trustees and charity trustees (31)
by Roderick Ramage, BSc(Econ), solicitor
first published in New Law Journal on 25 June 2021
This article is not advice to any person and may not be taken as a definitive statement of the law in general or in any particular case. The author does not accept any responsibility for anything that any person does or does not do as a result of reading it.
The legal structure of a typical unincorporated club or association is quite simple. The founders agree, probably informally, to form it and adopt a set of rules, which is the contract between the members. The association is not and cannot be a party to the contract, because it is not a legal person. The members elect some of their number to be a committee to manage it and, as (again) the association is not a legal person but just a body of natural persons, they, or sometimes the committee, appoint trustees to hold its property and investments. The members of the committee or some of them could also be the trustees, but it is not uncommon for the trustees or some of them not to be members. As a simplistic description, an association of this kind consists of three components, supporters and participators (members), doers (committee) and trustees.
The structure is not quite so simple if an association with members is a charity. A charity is defined in the Charities Act 2011 (ChA 2011), s1, as,
“an institution which (a) is established for charitable purposes only”,
and charitable purposes are defined in s2 and the remainder of Part 1 (sections 1 to 12) of the ChA 2011. The scope for confusion is that charities have charity trustees and might also have trustees. Part 9 (charity trustees, trustees and auditors etc) shows that the ChA 2011 recognises that these terms are not synonymous, it is not always apparent to trustees (or perhaps even to some of the Charity Commission’s employees) that the terms are not synonymous.
The ChA 2011 s177 (re-enacting s46 of the ChA 1960 and intermediate Charities Acts) defines charity trustees as
“the persons having the general control and management of the administration of a charity”.
In my above simplistic description, for the doers in the case of a charity substitute “charity trustees” for “committee”.
The definition of “trustee” in the Trustee Act 1925, s86, refers to the Settled Land Act 1925, which defines trustee only for the purposes of the Act, so, for a general definition, one can perhaps do no better than turn to Professor FW Maitland, who, in 1910, wrote this in Equity, 40.
"Where judges and text-writers fear to tread, professors of law have to rush in. I should define a trust in some such way as the following, -when a person has rights which he is bound to exercise upon behalf of another or for the accomplishment of some particular purpose, he is said to have those rights in trust for that other or for that purpose and he is called a trustee. It is a wide, vague definition, but the best that I can make."
The distinction is unlikely to be a problem for charities without a separate trustee or board of trustees, but if a charity has a sperate trustee body, it is important to distinguish those who are charity trustees from those, if any, who are trustees but not charity trustees. Until the definitions are clarified by the courts, my starting point when assessing the distinction is to assume that:
(a) the committee members and officers of a typical unincorporated body, which is a charity, are charity trustees and similarly the persons, who, in an incorporated charity, normally a Charitable Incorporated Body (CIO) registered under the ChA 2011 or a company registered under the Companies Acts 2004 (or earlier legislation), might have been called directors, are charity trustees;
(b) members of a committee, which is no more than a consultative or advisory body, are not charity trustees;
(c) employed managers, to whom the general control and management of the administration of the charity is delegated, would be charity trustees, which would raise further interesting questions about remuneration under ss 186 and 187 of the ChA 2011;
(d) if the only body which can appoint and remove such managers is a general meeting of the members, it might be argued that all the members are charity trustees, but I think not very convincingly unless this body actually exercises control and management;
(e) trustees who are merely custodians of the charity’s investments and property and are accountable to the charity for them would not be charity trustees;
(f) trustees who are not merely custodians, but who manage the investments and the property and decide how the income is to be applied, would be charity trustees; and
(g) charity trustees, where the charity’s property and investments are held by trustees are, on the face of it, not trustees of the property and investments, but under Maitland’s definition they are arguably trustees in respect of the purpose if not the assets.
In Cifci v Erbil  EWHC 3170 (Ch), the judge raised, but did not need to answer, the question whether those in de facto control of a charity have ostensible authority to act for it, which, if answered in the affirmative, would make them charity trustees.
One area in which the difference can be important is investment. The ChA 2011 is silent on the general duties of trustees in relation to investments and the duty to take advice, which are governed by the Trustee Act 2000. The 2000 Act however applies to trustees in normal sense of the word, which can but does not necessarily include charity trustees.
Another area in which the difference is in charity mergers, including a transfer from an unincorporated charity to a CIO. By the ChA 2011, s310, a pre-merger vesting declaration, the use of which is not compulsory but is useful because its effect is to transfer, but with a few significant exception, all the transferor’s property to the transferee, is made by a deed executed by the charity trustees, and this appears to apply even if the title to the property is vested in trustees. (In passing, sub-s(4) states that the automatic vesting in relation to registered land is a disposition required to be registered: see also HMLR’s PG 14 section 6.8.)
So how did this come about?
The Nathan Report (1952, Cmd 8710), many of the findings and recommendations of which influenced or were incorporated into the ChA 1960, does not use the terms “charity trustees”, but the definition of “trustees” on p208 as
The body of governors or trustees responsible for the administration of a charitable trust. In the recommendations made in the Report, it is assumed that they will act on a majority vote: that unanimity is not necessary, e.g. in reaching a decision to apply for a scheme.
This recommendation, the linking of trusteeship and administration, appears to be the origin of s64 of the ChA 1960 (now s177 of the ChA 2011), namely that the trustees of a charity are the body responsible for its administration.
It is likely therefore that, in the drafting of the ChA 1960, the word “charity” was added to the word “trustees” in order to distinguish the trustees of a charity from trustees in the normal sense of the word, rather than to codify the meaning of the expression “charity trustees” when used in the existing law.
historic note (Not included in the NLJ article.)
An annotation to the ChA 1960, s46, for which I thank to the staff of the Law Society Library, says the following.
“As to the definition of ‘charity trustees’ cf. the definition of ‘trustee’ in 1853, s.66. The expression ‘charity trustee’ is very wide, as was ‘trustee’ under the former law: it covers not only a trustee expressly and regularly appointed but also any person acting in the administration of a charity.”
Unfortunately the annotator did not explain in what way the word “trustee under the former law is as wide as the expression “charity trustees”, as the following definition in the Charitable Trusts Act 1853, s66, mentioned in the annotation to the ChA 1960 s46, is much the same as the “normal” trust law definition.
of any Charity shall mean and include every Person and Corporation seised or possessed of or entitled to any Real or Personal Estate, or any Interest therein, in trust for or for the Benefit of such Charity, or all or any of the Objects or Purposes thereof, and every Member of any such Corporation
Where the previous law uses the expressions “charity trustee” it appears to be no more than a means of referring to persons who are the trustees of a charity rather than giving it a distinct meaning. It was used in a section heading but not the body of s50 of Agricultural Holdings (England) Act 1875.
50 Landlord, charity trustees, &c.
The powers by this Act conferred on a landlord shall not be exercised by trustees for ecclesiastical or charitable purposes except with the previous approval in writing of the Charity Commissioners for England and Wales.”
Ex parte Brown (1815) 35 E.R. 563
That through the negligence of the former trustees thereof since the year 1743, the said charity estates have come into the possession of persons not objects of the said charity; and that many of them refuse to acknowledge the right of the said charity, and claim the respective possessions as their own absolute inheritance; and that and others dispute the claim of the said , and pretend to hold the cottages, pieces of land, and premises, which are in their possession respectively, as their own absolute property, insisting that the same never belonged to the said charity
"Making a sale" in section 29 of the Charitable Trusts Amendment Act, 1855, involves "transfer and alienation" of land, and does not mean merely entering into a contract to sell the property. If the court rejects this submission, it must necessarily upset the established practice of charities and in disposing of their property.
(Reader who are interested in amateur motor sport in the early post war years might perhaps enjoy the fact that the draft of this article as submitted to NLJ used exactly 1172 words.)
© Roderick Ramage
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