The future governance of Phennick Cove Marina in Ardglass took a dramatic twist last week at the Tribunal Hearing Centre at NI Law Courts in Belfast when an appeal hearing took place brought by the Ardglass marina directors opposing the previous Charities Commission for Northern Ireland saying they shout operate as a charity.
The final decision at the appeal hearing was that Phennick Cove Developments (PCD), a limited company by guarantee, was deemed to be a charity and the case was “dismissed”.
The local regeneration project started in 1991 with the formation of Ardglass and District Development Association which consulted locally on what projects would be beneficial to the village. It was finally decided that a marina would be suitable as a key tourism and economic development flagship project. £1.4million was secured through the International Fund for Ireland and EU funding and a company, Phennick Cove Developments, was set up. This company has proceeded to manage the marina project until the present.
However, the CCNI has become involved because of changes in charity law in Northern Ireland and has subjected PCD to the test of this law. PCD are having another meeting with their legal counsel to confer on the decision, but a further court action in the High Court will prove possibly very expensive. An appeal may be heard if lodged within 28 days of the day that PCD was given notification of the tribunal decision.
Background to the case (extracts from the Tribunal Service Notes)
(Note – the words in italics are extracts from the full tribunal decision which can be seen on the NI Courts Service website under Charity Commission Adjudications.)
1. Phennick Cove Developments (PCD) is a company limited by guarantee which operates the Marina at Ardglass, County Down (the “Marina”). The Company was incorporated on 11 January 1994.
2. On 9 September 1994 the International Fund for Ireland (“IFI”) under the Rural Development Programme (Fishing Villages Initiative) made an offer to Ardglass District Development Association (“ADDA”) to help fund the construction of the Marina. The offer anticipated that the project would consist of the construction of a boat park in two phases and include what was described as “associated environmental improvements” (“the Project”). The Offer itself was conditional on the applicant furnishing a “copy of the memorandum and articles of association…to be in terms which the Department [was] satisfied are consistent with the…Rural Development Programme”. There was then a condition that the memorandum and articles of association would not be altered without the prior consent of the Department (in this case the Department for Agriculture and Rural Development (“DARD”).
3. The Tribunal was furnished with correspondence between DARD and the Charity Commission for Northern Ireland (“CCNI” or “the Commission”) which confirmed that DARD as the funding agent was aware that ADDA would be trading as Phennick Cove Developments – a company limited by guarantee. It also confirmed that all conditions attaching to the funding remained in place for a period of 10 years (which period ended in 2004) and that both the funding conditions and the security which was granted to DARD for the loan then expired with DARD having no further interest in the Project.
4. At this stage it is also worth recording that the title to the Marina is held under a lease dated 24 May 1996 made between NI Fishery Harbour Authority (1) and Phennick Cove Developments (2). In the course of proceedings this was referred to as a lease negotiated on commercial terms but, firstly, it is for a term of 99 years (which would be considered less than commercial for a project of this type) and secondly, the lease reserved a nominal rent of 5p (if demanded) (which could be construed as donative in nature) and thirdly, and perhaps more importantly, the lease is restricted to user limiting use of the premises for:
“(i) – the purposes of a Boat Park providing berthing facilities for leisure craft, car parking and administrative and other out offices ancillary thereto; and
(ii) – subject to clause 3.14, within the Amenity Building such other social, educational and recreational activities which shall be of general benefit to the local community of Ardglass”.
Clause 3.14 simply details certain other restrictions but clause 3.15 makes it clear that the Landlord’s consent to any proposed change in the use of the premises is required – and that its consent is unqualified.
5. The Lease, therefore, is considerably more restrictive in nature than one would generally expect in a commercial transaction (i.e. if PCD had “bought” the facility).
6. What then seems to have occurred is that the original ADDA fell away to be reactivated in 2013/14 by a different group of people who, from the press coverage and clippings with which we were briefed, dissent from the current operation of the Marina and are keen to see that the resources which are generated from it are used for a wider number of projects within the Ardglass area than is currently the case. From the information before us the dispute between the reformed ADDA and PCD has, at times, been acute. That, in turn, has led to a suspicion within PCD that the subsequent investigation of the Commission has been motivated by agitation from that or a politically motivated quarter.
7. The Commission for its part has strenuously resisted such claims and has maintained that it has conducted its investigation (details of which will appear below) purely in furtherance of its statutory obligation of keeping and maintaining a register of charities (as is required under section 16 of the Charities Act (Northern Ireland) 2008 (the “Act”)) which brings us to the main issue to be determined in this appeal, namely whether PCD is a charity and whether it should properly be on the register of charities for NI.
In the hearing notes it was agreed by both the PCD directors and CCNI that the articles of association of the company were… “clear, even from a cursory examination, of the constitutional documents of the Company that they are not particularly well drafted and indeed PCD themselves within the pleadings accepted that they are “unfit for purpose”.
The hearing notes discussed in detail the Memorandum and Articles and focussed on the question, was PCD charitable in its aims. The hearing then drew on guidance from the CCNI. The hearing stated that there seemed to be “confusion in the minds of some of the parties as to what are the purposes of PCD as an institution as against what are its current activities.” The CCNI then believed that with all the cumulative evidence that PCD was in fact a charity in principle.
PCD’s objection was centred around a number of issues. “In summary PCD says that purpose (a) is not charitable because PCD does not have effective criteria for determining if the area needs regeneration (a reference to the requirements of CCEW guidance on the point); that as regards (b) tourism is not charitable and the “increase of employment” (which it considers not charitable) is not the same as and can be distinguished from the relief of unemployment (which PCD accepts might be charitable). Finally, as regards (c) there is acceptance that relief of poverty and the advancement of education are recognisable as charitable but in the objects clause as drafted there needs to be clarity as to “how” that was to be done. PCD say that the words “by” or “through” need to be inserted into Purpose (c) failing which it is ambiguous and therefore arguably not exclusively charitable. In the specifics PCD argues that “it was set up specifically to provide a marina [and] enhance the harbour” which could (but failed) to provide employment and that the objective of the relief of poverty therefore failed.
39. In relation to the question of public benefit PCD’s view is that “those who benefit most from the appellant’s activities are boat owners, both local and visiting. They are a part of the appellant’s business and therefore cannot be regarded as the public in general or a sufficient section of it”. On that basis they say there is no – or little – public benefit in the sense required by the Act.
40. Fundamentally, as I have said, they feel that registering the Company as a charity imposes an additional administrative burden to which they are resistant although, again as I have said, they do suggest that a “more sustainable vehicle” would be to transform it into a Community Interest Company. The starting point of their argument is, therefore, very much based on what the company does or has done (i.e. its activities) as opposed to an analysis of what it strictly was originally set up to do. The issue of what the Company does as opposed to the original purpose for which it was set up are, however, two very distinct questions – as the authorities such as the ICS case confirm.”
The decision of the tribunal.
The decision stated: We find that PCD as incorporated is charitable. We say that for the following reasons.
43. We have set out above what has been described as the “hallmarks” of the Memorandum and Articles of Association. We find that on a construction of that document the approach adopted by the draftsman was clearly focused on creating something that was charitable. Whether the draftsman confused “charitable” with “not for profit” is not for us to speculate upon. If however, one looks at each of the provisions in turn – clauses 3, 4, 5 and 8 – and then look at them collectively they disclose an approach that is entirely consistent with the setting up of a Charity. They also disclose that thought was given to the nature of the powers which the Company as a charity needed, for example the ability to raise funds through collections, the nature of the holding of property, the restrictions on the application of income and, most importantly of all, the consequences of what would happen on a dissolution of the Company where the assets would – in all circumstances – end up in another charity. That approach as a strand running through the document we find cannot be an accident and indeed is the complete antithesis of the approach that would be taken in setting up a trading or non-charitable company. We accept that that may not have been the intention of the original promoters of PCD but it is the result of the constitution as drafted – a point implicitly accepted by PCD which makes no claim beneficially to the assets of the Company acknowledging that a community interest company may have been an equally valid alternative. As the authorities cited to us and referred to above, however, make clear it is the constitution of PCD we must interpret not the promoters’ intentions.
44. Specifically, as regards to the interpretation of clause 3 – the critical objects clause itself – we prefer the approach adopted by CCNI as set out in paragraphs 26 et seq. That interpretation does not require – as PCD suggested – a realignment of the text of the clause or the insertion of additional words to give effect to its meaning. The provision is capable of interpretation as originally drafted and we agree that use of the words “and” and “to” provides the appropriate segregation within the text of that clause to give it its correct meaning. On that basis we do not find the objects clause at all ambiguous.
45. In that context the promotion of education and the catch all (Purposes 2 and 3) we find clearly fall within section 2(2)(b) and (l) respectively. There was no serious objection to either as between the parties given that each falls within the existing relevant statutory descriptions set out in that section. The greater issue in respect of each is if the public benefit test is met – a point we deal with below.
46. The more difficult provision is Purpose 1 and more particularly if it is exclusively charitable. The first question in dealing with that question is whether Ardglass needed regeneration in the sense used in the Roundtree case. In determining that we were provided with the original terms of the grant offer letter, the nature and scope of the Fund from which the grant assistance came and the conclusions of the Public Audit Committee who looked into the success of the programme overall – including a brief reference to what had happened in Ardglass. The evidence to the latter was of a development programme that was not only focused on jobs but on “areas of severe disadvantage” where the objectives were “not only economic but social and community based”. Mr Small who gave evidence to the Public Accounts Committee on 22 October 2000 made it clear that the Marina was not merely a job creation project, it was to further tourism activity with the consequent provision of additional bed and breakfast facilities, new restaurant bars etc. resulting in economic regeneration and increase of jobs. In short it was for economic regeneration leading to a wider community benefit.
47. Looking at that in the context of the objects clause PCD in turn was set up “to commission a programme for economic regeneration… for the development of tourism… to increase employment opportunities… for the relief of poverty…” and therefore, we find, to address that perceived need. PCD suggested that the Marina was the Company’s sole purpose. We do not agree. As originally constituted the objective as expressed was one of pursuing a wider objective of economic regeneration and development. That objective as originally drafted was directed overall to addressing perceived deprivation and through that to increase employment thereby relieving poverty (using that term in a relative sense). It was that overall purpose for which the funding was given. The distinction for which PCD has argued i.e. as between “an increase in employment” (which they say is not charitable) as opposed to “relief of unemployment” (which they accept is potentially charitable) is not one frankly which we see. They are one and the same and both, we find, are directed – not to individual or corporate gain in this case – but the relief of poverty in the sense provided for in S 2 (2) and community gain and, if the Company so decided, the promotion of Purposes 2 and/or 3.
48. We find that the evidence to the Tribunal demonstrates that there was “need” (in the sense used in the Rowntree Case) and that that need was ideally to lead to a programme of regeneration and development of tourism that would help in terms of job creation but would also have wider community benefits. That purpose clearly falls within section 2(2)(e) of the Act (as augmented by section.2(3)(c)) and is directly analogous to the promotion of industry and commerce in the sense in which that phrase was used in the Crystal Palace case.
49. It follows that we also therefore accept that CCNI are justified in taking a wider and more purposive approach to the concept of “need”. It is not fatal that PCD had not adopted criteria by which to measure it.
That argument was based on the CCEW Guidance which dated from 1999 and therefore before the enactment of the Charities Act 2006 in which the statutory ground was codified. On the facts of the case, the setting up of PCD was based on the acceptance by ADDA; DARD, IFI and others (including the original promoters of PCD) that need existed and all that followed was with the intended purpose of addressing it.
50. If one also accepts (as PCD has impliedly) that the Company has no commercial/personal interest in the pursuit of such purposes then they must by their nature be exclusively charitable insofar as they are directed entirely towards that objective or purpose. In short, PCD does not appear to us under its constitution to be set up to do anything else other than to pursue that/those purposes. It is, further, no accident in our view that the drafting of the lease was consistent with that approach.
51. We find, therefore, that each of the purposes (i.e. 1, 2 and 3) referred to above are exclusively charitable – subject in each case to the satisfaction of the public benefit requirement.
The Public Benefit Requirement
52. As I have said above (and as the ICS case confirms) when considering public benefit there are two distinct elements, a) firstly there must be a benefit; and b) it must be for the public – or a section of it.
53. In turn the benefit must have three essential features: i) It must flow from the purpose; ii) It must be capable of being demonstrated; and iii) finally the benefit must be beneficial (in the sense of not being harmful).
54. On the question of “benefit” PCD in its representations on this point, has taken a narrow construction. Their case, in simple terms, is that the Marina is for the benefit of a narrow class of beneficiaries with higher disposable income and that the result does not equate to “public benefit”. This is a further example of where, I feel, they have confused the activities which have been carried on by the Company with the purposes for which it was originally set up. As I have said above one only needs to refer to the activities in the case of ambiguity. In the present case it is the Tribunal’s view that it is clear that the purposes as drafted and contained in the Memorandum and Articles of Association all fall within section 2(2) of the Act in that they are exclusively charitable.
55. If one goes back to looking at the original purpose (“Purpose 1”) as set out in the memorandum that was to bring forward a “programme for economic regeneration in Ardglass… for the development of tourism… for the relief of poverty”. This is charitable and was intended to create benefit which is directed to a geographical area (ie Ardglass & district).
56. We find that in the context of the grant assistance which was provided the intention was to regenerate Ardglass and the wider district because of perceived economic deprivation. The method by which that purpose or objective was approached was initially through the construction of a Marina but it equally would have been possible for PCD – as constituted under its Memorandum and Articles – to undertake other endeavours which may or may not have been part of its original business plan, such as in the training of young people to meet the perceived increase in tourism that may have arisen from the Marina. On that point it is not, however, for us to speculate. The point is that the pursuit of the Company’s particular purposes (to use the language of the ISC case) was capable of public benefit – and was very much the public benefit about which the Public Audit Commission heard evidence in the course of its proceedings in 2000.
As to the “public” or “section of public”, to whom the benefit could accrue we further find that “the Ardglass district of County Down” is a sufficiently wide definition of the public or section of it to satisfy the requirements of section 3 (Williams’ Trustees v Inland Revenue Commissioners  AC447 and Shillington applied).
57. As to purposes 2 and 3 these (as drafted) (a) have no restriction as to whom they could benefit and (b) in terms of both (i.e. promotion of education (to the inhabitants of County Down and its environs) and promotion of charitable purposes generally or on a global basis) are in our view directed entirely at public benefit – and then to an even wider section of the public than simply Ardglass and its district. In this regard the language used in clause 3 “and to do all such other things beneficial to the public anywhere in the world …” is helpful in underlining the intent to further public benefit.
58. In summary, therefore, a) we find that the purposes set out in the constitution for PCD are sufficiently clear to be exclusively charitable; and b) the public benefit test in relation to each has been met.
59. On that basis we find that PCD is a charitable body and that the Commission were correct to register it.
60. As a rider to this determination it does appear that PCD’s principal objection to the registration of the company as a charity is because of the additional administrative burden which it perceives will be placed upon it. With respect we do not quite understand its reservations. We certainly do not accept that it would require the services of a full time employee – which is what was suggested to us. PCD already has company filing requirements to which it must adhere and the adherence to the filing requirements under the Act do not greatly add to that requirement given the current level and nature of activities carried out by the company.
61. The greater fear seems to be the local dispute regarding the application of the small surplus (currently £60,000 per annum) that is generated by the activities of PCD itself. On that we would say that it is entirely a question for the directors of PCD as to how that is to be applied – providing it is applied for the Company’s purposes. The determination of this case is that PCD was constituted as a charity. If its funds are properly applied for its purposes then we fail to understand how a local dispute can impact upon that determination. That question, however, is not before us but we think it is useful in putting the issues which have clearly been a motive in a long running dispute into some degree of context.
The Nature of the Commission’s Decision
62. There is one more issue with which we must deal. PCD through its representative Mr McKee raised, as an issue, that the Commission’s decision to register was “not taken lawfully as it was taken by a member of staff of the Commission and not by the Commission itself”.
63. This issue has come before the Tribunal before in various guises and has been ruled upon by the President of the Tribunal in the case of Sean Caughey v CCNI (case reference 8/16) at paragraph 3.
64. As applied to the facts of this case we find that the decision to register PCD as a charity was that of the Commission as a body corporate. Section 6 of the Act clearly establishes the Commission as a body corporate and that, when read in conjunction with section 19 of the Interpretation Act (Northern Ireland) 1954, makes it clear that body corporates have the right to regulate their own procedures and employ such staff as may be necessary for the proper conduct of its business – see section 6(7) and Schedule 1 to the Act.
65. On the facts of this case that is exactly what happened as detailed above. When the case was originally undertaken the preliminary investigation was carried out by Ms C Higgins. That determination was subject to review with her line manager and ultimately the subject of at least two case conferences and external legal advice. At each of those stages the decision taken was by the Commission who, as I have said, as a body corporate was entitled to put in place the processes by which it arrived at its determination.
66. On that basis we find that the decision was a collective decision taken by the Commission as a body corporate and therefore was lawful.