Contents Charities Act 2006

Charity & Education News Winter 2006/7

the lantern

In November 2006, the Charities Bill finally

completed its passage through Parliament

and received Royal Assent. The Charities

Act 2006 has been one of the most

carefully prepared pieces of primary

legislation in recent times and has been

widely welcomed in the charity sector.

Charitable Purposes and Public Benefit

Of all the measures in the new Act, none

has attracted as much attention as the

re-definition of charitable purposes and

the “public benefit” test. The Act lists 12

charitable purposes representing the

broad spectrum of charitable causes

under the previous law and a 13th purpose

representing other existing charitable

purposes and purposes analogous to

accepted charitable purposes. In order

to be a charity, an organisation must have

a purpose that falls within one of the 13

heads, and must be able to demonstrate

that it exists to benefit the public in

some way.

1–2 Charities Act 2006

3 Spotlight – The Guide Dogs

for the Blind

4 Ministers of Religion can Claim

Unfair Dismissal

4 Conference Dates

5–6 Product Liability

5 Did You Know?

A requirement for public benefit existed

under the previous law and is a concept

familiar to charities. However, charities

for the advancement of education or

religion and charities for the relief of

poverty, were previously presumed to

provide a public benefit and did not have

to prove this unless there was some specific

reason to do so. The Act removes this

presumption, so that all charities (new

and existing) must show that they are set

up and operate for the public benefit.

To the very end of the parliamentary

process there was debate about the

“In order to be a charity, an organisation must have a purpose

that falls within one of the 13 heads, and must be able to

demonstrate that it exists to benefit the public in some way”

criteria for testing public benefit. The Act

now requires the Charity Commission to

issue guidance, after consulting publicly.

It appears that the Commission will try

to establish generally accepted standards

and encourage charities that charge

significant fees to ensure that they reach

out beyond those members of the public

who benefit merely because they can

afford their fees.

The CIO – A New Vehicle for Charities

The Act creates a new legal vehicle

specifically for charities, the Charitable s

Charities Act 2006 (continued)

Incorporated Organisation, designed to

allow charities to take on corporate

status, with limited liability. As CIOs,

charities can take advantage of corporate

status and the protection of their

members /trustees from civil claims and

liabilities, without needing to register with

Companies House and report to two

regulators. Secondary legislation will be

required before it is available for use by

existing or new charities.

A New Charity Commission

The Commission’s objectives have been

restated in the Act and a key point is that

it remains a source of advice as well as

a regulator. The Commission’s roles continue

to include increasing compliance and

accountability as well as public trust and

confidence in charities, but also include

the requirements to promote awareness

and understanding of public benefit and

the effective use of charitable resources.

Charity Tribunal

The establishment of a dedicated Tribunal

to consider appeals from determinations

of the Charity Commission was warmly

welcomed by the charity sector. It remains

to be seen how the Tribunal will work in

practice and whether legal advice or

advocacy will be essential for charities

appearing before the Tribunal.

The principal benefit of the establishment

of the Tribunal may well be the clarity

with which the Commission will have to

make and present their decisions in

future, given that these are open to

examination by the Tribunal.

Payment of Trustees

The concept of the unpaid, volunteer trustee

remains at the heart of the charity sector

but the Act does attempt to ease the

personal burden of regulation and allows

the payment of a minority of trustees for

services, with appropriate safeguards.

Spending of Endowed Capital

There are welcome powers for smaller

charities to spend permanently endowed

capital, including land, while larger

charities will also be able to spend such

capital if the Charity Commission concur

with the rationale for doing so.

Mergers

The Act contains several measures to

facilitate mergers and re-organisations,

as charities seek to evolve to meet the

needs of the communities they serve.

Most importantly, future legacies to the

original charity can now benefit the new

or merged charity if the merger has

been registered with the Commission.

The slightly amended cy-près powers

may also be helpful here.

Fundraising

The Act brings in a unified system to

regulate public charitable collections and

collections for benevolent and philanthropic

organisations. It also requires clearer

statements to be made by professional

fundraisers and commercial participators

as to what they will earn.

Implementation and Review

The Act will take several months, if not

longer, to be fully in force. As is often now

the case within primary legislation, the

Minister for the Cabinet Office must

review the operation of the Act within five

years of its passing though the Government

has agreed to review the public benefit

issue within 3 years. n

“As is often now the case within primary legislation, the Minister

for the Cabinet Office must review the operation of the Act

within five years of its passing”

Michael King and Ann Phillips, partnersat Stone King LLP, have beencommissioned by the Law Society to write a book on the new Act entitled“Charities Act 2006: A Guide to theNew Law”. The book will be publishedin the Spring of 2007.

SpotlightThe Guide Dogs for the Blind

Whatever one’s age, whatever the condition,

sight loss causes a huge adjustment

to everyday routines and activities.

Above all, it can mean a severe loss of

mobility. The Guide Dogs for the Blind

Association is here to help, with the

extraordinary partnership between guide

dog and visually impaired owner at

the core.

Guide Dogs has just completed a year

of celebrations, marking the 75th

anniversary since the first working guide

dog partnerships appeared on the

country’s streets. Over three-quarters

of a century later, the charity’s dedicated

team of staff, volunteers and supporters

continue to provide freedom, mobility

and independence for blind and partially

sighted people.

Every year around 1,200 would-be guide

dogs are born at home to the charity’s

brood bitches, specially chosen for

their intelligence and temperament.

Volunteer puppy walkers introduce the

young pups to the sights, sounds and

smells of a world in which they will play

such an important part. After just over

a year the young dogs start their formal

training, where they learn the skills

needed to guide a blind or partially

sighted person. The training is rigorous

– it has to be – and not all the young

dogs make the grade. For the majority

that do, the introduction to their new

owner marks the start of a partnership

that will last around six years.

The couple spend three weeks of intensive

training with Guide Dogs’ specialist staff

before they are ready to face new everyday

challenges – the bond between guide dog

and visually impaired owner has begun. n

u Guide Dogs is known and loved

for delivering first class mobility

services that meet the needs of

blind and partially sighted people

with the guide dog at the core.

u The charity relies entirely on

public generosity to fund its

guide dog services.

u Guide Dogs is respected as an

influential charity campaigning on

behalf of its service users particularly

in the areas of access and mobility.

u Guide Dogs is acknowledged for its

eye health information and education

campaigns and regarded for its

prevention and care programme

of ophthalmic research.

u It costs £10 a day to breed, train

and support each guide dog.

u There are currently around 4,700

guide dog partnerships in the UK.

u The working life of a guide dog

is about 6 years, and a guide dog

owner could have 6 or 7 dogs

during their lifetime.

Top Facts The Guide Dogs for the Blind Association

For further information about The Guide Dogs for the Blind Association– including details on how to become a puppy walker, volunteer or fundraiser– phone 0870 600 23 23 or log-on towww.guidedogs.org.uk

A recent landmark decision from the

Employment Appeal Tribunal means that

ministers of religion are now entitled to

claim unfair dismissal from their churches

if they are dismissed.

Previously ministers of religion had always

been regarded by the law as appointed

to a holy office and not as employees

of a church.

Stone King has recently been involved

in a case where the Employment Appeal

Tribunal has held that ministers are

entitled to claim unfair dismissal against

their church. This has enormous

ramifications for all religious organisations,

which have previously enjoyed immunity

from being sued for unfair dismissal.

Reverend Sylvester Stewart was removed

as pastor from the Harrow congregation

of the New Testament Church of God in

June 2005, due to allegations of financial

impropriety. He claimed unfair dismissal,

which was resisted by the New Testament

Church of God on the grounds that he

was not its employee, and therefore

had no entitlement to bring a claim.

The Employment Appeal Tribunal rejected

this argument, stating “if the relationship

between church and minister has many

of the characteristics of a contract of

employment … these cannot be ignored

simply because the duties are of a religious

or pastoral nature.”

The government has been considering

giving employment law rights to

ministers for several years. It seems

the courts have given up waiting.

Ministers tend to religious needs on

behalf of a church, just like medical

staff tend to physical needs on behalf

of an NHS trust – but nobody would

suggest that medical staff should be

denied employment rights.

In December 2005, the House of Lords

held that a female minister in a Church

of Scotland parish was entitled to claim

sex discrimination, despite the previous

ban on ministers exercising any

employment rights (Percy v Church of

Scotland). So Reverend Stewart’s case

is an extension of the employment rights

of ministers.

However, The New Testament Church

of God is seeking the permission of

the Court of Appeal to appeal the

decision and if granted is unlikely to

be heard until sometime in 2007.

We will continue to report the Court's

findings as they happen. n

Lynden Lever

Ministers of Religion can Claim Unfair Dismissal

Conference Dates

Stone King is often involved in producing

seminars and conferences. The following

are currently being planned.

Please contact Annette Kirby on 01225

324 413 or e-mail ak@stoneking.co.uk

for further information where contact

not already specified.

2007

11 Jan Free Charity Workshop: Incorporation ofCharities Venue: Offices of Stone King LLP 28 Ely Place London EC1N 6TD For furtherdetails contact Paula Urban on 020 7796 1007

18 JanCharity Workshop in association with ChantreyVellacott – first in a series:"TrusteesResponsibilities – What You Need to Know" Venue: Royal Society of Medicine, ChandosHouse, 2 Queen Ann Street, London W1G 9LQ

19/20 JanCatholic Independent Schools' ConferenceVale Hotel, Hensol Park, Cardiff

1/2 MarIPD/HMC SeminarThe Hunting Lodge Hotel near MarketHarborough

8 MarFree Charity Workshop: TrusteesResponsibilities/Governance Venue: Offices of Stone King LLP, 28 Ely Place, London EC1N 6TD For further details contact PaulaUrban on 020 7796 1007

20 MarCharity Workshop in association withChantrey Vellacott – second in a series:"Trustees Responsibilities – What You Need to Know" Venue: Royal Society of MedicineChandos House, 2 Queen Ann Street, London W1G 9LQ

19 AprFree Charity Workshop: Planning for FinancialStability Venue: Offices of Stone King LLP, 28 Ely Place,London EC1N 6TD For furtherdetails contact Paula Urban on 020 7796 1007

“This has enormous ramifications

for all religious organisations

which have previously enjoyed

immunity from being sued for

unfair dismissal”

u Companies Act 2006

This received Royal Assent on 8th

November 2006 and will come into force

between January 2007 and October 2008.

Its provisions cover both new and existing

companies, although transitional

arrangements for existing companies

are still being formulated.

Some useful points of the Act are that:

• AGMs will no longer be mandatory for

private companies;

• the position of Company Secretary

will no longer be mandatory for

private companies;

• ‘authorised signatories’, who do not

need to be officers of the company,

may execute documents; and

• there are changes to the number of

votes needed to pass a written resolution.

All of these aspects and more have been

put out to consultation with the first

publication of responses due in the New

Year. We will be providing more information

when it is available, but if you have any

questions in the meantime please contact

us on 01225 481 481.

u “Get on Board”

Campaign to find new trustees. For more

information go to www.governancehub.org.uk

u Fundraising Standards Board

New self-regulatory body aimed at

reassuring the public and raising standards

in the sector. Sign up to the Promise and

the Codes of Practice and be able to display

the“tick”logo.

Many charities buy new goods for resale

to the public. But are all those charities

as aware as they ought to be of their

potential liability should some of those

products not be of a sufficient quality?

All new products, including “free gifts”

are caught by the legislation.

In English Law the maxim that is

often quoted is "let the buyer beware".

In many respects, however, this maxim

no longer holds any truth, thanks to

the European Product liability law of

"no-fault" or "strict" liability which

underpins the Consumer Protection

Act 1987.

Under this legislation the manufacturer

and certain others involved in the

distribution of a “defective” product

are liable for death, personal injury

or specified property damage resulting

from that product. This can be the case

even though they did not cause the

defect and even though, on their part,

there was no negligence towards nor

breach of any contract with the claimant.

What could you be liable for?

The key to the Consumer Protection Act

is the concept of a “defective” product.

A product is defective when it does not

provide the safety which persons are

generally entitled to expect, taking all

the circumstances into account. This

includes the presentation of the product,

any instructions or warnings on or

supplied with the product and the expected

use of the product. In practice, this is

a high standard, since people generally

expect a lot (from a safety perspective).

Clearly, care must be taken when trying

to escape liability merely by putting

instructions and warnings on the product.

It is normally not possible to build

a product that has a defect in it and then

argue that it does not have a defect in

it, simply because an attempt has been

made to warn people off using the product

in a particular way. This is particularly

so if the defect is likely to arise from any

reasonably anticipated use of the product.

Indeed, one should remember that most

Product LiabilityIs there a sting in the tail of that cuddly toy?

people do not read instructions as carefully

as those who write them! This is particularly

so in the case of consumer products.

Under the Act, if defective goods cause

harm, the Producer is liable to compensate

an injured person. The injured person

is only permitted to claim for death or

personal injury or damage to personal

(as opposed to business) property.

Despite the title “Consumer Protection

Act”, liability arises for business products

as well as consumer products.

Did you know? – News in Brief

s

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The Lantern deals with some current legal topics. It should not be usedas an alternative to specific legal advice on the individual circumstancesof a particular problem.

© Stone King LLP 2007email: charity@stoneking.co.uk

www.stoneking.co.uk

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Your Contacts

Charity:Michael King PartnerRobert Meakin PartnerAnn Phillips PartnerJonathan Burchfield PartnerStephen Ravenscroft PartnerAlexandra Whittaker SolicitorVladka Thwaites SolicitorMartha Burnige SolicitorMatthew Waters Solicitor

Education:Richard Gold PartnerMichael Brotherton SolicitorJane Graham SolicitorNaseem Nabi Solicitor

Legacy Disputes:Nick Watson PartnerRobert Meakin PartnerPaul Sutton Associate

Dispute Resolution:Nick Watson PartnerPaul Sutton AssociateMichael Brotherton Solicitor

Commercial Property:Hugh Pearce PartnerStephanie Howarth AssociateCatherine Sanderson AssociateDonna Del-Greco SolicitorJoanne Sturges SolicitorKathrine Wardle ParalegalAmandeep Basi Paralegal

Corporate & Commercial:Roy Butler PartnerLynn Rigg Solicitor

Employment:Nick Watson PartnerPeter Woodhouse PartnerNaseem Nabi Solicitor

Child Protection:Steven Greenwood Partner

Housing:Geraldine Winkler Legal Executive

Trust and Taxation:Andrew Mortimer PartnerAlison Allen PartnerCharles Hayward Partner

Such a person is giving himself a liability

which he might not otherwise have had,

and charities should consider their

positions carefully: do the commercial

benefits outweigh the risk? It is prudent

for charities in these circumstances to

seek an indemnity from the manufacturer

or their own supplier.

There are other situations where

a charity may find itself liable. Where

a charity supplies a product on which

the manufacturer is not identified, the

injured person may request the charity

to name the manufacturer.

The same is true where it is otherwise

not reasonably practicable for the injured

person to identify the manufacturer. If,

within a reasonable period after receiving

the request, the charity concerned fails

to identify its own supplier, the charity

will be liable to the claimant as though

he were the manufacturer.

Another possible liability arises where

the charity is the importer of the

products into the European Union.

A charity is not able to exclude or

restrict its liability under the Consumer

Protection Act by any contractual provision.

Indeed in some circumstances, it is a

criminal offence to attempt to do so.

There are only limited defences available

in the legislation. One practical defence

arises where the state of scientific and

technical knowledge within the industry

concerned at the time when the

manufacturer put the product into

circulation was not such as to enable the

existence of the defect to be discovered. n

1 This is the wording from the Act. The wording of the Directive is arguablywider: “any person who, by putting his name,trade mark or distinguishing feature on theproduct presents himself as its producer”.

Who can be liable? And howcan you protect yourself?

Liability will apply not only to the

manufacturer, but also to “any person,

who, by putting his name on the product

or using a trade mark or other distinguishing

mark in relation to the product, has held

himself out to be the producer of the

product1 (the “Producer”). This will often

include a charity which has affixed its

name onto the product.

Where a component is defective, both

the manufacturer of the finished product

and the manufacturer of the component

will be responsible. Of particular

importance to charities is that the charity

will be liable if, by putting its name

or other distinguishing feature on the

product, the charity “presents itself”

as the manufacturer. Although this may

appear ambiguous, a charity would be

unlikely to benefit from that ambiguity,

since a charity is unlikely to want the

adverse publicity associated with fighting

an arguable product liability claim.