England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY

		Birmingham Civil and Family Justice Hearing Centre Priory Courts 33 Bull Street Birmingham West Midlands B4 6DS
		2nd March 2016

HHJ PURLE QC:

1. The claimants seek relief in respect of the position of the first defendant, Mr Bahadar Shah, who claims to be a holding trustee of 253 Bordesley Green, Birmingham, on behalf of members of the Pak Pashtoon Association UK, which is an unincorporated association, which has a constitution which reads like the constitution of a charity, but which it is not because its objects, though wide, are not exclusively charitable.
2. The association appears to have been formed in around 1970, and is open to ex-patriots from an area, on the north-western border of Pakistan, from which the members or their families originate. 253 Bordesley Green was purchased in July 1997, and on 31 May 1998 the present constitution, subject to what may have been subsequent amendments, was adopted.
3. That constitution provides that the holding trustees may be removed at the pleasure of the Executive Committee: Clause M(1). In this case, the claimants allege that that is what the Executive Committee did. The defendant, however, alleges that that is not so, because at the time, in January 2014, of his purported removal, there was no Executive Committee in office, or (if in office) they were acting improperly or for an unlawful or improper purpose.
4. In short, differences had arisen between factions within the association as to the future of 253 Bordesley Green and the purchase of a further property, using association funds, in the name of a charitable company set up upon the instructions of the supposed Executive Committee on behalf of the association.
5. There were those within the association who considered that the main, if not the entire, focus of the association should be on maintaining a fund for funeral benefits, either in the form of funding repatriation to Pakistan, as was the original activity, or of providing financial support for funerals in this country. This view was reasonably and properly held and advanced, but so was the contrary view. It was for the association, through proper constitutional processes, to decide which course to adopt.
6. An Action Committee was set up within the association to press for the adoption of the view that the focus should be on funeral benefits. This eventually became a separate organisation. That separate organisation is seen as a rival organisation to this association, and forbids its members from being a member of both.
7. In April 2013 a decision had been taken in principle by the then Executive Committee to sell 253 Bordesley Green, as well as to purchase the new property. The purchase of the new property was considered at a general meeting of the association held on 19 May 2013 which appeared to approve of the proposal both to sell 253 Bordesley Green and to put in a bid of up to £400,000 for the new property. As it happens, the new property has subsequently been purchased for more than that, in the name of the charitable company to which I have referred, contracts having been exchanged in August 2014, completion taking place in September 2014.
8. In October 2014 there was a further Annual General Meeting ('AGM') at which an Executive Committee was elected and previous decisions were ratified so that disputed decisions from the past, such as the removal of the defendant as a trustee, which had by then taken place, and the decisions to purchase and sell the two properties were, insofar as they needed to be, clothed with legal authority. It is the claimant's case that the Executive Committee had authority throughout; the defendant disputes this. If the defendant is correct, I then have to decide whether the ratification was effective, which depends on the validity of the October 2014 AGM.
9. I turn to consider the provisions of the constitution from which the nature of the dispute will emerge. The constitution declares, in Clause B, as follows:

'Subject to the matters set out below, the charity and its property shall be administered and managed in accordance with this constitution by the members of the Executive Committee constituted by Clause H of this constitution'.

There is then set out a very broad range of objects and powers. It is clear that the objects, as expressed in the constitution go a lot further than merely providing death benefits, though these are included.

10. Under the section 'Powers', it is provided as follows: 'In furtherance of the objects, but not otherwise, the Executive Committee may exercise the following powers', and included amongst them under (ii) is: 'Power to buy or take on lease or in exchange any property necessary for the achievements of the objects, and to maintain and equip it for use'. Under (iii) there is: 'Power subject to any consents required by law to sell, lease or dispose of all or any part of the property of the Charity'. I interpose to say that as this is not a charity, despite the assumption that it is, no relevant consent is required, for example of the Charity Commission. Later on, it is provided under (vii): 'Power to establish or support any charitable trusts, associations or institutions formed for all or any of the objects'. Generally, under (ix) there is: 'Power to do all such other lawful things as are necessary for the achievement of the objects'.
11. It is not suggested in this case that in the exercise, or purported exercise, of the Executive Committee's powers in purchasing the new property and seeking to sell 253 Bordesley Green the Executive Committee acted otherwise than for the purpose of the broad objects as set out in the constitution. The complaint from the dissentient faction within the association is that they take the view that the focus should as a matter of policy be on providing death benefits and not any of the wider objects set out in the constitution. However, as I have said, those objects are very wide and there is no doubt that the purported actions of the Executive Committee fell within them.
12. The Executive Committee, as provided for in Clause H, consists of honorary officers, officers elected at the AGM who hold office from the conclusion of that meeting, and nominated members who are appointed. It is provided also that all the members of the Executive Committee shall retire from office together at the end of the AGM next after the date on which they came into office, and they may be re-elected, or re-appointed. Thus under the constitution as originally drafted, the appointments were for one year only, though there could be a new appointment of the same people.
13. Paragraph (4) of Clause H provides as follows: 'The proceedings of the Executive Committee shall not be invalidated by any vacancy among their number or by any failure to appoint or any defect in the appointment or qualification of a member'.
14. There are then detailed provisions as to the proceedings of the Executive Committee, the quorum needed, and the establishment of subcommittees. Under Clause M it is provided that the property shall be held in trust for 'the Charity', which means the association (though not in fact a charity) either in a corporation entitled to act as custodian trustee, or in not less than three individuals appointed by them as holding trustees. As I have said, the defendant was and still claims to be a holding trustee. The same clause, M(1), goes on to provide: 'Holding trustees may be removed by the Executive Committee at their pleasure, and shall act in accordance with the lawful directions of the Executive Committee'.
15. Alternations to the constitution are provided for in Clause U. Alterations require a majority of not less than two thirds of the members present and voting at a general meeting. U(1) provides: 'The notice of the general meeting must include notice of the resolution setting out the terms of the alteration proposed'.
16. There is also provision, earlier on in the constitution, in Clause E, for membership to be open to any person over the age of 18 years '… interested in furthering the objects and who has paid the annual subscription laid down from time to time by the Executive Committee'. It is also provided as follows in E(iii):

'The Executive Committee may, by unanimous vote and for good reason terminate the membership of any Individual: Provided that the Individual concerned shall [have] the right to be heard by the Executive Committee accompanied by a friend before a final decision is made'.

17. I return to the history. In 2006 a new Executive Committee took office following dissatisfaction with the efficiency, at least, of the old Executive Committee, or certain members of it. The affairs of the association were in some disarray. The details do not matter. The view was reached that both for the immediate future, and, at least by some people, generally, a period of office of one year was insufficient for the Executive Committee to carry out its functions properly. Accordingly, at the AGM in 2007 the then Executive Committee did not stand down, but the 2006 Executive Committee was regarded as continuing in office, with the assent of those present, for a second year. It is difficult to see how that could lawfully take place, except in accordance with the provisions regulating amendment of the constitution, including if this was only a one-off departure from the constitution. All parties appeared, however, to be agreed before me that the Executive Committee for 2006 lawfully remained in office until the 2008 AGM. That also is how all the members appeared to view the position at the time, including the defendant.
18. The 2007 meeting, however, is said, on the claimant's side, to have gone further than merely extending the 2006 Executive Committee's period of office for a further year. It is said that at that meeting the period of office was extended for the Executive Committee generally for the future, that is to say there was an amendment to the constitution having the effect of extending the period of office to a two-year period.
19. I have been shown a notice of a meeting, dated 16 May 2007, which refers to a general meeting of the Pak Pashtoon Association UK to be held on 10 June 2007 at 2pm, and one of the agenda items is: 'Resolution to amend the constitution to extend the elections to every two years'.
20. That, however, is not a meeting which took place at 2pm on 10 June 2007, and the notice, though in the name of the then general secretary, Anwar Khan, was not, in the only copy I have seen, signed by him. No one had any real recollection of that or indeed of any other notice, which is hardly surprising given that the meeting took place nearly nine years ago.
21. There was a meeting which did take place, but at 11am on 10 June 2007, not 2pm, and there is a notice for that meeting which is dated 5 June. That lists, as an agenda item:

'Amendment in the constitution

(a) Sub committee is part of the constitution

(b) Length of term of the cabinet.'

There is attached to the copy of a 5 June notice in the trial bundle a document headed 'Amendments in Constitution' which, though not elegantly worded, would, it is common ground, if validly passed have had the effect of extending the period of office of the Executive Committee generally to two years instead of the one year provided for in the original constitution, and would therefore be in line with the 16 May notice.

22. The copy of the 5 June notice in the trial bundle is signed by Mr Anwar Khan in the sense that there is a squiggle next to his name which he says is not in fact his signature. I accept his evidence on this point, but no one has disputed that this notice did in fact go out. The general meeting should have been called on 21 days' notice so that the 16 May notice, even with the change of time from 2pm to 11am, would have been sufficient, but the 5 June notice by itself was not. Nonetheless, no one complained at the time that the meeting was an invalid meeting, whatever it decided. In those circumstances it seems likely to me that both notices would have gone out, the second notice going out because of the change of time, and the more detailed formulation of the amendments as attached. It also seems likely to me on a balance of probabilities that the document headed 'Amendments in Constitution' was attached to the second notice, which also refers to amendments 'in' the constitution, though the reference in the agenda to one of the amendments being: 'Sub committee is part of the constitution', does not make much sense. Mr Maroof, one of the witnesses who gave evidence before me, explained that he found the 5 June notice and proposed amendments in his file attached with a paperclip, and inferred that they had always been so attached. I accept that evidence. I also accept Anwar Khan's evidence that the signature on the 5 June notice is not his, but I do not think that matters as the notice was certainly authorised by him.
23. As regards the earlier notice of 16 May 2007, Mr Anwar Khan was inclined to distance himself from that, and its provenance is not clear. Nonetheless, it exists and I am not prepared to treat it as a fake. I do consider it more likely than not, given the accounts of the AGM, which proceeded without protest, that an earlier notice had been sent out before the change of time from 2pm to 11am, and this notice is probably the notice that was originally sent out.
24. In those circumstances the question I then have to consider is what was decided at the 2007 AGM. In my judgment the probability is that the amendment as formulated in the attachment to the second notice was passed, having the effect of extending the elections to every two years, as expressly spelt out in the first notice.
25. There is a letter, dated, erroneously, 10 June 2006, which everyone came to agree before me should really have been dated 10 June 2007, from the association's then legal adviser to Mr Anwar Khan, the secretary, counselling that a further meeting should be convened setting out the amendments in the notice of the meeting. That might be said to indicate that there was no notice for the meeting of 10 June 2007, in which case the entirety of the meeting would subject to questions of acquiescence be invalid. However, in my judgment, the more likely explanation is that the letter, which, was written out of caution because the legal adviser, following the passing of a resolution amending the constitution, had doubts as to the resolution's efficacy. This is not surprising given that the amendments were not set out in either of the notices themselves, though attached to the second notice, the time of the meeting changed, and the second notice was short. The doubts of the legal adviser were not apparently shared by the secretary and treasurer and things carried on as normal with the existing Executive Committee in place.
26. In addition, subsequent events, corroborating the oral evidence of a number of witnesses on the claimant's side, suggest that the resolution passed in June 2007 was not related simply to the then Executive Committee continuing in office for a further year, but related generally to future elections of and appointments to the Executive Committee. There was an acceptance, at least by some members of the association, that that was desirable for the future and not just as a one-off occurrence, and this view carried the day.
27. I heard in particular from a Mr Pehlwan Khan, who was at the meeting, whose evidence rang true on this point. He told me that his view, which he expressed at the meeting, was that established members of the Executive Committee could hold office for an even longer period, but the view of the meeting was to limit the extension to two years. He expressed the view in his evidence before me that the relevant period would be five years. There is also an Executive Committee meeting later the following February in which the same individual, according to notes taken by the president, which have been translated before me, suggested a period of 10 years and not five. It is possible that Mr Pehlwan Khan could have been confusing that meeting with the earlier meeting; however that seems to me to be unlikely because there is a great difference between an AGM and an Executive Committee meeting, and Mr Pehlwan Khan gave convincing evidence in this respect. It is more likely that he raised the point at both meetings, though his recollection as to whether the period he suggested was 5 or 10 years may be incorrect, or his view may have changed between one meeting and the next.
28. The president was also a convincing witness. He kept contemporaneous notes of the meeting, which regrettably were only produced late in the day. The note which he made is consistent with both versions of what is said to have been agreed at that meeting and is probably more consistent in the eventual agreed translation with a one-off than with an intention to incorporate a perpetual change to the constitution. However, one has to look at the evidence as a whole, and, as I have said, the note is consistent with the alternative construction as well.
29. What happened after 2007 is that future appointments were made on a two-year basis without apparent objection from anyone, meaning that there were no elections in 2009, 2011 and 2013. When I say there was no apparent objection, queries were certainly raised by some members, but not pursued, and Mr Anwar Khan also queried the matter in writing at one stage, but was reminded of the 2007 amendment, which elicited no further response from him. The membership generally seemed to go along with the matter, and even those querying the position in at least one instance served on the Executive Committee despite the query.
30. The defendant's evidence about the 2007 meeting veered between not remembering it and not being there. In the end the evidence was firmer on the latter point, namely that he was not there, but he appears to have been kept abreast of what was going on over the years through others who did attend meetings, and I do not consider that his evidence added anything of value to the resolution of the question of whether or not the meeting which took place on 10 June 2007 at 11am did or did not amend the constitution in the manner suggested by the claimants.
31. The evidence from the witnesses who were called on behalf of the defendant was, as I have said, that this was a one-off alteration. All those witnesses appeared to be sincere and doing their best to help me, but in my judgment their evidence was mistaken, and their recollection incorrect. I find therefore as a fact that the constitution was purportedly amended on 10 June 2007 in the form which is attached to Mr Maroof's notice, having the effect of extending the elections to every two years. It follows from this that, unless the notice was defective in some other way, all subsequent proceedings of the Executive Committee were valid. The only respect in which the notice might be said to have been defective was that the earlier notice of 16 May 2007 referred to a meeting at the wrong time. Nonetheless, that was corrected by the later notice. One has to look at them together, and I do not consider that advancing the time of the meeting from 2pm to 11am would nullify the original notice, because the notice would still be sufficient notice for a meeting which had been advanced from the afternoon to the morning in that way. Accordingly, the Executive Committee remained properly in office until 2008, and all subsequent elections were for two-year terms so that everything that the Executive Committee did down to 2008 and thereafter was, subject to one further point, valid.
32. The further point is that it is said that insufficient notice was given to all the members in relation to the 2014 general meeting, because a large number of members, 700 in all, did not receive notice of that meeting because they were treated by the Executive Committee as having ceased to be members as they had not paid their annual fee.
33. I shall assume at this point of the argument that this was a mistaken approach on the part of the Executive Committee. Even so, it seems to me that that is the sort of circumstance for which Clause H(4) was intended to cater.
34. Against that I have been referred to the well-known decision of the House of Lords in Morris v Kanssen [1946] AC 459, [1946] 1 All ER 586. A similar but not identical clause to H(4) (derived from the then version of Table A as applied to a registered company) was considered to be ineffectual in circumstances where there had been no appointment at all. Instead there was a concocted minute of a meeting which never took place recording a purported appointment. That however was not the case in relation to any of the appointments in 2008, 2010, 2012 or, most importantly for present purposes, 2014. There were appointments purportedly made at meetings which took place. There were also meetings in the intermediate years at which the existing Executive Committee was treated as continuing in office and at which therefore no elections or appointments took place.
35. Accordingly, it seems to me that H(4) is a complete answer to the objection that in 2014 the elections and appointments were ineffective because some members had not been given proper notice.
36. Moreover, H(4) is another answer to the objection (if there was no effective amendment in 2007) that there was no election or appointment of Executive Committee members at the AGMs in 2007, 2009, 2011 and 2013. H(4) is wider than the Article under consideration in Morris v Kanssen, referring expressly to 'any failure to appoint'. Thus, in my judgment, when there was an acting Executive Committee which continued in office after an AGM, any failure to elect or appoint a new Executive Committee did not invalidate the proceedings of the continuing Executive Committee after the AGM. Mr Mitchell submitted that the 'failure to appoint' referred to in H(4) did not apply to a failure to appoint anyone at all in place of the retiring Committee, but I can see no reason for limiting its effect in that way. The word 'any' must be given full effect. Thus, even if the failure related to the whole Executive Committee, H(4) would in my judgment apply to validate the proceedings of the continuing Executive Committee.
37. In addition to that point, the 700 members in all probability had not paid their fee, and it seems to me that the Executive Committee were entitled to treat their membership as at an end, especially after, as happened, notice was given laying down a time limit for the payment of arrears. That emerges from Clause E(1), which provides that membership of the charity should be open to any person over the age of 18 years interested in furthering the objects, and who has paid the annual subscription laid down from time to time by the Executive Committee. That does not, in my judgment, refer only to new members; it applies to existing members. The Executive Committee were, therefore, entitled to regard people who had not paid their fees as having ceased to be members. It follows from this that the 2014 AGM was properly convened and everything that occurred at or as a result of that meeting, including ratification of previous acts, if needed, was likewise valid.
38. In the light of those conclusions I need not consider, strictly speaking, arguments that were advanced to me on issues of waiver and laches. It is well established in the case of both registered companies and unincorporated associations that formal defects may be waived by the membership, and that individual members may be barred by laches from raising any complaint themselves. In the present, in my judgment, the defendant is far too late to raise any complaint about the validity of the elections and appointments, or the failure to hold annual elections and appointments. Moreover, the membership including the defendant, despite queries raised from time to time, have treated the Executive Committee as in office throughout, which is hardly surprising in the light of Clause H(4). Having regard also to what happened at the AGMs (and other general meetings) since 2007, the membership as a whole have clearly waived any defect in the appointment process and accepted the acting Executive Committees from time to time as established facts.
39. The authorities referred to by Mr Wilkinson, though dismissed by Mr Mitchell with elegant disdain, seem to me to cover the present situation. Those authorities are summarised in Mr Wilkinson's note attached to his opening skeleton argument, starting with Abbatt v The Treasury Solicitor [1969] 1 WLR 1575, a decision of the Court of Appeal in which Lord Denning, the Master of the Rolls, said this at page 1583: 'But I should have thought it was implied that the members could, on notice, by a simple majority at a general meeting amend or alter the rules'. That was the main basis of the decision. He continued:

'In any event, however, if at such a meeting a majority purport to amend or alter the rules and the others take no objection to it, but instead by their conduct acquiesce in the change, then those rules become binding on all. It is like partners who by conduct acquiesce in the change of their partnership deed…or shareholders who by their conduct assent to an act done by the directors beyond their powers…It may be impossible to show that every member of the club knew of the change of rules, but that does not matter'.

40. Another case is Villatte v 38 Cleveland Square Management Ltd [2002] All ER (D) 218, a decision relating to the leasehold valuation tribunal where a claim was dismissed on the basis that Mr Villatte was barred by laches from maintaining a challenge in circumstances where he did not challenge the appointment of directors over a period of some seven years, and indeed had held himself out as a director. To similar effect is Home Treat Ltd [1991] BCLC 705, and Bailey Hay & Co Ltd [1971] 1 WLR 1357. As I have said, it is unnecessary for me to rely on those decisions because in my judgment there were no irregularities after 2007 which would otherwise have the effect of invalidating the Executive Committee's actions. Were I wrong about that, however, acquiescence or laches would be an answer to the point.
41. Mr Mitchell argued, by reference to the events of 2013, that the removal of the defendant was unlawful because it was done for an improper purpose. The foundation of his argument was that at a general meeting in May 2013, the Executive Committee sought and obtained the approval of the members to the proposed bid for the new property of up to £400,000, and the consequential sale of 253 Bordesley Green, which was intended to fund the sale. I do not however read the minutes of that meeting as limiting, nor from the evidence that I have heard do I consider that the meeting did limit, the authority of the Executive Committee to make an offer of no more than £400,000. The meeting was the occasion when the Executive Committee reported to the membership what the current situation was. The Executive Committee did not need the authority of the members under the constitution, though no doubt welcoming the comfort of such approval as was indicated.
42. The Executive Committee later took the view, rightly or wrongly, that a higher offer was justified. Those in the opposite camp, such as the defendant, took the view that any higher offer should receive the prior approval of a special meeting. That, however, is not what the constitution required. I do not consider that the May 2013 meeting in any way limited the powers of the Executive Committee under the constitution. Therefore, I cannot conclude, as Mr Mitchell invites me to do, that the defendant, in subsequently declining to execute a blank transfer, or indeed, as his solicitors made clear in correspondence, any transfer prior to a further special meeting being held, was acting justifiably because the instructions of the Executive Committee were unlawful. Equally, I cannot conclude that the Executive Committee was acting for an improper purpose by removing the defendant as holding trustee (which they did) in response to his failure to comply with the Executive Committee's lawful requests. They were entitled to remove him as holding trustee 'at their pleasure' and did so at an Executive Committee meeting of 20 January 2014.
43. A special meeting could have been held to consider the sale and purchase of the properties, but that would not without more override the ultimate decision-making powers of the Executive Committee. The constitution is not entirely clear as to what the requirements are for the convening of a special meeting. However, even if, as is contended on the defendant's side, a petition which those he supports prepared and attempted to, and on one version of the evidence actually did, tender to the Executive Committee was sufficient to require the summoning of a special meeting, that meeting could not, except by changing the constitution by special resolution (which the petition did not seek) take away the power of the Executive Committee to act as it saw fit. It may not have been politically sensible had such a meeting taken place for the Executive Committee to go against the wishes of the majority of the membership in general meeting, but that, in my judgment, undoubtedly was its right under the constitution: decisions of the kind under consideration were exclusively within the remit of the Executive Committee, and still are.
44. It follows that it cannot be said that the removal of the defendant as a trustee because of his failure to do as the Executive Committee wished was invalidated by some improper motive, or because the instruction that the defendant refused to comply with was an unlawful instruction. It is said by Mr Mitchell that the defendant could not be required to execute a blank transfer. That, however, was not the basis or extent of his objection. His objection was signing any transfer in the absence of a special meeting being convened of the members to consider the position. I have no doubt that the defendant, and others of like persuasion, genuinely considered that that was an appropriate course, but it was not one they could insist upon under the constitution as it then stood and now stands.
45. Accordingly, the defendant's removal as a trustee was, in my judgment, effective in law, and I shall so declare and grant such consequential relief as is appropriate, upon which I shall hear further argument in the light of my rulings.
46. There is an alternative claim for removal by the court of the defendant as trustee if he has not been effectively removed already; however, as I have held that he has been effectively removed I need not consider that alternative. One of the factors, it is said, which would justify his removal as a trustee is that he has ceased to be even a member of this organisation. In the circumstances, that is not a matter which I need to decide and I do not do so. His removal as a member by the Executive Committee (whether effective or not) followed shortly after his removal as a holding trustee.
47. I have referred, throughout, to Mr Bahadar Shah as the defendant. Technically, there are three defendants. The other two are merely nominal defendants and so all my references in this judgment to 'the defendant' are to be red as references to Mr Bahadar Shah alone.