Link: Case Summary Document
Citation: (First Tier Tribunal (Charity), General Regulatory Chamber, Holbrook J, Duggan, Khan)
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 a decision of the Charity Commission of England and Wales (the Commission) denying charitable status to Uturn UK CIC (formerly Uturn UK Limited) (the company). The reason for this decision was that the company was not a charity at law, because it was not established for exclusively charitable purposes (as defined in section 2(2) of the Charities Act 2006 (the Act)) and did not demonstrate the requisite public interest.
The company had as its first object the promotion of ‘street associations’. The Commission determined that this was not an object for exclusively charitable purposes. Having determined this, the Commission declined to consider any further objects of the company. On appeal, the company contended that this decision was wrong in law.
Section 2(1) of the Act provides that for a charity to be registered by the Commission it must be for a purpose set out in section 2(2), and be for the public benefit. Section 2(2) lists twelve heads of charity which include, relevantly to the company, the advancement of religion, and the advancement of citizenship or community development. The latter purpose includes rural or urban regeneration, and the promotion of civic responsibility, volunteering, the voluntary sector, or the effectiveness or efficiency of charities. In addition to the twelve specific heads of purpose, the purposes listed in section 2(2) include ‘any other purposes within subsection (4)’. Those purposes are:
(a) any purposes not within paragraphs (a) to (l) of subsection (2) but recognised as charitable purposes under existing charity law or by virtue of section 1 of the Recreational Charities Act 1958;
(b) any purposes that may reasonably be regarded as analogous to, or within the spirit of, any purposes falling within any of those paragraphs or paragraph (a) above; and
(c) any purpose that may reasonably be regarded as analogous to, or within the spirit of, any purposes which have been recognised under charity law as falling within paragraph (b) above of this paragraph.
The company’s position was that it had been established to confront the perceived breakdown of society in the UK. It sought to rebuild ‘true communities’ street by street, and to ‘re-establish values’. In terms of its legal constitution, Article 3 of the company’s Articles of Association defined the purposes of the Company in the following terms:
3.1 The Objects of the Charity are:
3.1.1 to advance citizenship and community development by the promotion and activation of the Street Associations initiative, which will seek to being [sic] the residents of streets together in local groupings with a framework that will engender civic responsibility and volunteering, and
3.1.2 to promote the Christian faith and Christian values, with particular emphasis on the Christian faith for its own sake and on the relevance of Christian values to the restoration of well-functioning community.
It was accepted by all parties that there were two separate purposes, and to be a registered charity, both the purposes had to be shown to be exclusively charitable. Was the promotion of street associations a charitable purpose? The term ‘street association’ was not defined. The company’s promotional literature referred to it as a group of about 70 households (about 200 people), who would form a supportive network, offering mutual help, activities and events which would be non-profit-making. The company would have no control over the setting up or workings of any street association established. There was no doubt that the initiative was worthwhile, but was it charitable?
It appeared to fall within section 2(2)(e), the advancement of citizenship or community development. This head of charity had not been fully defined. The definition of charitable purposes in the Act seems broad. Could ‘new’ purposes be charitable? Guidance from the Commission in 1999 stated that the section 2(2)(e) purpose dealt with:
…a set of methods that can broaden vision and capacity for social change, and approaches, including consultation, advocacy and relationships with local groups. It is a way of working which is informed by certain principles which seek to encourage communities – people who live in the same areas or who have something else in common – to tackle for themselves the problems which they face and identify to be important, and which aim to empower them to change things by developing their own skills, knowledge and experience and, also by working in partnership with other groups and with statutory agencies. The way in which such change is achieved is crucial and so both the task and the process [are] important.
On this basis, the Commission agreed that at least some of the company’s activities would be charitable. However, the Commission did not agree that the company’s activities would be exclusively charitable. Some of the activities might confer a private benefit to participants. In particular, there was no mechanism for control over the activities of individual street associations. The Tribunal said (at [34] and [35]):
This lack of control seems to us to be a fundamental feature of the street associations initiative, as presently conceived by the Company, and is one which makes it markedly different from more traditional membership organisations. For these reasons we find that the purpose stated in Article 3.1.1 is not an exclusively charitable purpose.
The second purpose of promoting Christian values was regarded by the Commission as unclear. Was it to promote Christianity generally, or only in the context of well-functioning communities? The Tribunal held that it was a general promotion of Christian values, and was therefore charitable. However, as the first purpose was not exclusively charitable, the Tribunal did not have to rule on the second purpose.
Since the company did not have purposes which were exclusively charitable, it could not be registered as a charity. However, the Tribunal went on to also consider the public benefit requirement. The benefit in question must be beneficial to the public or a sufficient section of the public. It must be clearly identifiable and not vague or remote.
In the case of the company’s activities, the Commission had acknowledged that a street association’s activities could have public benefit including assistance to the elderly, relief for carers, relief from loneliness, teaching English to migrants, and providing guidance, education and training to young people. However, the question considered by the Tribunal was not whether the company could confer a public benefit but whether it would do so in fact. Could the public benefit be demonstrated by evidence?
There were currently five street associations established. It was possible that there was some evidence of public benefit to be discerned, but none of this was presented to the Tribunal, and therefore the Tribunal found that public benefit had not been shown.
The company’s appeal was dismissed.
The case may be viewed at: http://www.charity.tribunals.gov.uk/documents/decisions/Uturn_UK_Decision.pdf
Implications of this case
The 2006 Act has now been replaced by the Charities Act 2011, which commenced operation in England and Wales on 14 March 2012. The 2011 Act replaces most of the Charities Acts of 1992, 1993 and 2006, and completely replaces the Recreational Charities Act 1958. The parts not replaced yet relate to fundraising, particularly charitable collections in public places. However, although the four Acts are now replaced by one Act, the law remains the same. Therefore, charities still need to have purposes which are exclusively charitable and to be able to demonstrate public benefit.
One of the subsidiary points considered by the Tribunal was the status of its jurisdiction over a community interest company (CIC). Uturn UK is now a CIC, but had previously been a company limited by guarantee. The Tribunal ruled that Uturn UK had been a company at the time of the Commission’s decision not to register it as a charity, so the Tribunal had jurisdiction in the appeal. If Uturn UK had been a CIC at the time, it would not have been able to be registered as a charity, even if its purposes were charitable: see Companies (Audit, Investigations and Community Enterprises) Act 2004 section 26(3).