The Regulator for Charities in England and Wales
Registered Charity No. 1046657
1. This is a statement of the results of an Inquiry under Section 8 of the Charities Act 1993 (‘the Act’).
2. Meadowlands (also known as Meadowlands Trust Limited) (‘the Charity’) was established as a limited company in 1992 and registered as a charity in May 1995. Its objects were to promote the conservation of wildflower meadows in Great Britain and to educate the public in the understanding and appreciation of and need to conserve such meadows and the natural environment.
3. In May 1995, a trading company, Meadowlands Limited (‘ML’) was established, with the principal aim of harvesting wildflower meadows. ML and the Charity had a close working and financial relationship. There was broadly a commonality between ML’s directors (who were its shareholders) and the Charity’s trustees. In December 2000 ML was struck off the Register of Companies and dissolved as a consequence of non submission of annual Accounts and Returns.
4. During routine monitoring of the Charity’s Accounts for the financial years ending 31 May 1996 and 1997, the Commission discovered that the Charity had transferred assets to ML and had also written off a loan to ML. In total, a sum in the region of £50,000 was involved. Preliminary enquiries raised with the Charity’s auditors indicated that its trustees had sanctioned non arm’s length transactions between the two companies, so that the Charity’s resources were possibly put at risk.
5. The Commission established that the Charity’s auditors had doubts about several transactions that had occurred in 1998, with the result that Accounts for that year could not be finalised. Relevant documentary evidence had not been produced to the auditors and the Charity’s accounting records for 1999 had not been provided to them. As a result, the Charity failed to comply with the necessary submissions of annual accounts and returns to the Commission and to Companies House.
6. It emerged that all but one of the Charity’s trustees had resigned. Consequently, the Charity was inquorate and was exposed to inevitable risks arising from being left in the hands of a single individual. The Commission experienced sustained non cooperation on the part of the sole remaining trustee, Mr Robert Edward Hanna, in its attempts to clarify the relationship between the two companies and to address associated concerns.
7. The Commission also began to receive complaints from sources such as landowners (with whom the Charity had purported to enter into tenancies), other regulatory agencies and other parties with whom the Charity had purported to enter into agreements. The complaints typically related to poor accountability in connection with funding provided to the Charity and to failures by the Charity to fulfil terms and obligations prescribed in agreements. Common to the complaints was the perception that Mr Hanna, as the public face of the Charity, was primarily at fault.
8. On 9 October 2000 the Commission decided to open and Inquiry to examine the concerns and complaints in more depth.
9. In November 2000 the Commission made Orders under Section 9 of the Act requiring the Charity’s Bank to provide mandates, statements, cheques and other documents.
10. In January 2001, as a result of increasing concerns about mismanagement and misconduct on Mr Hanna’s part and of the need to act to protect the Charity’s property, the Commission used powers under Section 18 of the Act to make an Order preventing Mr Hanna from entering into any transactions on behalf of the Charity without the Commission’s prior authority. No such authority was requested or granted.
11. Following a number of failed attempts to meet with Mr Hanna, in January 2001 the Commission directed him, under Section 8 of the Act, to attend its office for an interview and to bring with him the Charity’s books and records.
12. Mr Hanna failed to attend the interview, but eventually attended an interview at the Commission’s office in May 2001.
13. In July 2001 and February 2002 the Commission directed, under Section 8 of the Act, two different legal advisers who had acted on behalf of the Charity and/ or Mr Hanna to disclose specific information and documentation.
14. In October 2001 the Commission directed, under Section 8 of the Act, the proprietor of a business with which Mr Hanna had entered into certain transactions to disclose specific information and documentation.
15. The Commission considered making an Order under Section 18 of the Act to prevent payments from the Charity’s bank accounts without the Commission’s prior authority. However, the Bank had taken its own action to ‘freeze’ the accounts in the light of non cooperation by Mr Hanna in addressing concerns.
16. In January 2003 the Commission made an Order under Section 18 of the Act to vest a little over £10,000 of the Charity’s funds in the Official Custodian for Charities, to ensure protection of that money.
17. The Commission secured temporary suspensions of a proposed striking off of the Charity from the Register of Companies (for non submission of annual Accounts and Returns), so that options for the Charity’s future could be explored.
18. The trustees sanctioned transactions between the Charity and ML that were not at arm’s length so that the Charity’s resources were put at risk. The transactions were associated with the transfer of trading activities, carried on by Meadowlands before it was registered as a charity, to ML. As a consequence of ML’s financial collapse and its ultimate striking off by Companies House, charitable funds were lost. The Commission concluded that the fact ML was wound up long ago rendered it impractical and probably unproductive to pursue the matter further.
19. Mr Hanna failed to secure the appointment of additional trustees, and the Charity operated for some considerable time with less than the minimum number (three) of trustees prescribed by its governing document.
20. Mr Hanna never updated the Bank mandate, which required cheques to bear two signatures, following the resignations of other trustees. He was therefore the sole signatory to the Charity’s cheques for some considerable time.
21. Although Mr Hanna failed to provide the Charity’s auditors with evidence and records required by them to complete or prepare accounts, the Inquiry did not establish whether he had failed to keep proper accounting records for the Charity.
22. Licences (or similar authorisations) were withdrawn from the Charity owing to Mr Hanna’s failure to comply with regulations imposed by the licensing agencies and to concerns about issues such as poor accountability and poor land management.
23. Farm business tenancy agreements were terminated by land owners owing to a failure by the tenant to meet relevant obligations. Mr Hanna was cited by those landowners to be responsible for the failure to pay rent and other debts and to maintain land in accordance with the terms of the agreements.
24. In 1999 a sum of money (approximately £10,000) was raised on behalf of the Charity by a third party agency, acting on behalf of Charity, in connection with a wildflower meadow plot adoption offer. Those funds were withheld because of the agency’s concerns about Mr Hanna’s administration of the Charity. It was those funds that were vested in the Official Custodian (see paragraph 16).
25. In August 1999 Mr Hanna purchased in his own name a large area of land near to the village of Wortley, South Yorkshire. The Inquiry found evidence that the purchase was partly funded with the use of charitable funds and that Mr Hanna had misappropriated charitable funds totalling £35,300.
26. The Inquiry found evidence that Mr Hanna had submitted a false invoice, for £18,600, in support of a successful grant application on behalf of the Charity.
27. The Charity was, in effect, dormant and not operating from at least 2000 onwards. Mr Hanna seriously neglected its affairs during lengthy absences from the UK. Environmental organisations, local authorities, and other bodies expressed concern about what they perceived as his neglect of various areas of land owned by the Charity and the resultant threat to their ecological quality. However, the Commission is precluded by statute from acting in the administration of a charity.
28. Smooth conduct of the Inquiry was hampered by the fact that Mr Hanna largely failed to co-operate with the Commission, with the result that it had to seek from elsewhere records and information that should have been available from Mr Hanna. The consequent delays in the progress of the Inquiry increased the risks to the wellbeing of the Charity’s assets.
29. During the Inquiry, the Commission facilitated and coordinated liaison with and between various parties, for example, government departments and funding agencies. As a result, other agencies have been assisted in conducting their own investigations into particular aspects of the Charity’s affairs.
30. Having discovered evidence of misappropriation of charitable funds and other irregularities, the Commission referred a number of matters to other agencies to investigate, including the Police. A resultant prosecution led to Mr Hanna’s conviction for a number of offences under the Theft Act 1968 in April 2005. In May 2005, Mr Hanna was sentenced to 18 months imprisonment.
31. Legal and practical difficulties thwarted the possibility of one of a number of other charities or a local authority taking over trusteeship either of the Charity as a whole or of land owned by it or, alternatively, purchasing that land, with the aim of seeking to safeguard its future conservation.
32. The Commission decided not to exercise its power under Section 18 of the Act to appoint a receiver and manager in respect of the Charity’s property and affairs. One of a number of factors leading to that decision was the likelihood that a receiver and manager would have sold at least part of the Charity’s land in order to meet debts, thus potentially jeopardising its conservation prospects.
33. The Commission decided, instead, to lift its objection to the proposed striking off of the charitable company by Companies House and it was ultimately struck off and dissolved in April 2005. Its assets at that date were passed into the ownership of the Crown in accordance with provisions in the 1985 Companies Act. Thereafter, any party wishing to acquire any of those assets should contact the Treasury Solicitor’s office. The Commission decided that this was an acceptable outcome, having the benefit of avoiding the costs of the alternative step of appointing a receiver and manager and the consequent diminution of the Charity’s resources.
34. The effect of strike off by Companies House is that the charitable company no longer exists and the Charity, having ceased to operate, has been removed from the Central Register of Charities maintained by the Commission. There is, therefore, no longer a legal victim in existence in terms of the Charity. Monies paid under any Confiscation Order that might be made against Mr Hanna by the Courts following his conviction would pass to Central Government funds, thereby producing a measure of benefit to public funds.
35. The Charity’s assets were taken out of Mr Hanna’s control as a consequence of the Inquiry. The Commission regards this as an acceptable outcome.
36. The effect of Mr Hanna’s conviction under the Theft Act 1968 is that, under Section 72 of the Act, he is disqualified from acting as a trustee of any charity. In that light and following the charitable company’s dissolution, the Commission discharged the Order previously made against Mr Hanna preventing him from entering into transactions on behalf of the Charity.
37. As a result of the Inquiry’s findings the Commission concluded that there were grounds to justify using powers under Section 18 (2) of the Act to remove Mr Hanna as trustee, given the serious nature of some of his actions and failings as trustee. Its decision not, however, to use those powers was partly due to the fact that potential candidates as new trustees for the Charity rejected the opportunity on the grounds, for example, of concerns about potential exposure to an uncertain level of liabilities. The Order made against Mr Hanna in January 2001 protected the Charity’s property, and the Charity’s ultimate dissolution and Mr Hanna’s conviction for offences under the Theft Act 1968, removed the need for his removal using Section 18 (2) powers.
38. The Inquiry was closed on 12 January 2005.
39. Charities must fulfil responsibilities to comply with requirements for the submission of Accounts and Annual Returns to the Commission. Transparency and accountability helps underpin the confidence of the public in charities and allows funders and supporters to see how their money is being spent.
40. Charities that receive their funding from public bodies should ensure that close and open relationships are maintained. Funding bodies are entitled to expect charities to account openly for their use of grants and other funding.
41. When a trustee body is to be appointed by election, the Commission recommends that this be carried out through a process which is open and transparent and in strict accordance with procedures set out in its governing document. If trustees consider that the trustee appointment arrangements do not meet the needs of the charity, they should consult the Commission for advice.
42. Trustees have a duty to maintain a quorum, both to enable the charity to operate lawfully and to minimise the risk of the occurrence of financial irregularities.
43. It is a fundamental duty of all charity trustees to protect the funds, assets and property of their charity and to secure their application for the objects of the charity. If there is evidence of trustees having deliberately or recklessly used charity funds, assets or property for inappropriate purposes, there will be circumstances in which the Commission will take steps to obtain restitution from them personally.
44. If the Commission decides not to pursue repayment to the charity of sums lost because of a breach of trust, that decision does not eliminate any legal liability to repay. Nor does it bind the present or future trustees of the charity, or the Attorney-General.
45. The Commission’s primary interest in conducting an inquiry into the affairs of a charity is to protect the charity’s assets and beneficiaries. However, where the Commission discovers criminal evidence of financial irregularity, including fraud or theft, it is duty bound to refer that evidence to the Police.
46. This case demonstrates the importance of the Commission’s links with other regulatory bodies and agencies and with funding bodies and agencies.
47. One of the Commission’s functions is to encourage better administration of charities and the Courts have held that, quite apart from any statutory obligation to do so, charity trustees have a duty in principle to cooperate with the Commission. Where trustee cooperation is withheld, to the detriment of the charity, the Commission will not hesitate to use its regulatory and protective powers.
48. It is an offence for someone who has been convicted of an offence involving dishonesty or deception to act as a trustee of a charity unless the convictions are spent or a waiver has been granted.