Charity Commission merges Dudley Mosque charities using rarely used legal powers

The background

In the midst of ongoing inquiries into the Muslim Community Centre and Mosque 1977 and Dudley Central Mosque and Muslim Community Centre, the Charity Commission has elected to use its power under s. 79(2) of the Charities Act 2011 (the Act) to create a scheme, merging the two disputing charities. The Commission describes this as "an unprecedented use of its powers which have not been applied in this way for over 20 years".

The application of this rarely used power may have been facilitated in part in this matter by the appointment of an interim manager. While such appointments are not always welcomed by the charities involved, one advantage of them is that the interim manager has access to a direct line of communication with the Commission. This can provide a forum for the development of solutions tailored to the circumstances of the particular charities concerned, including the use of various Commission powers or the development of a detailed action plan as a preliminary to ending the Commission's direct involvement.

The Commission's powers

A scheme is essentially a method of altering or amending the governing document of a charity. Usually, this is done by consent, with the charity concerned applying for a scheme, but in this instance, the Commission has exercised its powers under s. 79(2) of the Act to create a scheme of its own motion.

The Commission may only exercise this power if an inquiry has been instituted under s. 46 of the Act, and it is satisfied that there has been misconduct or mismanagement in the administration of the charity, or that doing so is necessary or desirable in order to protect the charity's property. This is not, however, the only way in which the Commission can create a scheme of its own motion. Indeed, there is a power under s. 70(5) of the Act allowing the Commission to impose a scheme outside of an inquiry where it is satisfied that the trustees ought to have applied for a scheme, and have unreasonably failed to do so.

The Commission also has further powers to manage potential problems arising, including the power to direct that a charity be wound up under s. 84B of the Act. In managing such issues, each of the Commission's available powers have their nuances and benefits. In this instance, it seems that it was preferable to create a scheme and merge the disputing charities, rather than closing one, as this approach allowed the Commission to include parts of each of the charities' existing governing documents in the scheme, harmonising them.

Human rights considerations

The Commission is subject to the Human Rights Act 1998 because it is a public body. This means that it is obliged to act consistently with the Convention Rights listed in schedule 1 of the Human Rights Act, including the right to freedom of thought, conscience and religion, and the right to freedom of peaceful assembly and to freedom of association with others.

This is worth noting because the scheme here essentially relates to an agreement to associate with others, in a religious context. If and to the extent, therefore, the exercise of the power under s. 79(2) of the Act has affected people's right to associate and practice their faith, the Commission will have needed to satisfy itself that it has acted consistently with these rights in altering the rules governing how the people involved with the charities can associate.

Implications and managing charity disputes

The fact that the Commission has created a scheme of its own motion here is significant because it is effectively deciding for those involved with the charities what their rules are to be. Such an action may pose a solution to a protracted dispute, but also has the potential to erode the influence and ownership of the organisation by those involved with it, by removing their ability to determine how their charity should be governed.

Indeed, in this case, the fact that the Commission is exercising control to push the organisation in a particular direction could potentially be a cause for concern for some of the trustees or wider congregation members (who have a variety of differing perspectives), as there is a risk that the organisation may be moved in a direction that is contrary to the vision of those involved with it.

This highlights the importance for charities who are engaging with the Commission in relation to disputes to assess the possible outcomes early in the process, and decide what they want to achieve from the Commission's involvement. It is not unusual for the outcome of the Commission's involvement to develop in unexpected and unwelcome ways, where trustees have not been able to identify at a sufficiently early stage what they see as the desired outcome of the Commission's involvement in the interests of the charity and its beneficiaries. Where a statutory inquiry or other regulatory involvement is at risk of proceeding for a significant period without a clear route to resolution being identified, the Commission may conclude that it needs to take more control in order to avoid the uncertainty, expense and reputational damage that a charity may encounter in the course of a lengthy regulatory involvement.

It is, therefore, desirable for trustees to ascertain what they want to achieve in working with the Commission, and consider the realistic options and outcomes at an early stage. From here, trustees can develop a clear action plan to put to the Commission covering how they intend to address the issues concerned, allowing them to work constructively towards a solution that they are taking ownership of, in the best interests of their charity.

For further information about the assistance we can provide in managing charity disputes, please see Charity Internal Dispute Lawyers - Advice on Disputes.

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For more information about Commission inquiries and managing charity disputes, please contact Shivaji Shiva in our Charity Law and Governance team.