The Regulator for Charities in England and Wales

The Recreation Ground, Bath

Registered Charity No. 1094519

Charity Commission Logo

This is a statement of results under section 8 of the Charities Act 1993 (ďthe 1993 ActĒ).

The Charity

1. The Recreation Ground, Bath (ďthe RecĒ) is a large open space in the centre of Bath, used for recreational purposes by Bath residents and the public generally. It was transferred to the Mayor, Aldermen and Citizens of the City of Bath in 1956 from the Bath and County Recreation Ground Company Limited. At the time of the transfer the land was subject to a number of leases. Bath and North East Somerset Council (ďBANESĒ) is the successor to the Mayor, Aldermen and Citizens of the City of Bath.

2. In 1993 BANES approached the Commission regarding whether the Rec should apply for registration as a charity. The Commission advised that it did not consider that the Rec was a charity.

3. In 2002 BANES decided to clarify the Recís status and therefore put the matter before the court1. The judge determined that the Rec was and had been held on charitable trusts, and that the trustee (BANES) was charged with maintaining the Rec ďas a recreational facility available for the benefit of the public at large.Ē2

4. The Rec was registered as a charity in November 2002.

5. For the financial year ending 31 March 2006, the Rec had an income of just over £100,000.

6. In the following paragraphs, ďBANESĒ is used to refer to the Council when it was acting in its capacity as trustee of the Rec. BANES is referred to as ďthe CouncilĒ when acting in its capacity as local authority.

Source of Concern

7. Clarification regarding the charitable status of the Rec came in 2002. At the same time it became apparent that there were inconsistencies between the way the Rec had been used, and its charitable trusts and the provisions of the 1956 Conveyance relating to open space. It was recognised by the Commission and BANES that, as the sole corporate trustee for the Rec, BANES now had to address these inconsistent uses and ensure that the Rec was managed in accordance with its charitable trusts.

Issues

8. There are two main areas in which the Rec was and is being used in a manner inconsistent with its charitable purposes:

  • Prior to 2002 BANES built a leisure centre on the Rec and a car park partly on Rec land partly on Council land, effectively preventing the area they covered from being used for open air recreation. This also presented a conflict of interest for BANES as it both occupied the leisure centre as local authority and held the land it was built on as trustee.
  • In 1995 BANES had renewed a long-term lease (ďthe main leaseĒ) to the Rugby Club for an area of land used by the Rugby Club for their stadium. The area used by the Rugby Club was therefore not available to the public to use in accordance with the provisions of the 1956 Conveyance relating to open space. In addition, BANES did not demonstrate to the Commission that the terms of the lease were the best reasonably obtainable by the Rec. The law does not recognise the promotion of any particular sport, for its own sake, as charitable. Institutions which are concerned with professional or elite sport, and that give priority to professional teams and players over any amateur users of its facilities, would not be charitable. In addition to their main lease, from at least 2003 the Rugby Club advised BANES that it required a lease for an additional area of land to enable the building of a temporary seating stand (the East Stand).

9. The Commission also wished to look into the leases that BANES had granted to occupants of the Rec. These included the Bath Croquet Club and the Trustees of Bath Drama. This was because the areas covered by these leases may not be available for recreational use by the public.

Commission inquiry

10. From 2002 the Commission began to work with BANES to assist it in resolving these issues. The Commissionís aims were to:

  • ascertain the extent to which the land was not being used in accordance with the trusts of the Rec; and
  • secure the proper charitable use of the Rec in accordance with the charitable trusts, where possible working with the trustees to do so.

11. The Commission opened its inquiry on 4 October 2002 and closed it on 16 March 2007.

12. The inquiry ran over several years as the Commission acknowledged that BANES would need time to address the impact of the 2002 court judgment, especially as the finding that the land was charitable raised complex issues for its trustee and the Recís occupants, given the leases already in place.

13. During the majority of the period for which the inquiry was open the Rec was administered by Interim Managers (previously known as Receivers and Managers) appointed by the Commission.

Conduct of inquiry

14. From the outset of the inquiry the Commission made it clear to BANES that it was required by law to comply with its duties and responsibilities as charity trustee. Advice on particular areas of charity law, or particular duties and responsibilities, was given to BANES throughout the inquiry.

The leisure centre: 2003 - 2005

15. In 2003 the Commission appointed John Ariel and Cedric Clapp of Baker Tilly as Interim Managers of the Rec. They were appointed to manage the conflict of interest arising for BANES regarding the leisure centre, as they could undertake an independent review of its position on the Rec. The Interim Managers were also tasked with reviewing the position of all occupants of the Rec. BANES remained responsible for all other aspects of the management of the Rec.

16. The Interim Managers, as part of this review, considered a range of options regarding the leisure centre. The Interim Managers took account of the fact that the provision of a leisure centre for the public could be a charitable activity, but was not in this case consistent with the Recís charitable purposes.

17. In 2004 the Interim Managers proposed that the leisure centre and such areas of car park as were situated on the Rec should be let to the Council on a very long lease. They had discounted the option of demolishing the leisure centre and thereby making the land it covered available once again for open air recreation, as removing the leisure centre would reduce local leisure facilities and was not in the interests of the residents of Bath.

18. At the Interim Managersí request, the Commission agreed to promote a scheme to enable a disposal to go ahead. A scheme is a legal document which allows the Commission to alter, amend or amplify a charityís trusts. It was necessary in this case because the Recís trusts did not permit BANES to dispose of the charityís land outright and so the Commission had to provide it with the power to do this.

19. When promoting this scheme, the Commission was required by law to publish it for public consultation. When the draft scheme for the Rec was published, the Commission received wide-ranging representations from the public. Some of the representations received were outside the scope of the Commissionís regulatory role or not relevant to the contents of the scheme. Some were directly relevant to the issue of the sale of the Recís land, and argued that selling the leisure centre, car park and the land it was built to the Council would effectively result in that land being permanently lost to the Rec.

20. In addition to the representations about the scheme, the Commission received a request for an internal review of its decision to promote the scheme. The review concluded that there may be other options for the Interim Managers to consider which would not result in a permanent loss of land to the Rec.

21. As a result of the representations and the review, in 2005 the Commission decided not to proceed with the scheme on hold whilst other options were considered. The Commission aimed to find an option that would, as far as possible, retain this land for the public to use for charitable purposes.

The Rugby Club and temporary leases: 2003 - 2006

22. In 2003 BANES proposed to the Commission that it should undertake a strategic review of the current and future uses of the Rec, to review and resolve issues arising from the Recís current occupants, and to ensure that it was managed properly as a charity for the benefit of the public now and in the future. This review would include in particular the presence of the Rugby Club on the Rec under its main lease.

23. BANES explained to the Commission that this strategic review would take time and money to complete, and in the meantime the Rec required an income to pay for its management. BANES also informed the Commission that in order to operate properly under the main lease, the Rugby Club required additional seating capacity. BANES requested the Commission give authority for a lease to the Rugby Club to enable it erect the East Stand for the following rugby season, the rental income from which would be used to finance the management of the Rec. The temporary lease covered an additional area to the area they already occupied under the main lease granted by BANES in 1995.

24. This temporary lease would prevent this new area of land being available to the public for charitable use as it was a further encroachment on the Rec. It also appeared to give preference to the Rugby Club. It would not be in furtherance of the Recís trusts as it would not be consistent with its charitable purposes or the provisions relating to open space. The Commissionís consent was therefore required for the new lease. Having considered BANESí arguments and consulted with the Interim Managers (see below), in particular regarding the Recís financial position and the need for time to resolve issues with the Rec in the long-term, the Commission agreed that it was in the interests of the Rec to grant the proposed lease. Accordingly, the Commission authorised BANES to enter into a temporary one-year lease for full market rent to the Rugby Club for the East Stand area.  The order took effect on 22 August 2003.

25. In 2004, at BANESí request, the Commission agreed to authorise a further lease for the East Stand area, again to permit BANES the time and finances to conduct its strategic review. This lease was for two years and expired in May 2006.

26. A key factor in the Commission agreeing to the temporary leases was that it enabled a holding position to be maintained until such a time as the long-term use of the Rec could be resolved by way of the strategic review.

27. The Commission repeatedly requested BANES to carry out its strategic review to address the long-term future of the Rec. However, during 2003-2006 BANES delayed the review, stating that it had insufficient funds to conduct it.

Safeguarding the Rec for the public for the future: 2005 - 2007

28. Since their appointment, the Interim Managers had been reviewing the legal position of all tenants on the Rec. In April 2005, the Commission amended the specific functions of the Interim Managers to cover only how to deal with the presence of the leisure centre and car park on the Rec. There was no inherent conflict of interest for BANES with the Recís tenants and BANES argued it was in a position to properly discharge its duties and responsibilities as trustee when including the position of these tenants in its strategic review. 

29. In addition to the work completed by the Interim Managers, the Commission was separately engaged with BANES about its actions to address the issues with the Rec. During 2003-2006 BANES delayed its strategic review, stating that it had insufficient funds to do so.

30. Furthermore, in December 2005 BANES resolved to renew the temporary lease to the Rugby Club for the East Stand for a further two years, without seeking the necessary consent from the Commission. In March 2006 the Commission became aware of BANESí decision through its website. It immediately contacted BANES to remind and make clear to the trustee that they had no power to enter into such a lease with the Rugby Club without the Commissionís prior authority, and none had been sought. The Commission sought urgent confirmation that BANES understood this and would make the position clear to the Rugby Club.

31. BANES, however, did not provide the Commission with the confirmation it sought. To safeguard this area of land for the Rec, the Commission immediately issued a temporary and protective order under its powers in section 18(1) of the 1993 Act. This reaffirmed the position under the Recís Conveyance that the trustee had no power to sell or lease land, unless it is in furtherance of the Recís purposes. The effect of this was that the temporary lease to the Rugby Club could not be granted without the consent of the Commission.

32. After receiving the Commissionís order, BANES requested the Commission consent to the proposed new two-year lease to the Rugby Club. Again, BANES argued the lease would provide the time and income necessary to conduct its strategic review, and was therefore in the charityís interests. In order to be satisfied that the proposed lease would indeed be in the charityís interests, the Commission obtained a written commitment from BANES which detailed how and when the strategic review would be conducted. On this basis, the Commission was satisfied it was in the interests of the Rec that the lease be renewed for one further year, and in August 2006 the Commission agreed to this lease.

33. Satisfied on the basis of BANESí written commitment to carry out its strategic review, the Commission concluded that the issues raised by the charitable status of the Rec could and should be resolved by BANES as part of this review. BANES informed the Commission that the strategic review would cover the Rugby Club (both main and temporary leases), the leisure centre and car park, and all other uses of the land. The Commission therefore decided that it was no longer appropriate or proportionate to keep the Interim Managers in place and, in February 2007, discharged them.

34. At the same time, the Commission exercised its powers to vest title to the Recís land in the Official Custodian of Charities.

35. Having taken these steps and ensured that BANES had a mechanism in place to resolve the outstanding issues, which would require the Commissionís authority to implement, the Commission closed its inquiry on 16 March 2007. The Commission made it clear to BANES that issues remain about the current use of the Rec for activities which are inconsistent with its charitable purposes. BANES have to address these and provide a long-term plan for the Rec as the outcome of the strategic review and the Commission will remain engaged with the trustee until that plan, and how it will be implemented, is agreed.

Findings

36. The Commission found that the 1995 lease of part of the Recís land to the Rugby Club for its main lease did not meet charity law requirements. BANES advise the Commission that at that time it was treating the Rec as if it was not charitable. In the Commissionís view, the occupation of part of the Rec by the Rugby Club is inconsistent with the Recís charitable purposes. Also, because BANES have not demonstrated that the terms of the lease are the best reasonably obtainable by the Rec, this arrangement cannot be said to further the charityís interests by generating income for the charity.

37. Under the current trusts of the Rec, continually granting short-term leases to the Rugby Club for the East Stand area would not be consistent with the Recís existing charitable purposes, and consequently it would not be in the charityís long-term interests. The Commissionís previous consent to the granting of the short-term leases was appropriate as a holding measure pending the implementation of the strategic review. The short-term leases represent a continuing encroachment on the charityís land that prevents it being available to the public for open air recreation. Whilst the Commission understood that the temporary leases provided BANES with sufficient time and money to conduct its strategic review, this is a short-term expedient only. The Commission is of the view that a long-term plan for the Recís future must be agreed.

38. The Commission has taken the view that the occupation of the Rec by the leisure centre and car park is in breach of trust. The purposes of the Rec are clear that the principal use of the Rec is for outdoor games and sports. The leisure centre provides for indoor recreation only, meaning that is not within the current charitable objects of the Rec. The car park prevents the public from being able to use this area of the Rec for games and sports.

39. The Commission found that there were several possible options to rectify this breach of trust. These include amending the purposes of the charity to permit the area of the Rec covered by the leisure centre to be used for indoor charitable activities, throughout the useful life of the current building. The car park would be ancillary to this use. The options are now being considered by BANES as part of the strategic review.

40. During the inquiry, the Interim Managers reviewed the legal position of other tenants of the Rec, not just the Rugby Club. The Interim Managers concluded that these tenants, having obtained leases from BANES prior to the Rec being considered charitable and being amateur sports and leisure clubs, appeared to have effective binding leases in place. The Commission notes that these leases are of a very different nature to the lease to the Rugby Club.

41. The Commission found that on occasions during the inquiry BANES did not fulfil commitments it made to the Commission. In particular, the Commission was disappointed that BANES did not begin its strategic review until late 2006 despite this being put forward by BANES in 2003 and 2004 as a key reason why the temporary leases to the Rugby Club were expedient in the interests of the Rec.

Regulatory action taken

42. To summarise:

  • On 26 June 2003 the Commission appointed John Ariel and Cedric Clapp of Baker Tilly as Interim Managers of the Rec for the purpose of reviewing the position of all occupants of the Rec and the leisure centre and car park.
  • On 22 August 2003, 9 July 2004 and 3 August 2006 respectively, the Commission authorised the granting of temporary leases to the Rugby Club over the land occupied by the East Stand.
  • On 6 April 2005 the Commission varied the appointment of the Interim Manager so that their purposes only covered the presence of the leisure centre and car park.
  • On 30 March 2006 the Commission made a temporary and protective order restricting BANES, as trustee of the Rec, from entering into any disposal of land without the prior written approval of the Commission.
  • On 7 September 2006 the Commission varied the order made on 30 March 2006 so that it did not affect certain arrangements to use the Recís land that already existed between BANES and occupants of the Rec.
  • On 28 February 2007 the Commission discharged the order appointing John Ariel and Cedric Clapp as Interim Managers.
  • On 28 February 2007 the Commission made a temporary and protective order vesting all of the Rec in the Official Custodian for Charities.
  • Throughout the inquiry the Commission has provided advice and guidance to BANES about its role, duties and responsibilities as trustee.

Impact of Commission intervention

43. The Rec is no longer being managed by the Council as part of its corporate property, but instead has a clearly identified charitable purpose for the benefit of the public and is being managed for that purpose by BANES as trustee.

44. A strategic review is underway by BANES which can and should address the issues arising from the various ways in which the Rec is being used. This includes:

  • Resolution of the continuing concerns that the lease with the Rugby Club is not on the best terms reasonably obtainable by the Rec;
  • Resolution of the issue relating to the requirement of the Rugby Club for additional land;
  • Resolution of the future use of the leisure centre and the consequences of the historic use of that part of the Rec in breach of trust;
  • Resolution of the proper destination of the income from the car park; and
  • The overall use of the Rec.

45. Following the strategic review BANES should be able to manage the Rec as a charity and to develop it for the future with a long-term strategic plan in place. Until this is finalised the Commission remains engaged with BANES about its actions as trustee.

46. The Rec has been receiving the benefit of market rent for the temporary leases with the Rugby Club for the East Stand area.

47. The Commission has taken action to protect the Rec whilst BANESí strategic plans are agreed and implemented. This action includes:

  • Protecting the Recís land by preventing BANES from deciding to dispose of the land through sales or leases that prevent it being used for charitable purposes without the Commission being satisfied it is in the Recís interests and giving its consent.
  • By vesting the Rec in the Official Custodian for Charities, protecting it from being sold or otherwise disposed of in the future without the Official Custodian being aware and ensuring the Commissionís consent, if needed, has been obtained.

48. The Commission has made BANES fully aware of its duties and responsibilities as a charity trustee. As a result, with the Commissionís advice, BANES has set up internal structures to manage the Rec as a charity rather than as part of its corporate property.

  • BANES is complying with its duty under charity law to produce yearly accounts for the Rec. This will ensure that the Recís finances can be managed effectively and that its funds are fully accounted for and transparent to the public.
  • BANES has set up a Trust Board with delegated responsibility to manage the Rec and take decisions about its activities.
  • This Trust Board receives advice from independent Trust Advisors who are concerned only with the interests of the Rec.

Resources applied

49. Agreed Interim Manager Fees and Disbursements authorised by the Commission from the Recís funds:

Remuneration

£54,500

General disbursements

£6,270

Additional costs

Legal advisors £22,000
Land agents £22,500
Counsel £7,500

50. The Commission has invested considerable time and resources in this complex inquiry. It has dealt with a number of varying complaints about how the Rec is managed, and has been in correspondence with numerous groups and interested parties. The Commission has undertaken a decision review and a review of the representations against the scheme promoted for the leisure centre. The Commission has also taken various regulatory actions to safeguard the property of the Rec. Most recently the inquiry has been dealt with by the Commissionís Intensive Casework Unit within the Compliance and Support Division and its Customer Services Unit is currently exploring a complaint by a third party about the Commissionís handling of the case.

Ongoing monitoring

51. The Commission remains engaged with BANES whilst it conducts its strategic review. It is in regular contact and has been informed of the outcome of the review and how BANES intends to implement its plans for the Rec. The Commission will remain engaged with this process as long as it is necessary and appropriate to ensure that the Rec is managed in accordance with its charitable purposes.

52. Given the measures the Commission has taken to protect the Recís land, the Commission will be informed of, and where necessary involved in, all disposals of the Recís land for the foreseeable future.

Any lessons for other charities arising from the inquiry

53. Charity trustees are responsible for the proper management and administration of their charity, and must ensure that they act at all times within the terms of its governing document and the general law. Charity trustees can only exercise their powers, including powers to lease or let charity land, in furtherance of the charityís purposes and in accordance with the trusts of the charity.  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. This would include timely and regular reviews of leases and other financial arrangements.

54. Charity trustees should ensure that adequate records are kept of their decisions so that they can demonstrate that they have acted in accordance with the governing document and with best practice. From time to time, trustees may have to take decisions with which other people may disagree, and which may come under very close scrutiny. In these circumstances, trustees should be able to demonstrate clearly that they had:

  • acted honestly and reasonably in what they judged to be the best interests of the charity;
  • taken appropriate professional or expert advice where appropriate; and
  • based their decisions on directly relevant considerations.

55. Generally, the guiding principles that the courts look at in deciding whether trusteesí discretion has been properly exercised are as follows:

  • Was the decision of the trustees authorised by the power conferred upon them?
  • Did the trustees act in good faith?
  • Did the trustees adequately inform themselves in order to make the decision in question?
  • Did the trustees take into consideration any factors which it was not proper for them to take into account? 
  • Did the trustees fail to take into consideration any factors which they should have taken into account?
  • Was the decision made by the trustees one which no reasonable body of trustees could have made?

If trustees fail to follow these guiding principles, there is a risk that the courts could determine that a decision is void or voidable.

56. Other lessons:

Paragraph

Issue

Legal requirement and guidance

7

Charitable status and Sport

The law does not recognise the promotion of any particular sport, for its own sake, as charitable. The Commission has, however, recognised as charitable the promotion of community participation in healthy recreation by providing facilities for playing particular sports. Further information is available in RR11 ďCharitable Status and SportĒ, which can be found on the Commissionís website under ĎPublicationsí. Further to the Charities Act 2006 the promotion of amateur sport will be recognised as a charitable purpose. Guidance on the scope of this will be provided in due course.

7,16,49

Conflicts of interest

Charity trustees need to avoid and be sensitive to conflicts of interest. A trustee must not allow the interests of the charity to be subservient to their other interests, either in whole or in part. Advice on potential conflicts of interest and their handling can be obtained from the Commissionís website on www.charitycommission.gov.uk/supportingcharities/conflicts.asp.

7,18,31,32

Disposal of land

Charity trustees of any charity which owns property should be aware of the requirements of section 36 of the Act. The specific requirements are set out in detail in leaflet CC28 ďDisposing of Charity LandĒ, which can be found on the Commissionís website under ĎPublicationsí. Further guidance on disposals of charity land can also be found in our operational guidance on www.charitycommission.gov.uk/supportingcharities/ogs/index054.asp

29,48

Official Custodian for Charities

Charity trustees of land which is vested in the Official Custodian for Charities (ďOCCĒ) should be aware of the role of the OCC and their responsibilities when disposing of land vested in the OCC This information is set out in the Commissionís leaflet CC13 ďThe Official Custodian for Charities' Land Holding ServiceĒ available from the Commissionís website under ĎPublicationsí.

6,49

Charities & Local Authorities

Further information on advantages and disadvantages of local authorities acting as charity trustees can be found in the Commissionís publication CC29 ďCharities and Local AuthoritiesĒ which is available from the Commissionís website under ĎPublicationsí.

Subsequent action

57. On 9 July 2007 BANES presented the outcome of the Strategic Review to the Commission. The Commission is currently reviewing the information presented to it as to why the option proposed by BANES is a reasonable decision and is within the trusts of the charity and consistent with its duties and responsibilities as trustee in drawing the conclusions it has about the future of the Rec.

58. Whilst the Commission has no authority to act in the administration of the Rec, or to substitute its own views for those of the trustee, it will continue to ensure that BANES properly discharges its duties as it implements whatever proposals it adopts following the Strategic Review. The Commissionís role as the regulator for charities in England and Wales is to ensure that BANES discharges its legal duties and responsibilities as trustee of the Charity, and rectifies the irregularities in the usage of the Rec under the trusts of the Charity. This includes the Commission giving consideration to all the issues and providing such guidance, advice or regulatory consents as may be required and justified in the interests of the Rec.

59. On 20 July 2007 the Commission provided BANES with an order under section 26 of the 1993 Act authorising it to enter into a temporary lease with the Rugby Club for the area covered by the East Stand. The authority runs from 14 August 2007 to 21 May 2008. The Commission provided this authority having satisfied itself that BANES had properly discharged the responsibilities of a charity trustee in making the decision to grant the lease, and that the lease would be expedient in the interests of the charity. The decision to authorise the lease prompted representations to be made by a local resident, and accordingly it was reviewed by members of the Commissionís Board. Having considered the issues and representations, and reviewed the basis for authorising the lease under Section 26 and the proposed terms of the order, the Board members determined that the decision to authorise the lease under section 26 as being expedient in the interests of the Charity in the form of the order should stand.

The Decision of the Commissionís Board

End Notes

1. Bath and North East Somerset Council v HM Attorney General [2002] EWCA 1623 (Ch)

2. The Conveyance dated 1 February 1956 provides: ďthe corporation shall not use the property hereby conveyed otherwise than as an open space and shall so manage let or allow the use of the same for the purposes aforesaid as shall secure its use principally for or in connection with the carrying on of games and sports of all kinds and shall not show any undue preference to or in favour of any particular game or sport or any particular person club body or organisation.Ē

Date of Publication: 22/08/2007