Hirani & Ors v Hirani & Ors

This is a further judgment concerning the unincorporated association known as Shree Swaminarayan Satsang (“the Organisation”). It deals with one aspect of the terms upon which this Part 8 Claim have been settled, together with the costs of the proceedings.

The Organisation is a registered charity which exists to advance the Sanatan Dharma (a Hindu religion) in accordance with the teachings and principles of the Shree Swaminarayan sect. The activities of the Organisation are centred around the temple which it runs in Wood Lane, Stanmore, Middlesex (“the Temple”).

The affairs of the Organisation have been in disarray for some time. This is due, among other things, to a dispute between the parties to these proceedings concerning the composition of the so-called board of management of the Organisation (“the Board”) and the status of the various officers on it. In large part that dispute arises out of the lack of clarity in the wording of the constitution of the Organisation (“the Constitution”), but there are also a number of factual issues arising out of events at and around meetings of the Board in September 2007 and June 2009.

In essence the Claimants have contended that the current Board consists of themselves, the First to Fourth Defendants and the Head Priest of the Shree Swaminarayan Temple at Bhuj, India (“the Head Priest”) as ex-officio Chairman. The Defendants have contended that the Board consists only of the First, Second and Third Claimants, the First, Second and Third Defendants and the Head Priest. There has also been a subsidiary dispute about the appointment of the various members of the Board as “office-bearers” under the Constitution. Put simply, the Defendants contended that the office-bearers were as appointed at a meeting in September 2007, whilst the Claimants contended that they were as appointed following a meeting in June 2009.

There have in addition been various allegations made between the parties which are irrelevant to the issues in the Part 8 Claim. These include whether the Claimants were responsible for mismanagement of the affairs of the Organisation and whether the Defendants (or at least the First to Third Defendants) have taken control of the management of the affairs of the Organisation to the exclusion of the Claimants.

What is common ground, however, is that largely as a consequence of the dispute over the composition of the Board, the Organisation has not approved and filed any Report and Accounts since those for the year ending 31 March 2007. This has in turn led to difficulties with its bank. The Organisation has also not held an Annual General Meeting of its Members for seven years.

On 11 August 2009 Charles Russell LLP provided advice to the First Defendant in his capacity as President of the Organisation to the effect that the Board consisted of the First to Third Claimants, the First to Third Defendants and the Head Priest. For their part, the Claimants consulted the Charity Commission, and by a letter of 9 November 2009 it took a different view, namely that the Board consisted of all of the Claimants and the Defendants, together with the Head Priest. Charles Russell LLP did not accept that conclusion and reaffirmed their earlier view in a letter of 10 December 2009.

Various efforts were made during 2010 to resolve the differences between the parties. A number of efforts were made to mediate the dispute by a variety of means, all of which proved unsuccessful. It was not suggested that I could conclude on the evidence before me that any of the parties had been unwilling to participate in the attempts to mediate the dispute. It was also common ground that notwithstanding that some of the mediation attempts were informal and were not conducted subject to the confidentiality that accompanies formal attempts at mediation, I should not seek to investigate why the various mediation processes did not result in agreement: see e.g. Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002 at paras 13-14.

Matters not having been resolved, on 4 November 2010 the Charity Commission acceded to a request by the Claimants and authorised the commencement of proceedings in relation to the Organisation under section 33 of the Charities Act 1993. That decision prompted a letter from a group of business donors to the Organisation who considered that they were still engaged in mediating the dispute, but having received representations from the Claimants’ solicitors, on 29 November 2010 the Charity Commission reaffirmed its decision.

The Defendants also objected by letter of 7 December 2010 to the decision of the Claimants to institute proceedings, but the Part 8 Claim was nevertheless issued by the Claimants on 8 December 2010. In it the Claimants sought declarations as to the composition of the Board and the status of the various officers on it. The Part 8 Claim also sought (if and in so far as might be necessary) a scheme for the modification of the Constitution, but no specific proposals were advanced in that regard.

Evidence was filed on behalf of the parties, and the trial of the Claim was fixed to commence in the week commencing 6 February 2012.

The trial was in fact listed to start on 9 February 2012, but at the start of the hearing my attention was drawn to what purported to have been a general meeting of the Organisation that had been held on 4 February 2012 at the Temple. At that meeting, resolutions had purportedly been passed amending the Constitution and effectively removing and replacing all of the members of the Board by an Interim Management Committee.

The Defendants suggested that the meeting had been validly convened and held; the Claimants maintained that it had not. If such meeting had been validly held and the Board had all been removed from office, there would have been little point in proceeding with a trial aimed at establishing, as a historic matter, who the members of the Board of the Organisation had previously been. Accordingly, I heard argument on the point as a preliminary issue. On 23 February 2012 I handed down a Judgment [2012] EWHC 303 (Ch) in which I determined (at least as between the parties) that the meeting on 4 February 2012 had not been validly convened in accordance with the Constitution, that the resolutions had not been validly passed, and that it was therefore still appropriate to proceed with the trial of the Part 8 Claim.

In paragraph 72 of my earlier Judgment I also indicated that I saw force in a submission then made to me by Mr. Crampin QC for the Claimants that members of the Organisation could request the Board to convene a general meeting of the Organisation, and that the Board would be obliged to give such request due consideration. I also expressed my view that there must be a residual or default power in the members to convene a general meeting themselves, which default power might be available if the Board was unable or failed to act in accordance with its duties. I did not, however, finally decide that point, simply holding that any such default power had not become available for exercise prior to 4 February 2012.

Following my Judgment, there were a number of developments.

First, the Claimants’ solicitors wrote to the Defendants on 2 March 2012 making detailed proposals for all of the Claimants and the Defendants to be involved in the management of the Organisation pending a decision of the Court or order of the Charity Commission as to the composition of the Board. The letter also identified the lack of any mechanism in the Constitution to identify who the members of the Organisation actually were as a major obstacle to any attempt to hold a general meeting to adopt a new Constitution. It suggested that the Charity Commission be approached to make a scheme to address this point, either immediately or after a limited period of consultation with the Organisation’s advisory board and the Head Priest.

After a delay, further correspondence ensued between the parties. Although there was some common ground, the parties did not initially reach agreement over the way forward, and so the trial was relisted to recommence on Monday 28 May 2012. Further discussions then took place, and a few days before the hearing was due to commence the parties reached an agreement for the disposal of the Part 8 Claim which was reflected in a draft consent order. I shall return to the content of that draft order below.

The second development was that commencing with a letter of 7 March 2012, a number of persons claiming to be members of the Organisation sent letters to all of the parties to this dispute, expressing a lack of confidence in them, and asking the Board to convene a general meeting of the Organisation with a view to changing the Constitution and removing and replacing the Board with an Interim Management Committee in the same way as had purportedly been done at the meeting on 4 February 2012.

The Claimants’ solicitors responded on 13 March 2012 that this would not be possible because there was (at that stage) no agreement between the parties as to how the Board should function; and they further asserted that in any event it would not be possible to hold a satisfactory general meeting to adopt a new Constitution until the issue concerning the identity of the members of the Organisation had been resolved.

A further letter from members reiterating the request for a general meeting to be called was sent to all parties on 22 March 2012. When this did not receive a response, on 14 May 2012 the same members of the Organisation purported themselves to convene an extraordinary general meeting of the Organisation to be held at the Temple on 16 June 2012. As before, the purposes of the proposed meeting include the passing of resolutions to amend the Constitution to give power to the members to appoint an Interim Management Committee to run the Organisation for a limited period in place of the Board.

The parties initially sought the making of an order by consent containing declarations to the effect that the Claimants and the Defendants together with the Head Priest represented the current members of the Board, and also as to the identity of the Organisation’s office holders. The draft order then went on to provide, in more conventional “Tomlin” form that the proceedings be stayed on the terms of a schedule containing an agreement between the parties as to how they should co-operate to resolve the difficulties faced by the Organisation. The draft order further provided that the costs of the proceedings should be determined by the Court, subject to a proviso that there should be no recourse to the funds of the Organisation in respect of any party’s costs of these proceedings. The Treasury Solicitor indicated that the Attorney-General had no objection to such an order.

It has, however, long been the case that the Courts are wary of granting declarations by consent or without a trial having taken place. A number of the relevant authorities were considered by Mr. Stephen Smith QC (sitting as a Deputy High Court Judge of this Division) in Havim v Couch [2009] EWHC 1040 (Ch). Having referred to a number of cases, Stephen Smith QC concluded, at paras 17-18:-

“17.

From these four authorities I derive the following propositions:

(1)

That the rule that a court should not grant a declaration except after a trial was only ever a rule of practice.

(2)

That the rule should not be followed if following it would deny the claimant the fullest justice to which he is entitled.

(3)

That the rule is less strong since the coming into force of the Civil Procedure Rules than it was when the Rules of the Supreme Court held sway.

(4)

That where the parties' consent to (or agree not to oppose) the grant of declaratory relief and that consent forms part of a bona fide commercial bargain entered into between them to avoid the need for a trial, the Court is likely to consider it necessary to grant the declarations sought in order to do justice between them.

18.

Proposition (4) plainly accords with one of the underlying philosophies of the Civil Procedure Rules, viz. to encourage the parties to compromise their disputes rather than to litigate them through to the end of a trial. It does not mean, however, that the Court will inevitably accede to an application for a declaration to be made other than at trial just because the parties have reached a binding commercial agreement before they enter court that that is what should be done. In such a case the Court will first want to be satisfied (i) that the claim which has been compromised was seriously arguable, (ii) that if that claim had succeeded at a trial, the Court would have been likely to have considered that the declarations sought were necessary to afford justice to the claimant, and (iii) that the grant of the declarations is not likely to have any adverse repercussions for third parties.”

In the instant case, I had not heard any argument and had not formed a view as to whether the respective arguments of the Claimants or Defendants were well-founded. Further, I was conscious (not least from the developments concerning the intention to hold an extraordinary general meeting on 16 June 2012) that the composition of the Board is a matter of considerable importance to the members of the Organisation generally and that the declarations sought by the parties might be said to affect the interests of such members or to have adverse repercussions for them.

Accordingly, whilst I might have been prepared to make appropriate declarations had I conducted a trial at which I had heard evidence from the relevant witnesses and heard argument from all sides, I did not think that it was appropriate to do so in circumstances where I could have no assurance that the declarations would be accurate, and in circumstances in which they might adversely affect other persons.

After I had communicated my misgivings to the parties, they reformulated their draft order. The proposed declarations were abandoned in favour of an agreement between the parties that they would regard each other as members of the Board. The result is that the revised draft order simply provides for a stay of the proceedings on the terms of an amended schedule to the order, with permission to apply in the event that the terms are not complied with and generally in relation to the subject matter of the schedule.

The terms of the draft amended schedule are set out below:-

“1.

The Claimants and the Defendants agree that the present members of the Board of directors of the Charity are all the Claimants and the Defendants (together with [the Head Priest] as ex officio Chairman of the Board).

2.

The Claimants and the Defendants agree that the Charity’s eight office-holders shall be as mentioned in paragraph 2 of the minutes of the meeting held on 25 September 2007...

3.

The Claimants agree that without the concurrence of the Head Priest and without reasonable cause the Board cannot oust any of the Defendants from the Board.

4.

The Claimants and the Defendants (together acting as the Board of the Charity) agree to discuss among themselves and to consult with such other persons as the Board shall think fit with respect to the matters in (i), (ii) and (iii) below. Within 4 months of the date of the Order incorporating this agreemen or such greater period as the Board shall reasonably consider to be necessary in order to conclude their discussions and consultation, the Board shall apply to the Charity Commission with a view to the Commission making a scheme amending the Constitution of the Charity so as to make full and adequate provisions for:

(i)

identifying (by registration) the general members of the Charity;

(ii)

the calling of general meetings of the general members of the Charity; and

(iii)

determining the powers of a general meeting of the members of the Charity.

5.

Following the making of such scheme the Board of Directors shall use their best endeavours to formulate one or more resolutions to place before a general meeting of the Charity with a view to amendments being made to the Constitution governing (but necessarily limited to):

(i)

a person’s eligibility to act as a member of the Board of Directors;

(ii)

the method by which members of the Board of Directors are to be elected or appointed; and

(iii)

the method by which a member of the Board of Directors may be dismissed or may retire.

6.

In the event that it proves impossible or impracticable to achieve amendments of the Constitution which deal with all the matters mentioned in paragraph 5 above within six months of the date of the scheme mentioned in paragraph 4 above or such greater period as the Board shall reasonably consider to be appropriate, the Board of Directors shall apply to the Charity Commission for advice as to what further steps should be taken.

7.

The Claimants and the Defendants agree that pending the completion of the process at paragraph 4 above, no meeting of the membership shall be recognised by the Claimants or the Defendants as being in accordance with the Constitution of the Charity unless called by or agreed to by the Board, and accordingly, the Claimants and Defendants confirm that they will not recognize as binding on the Board or the Charity or the members of the Charity any resolutions or other decisions purportedly passed or made at the meeting which is to take place on 16 June 2012 or any other meeting of persons claiming to be members of the Charity unless that other meeting has been convened in accordance with the Constitution of the Charity.”

I think that it is obvious that the references to “the Defendants” in the schedule are intended to be limited to the First to Fourth Defendants and not to include the Attorney-General, but this should be made clear in the final form of the order. Subject to that point, I am content to make an order staying the proceedings on the terms of this schedule with permission to apply as envisaged.

Because the order and this Judgment are likely to be read by the wider membership of the Organisation, I should make it clear (and it should be reflected in a recital to the order) that the terms of the schedule take effect only as an agreement between the Claimants and the First to Fourth Defendants, and that the Court is not, by its order, making any judgment or decision on the terms of such agreement. The Court does not, for example, signify any approval of the parties’ agreement as to the composition of the Board, the process which they have devised to agree a new Constitution, or their approach to any general meetings that might be convened by persons other than the Board in the meantime. Nor does the order of the Court in any way prevent or inhibit any claims that may be made by other persons, whether in relation to the meeting which has been scheduled for 16 June 2012 or otherwise.

Although the parties have agreed a stay of the Part 8 Claim on the terms which I have discussed above, the parties have been unable to agree how the costs of these proceedings should be borne. Instead they have agreed to leave the matter to the decision of the Court provided that the funds of the Organisation should not bear any of the costs of these proceedings.

The first point of dispute between the parties is whether, in light of the fact that the Organisation is a charity, this is a case to which the principles established in ReBuckton [1907] 2 Ch 406 should apply. Those principles were summarised by Hoffmann LJ in McDonald v Horn [1995] ICR 685. Hoffmann LJ first described the principle by which a person who has been a party to proceedings in his capacity as a trustee is generally entitled to recover his costs from the trust fund provided that he has not acted unreasonably or in substance for his own benefit rather than for the benefit of the fund. Hoffmann LJ then continued,

“The Chancery courts have however been willing in certain circumstances to extend to other parties to trust litigation an entitlement to costs in any event by analogy with that accorded to trustees. The classic statement of the principles upon which the court acts is by Kekewich J., who was acknowledged in his time as a master of Chancery procedure, in In re Buckton [1907] 2 Ch 406, 413—415. While warning that it was “well nigh impossible to lay down any general rules which can be depended on to meet the ever varying circumstances of particular cases,” he said that trust litigation could be divided into three categories. First, proceedings brought by trustees to have the guidance of the court as to the construction of the trust instrument or some question arising in the course of administration. In such cases, the costs of all parties are usually treated as necessarily incurred for the benefit of the estate and ordered to be paid out of the fund. Secondly, there are cases in which the application is made by someone other than the trustees, but raises the same kind of point as in the first class and would have justified an application by the trustees. This second class is treated in the same way as the first. Thirdly, there are cases in which a beneficiary is making a hostile claim against the trustees or another beneficiary. This is treated in the same way as ordinary common law litigation and costs usually follow the event. The judge acknowledged, at p. 415, that “It is often difficult to discriminate between cases of the second and third classes,” but said:

“when once convinced that I am determining rights between adverse litigants I apply the rule which ought, I think, to be rigidly enforced in adverse litigation, and order the unsuccessful party to pay the costs.”

The Defendants contend that the instant litigation falls within Kekewich J.’s first category in Re Buckton. They submit that the Claimants are charity trustees of the Organisation; that they brought the Part 8 Claim primarily to resolve the issue of the identity of the members of the Board of the Organisation; that this question really turned upon the construction of the Constitution; and that resolution of this issue was necessary for the proper administration of the affairs of the Organisation. The Defendants say that in circumstances in which the parties have all agreed to forego any entitlement from the funds of the Organisation, this should have the result that the Court should make no order as to costs.

I do not accept that submission. Although the Claimants are undoubtedly trustees for the purposes of the Charities Act, and the issue of who is or is not a member of the Board of the Organisation undoubtedly turned mainly upon the interpretation of the Constitution, I do not consider that the proceedings were the type of proceedings which Kekewich J had in mind in his first category. I think Kekewich J had in mind the type of proceedings that are brought by trustees acting jointly in their capacity as such, to obtain guidance from the court which they reasonably think is necessary to assist them in administering the trust estate. The trustees may well maintain a neutral posture and will join representative parties to adopt opposing positions to ensure that the points in issue are properly argued. But essentially, the proceedings are a collaborative exercise instituted by the trustees as a body for the benefit of the trust fund.

In my judgment these proceedings were not of that nature. There was no consensus among the trustees or putative trustees as to whether proceedings should be brought. They were hostile proceedings brought by one group of persons who claimed that they were all members of the Board against another group of persons who disputed that status and contended that only some of them were members of the Board. I believe that the parties were what Kekewich J referred to as “adverse litigants”, and that the proceedings bore the closest resemblance to a dispute between beneficiaries within Kekewich J’s third category - being a dispute between two groups of members of the Organisation. I therefore consider that the usual rules as to costs apply.

Turning to those rules, the approach of the Court in a case which has been compromised without a trial and where the parties have not agreed costs was considered by the Court of Appeal in Brawley v Marczynski (No.1) [2003] 1 WLR 813 and in BCT Software Solutions v C. Brewer & Sons Limited [2003] EWCA Civ 939.

Brawley was a case of alleged infringement of intellectual property rights in which the parties had reached a compromise for the payment by the defendant to the plaintiff of one-half of the profits earned from the invention which was the subject matter of the dispute. On the subsequent hearing to determine who should bear the costs, the judge conducted a short review of the evidence and the arguments advanced by the parties and concluded that there was no doubt that, objectively speaking, the plaintiff had been the victor in proceedings and had obtained the half share of profits to which he should have been given at the outset. His decision was upheld by the Court of Appeal who referred with approval to a dictum of Scott Baker J in R (Boxall) vWaltham Forest LBC (unreported 21 December 2000) to the following effect:-

“(i)

The court has power to make a costs order when the substantive proceedings have been resolved without a trial but the parties have not agreed about costs.

(ii)

It will ordinarily be irrelevant that the Claimant is legally aided.

(iii)

The overriding objective is to do justice between the parties without incurring unnecessary court time and consequently additional cost.

(iv)

At each end of the spectrum there will be cases where it is obvious which side would have won had the substantive issues been fought to a conclusion. In between, the position will, in differing degrees, be less clear. How far the court will be prepared to look into the previously unresolved substantive issues will depend on the circumstances of the particular case, not least the amount of costs at stake and the conduct of the parties.

(v)

In the absence of a good reason to make any other order the fall back is to make no order as to costs.

(vi)

The court should take care to ensure that it does not discourage parties from settling judicial review proceedings for example by a local authority making a concession at an early stage.”

The Court of Appeal agreed with the judge that the case was one which fell within the fourth category of a case in which it was obvious which side would have won had the issues been fought to a conclusion.

In BCT Software, the parties had reached a compromise shortly after the start of a trial in an action for infringement of copyright, but had left the issues of costs to the Court. The judge heard argument and made an order for costs against the claimant. Mummery LJ made the following observations

“4.

The arguments advanced on this appeal have demonstrated the real difficulties inherent in asking a judge to exercise his discretion in respect of the costs of an action, which he has not tried. There are, no doubt, straightforward cases in which it is reasonably clear from the terms of the settlement that there is a winner and a loser in the litigation. In most cases of that description the parties themselves will realistically recognise the result and the costs will be agreed. There will be no need to involve the judge in any decision on costs. If he becomes involved, because the parties cannot agree and ask him to resolve the costs dispute, the decision is not usually a difficult one for him to make.

5.

There are, however, more complex cases (and this is such a case) in which it will be difficult for the judge to decide who is the winner and who is the loser without embarking on a course, which comes close to conducting a trial of the action that the parties intended to avoid by their compromise. The truth often is that neither side has won or lost. It is also true that a considerable number of cases are settled by the parties in the belief that the terms of settlement represent a victory, or at least a vindication of their position, in the litigation, or in the belief that they have not lost; or, at the very least, in the belief that the other side has not won.”

Chadwick LJ analysed the position as follows:-

“21.

I agree that this appeal should be dismissed. I add some observations of my own only in order to emphasise that - as has already been said by Lord Justice Mummery in his judgment - a trial judge should be cautious before making an order as to costs in litigation in which all other issues have been compromised without a full trial.

22.

The power to make an order as to the costs of civil proceedings is conferred by section 51(1) of the Supreme Court Act 1981. It is in the discretion of the court whether, in any particular case, that power should be exercised. That is made clear by CPR 44.3(1)(a). It finds expression in the opening words of CPR 44.3(2) - "If the court decides to make an order about costs The first question for the court - in every case - is whether it is satisfied that it is in a position to make an order about costs at all.

23.

In addressing that question the court must have regard to the need (if an order about costs is to be made) to have a proper basis of agreed or determined facts upon which to decide, in the light of the principles set out under the other provisions in CPR 44, what order should be made. The general rule, if the court decides to make an order about costs, is that the unsuccessful party will be ordered to pay the costs of the successful party - CPR 44.3(2)(a). But the court may make a different order - CPR 44.3(2)(b). Unless the court is satisfied that it has a proper basis of agreed or determined facts upon which to decide whether the case is one in which it should give effect to "the general rule" - or should make "a different order" (and, if so, what order) - it must accept that it is not in a position to make an order about costs at all. That is not an abdication of the court’s function in relation to costs. It is a proper recognition that the course which the parties have adopted in the litigation has led to the position in which the right way in which to discharge that function is to decide not to make an order about costs.

24.

In a case where there has been a judgment after trial, the judge may be expected to be in a position to decide whether one party or the other has been successful overall; whether one party or the other has been successful on discrete issues; whether the fact that the party who has been successful overall but unsuccessful on some issues calls for an order which reflects his lack of success on those issues; and whether - having regard to all the circumstances (including conduct) as CPR 44.3(4) requires - the order for costs should be limited in one or more of the respects set out in CPR 44.3(6). But where there has been no trial - or no judgment - the judge may well not be in a position to reach a decision on those matters. He will not be in a position to decide those matters if they turn on facts which have not been agreed or determined. In such a case he should accept that the right course is to decide that he should not make an order about costs. As the arguments on the present appeal demonstrate, it does the parties no service if the judge - in a laudable attempt to assist them to resolve their dispute - makes an order about costs which he is not really in a position to make.

25.

It does not, of course, follow that there will be no cases in which (absent a judgment after trial) the judge will be in a position to make an order about costs. There will be cases(perhaps many cases) in which it will be clear that there was only one issue, that one party has been successful on that issue, and that conduct is not a factor which could displace the general rule. But, in such cases, the answer to the question which party should bear the costs of the litigation is likely to be so obvious that, as Lord Justice Mummery has pointed out, the judge will not be asked to decide that question. It will be agreed as one of the terms of compromise.

26.

The cases in which the judge will be asked to decide questions of costs - following a compromise of the substantive issues - are likely to be those in which the answer is not obvious. And it may well be that, in many such cases, the answer is not obvious because it turns on facts which are not agreed between the parties and which have not been determined. The judge should be slow to embark on the determination of disputed facts solely in order to put himself in a position to make a decision about costs. As Lord Justice Mummery has put it, the better course may be to require the parties to confront the realities of their litigation situation; to point out to them that, if they have not reached an agreement on costs, they have not settled their dispute and the action must proceed to judgment.”

The Claimants contend that the instant case is a clear case within the principles set out in Brawley and BCT Software in which the Court can be satisfied that the Claimants are the successful parties within the meaning of the CPR, and hence that it can and should make a costs order to do justice between the parties. Mr. Crampin QC submitted that when one looks at the issues raised by the Part 8 Claim and compares them with the terms of the schedule to the consent order, it is obvious that the Claimants have been substantially successful.

Mr. Crampin suggests that there was one fundamental issue raised for decision by the proceedings, which was the question of the composition of the Board. He says that the Claimants contended that the Board comprised all of the parties and the Head Priest; and that by paragraph 1 of the schedule to the consent order, the Defendants have (finally) agreed that this is the case.

Mr. Crampin accepts that the Claimants have not, in terms, been successful in relation to their contentions concerning the identity of the office-holders as agreed in paragraph 2 of the schedule, but he says that this issue formed a very small part of the case and does not detract from his basic proposition. He suggested that the dispute over whether the office-bearers were as appointed at a Board meeting on 25 September 2007 (as contended by the Defendants) or as at a meeting on 23 June 2009 (as contended by the Claimants) had become effectively moot by the passage of time, because such office-bearers only held office for three years under the Constitution in any event. He also submitted that although the need to address the problems of the Constitution was manifest to all concerned, the issue of a scheme was never really raised as a substantive issue in the proceedings as such and should not enter into the equation on costs.

The Defendants dispute this analysis. They suggest that there have been no clear winners or losers in the litigation, and hence that the general rule that the successful party should have his costs does not apply and that the appropriate order is for the Court to make no order as to costs. Although the Defendants accept that they have agreed that the members of the Board are as alleged by the Claimants, they point to the fact that the Claimants did not obtain a similar agreement in relation to their contentions concerning the office-holders. More widely, the Defendants submit that the terms of the agreement in the schedule to the consent order should not be viewed as a simple acknowledgement by the Defendants that the Claimants were right all along. The Defendants submit that the terms of compromise should be viewed as part of a pragmatic decision to agree to work together with the Claimants in an effort to resolve the inadequacies of the Constitution for the benefit of the Organisation.

The Defendants also submitted that I should have regard to what Mr. Milne QC referred to as “the divisive and chilling effect upon the goodwill required of all sides” if I was to make an adverse costs order in favour of the Claimants. Both Mr. Child and Mr. Milne submitted that I could and should take into account the effect of such a costs order as between parties who had now agreed to work together to advance the interests of the Organisation.

In support of their respective contentions, the various parties each also drew my attention to a number of offers of settlement made (both openly and “without prejudice save as to costs”) at an earlier stage in the proceedings. Briefly those offers were as follows:-

The matters which I have recounted above were also relied upon in argument by the First and Second Defendants in support of a fall-back argument. Mr. Child submitted that if, contrary to his primary submission, I was minded to make an adverse costs order against the Defendants, I should also make an order that, as between the Defendants, the Third and Fourth Defendants should bear a greater proportion of the costs. He suggested that I should take into account the respective conduct of the Defendants and submitted that it was the Third and Fourth Defendants who had taken the more uncompromising stance to the litigation and who had sought at a late stage to introduce irrelevant evidence of alleged financial irregularities by the Claimants.

I have given anxious thought to the question of the costs of this litigation. I have also paid heed to the warnings sounded by the Court of Appeal in the BCT Software case about the dangers of making orders for costs in cases in which there has been no trial. Nevertheless, I have concluded that Mr. Crampin’s submissions for the Claimants are correct.

As a preliminary matter, and importantly having regard to the dicta in BCT Software. I consider that it is possible for me to reach a conclusion as to which of the parties have been successful in this litigation without having to investigate or rely upon any disputed matters of fact. Indeed, none of the parties suggested that there was any factual matter of which I was unaware or which I needed to resolve in order to be in a position to make a decision on costs.

I also note the limited and clearly defined scope of the issues raised in the Part 8 Claim. Comparing the claim with the terms of the consent order agreed at the end of the day, I consider that this is a case in which it is possible to reach a clear conclusion that the Claimants have been the successful parties. These proceedings were essentially commenced by the Claimants to establish that they were all properly appointed members of the Board of the Organisation, such status having been denied by the Defendants. By the schedule to the consent order, the Defendants have agreed that all of the Claimants are members of the Board of the Organisation. I cannot see how that can be described as anything other than a success for the Claimants.

In that regard, the issue of the identity of the office-holders has been very much a subsidiary point. Although addressed in the evidence, it seems largely to have fallen by the way-side during the proceedings, it did not feature significantly, or at all, in the attempts to settle the dispute that I have recounted above, and it was a small part of the submissions for trial. Likewise, although the Part 8 Claim included an entirely general plea for a scheme for the Organisation, this played no part in the evidence or arguments for trial.

I also do not think that the fact that the schedule to the consent order contains specific terms obliging the parties to work together on the Board of the Organisation changes the analysis or provides any basis for a departure from the general rule as to costs. The fact that the parties have (belatedly) taken the opportunity to agree and spell out what they intend to do to resolve the issues facing the Organisation does not change the fact that the Part 8 Claim raised a different and logically prior issue which the Defendants have now conceded in favour of the Claimants. To hold otherwise would be to confuse the resolution of that issue in favour of the Claimants with the path which the parties have chosen to follow as a consequence.

I further take the view that the application of the general rule that the unsuccessful parties to litigation should pay the costs of the successful parties is supported, rather than diminished, by a consideration of the conduct of the parties and the offers made to settle (see CPR 44.3(4)). The main initiative in making an offer to settle the litigation was taken by the Claimants following the signature of the “trustee resolutions” document in October 2011, when they formally offered to settle the proceedings on the basis that it should be agreed that all of the parties were members of the Board and the parties should bear their own costs. That offer was entirely reasonable, but it was not taken up by any of the Defendants. It was also not unreasonable for the Claimants to reject the subsequent offer of settlement made by the Third and Fourth Defendants at the end of January 2012, because that offer was accompanied by other terms and conditions (e.g. as to the wholesale resignation of the Board) which went well beyond the scope of the issues in the Part 8 Claim.

I also reject the argument made by the Defendants to the effect that I should refrain from making any adverse costs order because of the effect that it might have on the relations between the parties and in the operation of their agreed regime under the schedule to the consent order. Although the Court has a wide discretion in the award of costs, it must act in accordance with principle: it cannot make its order on the basis of speculation as to the effect that such an order might have on the parties for the future. Whether, and if so, how any such costs order might be enforced or dealt with between the parties hereafter cannot be relevant to whether to make such an order in the first place.

Moreover, in this case the parties reached their settlement and agreement to work together on the Board in full knowledge that I would be asked by them to determine the question of the costs of the proceedings. The making of an adverse costs order was obviously one of the potential outcomes contemplated by that agreement and the parties must therefore have envisaged that they would still be capable of working together if I made such an order. Further, and as I observed in argument, if an application of the normal rules on costs otherwise required an adverse costs order to be made to do justice between the parties, a refusal to make such an order without good reason might itself foster a sense of injustice in the parties deprived of such an order.

In any event, whatever the arguments in relation to the costs of the proceedings more generally, there simply cannot be any doubt that the Claimants must be entitled to their costs of the argument which took place on 9 and 10 February 2012 and which led to my first Judgment on the preliminary issue. Whilst the calling of the meeting for 4 February 2012 was not the responsibility of any of the individual parties, the attitude of the Claimants on the one hand, and the Defendants on the other, to those events was polarised. The Claimants contended that the meeting on 4 February 2012 had not been validly held, whilst the Defendants contended that it had, and that the trial should be adjourned as a consequence. It was a discrete argument which the Claimants clearly won.

I therefore propose to order the Defendants to pay the costs of the Claimants of and occasioned by the Part 8 Claim on a joint and several basis, such costs to be assessed on the standard basis if not agreed.

So far as the incidence of costs as between the Defendants is concerned, I do not think that there is any reason to distinguish between them. The Defendants took the same stance in relation to the issues, and although the First and Second Defendants were signatories to the trustee resolutions document of 10 October 2011, whilst the Third and Fourth Defendants were not, none of them accepted the offer of settlement which was made by the Claimants on 20 October 2011. I am not aware of any reason why, if they were keen to distance themselves from the Third and Fourth Defendants, the First and Second Defendants could not separately have accepted that offer and indicated that they would not be contesting the case at trial. That was, in fact, precisely what occurred a few days before the resumed hearing in May 2012.

Likewise, although the First and Second Defendants were willing to accept the offer made by the Claimants on 30 January 2012, subject only to costs, whilst the Third and Fourth Defendants were holding out for other terms, the simple fact is that no settlement was reached, and within a few days all of the Defendants were united in contesting the preliminary issue as to the validity of the meeting on 4 February 2012. The difference in stance between the Defendants over this short period is accordingly unlikely to have had any real difference in the costs incurred by the Claimants.

Finally, although the matters raised by the Third and Fourth Defendants shortly prior to trial appear to have been irrelevant to the particular issues raised by the Part 8 Claim, they were in any event overtaken by the argument on the preliminary issue. Moreover, there is no suggestion that they were the cause of any substantial costs being incurred by the Claimants which should be attributable to the Third and Fourth Defendants alone.

As a postscript, I should add that nothing in this Judgment should be taken to signify any criticism of any of the parties in deciding to settle this case; it is only unfortunate that the settlement was not reached very much earlier before significant legal costs were incurred. Putting the Organisation onto a sound constitutional footing and addressing the wider interests of its faith community must now be the priority.