Charity proceedings: can courts now ignore the need for Charity Commission authorisation?

The High Court has delivered judgment in the case of Singh v The Charity Commission & Ors. The judgment, delivered by HHJ Barker QC, will be of particular interest to charities as the case considered the relationship between the courts and the Charity Commission in the context of an internal charity dispute.

A dispute arose at the Guru Nanak Gurdwara (GNG) Sikh temple in Wolverhampton, an unincorporated association and registered charity. The dispute was essentially between the management committee (claimants) and the trustees (defendants) concerning the election of new committee members in 2015, which the defendants claimed was invalid. Both parties were supported by opposing factions of the congregation.

The question for the court was whether the claimants should be granted permission to discontinue the proceedings. The claimants’ case was that proceedings should be discontinued as the Charity Commission had not granted permission for the action. Notwithstanding this, the court refused the claimants’ application, taking into account the overriding objective, the respective parties’ conduct and the need for justice to be achieved by way of a practical solution.

Background

The election of new committee members at the GNG in May 2015 resulted in “turmoil within the congregation” and ultimately led to the Defendants complaining to the Charity Commission that the election was invalid. The Charity Commission responded in September 2015 stating that the election was invalid and that a further election should be held. However, the Charity Commission went no further on the basis that the GNG’s Constitution contained a mechanism for addressing an invalid election.

Proceedings were ultimately brought by the claimants against the Charity Commission to challenge the view that the election was invalid. However, as such proceedings constituted charity proceedings, the authorisation of the Charity Commission was required for this. Meanwhile, further disputes had arisen between the claimants and defendants regarding the operation of the GNG’s bank account and the claimants sought interim injunctive relief. An order was granted on 6 November 2015 that dealt with the operation of the bank account. The aim of this order was to “maintain the status quo pending a decision by the CC on whether or not to grant the Cs permission to continue the proceedings”. In January 2016, the claimants served notice to discontinue their claim.

Charity proceedings

Under section 115(2) of the Charities Act 2011, charity proceedings can only be commenced or continued with the authorisation of the Charity Commission (except in certain circumstances). HHJ Barker QC expressly referred to the reasoning behind this legislation, namely to prevent charitable assets and money being wasted on internal disputes.

The claimants relied on this provision and the Charity Commission’s refusal to authorise the proceedings as the basis of their application. They argued that the proceedings were no longer of any importance as further elections would be held in May 2017 and continuing the claim would cause the GNG to incur further unnecessary legal costs. The defendants rejected these submissions, arguing that the claimants’ discontinuance was a tactical response and that the dispute remained unresolved.

In delivering judgment, the court noted that the conduct of the parties, including any unjust tactical advantage, would be a relevant consideration. However, the most interesting aspect of the judgment was the court’s assessment of the interaction between the overriding objective and the role of the Charity Commission as regulator.

HHJ Barker QC addressed the purpose of section 115(2) but felt compelled to refuse the Claimants’ application to discontinue given the contextual factors and the conduct of the parties. The refusal by the Charity Commission to authorise proceedings was not, in the court’s view, determinative. Rather, it was possible that if given access to all the relevant information, the Charity Commission could form an alternative view. The court was clearly concerned by the conduct of the claimants who had taken it upon themselves to open and operate a second bank account for the GNG. In light of this and the discretion afforded by the overriding objective, the court found that it would be “a denial of justice … for the court to simply wash its hands of the proceedings”.

In furthering the overriding objective, the court reached a practical solution whereby the Defendants were given a window in which to serve a counterclaim and apply to the Charity Commission for authorisation. This acknowledged the fact that the court could not compel the claimants to continue the proceedings.

This decision demonstrates that there will be circumstances in which the courts may override the Charity Commission on the basis that it would not be in the interests of justice for proceedings to be refused. Given the somewhat unusual circumstances of this case, it seems unlikely that it will set a precedent which renders the role of the Charity Commission or section 115(2) as redundant. Rather, it demonstrates that the courts can use the discretion afforded by the overriding objective to create practical solutions. This enables the courts to assist the Charity Commission and to ensure that they are able to carry out a full investigation as regulator into proceedings under section 115(2).