Charities (Protection and Social Investment) Bill [HL]

Baroness Deech Excerpts

Wednesday 1st July 2015 Grand Committee

I am well aware that the Government have made more material resources available to the Charity Commission to deal with that sort of problem. It is also clear, as I have said before, that the Bill in a number of its provisions is intended to deal with that difficulty, and that the Government are well aware of the problem. The amendment is simply an attempt to see whether something else can be done and whether it is possible to have a constructive debate about that. The essential point is that although individual employees and trustees of unincorporated charities can be made personally liable under current law, that is of little comfort to victims if, as is commonly the case, they have no significant assets. I acknowledge that it is possible under current law to claim indirectly from the charity’s assets via an indemnity to the trustees or from insurance covering the trustees. However, even where that is possible it is certainly cumbersome and expensive, and it is not possible where the trustees are themselves implicated in the wrongful conduct or have been reckless. In some ways, the irony is, the worse the governance of the charity, the less prospect of a remedy for the victim. I beg to move.

[Baroness Deech (CB)]

I will speak briefly in support of my noble friend Lord Bew. I got interested in this area having had some experience of when things may go wrong. When you have a commune, for example, which takes all the assets of its members and something goes wrong, such as abuse, there ought to be recourse against those assets. The same applies to children’s clubs, after-school lessons, youth movements, and even student unions.

Our previous discussions show how far the charitable organisation has spread, reaching into every area of our life. It seems only right that there should be the same protection for those who may be adversely affected by an unincorporated charity as by an incorporated one. The main thrust of the amendment lies in proposed new subsection (2), which would enable a person entitled to damages to recover them from the assets of the charity. It is intended to be prospective and not retrospective in effect, applying only to torts committed after it comes into force.

In sum, the amendment would produce a small but useful improvement, making it practicable for victims to obtain compensation for wrongs committed in the course of the activities of unincorporated associations in circumstances where this is currently not practicable. It would remove disparity between unincorporated and incorporated charities; it would encourage the provision of additional resources to expose misuse of charities. It would strengthen compliance with the law and protect the reputation of legitimate charitable activities.

As my noble friend mentioned, the resources of the Charity Commission, which could be involved in this, are necessarily limited and it is only right to help the Charity Commission in its efforts. In sum, this is a good, useful amendment which seems capable only of doing good and certainly no harm.

[Lord Gold (Con)]

My Lords, as the noble Lord, Lord Bew, has said, the purpose of the amendment is to remedy a deficiency in English charity law which prevents victims of wrongs committed in the course of the activities of an unincorporated charity being able to recover compensation from the charity’s assets. This is of particular concern when an unincorporated charity is used as a mask by those knowingly funding terrorism. Victims may have claims against individual staff or trustees of the charity, but if such individuals are men of straw or vanish from view then, unless the charity is obliged to provide an indemnity for its staff or trustees—and that can be uncertain—the claimant will lose out. Worse, the unincorporated charity can carry on just as before, while the victims or their families are cheated out of justice to which they are entitled.

As the House of Commons Home Affairs Committee stated in its report of 30 April 2014 on counterterrorism, bogus charities are being used as a means of funding terrorist activities. There is a serious risk therefore that, unless there is some redress to the assets of unincorporated charities, this anomaly will protect such charities, which will not be liable for the activities of their staff or trustees. The amendment would give victims of wrongs who have claims arising from the conduct of trustees or employed staff the right to bring a claim directly against the unincorporated charity, just as they can at present against an incorporated charity. This proposal does not affect any personal liability of trustees or employees, but the court would have power to determine what should be paid by the charity and what the wrongful individuals should pay.

For an unincorporated charity presently to be liable to indemnify staff members or trustees, it must be vicariously liable for the wrongful acts of its trustee or staff member. That will apply only if the tort or wrongdoing was committed by the staff member in the course of their employment or, in the case of a trustee, if they were not acting in breach of trust. Only in such a case would it be possible for the claimant to recover damages indirectly from the charity’s assets via this indemnity. Even so, the claimant in such a case would face uncertainty, delay and cost if he or she were to test the position, which would be made harder if the trustees were unco-operative. For example, it may suit the individual wrongdoer not to be able to call for an indemnity so that the charity’s assets are protected and can continue to be used to sponsor terrorist activity. Similarly, any insurance cover which the trustees may have is unlikely to apply where they deliberately or recklessly misapply or jeopardise the charity’s assets.

By supporting the amendment and giving claimants a more direct and certain way of gaining redress, we would also be making it far harder for those seeking to fund terrorism or other wrongdoing to do so while hiding behind a seemingly charitable veil.

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[Baroness Deech]

My Lords, I will of course defer to the noble Lord, Lord Gold, who is much more of a lawyer than I am, but I do not believe that the purpose of the amendment is to turn all charities into incorporated bodies. It is simply to ensure that when something does go terribly wrong, an example being sexual abuse, innocent trustees should not lose their houses. The other side of that coin is that the value of the innocent trustee’s house may not be nearly enough to cover the damages that ought to be paid to the victim. It is simply a question of protecting the innocent trustee while of course respecting and honouring the long history of trustees being very involved and feeling personally liable. However, when there is a serious issue in which a victim has been seriously harmed either physically or mentally, the assets of the trustee may be insufficient for the victim, while at the same time the wrong trustee is being punished. The damages should come out of the collective assets of the charity. However, in every other respect, the long-standing, noble notion of the unincorporated charity should of course remain.

[Lord Watson of Invergowrie (Lab)]

My Lords, we support the amendment in the name of the noble Lord, Lord Bew. Change is needed because, as we have heard, many people who have suffered in a manner that would allow them to seek at least adequate redress against an unincorporated charity are currently in effect unable to achieve that. There are a lot of unincorporated charities. The Charity Commission has around 125,000 of them on its register, which gives some idea of the scope of those that may be covered by this amendment.

Surely there is a need for parity, because where a tort has been committed in the course of a charity’s activities, the remedy should not be different simply because of the charity’s status. An example of an unincorporated charity being able to escape the consequences of its actions arose a few years ago, and I had personal contact with it. Noble Lords may recall that a number of charities became involved in fundraising to assist countries in sub-Saharan Africa. Huge amounts of clothing, toys and other portable goods which had been donated by the public in the UK were transported by road to people in need in those countries. I had a friend who was involved in delivering those goods as part of one of the convoys. Sadly, during the journey his convoy met with an accident in which he suffered a serious leg injury. He is now unable to drive and has lost his job, because driving was an essential part of it. However, the charity was unincorporated so he had no effective means of redress in the form of compensation. He did receive some, but not nearly as much as he would have done had he been able to take action against an incorporated charity.

I do not think that there is any point in repeating the comments made by noble Lords in this debate. I simply wish to say that the amendment is a sensible one and I hope that the Minister will agree to bring forward an amendment on Report that incorporates its aims.