Charities must understand their duties under the Equality Act 2010 and must be clear that, if they discriminate in the provision of benefits, they do so lawfully. This point has been re-emphasised recently in the case of St Margaret's Children and Family Care Society -v- OSCR. The case was an appeal to the Scottish Charity Appeals Panel and the decision, which went in favour of the charity, was not appealed further by OSCR. The case so far is the only Scottish case touching on equality and the public benefit test.

The principal facts can be summarised as follows: the charity is an adoption agency operating within the ethos of the teachings of the Roman Catholic Church. OSCR carried out an investigation into the activities of the charity and decided it was not providing public benefit. A statement on the charity's website stated that the charity gave priority to people who had been married for at least two years. OSCR interpreted this as direct discrimination against same sex couples.

In its decision to quash OSCR's ruling, the Appeals Panel concluded that the whole purpose of the charity is the manifestation of its religion and the religion of its members and supporters: it was more than simply an adoption charity. The Appeals Panel took the view that both the charity exemption and the religious exemption contained in the Equality Act applied. In addition, St Margaret's had been able to present evidence at appeal which showed efforts being made to mitigate against any indirect discrimination.

Another factor brought into play in the decision was the motive of donors. If the charity had to carry out its activities other than in accordance with the ethos of Church teachings, financial support from the Church and the faithful was likely to fall substantially or even stop. The direct result would be that the charity would have to close. As St Margaret's currently deals with approximately 10% of all adoptions in Scotland, this would represent a loss to the wider community. The Appeals Panel felt that the impact of a potential closure of the charity had to be taken into account. The Appeals Panel also suggested in its judgement that OSCR had not acted proportionately in reaching the decisions it did, considering all of the factors which the Appeals Panel had taken into account in reaching its appeal conclusions.

OSCR's did not appeal the case to the Court of Session since the decision only related to St Margaret's and its particular facts, and the implications more widely for OSCR's regulatory role were limited. The Commission on Equality and Human Rights has criticised the Appeals Panel for a failure properly to understand the meaning of direct and indirect discrimination. It is a pity that the case did not go to appeal at the Court of Session as this would have given the charity sector a clear steer from the courts on the interpretation of the Equality Act when read in conjunction with the public benefit test – something which is currently sorely lacking.

The decision emphasises the importance to charities of meeting the requirements of equality legislation.