Analysis
Sri Guru Singh Sabha Southall (the charity) was a registered charity whose objects included the advancement of religion. An executive committee was responsible for the management of the charity and, with 10,000 members, there was a tendency to form factions. A former president of the charity (Mr Sohi) was expelled from membership, following a change of office, and commenced proceedings against the members of the executive committee then in power (the old committee) for a declaration that the resolution of expulsion was null and void. They were sued on their own behalf and on behalf of all of the members of the charity, and the Attorney General was joined in by permission of the Charity Commission. For this purpose, the old committee retained as their solicitors, BSG LLP, and counsel was briefed to attend two hearings for interim relief by Mr Sohi (in the event unsuccessful) and to appear at trial. However, as a result of mediation, the case was settled on the basis of a consent order under which the old committee would pay two-thirds of Mr Sohi’s assessed costs (if not agreed), and the Attorney General made no objection to their payment from the funds of the charity. As a result, a total of £169,084 was paid to BSG LLP – it was not clear whether the old committee had sought the approval of the Attorney General or anyone else.
At the next election, Mr Sohi was restored as president and the old committee was displaced by the claimant and others (the new committee). Its mandate included the recovery of the legal costs paid to BSG LLP for representing the old committee, for which purpose it sought the delivery up of the solicitors’ files, documents, invoices and ledgers. The Charity Commission refused to grant permission for the commencement of proceedings by the new committee for a declaration that they were entitled to the delivery up and inspection of these documents. The new committee then sought the approval of the court for the commencement of such proceedings.
Held (refusing permission for the commencement of proceedings):
Section 115(5) of the Charities Act 2011 conferred on the court an original jurisdiction to grant leave to take proceedings, for which purpose it needed (a) to be satisfied that a legally sustainable claim had been advanced in good faith and, in order to prevent charitable resources from being wasted on internal disputes, (b) to be clear that the commencement of proceedings was the least unsatisfactory course having regard to the interests of the charity as a whole. On the facts of this case, while there was no doubt that the new committee had a legally sustainable claim, which was not being advanced in bad faith and could be conducted without frittering away charity resources, the court was not satisfied that the commencement of proceedings was the least unsatisfactory course having regard to the interests of the charity as a whole. Any attempt by the new committee to obtain restitution from the old committee for any part of the legal costs of BSG LLP on the basis of a negligence claim was wildly speculative. As regards a claim for restitution on the basis of breach of trust, there was no improper motive on the part of the old committee in having defended the proceedings – it was Mr Sohi who chose to bring the proceedings with the leave of the charity commission. There was a real issue which had to be settled by the court and, as Mr Sohi was party to the agreement which dealt with the costs (to which no objection was raised by the Attorney General), it would be extraordinarily difficult for the new committee to recover them from the old committee and for this reason any order for the production of documents would be a first step on a journey that led nowhere. The alternative argument, that the old committee had agreed the legal costs of BSG LLP in an unreasonably large sum, was stronger, given that the consent order only addressed the principle, rather than the amount, of costs and that they had been paid out of charity funds without evidence of examination by the old committee or approval by the Attorney General. However, the new committee had specifically approved Mr Sohi’s costs and the possibility of demonstrating that the amount of those costs paid to BSG LLP was disproportionate and unreasonable seemed remote. Moreover, even if there were exceptional circumstances to make an order for assessment, the time limit within which such an application could be made had already expired. As the new committee could have (but did not) seek such assessment, they should not now endeavour to recover it in some other way by commencing proceedings for the delivery up of documents. They would serve no useful purpose and the prolongation of internal disputes could not be in the best interests of the charity.
Obiter: the original judgment, delivered extempore, was withdrawn and reconsidered, on account of a mistaken finding of fact, but the same conclusion was reached in the subsequent reserved judgment.
JUDGMENT NORRIS J: [1] Sri Guru Singh Sabha Southall (the charity) is a registered charity whose objects include the advancement of the Sikh religion. It is an unincorporated association governed under the provisions of a scheme approved by the court in 1993 (as subsequently amended). By clause 13 of the scheme the management of the …Continue reading "Garcha & ors v Moore & ors [2014] EWHC 2754 (Ch)"