Legal advice leaves charitable trust in disarray

SIC convener and SCT councillor-trustee Malcolm Bell.

THE TROUBLED relationship between Shetland Islands Council and Shetland Charitable Trust has reached a low ebb after five councillors walked out of a trust meeting on Thursday morning.

Trustees met to agree a £9.85 million budget for 2015/16 – nearly £800,000 down on what it spent in 2014/15. But after a delayed start due to technical problems, proceedings in Room 10 at Islesburgh swiftly descended into farce.


Twenty four hours earlier, trust management had issued legal advice stating councillor-trustees must not participate in a decision on whether to cut funding towards Shetland’s rural care homes by £83,500.

They were deemed to have a conflict of interest because the money will go directly towards running council care homes.

SIC convener Malcolm Bell – now understood to be seriously considering resigning from the trust – said it “opened a can of worms”. He pointed out that virtually every SCT decision could have some sort of knock-on impact for the council.


Several councillor-trustees had indicated opposition to the cut, which was in line with a previous trust decision to make a 25 per cent cut in planned maintenance for the organisations it funds.

After they walked out it left the bare minimum of six trustees who must be present for SCT meetings to be quorate. At least three must be appointed trustees, but there is no requirement for any of the other three to be councillor-trustees.

One of the appointed trustees, Stephen Morgan, is also interim executive manager at SIC social work but – surprisingly to some observers – legal advice stated it was legitimate for him to take part in a decision councillors were barred from.


Morgan said that, while he faced no conflict of interest, for the sake of perception he would not vote and “probably” wouldn’t take part in discussions on rural care home funding.

Bell, one of the councillor-trustees, made crystal clear his view that it was improper for Morgan to take part, describing him as “quorum fodder” and saying he admired the “whipping arrangement” the trust had undertaken to ensure enough people were present for the meeting to proceed.

He said: “I don’t know how he [Morgan] can receive, as an employee of the department concerned, advice that it’s okay for him to stay in and take part.”

Bell referred to an SIC-SCT partnership signed in 2010 regarding the rural care model, and said Turcan Connell’s legal advice “raises serious implications for the future involvement of councillor-trustees on this trust”.

The upshot was that Bell walked out and did not return for the rest of the meeting. He was joined by councillor-trustees Allison Duncan, Robert Henderson, Andrea Manson and Amanda Westlake.

The legal advice was sought after Duncan visited the trust earlier this week and expressed unhappiness with the proposed £83,500 spending cut on maintaining care homes for the elderly.


Duncan said a situation where seven people declared an interest, leaving only “a select few people” to take decisions, made it feel like a “dictatorship” and a “charade”.

Thursday morning’s episode will only heighten discontent behind the scenes at Lerwick Town Hall with the manner in which the trust – tasked with managing a £200 million fund on behalf of the wider community – is being run.

Trust chairman Bobby Hunter insisted there was “no ulterior motive” in tabling the legal advice late in the day and it was “not done in any conspiratorial manner whatsoever”.

“I canna un-know what I know, so I have to go with the legal opinion,” he said, adding he would call an unofficial meeting of trustees to “speak this whole thing through” and clarify the matter of councillors’ conflict of interest.

The thorny subject hit the headlines when the SCT became involved in the Viking Energy wind farm project. Clamour for change, including from charities regulator OSCR, ultimately resulted in trust reform – ending the presence of 22 councillors on a 24-strong board of trustees.

Now there are eight appointed trustees and seven councillor-trustees – a system heavily criticised when it was brought in, with calls for non-councillors to be elected falling on deaf ears. With Betty Fullerton’s imminent departure, there will soon be three trustee vacancies.

Councillor-trustee Drew Ratter, joining in by phone link, said the advice had “opened a Pandora’s box” with complex ramifications, which trustees would need to get together and discuss.

Whether Bell will remain on the trust for long enough to hear those discussions, however, looks highly questionable.

After the meeting, he told journalists: “When you think about it there’s no decision the trust takes that doesn’t have an impact on the trust budget, and you can take no decision on the trust budget without having potentially an impact on council income, and therefore council services.

“So this legal advice and ruling sets a very dangerous precedent, in my opinion. However, I am still a trustee of SCT and therefore bound by the rules of that trust, and at this stage it would be remiss of me to say anything further.”


Hunter said afterwards that he would “rather there was more people in the room” and he needed to “go away and have full discussion with all trustees and our legal advisers to see how we can help the situation”.

Asked if it was right for the meeting to proceed in the circumstances, he said the chairman’s duty was to act on legal advice – while postponement would have delayed the setting of next year’s budget.

Questioned about Morgan’s participation in the meeting, Hunter said he was “not going to enter into any conversation on individual trustees – they make their own decisions”.

Those left in the meeting unanimously agreed to cut spending on rural care homes from £2,491,000 to £2,407,500.

Fullerton said she was “quite concerned that the care centres could deteriorate to a level of repair which would require additional funds at some point to bring them back up again”.

Trustees were informed by Hunter that, if the money wasn’t cut this year, “you’ll have to find it somewhere else next year”. 

SCT expects to generate income of £8.18 million, primarily from its investments on the stock market, in 2015/16. That means the £9.85 million overall budget leaves a projected deficit of £1.67 million.

Other major items of expenditure include £2.5 million to Shetland Recreational Trust, £1 million to Shetland Amenity Trust and £696,000 to Shetland Arts, along with smaller grants to a raft of other organisations. Management and administration costs come to £652,000 and fund manager fees amount to £412,000.

The trust is in the midst of a spending review which will result in cuts to the organisations it funds being phased in between 2016 and 2020.