Marwaha v Singh & Others

Trustees’ power to exercise a discretion under a charity’s constitution does not exclude judicial supervision. Where the true construction of the trust imposes a duty to take reasonable care to exclude ineligible members, breach of that duty may justify intervention even without dishonesty. The court also has general supervisory power to vary a charity’s constitution by scheme. An appellate court should not decide whether the duty was breached where the first-instance judge applied the wrong legal test and the appeal record is insufficient to determine the issue. In such circumstances, the costs order may be set aside and replaced with no order as to costs.

The proceedings concerned elections to the executive committee of a Sikh charity. The appellants alleged that the committee had failed to take reasonable steps to enforce the constitutional rule excluding persons who belonged to another Sikh or Hindu temple from membership.

The High Court held that the committee’s discretion under clause 3(7) could not be reviewed in the absence of dishonesty. It dismissed the complaints about the renewal process, declared an amendment to the constitution invalid, recorded voluntary constitutional changes, and ordered the appellants to pay half the respondents’ costs.

The appeal concerned the correct legal test for intervention, the court’s power to vary the charity’s constitution by scheme, the agreed constitutional amendments, and costs.

1. Disposition. The appeal was allowed in part. The applications to amend the grounds of appeal and admit new evidence were granted. The next membership renewal and elections were ordered to take place in May/June and September respectively. The order requiring the appellants to pay half the respondents’ costs was set aside and replaced by no order as to those costs.
2. Trustees’ duty. The court held that the High Court had taken too narrow an approach. A discretion conferred on trustees by a charity’s constitution does not exclude an equitable duty to exercise reasonable care. Where the true construction of the trust imposes a duty to take reasonable care to exclude ineligible members, the court is not prevented from intervening merely because the trustees were exercising a discretion. Dishonesty is not required. The High Court’s contrary analysis was incorrect. The authorities cited, including Tempest v Lord Camoys [1882] 21 Ch D 571, Dean v Burne [2009] EWHC 1250 (Ch) and Attorney General v Charity Commission for England and Wales [2012] UKUT 421 (TCC), [2012] Ch D 214, did not take the point of law further.
3. The High Court had found that reasonable steps had not been taken, including adequate attention to the dual membership rule and suitable application forms. It had not decided, applying the correct legal test, whether those failures amounted to breach of duty. The Court of Appeal considered that the evidence and the brevity of the appeal hearing did not enable it to determine what the High Court would or should have decided.
4. Supervisory power. The court confirmed that it had a general supervisory power in relation to charities, including power to vary a charity’s constitution by scheme. However, it was uncertain whether the High Court would have exercised that power, particularly because the relief had not been pleaded and interested members or the executive committee might have required an opportunity to consider the proposed changes.
5. The appellants had been justified in commencing proceedings, having regard to the charity’s history, earlier disputes, and the High Court’s findings. The uncertainties about the result that would have followed a correct application of the law justified making no order as to the respondents’ costs.

• Court of Appeal (Civil Division): Allowed the appeal in part, granted applications to amend the grounds and admit new evidence, ordered the timing of the next renewal and elections, and set aside the costs order in favour of the respondents.
• High Court of Justice, Queen’s Bench Division: By order dated 18 February 2013, dismissed the complaints concerning the membership renewal process, declared the purported 2006 constitutional amendment invalid, recorded voluntary constitutional changes, and ordered the appellants to pay half the respondents’ costs.