First-tier Tribunal decision upholds disqualification of de facto trustees

In 2021, the Charity Commission brought a regulatory compliance case into Dot Com Children’s Foundation (the Charity), following which the Commission made disqualification orders against two individuals, who had founded the Charity and continued (in changing capacities, including as CEO and COO) to be deeply involved with the Charity. The disqualification orders had the effect of disqualifying the individuals from acting as trustees or senior managers of any charity for 4.5 and 3.5 years respectively. These individuals, Sharon Evans and Neil Evans (the Appellants) appealed against the Commission's disqualification orders.

A few months ago, the First-tier Tribunal released its decision rejecting the Appellants' appeal and upholding the disqualification orders made by the Commission. The Tribunal found that it was desirable, in the public interest, to make the orders to protect public trust and confidence in charities. 

In reaching its decision, the Tribunal covered ground that will be of interest to all charities and those who run them:

• This type of regulatory intervention by the Commission and the Courts applies not just to formally appointed trustees - it extends to all people who in reality run a charity.
  
  In this case neither of the Appellants were formally appointed trustees of the Charity at the time of the disqualification (and one of them had never been). Nevertheless, the Tribunal agreed with the Commission that both of the Appellants did at all relevant times have general management and control of the Charity and so were in fact de facto trustees of the Charity.   
  
  Even though they were not formally appointed trustees, as de facto trustees the Appellants were required to comply with trustee duties and charity law like other charity trustees, including, as was pertinent in this case, in relation to conflicts of interest and acting in the best interest of the charity. Indeed, the Tribunal was particularly concerned that the Appellants "showed no appreciation of the importance of a declaration, or a need to declare, any conflict of interest when acting in their roles and involvement with the charity".

• Be alert to the dangers of individuals (or indeed businesses) profiting from their role in or relationship with charities.
  
  The circumstances involved a complicated interweaving of the Appellants, the Charity and two for-profit businesses (and previously another charity and a Community Interest Company) that were set up, controlled or owned by the Appellants.
  
  The Appellants had at one point produced a document which set out the relationship between them, the Charity and one of their for-profit businesses. The arrangement regarding the Charity's purchase of goods from the business and onwards sale was envisaged to create significant profits for the business, immediate loss for the Charity, and any sale proceeds for the Charity to be remitted to the business. The Tribunal found that the document set out a business model for the Charity designed to generate income for the individuals personally - such a set up should be a cause for alarm in any charity.
  
  The Tribunal found indeed that the most significant issue in the matter was the relationship between the Charity and the Appellants - that there had been "a complete disregard for the inappropriate relationship between the two appellants and the charity over a period of years". There had been " a lack of operational separation" and "clear misconduct". 

• Awareness of charity law and regulation
  
  The Tribunal had found a disregard for or naivety of charity law and a distinct lack of appreciation shown by the Appellants of the issues raised. The Tribunal also noted the lack of independent advice sought by the Charity in making decisions.
  
  It is a good reminder then for all who have control and management of charities that they are expected to have a reasonable awareness of the legal and regulatory framework in which charities function. 

For more information please contact Gabriel Cohen in our Charities team.