Upper Tribunal judge Lord Tyre has quashed two First-tier Tribunal decisions in charity appeals on the basis that they failed to provide “proper, adequate and intelligible reasons” for their outcomes.

New Lanark Hotels Ltd and New Lanark Trading Ltd, two companies owned by New Lanark Trust, the charitable body that substantially owns the village and World Heritage Site of New Lanark in South Lanarkshire, had appealed a decision of the Office of the Scottish Charities Regulator (OSCR) refusing to enter them in the charities register. Hotels operates an hotel, a hostel and self-catering accommodation within the village. Trading carries on activities such as operating the visitor centre, yarn-making, generating hydro-electric power, making ice cream and operating a café and gift shop, all within the village.

OSCR had based their refusal on the fact that in each case the commercial activities of the company outweighed their charitable activities and that they both failed the “public benefit test” set out in the Charities and Trustee Investments (Scotland) Act 2005, section 7. The companies had appealed to the FTT on the basis that their activities, even those which were overtly commercial, contributed to the charitable enterprises of the revivification of the historic settlement and facilitating public access to the interpretation of the site’s history.

The FTT refused both appeals, finding that the companies’ commercial activities outweighed their charitable activities. The FTT also observed, however, that OSCR’s position that commercial activity could not also be charitable was wrong, and the fact that an entity carried out activity that was commercial did not mean that that activity did not further its charitable purposes.

The New Lanark companies, represented by Calum MacNeill QC of Westwater Advocates and instructed by Turcan Connell, appealed the decisions to the Upper Tribunal. It was argued that the FTT had not explained why, if commercial activity could contribute to charitable purposes, the commercial activities of these companies did not. OSCR, represented by Christine O’Neill of Brodies, argued against the appeal on the grounds that the FTT was an expert tribunal whose decisions should not be lightly interfered with, a sense of proportionality had to be applied and elaborate reasoning was not required and both parties were well aware of the factual background and the contentious issues. The appellants’ position, argued OSCR, involved subjecting the FTT decisions to hyper-critical analysis.

In two 10- and 11-page judgments published last week [28 November 2019 https://www.scotcourts.gov.uk/docs/default-source/cos-general-docs/pdf-docs-for-opinions/2019-ut63.pdf?sfvrsn=0, https://www.scotcourts.gov.uk/docs/default-source/cos-general-docs/pdf-docs-for-opinions/2019-ut62.pdf?sfvrsn=0], Lord Tyre found that there is no difference in the requirement to give reasons as between a tribunal and a court, any differences emanating from the particular requirements of the case under consideration. In these cases, the FTT was under an obligation to address the question whether (and if so to what extent) the companies’ commercial activities did or did not further their charitable purposes and thereby provide public benefit and to give reasons for its decisions on that question. Such findings were essential in order to address the issue of law and decide the appeals; in its absence the FTT’s reasons were inadequate. For the appeal to be allowed, there was no requirement to point to any additional prejudice other than the lack of intelligible reasons itself.

It is not yet known whether OSCR will appeal to the Court of Session.