Essential Trustee – Charity Commission finds trustees failed to properly consult community
21 September 2018
On 5 September the Charity Commission published a case report after carrying out an investigation into the behaviour of the trustees of the charity Imamia Mission London (UK). The charity’s objects are the ‘advancement of the Islamic religion according to the precepts and the tenets of the Shia Isna Ashri faith’ and the charity has run a mosque and community centre in Newham, East London since 1985.
The Commission began its inquiry after protestors demonstrated outside its offices and handed in a petition objecting to the trustees’ decision to sell the charity’s premises and relocate to Ilford, some four miles away. The protesters also raised concerns with the charity’s membership and election procedures and alleged that there had been financial irregularity with the sale of the property.
The trustees pointed out that the facilities at the existing mosque and community centre were too small and were inadequate, lacking disabled access and proper toilet facilities.
The Commission found no evidence to substantiate the claims of misconduct in relation to the financial elements of the relocation. The charity’s governing document conferred power on the trustees to sell the premises and allowed the charity to operate throughout London, so the trustees were not acting ultra vires in deciding to relocate the premises from one borough to another. In addition, the trustees had acted in accordance with the Charities Act 2011 and there was no conflict of interest. The Commission found that, whilst potentially unpopular, the decision to sell the property did not fall beyond the range of decisions a trustee body could reasonably make. In short, there was nothing to invalidate the trustees’ decision to sell the property.
However, the Commission criticised the way in which the trustees made their decision to sell the property and relocate to Ilford and said that, given the central role of the property to the charity’s activities, they would have expected to see more involvement with the charity’s members and beneficiaries. In particular, the inadequacy of the trustees’ attempts to communicate their intentions to the community undermined any claim that they had completed a proper consultation. As a result, the trustees could not prepare an accurate assessment and action plan to mitigate the risks arising from public opposition to their decision, including potential litigation and damage to the charity’s reputation. The report also found that the trustees had failed to show that their decision to relocate had taken into account the controversial nature of the issue.
The Commission has issued the trustees with formal regulatory advice under section 15(2) of the Charities Act 2011. This takes the form of an ‘action plan’ which is aimed at minimising further disruption and addresses the community’s concerns about fair elections. The relocation can proceed as planned but will be under careful scrutiny from the Commission, which has stated that further failure to comply with trustee duties may result in more serious regulatory action.
This report is interesting as it illustrates what the Charity Commission expects to see from trustees in terms of decision making. Trustees must act professionally and there should be a clear paper trail showing evidence of consideration of the risks faced by a charity in all aspects of its work, with plans for management of those risks.
The Commission said that in this case the trustees should have prepared a business plan for the project. Whilst the trustees had, on the face of it, complied with the charity law aspects of the disposal of the land (in fact one of their trustees is stated to be a lawyer), they should have also ensured their decision making process would bear scrutiny.
The trustees may well have been trying to do the right thing for the charity but their actions have resulted in unwanted publicity which could damage the charity’s reputation and, presumably, wasted time and embarrassment for the trustees personally.
The charity trustees could also potentially find themselves personally responsible for any loss suffered by the charity as a result of poor decision making. Whilst trustees of an unincorporated charity are usually entitled to be reimbursed from the charity’s assets for liabilities incurred by them on the charity’s behalf, this depends on them having acted ‘properly’. (It also, of course, depends on the charity having sufficient assets to meet the liability.)
The Charity Commission says “when making significant or strategic decisions, such as those affecting a charity’s beneficiaries, assets or future direction, it is vital that trustees follow the principles set out in ‘It’s your decision: charity trustees and decision-making (CC27)‘.”
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at September 2018.