England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand,London WC2A 2LL
		6th November 2013

THE CHANCELLOR OF THE HIGH COURT:

1. The following is the judgment of the Court.
2. This is an appeal against parts of an order dated 18 February 2013 of His Honour Judge Pelling QC sitting as a judge of the High Court.
3. In view of the way that the appeal has progressed the principal substantive issue between the parties on the Judge's order is in relation to that part dealing with costs. The brevity of this judgment reflects that fact.
4. The proceedings concern the elections to the Executive Committee of a charity called Guru Tegh Bahadur Gurdwara ("the Charity"). The administration of the Charity is currently governed by a scheme made by the order of Chadwick J dated 10 October 1996.
5. The object of the charity is to promote the Sikh religion in Leicester by, among other things, maintaining a temple, conducting religious rites, maintaining a library and giving instruction in Sikh religious principles.
6. Membership of the Charity is open to residents in Leicestershire who profess the Sikh religion and who are not members of any other Sikh or Hindu temple: clauses 3(1) and (2) of the constitution. I shall refer to the last of those conditions as "the dual membership rule".
7. The Charity is administered by an Executive Committee ("the Committee") made up of 17 committee members who are elected from the membership of the Charity in elections held in September of every other year. The persons entitled to vote in the elections are the members of the Charity. The members of the Committee are "charity trustees" within the meaning of the Charities Act 2011.
8. The 1st to 17th respondents, who were elected in 2010, are the current members of the Committee. Neither the 7th respondent nor the 18th respondent, who is the Attorney General, has taken any part in the proceedings, save that the Attorney General has written a letter to the court dated 16 September 2013 expressing views about the merits of the appeal. It also appears from the correspondence from the Attorney General that the Attorney General saw fit to seek advice and obtain advice from counsel once the proceedings had reached this court. Where I refer to the respondents, unless I indicate otherwise, I am referring to those respondents who are both members of the Committee and have taken an active part in these proceedings.
9. The primary method by which the constitution seeks to enforce the dual membership rule is to require the register of members to be completely renewed in May and June in each election year and to close the membership between June and the election. It is plain that the dual membership rule is an important rule in a scheme that was brought into existence against a background of dispute and litigation.
10. Under the constitution membership renewal is the responsibility of the Committee. Clause 3(7) of the constitution includes the following:

"The manner in which such renewals are conducted should be within the discretion of the Committee, provided that adequate publicity is given to the renewal and adequate means are afforded to give all those potentially interested in applying for membership a fair opportunity to have themselves entered in the new register."

11. Elections to the committee were due to be held in 2012. Accordingly, the membership list was due to be renewed in May and June 2012.
12. The current proceedings were issued on 29 June 2012. It is alleged that in the course of the previous elections held in 2010 there had been large scale breaches of the dual membership rule and also that in carrying out the 2012 membership renewal the Committee failed to take reasonable steps to prevent a recurrence of such breaches.
13. The appellants sought various orders. They include, in substance, an order that the membership renewal be repeated with steps being taken to reduce the risk of a recurrence of that alleged irregularity.
14. An additional matter in dispute between the parties was as to whether or not the duration of membership had been extended to 6 years by virtue of an amendment to the constitution as a result of voting by the members. That issue (originally raised in the Defence) led to an amendment to the Particulars of Claim, in which a declaration was sought that the amendment to the constitution purportedly passed at a general meeting on 20 August 2006 was invalid.
15. By their Defence the respondents deny the facts on which the appellants' complaints were based. They also claim in effect that the court has no jurisdiction to entertain any question of the Committee's conduct in relation to membership renewal in the absence of bad faith. They rely on clause 3(7) of the constitution and, in particular, to the discretion conferred there upon the Committee.
16. The trial of the proceedings took place over two days before the Judge, with a further half day spent on submission on costs. The Judge handed down a reserved judgment on 18 February 2013. It is a full and careful judgment.
17. He rejected the respondents' case as to the alleged amendment of the constitution in relation to the duration of membership.
18. As to the issues concerning the validity of the procedures in the 2012 renewal process, the Judge was of the view that clause 3(7) conferred a discretion on the Committee with which the court could not interfere in the absence of dishonesty. He found that the Committee had not taken reasonable steps to draw the attention of the dual membership rule to potential members but, in view of his decision on the law, he dismissed the complaints of the appellants on the issue of the renewal processes.
19. The Judge ordered the appellants to pay half of the respondents' costs on the basis of the following matters. First, the respondents lost on the amendment issue. Secondly, however, that issue had only been raised by amendment to the Particulars of Claim at a late stage. Thirdly, 75 per cent of the costs of each party was attributable to the renewal issue and only 25 per cent to the amendment issue.
20. The Judge's order contains a recital of the intention of the defendants:

"to conduct the next election to the Executive Committee of the Charity... in the manner described in the First Schedule hereto."

21. The First Schedule sets out various steps to be taken both by the Committee and by the appellants. As is apparent from the recital to which I have referred, those steps and the commitment to take them were offered voluntarily by the respondents since the Judge had held that there was no basis for the intervention of the court itself.
22. Paragraph 1 of the Judge's order declares that the amendment to the constitution purportedly made on 20 August 2006 was invalid and of no effect.
23. Paragraphs 2 and 3 of the order relate to amendments to the constitution. They are as follows:

"2. It is ordered by way of scheme that the Constitution of the Charity be amended in the manner set out in the Second Schedule hereto."

"3. The Constitution of the Charity as so amended consists of the provisions set out in the Third Schedule hereto."

24. The amendments to the scheme ordered by Chadwick J and contained in the second and third schedules were necessarily offered voluntarily by the respondents since the Judge considered that there was no basis on the evidence for interfering in the affairs of the Charity.
25. Paragraph 4 of the order is that the appellants should pay one half of the respondents' costs of the proceedings to be assessed on the standard basis if not agreed.
26. An appellants' notice was in due course filed and permission to appeal was given. There is also a respondents' notice. There were applications by the appellants to amend the grounds of appeal and to admit new evidence. We grant those applications.
27. Yesterday morning was taken up establishing and resolving precisely what remains in dispute on the proposed amendments to the constitution in the light of concessions made voluntarily by the respondents from time to time, that is to say both those concessions recorded in the schedules to the order and offers made since then.
28. In the end it transpired that virtually nothing was in dispute between the parties as to what amendments should be made to the constitution save, in particular, some provisions which the appellants were promoting relating to the confidentiality of members' personal information and data protection and a proposed provision concerning those potential members who could not read or write. We expressed our view that we favoured the position of the respondents on those matters.
29. We gave the parties time to try to agree the amendments. By 2pm yesterday they had done so in a revised schedule, save for one matter which they could not agree, that is to say the new time for holding the next renewal application and elections. Our view is that they should be in May/June and September respectively for the reasons which were advanced on behalf of the respondents by their counsel, Mr Robert Pearce QC. We so order.
30. That left as the only substantive matter the question of the Judge's order for costs. The principal issue there, at least as presented on behalf of the appellants by their counsel, Mr Peter Crampin QC, was whether the Judge had been right to hold that the court could not interfere in the permitted exercise of the Committee's discretion under clause 3(7) of the constitution unless that there has been dishonesty: mere lack of care is not enough.
31. On that issue we consider that the Judge took too narrow an approach. The respondents accept that in exercising its discretion the Committee has to exercise reasonable care. That is conceded in the Defence. It is also conceded in paragraph 10(2) of the respondents' skeleton argument.
32. We agree with the way that the matter is put on behalf of the Attorney General by the Treasury Solicitor in the letter dated 16 September 2013, to which I have referred; that is to say that, "where on the true construction of the trust the trustees have a duty to take reasonable care to exclude ineligible persons for membership and they breach that duty", the court is not prevented from intervening.
33. As I have said, in the present case the Judge took the view that the respondents did not take all reasonable steps to ensure compliance with the dual membership rule: see paragraphs 39 to 41 of his judgment. In particular, he said that it would have been reasonable to take the following steps but they had not been taken: (1) drawing attention to the dual membership prohibition in the advertisement preceding the membership renewal, (2) using a membership application form written in Punjabi as well as English, and (3) using the appellants' proposed membership application form.
34. Mr Pearce, on behalf of the respondents, referred us to several authorities, including Tempest v Lord Camoys [1882] 21 Ch D 571, para 592, Dean v Burne [2009] EWHC 1250 (Ch), Attorney General v Charity Commission for England and Wales [2012] UKUT 421 (TCC), [2012] Ch D 214, esp. at para [220], and Halsbury's Laws of England (5^th ed) Vol 8. We do not consider that those cases take the point of law any further.
35. The Judge did not recognise any circumstances in which there could be a breach of an equitable duty where a trustee was exercising a discretion, short of dishonesty. That was, on the admission of the respondents, not a correct analysis of the law. It is a different question as to whether or not there has been breach in the present case. As I have said, the Judge said that there had been a failure to take reasonable steps but he did not go on to decide specifically, on a correct view of the law, whether or not there has been a breach of duty.
36. We also agree with the submission of Mr Crampin that the Judge had the power to vary the constitution of the Charity by a scheme pursuant to the general supervisory power of the court in relation to charities. Mr Pearce did not argue with that as a general principle but pointed out that there is no claim for a new scheme or for amendment to the present scheme in the appellants' statements of case. He referred us to the provisions of the Civil Procedure Rules.
37. Mr Pearce also emphasised that the Charity has not been well served by these proceedings. He says that the appeal has achieved nothing. He observed that the steps outlined in the First Schedule to the Judge's order were not taken at the time of the trial and still have not been taken. He emphasised that the proceedings have interrupted the renewal process and so the steps to be taken by the respondents to ensure compliance with the constitution are still underway.
38. We turn then to the question of what order should be made in relation to the order for costs below. We consider that the claimants were justified in commencing these proceedings bearing in mind, firstly, the historic background, the disputes between the membership of Gurdwara, including the genesis of the current scheme in the proceedings before Chadwick J in 1996; secondly, the disputes or disagreement about the 2010 list of members and elections; and, thirdly, the failure (as found by the Judge) of the respondents to take the reasonable steps mentioned in paragraphs 39 and 40 of the Judge's judgment.
39. We take the view, as I have said, that the Judge was wrong to hold that the Court could not interfere unless the respondents had exercised the discretion under clause 3(7) of the scheme dishonestly. As we have said, having taken the view that he did, the Judge did not go on to consider whether or not the respondents were in breach of duty. It is not clear to us what the Judge would have decided on that point if he had considered it in the light of his findings that not all reasonable steps had been taken to draw the attention of potential members to the dual membership rule and his acceptance of the second respondent's evidence as to the steps which the Committee still intended to take, as outlined in paragraph 41 of the Judge's judgment. We take the view that we are simply not in a position to decide ourselves in the light of the limited evidence placed before us and the brevity of the appeal hearing what the Judge would or should have decided on that point. We cannot say, therefore, whether he would have made an order in the terms of the First Schedule to his order which was volunteered by the respondents.
40. One consequence of the proceedings was a revision of the current scheme. The revisions in the Second Schedule to the Judge's order were offered voluntarily by the respondents, as I have said. It is not clear whether or not the Judge would have made an order for a scheme incorporating those amendments if he had been aware that he had power to order them. The Particulars of Claim, as Mr Pearce has emphasised, do not contain a claim for such relief. The Judge may well have taken the view, even if he was aware of his power to make an order for a scheme, that he should not make such an order on the hoof in the course of proceedings without giving the members of the Gurdwara, or at least its Executive Committee, an opportunity to consider the proposed changes.
41. In the light of all of those matters, we are clear that the Judge's order for costs should be set aside insofar as he ordered the appellant to pay half the costs of the respondents. On the other hand, in view of the uncertainties to which we have referred as to what the Judge would have done and could properly have ordered if he had been aware of the extent of his legal powers to intervene, we consider that there should be no order as to costs.
42. So we set aside the Judge's order for costs and substitute for it no order for costs.
43. There is at least one matter outstanding, which is what order should be made as to the costs of the Attorney General. We have not heard submissions on that issue. Our current provisional view, subject to hearing counsels' submissions, is that the Attorney General should get some but not all of his costs. We take the view that the presence of the Attorney General was of course necessary in the charity proceedings as he represented the interests of the public. We consider it was entirely reasonable of the Attorney General to seek to obtain advice once the matter had got to the Court of Appeal. Accordingly, in principle, as a necessary party to the proceedings, we consider that the Attorney General's costs should be met. As to whether they should be met in full or otherwise is a different matter. Again, subject to hearing any submissions to the contrary from counsel, our present view is that they should be summarily assessed at £3,500.