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Council acting as custodian trustee should it be discussed separately from normal council business?

0 votes
The council has, after 122 years of being a custodian trustee, just discovered that it is.  It is now looking to take decisions as the custodian trustee in full council meetings.  These decisions relate to how the Custodian trustee complies with its duties under the trustee act, but primarily by reading the NALC guidance on the subject.    My understanding is that the Custodian Trustee acts on the instruction of the charity so the councillors should not be voting on how they will manage their legal duties - these are laid down in law.   If they do have to take a decision (such as reviewing the instruction from the charity, determining if is legal and if not telling the charity), should they have a separate meeting and minutes as at that point they are acting under charity law, not council law?   Opinions sought.
by (1.5k points)

2 Answers

0 votes
If the Council are custodian trustees, they have no say on the running of the charity or the items they look after, all the Council is doing is holding the deeds.
by (3.0k points)
ParishCouncillor    Under the Trustee Act and the councils own finance procedures, the Council have to comply with the following requirement.    ....... All sums payable to, or out of, the income or capital of the trust property should be paid to or by the custodian trustee. It may allow dividends and other income derived from the trust property to be paid to the managing trustees.......  The council has been managing the charities finances for 15 years as it there were their own.  Now we have instructed the council to pop the charity income into a charitable account, but the clerk thinks that decision needs to go to the council to decide.  Meanwhile they are hanging on to the income.    My view is that its a done deal and they have to comply.  However if they do have to take a decision (which will be to sign a lease as the CT, say) then the council would need to meet as the custodian trustee, not the council as they are taking decisions under charity law.
Having taken some very expensive legal advice over the years on trustee responsibilities of local councils, it does sound as if your council is sole managing trustee and not custodian trustee.  The two are very different in law and as ParishCouncillor has said, a custodian trustee is totally separate in law from a sole managing trustee.
A sole managing trustee absolutely should be meeting quite separately from the council albeit that the same people are involved.  It is the council that is the trustee, not individual councillors as trustees.  There should be separate meetings and separate financial arrangements.  My council is sole managing trustee of a local charity and we have separate meetings (usually immediately after the full council meeting) and a separate bank account for charity finances.   In the interests of good governance, we've resolved to apply our local council financial regulations to the charity finances (e.g. three quotes for work above a certain limit, two signatures on cheques etc. etc.) and our meetings have the same set of standing orders but the two are run separately.
Delboy    The council is custodian trustee (and they have legal advice that tells them so) and the committee of management are the managing trustees.  It is all in the indenture signed in 1920. However, our situation arises as the council thought the management hand been handed over to them in 2007.  There was a vote by the trustees at the time (6 councillors and 2 MOP) but the indenture was not changed, no agreement was signed and the CC was not informed.  At that point the council should have become sole trustee.  The 'trustees' continued to meet though that period and the council continued to appoint councillors to the 'committee of management' while they administrated the land and buildings, but not the committee of management.  It was a right muddle.  Move on to now and the council has gone though a bruising peropd when it has had to come to terms with it not owing the land or legally  managing it and it has to be managed in line with charity and council law.  The council are custodian trustee, but take all instructions from the charity (to the cistodian trustee) to full council and vote on them.  I an not sure this is in their powers, other than to consider if the instruction is legal (which the clerk should advise them).  ie can a council vote to ignore the instruction of a charity to its curtodian trustee, even if the clerk says it is a legal request>  And when they meet to consider it - should it be in a separate meeting as the decision is under charity law?
I should add - the council sought charity commission advice across that period and it was consistent in that the CC asked them what they were doing and that the Managing Trsutees were the ones in charge, not the council.
0 votes
It's interesting that you suggest that the council has been a custodian trustee for 122 years, as the title was first adopted in the Public Trustee Act 1906. The paragraph about "all sums payable..." refers to the role of the Public Trustee (now the Official Custodian for Charities) at that time.

The current operational guidance from the Charity Commission states that "the custodian trustee holds the title to all the property of the trust but is not involved in the day to day management of the trust."

The governing document of the charity and other legal paperwork will be the key to this, as they may override certain aspects of the legislation. It isn't clear from your comments whether the council has been recording the charity transactions separately and submitting the relevant annual returns to the Charity Commission, but I hope that this is the case. You are correct in stating that the council must now hand over all sums to the charity and a simple resolution will suffice for this purpose. There is nothing to debate.

You haven't mentioned the charity's main asset's nature, but I presume it is a building or land. This should be registered at the Land Registry with the title held by the council "as trustee of..." referencing the charity or the will or deed by which the asset passed to the council. Assuming this is all in place, it is highly unlikely that the council will ever be asked to make a decision regarding the charity, so the issue is unlikely to arise. It is not the role of the council to monitor the work of the managing trustees, and they must not interfere.

Having said all of that, if the managing trustees do ever instruct the council to act, the council should record this as an agenda item at a regular meeting, but any debate regarding the instruction must be limited to the legality of the instruction, not the perceived wisdom or otherwise thereof. The Clerk should confirm beforehand whether or not the charity has the legal power to act, so if it does, the council has no say in the matter. Calling a separate meeting to discuss the charity's affairs will inevitably lead to unwarranted meddling.

Conversely, if a council acts as the managing trustee of a charity, separate meetings should be held, as charity law prevails in that situation.
by (41.0k points)
Dave  Thanks - Your answer starting 'Having said all that' is good stuff for us to follow.
Re the charity, it is a charitable trust holding land and buildings built on it since 1920, under the 1859 recreation grounds act and its charitable aims are from that act.  The governing doc says the Managing trustees will manage it (a crib from the 1859 Recreation grounds act), and that has been interpreted by our charity lawyer as the overall management cannot be delegated but administration can be (by agreement / MOU / Legal advice), a position the CC concurr with.  The indenture says that the council shall appoint 4 Managment trustees (out of 10), but they have not ( no councillor wants to do it).   This absence of councillors in the charity and in council is a key issue, as it is a requirement of the agreement signed in 1920 by the council (they agreed to appoint the 4 and then hold a parish meeting to find 6 members of the pubilc in 1920).    If the council cannot appoint them then we need to review the charities structure and funding as the council offices are on charity land, as is a council run library and council run bar - all without lease agreements and no rent paid (going back many years).  The council voted to leave by end oct and hand it to the charity, a charity with no income (the council has taken all land and property income since 2007) and very little in the bank.   Meanwhile the internal auditor has found that the accounts have not been right for a number of years and need re casting (they have not for 2021/22)  and the charity needs to re cast theirs as well and tell the CC.  There is a lot to do, as there always is when sorting out sucg problems.  It has not helped that over the years the indenture seems to have been lost and found a few times.
Wow. What a mess! This type of council//charity issue is so common and I'm dealing with two cases of disputed ownership in my three councils at present, both within the last 30 years. In the first case the charity built a community centre on council land and the second was a mirror image whereby the council built a community centre on charity land. With no legal advice (to save money!) the appropriate documentation wasn't prepared and now I'm left to pick up the pieces. The new legal bill will be at least ten times the original cost would have been. Ho hum!
Dave  Thanks   Just to note that the council has not been recording the charity transations separately and has not been submitting the relevant returns to the charity commission.  The council expected the charity to do that, but kept all the income and recorded it as being Parish Council income.  It contnues to do so - hence they need a letter.
It gets worse, as the PC has not recorded the charities income and expenditure correctly the charity is considered to be dormant.  The PC is going to cancel the insurance for the grounds and buildings, but as the charity is dormant - we cannot get insurance.  What a mess.

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