HC Deb 21 July 1960 vol 627 cc867-76

Debate resumed:

10.0 p.m.

The Solicitor-General

I was saying that the case put by the hon. Gentleman is the creation of a new unregistered charity. It matters not that the trustees already appear on the register as trustees of an existing charity. For example, if money is given to the governors of a school who are its trustees for the promotion of teetotal teashops, that is a new unregistered charity. It can then be challenged by the residuary legatees in the administration of the estate. In any case, there is no time limit on their subsequently seeking to remove a registered charity from the Register on the ground that it is not truly, when properly considered, in law a charity. If they succeed there is a resulting trust as to all property in the hands of the trustees in favour of the original donors or the people who claim through them, but the trustees are completely protected under the Clause as to income which they have expended.

The point raised by my hon. Friend the Member for Crosby (Mr. Graham Page) is a slightly different one. The Clause provides that an institution shall be conclusively presumed to be a charity in respect of any period during which it was on the register, whether it was then a charity in fact and in law or not. The Amendment seeks to delete "conclusively".

I am bound to advise the House that the practical effect of that would be to nullify the whole Clause. It would create a rebuttable presumption that an institution on the register was a charity, but that is of no practical use. The only purpose of a rebuttable presumption is to alter the onus of proof so that the person who alleges the contrary must prove it. There is no question of onus of proof in considering whether an institution is a charity. It is purely a legal question: having examined the declared trusts, does it fall within the legal concept of charity? Where the matter is one of law, only a conclusive presumption can avail.

I therefore trust that with that explanation the House will feel that the Clause should stand in both of these respects as it is at present.

Amendment negatived.

Mr. Graham Page

I beg to move, in page 6, line 29, at the end to insert: (4) A decision of the Commissioners or of the High Court that an institution should be entered in or removed from the register shall state the date upon which such entry or removal (as the case may be) shall be effective and such date may be a date then past. This is perhaps a modified form of what we have just been discussing. The Clause as it stands at present allows the Commissioners or the court on appeal to declare that an institution is not a charity and should be removed from the Register only at the date that that decision is given. It may be that the institution has been wrongly registered; that it ought not to have been registered as a charity at the outset. It may be that after registration it has ceased to have charitable objects. I should have thought that the Commissioners or the High Court ought to be permitted to say at what date that institution ceased to be a charity and ought to be removed from the register; or, to take it the other way round, at what date an institution commenced to be a charity, and ought to have been registered.

Let me take the first example, that of the court being given the power to say when an institution that is on the register ceased to be a charity. I take, again, the case of the gift under a will to an institution which may or may not be charitable. We will assume that the gift is given on trust for that institution—not an outright gift, but given on trust. Therefore, the institution will be entitled, if it is a charity, to the income from that gift. If it is not a charity, it will not be entitled to the income from that gift, because the rule against perpetuities will be broken.

Tie residuary legatee wants to question whether or not it is a charity and, therefore, whether or not the institution is entitled to the income. Surely, he should be entitled, if the income is still in the hands of the trustees, to go back to the date of death or, if the point does not arise until some time considerably after death, to go back to the date when the institution ceased to be a charity. In short, if there is income still in the hands of the trustees, the residuary legatee should be entitled to ask the court to place a date upon which the institution ceased to be a charity, upon which the gift failed, and from which he is entitled to the income.

The Solicitor-General

The purpose of the Amendment is to give the court and the Commissioners complete freedom to select any day, past, present or future, as from which any registration shall cease to operate—or, indeed, shall begin. The first thing I would say is that the Amendment gives no indication at all of the principles upon which the apparently unlimited discretion should be exercised.

As I indicated on the earlier Amendment, the whole purpose of Clause 5 is to convert a non-charity into a charity in respect of any period when it is on the register unchallenged. That, of course, protects the trustees in respect of the tax payable, protects them in respect of their rating assessment and, indeed, protects them from actions by the persons entitled under any resulting trust in so far as they have expended income.

The benefit of such a provision obviously cannot be made the subject of discretion, so as to enable the court and the Commissioners to alter the rights and obligations at will. The example given by my hon. Friend was that of a gift under a will or trust to pay the income, as I understood it, in perpetuity, without any limitation—

Mr. Graham Page

indicated assent.

The Solicitor-General

—to an institution which may or may not be a charity, but I think that he implied that it was on the register as a charity. If it was not on the register already, it could, of course, be challenged in the ordinary way in the administration of the estate. Let us suppose that it is on the register. The first thing that the next of kin will do will be to give notice to the trustee of the will, and clearly they will not pay over any income to the trustees of the charity. He will give notice to the trustees of the will that he is disputing the matter and they will not pay anything over until that matter has been determined on an application to rectify the register. But suppose the income is still in the hands of the trustees. If by that my hon. Friend meant the trustees of the will, then indeed any order will in practice relate back to the date of death because that will be unexpended income and there is a resulting trust in favour of the next of kin.

Mr. Graham Page

With respect to my hon. and learned Friend, I would have thought that that was not so, and that the income would be apportioned as at the date when the order was made.

The Solicitor-General

This is unexpended income. I thought that the House accepted—I have no doubt about this—that in so far as income has not been expended, there is a resulting trust in favour of the donor or his next of kin or personal representative, just as much as in the case of capital.

The only case in which it is possible to remove an institution from the register with effect from some back date, other than the removal on appeal, is the obvious case to which I referred earlier under Clause 4 (3) where the trusts are altered, for example, by the exercise of a power of revocation after it has been put on the register. In that case the removal can date back to the date on which the charity ceased to be a charity, which is the other case which was put to me by my hon. Friend.

I hope that with that explanation, my hon. Friend will see that the Clause is right as it stands.

Sir Hugh Lucas-Tooth (Hendon, South)

My hon. and learned Friend dealt with the case where there is an unexpended income in the hands of the trustees of the will. Then there is the further case where there is unexpended income in the hands of the trustees of the charity. Perhaps capital has been paid over to the trustees, and the challenge comes later, or it may be that some income has been paid over and they have not yet expended it. I think it is right that, where there is such unexpended income in the hands of the charity trustees, that has to be paid back again under the resulting trust.

The Solicitor-General

Yes, that certainly is my understanding of the law. I think that is the case that my hon. Friend cleared up in Committee.

Amendment negatived.

Mr. Graham Page

I beg to move, in page 6, line 33, to leave out from the beginning to the first "the" in line 34 and to insert: decision on appeal has been made". Would it be convenient, Mr. Deputy-Speaker, to take with this Amendment the next Amendment, in line 39, leave out subsection (5) and insert: (5) A decision on appeal under subsection (3) above shall not preclude the commissioners from arriving at any further decision affecting the registration or removal from the register of an institution for any period subsequent to the decision on appeal?

Mr. Deputy-Speaker (Sir Gordon Touche)

I think that would be convenient.

Mr. Graham Page

Under a later part of the Bill, in paragraph 1 of the First Schedule, the Charity Commissioners are stated to be civil servants. Here in Clause 5 we are giving such civil servants the power to nullify the judgment of the High Court. Putting it briefly and simply, that its what subsection (4) pro vides. Indeed, they may nullify not only the judgment of the High Court but the judgment of another place sitting judicially if a case reached them on appeal. Moreover, it is not even a matter of formally nullifying it by any sort of order. They just ignore it. The Charity Commissioners need not bring a High Court judgment into effect if they are not satisfied that it should come into effect.

10.15 p.m.

I cannot recollect any other occasion in the law on which a High Court judgment could be ignored in such a fashion. By subsection (4), a decision of the High Court is of no effect until the Commissioners are satisfied that it should stand. This really is an impertinence and an insult to the High Court, and it is a precedent in the Bill which I respectfully submit ought not to be allowed to stand.

I come now to subsection (5). The High Court has given its judgment. The parties Tinny have gone to great expense in litigation, and the court may well have spent a great deal of time on the case. The taxpayer, too, may have been put to expense because the parties may be assisted under the Legal Aid Scheme. After all this paraphernalia of litigation, the High Court judgment may be ignored because the Charity Commissioners may, without letting it take effect, consider it afresh, and the issue is not concluded by the decision of the court if it appears to the Commissioners that there has been some change in circumstances or there is a later decision of 'the court which alters the situation.

How can the Charity Commissioners say whether a later decision of the court alters the decision Which the court has given in a particular case? They ought to apply to the High Court for a further order. It is right that they should consider the circumstances if there are fresh circumstances arising after the decision of the High Court, but not so as to make that consideration retrospective and have the effect of upsetting the judgment. It may be that, after judgment has been given, the institution changes its objects and, therefore, ceases to be a charity. Of course, new circumstances then apply and it is right for the Charity Commissioners to consider the matter afresh. But the power they are given by subsection (5) is not merely to consider fresh circumstances arising after the decision of the High Court but to look at the whole case afresh and decide that the High Court was wrong, that they, the Commissioners, will not abide by the decision of the court at all. As I say, the matter may have gone on appeal to a tribunal much higher than the High Court, if I understand 'the matter aright.

By my Amendments, I have deleted from subsection (4) the power of the Commissioners to ignore the decision of the High Court, whether or not they are satisfied that it should stand, and by substitution of a new subsection (5) I suggest that they be given power 'to consider fresh circumstances arising after the judgment, and to that extent to regard the judgment as not conclusive, but not to review the judgment as a sort of court of appeal from the High Court.

The Solicitor-General

It may be convenient if I deal with the Amendments separately, because each raises a different point. Subsection (4) provides that where there is an appeal to the court the Commissioners are to mark the entry in the register as being in suspense, and it is to continue so until the Commissioners are satisfied whether their decision to register it is or is not to stand. I do not see how that provision merits the language used by my hon. Friend—such language as "ignoring the judgment of the High Court "or," ignoring the judgment of another place". On the contrary, when there is an appeal it is surely reasonable to put the matter in suspense so that transactions do not take place on the basis of a registration which is in dispute.

The purpose of the Amendment is to alter the words is or is not to stand to the words until the decision on appeal has been made. It is an attempt to improve the drafting.

But the Amendment proceeds on the assumption that every appeal will be decided and that, having been decided, it will stand. Neither of those assumptions is necessarily well founded. In the first place, it is quite common for proceedings to be commenced and yet neither brought to trial nor dismissed for want of prosecution. Similarly, there may be an appeal from the decision of the trial judge to the Court of Appeal, and it may go further, to the House of Lords. Therefore, as a practical matter, the Commissioners must be allowed to maintain the suspension if they know that an appeal against the trial judge is to be brought, and, similarly, to put an end to the suspension as soon as they know that the matter is not to be proceeded with.

The Amendment 'to subsection (5) covers a different point. The purpose of that subsection is to prevent the registration of an institution becoming resjudicata—in other words, a judgment binding all parties and all persons who may be interested—so as to prevent the Commissioners from taking account of a subsequent decision of the courts, or changed circumstances, in deciding whether an institution should or should not be registered. My hon. Friend mentioned a change of purposes, but that is taken care of by Clause 4 (3). This is a change of circumstances, and 'the Commissioners cannot take a charity from the register retrospectively except in the solitary case of a change of purposes, which is dealt with by Clause 4 (3).

The purpose of the Amendment seems to be to simplify that provision by eliminating the limitations, presumably on the assumption that the Commissioners will act reasonably. It does not affect the real purpose of subsection (5); it merely removes the words of limitation. But I should have thought that there was an advantage in making it clear that the decision of the court will be final in the absence either of some subsequent adverse decision or a definite change of circumstances. First, it indicates clearly to the Commissioners and everybody else what are the events which warrant a reconsideration and, secondly, it serves to prevent any mistaken notion that there is no point in appealing. Therefore, on the general approach of my hon. Friend, it seems to me that the subsection as drafted is preferable to the subsection as he seeks to amend it.

Mr. Fletcher

For my part, the Solicitor-General has effectively answered the points made by the hon. Member for Crosby (Mr. Graham Page) concerning his second Amendment to omit subsection (5) and substitute different words. It seems to me right that subsections (5) should stand in order to prevent the operation of the res judicata rule.

I am not so happy with regard to the Solicitor-General's explanation of the wording in subsection (4). It seemed to me that the hon. Member for Crosby was sound in criticising the language. It is unfortunate language. It appears to suggest that the Commissioners have a discretion to decide whether a decision of the High Court is to stand.

The Solicitor-General said that there may be circumstances in which it is not known whether an appeal will be proceeded with or whether it may be entered and subsequently dismissed for want of prosecution. That opens up a prospect of considerable uncertainty. If that uncertainty is to exist, it does not follow that it should be right for the Commissioners to have the discretion to say whether the charity should remain on the Register.

Sir H. Lucas-Tooth

Surely, the wording of the subsection only authorises the Commissioners to hold the charity in suspense. They cannot come to a decision on it.

Mr. Fletcher

It authorises the Commissioners to refrain from acting on a decision of the High Court until they are satisfied that the decision is to stand. We all now appreciate what is intended by these words, but having heard the argument of the hon. Member for Crosby and the attempted justification of the Solicitor-General, it seems to me that the words are not as happily drawn as they might be. I wonder whether it might be possible, even at this late stage of the Bill, for the Solicitor-General to consider whether some other words might be possible to give effect to the criticism of his hon. Friend the Member for Crosby.

The Solicitor-General

It is late in the proceedings on the Bill to start considering what would necessarily be a manuscript Amendment and one tends to get into trouble in moving one. I see the force of the observations of the hon. Member for Islington, East (Mr. Fletcher). The Commissioners will act reasonably. If there is an appeal to the High Court against their own decision, until the case has been decided the register is maintained but marked "In suspense". It is necessary to have those rather vaguer words instead of the words put by my hon. Friend the Member for Crosby (Mr. Graham Page) to cover the case where there is an appeal. I believe that the intention is carried out by the drafting. But it might be much clearer if one said until the Commissioners are satisfied whether the decision of the Commissioners is or is not to stand. That was the point that my hon. Friend sought to make.

I do not like moving a manuscript Amendment at this stage, but that would make it more clear and it would, I hope, meet the points raised by my hon. Friend. If the House would wish it, I would ask leave to move it to make it clear that it is the decision of the Commissioners that they have to be satisfied whether or not it is to stand.

10.30 p.m.

Mr. Deputy-Speaker

I am quite prepared to accept a manuscript Amendment.

Mr. Fletcher

Speaking for myself, it seems to me that that would go a long way to meet the doubts I feel about this subsection. It may not entirely satisfy the hon. Member for Crosby (Mr. Graham Page), but I think that, as the Solicitor-General pointed out, there is a danger in trying to embark on an elaborate reconstruction of the language of the Clause at this stage. Personally, I would welcome the suggestion which the Solicitor-General has made.

Mr. Graham Page

It only goes about 5 per cent. of the way I should like to go, but I am always willing to compromise, and so I think that the thing for me to do is to withdraw my Amendment. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Amendment made: In page 6, line 33, after "decision" insert "of the Commissioners".—[The Solicitor-General.]