Charities Bill [HL]

moved Amendment No. 56:"Page 20, line 26, leave out ““of any other person arising in respect of”” and insert ““arising in connection with””" The noble Lord said: My Lords, Clauses 20 and 21 provide the commission with powers to give directions which it considers expedient in the interests of the charity and to direct the application of charity property. In an earlier discussion of these powers on 14 March we considered the effect that acts of trustees complying with such directions might have on third parties. The matter was raised, not unusually, by the noble Lord, Lord Phillips, and we agreed that the rights of a third party should not be adversely affected, notwithstanding that the commission must rightly be able to act effectively to protect charity and to direct the application of charity property. Having thought about this matter, we added a subsection to each of the new sections dealing with these powers—new Sections 19A(5) and 19B(5). On reflection we see that those amendments did not quite achieve what we wanted them to. The intention here is to enable the commission to act when it needs to do so, to ensure that anyone acting in compliance of the commission’s directions can do so, and to ensure that rights arising in connection with compliance with a direction are preserved. We recognise that for these powers to be effective, the commission will in some cases make a direction which affects others. This is the intention. Those others may be the people required to act on the directions or any other third parties who may be involved either directly or indirectly. An example of a direct effect to a third party could be a direction to trustees to close a particular project because running that project was outside the purposes of the charity. If the charity employed staff in connection with the project, their contracts of employment would be affected. An example of an indirect effect would be where the commission directed that a particular asset be transferred from one charity to another. In both cases, contractual or other rights could arise in connection with compliance with the commission’s direction. As these examples show, situations arise when a particular action must be taken to protect a charity or its property. The consequences of that action, for all concerned, should be dealt with fairly. These amendments will preserve the contractual and other rights which arise in connection with anything which has been done under the authority of a direction of the commission. These could be rights of the charity itself or of a third party. These amendments would preserve rights arising in the event that a contract were frustrated as a result of compliance with a direction of the commission. Where a frustrating event occurs, rights arising are mainly dealt with under the Law Reform (Frustrated Contracts) Act 1943, although some cases are dealt with under the common law. I would like to make it clear that where compliance with an order under either of these sections has the effect of discharging by frustration a contract to which the charity or its trustees are party, it is not the intention behind the amendment that the charity or its trustees should be treated as if it or they had been in breach of the contract. I recognise that this is a rather detailed explanation and probably noble Lords will want to have another look at it in the Official Report. If upon reflection any noble Lord would like a further explanation on any point I should be more than happy to provide it. I beg to move.