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Disappointment as tribunal fails to clarify charity law

Ruling consolidates Charity Commission's position on public benefit

24 October 2011

Independent schools failing to provide some benefits for their potential beneficiaries other than its fee-paying students would be falling foul of the law, an appeal tribunal ruled last week as it rejected most of a claim challenging the interpretation of the concept of ‘public benefit’ as set out by the Charity Commission.

Ruling in Independent Schools Council v Charity Commission [2011] UKUT 421 (TCC) the Upper Tribunal decided that each case depended on its own facts and that – provided the de minimis threshold was crossed – it was a matter for the trustees of a charitable independent school, rather than up to the Charity Commission or tribunal, to decide how trustees’ obligations might best be fulfilled in the light of their circumstances.

The Charity Commission said the ruling confirmed its position that, if independent schools wanted to take advantage of the privileges of charitable status, they had to operate for the public benefit. In practice, this meant that “they must run their charity to ensure that the poor can benefit in a way that is more than minimal or tokenistic”.

To the disappointment of charity lawyers, however, the tribunal didn’t provide clearer guidance for trustees. According to the commission this was an acknowledgment that “it is simply not possible to provide the clarity which some schools have wished for”. Paul Ridge, a partner at Bindmans who represented the Education Review Group, which intervened in the case, said the court’s only suggestion – that allocating ten per cent of funds to poor pupils would be enough – didn’t provide sufficient clarity.

Tom Murdoch, a solicitor with Stone King, said the ISC had secured a few small victories but that it was not the unqualified success the organisation claimed. “Broadly the Upper Tribunal upheld the current framework and reaffirmed the commission’s role in both issuing guidance as to what ‘public benefit’ means and in overseeing the application,” Murdoch said.

“The 2006 Charities Act moved charity law significantly but the tribunal missed an opportunity to clarify the law,” Murdoch continued. “Having discretion is good because it means trustees have freedom, but, if you’re unsure, you have little guidance.”

He went on: “Both the tribunal and the commission are recent creatures, with the objective of moving on charity law – which had been stagnating – but they backed away from political questions they didn’t want to get into.” According to Murdoch, bursaries would not – in theory – be the only way of complying with the public benefit requirement, but he said there were no examples so far. The only case was that of a fee-charging school that had separately contributed £5m to the running of the nearby local academy.

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Charities Education