Appealing to charity

The Charities and Trustee Investment (Scotland) Act 2005 (“the Act”) received Royal Assent on 14 July 2005 and it is intended that the majority of the provisions in the Act relating to the basic regulation of charities will come into force around April 2006.

The Act is broad in its scope. It deals inter alia with the regulation of charities in place of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990, provides a statutory definition of what is charitable in Scots law, defines the responsibilities of charity trustees, introduces a new regime for the reorganisation of charities, and provides for a new optional legal form for Scottish charities, the Scottish Charitable Incorporated Organisation or SCIO, though this is not likely to be introduced until 2007.

OSCR as regulator

Central to many of these reforms is the role of the Office of the Scottish Charity Regulator (OSCR), established under the Act as a non-ministerial office holder of the Scottish Administration as from February 2006 rather than as previously an Executive Agency of the Scottish Executive. As the new regulator for charities in Scotland, OSCR derives its functions and powers for regulation and supervision of charities from the Act. Its intended role is to regulate charities proportionately and transparently, in the public interest.

Under the Act, OSCR must keep a register of charities to be known as the Scottish Charity Register. Decisions on charitable status as from April this year are intended to be taken by OSCR rather than the Inland Revenue. Every charity will have to demonstrate that it provides public benefit as well as having one or more of the listed charitable purposes. OSCR is under an obligation to publish guidance as to how it will determine whether a body meets the charity test; the consultation document was issued in November last year.

OSCR is also given specific powers relating among other matters to charity names, constitutions and reorganisations, involving processes for requests for consents and notifications of changes which are currently also out for consultation; inquiries about charities, including powers of suspension or to give directions not to undertake specified activities for up to six months or to restrict the transactions or payments that may be made without OSCR’s consent; the preparation of annual accounts; and dealing with dormant bank accounts of charities. 

Decisions and appeals

Arising from the exercise of these powers, a challenge can be taken under section 71 against a considerable range of decisions by OSCR (or by another regulator to whom OSCR has delegated its functions under section 38). These relate among other matters to applications for entry in the register, changes of name, amendment of purposes, reorganisation and winding up, suspension of managers, giving of directions, false holding out, recovery of unauthorised remuneration, and designated religious charities and national collectors.

Under section 75 and schedule 2 the Act establishes the Scottish Charity Appeals Panel to provide an accessible appeals procedure without recourse to the courts. The Scottish Ministers will appoint 24 members to a pool who will then be eligible to sit on a panel as and when needed. Eight of these will be appointed to act as chairs. When an appeal is lodged, a panel of three, including one of the members appointed to be a chair, will be chosen to sit. This will be done on a rota basis but will take account of any potential conflicts of interest or particular areas of expertise.

The procedures and powers of the panel will be set out in rules made under schedule 2. These are to be the subject of consultation by the Scottish Executive and will be laid before the Scottish Parliament in the spring after being submitted to the Scottish Committee of the Council on Tribunals.

A viable option

The appeals process is intended to provide an important balance to the new regulatory regime and to make appealing decisions a viable and real option. The Act provides for a three-stage appeals process for decisions made by OSCR (or its delegate). The process begins with the charity, trustee or employee concerned asking OSCR to review a decision under section 71. OSCR must review the decision within 21 days, confirm, vary, revise or revoke it, and give notice of its decision with reasons to the person who requested the review. OSCR must also publish any further procedures in accordance with which reviews are to be conducted.

If OSCR confirms the decision (with or without variations), the person or charity involved may appeal to the panel under section 76. The panel will consider the appeal and reach a decision either following a hearing or on the basis of the information sent to it by the parties. The panel can confirm OSCR’s decision, quash the decision and direct OSCR to take such action as the panel thinks fit, or remit to OSCR with the panel’s reasons for reconsideration. If OSCR reconfirms a decision remitted to it by the panel, the person subject to that decision may again appeal to the panel. Either party can appeal a decision by the panel to the Court of Session who may confirm or quash the decision. A decision by OSCR to suspend a charity trustee, agent or employee can be appealed directly to the Court of Session. 

A question of remedy

The Act is based on the proposals of the McFadden Commission on the reform of Scottish charity law, which included the recommendation that a review tribunal should be established. According to the Consultation on the Review of Scottish Charity Law undertaken by the Scottish Executive on the McFadden proposals, whilst just over half (52%) of respondents broadly agreed with this recommendation, it did attract concern relating to the composition and scope of the tribunal, and perhaps more generally the over-legalisation of the process. Several respondents argued for open application and representation of the charitable sector on the tribunal.

The Law Society of Scotland did not agree with the McFadden recommendation, commenting:

“There should be a clear right to challenge decisions made by CharityScotland. However, there is, in the Working Party’s view, no need to create a separate right of appeal. Such decisions would be capable of being judicially reviewed and there is therefore already a remedy in existence… The Working Party believes that the courts can deal adequately with these issues and as the number of cases is likely to be small, the Working Party questions the need for an ad hoc tribunal”.

In the event, the view was taken, probably with some justification, that judicial review was not a cheap mechanism for the resolution of grievances, and that provided the appeal mechanism put in place has been exhausted, judicial review would be a competent procedure anyway.

Members of the public who wish to challenge OSCR’s decisions will be able to do so through the Public Services Ombudsman or by way of judicial review.

Good governance

It is clear from the divergence of views that there were genuine concerns, and it is submitted that those appointed to the panel should include persons having experience of governance and knowledge of the charity sector and its operation in Scotland who will be able to empathise with the aims and objectives of the Act and to avoid the over-legalisation of the process. With this in mind, due emphasis should also be placed on the panel’s role in developing guidance on the appeals process and providing forms for lodging appeals and supporting information.

In the Leggatt Report, page 6, the view was expressed that: “It should never be forgotten that tribunals exist for users, and not the other way round. No matter how good tribunals may be, they do not fulfil their functions unless they are accessible by the people who want to use them, and unless the users receive the help they need to prepare and present their cases”.

The Act is primarily concerned with achieving good governance within the Scottish charitable sector and the panel will clearly have an important role to play not only in reaching its decisions, but also in ensuring its procedures are operated in a manner which is in keeping with the spirit of the Act.

Stewart Graham is a partner in Stodarts, Hamilton