Ioannou v Charity Commission for England and Wales

Factual and Procedural Background

The appellant was a trustee of a registered charity established to maintain and promote the wellbeing of a large housing estate. The charity was funded by rent charges paid by freeholders and leaseholders and was responsible for upkeep and enforcement of covenants. The appellant became a member in 2009 and a trustee in 2013. A serious dispute arose regarding estate management and the appointment of managing agents, leading to the Charity Commission’s involvement.

The contract with the initial managing agent was terminated in early 2014, leading to litigation. The appellant was a director of two companies appointed as managing agents for the charity at different times. The Charity Commission opened a statutory inquiry in 2015 and appointed interim managers later that year. The appellant resigned as trustee in September 2015 but was involved in subsequent disputes over the handling of charity funds and management contracts.

In March 2021, the Charity Commission disqualified the appellant from acting as a charity trustee for five years under section 181A of the Charities Act 2011. The appellant appealed this order to the First-tier Tribunal. The appeal was heard remotely over two days in 2022, with oral evidence from the appellant and witnesses. Written submissions were completed by December 2022.

Legal Issues Presented

1. Whether one or more statutory conditions under section 181A(7) of the Charities Act 2011 were met in relation to the appellant.
2. Whether the appellant was unfit to be a charity trustee.
3. Whether making a disqualification order was desirable in the public interest to protect trust and confidence in charities.
4. The appropriate scope and duration of any disqualification order.

Arguments of the Parties

Respondent's Arguments

• The appellant was involved in misconduct or mismanagement while a trustee, including mishandling the termination of a major management contract, misappropriating charity funds, and permitting conflicts of interest.
• The appellant was responsible for or facilitated the misconduct, failed to oppose it, and was unfit to be a trustee due to lack of competence, honesty, and integrity.
• The disqualification order of five years was proportionate and necessary to protect public trust and confidence in charities.

Appellant's Arguments

• The appellant denied any misconduct or mismanagement, asserting that the initial managing agent terminated the contract and that proper legal advice was sought.
• He argued that funds held by his company could not lawfully be transferred due to statutory protections relating to service charges, and that he had ceased to be a trustee before the fund transfers, acting only as a company director.
• The appellant contended there was no conflict of interest as any potential conflicts were managed properly and that his competence, honesty, and integrity were not in question.
• He submitted that the disqualification order was neither desirable, necessary, nor proportionate.

Table of Precedents Cited

Court's Reasoning and Analysis

The tribunal conducted a rehearing considering all evidence, including oral testimony and documentary material. It focused on three main areas of alleged misconduct: the termination of the contract with the initial managing agent, the handling of charity funds held in company accounts, and conflicts of interest arising from the appellant’s dual roles as trustee and director of managing companies.

Regarding the contract termination, the tribunal found the appellant acted recklessly by provoking a dispute without sufficient legal advice or proper documentation, thereby exposing the charity to legal risk and costs. The appellant’s claim that the contract was invalid or terminated by the other party was contradicted by contemporaneous evidence, including minutes and letters signed by the appellant.

On the misappropriation of funds, the tribunal accepted that the appellant did not voluntarily transfer requested funds, despite formal orders and his understanding of the obligations. It rejected the appellant’s argument that statutory provisions relating to service charges prevented transfer, finding the funds were rentcharges and thus not protected under the relevant legislation. The appellant’s fiduciary duties as a company director required him to transfer the funds, which he failed to do.

Concerning conflicts of interest, the tribunal found the appellant’s simultaneous roles created serious conflicts that were not adequately managed. The contract with his company was significant in value and duration, and the appellant’s involvement in decisions about this contract while a trustee was problematic. Limited advice was sought, but it was insufficient to address the conflicts.

The tribunal concluded that the appellant’s conduct amounted to misconduct or mismanagement under the statutory criteria, rendering him unfit to be a trustee. His conduct risked damaging public trust and confidence in charities. The tribunal gave appropriate weight to the Charity Commission’s decision but formed its own judgment on the evidence.

In determining the disqualification period, the tribunal applied the Charity Commission’s guidance on proportionality and disqualification bands. It found the appellant’s conduct serious but not warranting the upper band (over 10 years). The middle band (5 to 10 years) was appropriate due to the duration and deliberate nature of the misconduct, but mitigation such as no loss of funds and some proper estate maintenance were noted. The tribunal settled on a five-year disqualification as proportionate.

Holding and Implications

The tribunal DISMISSED the appellant’s appeal and upheld the Charity Commission’s order disqualifying him from being a charity trustee or trustee for a charity for a period of five years.

The disqualification prohibits the appellant from acting as a trustee or holding senior management functions in any charity during that period. The decision enforces accountability and protects public trust in the charity sector. No new legal precedent was established; rather, the tribunal applied existing statutory criteria and guidance to the facts of this case.