Link: Case Summary Document
Citation: [2015] NICA 21 Northern Ireland Court of Appeal, Morgan LCJ, Girvan LJ and Gillen LJ
Acknowledgement:The Pemsel Case Foundation thanks The Australian Centre for Philanthropy and Nonprofit Studies for its contribution in the drafting of this Case Note.
Summary:
This was an appeal from The Charity Commission for Northern Ireland v Bangor Provident Trust Ltd [2014] NICh 19. The Charity Commission for Northern Ireland (the Commission) is a body established under Section 6 of the Charities Act (Northern Ireland) 2008 (the Act). On 8 August 2012 the Commission instituted an inquiry into the Bangor Provident Trust Limited (Bangor). On 17 September 2012 Bangor applied to the Charity Tribunal for Northern Ireland (the Tribunal), a body established under section 12 of the Act, for a review of the Commission’s decision to institute an inquiry. Under section 12 of the Act (together with Schedule 3 paragraphs 3 and 4, and the Table in paragraph 5), the Tribunal is empowered to direct the Commission to end such an inquiry. On 10 May 2013, the Tribunal allowed the application by Bangor and directed the Commission to end its inquiry in relation to Bangor, pursuant to Schedule 3 of the Act. It did so on the basis that Bangor was not in law a charity, and not, therefore, subject to the jurisdiction of the Commission for that or other purposes. An appeal on this point was then made to the High Court of Justice. The High Court held that Bangor was a charity, and that therefore an enquiry could be made into it.
Bangor Provident Trust Ltd is an industrial and provident society registered in Northern Ireland, originally under the Industrial and Provident Societies Act 1893. It was later deemed to have been registered under the Industrial and Provident Societies Act (NI) 1969 (the 1969 Act). As is evident from its name, Bangor is an incorporated body. Its main object was to provide housing for the aged and poor in Rule 2 of its Rules as follows:
The objects of the Society shall be to erect, provide, improve and manage housing accommodation in Northern Ireland for persons of advanced years and limited means who are eligible to occupy or use housing accommodation provided under the Housing Acts (NI) 1890-1953 (or under any acts amending or substituted for the said Acts) on terms appropriate to their means and to provide such amenities as the Society shall think fit for the occupiers of such accommodation and to do all other things as are incidental or conducive to the attainment of the above objects.”
The High Court of Justice decision
In the decisions below, there was no doubt that the provision of housing to the aged and poor was a charitable object. However, the Tribunal found that Bangor’s objects were not exclusively charitable. The basis of this finding was the use of word ‘conducive’ in Rule 2. The use of the word ‘conducive’ was found to be indicative of the possibility of non-charitable objects, so that, on balance, the Tribunal held that Bangor was not charitable and therefore, the Commission could not instigate an inquiry into it.
In the High Court decision the issue of whether Bangor was in fact charitable was reconsidered. Section 1(1) of the Act provides that:
For the purposes of the law of Northern Ireland, “charity” means an institution which –
(a) is established for charitable purposes only, and
(b) falls to be subject to the control of the Court in the exercise of its jurisdiction with respect to charities.
His Honour in the High Court was quite clear that Bangor was a charity (at [30] of the decision below):
In the light of this case law and bearing it in mind I return to the Rules of the Bangor Provident Trust Ltd. Rule 2 has been set out above. I state quite plainly that it seems to me that in its natural and ordinary meaning, in the context of a body set up to provide housing “for persons of advanced years in limited means” the natural and ordinary meaning of it is that the third clause was to facilitate such objects and not to allow the Society to launch into non-charitable activities.
The interpretation of the use of ‘conducive’ in Bangor’s Rules was not such as to indicate non-charitable activities as an object (at [35]-[36] of the decision below):
Finally, I observe that the Shorter Oxford English Dictionary defines “conducive” as “tending to promote or encourage”. While mindful of the judicial observations on its meaning the starting point, it seems to me…is that this language of “incidental or conducive to the attainment of the above objects” is not inconsistent with merely allowing the Society to engage in activities ancillary to its main and indisputably charitable objects. It may be that they would include the lobbying of the legislature in regard to the provision of housing to the aged of limited means. That would be ancillary. That would not, on a proper reading of these rules, at the time the Society came into existence, lead one to conclude that its objects were not exclusively charitable. In the light of all the factors before the court I consider that the Charity Tribunal erred in finding that Bangor was not a charity. I allow the appeal of the Charity Commission which is at liberty to proceed to discharge its statutory functions in regard to Bangor Provident Trust Ltd.
Therefore, since Bangor was a charity, the Commission could conduct an inquiry into it. Bangor appealed to the Northern Ireland Court of Appeal.
The Court of Appeal decision
The grounds of appeal were that the learned judge erred:
(i) in holding that the objects set out in Rule 2 of the appellant’s Rules did not extend to purposes which were not exclusively charitable in law or incidental or ancillary thereto;
(ii) in finding that the use of the words “incidental or conducive to the attainment of the above objects” in the appellant’s objects clause did not prevent the appellant’s objects from being exclusively charitable;
(iii) in failing to distinguish between exclusively charitable objects and mere powers to do acts which are incidental, ancillary or conducive to charitable objects;
(iv) in failing to distinguish between the objects of a charity and other provisions in its constitution which might empower it to carry out non-charitable activities or use funds for non-charitable purposes where to do so in the relevant context was a means, or alternatively an involuntary or necessary incident, of furthering the charitable object;
(v) in law in distinguishing the case of McGovern v Attorney-General [1982] Ch 321 from the appellant’s case; and
(vi) in failing to take sufficient account of other provisions within the appellant’s Rules, and in particular to the dissolution provision in Rule 90 which does not confine the application of the funds in the event of dissolution to charitable institutions or purposes only.
In the Act, section 2 provides that a charitable purpose is a purpose which (a) falls within subsection (2), and (b) is for the public benefit (defined in section 3). Section 2(2) lists a number of purposes which include ‘the prevention or relief of poverty’ (section 2(2)(a)) and ‘the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage’ (section 2(2)(j)). Section 22 of the Act provides for the Commission’s general power to institute inquiries:
(1) The Commission may institute inquiries with regard to charities or a particular charity or class of charities, either generally or for particular purposes.
Was Bangor a charity, and therefore subject to an inquiry under the Act? The Court of Appeal said that only Rule 2 was relevant to this determination (at [27]):
The objects clause of an incorporated body such as the appellant establishes the lawful powers (vires) of the body beyond which it is not legally entitled to go. It must act intra vires and is not permitted to act outside its objects clause. The powers of a body corporate in its objects clause are to be distinguished from the powers of its directors and agents which emerge from express or implied powers contained elsewhere within the constitutional documentation. The powers of the agents must be exercised within the vires of the body corporate and cannot permit the agents to exceed what is permitted by the objects clause. Thus nothing in the rules outside Clause 2 can detract from the charitable status of the company if Clause 2 gives rise to exclusively charitable objects and powers for the rest of the Rules must be construed and acted upon in a way which is compatible with and intra vires the objects clause. Hence no real assistance in determining the question in this appeal can be obtained from the provisions outside Clause 2. If it imposes an exclusive charitable purpose on the body then actions outside the exclusively charitable purpose would be ultra vires and a breach of fiduciary duty on the part of the directors and members of the governing committee.
However, was the reference to ‘conducive’ in the objects clause, such as to widen the scope of the purposes of Bangor beyond the charitable? This was purely a question of construction (at [32]). The Court considered the relevant authorities and concluded (at [37]):
Reading Clause 2 as a whole set in the context of the document (which on its front page indicates a clear intention to create a charitable body) we have no doubt that the words in questions fall to be considered as incidental to the main purposes which are clearly exclusively and admittedly charitable in nature. The power to do acts incidental or conducive to the charitable objective set out earlier in Clause 2 does not envisage the Society undertaking some activity inconsistent with those charitable purposes.
Therefore, Bangor was a charity, and could be subject to an inquiry by the Commission. The appeal was dismissed.
This decision may be viewed at: http://www.bailii.org/nie/cases/NICA/2015/21.html
The case in the High Court may be viewed at: http://www.bailii.org/nie/cases/NIHC/Ch/2014/19.html
Implications of this decision
In the High Court of Northern Ireland the case was considered in the context of the possible objects which might be encompassed by the word ‘conducive’ in the objects clause of Bangor. How wide could these objects go? Was there a ‘political’ dimension to the objects of the Bangor Trust, indicated by the use of the word ‘conducive’? Deeny J considered the well-known case of McGovern v Attorney General [1982] Ch 321, a case concerning Amnesty International. Although not itself a charity, Amnesty sought to set up a Trust with a view to obtaining charitable status for some of its activities. Slade J refused a declaration that the Trust ought to be registered as a charity, finding that although a trust set up for the relief of human suffering and distress would be capable of being charitable in nature it would not be charitable if any of its main objects were of a political nature; that trusts for the purpose of seeking to alter the laws of the United Kingdom or a foreign country or persuading a country’s government to alter its policies or administrative decisions were political in nature; and that, accordingly, the object of the trust to secure the release of prisoners of conscience by procuring the reversal of governmental policy or decisions by lawful persuasion was of a political nature and since that object affected all the trusts of the trustee, the trust was not a charitable one. However, Deeny J at first instance held that the object clauses of the Trust set up by Amnesty were very different from the rules of Bangor, so that the decision was ‘clearly distinguishable’ (at [15]) of the decision below). The Court of Appeal did not consider this dimension of the case. It held that Bangor was charitable purely on a contextual reading of its Rule 2 objects, taking into consideration its status as an incorporated body, and what this meant for the powers that its directors had.