England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY

		Birmingham Civil Justice Centre, 33 Bull Street, Birmingham B4 6DS.
		19th July 2016.

HIS HONOUR JUDGE PURLE:

1. In claim number 2YN67093, as it formerly was (now C30BM205), I gave judgment on 4 July 2014 for £59,175.40 together with interest of £3,466.72, in favour of Harish Chandra ("Dr. Chandra") against the Defendant ("Dr. Mayor"), together with an order for costs against Dr. Mayor, including interim costs of £20,000.
2. Dr. Mayor was expressed to be sued in a representative capacity on behalf of the members of the executive committee of an unincorporated association and charity known as Arya Samaj (Vedic Mission) West Midlands ("the Mission") as at 19^th August 2012. Dr. Mayor sued for wrongful dismissal and for sums due to him under the minimum wage legislation. 19^th August 2012 was the date when Dr. Chandra was removed from employment by the then executive committee of the Mission. He was not originally employed by that executive committee, but by a previous executive committee. It is nevertheless evident both from the terms of The Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") and the decision of Morison J. in Affleck v. Newcastle Mind [1999] ICR 852 that the contractual liabilities of the Mission in relation to Dr. Chandra's employment were transferred upon a change of committee and crystallised upon the termination of his employment, so that judgment was properly sought against Dr. Mayor representing the members of the executive committee as at 19^th August 2012.
3. The trial before me proceeded on that basis. Dr. Mayor now seeks a contribution from the other executive committee members towards the amounts including costs he has been ordered to pay, and Dr. Chandra seeks permission to enforce the costs order in his favour against those other executive committee members. Mr. Quirke, who has appeared on behalf of those other members of the executive committee, not directly represented in their own right at the earlier trial before me, initially resisted the conclusion that the executive committee members at the time of Dr. Chandra's dismissal were liable. Following Mr. Brown's submissions for Dr. Mayor, which included detailed analysis of the TUPE regulations and underlying legislation, that resistance rightly fell away. In my judgment, it is plain that the basis upon which the earlier trial proceeded was correct and that the order was properly obtained against Dr. Mayor in a representative capacity.
4. The order as drawn by the court, I should mention, did not in terms refer to Dr. Mayor's representative capacity. I was puzzled by that and enquired of the court staff why that was so. The draft order, as lodged by the parties, expressly recited the representative capacity in its heading. I was told that the Case Man electronic system used by the court does not allow enough characters in the heading for such a description to be incorporated, a proposition which I doubted, but which explains why the order coming out of the Case Man system was different from the draft order as lodged by the parties. Moreover, and more significantly, the originating process expressly sued Dr. Mayor in a representative capacity, and I have no doubt that these proceedings have been representative proceedings throughout.
5. CPR 19.6 (1) provides:

"Where more than one person has the same interest in a claim –

(a) the claim may be begun; or

(b) the court may order that the claim be continued,

by or against one or more of the persons who have the same interest as representatives of any other persons who have that interest."

6. In this case the claim was begun against Dr. Mayor as a person having the same interest as every other member of the executive committee. They were all contractually liable to Dr. Chandra in respect of his dismissal and, as the trial established, in respect of the failure to pay him the then minimum wage. There is power under CPR 19.6 (2) for the court to direct that a person may not act as a representative, but that power has not been invoked hitherto, though there is now an application to invoke it for the future.
7. CPR 19.6 (4) provides:

"Unless the court otherwise directs, any judgment or order given in a claim in which a party is acting as a representative under this rule –

(a) is binding on all persons represented in the claim; but

(b) may only be enforced by or against a person who is not a party to the claim with the permission of the court."

8. It has been suggested by Mr. Quirke that the order of 4 July 2014 merely creates an issue estoppel, but does not enable enforcement of the costs element against individual members of the class represented by Dr. Mayor. The judgment sum, interest and costs on account have been paid, and Dr. Mayor has brought separate High Court proceedings (now C30BM206 formerly B90BM080) seeking contribution from the other executive committee members at the time, both in relation to sums paid and further outstanding costs awaiting assessment. The figures for costs mentioned to me are eye-wateringly high, of the order of half a million pounds, and still moving upwards. Dr. Mayor also seeks to add the represented parties individually as parties to the original claim under section 51 of the Senior Courts Act 1981, for the purpose of costs.
9. As the parties for whom Mr. Quirke appears are the other members of the executive committee liable on Dr. Chandra's employment contract, it seems to me that CPR 19.6 (4) clearly applies, and that the order, including the order for costs, is not only binding upon Mr. Quirke's clients, but may be enforced against all or any of them with the permission of the court. It appears also from the decision of Cox J., in Howells v. The Dominion Insurance Company Ltd., [2005] EWHC 552 that exceptional circumstances are required for the court to withhold permission to enforce a judgment on liability against the represented parties. Without in any way being prescriptive, an example might be a collusive judgment, of which there is no suggestion in this case.
10. The object of rules such as CPR 19.6 is to avoid the unnecessary joinder of parties so as to produce an ever-lengthening list of (in this case) Defendants, where it is appropriate and sufficient to join one party as representing himself and all others in the same interest. If however needless obstacles are then erected to enforcement, the beneficial object of the rule will be undermined, because Claimants, unless enforceability is reasonably assured, will not bother to go down the representative route, but will add to the costs by joining everyone in sight in the same interest, resulting in multiple acknowledgments of service and possibly multiple representation with increased costs. That cannot be in the interests of efficient litigation, yet CPR 19.6 construed in the way suggested by Mr. Quirke might well lead to such a result.
11. In fairness, Mr. Quirke is not to be criticised for making that submission, because he has respectable authority behind him, namely, the decision (under the RSC pre-dating the Wolf reforms) of the Court of Appeal in Moon v. Atherton [1972] 2 QB 435, where it was suggested that the costs order could not be enforced against anyone other than the named defendant. Lord Denning MR explained

"In a representative action, the one person who is named as plaintiff is, of course, a full party to the action. The others, who are not named, but whom she represents are also parties to the action. They are all bound by the eventual decision in the case. They are not full parties because they are not liable individually for the costs. That was held by Eve J in Price v Rhondda Urban District Council. But they are parties because they are bound by the result."

12. As pointed out by Cox J., in the Howells case, the wording of the then RSC was not significantly different from the current wording of the CPR. However, it is clear from a full reading of Moon v. Atherton that the observations I have cited were obiter, and the Court of Appeal did not address at all the express wording of the RSC contemplating enforcement with the permission of the court. Accordingly, it seems to me that those obiter observations cannot override the clear wording of the rules, and I respectfully disagree with the contrary suggestion in the Howells case, where the point, though raised, does not seem earnestly to have been argued. In my judgment the wording of the rules is too clear to be affected by the Moon v Atherton dicta, which I therefore cannot follow.
13. A number of earlier authorities were also referred to me, including Price v. Rhondda UDC [1923] WN 228, Scott v Pascal and Adams (1847) 15 Sim 559, 60 ER 736 and Markt & Co Ltd v. Knight Steamship Company Ltd [1910] 2 KB, 1021. These all support the proposition that a costs order cannot be enforced against a person represented by another, though it appears to be accepted that judgment on liability can be, a distinction the sense of which is not easy to follow. However, as Mr. Brown demonstrated by his researches, these cases all related to differently worded rules, and are of no assistance to me in this case. They also were decided at a time when it was thought that a costs order could not be made against non-parties as a matter of principle, a point which, though strictly distinct from any question of construction of the rules, is now recognised to be wrong in the light of Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965. Further, Waller J., in Bank of America National Trust and Savings Association v Taylor and Another [1992] 1 Lloyds Reports 484, 495, after noting that there was no difficulty in enforcing a judgment on liability, and questioning why a judgment for costs should be different, suggested, that in the light of the Aiden Shipping case, Price v. Rhondda UDC might require reconsideration. I have reconsidered it, and decline to follow the decision.
14. Accordingly, it seems to me that the judgment for the outstanding costs is enforceable by Dr. Chandra against Mr. Quirke's clients with the permission of the court. No special circumstances have been advanced which would justify refusing enforcement of the outstanding order for costs.
15. Procedurally, the matter came before me upon the application of Mr. Brown's client, Dr. Mayor, seeking contribution. He based his case upon (amongst other arguments) CPR 19.6 and section 51 of the Senior Courts Act 1981. It might have been said that, in the absence of an application by Dr. Chandra under either of those two provisions, the procedure adopted by Mr. Brown was inappropriate. However, Mr. Royle for Dr. Chandra has now associated himself with Mr. Brown's submissions and wishes on behalf of Dr. Chandra to make an application of his own for enforcement of the outstanding costs orders against Mr. Quirke's clients. I will, therefore, treat him, as all parties did before me, as making that application on behalf of Dr. Chandra.
16. The conduct of the earlier proceedings had an unfortunate history in this sense: the Mission's executive committee initially left the conduct of the defence to the trustees of the Mission, who had a separate function under its constitution. Under the terms of the constitution of the Mission, the duty to conduct litigation appeared to rest upon the trustees, though they had an express indemnity from the executive committee.
17. The association was at the time of the hearing before me an unincorporated charity. Before I gave judgment, a separate charitable incorporated organisation ("CIO") of the same name was established in April 2014, which has taken over the functions and assets of the Mission.
18. Mr. Quirke for the executive committee members hitherto represented by Dr. Mayor now applies to join the CIO for an indemnity or contribution. Mr. Brown for Dr. Mayor makes the same application. This is resisted primarily on the grounds that the CIO never had anything to do with the defence of the original proceedings. In the original proceedings, as I have briefly mentioned, initially the trustees on behalf of the Mission conducted the defence in the name of Dr. Mayor. They did so through much of 2013, utilising the services of solicitors, Eversheds and Prestons successively, until Prestons eventually came off the record. It appears that the trustees came to appreciate or believe that they were not liable in the proceedings and therefore ceased funding their defence. Dr. Mayor, who had previously complained that Prestons had no authority from him, as it appears they did not, to conduct proceedings in his name, became unrepresented.
19. All of the remaining executive committee members were aware that the defence was left initially to the trustees and, upon Prestons' withdrawal, that no lawyers were representing them or the Mission. They were naturally happy enough to leave it to others when the trustees were funding solicitors, and remained happy to leave it to others to conduct the defence, even when in fact there were no others apart from Dr. Mayor, who was himself without legal representation for some considerable time. The result was that the defence was not conducted with any efficiency, or (ultimately) in accordance with the orders of the court, resulting in Dr. Mayor becoming debarred from adducing witness statement evidence.
20. It is in one sense not entirely surprising that the executive committee members did nothing. By the time the matter came to be litigated, they no longer held office, and the trustees initially assumed responsibility for the defence, as I have said. But that changed, to the knowledge of all, and still the executive committee members did nothing. All were, as I understand it, volunteers holding office as devout adherents to the faith that the Mission, a charitable organisation, promoted. It is a personal tragedy that they now find themselves under a substantial liability, but that is the consequence of their status as the relevant executive committee members, and I have to give effect to the legal rights and wrongs arising from that.
21. I shall assume for argument's sake that there was some confusion over who was responsible, internally within the Mission, for the conduct of the defence. That however cannot affect Dr. Chandra's rights under the judgment which he has obtained against Dr.Mayor and those represented by him. In all the circumstances, I can see no justification for withholding permission to enforce the judgment, including as to costs, which Dr. Chandra obtained against Dr. Mayor in 2014, against the other executive committee members, and every reason for granting such permission under CPR 19. 6(4)(b).
22. I did consider whether, given that there was no formal application from Dr. Chandra to that effect, it was appropriate to make an order (granting permission to enforce) today. However, as Mr. Brown was seeking exactly the same order, and the merits were considered on his application, it seemed to me that all of the necessary material was before the court and that Dr. Chandra ought not be put to further expense in making a formal application and adducing what would be merely formal evidence in support. Accordingly, I give permission immediately.
23. The position as between Dr. Mayor, the represented defendants and others requires separate consideration. Hence, Mr. Quirke's application to join the CIO, and Mr. Brown's application to the same effect.
24. There is, in this respect, a major problem facing Mr. Quirke's and Mr. Brown's clients. They seek to add the CIO for an indemnity or contribution, even though it did not take part at any stage in the proceedings. I must consider therefore the legal justification if any for holding the CIO liable.
25. It may be that the individual trustees, by taking on the conduct of the defence initially, rendered themselves potentially liable for a third party costs order, but that is not sought, at least presently, whether by Dr. Chandra or anyone else.
26. As I have said, the trustees appear under the Mission's constitution to have had the benefit of an express right of indemnity from the executive committee members. That may be the executive committee I am concerned with or a later executive committee. Which executive committee is liable under the express indemnity is not a point I have to consider on this application.
27. It may also be that individual trustees would also have a right of indemnity out of the assets of the trust, which are now held by the CIO, either for the costs they incurred or the costs which they might become liable to pay, if ordered to pay all or any part of the costs. The relevant executive committee members might also, as Mr. Quirke suggested, have a right of indemnity out of the assets in respect of the costs they have been ordered to pay. As Mr. Quirke says, the executive committee members are themselves to be regarded as charitable trustees, at least for some purposes. If there is such a right of indemnity out of the assets, then the CIO appears to be the appropriate party to join as the current holder of those assets.
28. Any enforcement of such rights of indemnity would arise either under the constitution of the Mission, or under the general law of trusts, and would amount to the court administering the trusts of the charity for that purpose.
29. Thus Dr. Chandra might (though he does not in fact do so) seek costs against the CIO directly as a party against whom rights of indemnity exist, not because the CIO was involved in or represented in the litigation (which clearly it was not) but because others who were (the trustees or Dr. Mayor and those he represented) had a right of indemnity out of the assets which the CIO now holds. Dr. Chandra's claim would be on the basis that he was subrogated to the rights of indemnity that those others enjoyed (see Lewin on Trusts, 19^th edition, paragraph 21-048 et seq).
30. On that basis, any claim by Dr. Chandra against the CIO would, in my judgment, constitute charity proceedings within the meaning of section 115 of the Charities Act 2011, which are defined as including proceedings brought under "the court's jurisdiction with respect to trusts in relation to the administration of a trust for charitable purposes": section 115(8)(b). This would require the authorisation of the Charity Commission under section 115(2), which has not been sought. The court would be administering the trust so as to give effect to the subrogated rights of indemnity.
31. In my judgment also, the members of the executive committee, who seek a contribution or indemnity from the CIO, on the basis that the CIO is liable to Dr. Chandra in common with them, can only establish that common liability by invoking the same rights of indemnity which Dr. Chandra could invoke, without which there is no common liability. The claim for contribution presupposes that CIO is liable to Dr. Chandra, which in turn is dependent upon administration of the trusts by the court so as to enforce the rights of indemnity. It follows that a claim by any executive committee member for contribution or indemnity must also, in my judgment, require the authorisation of the Charity Commission, which has not been sought.
32. I should say, for the avoidance of doubt, that the existing proceedings against the executive committee members, including Dr. Chandra's claim for costs, are not charity proceedings, because they arise out of the breaches of Dr. Chandra's contractual rights against the then executive committee. He is not asking the court to administer the trusts of the charity. Likewise, Dr. Mayor, in his existing claim for contribution from the fellow members of his executive committee, is not asking the court to exercise its jurisdiction to administer the trusts of the charity. He seeks contribution either under the Civil Liability Contribution Act 1978, as all members of the committee are liable contractually for the same damage, or, to the extent that Dr Chandra's claim may be characterised as a debt claim for which all executive committee members are liable, on restitutionary principles. I need not decide which it is at this stage. The points are clearly arguable both ways.
33. The applications to join the CIO to the existing proceedings are, in the circumstances refused. The position may conceivably be different in the future after the authorisation of the Charity Commission has been sought, if it is then refused. That is a future question which I should say no more about unless and until a further application is made. I express no provisional view one way or the other on what the outcome of such an application might be.
34. There is also an application under section 51 of the Senior Courts Act 1981 to add the other 10 executive committee members as parties to the original claim brought by Dr. Chandra for the purposes of costs. That mirrors the contribution proceedings, where the same 10 members are already Defendants. It may strictly be unnecessary to add them to the original proceedings, but it can do no harm so long as both sets of proceedings are managed and heard together hereafter, which I direct. It is not necessary to consolidate the proceedings and there may be technical difficulties in the way of that anyway, given the different Claimants.
35. Mr. Quirke also seeks permission to amend his clients' defences in the contribution proceedings. I am prepared in principle to allow such an amendment, though not so as to raise matters upon which I have ruled against him, such as whether or not his clients are liable under the original judgment, where I have now given permission to enforce that judgment against his clients. The proposed pleading will need to be revisited in the light of all the rulings in this judgment. In addition, Mr. Quirke wishes to put in a general defence supplemented by individual defences relevant to each individual executive committee member. That is unusual, but not of itself objectionable in an appropriate case. However, Mr. Quirke was unable to assure me that there were no contradictions between the general defence and the individual defences and I rather inferred that under pressure of time the necessary cross-check and consequential tidying-up had not been undertaken. I require that to be undertaken before considering any final amendment. I will also, subject to any further argument that I may hear, be prepared to consider the question of final amendment on paper without a further hearing.
36. There is also the question of whether or not the proceedings ought to remain as a representative claim. As I have said, assessment proceedings are now on foot. Subject to anything else that anyone may say, it is desirable that those assessment proceedings should remain as representative proceedings. It does not presently seem desirable that another 10 parties should be added to the assessment proceedings, where all paying parties have the common aim to reduce the costs as much as possible.
37. The contribution proceedings and the section 51 applications, on the other hand, clearly cannot take place on a representative basis. CPR 19.6(2) provides, as I have mentioned, that a court may direct that a person may not act as a representative. It seems to me that what I should direct is that Dr. Mayor may not act as a representative in the contribution proceedings or in the section 51 applications, but that he should remain as a representative, unless anyone has any strong objections to this, in the assessment proceedings because in that respect everyone's interests really are identical. However, I have not heard full argument on the point, and will hear further argument, if anyone wishes it. It seems to me that there is nothing in the wording of the rules which stops me from bifurcating, if I can put it that way, the representation order in the manner I have suggested.
38. I will now hear counsel on the consequences of these rulings.