Law: Prevention is always better than cure: In the wake of recent consolidating legislation, Sharon Wallach examines the impact on the growing area of trusts, trustees and charities law

Sharon Wallach
Thursday 08 July 1993 23:02

LAWYERS are reconciled to a world in which they have to seek out new fields of business to flourish, or even survive, so talk of a growth area should make them prick up their ears.

Charities law is one such area, and one which an increasing number of firms are getting into. The City practice Lovell White Durrant has recently advertised for a charities specialist. Partner Charles Pike explains why.

'Trusts and trustees work is very much a growing area,' he says. 'Post-Maxwell particularly, people who accept office as trustees take on a greater responsibility than they might have realised before.'

As Mr Pike points out, the body of trustee law goes back hundreds of years; charities are encumbered with an additional area of law. 'The role of the lawyer is to make sure the client is aware of problems that he may not have foreseen. Prevention is worth all the cures,' he says.

Trustees need to understand firstly their powers, and secondly - and this, says Mr Pike, is what people tend to forget - the question of whether the decision to exercise those powers in a particular way is correct.

All areas of Lovell's practice, from the most to the least commercial, are dealing more with trusts and trustees than they were 10 years ago, says Mr Pike. Charities work is currently done by several people within the firm, none to the exclusion of other work, but its growth now warrants 'not less than one partner and not less than three other solicitors' working exclusively in the field.

'The truth is that if you explain to someone who takes on the office of trustee - either charitable or private - that if he makes a decision that is honest but incompetent, he is actually personally liable, he will think twice about taking on a trusteeship. Someone may be acting from the best philanthropic motives but can still be shot at. That's where the lawyer comes in, to educate people.'

In response to the growing number of specialist charities lawyers, Anne-Marie Piper, a partner with the City firm Richards Butler, was instrumental in setting up the Association of Charity Lawyers at the end of last year. It now has more than 220 members, practitioners, academics, and affiliates such as accountants.

The association's function is threefold, says Ms Piper: to initiate projects and discussions with others in the charities sector; self-education; and to represent and be consulted.

In the past charity law has been badly drafted, in part because there is no professional body to comment on the legislation, Ms Piper says. This is something the new association hopes to redress. And, she adds, it is useful for the Charity Commissioners to have a body to which to refer.

Ms Piper is the association's secretary, its chairman is Peter Mimpriss, of Allen & Overy, and the honorary president is Hubert Picarda QC. Other committee members include Stephen Lloyd, of Bates Wells & Braithwaite, and Judith Hill, of Farrer & Co. The association plans a range of activities, including running training courses for trustees on the 1992 legislation, organising conferences and various publications.

The charities lawyer, says Ms Piper, has traditionally been viewed as a jack of all trades. 'Charities is an area of law that everyone did, usually as an adjunct to private client work, but in which few specialised.'

That is changing fast, however. 'In the 1980s, there was huge growth in the charities sector,' she says. 'It was as much part of the yuppie boom as everything else, with events such as Live Aid. These inspired all kinds of other charities and large amounts of money were being raised.'

In 1989, the Government instigated a review of charities, following concern at the way they were being run, and new legislation was enacted last year. It was, believes Ms Piper, the most significant legislation in the past 20 years, although she describes its piecemeal introduction as 'a pig's ear'.

'This year a consolidating Act was introduced, bringing together the 1960 Act with the first part of the 1992 Act - that in itself led to an increased burden for charities lawyers,' she says. 'And the 1992 Act codified certain obligations of charitable trustees.'

The National Health Service, for example, is giving rise to an increasing amount of work: the transfer of charitable 'trust funds' from health authorities to NHS trusts; the registration of NHS trusts as charities; and issues arising from the possible shutdown or merger of teaching hospitals.

Leisure and sport are also set to become growth areas, Ms Piper predicts, largely brought about by the recession. 'Because local authorities have less money, and people are less willing or able to provide funds, there will be more private or public sector partnerships in return for planning gain.

'For instance, a company acting in the leisure industry that wants to build a bowling alley on local council land is told 'yes, if you also build a swimming pool'. Sport and charity have always had a complicated relationship and the law here needs looking at.'

As a sector, charities cover everything from local amenities groups to vast international bodies. The Charity Commission registers some 4,000 new charities each year. The total income of the 170,000 registered charities is around pounds 16.2bn - the equivalent of 3.4 per cent of GDP.

The voluntary income of the top 400 charities rose by 6 per cent in 1990/91, although the sector's total income has been falling since 1985. But there is plenty of work for the lawyers.

(Photograph omitted)

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