Decision

Annex 3: Details of the Interim Manager appointment

Published 18 January 2019

This decision was withdrawn on 19 October 2023

No longer current.

On 26 April 2013, the Inquiry made a Commission order under section 76(3) (g) of the Act, appointing an Interim Manager ^{[footnote 1]}.

Sections 78(2) and (3) Charities Act 2011 makes it clear that interim managers have the functions that are defined by the order of the Commission that appoints them, and they operate under the supervision of the Commission and not the court.

In this case, the specific functions of the Interim Manager’s appointment were to:

• take over the management and administration of the charity and its property and discharge the functions of the trustee of the charity to the exclusion of the trustee of the charity
• take any steps necessary to secure and take control of the property of the charity in particular to:
  • assume responsibility for handling the charity’s claims for gift aid with HMRC arising from its participation in the scheme between January and December 2010 and reply to and provide full answers to HMRC’s requests for information in a timely fashion, including outstanding requests upon which penalties have been levied against the charity by HMRC
  • examine the charity’s options to bring its gift aid claims to resolution, including (if this would be in the best interests of the charity) options for withdrawal and novation of any future benefit of any claim
  • deal with any issues with HMRC or those participating in the scheme, about or arising from the charity’s participation in the scheme
• carry out an initial examination of how conflicts of interest have been managed as regards the charity’s participation in the scheme and to determine if there is any potential substance or merit in any duty to account on the part of the trustee of the charity and/or directors of the trustee arising as a result of one or more of them being associated with advisors to and/or those participating in the scheme
• review the charity’s grant-giving activities for the financial year ending March 2013 to determine the accuracy of information published in the accounts and/or given to the Commission/HMRC about its past donations and timings of them
• consider the charity’s strategy/strategies as regards its activities and future operation.

A second Interim Manager was appointed on 18 February 2014.

Details of how the Interim Managers discharged their duties

The Interim Managers (both individually and through their instructed solicitors, Stone King LLP, of which firm both Interim Managers are partners):

• secured control of the charity’s assets, including twelve boxes of charity and Scheme paperwork, and the charity’s bank accounts (including several discussions over the terms of this with Mr Jenner)
• undertook throughout their appointment the following general administration of the charity:
  • acknowledged and responded to grant applications
  • prepared and submitted as required annually (Charity Commission returns, accounts and tax returns)
  • held quarterly meetings of the Interim Managers (and others as necessary) to make decisions on the running of the charity in the place of the trustees. Governance and secretarial support for this.
  • handled press enquiries
  • protected individual taxpayers’ personal data (included amongst the charity’s papers) when responding to regulatory requests for information
  • the Interim Managers also answered questions as they arose (in so far as they were able by law) from HMRC, the Charity Commission, the National Audit Office, and the Financial Reporting Council
• undertook a detailed review of the charity’s paperwork and provided a report to the Commission on the 26 July 2013 on the charity’s grant making activities and management of conflicts of interest (and wider conflicts)
• undertook a detailed review of the charity’s gift aid claims, including instructing specialist Counsel, Michael Furness QC of Wilberforce Chambers for advice on the merits of the claims, and carried out liaison on behalf of the charity with HMRC. Prepared a report for the Charity Commission on the Interim Managers recommended way forward in relation to the gift aid claims
• due to the fact that Mountstar was appealing the appointment of the Interim Managers and could in theory be re-appointed, the Interim Managers had to maintain the gift aid claims’ status until this matter was decided. This involved the Interim Managers:
  • requesting HMRC to carry out a decision review on the 27 January 2014
  • submitting an appeal to the First-tier Tribunal (Tax) on the 8 May 2014, in line with advice from the Commission under section 110 Charities Act 2011
• as the time to submit fuller appeal paperwork was approaching, the Interim Managers had to consider options to stay the claim pending the outcome of the appeal. However in August 2014 Mountstar then withdrew its appeal
• the Interim Managers, based on advice from Counsel, indicted that they were minded to withdraw the gift aid claims as to continue them was not in the best interests of the objects of the charity subject to the formal approval of their decision either by the Charity Commission or the High Court. This took some time to resolve but it was eventually decided that an application should be made to the High Court under section 78(5)(b) Charities Act 2011 confirming the steps the Interim Managers should take in relation to the gift aid claims
• on Counsel’s advice, bearing in mind the very large sums at stake should the claims be successful, the Interim Managers, had also looked in detail at offers by Mountstar to fund the gift aid claims, looked into third party funding options and instructed Mischon de Reya to provide a view on whether it, or any other law firm, would consider taking on the claims as part of a conditional fee arrangement, as the charity had no funds of its own to continue the claim. Possibilities of assigning the claims were also looked at
• the application to the High Court meant that the Interim Managers had to apply to the First-tier Tribunal (Tax) for a stay pending the High Court’s decision, so as not to jeopardise the gift aid claims in advance of the decision The stay was granted on the 9 September 2014, but due to the time spent applying to the High Court the Interim Managers had to later oppose attempts by HMRC to remove the stay
• in order to undertake these steps the Interim Managers had to maintain a dialogue with HMRC, the Commission, and instruct specialist tax counsel, Thomas Chacko of Pump Court Tax Chambers
• the Commission issued its application to the High Court under section 78(5)(b) Charities Act 2011 on the 24 July 2015, in which the Interim Managers were represented. This involved the Interim Managers liaising with the Commission; instructing Jonathan Davey QC of Counsel of Wilberforce Chambers to represent the Interim Managers; attendance at Court; assessing last minute offers from Mr Mehigan to contribute to the costs of continuing the gift aid claims before and after the hearing
• on the 21 April 2016 judgment was handed down directing that the Interim Managers should be at liberty to discontinue the gift aid claims and sanctioning the Interim Managers’ proposed decision to do so
• Mountstar then sought permission to appeal the High Court decision, which again involved the Interim Managers. But the High Court refused permission and an Order was issued sanctioning the decision to withdraw the claims on the 1 June 2016
• the Interim Managers therefore formally decided to withdraw the gift aid claims/appeals, and then wound up the charity

Normally the fees of an Interim Manager are paid for out of a charity’s funds as is required under the 1992 regulations. In this case, the Commission made the exceptional decision to indemnify the costs of the Interim Manager appointment to the extent that the charity’s own funds were not sufficient to cover them.

This was on the basis that it was evident that the charity had insufficient funds currently available and it was, exceptionally, in the public interest to do so as an interim manager appointment was necessary with no viable alternative.

The Interim Managers remained in post until 26 May 2017.

The costs of the Interim Managers’ appointment, including legal advice and fees that would have been necessary and incurred by any trustee was as follows.

Costs breakdown

Total fees charged (both for the work of the Interim Managers and for work carried out on their behalf for the Charity): £296,483.90 (exclusive of VAT and Disbursements).

Total VAT: £65,846.96 Total disbursements: £32,825.49 Overall total: £395,156.35

This breaks down as follows:

Disbursements

Total Counsels’ fees re advice and representation re gift aid claims, and external legal advice: £32,530 Total other (travel/post/bulk copying for regulators/search fees) £295.49

Stone King LLP fees from 2013 to 2017

Charity Administration and Fulfilling duties of Interim Manager

Including: taking control of the charity’s assets (including dealing with the charity’s Trustee), dealing with grant applicants, governance support, preparing and filing the charity’s accounts and annual returns, dealing with HMRC requests for donor papers, liaising with donors, dealing with Charity Commission request for papers, answering questions from National Audit Office, producing the Annual Interim Manager reports, dealing with the press, and closing the charity: £137,750.50

Dealing with the Gift Aid claims

Including: maintaining the claims, requesting HMRC decision review, submitting the appeal and stay, assisting in application to High Court to sanction decision to withdraw claims, answering HMRC requests, and withdrawing claims: £133,992.90

Review of, and reports to the Commission, on the charity’s structure/conflicts management and so on: £21,740.50

In addition, Stone King LLP wrote off a significant amount of time incurred by its staff and by the Interim Managers over the period of the assignment.

1. On 18 February 2014, a partner in the Interim Manager’s firm was appointed joint charity interim manager by the inquiry by an order made under section 76(3) (g) and section 337(6) of the Act. This measure was taken because the original interim manager was going to be unavailable for some time and the Commission needed to ensure the charity’s property was protected during this period. ↩