Charity trustees find themselves in contempt of court for disobeying the directions of the Charity Commission

The recent case of Charity Commission v Wright and another [2019] EWHC 3375 (Ch) (8 November 2019) has highlighted the need for charity trustees to observe the instructions of the Charity Commission, following a finding that two former charity trustees were in contempt of court for failure to follow the Commission’s directions.

As the regulator for charities in England and Wales, one of the Charity Commission’s key functions is to identify and investigate apparent misconduct or mismanagement within a charity and by charity trustees, and to take remedial action in such circumstances. In practice, the Commission fulfils this function by carrying out formal statutory inquiries, also known as Section 46 (The Charities Act 2011) inquiries.

The Charity Commission opened an inquiry into the Darren Wright Foundation in 2017, following difficulties in communicating with the charity after receiving a number of complaints from members of the public. In its inquiry, the Commission served directions on two of the trustees requesting them to provide information and documents about the charity to the Commission. However, both trustees again failed to respond to the satisfaction of the Commission, and consequently the Commission brought proceedings against the trustees for their failure to comply with its directions.

This is the first time that the Charity Commission has pursued such a case through the High Court, who has the power to deal with individuals found guilty of disobeying a direction of the regulator. Even more alarming to trustees is that the same criminal penalties can apply to them under a High Court order, including a custodial sentence of up to two years.

In the hearing in November 2019, it was concluded that it was beyond reasonable doubt that the respondents had failed to comply with the Commission’s directions. Another hearing is pending to determine what penalty will be imposed against the trustees, thus giving the trustees the opportunity to comply with the Charity Commission’s directions in the interim.

Whilst it may come as a surprise to some that the Commission has pursued such a case through the courts, it is not new information that they have the ability to do so. In the Charity Commission’s guidance note ‘Statutory inquiries into charities: guidance for charities’ the Commission advises that failure to follow a direction can result in the Commission taking further regulatory action, and can have serious legal consequences.

Despite the referral to the High Court in this instance, the Commission stresses that the opening of an inquiry against a charity is not in itself a finding of wrongdoing. They reiterate that the purpose of an inquiry is to examine issues in detail, investigate and establish the facts so that the regulator can ascertain whether there has been mismanagement and/or misconduct, establish the extent of any risk to the charity’s property, beneficiaries or work and decide what action needs to be taken to resolve the serious concerns.

However, as this case indicates, where an inquiry is opened, trustees should do all in their power to assist the Commission with their enquiries to avoid facing potential reputational damage to the charity and potentially further serious legal consequences.

Case: Charity Commission v Wright and another [2019] EWHC 3375 (Ch) (8 November 2019) (Morgan J).

This article has been co-written by Ben Brice and Emilie Archer.