested in it. I hope that, if I withdraw the amendment, which I think it would be proper for me to do, perhaps we could go a stage further on Report and get a co-ordinated Government view on the issues that I have been raising.

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland 5:00, 11 July 2006

I understand and am sympathetic to the hon. Gentleman’s argument, but could he tease out for us why this case is different from cases involving corporate manslaughter?

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

The police have decided that there is not a case for manslaughter, so there is no question of corporate manslaughter. It is not a case of manslaughter, whether by a corporate or unincorporated body—that is not in the field. There is no question of special treatment for unincorporated trustees, as it has been decided that there can be no prosecution for manslaughter. I hope that that answers the hon. Lady’s question.

The second part of my amendment is that the Law Officers should have the power under the 1993 Act or the Health and Safety at Work etc. Act 1974 to stop the prosecution of a trustee of an unincorporated charitable trust if it is in the public interest to do so. I have no doubt that every unincorporated trust in the country will be tempted to turn itself into an incorporated trust as more publicity becomes available on the issue that I have raised. I do not know how many of them there are, but the Minister may know. Perhaps when we return in the autumn, we can have a discussion about that.

It may be that charitable trusts would all be wise to incorporate, but it seems that there must be a shorter way of ensuring that justice is available on behalf of society and the victims—there certainly have been victims. It should be open to the Health and Safety Executive to make proper decisions on prosecutions. I am not in any sense suggesting that its approach is improper—rather the reverse. I recognise its validity, which is open and clear, but it is not just I as a Member of Parliament or as a trustee but Parliament and the Government as a whole who must ensure that potential injustice is avoided.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I am sympathetic to what the hon. Member for Worthing, West (Peter Bottomley) said, and I hesitate to question his judgment in an area in which he is obviously expert and experienced. Of course, he is right that there are many unincorporated trusts and that they are an important part of the voluntary and charitable sector—a sector within a sector. Indeed, I can think of a good example in my constituency. The Charles Irving Charitable Trust celebrates the flamboyant and liberal life of Charles Irving, a predecessor as MP for Cheltenham. The trustees of that body do nothing more risky than meet to dispose of the moneys in its bank account.

It seems a strange response to the genuine problems that the hon. Gentleman identified to introduce a loophole in the law that will then apply to all unincorporated charitable trusts whether or not they have a serious problem of risk. I cannot quite work out why he believes that CIO status is not sufficient for the unincorporated trusts that he described, why they should be so afraid of incorporating—in a sense, the purpose of establishing the new status is to provide a less onerous form of incorporation—or whether the current liability that he describes is such a deterrent to forming or running unincorporated trusts, as there are many vibrant unincorporated trusts today.

I would have thought that a charity that owns almshouses or other physical property, and which would obviously have a higher level of risk, probably should be a limited liability company or a CIO. In effect, what the hon. Gentleman is doing through his amendment is advising them not to incorporate and then introducing a complicated exemption for them in law. That is not in the spirit of the Bill, which is trying to move towards more transparency and more simplicity. I would welcome the Minister’s thoughts, as I might be misreading the situation unfairly.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

I am not suggesting anything other than if the prosecution of an unincorporated charitable trust under health and safety provisions is  being contemplated, it should require the consent of a Law Officer and the Charity Commission and must satisfy the public benefit test. It is not a loophole. If the Charity Commission, the Law Officer and the public benefit test were satisfied, the prosecution would go ahead. Secondly, the hon. Gentleman asked whether it would make sense for people to be incorporated. The answer is clearly yes.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

If the hon. Gentleman is right that in such circumstances it would be sensible for those companies to be incorporated, I am still not quite sure why the amendment is absolutely necessary. I take his word that he is absolutely sincere in thinking that it is and look forward to hearing the Minister’s comments.

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office)

Let me deal first with amendments Nos. 28 and 122, and then I shall come to the amendment tabled by the hon. Member for Worthing, West. Full marks to the hon. Member for Isle of Wight in one sense, and the hon. Member for Cheltenham in another.

Amendment No. 28 is unnecessary because the provision already exists. CIOs will be charities and therefore the trustees and auditors are already included in the power of the commission to relieve from liability for breach of trust or duty under clause 38. However, as spotted by the hon. Member for Cheltenham, amendment No. 122, which was tabled by the hon. Member for Isle of Wight, identifies a gap in the legislation even at this late stage. We shall come forward on Report to remedy that gap. I am grateful to the hon. Gentleman for tabling the amendment, because he has drawn our attention to an important issue.

I shall now deal with amendment No. 132. Obviously, I shall start by saying that I am unable to comment on any specific case, and I know that the hon. Member for Worthing, West would not expect me to. My comments will be a little more general. As a relatively junior Member of the House, I thought that the hon. Gentleman spoke incredibly passionately and eloquently about the subject of the amendment.

I shall take the matter away, think further about it and talk to colleagues in government. The material part of the hon. Gentleman’s amendment is subsection (7) rather than subsection (8). As he says, the little-known—at least to me—procedure of nolle prosequi allows the Law Officer to stop proceedings on indictment. A public interest test is at least implicit, if not explicit, in that.

We should take on board the points made by the hon. Member for Cheltenham about subsection (7), as the new form of CIO is designed precisely to provide limited liability and those other aspects that are currently available only in company law. Nevertheless, the hon. Member for Worthing, West spoke eloquently about some of the risks facing trustees of unincorporated trusts. The best I can do is, as he says, not give a specific answer on the spot. I think that he has had a response from the Charity Commission, and that at least shows the seriousness with which it is  taking the issue and contains specific responses. I shall take the matter away and communicate further with him.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

I am grateful to the Minister and to the hon. Member for Cheltenham. I want to correct something that I said that was wrong. It was not the police who decided not to pursue manslaughter charges but the Crown Prosecution Service. I want to correct that.

The Minister rightly reminded me of the helpful letter from Andrew Hind, chief executive of the Charity Commission. I do not want to give an unbalanced impression of that letter, but it is worth putting one sentence on the record. He states:

“We do share your concern that facing liabilities such as this may deter people from becoming trustees of charities that run undertakings such as the Whiteley Homes Trust.”

I should be interested to know whether the charity commissioners, when reviewing their own health and safety at work responsibilities and risk assessments, include as explicitly as the trustees of the Whiteley Homes Trust did a requirement that gas works should be done by CORGI-registered fitters. I should be interested to know whether the management board of the Minister’s Department or that of the Department for Work and Pensions, which is responsible for the Health and Safety Commission, have done a risk assessment that includes a statement that gas works should be done by CORGI-registered fitters. I should also be interested to know what steps have been taken—or what reasonably practicable steps will now be taken—to ensure that those measures and agreements are undertaken as they should be. I shall not press the amendment.

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office) 5:15, 11 July 2006

I thank the hon. Gentleman for his remarks, although I do not have specific responses on the procedures that he raised.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I welcome the words of the hon. Member for Cheltenham on amendment No. 122. He quite rightly said that amendment No. 28 is unnecessary, but I am grateful for the Minister’s words on that amendment and for his award of full marks, which should go to the CLA—which I always think of as the Country Land and Business Association, rather than the Charity Law Association, with which I am sure hon. Members are familiar, but there we are.

Photo of Alun Michael Alun Michael Labour, Cardiff South and Penarth

It is interesting to note that the pervasive use of acronyms means that the Country Land and Business Association still calls itself the CLA, even though it is has inserted the word “Business” in its title.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

Absolutely—some of us also have difficulties with CSAs, which are variously the Child Support Agency and children’s services authorities.

My hon. Friend the Member for Worthing, West certainly has a point. I look forward with interest to the response that the Minister will bring forward at a later stage.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

The chief executive of the Health and Safety Executive rightly said in the letter that decisions had to be taken without regard to political pressure. I hope that what I have said will be not be regarded as political pressure, but as a search for what is right.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 38 ordered to stand part of the Bill.

Clause 39 ordered to stand part of the Bill.