HL Deb 27 March 1990 vol 517 cc739-47

3.7 p.m.

The Lord Advocate (Lord Fraser of Carmyllie)

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee. —(Lord Fraser of Carmyllie.)

On Question, Motion agreed to.

House in Committee accordingly.

[The BARONESS SEROTA in the Chair.]

Clause 6 [Powers of Court of Session to deal with management of charities.]:

[Amendment No. 83 not moved.]

The Earl of Selkirk: moved Amendment No. 84: Page 7, line 31, leave out ("(f)") and insert ("(j)").

The noble Earl said: This is not an important amendment in itself but it provides certain variations for the Lord Advocate in pursuing cases where there appears to be misconduct or mismanagement. The alternatives are shown in paragraphs (a) to (j). I am suggesting to the noble and learned Lord that in both cases which are there cited he may as well take all the alternatives from paragraphs (a) to (j). He has divided them in two, taking paragraphs (a) to (f) and then paragraphs (f) to (j). I should have thought that it would be better to have no division. The alternative lies in the words of the Bill which say in effect: "Where the court thinks that there has been misconduct …".

In the second case the court is satisfied that there is misconduct. Those distinctions are very small. I should have thought that, to give the noble and learned Lord the Lord Advocate as wide a choice as possible, it would be much better to keep the full list of alternatives in both cases; that is, from paragraphs (s) to (f) Paragraph (j) comes in a little later. I suggest that he might take those out and put all the alternative courses in both cases. I beg to move.

Lord Fraser of Carmyllie

The Government believe that it is important to distinguish between the powers which the noble Earl referred to at subsection 5 (a) to (f) and those at paragraphs (f) to (j). The powers at paragraphs (a) to (f) are essentially of a temporary and protective nature. Before applying them the court need only be satisfied under the clause that there is or has been misconduct or mismanagement or—and I stress this—that it is necessary to act for the purposes of securing proper application of the property.

In applying those permanent and remedial powers at paragraphs (f) to (j), the court must apply the more stringent test which is that there is or appears to have been misconduct or mismanagement and that it is necessary to act to secure the proper application of the property.

As the noble Earl spelt out, the latter powers are very stringent in character. For my interest I am content that I should be restricted to the first set of powers, where I am only involved to ensure that nothing damages the trust until the court is in a position to look at the matter on a more permanent basis.

The Earl of Selkirk

If the noble and learned Lord the Lord Advocate is satisfied, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 85 and 86 not moved.]

The Principal Deputy Chairman of Committees (Baroness Serota)

In calling Amendment No. 87 I should point out to the Committee that if the amendment is agreed to I cannot call Amendments Nos. 88 or 89.

Lord Fraser of Carmyllie: moved Amendment No. 87: Page 7, line 41, leave out subsection (3).

The noble and learned Lord said: This amendment reflects our desire to make the provisions of Clause 6 more easily understandable. The primary effect is to combine the provision at existing subsections (3) and (6) to form a new subsection (5), which will deal comprehensively with the power of the Court of Session to transfer the assets of a body to another charity.

In exceptional circumstances the court may decide that the public interest would be better served by winding up a body altogether and transferring its assets to another charity. That would be a drastic and unusual step to take and the court must be satisfied that in the case of a recognised body or a registered or non-registered charity the very rigorous criteria set out in what was formerly subsection (3) are all met.

Under the terms of this amendment these provisions have been associated with subsection (6), which now becomes amended subsection (5), and enables me to bring before the court a scheme for the transfer of the body's assets to another recognised body. Under the provisions of amended subsection (5) the court may also approve a scheme for the transfer of assets of a non-registered body representing itself as a charity as mentioned under amended subsection (3). The procedures to be followed in those circumstances will be prescribed by my right honourable friend the Secretary of State for Scotland. I beg to move.

Lord Morton of Shuna

This amendment should be dealt with at the same time as Amendments Nos. 92, 93, 100 and 102. On the basis that that is correct, I draw attention to Amendment No. 100.

It is not necessary that there should be an "or" between paragraphs (a) and (b) or is it intended that there should be an "and" between paragraphs (a) and (b) of the amendment? Alternatively, is it necessary to have paragraph (a) at all, because the meaning of paragraph (a) is included in paragraph (b)? While there is a laudable and obvious intention to make this provision clearer—it would not be difficult to make this part of the Bill more clear—the noble and learned Lord the Lord Advocate has not achieved it in Amendment No. 100.

Lord Fraser of Carmyllie

I will check that. I thought it was clear enough, but I will look at it again.

On Question, amendment agreed to.

[Amendments Nos. 88 to 91 not moved.]

Lord Fraser of Carmyllie: moved Amendment No. 92: Page 8, line 13, leave out ("subscriptions (5) or (6)") and insert ("subsection (5)").

On Question, amendment agreed to.

Lord Fraser of Carmyllie: moved Amendment No. 93: Page 8, line 14, after ("exercised") insert ("under this subsection").

On Question, amendment agreed to.

[Amendments Nos. 94 to 99 not moved.]

3.15 p.m.

Lord Fraser of Carmyllie: moved Amendment No. 100: Page 8, line 40, leave out ("The court") and insert: ("Where the court is satisfied, in the case of such a body as is mentioned in subsection (1) above, that — (a) there has been in its administration any misconduct or mismanagement; (b) it is necessary or desirable to act for the purpose of protecting its property or securing a proper application of such property for its purposes; (c) it is not practicable nor in the best interests of the body to retain its existing administrative structure and, if appropriate, trustee body; and (d) in its opinion, the body's purpose would be achieved better by transferring its assets to another such body, or where the court is satisfied as mentioned in subsection (4) above in the case of a non-recognised body, it").

On Question, amendment agreed to.

The Principal Deputy Chairman of Committees

I should point out to the Committee that if Amendment No. 101 is agreed to I cannot call Amendment No. 102.

Lord Morton of Shuna moved Amendment No. 101: Page 8, line 40, leave out from "scheme") to end of line 45 and insert ("for the transfer of any assets of that body to such body as the court may approve being a recognised body, an exempt charity or a registered or non-registered charity which is managed or controlled wholly or mainly in or from Scotland.").

The noble and learned Lord said: The purpose of this amendment is to give a wider discretion to the court rather than confine it to the Lord Advocate to specify which scheme the body is to be transferred to. It would seem more appropriate that the court should have a wide discretion and that it should decide whether this should be done. I beg to move.

Lord Fraser of Carmyllie

Under subsection (6), to which this amendment relates, the earlier government amendment becomes subsection (5). The amendment tabled by the noble and learned Lord seeks to exclude the role of the Lord Advocate to bring a scheme before the Court of Session for the transfer of assets of a body which has been guilty of misconduct to another body.

A recurring theme in this Bill is the requirement for the Lord Advocate to act in the public interest. That is essentially the development of an existing role contained in the Act of 1921. The lack of anybody who may act in the public interest in the field of charitable supervision has been one of the most persistent complaints which persuaded the Government that this legislation was required.

It is unlikely that the court will often be asked to transfer assets to another body, but the ability for me to bring such a case before the court so that that may happen should be retained. That would seem to be the appropriate way forward, and with that explanation I hope the noble and learned Lord will withdraw his amendment.

Lord Morton of Shuna

Unfortunately I disagree with the noble and learned Lord the Lord Advocate. I cannot see anything in my amendment which prevents him from putting forward a scheme. I am trying to give the court the final discretion as to what to do with the scheme and to allow other people to put forward ideas. That is the only purpose of the amendment. There is certainly no intention to stop the Lord Advocate putting forward a scheme. However, I do not intend to press the matter and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Fraser of Carmyllie: moved Amendment No. 102: Page 8, line 42, leave out ("that") and insert ("the").

On Question, amendment agreed to.

Lord Fraser of Carmyllie moved Amendment No. 103: Page 8, line 48, leave out ("money or securities") and insert ("moveable property").

The noble and learned Lord said: These amendments seek to substitute the words "moveable property" in place of "money or securities" to ensure that the court order covers a wider range of dealings as well as monetary transactions. I beg to move.

On Question, amendment agreed to.

Lord Fraser of Carmyllie: moved Amendment No. 104: Page 9, line 2, leave out ("the money or securities") and insert ("that property").

On Question, amendment agreed to.

Lord Morton of Shuna: moved Amendment No. 105: Page 9, line 5, leave out subsection (8).

The noble and learned Lord said: This amendment is grouped with Amendment No. 106, which proposes leaving out subsection (9). They are probing amendments. As I understand the clause, these subsections refer back to subsection (7), which deals with a charity, managed or controlled wholly or mainly outside Scotland". In fact, it becomes a question of an English or Welsh charity because we are dealing with information from the Charity Commissioners and it is therefore a Charity Commissioners' charity, so to speak.

One can see why the court in Scotland should make an interim order, but why is it necessary that the court in Scotland should suddenly transfer money belonging to an English managed charity to some other body? Would it not be a matter more appropriately dealt with by an English or Welsh court? The same applies to subsection (9). Perhaps the noble and learned Lord can explain why the Scotish courts are to interfere with English charities. I beg to move.

Lord Fraser of Carmyllie

Subsections (7) to (9) provide powers to deal with charities which are based in England but which transfer their money or securities to a bank or a financial agent in Scotland. Most will have good and legitimate reasons for doing so. However, in some cases, transfer of money to Scotland may be in order to escape the control of the Charity Commissioners in England and Wales. The controls in the Bill at subsections (8) to (9) are severe controls designed to signal to any dubious charity which thinks that it can escape the control of the Charity Commissioners by transferring money to Scotland that it is much mistaken.

If we accept the amendment then we must rely in respect of such charities on the controls at subsection (7), which enables the court to make an order on the bank or financial agent freezing the transaction. Valuable as that is, however, it is intended to be a temporary power. Subsection (8) provides for confirmation of such an order but only where the court is satisfied that there has been mismanagement and that it is necessary to protect the property of the charity.

As the noble and learned Lord also pointed out, subsection (9) goes yet further. It enables as a final resort—I stress, final resort—where the court is satisfied that the money would not be used for the purposes of charity, to transfer such money to another recognised body or registered or non-registered charity. I take the noble and learned Lord's point that it is not difficult to envisage circumstances where the English courts intervene. This is seen very much as a backstop provision.

Lord Morton of Shuna

I said that these were probing amendments but I am still wholly unclear as to where, if one has in subsection (7) a charity which is managed or controlled wholly or mainly outside Scotland, we shall get the Scottish courts transferring its funds to some other charity that it or the Lord Advocate thinks of without creating absolute havoc with the judges in England. However, if the noble and learned Lord the Lord Advocate is happy, so be it, and I beg leave to withdraw the amendment.

Baroness Phillips

Before the noble Lord withdraws his amendment may I ask, as a mere Englishwoman who has handled charities, whether there is not some danger of being misunderstood? Scottish banks write to English people, surprisingly, and invite them to invest in various offers so that the old rather distinct order between North and South of the Border has happily changed. It appears that there is some slight danger that the English charities will become a little concerned unless the position is spelt out extremely clearly.

Lord Fraser of Carmyllie

As I attempted to point out, this measure is intended to catch not the perfectly legitimate and worthwhile charities which, for very good reasons that I might encourage them in, make some or all of their investments with a Scottish institution.

I believe the powers are necessary. They were not simply dreamt up in Edinburgh for the further expansion of the jurisdiction of the Scottish courts. I understand that the Charity Commissioners themselves asked that we take on board these additional powers.

Amendment, by leave, withdrawn.

[Amendment No. 106 not moved.]

Lord Fraser of Carmyllie: moved Amendment No. 107: Page 9, line 17, leave out ("money or securities") and insert ("moveable property").

On Question, amendment agreed to.

Lord Fraser of Carmyllie moved Amendment Nos. 108 to 110: Page 9, line 19, leave out ("money or securities") and insert ("that property"). Page 9, line 23. leave out ("money or securities are") and insert ("moveable property is"). Page 9, line 24, leave out ("the money or securities") and insert ("that property").

On Question, amendments agreed to.

Lord Morton of Shuna moved Amendment No. 111: Page 9, line 42, leave out ("notwithstanding that he is not a named party to the proceedings.") and insert ("provided that he has had intimation of the nature of the proceedings, his potential liability for expenses, and his right to be heard.").

The noble and learned Lord said: The noble Lord, Lord Cameron of Lochbroom, and the noble Lord, Lord Macaulay of Bragar, join me in this amendment. The Bill provides, in subsection (11) of Clause 6, that the court, may award expenses against a person concerned in the control or management of the body, or against any such persons jointly and severally, notwithstanding that he is not a named party to the proceedings".

We propose adding that a person has the right to be heard in the proceedings as well as on his potential liability for expenses. For some reason this amendment is not grouped with Amendment No. 112, tabled by the noble and learned Lord the Lord Advocate. However, I suggest that it is not sufficient just to be heard on the question of expenses, because that leaves it impossible for the person to say that the whole thing was misconceived. Surely he must have the right to say that. I beg to move.

Lord Macaulay of Bragar

I support this amendment. To put the matter briefly, it seems to me that we are dealing with a question of natural justice. No person should be in the position of being landed with what might be considerable expenses without being informed, first, that there is a hearing in relation to the proceedings and, secondly, that he may be found liable. It is only natural justice that any person who might have such a liability pronounced against him should have information about the hearing and a right to be heard, as contained in Amendment No. 112.

Lord Grimond

I too support the amendment. As I mentioned on a previous amendment, I have suffered from being named in proceedings which came as a surprise to me as I regarded myself simply as an honorary officer of the charity concerned. I now understand that an honorary officer may be found due for expenses even though he is not named in the proceedings. I should have thought that was contrary to natural justice and therefore I hope that the noble and learned Lord will consider the amendment seriously.

Lord Fraser of Carmyllie

As regards a hearing on expenses, the noble and learned Lord will appreciate that I will be moving Amendment No. 112, which he indicated might have been grouped with Amendment No.111. I accept the validity of the point underlying his amendment to that extent.

I should have thought that my amendment was sufficient. What is objectionable—the noble Lord, Lord Macaulay, pointed this out—is that as things stand at present in terms of subsection (11) there might be an award of expenses against a person who was in control of management of the body but had no knowledge of the hearing and what happened at that hearing.

The view of the Government is that where there has been a hearing and the matter has been resolved before a court, that decision should stand. What is accepted as undesirable is that if there were those to be defined as in control of management but who were rot parties to the proceedings before, they should not be subjected to expenses liability without a hearing. I suggest to the Committee that, given this opportunity, the provision that is contained in Amendment No. 112 is sufficient. I shall be moving that amendment. In those circumstances I invite the noble and learned Lord to withdraw Amendment No. 111.

3.30 p.m.

Lord McCluskey

Does the noble and learned Lord the Lord Advocate envisage that if his amendment becomes part of the Bill the court will regulate the matter by making an appropriate act of severance so that the conditions for notice and the like are all set forth?

Lord Fraser of Carmyllie

I certainly envisage that. As the matter looks at the moment, in terms of Clause 6(11), it appears a rather startling circumstance that the court can award expenses against someone without hearing that person. If there is any further intimation required and the court considers that appropriate, I envisage that that will be provided.

Lord Morton of Shuna: I

very much hope that the noble and learned Lord will take this matter away and think about it further. He appeared to be saying that before the mismanagers, if I may call them that, were told anything about the matter, the court would decide without their being present that there had been mismanagement or lack of control. Having so decided, and without giving the mismanagers the opportunity of being heard, the court would then allow them to be heard on the question of expenses. I am sure that the noble and learned Lord will agree that that seems to be a denial of natural justice. It is necessary for the persons concerned to have a right to be heard on the main complaint of mismanagement before they are found in any way liable for expenses. Therefore, I hope that the noble and learned Lord will take this point away and think about it again rather than simply rely on his own amendment which does not go far enough.

Lord Macaulay of Bragar

There is one other point to be raised. The tabloid press is quick to jump on the issue of the mismanagement of charities in what it sees as the exercise of the public interest as opposed to curiosity. It could do considerable damage to a party to have his alleged activities in the running of a charity canvassed in the press without any contradictor being in court at the time. For that reason I support the observations of the noble and learned Lord, Lord Morton of Shuna, on this point. There should be no hearing on the matter until intimation has been made against two persons who are likely ultimately to be found liable for expenses for mismanagement or miscontrol.

The Earl of Perth

I support noble Lords who have said that it appears odd suddenly to find that all one can appeal about is expenses and nothing else because one does not know about other factors. I very much hope that the noble and learned Lord will, as asked, think again.

Lord Fraser of Carmyllie

Perhaps I may explain the mischief to be met in terms of Clause 6(1 l)(b). There could be an award of expenses against someone concerned in the control of the management of a body notwithstanding the fact that he is not a named party in the proceedings. It was envisaged that there might be four or five people involved in the management and control of a charity. Let us say that four of them were named parties in the proceedings. As matters stand the fifth person might find that there was an award of expenses against him as well. It is that set of circumstances, which may be remote, that we have to anticipate and deal with.

I shall certainly look at the matter again. I thought that what concerned Members of the Committee would be met by my amendment. I still propose to move Amendment No. 112 and I invite the noble and learned Lord to withdraw his amendment. I make that request on the basis that I will look at the matter again.

Lord Morton of Shuna

I am obliged. This part of the Bill is in a complete mess as regards who are parties to any of these proceedings except the Lord Advocate. As far as we know from anything in the Bill, he goes to court and nobody else has a right to do anything except that certain trustees may sometimes be able to go to court and object about expenses. I hope that the noble and learned Lord will look at the matter again. On his assurance that he will, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Strathmore and Kinghorne

I beg to move that the House do now resume.

Moved accordingly and, on Question, Motion agreed to.

House resumed.