Hirani & Ors v Hirani & Ors

A court should be cautious before making declarations by consent where there has been no trial. It should be satisfied that the declarations are justified and will not adversely affect third parties. In hostile litigation between rival groups claiming control of a charity, the dispute is ordinarily treated as adverse litigation rather than trust-administration proceedings attracting special costs protection. Where substantive issues have been compromised, the court may decide costs if it has a proper factual basis for identifying success. If one party has clearly achieved the principal relief sought, the general rule that costs follow the event may apply, despite subsidiary issues or a settlement designed to secure the charity’s future operation.

The claim concerned the constitution and management of the unincorporated charity known as Shree Swaminarayan Satsang. The claimants and defendants disputed the composition of its board and the identity of its office-holders.

The proceedings were compromised shortly before the resumed hearing. The parties abandoned proposed declarations and instead agreed to treat one another as members of the board, to seek a Charity Commission scheme addressing constitutional deficiencies, and to stay the proceedings on those terms. They could not agree the incidence of costs and asked the court to decide that issue.

The central questions were whether the court should make declarations by consent, whether the proceedings fell within the special costs principles applicable to trust administration, and whether the claimants were sufficiently successful to justify an order for costs.

1. Consent order. The court declined to make declarations as to the composition of the board or office-holders. It had heard no evidence or argument on the merits and could not be assured that the declarations would be accurate. The declarations might also adversely affect members of the Organisation who were not parties. The revised order therefore stayed the proceedings on the parties’ agreement, without approving or determining that agreement. The order did not prejudice claims by other persons.
2. Nature of the proceedings and special costs rules. Although the claimants were charity trustees for the purposes of the Charities Act 1993, the proceedings were hostile litigation between rival groups claiming membership of the board. They were not collaborative proceedings brought by trustees jointly to obtain guidance for the administration of trust property. The proceedings therefore resembled the third category identified in Re Buckton [1907] 2 Ch 406, in which ordinary costs principles apply.
3. Costs after compromise. The court applied the caution in BCT Software Solutions v C. Brewer & Sons Ltd [2003] EWCA Civ 939 and the approach in Brawley v Marczynski (No 1) [2003] 1 WLR 813. A costs order could be made because success could be assessed without resolving disputed facts. The principal issue was whether the claimants were board members. The defendants’ agreement that all claimants were members of the board constituted a clear success. The office-holder issue and the general request for a constitutional scheme were subsidiary and did not alter that conclusion.
4. The general rule applied. The defendants were ordered jointly and severally to pay the claimants’ costs of the Part 8 claim, to be assessed on the standard basis if not agreed. The court rejected the submission that a possible adverse effect on future relations justified withholding costs, since the court had to act according to principle rather than speculation.
5. The court also treated the claimants as successful on the discrete preliminary issue concerning the validity of the purported general meeting held on 4 February 2012. The costs order applied to the defendants collectively; there was no sufficient basis for apportioning liability between them.