The role of a charity trustee is set out by the Charity Commission's ("the Commission") current guidance as follows:
'They have and must accept ultimate responsibility for directing the affairs of a charity, and ensuring that it is solvent, well-run and delivering the charitable outcomes for the benefit of the public for which it has been set up.' (Charity Commission: The Essential Trustee: What you need to know (CC3) – Section D)
In addition to this there are generally further powers and responsibilities set out in the document which governs the Charity's rules and thus a charity trustee will commit a breach of trust or duty if s/he carries out an act which is not authorised by the governing document or contradicts the above role.
The majority of those who act as charity trustees are unpaid volunteers, which has historically led to calls that volunteers should not be held personally responsible for their acts. The courts have reacted to this and generally will not hold a charity trustee personally responsible for those actions which have been reasonably undertaken, despite the fact that they may have been mistaken. However, if a charity trustee is paid for his/her services or holds himself out as having a particular expertise then a higher standard of care may be implied. If a charity trustee commits a deliberate or reckless breach, amounting to misconduct and serious losses to the charity, then the Commission can hold that charity trustee to be personally accountable.
The Commission's new guidance now gives charity trustees the added responsibility to respond and take action to recover funds lost to a charity through deliberate or reckless behaviour. The new expectations of charity trustees include:
- Considering what steps to take to recover property, in the best interests of the charity;
- Taking legal advice;
- Considering the economic prospects of successfully recovering the property and the proportionality of their actions; and
- Seeking the Commission's consent or advice where necessary and appropriate.
However, the Commission will not leave it all to the charity trustees. It states in its guidance that in situations where the charity trustees are unwilling or unable to act, the breach is sufficiently serious and there is a significant amount of money involved, the Commission will step in and use its powers of intervention and remedy. Some of the powers that the Commission has at its disposal include giving regulatory advice to charity trustees on the discharge of their duties, holding a statutory enquiry, appointing neutral third parties to act as replacement charity trustees and even freezing or restraining the disposal of charity property.
So what will amount to a serious breach? The Commission sheds light on what it will consider to be a serious breach. This is to include situations where charity trustees gain personally from a deliberate or reckless breach (ie, the misappropriation of trust property and receipt of unauthorised benefits), or poor decision making which leads to the charity suffering significant losses.
There are also some situations in which the Commission will consider bringing legal proceedings itself to recover funds lost to charities. In order to do so it must be in the public interest after having considered the ability of those responsible to repay the sums, the impact on the charity and its beneficiaries (will it affect its ability in the future to raise funds?), the importance of volunteers in the charity sector and the impact legal proceedings could have on the desire to be a voluntary charity trustee, as well as the need to maintain public trust and confidence in the charity.
In essence this new guidance is aimed as a reminder to charity trustees that the Commission will not simply swoop in to save the day when charity money or property is lost. Their response is that charity trustees must be aware that they are primarily responsible for the charity and it is they who should be seeking restitution and the recovery of property when there have been acts of breach of trust and serious misconduct. It should also be noted that this does not mean that charity trustees will be left to clear up the mess personally and solely where they have made honest mistakes or failings, even if they cause losses as a result.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
