Public benefit challenge 'difficult', lawyers say

The Independent Schools Council, the body representing fee-paying schools, would face difficulties in bringing proceedings against the Charity Commission over its application of the 'public benefit' test, lawyers have said.

Their remarks come as the ISC's chief executive suggested his organisation may be prepared to take the commission to court for wrongly interpreting the test.

The requirement for charities to pursue aims that have a public benefit is not new but the Charities Act 2006 has explicitly removed the previous presumption for schools, religious organisations and organisations working to relieve poverty.

All these charities now have to demonstrate their aims benefit the public or a section of the public, which the commission will assess against its own guidance published under the Act '“ including specific guidance for fee-charging organisations.

Following the regulator's first round of assessments last month, four of the 12 charities selected for the exercise were told they did not meet the test. Two of those were fee-paying schools, which have been told by the commission they should provide more bursaries.

Although the commission insists all cases are decided on their own individual merits, many schools fear that the guidance has introduced a new poverty test not originally in the legislation.

The ISC's statement is the latest development in the row between independent schools and the regulator but the representative body has not yet decided whether and how it would bring proceedings.

'That's a major and expensive step to take,' ISC chief executive David Lyscom told The Guardian, 'but it is an option we may have to consider.'

Moira Protani, head of charities and schools at Wilsons, said the commission's public benefit guidance was wrong in law.

'This is an ill-conceived, politically driven policy which deserves to be challenged,' she said. 'The guidance is flawed, and so too are the assessments.'

However, Protani said at this stage a judicial review of the guidance would be unlikely because it was not a binding document.

The alternative route would be for one of the schools to challenge a commission decision against it. No such decision has yet been made.

Michael King, head of charity at Stone King Sewell, agrees. It would be possible to bring judicial review proceedings on the ground that the guidance is so unreasonable that no authority could reasonably have taken it, but this would be a difficult challenge.

'Until such times as the Charity Commission makes a decision in reaction to a perceived failure to give sufficient public benefit to a specific group of people, it is difficult to see how legal proceedings could be brought,' he said.

A more likely scenario, according to King, would be for the commission to overcome the school's resistance by removing one or more trustees, as it can under the Charities Act. Such a decision could then be challenged before the Charity Tribunal.

'Section 19B of the 1993 Act, as amended by the 2006 Charities Act, gives the Charity Commission new powers to direct application of charity property,' King continued.

'There is no requirement for a prior investigation before the commission can rely on this section. Where the trustees are unwilling to apply property as directed, the commission can make an order for property to be applied for the charity's purposes. If it did, that could be appealed to the tribunal.'

Protani also suggests that the Charity Commission itself or the Attorney General could make use of the powers under the Charities Act to refer a question of law to the Charity Tribunal. But she believes neither feels sufficiently confident yet of the quality of the decision-making process at the tribunal.