HL Deb 20 October 1987 vol 489 cc61-7

The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Lyell) rose to move, That the draft order laid before the House on 29th April be approved.

The noble Lord said: My Lords, the Department of Finance and Personnel, which is the charity authority for Northern Ireland, has for some time felt that certain minor changes in the existing charity legislation, most of which dates from 1964, would be desirable. Similar thoughts prompted the Finance and Personnel Committee of the Northern Ireland Assembly to begin an examination of charity law in Northern Ireland. Having taken evidence from interested parties the Committee produced a report on this subject which was adopted by the Assembly in 1985. The report made a number of recommendations for changes in the present system of charity law. Although the Government were not able to accept all of these recommendations—some being too costly and others raising wider issues which could only be addressed nationally—it was clear that some of the changes would be advantageous to charities in Northern Ireland and should be put into effect.

Simultaneously, Parliament was considering and updating the law in England and Wales through the Charities Act 1985, a piece of legislation which owed much to the energy of a Select Committee of your Lordships' House. Although certain of the provisions of this Act are appropriate only to the system of charity law in England and Wales, others could well be of use in Northern Ireland and it was felt that it would be desirable to add new provisions based on part of this Act to the other proposals for changes in the Northern Ireland charity law.

What I have said is a brief background to the order before us this evening. Your Lordships may consider it of some assistance if I take the articles in the sequence in which they appear in the order.

Your Lordships will see that Article 3 is based on the Charities Act 1985 and that it applies only to charities whose main objective is the relief of poverty and which are also at least 50 years old. If the trustees of such a charity believe that the objects of the charity are obsolete, useless or impossible to achieve, then upon the passing of a unanimous resolution by the trustees the objects of the charity may be modified so that the charity's resources may be put to better use. The new objectives, however, must not be unjustifiably far from the original intention of the founder of the charity. This procedure which I have briefly outlined would be subject to the agreement of the Department of Finance and Personnel.

Article 4 on pages 4 and 5 is also based on the Charities Act 1985, and would allow for the trustees of charities with an annual income of less than £200 to transfer their charity's assets to another charity which has similar objectives to be held and applied as the property of the transferee charity. This procedure would also be subject to the agreement of the Department of Finance and Personnel.

Article 5 is again closely based on the Charities Act 1985. It concerns relatively small, even tiny, charities with an endowment of £25 or less and an annual income of £5 or less. The trustees of a charity in that category would thereby be allowed to expand the charity's income and capital, therefore bringing their charity to an end.

Article 6 paragraph 1 amends Section 13(1) of the Charities Act (NI) 1964, under which the Department of Finance and Personnel can now make cy-près schemes to alter the purposes of defunct charities whose assets do not exceed £5,000. The rather curious expression cy-près is a Norman French term and has come through usage to mean as near as possible. The essence of the present doctrine is therefore that if a gift is given with a general charitable intent, the law shall not allow the failure of a particular mode of trust to defeat the testator's intentions but will substitute other charitable purposes approaching as near as possible to the testator's original intentions.

The making of a scheme under the cy-près mechanism is a function which belongs traditionally to the Chancery Court. The object of giving limited powers to the department was to save small charitable bodies the cost of court proceedings which would seriously reduce the corpus of the charity or which might result in the virtual cessation of the charity because the trustees felt that they could not afford the expense of court proceedings. The present monetary limit of £5,000 of capital has been in operation for 22 years and the need for an upward revision of this limit to the proposed figure of £50,000 is pressing. I am sure that your Lordships will agree with that. This proposal should be generally welcomed by charity trustees.

Article 6 paragraph 2 deals with and amends Section 14(1) of the Charities Act (NI) 1964 under which the department can accept a bequest to a charity which has not been clearly identified and redirect it to a suitable recipient provided that the bequest does not exceed £250. By that paragraph we propose to increase that figure to £2,500.

Article 6 paragraph 3 concerns Section 24 of the Charities Act (NI) 1964 which deals with mixed trusts. When property is given so that it could he used for charitable or non-charitable purposes the gift may he invalid. But the department has power under Section 24 to direct such a gift to valid, exclusively charitable purposes provided that its value does not exceed £5,000. Article 6 paragraph 3 will increase the department's jurisdiction to the value of £50,000. This increase is in line with that proposed for the department's cy-près jurisdiction which I mentioned previously under Article 6 paragraph 1 of the order. Article 6 paragraph 4 will enable various financial limits in the Charities Act (NI) 1964 to be changed more readily in the future to allow for inflation.

Article 7 does away with the existing Section 32 of the 1964 Act and replaces it with a new section under which the value of land or leases of land will be assessed for the department by the Commissioner of Valuation on the basis of market value. The present system, which is carried out by means of a formula involving the net annual value, has over the years proved to be unsatisfactory in that it does not reflect the true market value of the property concerned.

Article 8 has been introduced to extend to this order the provisions of Sections 34, 35 and 36 of the 1964 Act covering the annual report by the department, interpretation, and the functions of the Attorney-General.

At present there is a potential loophole in the existing charity law. Article 9 introduces a new provision to deal with that situation. At the moment it is possible that a charity which is a company or body corporate and has power to alter the governing instruments establishing it as a body corporate could alter these instruments to allow assets to be used for a non-charitable purpose. This new provision, based on Section 30(2) of the Charities Act 1960 which only applies to England and Wales, will close this potential loophole in the law in Northern Ireland.

Article 10 provides for certain functions in relation to house-to-house collections, currently administered by the Department of Health and Social Services, to be transferred to the Department of Finance and Personnel. It is felt that this would be most appropriate as the latter department has general responsibility for charity matters in Northern Ireland.

The schedules contain pro forma resolutions of the types which can be passed by the trustees of certain charities under Articles 3, 4 and 5. It is desirable to provide these, partly to save trustees the trouble of drafting their own resolutions, and partly to ensure that the charities which take advantage of those articles pass resolutions in a consistent and legally sound form.

Those are the main points contained in the order. It is a difficult and complex field of law and I trust that my remarks have helped to clarify the various proposals. They represent a prudent modernisation of charity law in Northern Ireland. Since the order was laid a number of far-reaching proposals in relation to charity law and administration in England and Wales have been put forward in the report of the efficiency scrutiny of the supervision of charities conducted by a team led by Sir Philip Woodfield. Some of the proposals, if implemented, would have equivalent implications for Northern Ireland which would give rise to a need for us to consider further legislation. None, however, conflicts with the present proposals and therefore I confidently commend the order to your Lordships.

Moved, That the draft order laid before the House on 29th April be approved.—(Lord Lyell.)

Lord Prys-Davies

My Lords, I thank the noble Lord, Lord Lyell, for taking us through the articles of the draft order which is before the House. As the noble Lord pointed out, the order is based in part on reports from the Assembly and in part on the Charities Act 1985. We support the order, subject to one reservation concerning Articles 4 and 5.

Articles 3, 4 and 5 owe their impetus to the Charities Act 1985 which is based on the report of a select committee of your Lordships' House under the chairmanship of the noble and learned Lord, Lord Brightman. The Bill was introduced to your Lordships' House by the noble Viscount, Lord Colville. Articles 3, 4 and 5 adopt what has been described as the do-it-yourself mechanism for winding up the small charity for the relief of poverty.

The only doubt which we have revolves on the financial criteria to be found in Articles 4 and 5 which follow the qualifying income and capital criteria adopted by the 1985 Act. A small charity, for the purpose of the transfer of assets to another charity under Article 4, is defined in the order as having a gross income not exceeding £200 during the preceding accounting period. Those criteria were established by the 1985 Act. Yet some Members of your Lordships' House and of the other place considered that that limit was too low and thought that £500 would be an appropriate threshold.

Under Article 5, a small charity is allowed to spend its capital and thus, in effect, to dissolve itself. But for the purpose of the article, the small charity is defined as one which has a permanent endowment of £25 or less, not including land, and with a gross income of £5 or less during the preceding accounting period. Once again, those are the criteria to be found in the Charities Act 1985, and some members of your Lordships' House and of the other place considered that those figures were too low.

Is there evidence that the thresholds to which I have referred are about right, or are they too low? It is an important point because if the thresholds are too low the order may not answer the problems of many small charities as they will not be small enough to take advantage of the do-it-yourself mechanism. In that case, the desired result would not be achieved. Perhaps the Minister can help the House concerning that aspect of the order. Can he tell the House how many charities in England and Wales have availed themselves of the provisions of the 1985 Act and transferred their assets to another charity or spent their permanent endowment and ceased to exist as separate entities?

I should also like to ask the Minister whether the department consulted the Charity Commissioners for England and Wales in determining where the thresholds should be drawn. In the light of their experience in operating the Charities Act 1985, do the commissioners for England and Wales consider that the limits provided in the 1985 Act should be increased? Did that matter concern the department when it was drafting the order?

The Minister has explained that the new powers are available to the trustees on the passing of appropriate resolutions which are set out in the schedule to the order. Those are identical to the resolutions contained in the Charities Act 1985. However, I should be grateful if the Minister could clear up one small point. The requirements of the 1985 Act in that respect would be satisfied if the resolution is, as near to the prescribed form as circumstances may admit". Those words are missing from the draft order which is before the House. I am mindful of an explanation given by the Minister to the House in the course of the debate on the Enduring Powers of Attorney Order a few months ago. Am I correct in assuming that the alternative wording which is to be found in the 1985 Act is implied by virtue of one of the Northern Ireland interpretation Acts?

I note that the order does not contain a statutory obligation on charities to file annual accounts. Presumably that is so because Northern Ireland charities are not registered in any central register maintained by the department. I notice from the report of the Assembly that many people consider that those two omissions point to a weakness in the law on charities in Northern Ireland. I believe that the Assembly came to the conclusion some years ago that there was an overwhelming need for all charities in the Province to be registered in a central register, and it so recommended. It seems to us to be a recommendation which should have been accepted by the department and I am just wondering why it was rejected. Was it simply rejected because the department did not want to increase its workload?

As I have said, we on these Benches, subject only to those reservations about the thresholds in Articles 4 and 5, approve the order and very much hope that it will achieve the desired result. I should be glad if the Minister could deal with this today or could write and place a copy of his answer in the Library.

7.15 p.m.

Viscount Colville of Culross

My Lords, the noble Lord opposite is in a unique position to speak on this not only with his knowledge of affairs in Northern Ireland but also as a former member of the Select Committee which gave birth eventually to the Charities Act 1985. He will probably recognise that in relation to the statutory financial limits the order provides for a substitution of the sum specified by an affirmative resolution in Article 4(12) and in Article 5(5). He will probably recall that the discussions that took place concerned only England and Wales at that stage, and there was a very delicate balance in the discussions and in the evidence that was placed before the Select Committee about the starting point for the small charities that were going to be allowed to use this procedure.

I suggest to the noble Lord that there is probably no very great harm done in beginning at the same point in Northern Ireland as in England and Wales. If experience shows—and I would be extremely interested if my noble friend could tell us what the experience is of the legislation in England and Wales—that trustees are not coming forward because the limits are too low, then of course we would have evidence to bring before Parliament to suggest that there should be an increase. Perhaps the noble Lord will agree with me that it is best to start at the same point as in the original legislation and then see how things go from there.

Lord Prys-Davies

My Lords, I would not at all dissent from that contribution. The point I was trying to make was whether the department had had consultations with the Charity Commissioners and whether in the light of their experience they were satisfied with the thresholds in the 1985 Act or whether they thought that the time had come to increase them.

Lord Lyell

My Lords, we are very grateful to the two noble Lords who have spoken, first of all to the noble Lord, Lord Prys-Davies, and, not surprisingly, to my noble friend Lord Colville, whose speech recalled his Private Member's Bill of just under three years ago in which he did such great work. I have been reading this evening. I felt that I might need further advice on some of the queries raised by the noble Lord opposite. I felt that, "Cometh the man, cometh the hour", and my noble friend was giving us great support in your Lordships' House. I am particularly grateful to him.

The noble Lord, Lord Prys-Davies, raised the question of financial criteria in Articles 3, 4 and 5 and I hope that he will accept that certainly I would have nothing further to add to what my noble friend has said. I am particularly grateful, since I think I would have either to write to the noble Lord or alternatively I would not have been able to give him such a concise answer as that which has been given by my noble friend.

The noble Lord also asked me how many English and Welsh charities have taken advantage of the similar legislation in the 1985 Act. I am afraid I shall have to write to him on that. I am sorry that I do not have the information with me this evening.

As far as the limits are concerned and whether they are too low, we understand they certainly reflect parity with England and Wales. We believe that there has not been any difficulty or that there should not be any difficulty with these limits. The noble Lord also asked me whether we were satisfied with the words, "as near as". The best answer I can give him is to consult both Articles 3 and 4 in the order this evening. If he will look at Articles 3(8) and 4(7), he will find that they are near enough the same and the department may give its power. It has options of granting, deferring or refusing the request of the trustees to wind up the charity, change the charity or transfer, in the case of Article 4, and to alter the objects in Article 3.

We think that these two paragraphs provide the longstop and the safeguard to the charities and, above all, to the testators, whose original intention is set out in the charities in that if the trustees can obtain unanimous agreement as to what they ought to do, then they certainly will have to convey their wishes to the department, which will have the final say. This is certainly a respectable longstop and a respectable tradition. We think that this will be effective, since it is based on the 1985 Act in England and Wales and we do not think there has been any major problem with that.

As to the interpretation point raised by the noble Lord, Lord Prys-Davies, I shall have to write to him on that. I am sure that it will be a brief note. I am particularly grateful to my noble friend Lord Colville for his intervention and for pointing out to me something which I should have known, namely, that the noble Lord, Lord Prys-Davies, was a member of the Select Committee.

With that and with the assurances I have given to the noble Lord, Lord Prys-Davies, that I shall let him have, I hope, a brief note on the points to which I am not able to reply to tonight, I commend the order to the House.

On Question, Motion agreed to.