Koeller & Anor v Coleg Elidyr (Camphill Communities Wales) Ltd

This is an appeal by Mr and Mrs Koeller against a possession order made on 28 June 2004 by His Honour Judge Weeks QC, in the Bristol County Court, in an action brought against them by Coleg Elidyr (Camphill Communities Wales) Ltd (“the Company”). The possession order relates to a freehold dwellinghouse known as Ty Hir, Rhandirmwyn, Llandovery (“Ty Hir”).

It is common ground that Ty Hir is owned by the Company, and that Mr and Mrs Koeller occupied it merely as licensees. Hence, on the face of it, on the termination of their licence a possession order would appear to have been inevitable. However, by their Amended Defence and Counterclaim Mr and Mrs Koeller contend that in terminating their licence and in seeking to recover possession of Ty Hir the Company has acted in breach of contract; alternatively that it is estopped from asserting its right to possession of Ty Hir. They counterclaim for a declaration to that effect, together with injunctive relief and damages.

The judge concluded that the case pleaded in the Amended Defence and Counterclaim was misconceived, and made a possession order, He found that the only contract between the Company and Mr Koeller was his contract of membership of the Company, which had not been breached; and that the defence of estoppel failed since Mr Koeller did not rely on any assurances he might have been given. He refused permission to appeal.

The appellants duly applied to this court for permission to appeal. Permission was refused by Chadwick LJ on the papers on 4 October 2004, but was granted by Brooke and Rix LJJ following an oral hearing on 13 October 2004.

The factual background is, in summary, as follows.

The Company was incorporated on 13 June 1975 as a company limited by guarantee and not having a share capital. It is a registered charity. Mr Koeller was one of the nine subscribers to its Memorandum of Association. Its main object is expressed in paragraph 3 of the Memorandum of Association as follows:

“To establish and maintain in accordance with the [principles] referred to in the Schedule hereto … centres for the development of working communities for handicapped persons from school leaving age upwards at which such persons will receive further Education and training and possibly thereafter be able to live as workers in a sheltered occupation become skilled in Agriculture and in various light industries of a productive nature and enjoy the benefits of a private family life in all its aspects.”

The principles referred to in the Schedule to the Memorandum of Association are those of the Camphill Communities, an organisation founded in 1940 by Dr Karl Konig. I return to these principles in paragraphs 12 to 19 below.

Paragraph 3(I) of the Company’s Memorandum of Association provides as follows (so far as material):

“To receive as members of the Centres, such persons … as the Council of Management (hereinafter referred to as ‘the Council’) nay consider proper, and that on such conditions, including payment of fees for or towards their maintenance and treatment and for such periods, all as the Council may fix; and to remove any such persons from any establishment of the Trust [i.e. the Company] at the discretion of the Council, without cause assigned.”

Paragraph 4 of the Memorandum of Association provides as follows:

“The income and property of the Company, whencesoever derived, shall be applied solely towards the promotion of the objects of the Company as set forth in this Memorandum of Association, and no portion thereof shall be paid or transferred directly or indirectly, by way of dividend, bonus or otherwise howsoever by way of profit, to the members of the Company.

Provided that nothing herein shall prevent the payment, in good faith, of reasonable and proper remuneration to any officer or servant of the Company, or to any member of the Company, in return for any services actually rendered to the Company, nor prevent the payment of reasonable interest on money lent or reasonable and proper rent for premises demised or let by any member of the Trust.”

Article 5 of the Company’s Articles of Association provides as follows:

“The subscribers to the Memorandum of Association and such other persons as the Council shall admit to membership in accordance with the provisions hereinafter contained shall be members of the Company”

Accordingly Mr Koeller was one of the founder members of the Company, and he has since remained a member of it. He subsequently became the Company Secretary.

Article 8 of the Company’s Articles of Association contains a power of expulsion in the following terms:

“Any member who shall fail to observe any of the regulations or bye-laws of the Company, or whose conduct or public utterances shall, in the opinion of the Council be derogatory to the character or prejudicial to the interest of the Company, may be excluded from the Company by a resolution duly approved by a majority of three-fourths of the Council present and voting at a meeting of the Council specially called to consider the passing of such a motion, of which meeting such member shall have been given reasonable notice and at which he shall have had a proper opportunity of being heard in his defence, and such member shall thereupon cease to be a member of the Company.”

The only other articles to which I need refer are articles 35, 39 and 50, which provide as follows (so far as material):

“35.

The business of the Company shall be managed by the Council who may pay all such expenses of, preliminary and incidental to, the promotion, formation, establishment and registration of the Company as they think fit, and may exercise all such powers of the Company, and do on behalf of the Company all such acts as may be exercised and done by the Company, and as are not by statute or by these presents, required to be exercised or done by the Company in General Meeting…

…

39.

The office of a member of the Council shall be vacated (inter alia):

….

(E)

If by notice in writing to the Company he resigns his office.

…

50.

The Council may delegate any of their powers to committees consisting of such member of members of the Council as they think fit ….”

Mr Koeller was a member of the Council until his resignation in November 2002, in circumstances to which I shall turn in due course.

The principles of the Camphill Communities are based on the concept of anthroposophy (i.e. knowledge of the nature of man) as expounded by the philosopher Rudolf Steiner. These principles are elaborated in a document entitled “The Camphill Community, A Chronicle” (“the Chronicle”), a copy of which is held at every Camphill Community by its Keeper of Documents. The Chronicle is regarded by the Communities as the established doctrinal and pastoral statement of the relevant principles. It includes a section entitled “The First Memorandum”, written by Dr Konig.

The First Memorandum includes the following:

“All who work in the Camphill-Rudolf Steiner-Schools in such a way that they do not claim any payment in the usual sense but who do their work out of love for the children …, who wish to do the work of their hands out of devotion to Christ … all these who are willing to work out of this striving may call themselves members of the Camphill Community, if they are working in one of the Camphill-Rudolf Steiner-Schools or in one of the institutions connected with them.

….

If after a year, the new member finds himself united in freedom with the aims of the Community or if he believes that he can unite more and more with the inner striving of the Community, he can be accepted as a Deciding Member.

Any member is free to leave the Community at any time and with his leaving the Community also the Camphill-Rudolf Steiner-Schools or any one of the institutions connected with them; or else in spite of not belonging to the Community to continue his work as a private individual in the Schools.

On the other hand, the Community has the right to suggest to members who in their attitude and work do not conduct themselves according to the rules given above that they leave the Community or retire from it for a time. Such members, if they cannot bring themselves to agree, can through the decision of other members be excluded from the circle of Community members.

To make decisions is the right of all deciding members; the carrying out of decisions is the task of all members.

….

Membership [of] the Community is not a life insurance; it is a service. Members should learn to see that this service ought to be performed in accordance with his individuality. The service should be rendered out of individual freedom.

Membership to the Community implies duties; the duties of work, of devotion and inner striving. Everyone should be conscious that when he becomes a member, he enters a circle of souls who know they are responsible for these duties. He may leave the circle in freedom, just as the circle of the Community claims the freedom to disengage itself from a member who does not fulfil his duties of service.”

In the mid-1990s the Inland Revenue raised a question as to the tax status of those who worked in the Camphill Communities (such persons being known as “co-workers”). The Communities sought the advice of Peter Trevett QC. In a written opinion, Mr Trevett set out at some length the factual position as he understood it from his instructions. Subject to one qualification (to which I shall return) the accuracy of Mr Trevett’s factual account is not disputed. I shall accordingly set it out in full (as the judge did on pages 6 to 10 of his judgment):

“The Camphill Movement.

The Camphill Movement was founded in 1940 by Dr Karl Konig who formulated the principles underlying the Movement upon the insights of the philosopher, Rudolf Steiner. The fundamental concept is that of anthroposophy – a knowledge of one’s humanity. Anthroposophy recognises that every human individual embodies a higher spiritual being which existed before and will exist after that individual’s life on earth. Any mental disability which might obscure this undamaged spiritual being is seen as having a definite meaning in the continuing destiny of the individual and as being of particular significance to those who come and work with the individual, as well as for society as a whole.

There are three guiding principles in the Camphill Movement:

(1)

A cultural life enabling members of a Community to realise their own potential.

(2)

A shared Community life based on Christianity and a recognition of the special qualities of every individual.

(3)

An economic life based on the needs of the Community and the ability of each person, where there is a separation of work from money.

Camphill Communities occupy premises owned by various corporate charities connected with the Camphill Movement and the principal activities of these charities is the provision of accommodation and land for caring communities. The main land-holding companies are Camphill Village Trust Limited which owns seven properties in England and two properties in Scotland. Camphill Estates Limited and Camphill Central Scotland Limited which owns eight properties in Scotland and Camphill Communities Trust Northern Ireland which owns three properties in Northern Ireland.

Each Camphill Community is founded upon residential life sharing where co-workers and their families share their lives with individuals with varying special needs. Those individuals live with co-workers and their families in a shared daily life within a house. House Communities vary in size from four to 20 people made up of children, young persons or adults of all ages depending upon the nature of the Community, together with experienced co-workers, members of the co-worker’s own family and younger co-workers. Shared family life assists in mutual understanding and lessens the distinction between a ‘helper’ and the ‘helped’. True Community life is fostered and reflected in ‘non-hierarchical’ decision making processes which involve many different people who aim to reach a consensus as to what is to be done in relation to any particular situation.

All Camphill Communities recognise the importance of work both in its value to the individual and to the Community. All members of Communities contribute what they can for the benefit of those with whom they are living and in accordance with their own abilities. It is a fundamental principle of the Camphill Movement that nobody within a Camphill Community receives remuneration for work done. Each person’s needs are met by the Community according to individual circumstances.

Camphill Communities operate solely on a basis of mutual trust and shared belief, so any individual is free to leave a Community at any time if he or she wishes to do so. A co-worker who chooses to leave has no rights against the Community but he or she has been a part of and conversely, the Community has no rights against the co-worker who chooses to leave. This lack of enforceable obligation between the co-worker and a Community is an essential element in each Community – the shared sense of purpose and belief which is fundamental to the successful working of a Camphill Community cannot be imposed by any form of contractual or other legal obligation. Without mutual trust and shared belief, a Camphill Community cannot function.

The lack of an enforceable right between a Community and a co-worker can work to the significant disadvantage of a Community. Substantial time and trouble will usually have been invested by a Community in formally training a co-worker in specialist skills such as curative education or nursing leading to the award of a recognised Camphill certificate (a one-year foundation course for short-stay co-workers, a three to five year formal training course for other co-workers) and yet the co-worker is free to leave a Community at any time giving no notice and with no obligation to compensate the Community for the specialist skills that have been taught. Disadvantages such as these are accepted because all the Communities agree that the fundamental tenets of the Camphill Movement are inconsistent with the imposition of any legal obligation on co-workers. Camphill Communities do, of course, have paid employees to perform specific functions for the Community and these employees are subject to income tax and national insurance contributions in the normal way, but they are not members of the Community and their position is fundamentally different to that of a co-worker. Employees are engaged under a contract of employment providing for agreed remuneration, holiday entitlement and a minimum period of notice of termination of employment, all of which are enforceable rights.

In contradistinction to the contractual provision made for its employees, each Community only provides for its members, including co-workers, according to its perception of their needs, so that shelter, food and clothing is given, education may be provided for the children of co-workers, an annual holiday may be provided for a co-worker and his or her family and pocket money is provided according to the perceived needs. All such provision is made by the Community on the basis of mutual trust and without the creation of any obligation or enforceable right so that a co-worker who chooses to leave a Community cannot make any claim for his or her ‘unpaid’ pocket money or for a holiday not provided. Whilst a co-worker is in a Community, the Community will provide for the co-worker according to the Community’s perception of the needs of the individual, but any such provision is made without the creation of any obligation.

As Camphill Communities function on the basis of mutual trust and shared belief, a Community can ask (and particular Communities have asked) a co-worker (or co-workers) to leave the Community immediately as his or her (or their) presence no longer conducive to the satisfactory operation of the Community as a whole. A co-worker who is asked to leave has no rights against the Community that he or she was formally a part of, nor can the Community make any claim against the co-worker.

In summary, therefore, a co-worker’s ‘membership’ of a Camphill Community is a relationship based on mutual trust and shared beliefs and not on the existence of any rights enforceable by a co-worker or by the ‘Community’ of which the co-worker is a part. Benefits are not provided and members of his or her family under any agreement that the co-worker makes with a Community on becoming a member of it, but are provided informally by the Community based on its perception of the needs of that individual whilst living within the Community.”

The one qualification to which I referred earlier is that Mr Koeller does not accept the statement in the penultimate paragraph quoted above that a co-worker who is asked to leave has no rights against the Community. He asserts the contrary, and I shall have to return to that in due course.

In his Opinion, Mr Trevett went on to advise (contrary to Mr Koeller’s assertion) that there was no contract between co-workers and the Community for which they worked, and that co-workers were not employees for tax purposes but were persons carrying out vocations. The Inland Revenue accepted Mr Trevett’s conclusions. Mr Koeller was aware of this at the time.

In 2002, the Charity Commission raised a number of queries with the Communities, including the following:

“35.

On the rare occasion when a co-worker is asked to leave a Community, are there set procedures to be followed? If so, may we have sight of the relevant documents?”

The Communities replied to that query as follows:

“As the Camphill charities share an ethos and a firm set of ideals and principles, there are likely to be similarities in the way such a situation is approached between the different organisations. However, they are equally individually constituted and ‘set procedures’ across all 13 charities, backed up by legal and professional guidance, especially in the obvious sensitive and problematic areas of ‘dismissal’ and other disciplinary issues, would call for much careful thought.

As you rightly indicate, these are rare occasions indeed. Most of the centres have never encountered such a need. Were they to do so, appropriate policies are in place, the procedures from which would be followed with professional advice taken as appropriate in relation to any potential problem.

…

Co-workers need to be able to receive additional benefits without which the Camphill charities could not function. These include some financial assistance if leaving the Community, and financial support in old age, by way of recognition that having devoted a very significant part of their lives in support of the beneficiaries of the Camphill charities, they would have been unable to provide financially for the future in a way which they might otherwise have done.

In the absence of any security of this nature, it would be impossible for any of the charities to recruit and retain committed co-workers, and thus be impossible to serve the needs of the beneficiaries.

Were the co-workers staff of the various charities, they would be entitled to a salary and other employment benefits such as pensions. Even if they were not paid a salary up front a contractual entitlement to benefits on leaving the Community, and in old age, would be awarded. It is due to the distinct nature of the communities run by the Camphill charities that no contractual commitment exists: the communities are based on anthroposophical principles, and thus ‘an avoidance of rigidity in the matter of control’ to paraphrase the principles set out in the constitution of several of the Camphill charities.

Contractual relationships between the charities and their co-workers would be inconsistent with the philosophy underpinning the way that the communities are run. Thus, in accordance with the Stein philosophy, there is an understanding that co-workers will be eligible at the trustees’ discretion for some reasonable financial assistance on leaving the Community, and in old age, based on an assessment of their needs at that time and on their earlier contribution to the Community, rather than on any conventional contractual commitment.

This is not inconsistent with the communities’ abilities to further the charities’ objectives. It is nonetheless unusual, and means that the Camphill communities need to be viewed in the light of their very particular circumstances.”

In February 2004 a document was circulated for discussion in the Communities. The document, on which Mr Koeller relies, contains the following:

“Since their inception, Camphill communities in Britain, North America, South Africa and a number of other countries have maintained the principle that all resident co-workers, whether long or short-term, are unsalaried volunteers. They give their work, energy and creatively freely to the community; the community in turn provides for them and their families on a needs basis. This arrangement is based on Steiner’s Fundamental Social Principle and has been central to the Camphill ethos. In other countries particularly Germany, Holland and Switzerland, communities have for some time been able to operate only by introducing formal employment for their longer-term co-workers…

Regarding our financial and other benefits to all co-workers we need to be absolutely clear – and should now state this explicitly – that these are always at the discretion of the community: no rights or expectations of any kind are to be linked with them. Otherwise we will be deemed to have created implicit or explicit contracts of service or employment, and will then probably be classed as ‘workers’ within the National Minimum Wages Act.”

The judge describes Mr Koeller’s involvement in the Communities as follows (at page 13 of the transcript of his judgment, lines 16-26):

“Mr Koeller was born in an orphanage in Germany in 1944 and adopted by Erica Koeller. His mother came to England in 1953 to work as a co-worker at a Camphill community, Mr Koeller himself became a co-worker in 1965. He was a founder member of Coleg Elidyr in 1973 and helped promote the formation of the claimant in 1975. In 1997 he was appointed principal of the college. In 1999 he divorced his third wife and married the second defendant. They were allowed to move into Ty Hir, on the Rhandirmyn estate of the claimant.”

By mid-2000 relations between Mr Koeller and a number of senior co-workers at Coleg Elidyr had deteriorated to the point where, at a meeting of the management group of Coleg Elidyr on 26 September 2000, Mr Haugen, a senior co-worker, said that he could no longer work with Mr Koeller. The Council held a meeting the following day, which was attended both by Mr Koeller and by Mr Haugen.

The minutes of that meeting, which were signed by the chairman, include the following:

“[I]t has become apparent that there is a major rift between the senior co-workers in Coleg Elidyr.

Mr Haugen had at a Management Group meeting in the evening of 26^th September announced that he was no longer able to continue working with Mr Koeller. The letter written to the community had been the latest in a whole series of events that had led him to this conclusion. Mr Haugen said that he had always felt that Coleg Elidyr could not manage without Mr Koeller, but that due to the many conflict situations lately he now felt that the community could not manage with Mr Koeller.

Mr Haugen also said that his conclusion was not based on any mistrust in the way Mr Koeller had dealt with finances in the community, but was based on a perception that Mr Koeller was now preventing the community to move forward in the new way of management as we have been learning from Margarethe van den Brink. He also said that that he knew that Mr Koeller had for 27 years given freely to the community his full commitment, and had always done what he thought best for Coleg Elidyr, Mr Koeller expressed puzzlement as to what had caused such a reaction from Mr Haugen. The letter not in any way intended to cause upset. He also said that he respected the work of Mr Haugen, and that he had enjoyed and continue to enjoy working together with Mr Haugen.

The acting chairman, the Reverend M Cottam, said that he was aware of the existence of conflict within the community and was appreciative that ‘the boil had finally been cut open’. He also drew the attention of the Council to a letter written by Margarethe van der Brink, which said that unless a change was made in the way of management of Coleg Elidyr she would withdraw from working with the college. The letter also highlighted that there were major interpersonal difficulties to overcome.

Some members of the Council expressed grave concern and shock at what they had just listened to.

The Council then said that it wanted this matter to be dealt with within the Coleg Elidyr community, and would listen to what the community decided to do.”

On 29 September 2000 there was a further meeting of co-workers. In paragraph 14 of his witness statement, Mr Haugen says that the meeting was attended by “all of the responsible co-workers of the Community, apart from Thomas and Daria Koeller and two co-workers who had only recently joined the Community”. The judge records in his judgment (page 16 of the transcript, lines 2-3) that Mr Koeller was asked not to attend the meeting, and that he was told that no decision would be taken at it. What transpired at the meeting is recorded in an informal minute, the contents of which are accepted as correct. The minute records as follows:

“Many felt that it was not possible to confront Thomas Koeller, or feared [to] do so. They who felt they could confront him stressed the fact that it cost them a great deal of energy to stand against his resistance to change.

Many felt belittled and inadequate in encountering Thomas’s remarks and strong points of view.

Although Thomas was involved for so long in the running of Coleg, Thomas was perceived to be acting and working from the periphery of the community, no doubt with the best intentions. This may have had to do with the functions he carries. It was also felt that on the other hand he was not supporting the community building aspect.

These are the most important elements which were brought to the fore. Almost everyone ended their comments by saying that they felt Thomas had to leave for his own sake and the sake of Coleg Elidyr.

We then proceeded to find out whether anyone had any objections that Thomas would be asked to leave. No objection was raised and thus we reached a full consensus.

It was then decided that a delegation would meet Thomas on Saturday, 30^th September to announce to him our decision. Bjarte Haugen, Hazel Straker and Pierre Vuilleumier volunteered to do this.”

The following day, 30 September 2000, Mr Koeller was told of the decision which had been taken at the meeting. In a letter dated 6 October 2000 Mr and Mrs Koeller asked the Community to reconsider that decision. In the course of their letter they said:

“We cannot understand the process by which the conclusion was reached and we cannot, therefore, understand the conclusion either. … If you can find it in your hearts to set aside the events of the last few days and the communities’ conclusion that we must leave, we will find the way forward together.”

However, at a further meeting of co-workers held on 12 October 2000 the decision reached at the meeting on 29 September 2000 was confirmed.

On 15 October 2000 Mr Haugen and three other senior co-workers wrote to Mr Koeller on behalf of the Community. The letter, which was written on the Company’s notepaper, reads as follows:

“We have been entrusted by the community to answer the letter from yourself and Dasha [a reference to Mrs Koeller] dated 6^th October 2000 and let you know the outcome of our meeting on Thursday 12^th October 2000.

We admit that events took a rapid turn following the meeting of the Council on Wednesday 27^th September 2000 and that for you this came very unexpectedly. We do however believe that the conclusion reached on Friday 29^th September 2000 arose as a true insight by the community into the future of Coleg Elidyr.

We all acknowledged the fact that this decision is very difficult for you to understand. It was not based on any single factor but arose from a common perception voiced at the meeting that we could no longer believe that the right way forward for Coleg Elidyr would lie in us continuing to work with you.

By way of explanation we feel we have to mention the difficulty we perceive you to have in adapting to a participatory style of management, and personal upsets you continue to cause in both meetings and individual situations.

We regretfully have to state that the decision made on 29^th September 2000 was confirmed in our further meeting of 12^th October 2000.

We would like to come into a dialogue with you about the future implications for both Coleg Elidyr and yourself following this decision.

To make that possible we suggest calling a meeting or series of meetings, both with members of our community and other Camphill communities. We have approached some people in this regard, and would in particular ask you to invite one or two of your Camphill friends as well.

Please let us know if you agree to this and when you would be able to attend. We would suggest that it take place as soon as practicable.

The purpose of this process would be to create a platform where a deeper insight into recent events can be reached, and to deal with the practical aspects resulting from our decision, i.e. when you would lay down your functions, when you would move on from Coleg Elidyr and what your needs would be.

The four undersigned have been asked by the community to take this process further. If you have any questions please address them to this group. We are sending a copy of this letter to all senior members of the community.

Please acknowledge our deepest respect and gratitude for the energy you have put into founding and building up Coleg Elidyr.”

Mr and Mrs Koeller replied in a written memorandum dated 16 November 2000 and headed “Needs at our departure”. In this memorandum Mr and Mrs Koeller say that they have decided to move to the Bristol area, and that they have looked into the question of the availability of houses and prices. The memorandum continues:

“There appear to be two options:

1.

To buy a house with 4 bedrooms (these are invariably small) a small garden and somewhere to park a couple of vehicles. Prices for these are around £175,000 to £200,000 as we have seen them in numerous estate agents visited and phoned. We have also seen some houses. I am sure it will be possible to find a house for £150,000 in due course.

2.

To buy a house as described above for about £100,000 to £125,000 which would require substantial modernisation to make it habitable, which I could carry out myself. A substantial sum would have to be allowed for to pay for the materials.

In either case £150,000 would be required, and as I am not able to get a mortgage due to my advanced age of 56, this will have to come from the Community.

Additionally we would need to spend some considerable time to review our situation and search our souls for what we could and should do with our lives in the future. So we feel that a further £25,000 would be needed for this ‘sabbatical time’. The cost of moving and utility items such as cooker, fridge etc. would come out of this.”

On 17 November 2000 a further meeting of the Council was held, at which Mr Koeller was present. The judge records in his judgment (page 17 of the transcript, line 13) that “the defendants’ departure was taken as a given”. The minute of the meeting includes the following:

“To look at the process of asking Thomas Koeller to leave the community. Thomas presented what he and Dasha will want to take with them; he then left the meeting to enable the Council to discuss this.

Thomas is asking for 175,000 pounds, some items of furniture and the Renault van.

There is a possibility of short-term borrowing form Camphill to cover the lump sum for Thomas.

The council did not find Thomas and Dasha’s request unreasonable. How this money might be raised and over what time period remains a question.

We recognise that Thomas and Dasha need to have clarity soon about where they stand at least for the next 12 months regarding housing and finance.

This needs to be clarified with Charities Commission. The Council will write to Thomas a letter to thank him for 27 years of service.”

On 24 November 2000 Mr Haugen circulated to Council members a letter reporting on the progress of the negotiations with Mr and Mrs Koeller. On 12 December 2000 Mr Koeller wrote to the Council tendering his resignation as a member of the Council and as Secretary of the Company with immediate effect.

At a meeting of the Council held later that day Mr Koeller’s resignation as Council member and Secretary of the Company was accepted. The minutes of the meeting include the following:

“(2)

Resignation of Mr Koeller as Director and Company Secretary. Mr Koeller has been asked by the Coleg Elidyr community to lay down his functions and leave the community. In order to be able to address the question of how his needs for the future should be met, the Council had been advised that he should resign as director first. Mr Koeller handed in his letter of resignation before the meeting, and the Chairman read it to the whole Council.

The Council made the comment that it was not necessary for Mr Koeller to resign at this point as a result of having been asked to leave, but due to the point made above.

Council also accepted the date for Mr Koeller to leave as being 31^st March 2000. The date is subject to him having somewhere to go.

The Council accepted the resignation both as Director and Company Secretary…

(4)

To decide on what Coleg Elidyr can offer Mr Koeller as ‘severance’ payment. At the last meeting Mr Koeller had made a request for-

25,000 pounds for living costs for one year.

150,000 pounds to buy a house.

The Council agrees to give 25,000 pounds to Thomas and Dasha in cash.

The Council wishes to extend the Camphill principle of security for the future to apply to a property up to the value of 150,000 pounds to provide a home for Thomas and his family on terms to be agreed.

Mr Morris and Mr Butterfield will work on creating a contract for the arrangement. The property would not be made over to Mr Koeller, but on the other hand must be made safe for Thomas and his family should Coleg Elidyr end up in financial trouble.

Mr Sands who attended the meeting in order to present Thomas’ needs said that he felt this arrangement met the need of security for the future and was willing to present this to Thomas after the meeting.”

The Council met again on 30 January 2001. The meeting was attended by Mr Morris (the Company’s solicitor). The minutes of the meeting include the following:

“Property purchase re Thomas and Dasha. Mr Haugen and Mr Morris (solicitor) had recently visited a Bristol based firm of solicitors called Burges Salmon who specialise in Charity Law; after some discussions Burges Salmon advised that, in their opinion, Mr Koeller is not an employee; therefore Mr Morris is reasonably satisfied that it is not a legal issue but a moral obligation to settle this issue.

Mr Morris stated that any settlement scheme would need to go to the Charity Commission under section 29 of the Charities Commission Act for their approval, this would be best carried out by Burges Salmon. It was briefly discussed whether or not the property should remain with Thomas and Dasha. Mr Morris said that Burges Salmon would not think that acceptable, as there are different considerations for Dasha than Thomas. Mr Morris felt that the Charity Commission might accept an outright payment, but we have to ask ourselves what would be the best for this organisation. Mr Butterfield said that the first 30,000 pounds would be tax free, after that there would be tax implications. Mr Morris briefly explained the difference between a lease and a Life Interest, any leasing arrangement would be for a specific property.

Mr Griffiths stated that we would have to look at this carefully, and it must be made clear that whatever we agree for Mr Koeller, we would have to state that this is not our policy, this should not necessarily be the same if someone chooses to retire from the community. Mr Morris felt that we need to ask ourselves what is our quasi-contractual agreement…

After a long discussion it was agreed that Coleg Elidyr would purchase a house for 150,000 pounds (plus costs and 25,000 pounds living expenses for the first year) as a Life Interest for Mr Koeller or the longer of twenty years, for the benefit of Dasha and any children under 18 at that time. The Council recognises its moral responsibilities to these children. Burges Salmon will deal with the Charities Commission and Mr Morris will deal with the agreement, which would be shown to Burges Salmon. Mr Morris will write to Burges Salmon in the next instance.

The date of Thomas and Dasha leaving was discussed, it was agreed that 31^st March should stand; it must be made clear to Thomas that his duties in Coleg must cease as from Thursday, 1^st February, and he must vacate his office by Friday, 9^th February.”

By letter dated 1 February 2001 the Chairman of the Council, the Revd. Michael Cottam, wrote to Mr Koeller setting out the Council’s offer as to the terms on which Mr and Mrs Koeller should leave Coleg Elidyr. Under the heading “Purchase of a property”, the Chairman wrote:

“Coleg Elidyr will purchase a house for you and Dasha up to a maximum value of £150,000. This property will belong to Coleg Elidyr but in the lifetime interest of yourself only. As the Council recognise the duty of care that Coleg Elidyr has to your children who have not attained their majority, the interest in the property will also extend to Dasha and/or them but for a period of twenty years only from March 31^st, 2001.

The costs arising out of the purchase of this property will be the responsibility of Coleg Elidyr”

In addition, the letter referred to “a lump sum severance payment of £25,000 for your personal use”. The letter continued (with some prescience, having regard to subsequent events):

“These offers are subject to the approval of the Charity Commissioners.”

As to the “date for leaving”, the Chairman wrote as follows:

“This date will remain, as suggested by yourself, to be the 31^st March 2001. This date will be reviewed in the course of events, only by the council in session.”

On the same day Mr Koeller wrote to the members of the Coleg Elidyr management group referring to the Council’s “generous offer of settlement” and saying this:

“The main point for writing is that we now feel that the question of the house purchase by the college is so beset with problems for everyone, some of which will remain during the entire term of the agreement, that we would suggest to receive the amount of £175,000 voted to us yesterday in cash and we would pay our own Income Tax as it arises and buy a house of our choice with the rest.”

By letter dated 2 March 2001 the Council agreed to pursue Mr Koeller’s proposal for a lump sum of £175,000, and to make £12,500 available immediately to enable Mr and Mrs Koeller to find alternative accommodation by 31 March 2001, with a further £12,500 to be paid “[a]s soon as you are leaving, at the latest 31^st March”. The letter went on to say that failure to vacate Ty Hir by 31 March 2001 would jeopardise “the goodwill of the Council to go forward with the settlement of the final amount of £150,000”.

Mr Koeller replied by letter dated 5 March 2001 refusing to move out of Ty Hir by 31 March 2001 and returning the Company’s cheque for £12,500.

By letter dated 8 March 2001 the Chairman wrote to Mr Koeller reiterating the Council’s requirement that Mr and Mrs Koeller vacate Ty Hir by 31 March 2001, and noting with sadness that the cheque for £12,500 had been returned. In the course of his letter, the Chairman said this:

“I have to remind you – I had hoped that I would not have to – that there is no legal or contractual obligation on the Community’s part for anyone on their leaving the Community – and vice versa. … This opinion is also reinforced by Queen’s Counsel, of which you are aware. … The offer of the total amount of £175,000 is in consideration of your years at the College and is agreed by all to be very generous. As you are very well aware, it [is] not only unprecedented but puts considerable pressure on the college’s financial position. … This offer is also made in the face of a great deal of expressed opposition to its very existence – and size – from many individuals both within the community and within the Camphill movement at large.”

In the event, Mr and Mrs Koeller did not vacate Ty Hir at the end of March 2001, and they have since continued in occupation of it.

On 5 April 2001 the Chairman wrote again to Mr and Mrs Koeller, as follows:

“As you will probably be aware, the council of Coleg Elidyr met yesterday at Rhandirmwyn, part of the meeting was to discuss your departure from the community.

It has now been agreed that:-

1.

We will revert to the original option of purchasing a house for £150,000 (plus costs and £25,000 living expenses for the first year) as a Life Interest for Thomas Koeller or 20 years, whichever is the longer

2.

You may remain at Ty Hir until further notice.

3.

The community will refund expenses up to £200 per week in addition to your housing and running costs of your vehicle. Any major repair of your vehicle has to be discussed by the Management Group.

The Council may review points 2 and 3 at any time.

We will contact our Solicitors ([Burges] Salmon) who will be looking after the arrangements they will be in contact with you shortly. Any future correspondence will now be between our Solicitors and yourselves.”

On 22 May 2001 Burges Salmon wrote to the Charity Commission asking whether the proposed settlement was within the Company’s powers, alternatively for an order under section 26 or 27 of the Charities Act 1993. In their letter, Burges Salmon said this:

“In the past, no one has ever been expelled from a Camphill Community except for impropriety and even in those cases some financial assistance was still provided to those individuals to set up in the outside world. In this case, there is no question of impropriety but there is some discontent and there is a feeling on the part of other key members of the community that they can no longer work with Mr Koeller. Coleg Elidyr are very keen to be fair to Mr Koeller partly in recognition of the contribution he has made to the community and to provide him with the appropriate assistance to enable him to set up outside the community. Mr Koeller is currently 57 and his wife, Daria, is 22 and pregnant. Daria had originally worked as a co-worker for about 12 to 18 months and then trained in the Camphill Community in Thornbury.

On the basis that the community feels an obligation to provide sufficient financial assistance in relation to Mr Koeller’s transition to the outside world they have provisionally agreed to make an outright grant to him from charity funds of 25,000 pounds. In addition, on the basis that they feel there is an obligation to provide a home for him for the rest of his life, they have also provisionally agreed to provide 150,000 pounds towards the purchase of a property in which he will be able to live for his life or 20 years, whichever is the longer. The intention is that the property will be held on the terms of the draft deed enclosed and a separate occupation/co-ownership agreement is drawn up to cover the terms on which Mr Koeller and his family will occupy the property.”

At the same time, Burges Salmon were careful to warn Mr Koeller that it was by no means certain that the Charity Commission would approve the proposed settlement.

The Charity Commission took three months to reply. By its letter dated 23 August 2001 it said that it was difficult to see how a defence based on estoppel could possibly succeed. The letter continued:

“It is difficult to see that there has been any promise of representation to provide a home to co-workers for the rest of their lives. At best there was an understanding that they would be provided for so long as they remained members of the Community. However, there was no suggestion that co-workers would be supported after leaving the Community. It appears to have been understood that a co-worker could leave or be asked to leave at any time.

Given the absence of any such promise any claim based on promissory estoppel would fail. Further, there must be doubt as to whether Mr Koeller could be said to have acted to his detriment. As with other co-workers he voluntarily became a member of the community fully aware of what the community would offer him and what was expected in return. This is not a case where the promisee has given up or waived his entitlement to something he would otherwise have been entitled to claim in reliance on a promise.”

The letter went on to say that there was no justification for making any payment to Mr and Mrs Koeller by way of settlement of any recognisable claim in law, still less on the strength of some moral obligation; and that in the circumstances the Charity Commission declined to make any order authorising such a payment.

A year later, on 24 August 2002, Burges Salmon served notice to quit on Mr and Mrs Koeller, with effect from 18 October 2002. Mr and Mrs Koeller did not comply with the notice, and on 24 October 2002 the present proceedings were commenced in the Carmarthen County Court. They were subsequently transferred to the Bristol County Court.

After setting out the detailed facts, the judge turned (at page 26 of the transcript of his judgment, line 17) to Mr and Mrs Koeller’s Amended Defence and Counterclaim, saying this:

“I can say straightaway that I think the counterclaim is misconceived. Mr Koeller has no contract with the claimant other than that contained in the Memorandum and Articles, which protect his rights as a member of the company. He has not been deprived of his interest in the company, and he remains a member. Whether or not he is a member of the community is a matter for the community, and, although the company may have some influence on the community, Mr Koeller has no contractual rights to compel the company to exercise their influence and no right to damages if the company fails to exercise that influence in any particular way.

In a more extreme case, Gaiman v The National Association for Mental Health [1971] Ch 317, where certain members of the company had actually been expelled and deprived of their membership of the company, the Vice-Chancellor declined to intervene and doubted whether the principles of natural justice could apply to a company formed under the Companies Act.

Mr Koeller has failed to establish any breach of any express or implied contractual duty owed to him by the claimant, and the counterclaim will therefore be dismissed.

I now turn to the question as to whether there is any equitable defence to the claim for possession. As counsel for Mr Koeller admitted, this can only be by way of promissory estoppel since there was no specific property to which a defence of proprietary estoppel could be raised.

The requirements of promissory estoppel were considered by the Court of Appeal in Bird Textile v Marks and Spencer[2002] 1 AER 737. Lord Justice Mance said at page 764:

“It is on authority an established feature of both promissory and conventional estoppel that the parties should have had the objective intention to make, affect or confirm the legal relationship.”

In the present case, from all the documents I have quoted it is plain that the company never intended to create any legally binding relationship between itself and any co-worker. The whole ethos of the communities was against legal commitment. Mr Koeller recognised this in his evidence and said that, though he might have had certain expectations, he knew he had no rights against the company, which might or might not reward him at its discretion.

In my judgment, he did not rely on any assurances he may have been given because he knew that [they] were not legally enforceable. In devoting his time and energy to work at Coleg Elidyr he was pursuing a vocation and not relying on any expectation of benefits in this world.

The claim in estoppel therefore fails, and there will be judgment for possession….”

By their grounds of appeal, Mr and Mrs Koeller contend: (i) that the judge misapplied Gaiman, and that principles of natural justice apply in the instant case; (ii) that the judge was wrong to hold that there was no promise was made by the Company to Mr Koeller, given that both parties conducted their relations on the basis of mutual trust; and (iii) that Mr Koeller’s “expulsion” from the Community was not “in accordance with the minimal procedural fairness which Mr Koeller was promised to expect”.

By a Respondent’s Notice, the Company invites us, if and so far as may be necessary, to uphold the judge’s judgment on the additional grounds that an arrangement that parties will deal with each other on the basis of mutual trust cannot amount to an enforceable contract, nor can it found an estoppel; and that in any event, even if Mr Koeller had been expelled as a member of the Company (which he had not), principles of natural justice would not have applied to such expulsion.

For Mr and Mrs Koeller, Mr Roger Evans submits that by the decision taken at the meeting on 29 September 2000 Mr Koeller was expelled from the Community, and that the principles of natural justice applied to that expulsion.

He referred us to Harman J’s formulation of the principles of natural justice in Byrne v. Kinematograph Renters Society Ltd [1958] 1 WLR 762 at 784, where he said this:

“What then are the requirements of natural justice …? First, I think that the person accused should know the nature of the accusation made; secondly, that he should be given an opportunity to state his case; and thirdly, of course, the tribunal should act in good faith ….”

Mr Evans submits that the principles of natural justice apply in the instant case because (among other considerations) the parties, on the judge’s findings, deliberately chose not to enter into enforceable obligations but opted instead for a relationship based on mutual trust. He also points to the obvious importance of the matter to Mr and Mrs Koeller.

He submits that the judge misapplied Gaiman, and that Gaiman was not a “more extreme case” than the instant case. He referred us to the observations of Webster J in Shearson Lehman Hutton Inc & Anor v. Maclaine Watson & Co Ltd & Ors [1989] 2 Lloyd’s Reports 570 at 629, where he said this:

“Nor do I consider my conclusions to be inconsistent with the decision of Megarry J in [Gaiman] because Megarry J held that the principles of natural justice applied unless there were circumstances such as to indicate the contrary” (Mr Evans’ emphasis).

Mr Evans cites Byrne (among other authorities) as an example of a case in which the principles of natural justice were applied to a company limited by guarantee. He submits that there are numerous examples in the authorities of the courts applying principles of natural justice to other bodies, including (in McMillanv. Free Church (1861) Dunlop 1314) the Free Church of Scotland. He also referred us to passages in Wade & Forsyth’s Administrative Law, 9^th edn., to the like effect.

He relies on the decision of Megarry V-C in McInnes v. Onslow-Fane [1978] 1 WLR 152 as establishing that the Court may intervene to enforce the appropriate requirements of natural justice in the absence of any contract between the parties and notwithstanding that the case is not governed by statute. He submits that contracting parties may be bound by the principles of natural justice. In support of this last submission he relies on the observations of Denning LJ in Lee v. Showmen’s Guild of Great Britain [1952] 2 QB 329 at 342, referred to by Lord Pearce in Faramus v. Film Artistes’ Association [1964] AC 925 at 947.

Mr Evans goes on to submit that the principles of natural justice were clearly breached in the instant case, in that Mr Koeller had no advance notice of the complaints which were made against him, nor was it put to him that he had failed in any specific respect to fulfil his ‘duties of service’ as described in the First Memorandum (see paragraph 16 above). Mr Evans notes that (according to the written skeleton argument of Mr Stephen Jourdan, who appears for the Company) the Community’s reasons for expelling Mr Koeller are said to be “essentially his resistance to change in the management of the Community that other members wished to pursue”. He submits that Mr Koeller was never told that that was the charge against him, still less was he given an opportunity to answer it.

Mr Evans also relies on the fact that (as the judge records in his judgment, at page 16 of the transcript of his judgment, at lines 2-3) Mr Koeller was asked not to attend the meeting on 29 September 2000, and was told that no decision would be taken at it. Mr Evans submits that the Community’s only response to Mr Koeller’s request for an explanation of its decision was to reconsider the decision and to confirm it (once again, in Mr Koeller’s absence).

He submits that had Mr Koeller had a contract of employment he would, on the facts of the instant case, have plainly been unfairly dismissed; and that Mr and Mrs Koeller never envisaged that they would be required to leave the Community, and to vacate Ty Hir, without any kind of compensation package.

As to the role of the Company in Mr Koeller’s expulsion from the Community, Mr Evans submits that the distinction drawn by the judge between Mr Koeller’s membership of the Community and his membership of the Company is highly artificial. He submits that no material distinction should be drawn between the Company and the Community; and that the Council of Management of the Company simply acquiesced in the verdict of what he describes in his written skeleton argument as a kangaroo court of co-workers. The Company, he submits, acted as the Community’s agent in doing its improper bidding. He goes so far as to submit that the co-workers usurped the functions of the Company’s Council of members in such a way as to render them shadow directors of the Company. He invites this court to look at what he describes as the realities of the situation and to interpret the concept of membership of the Company more flexibly in the context of the facts of the instant case.

Mr Evans seeks to draw a parallel with the jurisdiction of the court under section 459 of the Companies Act 1985, submitting that it cannot be acceptable practice nowadays for a charitable company to have behaved in the way here complained of, and that Mr Koeller’s interest as a member of the Company has thereby been seriously prejudiced in that his interest as a member of the Company includes a right to insist that the Company’s constitution is operated in accordance with principles of natural justice. In this connection he referred us to the House of Lords decision in O’Neill v. Phillips [1999] 2 BCLC 1.

Mr Evans also challenges the judge’s conclusion that Mr Koeller’s relationship with the Community/Company was not a contractual one. He submits that the court can and should imply a contract between Mr Koeller and the Community/Company that dealings between them would be based on mutual trust, that is to say that their dealings would by subject to a minimum standard of procedural fairness or fair dealing. In support of this submission he relies on the reference to ‘duties’ in the First Memorandum.

Mr Evans accordingly invites this court to set aside the order for possession.

Mr Jourdan, on the other hand, submits that the judge was right for the reasons he gave. He submits, firstly, that the Company’s Memorandum and Articles have nothing to say about Mr Koeller’s position as a member of the Community, nor do they confer on him any right to possession of the Company’s property; and that there is no scope for implying a term into Mr Koeller’s contract of membership of the Company to the effect that he could remain in possession of Ty Hir until expelled from the Community by a process conforming to principles of natural justice.

Mr Jourdan submits that the judge was right to draw a distinction between the Community and the Company, given that the Company is a legal entity formed for the purpose of holding property on charitable trusts to carry out the purposes set out in its Memorandum of Association. He submits that membership of the Company or its Council (in effect, its board of directors) is not the same as membership of the Community, pointing out that the Chairman of the Council (the Revd. Michael Cottam) is not a member of the Community.

Mr Jourdan also relies on paragraphs 3(I) and 4 of the Company’s Memorandum of Association (quoted in paragraphs 8 and 9 above) as making it clear that the Company may remove persons from its property without assigning any cause and that its property is not to be applied for the benefit of its members.

Mr Jourdan further submits that the Chronicle makes it clear that a co-worker in a Camphill Community can be expelled if the other members decide that he is not working according to the principles of the Community; and that there is no contract of any kind between members of the Community as such. In any event, he submits, even if the members of the Community had intended to create legally binding relations (which manifestly they did not) no enforceable contract would have resulted.

Mr Jourdan submits that had Mr Koeller been expelled from membership of the Company pursuant to Article 8 of the Company’s Articles of Association (quoted in paragraph 12 above), Gaiman would be authority for the proposition that principles of natural justice do not apply where a board of directors of a company limited by guarantee expels a member. However, as he points out, that question is academic since the power of expulsion in Article 8 was never exercised.

Mr Jourdan relies on the judge’s findings (at page 28 of the transcript of his judgment, at lines 2 to 5, quoted in paragraph 49 above) that “it is plain that the Company never intended to create any legally binding relationship between itself and any co-worker”, and that “[t]he whole ethos of the Communities was against legal commitment”. He submits that the law should be slow to impose binding obligations on parties who have taken a deliberate decision not to create such obligations. In support of this submission he relies on Booker v Palmer [1942] 2 All ER 674 at 676 per Lord Greene MR.

Mr Jourdan submits (relying on Baird Textiles Holdings v. Marks & Spencer plc [2002] 1 All ER (Comm) 737) that the law will only imply a contract between parties where it is necessary to do so. He submits that there is no such necessity in the instant case.

Turning to the documentary evidence, Mr Jourdan relies in particular on the Company’s Memorandum of Association, the Chronicle, Mr Trevett QC’s Opinion, the Communities’ reply to the Charity Commission in 2002 (quoted in paragraph 18 above) and the discussion document circulated in February 2004 (quoted in paragraph 21 above) as making it clear that the Community operated on the clearly understood basis that co-workers had no legally enforceable rights. The most they can have had, he submits, was an understanding that they would be eligible at the discretion of the trustees for some reasonable financial assistance on leaving the Community, but with no right to have that discretion exercised in their favour.

Mr Jourdan submits that in any event a contract to deal on the basis of mutual trust would be unenforceable since the terms of such a contract would be wholly uncertain. Similarly, he submits, a promise to deal on the basis of mutual trust would be too vague to found a promissory estoppel. In any event, he submits, promissory estoppel requires a pre-existing legal relationship if the promise which founds the estoppel is not to operate as a sword rather than as a shield.

Turning to the suggested application of the principles of natural justice in the instant case, Mr Jourdan submits that such principles have been applied by the courts in three situations: viz. where a decision is made by a body which is susceptible to judicial review; where a contract between the parties provides for a particular benefit to be expropriated (see Byrne and Gaiman); and where the decision-making body exercises a virtual monopoly in an important field of human activity, e.g. a licensing authority (see Nagle v. Fielden [1966] 2 QB 633 and McInnes). The instant case, he submits, falls into none of those categories. Accordingly, he submits, the principles of natural justice did not apply to the decision by members of the Community to ask Mr Koeller to leave the Community.

Mr Jourdan submits that once Mr Koeller had been asked to leave the Community and once he had accepted that decision (as, on the facts, he did), the only remaining question was as to what financial provision should be made for him and his family by the Company. That question, he submits, was not a question to which the principles of natural justice could have any application. Mr Jourdan accepts that the Council (on behalf of the Company) had a duty to consider what steps it should take in the situation which had arisen, but (he submits) it did that. He submits that once the Charity Commission had refused to sanction the proposed compensation package, the Company had little choice in practice but to require Mr Koeller to leave Ty Hir.

In any event, submits Mr Jourdan, even if the Council of the Company had decided to require Mr Koeller to leave Ty Hir in circumstances which were unreasonable, that would not have provided him with any defence to the possession claim.

As to Mr Evans’ submissions in relation to a possible petition by Mr Koeller under section 459 of the Companies Act 1985, Mr Jourdan submits, relying on O/Neill v. Phillips, that such a petition would inevitably have been dismissed since the court’s jurisdiction under the section is limited to protecting rights which are recognised either at law or in equity.

I agree.

I also agree that the appeal should be dismissed, for the reasons given by Lord Justice Jonathan Parker.