Friends of Burbage School Ltd. v Woodhams

A trustee who undertakes to collect charitable receipts through a company may remain personally accountable to the charity where the arrangement is personal and no contract is made between the charity and the company. A separate company is responsible for services supplied under its own contract with the charity. An auction sale is enforceable when completed by the auctioneer, but trustees may release the bidder from the resulting obligation without formal minutes where they unanimously assent and the release is consistent with the charitable purpose. A charity’s accounts do not discharge a trustee’s separate duty to account. The corporate veil will not be pierced merely because a company is small or its director controls its operations.

The claimant charity sued a former trustee for an account and damages arising from two fundraising events. The first event used merchant-services facilities and employees supplied through companies associated with the defendant. The defendant paid £33,000 but the claimant alleged that further receipts remained unaccounted for. He also bid for tickets donated by his company and contended that the trustees released him from payment. The second event was organised under a contract between the claimant and the defendant’s company, Bespoke. The issues were whether the defendant was personally accountable for the first event, liable on the auction bid, or personally liable for matters arising from the second event.

1. Merchant services. The defendant personally undertook to facilitate the collection of the charity’s receipts, although the equipment, account and staff belonged to Concierge. As a trustee, he owed fiduciary duties and impliedly undertook to account for money received into that account. After crediting the £33,000 paid and the permitted service-charge and wage deductions, he remained liable for £15,900.
2. Auction bid. The defendant bid £5,000 for the tickets. Under section 57(2) of the Sale of Goods Act 1979, the sale was complete when the auctioneer announced its completion. The other trustees nevertheless assented to releasing him from the obligation. That decision did not require a particular formal procedure and it was inequitable for the charity to rely on a technicality under section 42 of the Companies Act 2006. The claim for the bid was dismissed.
3. Mango Tree event. Bespoke contracted with the charity for the relevant services. The defendant was therefore not personally liable. The evidence did not establish a recoverable shortfall, and the circumstances did not justify piercing the corporate veil.
4. The reconciliation of the charity’s accounts did not absolve the defendant from accounting for receipts identified at trial. The court rejected reliance on delay, estoppel or abandonment in relation to the merchant-services claim, but considered that such doctrines would have defeated the bid claim had that claim succeeded.
5. The court excluded evidence of an alleged admission made in settlement discussions because it was without prejudice. The claim for £15,900 was allowed, while the claims concerning the auction bid and Mango Tree event were dismissed.