Trust must be reformed to dilute influence of councillors, QC warns in legal opinion

Shetland Charitable Trust must be reformed to ensure that the majority of trustees is no longer comprised of councillors, according to the lawyer appointed jointly by the trust and Shetland Islands Council to rule on the issue.

Trustees will meet in secret on Thursday to discuss the legal opinion put forward by Roy Martin QC, a former Dean of the Faculty of Advocates, that councillor-trustees face a clear, irreconcilable conflict of interest because of their dual role.

It is understood Mr Martin has recommended four options for reform, including a 15-member trust with just four councillors, but his overall message is that the influence of the council on the trust must be sharply reduced. At present 21 of the 22 councillors sit on the trust along with two independents, Lord Lieutenant John Scott and Anderson High School head teacher Valerie Nicolson.

Mr Martin’s report follows a bad-tempered trust meeting in September last year at which council convener and trustee Sandy Cluness succeeded in winning support to appoint a leading legal figure to give his opinion. In the process trustees rejected reform proposals put forward by Mr Scott, Jonathan Wills and Gary Robinson.

Mr Cluness had previously vowed to defend councillors’ dominance of the trust even if it meant going to the highest court in the land, the House of Lords, to fight off demands for reform by the charity regulator OSCR.

But Mr Martin’s opinion, along with a recent report from OSCR on the risks faced by charity trustees, which singled out Shetland Charitable Trust as a case study and highlighted the dangers of conflicts of interest, will intensify pressure for change.

Mr Scott said he intended to ask for Thursday’s meeting to be held in public. “We have waited long enough [for this report]. Now that we have it I can see absolutely no reason for trustees to meet in secret.” Dr Wills said he supported Mr Scott’s call.

OSCR imposed strict monitoring requirements on the trust in July last year, forcing it to give notice of how it deals with all conflicts of interest. The trust was reminded that if any “inappropriate actions” were identified, OSCR could use its powers to prevent “trustees from carrying out certain transactions”.

In its report, “Who’s In Charge: Control and Independence in Scottish Charities”, published last month, OSCR pointed out that the trust had moved to demonstrate that there was a clear separation between itself and the council, but said there was still a “high in-built risk of irreconcilable conflict of interest where (effectively all) councillors were SCT trustees”.

It warned that the make-up of a board, where it is dominated by members from a linked body, can lead to an inherent risk of recurrent conflict of interest and that the charity should “consider whether it is advisable to maintain a Board where conflict of interest arises so frequently that charity trustees must withdraw thus preventing effective management of the charity”.