Choudhury & Anor v Stepney Shahjalal Mosque & Cultural Centre Ltd & Ors

MR JUSTICE BIRSS: This is a dispute about the control of a mosque. The mosque is Stepney Shahjalal Mosque and Cultural Centre. It is controlled by a company limited by guarantee named Stepney Shahjalal Mosque and Cultural Centre Limited. The company is a charity. It is the first respondent.

Its Articles of Association define its members and that definition includes a limitation on the geographical residence of those individuals, limited to the ward of St Dunstan’s in East London where the mosque is situated. The Articles also define trustees and provide provisions for election of trustees for the members of the company. There is a process for organising meetings, as one would expect.

In 2012 there was an uncontentious election of trustees and a number of trustees were elected. They include the applicants, Mr Abdul Munim Choudhury and Mr Jahir Ali and the individual respondents, Mr Mohammed Ali, Mr Ful Miah and Mr Ali Sadad.

All five of these gentlemen were at that timeelected as trustees of the limited company. In 2013 problems arose and, as a result of those disputes, the details of which at this stage are not important, the trustees divided into two camps, as can now be seen in this action: the applicants and the respondents.

In June 2014 there were a series of meetings of the trustees and general meetings of the company. Each side says that the effect of the meeting on which they rely was to expel the other from membership or trusteeship of the company. Since then the dispute has continued. It includes a number of extremely serious allegations concerning control of funds and allegations of violence. The police have been called to the mosque on at least one, though I think in fact more than one, occasion.

The applicants contend that the first applicant should be the Chairman of the charity and the second applicant should be the Treasurer. Currently the position is that the respondents have control of the electronic codes which allow them to make changes to the register at Companies House. Using those codes they have removed the applicants from being named on the register as trustees. The applicants submit that these changes are incorrect and unlawful. I think I am right in saying that the applicants have some control at least over the banking facilities of the company, although I gather that the bank has frozen the accounts as a result of this dispute.

The applicants brought an application in September of last year before Phillips J in Queen’s Bench Division, which was on notice to both sides. I am told that at that stage the judge told the applicants that they should bring their case before the Companies Court given that the charity was a company. It is also the case that attempts to mediate have been made and mediations have taken place, but to no avail.

In early December 2014 there was a third mediation. One of the results of that was a decision to hold new elections. That was clearly something which, if it can be done, would be appropriate to sort out the control of this company.

In late December 2014 the applicants issued the Petition which is now before the Companies Court and is due to be heard on 27 February 2015. That would be the first hearing and would issue directions. The Petition is the originating process which commenced these proceedings.

Sometime around December or early January, the precise dates are not in my mind but do not matter, there was a notice to hold an Annual General Meeting and an Election in relation to the company.

An important next step took place on 6 January 2015. At that stage the respondents terminated, or purported to terminate, the applicants’ membership of the company. That would mean that the applicants could not participate, vote or stand in the forthcoming meeting and election. The meeting was due on Sunday 19^th January 2015.

What happened then was that on Thursday 16 January I heard an application without notice by the applicants to seek an injunction restraining the carrying out of the meeting. It was due the following Sunday. I granted that injunction. The matter returned before the Applications Court on 23 January, now on notice, and on that occasion I gave directions so that the matter could to return to be properly argued as an application by order. That is the application which I have heard today. In the meantime I continued the injunction that had been granted on 16 January. At that hearing on 23 January Mr McCombe, who appeared then and now for the respondents, submitted that these proceedings should be stayed under the provisions of the Charities Act 2011.

In the circumstances as they were on 23 January it was not clear to me that Mr McCombe’s submission was right. In fairness to Mr McCombe, the matter had been prepared in somewhat of a hurry. I did think he had a properly arguable case that the matter should be stayed but on the relatively short review that was possible at that time, it was not clear that that was necessarily so. For that reason among others the proceedings continued and, in the exercise of my discretion on 23 January, the injunction continued as well.

There was a further exchange of evidence between the parties and they now have the opportunity to properly prepare their cases and have the points properly argued. All the same, in the course of the argument today both sides substantially supplemented their evidence on instructions and had documents handed up during the hearing.

Having heard the argument from Mr McCombe, and the argument from Ms Anifowoshe appearing for the applicants, it is clear to me that these proceedings are proceeding which require permission of the Charity Commissioners to be brought or, if no permission from the Charity Commissioners is given, permission of the court.

I will deal with that briefly. A key provision, as Mr McCombe submitted, is section 115 of the Charities Act 2011:

“(2)

Subject to the following provisions of this section, no charity proceedings relating to a charity are to be entertained or proceeded with in any court unless the taking of the proceedings is authorised by order of the Commission.

[…]

(5)

Where subsections (1) to (4) require the taking of charity proceedings to be authorised by an order of the Commission, the proceedings may nevertheless be entertained or proceeded with if, after the order had been applied for and refused, leave to take the proceedings was obtained from one of the judges of the High Court attached to the Chancery Division.

[…]

(8)

In this section ‘charity proceedings’ means proceedings in any court in England or Wales brought under—

(a)

the court's jurisdiction with respect to charities, or

(b)

the court's jurisdiction with respect to trusts in relation to the administration of a trust for charitable purposes.”

Mr McCombe also drew my attention also to section 353(1) of the same Act, as follows:

“(1)

In this Act, except in so far as the context otherwise requires—

[…]

‘trusts’—

(a)

in relation to a charity, means the provisions establishing it as a charity and regulating its purposes and administration, whether those provisions take effect by way of trust or not, and

(b)

in relation to other institutions has a corresponding meaning.”

This sub-section defines “trusts” for the purposes of the Act in such a way that it includes a charity set up as a company limited by guarantee rather than as a trust, such as the first respondent in these proceedings. Therefore I accept his submission that either or both limbs of subsection (8) apply to this case. Although this is a claim in the Companies Court about a company, it is also a claim brought under one or both of the jurisdictions mentioned in s115(8)(a) or (b) when those provisions are read with s353(1).

I am also grateful to Mr McCombe for drawing my attention to the 2014 supplement to the textbook Law and Practice Relating to Charities by Hubert Picarda QC and in particular page 913, which expresses the view that “matters relating to incorporated charities may be treated as falling in either limb of this definition [i.e. the definition in section 115(8)]”. In my judgment Mr Picarda is correct about that.

Mr McCombe also submits, and I accept, that these proceedings are charity proceedings. He draws my attention to a decision of the Court of Appeal and in particular the judgment of Mummery LJ in Muman v Nagasena [2000] 1 WLR 299, in particular to what the learned judge said from page 304G down to page 305G, which I will not repeat the whole of. Among other things, in that passage Mummery LJ indicated that proceedings concerning debate about who are the trustees of a charity and possibly who are the members are the sort of things which are charity proceedings. That is a key aspect of the dispute before me.

Mr McCombe also points out that Mummery LJ held that the whole point of requiring permission is to try to stop charities frittering away money subject to charitable trusts in litigation about internal disputes. This is an internal dispute. It is clear that there is a great risk that a dispute of this kind will fritter away money which is meant to be subject to the charitable purposes.

So where this takes me is that it is clear that these are proceedings which ought to be stayed since no permission has been given either by this court or by the Charity Commissioners. The stay should be at least pending resolution of any application for permission before the Charity Commissioners.

In the course of this hearing it emerged, and this had not been in the evidence, that in fact the applicants have been in touch with the Charity Commissioners in some detail. Although I knew that there had been some contact with the Charity Commissioners, I was not aware until now that the Charity Commissioners are now actively considering the applicants’ position and, as I understand it, are actively considering whether they should be given permission to continue proceedings or at least whether they should be considering how to resolve this dispute. I am also told that the respondents themselves have also been in touch with the Charity Commissioners. These all seem to me to be further reasons why it is clearly right that these proceedings should be stayed.

However staying the proceedings does not resolve the matters I need to sort out today. It is quite clear that although these proceedings should be stayed, there is a real question about what, if any, relief should be granted in the meantime.

Mr McCombe refers to CPR Part 25.10:

“the interim injunction shall be set aside unless the court orders that it should continue to have effect even though the claim is stayed.”

Mr McCombe submits that the way in which that is drafted indicates that only in exceptional circumstances should an interim injunction be continued when an action is stayed.

First it seems to me that the Part clearly contemplates that the court has a jurisdiction to continue interim injunctions pending a stay. Second, I would not go as far as Mr McCombe’s submission so as to say that such an injunction should only be continued in exceptional circumstances. The fact that an action is to being stayed is better characterized as being something which needs to be taken into account in the court’s discretion with a view to furthering the overriding objective to deal with cases justly, at proportionate cost and the other matters set out in CPR 1.1. The fact of a stay is very important and no doubt it will be an unusual case in which an interim injunction is continued after an action is stayed, but that is a different point.

Mr McCombe submits that I should not continue the injunctions. He submits first that the election, which was due to be heard and conducted and has now been derailed by the injunction, is the best way to resolve the future conduct of this charity. That is the way which the Articles themselves deal with how control of the charity should be resolved. The election is the fairest and best way for the matter to be sorted out.

He also submits that there was a failure to give proper notice at the ex parte application and that failure indicates that the exercise of the court’s discretion should not be exercised in the claimants’ favour as a result. He submits that there has been a failure to properly explain what happened at the ex parte hearing, and he also submits that after the first injunction was granted the applicant organised an Extraordinary General Meeting which, although not contrary to the letter of injunctions, was clearly contrary to the spirit and purpose of the interim relief which the applicants themselves had sought. After all the purpose of the injunction was to hold the ring pending resolution of the dispute. The very thing that should not have happened is that the applicants themselves should not have taken the position into their own hands and attempted to call an Extraordinary General Meeting to essentially expel the respondents or otherwise deal with the matter out of court.

Mr McCombe also points out that any cross-undertaking of damages from the claimants is not supported by any evidence of any finances. While he is right about that, he also recognises, realistically in my judgment, that the harm which is to prevented by the injunction and the harm which would be caused if the injunction were wrongly granted is largely unquantifiable. It is all about control of the mosque. Nevertheless, it is a significant factor to take into account all the same.

Ms Anifowoshe for the applicants submits that I should keep the injunction in place. She submits that the election is not a fair or appropriate way of resolving this dispute. Her important point is that the respondents themselves have suspended the applicants from membership of the company. Accordingly, they cannot vote in the election and, I think I am right in saying, they cannot stand as trustees if they are not members. In other words, to grant no injunction at all would play into the hands of the respondents and would be effectively resolving the dispute in favour of the respondents in the meantime.

She accepts that no notice was given for the ex-parte application but the applicants contend that that was at least due in part to a mix up at the court. They were at that stage representing themselves. They had not intended to apply ex-parte, but were brought into the court room and understood that the court was dealing with the matter in any event. She also points out that the Petition itself was served on the respondents and there was therefore no question that the overall proceedings were on notice to the respondents.

As regards the EGM which was to take place after the first injunction was granted, she submits that it was called before the injunction was order. I think there is proper evidence of that. She also submits on instructions that after the injunction had been granted the applicants then tried to stop the EGM but other members of the company continued with it and that is why the EGM took place.

My assessment of Ms Anifowoshe’s submissions is as follows. As regards the ex parte, it does seem as though there has been some confusion but I am sceptical that that explains the lack of notice. It is apparent that the applicants came to issue the application, the court officials brought them before the court in the Applications Court and I heard their application. As I say I accept there may have been some confusion on the applicants’ part but the matter was presented as being very urgent. It arose on Thursday for an injunction to restrain something from taking place on Sunday. I doubt that a simple misunderstanding explains why the applicants did not give the respondents any notice that that is what they were doing. They could have done so.

I must say I am sceptical that I have heard the full story about this Extraordinary General Meeting. Nonetheless it is true that the wording of the injunction did not restrain such a meeting, albeit plainly it was against the spirit of the case the applicants were presenting to the court, which was to hold them pending the resolution of this dispute in court.

The question I have to decide is whether to grant any relief pending the decision of the Charity Commissioners. Neither of the choices presented by the parties is palatable. One is to grant no relief at all and leave both sides free to carry on the way they have been doing up until now. That is what the respondents want. The alternative would be to grant an injunction along the lines I have granted already. That is what the applicants want.

I do not think either course would be appropriate. What might be appropriate is to grant a modified injunction to ensure that neither side can call any further meetings or elections until the Charity Commissioners have decided what to do.

If the election which had been on foot to be conducted a couple of weeks ago had been one in which the applicants themselves were free to participate as much as the respondents then I would have been very willing to make no order and allow that election to go ahead. However it is clear that that is not what the respondents have in mind.

I cannot resolve who is correct in the underlying dispute about the control. Each side has produced significant evidence which, if accepted, means that the others have been in serious breach of their duties. As I say, it is not something I can resolve at this hearing.

Given the nature of this dispute, it seems to me that if I do nothing there is a great risk that the dispute will escalate even more. There is great risk that if I do not hold the ring for a limited period the charity’s assets will be dissipated even more. In the circumstances today it seems to me that the best way to preserve the charity’s assets in the meantime is to grant a modified injunction preventing both camps from calling any further meetings or having an election. The injunction will not be for an indefinite period. Given that the proceedings are to be stayed I proposed to maintain the injunction in place for three months with liberty to apply.

If the Charity Commissioners decide to take proceedings then the parties can apply to the court to discharge or modify the injunction as appropriate. If nothing happens then in three months’ time the injunctions will expire. I should say that I am satisfied that the court’s jurisdiction to grant interim orders must include a power to make an interim order pending application under section 118. That is the power I have exercised in the circumstances of this case.