White & Ors v Williams & Ors

The claim concerned cy-près schemes to transfer the remaining Bibleway Trust church buildings (Lewisham, Bethnal Green and Mitcham) to local congregational trustees and a separate enforcement application by Mr Abrahams for a charging order over the Lewisham Building. The court found that the Bibleway Trustees had mixed the finances of the Cambridge congregation with the national trust, incurred ongoing losses, authorised or permitted unauthorised remuneration to a trustee, and pursued imprudent and unauthorised borrowing. Those failures amounted to breaches of trust.

Applying the law on trustees' indemnity and the Charities Act 1993 (notably section 38), the court held that unsecured borrowing by trustees will attract an indemnity only where the borrowing was for a proper trust purpose and where repayment was consistent with the lasting interests of the charity; on the facts the loan from Mr Abrahams could not properly be indemnified from the remaining trust buildings. The Bibleway Trustees' indemnity claims therefore failed in relation to the Lewisham, Bethnal Green and Mitcham assets.

The court exercised its discretion under the Charging Orders Act 1979 to set aside the interim charging order obtained by Mr Abrahams, concluding that making the order final would unjustly prejudice the congregations for whose benefit the buildings had been acquired. The court directed that cy-près schemes be implemented so each building is transferred subject to special trusts reflecting the "spirit of the gift" and with the Charity Commission to make plain schemes under section 16(2) of the Charities Act 1993.

Background and parties: The claimants were the trustees of the Tabernacle Ministries of Great Britain seeking cy-près schemes for the transfer of three church buildings of the Bibleway Trust (Lewisham, Bethnal Green and Mitcham) to the trustees established since a 1997 schism. Separately, Alistair Abrahams sought to enforce an unpaid loan to the Bibleway Trustees by way of a charging order over the Lewisham Building. The Bibleway Trustees (including Bishop Williams) claimed entitlement to indemnity for various liabilities and expenditures from the remaining trust assets. The Charity Commission and the Attorney General did not appear at the final hearing; Bethnal Green and Mitcham trustees were joined as additional defendants and participated.

Nature of the applications: (i) cy-près applications seeking schemes to transfer each building to local congregational trustees on terms consistent with the original expectations of donors; (ii) determination of the Bibleway Trustees' claims for indemnity against trust assets; and (iii) determination whether the interim charging order obtained by Mr Abrahams against the Lewisham Building should be made final.

Issues framed: whether (a) the Trustees were entitled to an indemnity out of the Lewisham, Bethnal Green and Mitcham Buildings for the liabilities and payments they claimed, (b) the Trustees had committed breaches of trust by mixing Cambridge and Trust affairs, incurring unauthorised payments and borrowing, failing to keep proper accounts and advice, and (c) the charging order in favour of Mr Abrahams should be made final.

Findings of fact and law: The court found that all four originally trust-held buildings had been acquired from the contributions of individual congregations and had been held, before the schism, on an understanding that each congregation would bear the costs and enjoy the use of its building. After the schism the trustees, led by Bishop Williams, treated the Cambridge congregation and the Trust as indistinguishable, ran combined accounts, repeatedly incurred expenditure in excess of income, and sought to use other buildings' value to support Cambridge activities. The trustees had paid wages and expenses to Bishop Williams and made payments to an associated company; those payments were not authorised by the 1971 Trust Deed and amounted to unauthorised remuneration and breaches of trust. The trustees also incurred unsecured borrowing from Mr Abrahams which, on the facts, was not a proper basis for an indemnity out of the remaining trust buildings.

Reasoning and outcome: The court applied charity and trust principles (including the limitations on trustee indemnity where funds are effectively segregated for particular beneficiaries) and statutory guidance (including Charities Act 1993 section 38 regarding secured borrowing). The Bibleway Trustees' indemnity claims failed because the expenditures were either not proper trust liabilities, arose from breaches of trust, or could not fairly be recouped from the remaining buildings. In the exercise of equitable discretion under the Charging Orders Act 1979 the court set aside the interim charging order obtained by Mr Abrahams, concluding that it would be unfair to make it final given the trustees' misconduct and the adverse impact on the congregations. The court directed that cy-près schemes be implemented, transferring each building to be held under special trusts reflecting the "spirit of the gift", with the Charity Commission to make the necessary schemes under section 16(2) of the Charities Act 1993.

At first instance the court dismissed the Bibleway Trustees' claims to be indemnified out of the remaining trust properties (Lewisham, Bethnal Green and Mitcham) because their mismanagement and breaches of trust (mixing funds, ongoing losses, unauthorised remuneration, imprudent borrowing and inadequate accounting) meant any indemnity was not available against those assets. The court set aside the interim charging order obtained by Mr Abrahams and refused to make it final, exercising its discretion under the Charging Orders Act 1979 in favour of protecting the congregations’ interests. The court ordered cy-près schemes for transfer of the three church buildings to local charitable trustees subject to special trusts reflecting the spirit of the original gifts, with the Charity Commission to implement the schemes under section 16(2) of the Charities Act 1993.