Powers of Investigation of Charities Regulator Affirmed in High Court

A recent High Court case highlights the importance of a third party responding to a statutory demand made by a regulator in accordance with its statutory powers in order to avoid a criminal prosecution. Our Public, Regulatory & Investigations team analyses the key points of the judgment and sets out some top tips for responding to a regulator’s request for information.

The High Court recently considered the interpretation and application of the powers of the Charities Regulatory Authority (CRA) to require a non-charitable third party to produce documents and evidence[1]. This arose following the appeal by the CRA of the acquittal of a company secretary in the District Court for failing to comply with a statutory demand to produce documents.

The case demonstrates that it is important for third parties to engage with a regulator regarding document and information requests made under a regulator’s statutory powers. Even where a request cannot be complied with, it is important to establish that to the regulator. A failure to engage with the regulator might otherwise result in a criminal prosecution.

Background

Section 65 (2) of the Charities Act, 2009 confers an inspector with certain investigatory powers. These include the ability to compel a person to produce documents, attend before, or to assist he/she with their investigation. This can arise if the inspector considers that a person, other than a charity trustee or agent of a charitable organisation, is or may be in possession of information concerning the affairs of a charity.

During an investigation into the ISPCA, an inspector issued a statutory demand to a company secretary of a company that had issued an invoice to the ISPCA, although he was not the company secretary at the time of the events giving rise to the investigation. The information sought related to the invoice issued and the relationship between the two parties. The CRA did not receive a reply to this letter and accordingly brought a prosecution against the company secretary in the District Court, for failing to comply with the statutory demand.

The District Judge dismissed the prosecution based on the view that:

• Section 65(2) of the 2009 Act implied that a non-charitable third party should be made aware of the possibility of a statutory demand by the CRA and given an opportunity to decline relations with a charity. The nature of the criminal offence may not be immediately apparent to a lay person, and
• The company secretary was powerless to comply with the statutory demand as he required the approval of the company’s board to release the documents.

The CRA appealed this decision, and the District Judge stated a case to the High Court on whether his interpretation and application of section 65(2) was correct.

Decision

The High Court disagreed with the District Judge’s interpretation and in doing so considered the principles of statutory interpretation set out in the Heather Hill decision^[1]. It held that the natural and ordinary meaning of section 65(2) is that an inspector may require a person “who is or may be in possession of information concerning the affairs of a charitable organisation” to produce documents, attend before or give the inspector assistance in connection with the investigation.

Key points arising from the High Courts’ consideration were as follows:

• The District Judge’s interpretation of section 65(2) could immunise non-charitable third parties from complying with statutory demands under the 2009 Act and severely limit the inspection powers of the regulator.
• There was no wording in section 65(2) to support the District Judge’s interpretation. The magnitude of the District Judge’s limitation suggested that if this was the legislative intent, it would have been explicitly spelt out in the legislation.
• A person subject to a statutory demand is entitled to know that a failure to comply will result in criminal liability. This had been made clear in the regulator’s letter.
• However, the District Judge’s interpretation that a non-charitable third party was entitled to know of these potential obligations before contracting with a charitable organisation was incorrect. In general, a person must be taken to know the law.
• An inspector does not have to consider the ability of the third party to obtain the required documents prior to issuing a statutory demand. The inspector has only to consider whether the person is or may be in possession of information or documentation concerning the affairs of a charitable organisation.
• However, if a person establishes that the statutory demand cannot be complied with, according to the High Court, then there is no failure to comply and no criminal offence.

Conclusion

This decision highlights the importance of responding to a statutory demand for information from a regulator. Our top tips are to:

• Check what statutory basis is being relied on by the regulator to request the information.
• Consider whether compliance is possible.
• Engage with the regulator. A failure to engage may result in criminal prosecution

For more information and helpful advice about responding to a regulator's request for information, contact a member of our Public, Regulatory & Investigations or Charity & Not-for-Profit teams.

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The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] Charities Regulatory Authority v David Ellard [2024] IEHC 251

[2] Heather Hill Management Company v an Bord Pleanala & Ors [2022] IESC 43.