Decision of the Upper Tribunal emphasises key role of Trustees in determining benefits to be provided to meet public benefit requirement.

In this article, our charity law experts outline the key facts of last month's landmark decision of the Upper Tribunal relating to independent schools and meeting the public benefit requirement. We hope you find this article of interest. Should you require any advice in relation to the decision, please do not hesitate to contact us.

Background

Two sets of proceedings were referred to the Upper Tribunal. The first was an application for judicial review brought by the Independent Schools Council (ISC) seeking an order to quash certain parts of the Charity Commission's Public Benefit Guidance. The second was a reference to the Tribunal by the Attorney General under the Charities Act 2006 of a series of questions regarding the application of charity law in relation to a hypothetical independent school. The two sets of proceedings were heard together and the Tribunal published its decision on 13 October 2011.

The Decision

Need for benefits to be provided to the poor

The ISC argued that as five per cent of schoolchildren attended charitable fee-charging schools, that is a sufficient section of the public in itself and that there is therefore no need for benefits to be made available to those who cannot pay the fees. The Tribunal rejected this argument, stating that "in all cases, there must be a benefit for the poor that is not de minimis or merely token". 

Benefits to be taken into account

The Tribunal held that in assessing public benefit, the "primary focus" must be on the direct benefits which the school provides. This means that account can be taken of scholarships and bursaries, as well as other direct benefits such as where pupils at local state schools can attend classes at independent schools in subjects that would not otherwise be readily available to them. 

However, The Tribunal stated that in the case of an educational charity, making facilities available to the community as a whole could not be taken into account since that activity would not be carried out "in fulfilment of the charitable purpose, namely the advancement of education".

The members of the Tribunal indicated that provided there was an appropriate level of benefit for the poor, the provision of scholarships and bursaries for those who could afford to pay some but not all of the fees could be taken into account in considering the public benefit provided.

Key role of the trustees

The Tribunal stated that it is for the trustees of a school to address and assess how their obligations in relation to public benefit may be met in the context of that particular school. This means that it is not possible to be prescriptive about the nature and extent of the benefits that must be provided. The trustees must ensure that the level of benefits provided to the poor is more than de minimis or merely token but that subject to that, it is a matter for the trustees to decide and not for the Charity Commission or the Court. On this basis, the Charity Commission could still intervene but only if it considered that the school was not meeting the minimum threshold.

Charity Commission Guidance

The Tribunal held that parts of the Charity Commission's Public Benefit Guidance are wrong and should be corrected. In particular, the Tribunal considered that it was wrong to impose on the trustees the views of anyone else about what is "reasonable". As indicated above, the Tribunal considered that it was for the trustees to decide what was appropriate as long as the minimum threshold was met of providing benefits for the poor that go beyond a token benefit.

The Tribunal indicated that it hoped that the parties would be able to agree a form of wording, failing which the Tribunal would consider further submissions. It may therefore take some time before the revised Guidance is available. In the meantime, trustees will need to refer to the Upper Tribunal Decision, which can be found on the Tribunal's website 

Questions referred by the Attorney General

The Tribunal considered a number of questions put to it by the Attorney General regarding a hypothetical school. The Tribunal caveats its answers by pointing out that they have already held that it is for the trustees to decide what is appropriate in the particular circumstances of the school in question. Nonetheless, the answers to the reference questions provide a useful insight into the thinking of the Tribunal and the practical application of their decision.

We will watch for any further developments on this decision and keep you informed.  In the meantime please contact a member of our charities team if you have any queries.

For further information please contact:

Anne Holmes

anne.holmes@cobbetts.com

0845 404 2505

Penelope Byatt

penelope.byatt@cobbetts.com                                  

0845 404 2496
 

This content of this article is for information only and should not be relied upon as a substitute for legal advice. 

Copyright 2011 Cobbetts – All rights reserved – November 2011