Hollis & Ors v Rolfe & Ors [2008] EWHC 1747 (Ch)

[2008] EWHC 1747 (Ch)

Case No HC06C03169

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 22/07/2008

Before

THE HONORABLE MR JUSTICE EVANS-LOMBE

Between

(1) The Right Reverend Crispian Hollis, Bishop of PortsmouthClaimants

(1) Edwin Douglas RolfeDefendants

(2) Vivienne Amy Elizabeth RolfeDefendant

(3) The Attorney GeneralDefendant

Mr Ed Morgan (instructed by Matthew Arnold & Baldwin) for Claimants

Mr Mark Warwick (instructed by Howard Kennedy) for First Defendant

Mr Nicholas Isaac (instructed by Direct & Access) for Second Defendant

Mr William Henderson (instructed by The Treasury Solicitor) for H.M. Attorney General

Hearing Hearing dates: 10/4/08 – 9/5/08

Judgment

[1]The Claimants in this case are the Roman Catholic Bishop of Portsmouth (“the Bishop”) as First Claimant, Miss Grundy-Parker, the last surviving member of a Benedictine community of nuns (“the Community”) known as Sister Scholastica (“SS”), as Second Claimant, and Miss Fewtrell, a Benedictine nun, not a member of the Community but attached to it, known as Sister Maura Mary (“SM”), as Third Claimant. SS and SM are respectively 83 and 81 years old. SS joined the Community as a “postulant” on 21st March 1957. SM joined in 1989. By these proceedings the Claimants seek to recover two properties, Penton Lodge (“the Property”), a substantial listed building with extensive outbuildings and grounds in which the Community had been conducting a Roman Catholic school, and West Lodge, originally part of the Property but in the past sold away and subsequently repurchased, which had been transferred by the Community’s trustees (“the Trustees”) comprising SS, SM and Mrs Vivienne Rolfe (“Vivienne”), the Second Defendant, as to the Property, to Mr E.D. Rolfe (“Mr Rolfe”), the divorced husband of Vivienne First Defendant, and as to West Lodge, via a series of three transfers initially to SS, then from SS to SS and Vivienne jointly, and finally from them to Vivienne. I will refer to Mr Rolfe and Vivienne together as “the Defendants”.

[2]The Property was sold by the Trustees to Mr Rolfe as part of a sale and leaseback transaction intended to finance the continuation of the Community’s school known as St. Benedict’s Convent School (“the School”) which was in financial difficulty. By that transaction the Trustees sold the Property to Mr Rolfe who granted to a company, limited by guarantee, incorporated by the Trustees and called St. Benedict’s Convent School Company (“the Company”), a lease of the Property for a period of 21 years at a rent substantially below the market rate for such a property, but carrying burdensome landlord’s repairing covenants, renewable thereafter at a market rent. In consequence the purchase price payable was substantially less than the open market value of the Property with vacant possession at the date that completion of the transaction took place. West Lodge was transferred to SS for a nominal consideration and subsequently in effect given to Vivienne by SS who was her cousin.

[3]It is the Claimants’ case that the transfers of the Property and West Lodge to Mr Rolfe and Vivienne respectively, constituted breaches of the rule against self-dealing, further or alternatively, breaches of trust by the Trustees. The Claimants also allege that the transfers were induced by undue influence, constituted knowing assistance in breaches of trust and knowing receipt of trust property. In the result, so the claims are made, both transactions are void or voidable accordingly. The Defendants deny these allegations, pointing out that the transfer of the Property was made in the course of a financing scheme where all parties to the scheme were advised by solicitors and specialist charities counsel, Mrs Francesca Quint. Throughout the history leading up to the transfers and thereafter the Trustees and the Community were advised by solicitors Messrs Parker Bullen (“PB”). Latterly, and for the purpose of the transfer of the Property only, they were advised by a Mrs Michelle Wilson of Interchange Legal Advisory Service (“ILAS”), a firm of solicitors specializing in charity work, and, for valuation of the Property, by Messrs Cluttons (“Cluttons”), chartered surveyors. For the purposes of the transfer of the Property, Mr Rolfe was advised by Messrs Howard Kennedy solicitors (“HK”). The Defendants contend that West Lodge was not, at the time of its transfer, an asset of the Community vested in its trustees.

The background facts

[4]The inter-relationships between the Claimants and the Defendants is an important aspect of this case. As already described, Vivienne, the Second Defendant, was the cousin of SS, the Second Claimant, having been largely brought up by her as a result of Vivienne’s family circumstances during her youth. It is apparent from the correspondence before the court that Vivienne retained and retains a considerable fondness for SS as a result.

[5]Mr Rolfe and Vivienne were married in 1970 and lived together in No. 112 Beaufort Street in London. Their first son James, who suffers from epilepsy, was born in 1976. They separated in June 1988 when Mr Rolfe went to live in a flat in Queensbury Terrace. On 21st January 1992 Mr Rolfe petitioned for divorce although the separation had been caused by his own infidelity. On 3rd July 1992 a property adjustment order was made whereby No. 112 Beaufort Street was transferred to Vivienne. In 1995 Vivienne sold No. 112 Beaufort Street and bought No. 135 Beaufort Street (“No. 135”) with the proceeds of that sale and money left her by her father. She went to live in a maisonette apartment, part of No. 135, which contained other apartments. She employed Mr Rolfe, who was in the building trade, to supervise building work on No. 135 so that she could let other apartments in it and provide herself with an income.

[6]Also in 1995 a bankruptcy order was made against Mr Rolfe on his own petition. At about this time four companies were incorporated through which Mr Rolfe continued to conduct his building and property development business. This judgment is concerned with two of them, Rose Link Services Limited (“Rose Link”) and EDR Developments Limited (“EDR”).

[7]Rose Link was incorporated in June 1995 by Vivienne and a Mr Dhankot, an accountant who was a friend of hers. They each held half the shares. Rose Link was a property development company which employed Mr Rolfe from time to time, more particularly while he was an undischarged bankrupt. Mr Dhankot resigned as a director of Rose Link in January 1997 when Mr Rolfe became company secretary. In 1999, following his discharge from bankruptcy, Mr Rolfe took over Rose Link when Vivienne resigned as a director and transferred to him her shares in the company, which by this stage included the shares that had been held by Mr Dhankot. Thereafter he ran that company as his own until October 2002 when, on his application, it was struck off the register. Filed accounts of Rose Link show that in one year it turned over £200,000 approximately.

[8]EDR was incorporated on 4th December 2001. Mr Rolfe became a director of it on 1st January 2002. On 22nd January 2002 it entered into a charge with the HSBC Bank. Filed accounts for the company for the year to 31st December 2002 show turnover of £220,781. On the application of Mr Rolfe it was struck off the register on 3rd August 2004.

[9]As will be later described, from about 1999 until completion of the purchase of the Property by Mr Rolfe in April 2003, he had been himself undertaking repairs to the Property, supervising building works by others to the Property and making advances to finance the continuance of the School, which, by the time of completion, amounted to approximately £190,000. It was Mr Rolfe’s evidence that he obtained that money by unrecorded drawings from Rose Link and EDR. Be that as it may, it is not in issue that Mr Rolfe assisted with building works on the Property during that period and made loans financing the School.

[10]It was Vivienne’s unchallenged evidence that in the mid-1990s she and Mr Rolfe came to share the responsibility for looking after their son James who, in 1996, became resident at the National Society for Epilepsy in Chalfont St Peter but who came home to No. 135 at weekends. For this purpose Mr Rolfe moved into a studio flat on the top floor of that house while Vivienne occupied a maisonette in the ground floor and basement. There was no evidence, apart from one sentence in paragraph 44 of SS’s witness statement, that, whereas they co-operated in looking after their son and in Mr Rolfe’s building and development activities, and in their support of the School, they ever lived as man and wife at any material time after their separation in 1988. There is equally no evidence that Vivienne was in any way dependent on Mr Rolfe for financial support after their separation although it is clear that from time to time during that period he depended on her for such support, in particular by making available No. 135 as security for bank facilities to his companies.

[11]SM is a Benedictine nun but has never been admitted as a formal (“canonical”) member of the Community. She came to live at the Property in 1989 and in late 1991 was granted permission by her Mother Superior to remain indefinitely resident there. In 1989 the only surviving members of the Community were the Mother Superior whose religious name was Mother Philomena and SS. I will refer to Mother Philomena as “MP”. The School was largely the creation of MP. It is not in issue that MP was determined that the School would survive her and was concerned that the Roman Catholic Church would seek to obtain possession of the Property which comprised the School’s premises on her death. MP died on 24th April 1991 leaving SS as the sole surviving member of the Community.

[12]By a transfer dated 15th January 1946, the Property, then including West Lodge, was transferred to a Miss Kendall and a Miss Renouf (MP) under a sub-purchase for a price of £5,530. The purchasers were Benedictine nuns who had previously been conducting a school in the Andover area. It is common ground that the Property was purchased for the purpose of providing accommodation at which could be established a Roman Catholic religious community of nuns and at which a school could be re-started. It seems clear from contemporaneous correspondence that the purchase price was provided by Miss Kendall and Miss Renouf from their own resources and from an advance from Barclays Bank to them secured on the Property: see in particular a letter from Barclays Bank to the two sisters dated 5th January 1946 which is in evidence. The Land Registry transfer of 15th January 1946 shows that the property was conveyed to the sisters “as joint tenants”. At its peak the Community consisted of 12 sisters. No formal constitution for the Community, or trust deed for the holding of its assets, came into existence at this stage. Each of the members of the Community, following the rule of St. Benedict, will have made a vow of poverty assigning to the Community all rights to property which they possessed on joining.

[13]On 29th June 1956 a formal written constitution for the Community received Episcopal approval and, as a result, the Community was accepted by the Roman Catholic Church as a “religious institute”. The constitution expressly incorporated certain provisions of the Canon Law of the Roman Catholic Church. Consequent on their vows as Benedictine nuns and in accordance with Chapter XXXIII of the constitution, the following rule applied to the members of the Community:- “Although every professed sister retains the ownership of her property, and the capacity to acquire other property, she may not use for her own advantage and as her own any temporal thing that can be given a value; in order that the decrees of the Holy Canons regarding the vow of poverty may be most faithfully carried out, it is commanded that no sister, even though she be a Superior, may use as her own, movable or immovable goods, money, interest, property, alms acquired by whatsoever title, by her own lawful work or in her own behalf, even though they may be subsidies from relatives, or pious gifts, legacies or donations; but all these must at once be handed over to the Superior.”

[14]By Chapter III it was provided that the “matters requiring the consent of the Chapter [the Community in general meeting] and of the Ordinary [in this case the Bishop of Portsmouth, the First Claimant]” included at sub-paragraph (v):- “(v) Alienation of lands or revenues, the value of which exceeds £2,000, …for all of which the permission of the Holy See is also required.”

[15]The school, which the Community started at the Property, became known as St. Benedict’s Convent School. From time to time after its acquisition sales were made of land and buildings which had formed part of the Property when it was originally bought, so as to provide the Community with money, inter alia, to run the school. There is no evidence that any outside permission was sought or obtained for these sales or that any objection from the Church hierarchy was raised to them. One of those sales was the sale of West Lodge on 5th April 1951.

[16]It is the Claimants’ contention that, by adopting this constitution and applying to the appropriate Church authorities for its acceptance, the Community accepted that the Canon Law of the Roman Catholic Church (then that promulgated in 1917 but replaced in 1983 by a new code, the Codex Iuris Canonici or CIC) was imported in its entirety into the regulation and governance of the Community.

[17]On 23rd April 1959 SS, since March 1957 a postulant, having previously been trained and practised as a teacher, was admitted as a full member of the Community.

[18]The Defendants were married on 16th May 1970.

[19]On 27th January 1976 West Lodge was repurchased by three of the nuns, two of which were MP and SS and the third Kathleen Coyne (known as Sister Benedicta), for a consideration of £8,000. There is no evidence of the source of the purchase monies, in particular, whether that source was the money of the Community or from funds provided by the individual purchasers. SS does not deal with this in her witness statement and she was not questioned about the source of the purchase price in cross-examination. By the Land Registry transfer in respect of this purchase the purchasers declared “that the survivor of them can give a valid receipt for capital money arising on a disposition of the land.”

[20]At all material times there has existed a body known as the Friends of St. Benedict’s Convent School. On 2nd March 1987 there took place the annual general meeting of that association. It appears that the primary source of the pupils attending the school until recently has been the families of servicemen from the various military bases in the area. From the minutes of the annual general meeting it is apparent that in 1986 the school was doing extremely well. In the course of the meeting questions were raised about the future of the school in the light of the fact that the members of the Community were aging and the destination of the assets of the Community was unclear. A Mr J. Davis, Chairman of the Board of Governors of the School, was asked to clarify the position which task he delegated to Mr Melville-Walker, a solicitor who was also a parent who had recently spoken to Mr Bullen of PB, the Community’s solicitor. The relevant parts of the minute read as follows:- “So far as the land and buildings is concerned, that is in the name of four people; one is now deceased, Reverend Mother [MP], Sister [SS] and Father Hogan, they own the building. The way it has been arranged if any dies, the surviving two would continue to own the land and buildings. The main concern is inheritance tax…On the passing of Mother there would be no liability for major tax. Bound to add that on the passing of Sistera catastrophic position. Mr Bullen assured that he is in the course of drafting a trust document. There is no trust as we understand. No document sets out but he is preparing it. It will include drawing in two lay persons who will not be Roman Catholics. The reason two lay persons – if you think the matter through – Sister is the last survivor of the Order and there is an argument if the RC Church wish to advance it that if the Order concluded on the death of Sister Trustees could/should probably sell the land back to the RC Church. Mr Bullen emphasised this was not the case. There had been difficulties in the past years. But no present difficulties. His intention on the passing of Mother is to draft a trust document bringing in lay persons to block the position of settling to the RC Church. So far as the school is concerned that is a business run by Mother and Sister the same as any other business, they undeniably have control of it. Governors have been appointed in view of the recommendation made by the Inspector of Schools. ”

[21]Also in evidence was a document dated March 1987 and apparently emanating from a Mr M. Young, a governor, headed “Summary of discussion with Mr J. Bullen re St. Benedict’s”. Having drawn attention to the fact that the land was currently held in the name of three persons, MP, SS and Father Hogan, it continues:- “The land is held as beneficial joint tenants and therefore on the death of any one of them the land automatically passes to the survivors without any need for any other steps to be taken. It follows that three persons are therefore owning the land at the moment. On the passing of Mother Philomena her interest will automatically pass to the surviving two persons, namely Sister and Father Hogan.”

[22]Later it continues:- “It is the intention of both Mother and Sister to continue the school. That is a view they very strongly hold. The only potential difficulty is on the death of Sister. Then, as this is the end of the Order, the Roman Catholic Church could argue they should step in and sell the school and take the proceeds. The difficulty is that there is no written trust document and the Order of St. Benedict’s is a purely oral concept. There have in years gone by been difficulties with the Roman Catholic Church who wanted to close the school down but that has not been their view for many years and their present policy is understood to be that the school should continue for as long as it provides a useful function which is why two new lay Trustees will be appointed on the death of Mother to make quite sure that any influence the Roman Catholic Authorities might have would hopefully be equalled by the views of the lay Trustees. The intention of Mother and Sister is that even after Sister’s passing the school should continue, a headmistress would be appointed by the Trustees in consultation with the governors…A distinction should be made between the ownership of the land and buildings set out above and the actual business of running the school which is the sole responsibility of Mother and Sister.”

[23]At the succeeding meeting of the Board of Governors of the School on 27th April 1987, attended among others by MP and SS, there was a discussion of the future of the School. Extracts from the minutes of that meeting read as follows:- “Mr Melville-Walker [a solicitor who had been asked to attend] commented, it was Reverend Mother’s and Sister’s wish that the school should continue as an educational establishment. In the event though of it having to close through no fault of the Trustees then any revenue raised from the sale of the property would still be used for educational purposes. It was stressed that the school is a business and therefore a separate entity from the land and buildings but no document existed at present covering the latter. … The Chairman reported that one of the parents had written to the Bishop and his reply – which was totally inappropriate – was read to the Governors. This resulted from the recent meeting with the Friends when the Chairman was unable to give a satisfactory answer to this question. Mr Melville-Walker thought the correspondence had the well-being of the school at heart but it was a tactless move. Mr Bullen definitely does not want the school to get into the hands of the Diocese.”

[24]As presaged in the course of the previous meetings which I have described above, on 20th May 1987 MP and SS entered into a Declaration of Trust of that date. The material parts of this Trust Deed are as follows:- “WHEREAS 1. For many years past there has been established at Andover a Roman Catholic Community known as the Order of St. Benedictine of the Holy Child (hereinafter called "the Order") 2. Since the formation of the Order it has established a Roman Catholic Private School known as St. Benedict's Convent now carried on in the said Penton Lodge Penton Mewsey Andover aforesaid (hereinafter called "the School") under the direction of the Order. The freehold property Penton Lodge and land adjoining was purchased by the Order in or about the year 1946 in the names of Trustees for the benefit of the Order. 3. In or about the years 1959 or 1960 additional Trustees of the said property were appointed upon oral trusts since carried out for the furtherance of the Order and from time to time various Trustees of the said freehold property have died and have been replaced by new Trustees. 4. From time to time various sales and purchases of land and property have been carried out and the freehold property of the Order is now as shown in the Land Certificates set out in the schedule hereto. 5. In addition further cash investments and chattels acquired from time to time have been donated or otherwise acquired by the Order and are subject to the trusts powers and provisions of this Deed. NOW THIS DEED WITNESSETH AND IT IS HEREBY AGREED AND DECLARED as follows: 1. In furtherance of the said wish and subject as hereinafter contained the Surviving Members of the Order confirm and declare that after the death of the last Surviving Member of the Order the Trustees for the time being of the freehold lands and property will hold the before mentioned freehold property and other assets of the Order upon trust to use and maintain the same for the continued use of the School for the purpose of providing education for children professing the Roman Catholic faith PROVIDED ALWAYS that nothing herein contained shall preclude the Trustees from providing places at the School for children not adhering to the faith if the Trustees for the time being shall so decide 2. The Trustees may from time to time acquire by purchase exchange gift or otherwise other freehold or leasehold land and premises for the use of the School… 4. (a) If for any reason any part of the premises from time to time occupied for the purposes of the School should in the opinion of the Trustees become unsuitable or not be required for such purposes the Trustees may (with any consents as by law required) sell exchange or lease the same… 6. The Surviving Members are indeed the only two remaining members of the Order and no further members will be admitted to the Order or Community. The Surviving Members are anxious that the School established by the Order shall continue after the death of the Survivor and are concerned that no written record of the oral trusts has ever been made and wish to declare and confirm as hereinafter contained. 7. In the event of the School becoming bankrupt or if the trusts hereinbefore described shall fail the Trustees shall have power to sell the School and all other property and to hold the net proceeds of such sale upon trust for the Parish Priest for the time being of St. John the Baptist Roman Catholic Church Andover who shall apply the same for the benefit of the Roman Catholic Community in and about the Parish of Andover but to be used in particular for educational purposes” At paragraph 31 of her witness statement SS acknowledges that the 1987 Declaration of Trust was entered into to protect the School from losing its premises to the Church on the Community coming to an end, as is also made clear in the documents leading up to the Declaration of Trust which I have set out above. NOW THIS DEED WITNESSETH AND IT IS HEREBY AGREED AND DECLARED as follows:

[25]Following this meeting Mr Wheelwright, the husband of the deputy headmistress, was added as a Trustee to the title of the Property.

[26]On 24th April 1991 MP died in her 101st year.

[27]In 1991, with the collapse of Communism, the end of the Cold War and the consequent rundown of the armed forces, documents emanating from this time show the beginning of a decline in the financial health of the School.

[28]On 2nd March 1992 SS wrote to the Test Valley Borough Council seeking planning permission to replace a fence at West Lodge which had been blown down. In the course of the letter she writes:- “I am sorry to be so pressing on this matter but both the fence and the lean-to need urgent attention as I have my eye on West Lodge as my future retirement home, and would be unable to undertake any of this work myself. The lean-to was in a very dangerous condition, damp and quite unusable.”

[29]On 9th June 1992 the local fire officer wrote to the Department of Education and Science with a copy to SS drawing their attention to the failure of the School to complete the planned programme of works which would make the Property comply with the appropriate fire regulations and that the School’s odd job man, although he had completed some of the works, was incapable of completing all of them. It appears from SS’s witness statement that what she describes as the “crisis years”, which were the years of financial crisis for the School, had started by 1993.

[30]On 7th April 1993 SS instructed Mr Hiscocks of PB to alter her will so as to make Vivienne an executor. Pursuant to a further will of 13th October 1995, SS left West Lodge to Vivienne on her death.

[31]By a deed of 26th July 1993 Vivienne was appointed a Trustee under the 1987 deed in place of Father Hogan. This appointment had been presaged in correspondence in which SS had described Vivienne as “used to dealing with property” and having “a good head on your shoulders”, and was preceded by a letter from SS addressed to all the parents in which she gave notice of her retirement as headmistress of the School to be replaced by Mrs Wheelwright.

[32]It is not in issue that SS was fully aware that Vivienne and Mr Rolfe were divorced. Notwithstanding this, on 16th October 1994 she wrote to them a letter addressed to Douglas and Vivienne in which she sought their assistance in organising repair work to West Lodge to fend off a threatened compulsory purchase order by the local council because of its state of disrepair. That she received such help is shown by a letter of 27th October in which she expresses her gratitude for “all the trouble you are taking over West Lodge.”

[33]The School’s accounts for the year to August 1995 showed an excess of expenditure over income of £26,888. Minutes of a meeting of the School Governors of 5th February 1996 show that the Community was covering these deficits by drawing on reserves built up during the past years of profitable trading. The minutes record the Governors’ comment that this “drain on reserves must not be allowed to continue”. In evidence was a circular to past pupils of the School dated 5th March 1996, signed by SS, appealing for financial support for the School described as “battling on”.

[34]It appears that SS, who was still in charge of administering the School, was finding difficulty in recovering unpaid fees. On 16th April 1996 Vivienne wrote to Mr Hiscocks of PB concluding her letter by saying, “I am most concerned about my cousin’s health. Any stress or anxiety aggravates her condition so I feel I must take over all the difficult situations and shoulder the problems for her.” Mr Hiscocks responded on 17th April in the course of which he mentions the possibility of SS appointing an attorney. In due course on 15th May 1996 SS signed an enduring power of attorney in favour of Vivienne with general authority to act on her behalf in relation to all her property and affairs.

[35]On 21st May 1996 SS wrote to Mr Hiscocks of PB on the subject of West Lodge:- “As you can see from the enclosed Instrument of Government the whole of the property here belongs to the Community of St. Benedict’s which unfortunately now is just me, although Sister Maura has in a way been adopted by us. Both Sister Maura and myself feel that West Lodge should go to Mrs Rolfe, as it is with the help of her and her husband’s expertise that the work has gone ahead and for grateful help financially [sic] too with the restoration. The rest of the property we wish still to remain a school for as long as it is viable. As you are probably aware, at one point, Mother Philomena sold West Lodge and East Lodge in order to help out the school which was in financial difficulties. When West Lodge became vacant and up for sale again Mother Philomena and friends bought it back from the owner, who kindly let us have it at a lower price than she had already been offered for it. The idea was that this would be a retirement home for the remaining Sisters and in the meantime it should be rented out to provide the Sisters with some kind of income thus making us independent of the school.” Mr Hiscocks responded on 24th May, the material passage from his letter being as follows:- “… all the land at the moment is vested in the Trustees namely yourself, P J Wheelwright, Edna G Fewtrell and Mrs Vivienne Rolfe. The Trustees hold the land in accordance with the Declaration of Trust dated 20th May 1987 and I enclose a copy. The Trustees of the land hold the property for the benefit of the Order. On the death of the last surviving member of the Order the Trustees hold the property for the continued use of the school; and ultimately for St John the Baptist Roman Catholic Church in Andover, for the benefit of the Roman Catholic Community around Andover (for education purposes). It is clear from the School's Instrument of Government that the school itself and the School Governors can never claim any ownership right or tenancy over the land. Equally it would appear that the individual members of the Order do not own the land; but the Trustees hold the land for the benefit of the Order, (with a Licence for the school to use the property), and ultimately for the trusts for educational purposes for the Roman Catholic community described in clause 7 of the Declaration of Trust. The School's Instrument of Government and the Declaration of Trust together raise the question: are you in a position to dispose of any part of the land at the convent to an individual, at your discretion? If not, would it be more appropriate for you to leave a direction to your executors asking them to make a formal request to the Trustees of the land (at the time) to allow Mrs Rolfe to occupy West Lodge, as you would wish, for her 1ife or for as long as the convent occupies Penton Lodge. This request would be asking no more than the school and the School Governors enjoy at the moment - namely a licence to occupy the freehold premises. The school was established by the Order and the Trustees hold the land for the benefit of the Order. On this basis, I am having second thoughts about the draft of your Will and codicil: do you think it inappropriate to include any reference at all to any freehold property of part of the land at Penton Lodge or the Lodge?”

[36]In August 1996 Mr Wheelwright retired as a Trustee. It seems that his retirement was connected with the Trustees’ decision to transfer West Lodge into the name of SS. The Land Registry transfer shows the transferors as being the remaining Trustees, SS, SM and Vivienne. The consideration for the transfer was expressed to be £1. This is the first of the two transactions which the Claimants seek to set aside in these proceedings. Subsequently in 1997 West Lodge was transferred by SS into the joint names of SS and Vivienne and in 2000 by them, into the sole name of Vivienne with no consideration being paid on either transfer.

[37]Mr Wheelwright was replaced as a Trustee by the appointment of Mr Holliday on 30th June 1997.

[38]On 17th July 1997 SS wrote a letter to all the School governors calling upon them to resign. The reason given for this letter was the length of time that they had been in office and the necessity to have “some new faces with fresh ideas.” Under cross-examination SS accepted that the actual reason for doing this was “because I sensed the governors might have been on the verge of wanting to close the school.” In due course on 25th July the six governors resigned as a body. Notwithstanding what she said in her letter of 17th July, SS did not appoint a fresh Board of Governors but rather created an “Advisory Committee”. The first meeting of that committee took place in October 1997 at which SS informed the committee that the School was losing money at the rate of £30,000 per term. In a letter of 27th October 1997, Mr J.W.S. Payne, the Chairman of the Advisory Committee, wrote a letter to one of the recently retired governors of the School in which, having commented on the absence of financial information with relation to the past conduct of the School, he said:- “In view of this lack of information we cannot understand why no action was apparently taken by the Governors and school administrators to correct the very significant losses that the school incurred over the last few years.”

[39]There was in evidence a draft response to this from a retired governor part of which reads:- “As a governing body, we had no power except in an advisory capacity as all power resides in the principal, Sister Scholastica. That being the case, you will agree our hands were tied. We were further handicapped because Sister Scholastica refused to attend meetings so that our advice was relayed through minutes and more often than not ignored.”

[40]An extract from another draft letter in evidence, prepared to be signed by the recently-retired governors, reads:- “The principal [SS] has on many occasions agreed to certain actions and activities which have not been followed through by that office. The last governing body became so frustrated with its inability to influence any event in the school that it reluctantly but unanimously decided en masse to resign. The resignation was an attempt to put some shock waves through the school so that the follow-on governing body would have a better chance of being listened to and be successful in bringing about some constructive action aimed at improving the future of the school. We can but hope that this is the case….”

[41]On 16th November 1997 a member of the Advisory Committee, resigning from that committee as a result of a clash with SS, wrote to her again drawing her attention to the continuing losses being incurred by the School caused by the small number of pupils attending it. In the course of the letter he suggested a sale and leaseback of the Property to a financial institution to raise money to finance improvements.

[42]On 12th November 1997 the School’s head teacher, Mrs Taylor, wrote to SS:- “I have on several occasions now made great efforts to discuss with you the structure of the School. However, as you will not entertain such a discussion I must resort to writing you a letter in order to get over some of the points I must make. I have at all times sought agreement and support from you for everything I have done over the past year. At various times I have given you my ideas on paper. If I have gone ahead to put a plan into action it has been after you have agreed. Since last January I have sought your help and advice because you have the experience and I have always valued your judgement. It is widely known by certain employees at St. Benedict’s that if they do not like what is happening with their position then they can follow one, or both, of two options. Firstly, go directly to Sister Scholastica, or secondly let certain persons, well known to have what is commonly called around School “the ear”, know their feelings on the subject. You then change your mind and tell everyone that you were never in favour in the first place! This leaves me looking (and feeling) like an idiot. I despair. There is no way forward. …” I despair. There is no way forward. …”

[43]In November 1997 the Advisory Committee submitted a financial plan to SS for her consideration. On 13th January 1998 Mr Payne wrote to SS giving notice of his resignation from the Advisory Committee and that of six other members. Extracts from this letter read as follows:- “At our first meeting last October you advised us that the School was losing £30,000 a term and would run out of money in three years…I decided that a small finance group should be set up. This group has spent very many hours evaluating and quantifying the situation and a detailed financial analysis with various projections was carried out. This analysis…was given to you in November. It was also clear that the School had operated for many years with no firm financial budgeting or control and no forward planning and has lost very substantial sums of money every year but one since 1990. Apparently no action has been taken to correct this…The present situation is now critical with the forecast loss for this academic year of over £100,000…As you are aware, Mr Buckley resigned even before the financial report, on the basis that he felt you did not accept that the situation was serious and I am afraid I agree. I should point out that as principal and owner, in control of the financial management of the Convent School, you are the person responsible to ensure that the School trades profitably and honours its moral and legal responsibilities to the children, parents, staff and suppliers.”

[44]The following day he faxed Vivienne and after referring to his letter to SS adds:- “Sister has been informed of all these points and appears to blithely ignore them. We have been gentle to no avail and in view of the situation we feel, for all concerned, she must have the facts put plainly to her. I think she is much tougher than you think! She does play games with people, as we have discussed.”

[45]On 22nd January 1998 there was a meeting of the School staff at which the financial position was discussed. It seems that on the same day there was a meeting between Mr Hiscocks and Mr Le Masurier of PB with SS, Vivienne and Mr Payne, as a result of which SS wrote a letter to all members of the School staff in which she said:- “Yesterday afternoon I carefully studied the minutes of your staff meeting and I must admit that some of it has surprised and I might say in some ways alarmed me. I just want to say that as long as I have life in this body of mine I will fight as hard as I can for St. Benedict’s to continue…For a long while now we have spent more than we have received by fees but last term’s income was the lowest I have seen for many years. The convent reserve has more or less disappeared and the School reserve is sadly depleted but we can beat this. St. Benedict’s is the best school in Hampshire. Please help us to keep it that way….”

[46]On 11th March Mr Le Masurier wrote to Vivienne:- “I am writing further to my letter of 29th January…I recall that John Payne was going to try and arrange a further meeting but during a recent telephone conversation he informed me that further progress seemed unlikely as Sister Scholastica was not prepared to go ahead with any of the proposals that had been discussed.”

[47]It is not in issue that the financial health of the school operation continued to deteriorate during the remainder of 1998 and 1999 with a failure to recruit new pupils and the withdrawal of existing pupils by their parents. On 3rd March 1999 there took place a joint meeting between the staff of the School and the Trustees at which the financial and other problems of the School were discussed. During the meeting it emerged that, in the past year, SS and SM had contributed £20,000 to finance the running of the School, apparently from their own resources, and the meeting was informed that SS had sufficient funds to finance the School for a further year. Minutes of the meeting conclude with the following statement:- “It was felt that a substantial sum of money needs to be invested and/or raised by the School to give it a chance to grow and, without wishing to be disrespectful, Sister Scholastica should perhaps now consider the advantages of allowing a good Board of Governors/management team to assist her with the day-to-day running of the School.”

[48]The minutes also show that the meeting was attended by Mr Rolfe. As Vivienne’s ex-husband, he was known to SS and had been in the habit, in the past, of bringing his children during holidays to camp in the School grounds. Because of his experience in the building trade, SS had approached him for advice on effecting repairs and improvements to the buildings upon which he, himself, worked, from time to time, free of charge. It is also accepted that, from the beginning of 1999 Mr Rolfe, at the request of SS or with her knowledge and tacit approval, began to play a part in the management of the School’s affairs. Thus, from time to time, he can be seen attending meetings at which decisions in relation to the School were made. His contributions were not continuous but were ad hoc.

[49]It appears that in March 1999 SS was persuaded that it was necessary to form a new Board of Governors. On 10th May she wrote to Mr Le Masurier of PB to inform him that she was “transferring the management of St. Benedict’s Convent School in its entirety, to a Board of Governors now to be appointed.” The letter instructed him to prepare “an updated Instrument of Management” for thatpurpose and told him that one of the governors would be Vivienne. She expressed her intention that the decision to effect this change was “irrevocable”. The new Board of Governors consisted of Mr Rolfe as chairman, Mr Holliday, SM, and Vivienne with Michael Volkers as secretary. SS was entitled “Principal”. The new board’s rescue plan for the School involved closing the senior school and concentrating on “pre-prep” and infant pupils. This plan was opposed by SS who wished to keep the senior school open at least until Christmas. Amongst the governors she was supported by SM and Mr Rolfe, Vivienne abstained but the decision to close the senior school was carried by the votes of the remaining governors.

[50]The new Board of Governors appointed the firm of Jones Fisher Downes to act as auditors and accountants of the School, having been introduced through the connection between Vivienne and Mr Fisher of that firm. They were instructed by the governors to make a financial report on the School’s operations. Their report is dated 23rd June 1999, signed by Mr Fisher. Having drawn attention to the fact that no business accounts had been prepared since August 1990 and the general paucity of financial information, his report’s conclusion was that, on its existing pupil levels, the School would lose £58,205 in the year to 31st August 2000 and to trade profitably would require a cash flow over those 12 months of £120,000. On the question of finding money to fund the School during any recovery period his conclusions were as follows:- “I have to conclude that the prospects for any potential investor appear bleak, and, in my view, would present an unacceptable rather than an acceptable commercial risk. The only hope, I feel, is that an individual or individuals could be found, probably from within the existing school staff, parents or governors, who would be prepared to risk substantial sums on the basis of sentiment, rather than sound business judgement. If funding cannot be achieved almost immediately then my view is that, in all fairness to pupils and staff, the school should not commence activities at the start of the new academic year in September.”

[51]The governors considered Mr Fisher’s report at a meeting on 23rd June. Their general conclusion, as noted in the minutes at paragraph 4, was that:- “The meeting considered that there was probably no alternative but to close down the prep and pre-prep parts of the school from the end of this term. Whether the kindergarten and nursery elements remained was a separate question requiring further study.”

[52]Then at paragraph 9:- “…It was the view of all present that for the governors to continue their attempts to rescue the school was pointless. A high risk strategy, financially as well as personally, was only justifiable if the governors could be absolutely sure they would have sole authority to manage, as well as the full support and wholehearted commitment of Sister Scholastica. These conditions they did not believe would be fulfilled over time.”

[53]The governors’ decision was to close the School at the end of the summer term. In the course of the meeting Mr Rolfe indicated his wish to resign as chairman and Vivienne her wish to resign as a governor.

[54]It having become clear that SS was intransigently opposed to the governors’ closure plans, on 7th July the governors wrote to SS resigning as a body. On 19th September Mrs Jerrard who had been acting as deputy headmistress to SS also resigned. Accounts for the School for the period September to December 1999 showed an operating loss of £20,309. In the course of her cross-examination SS agreed that as at October 1999 “things were very, very bad at the School.”

[55]It appears that, in this situation, consideration of SS and those advising her turned to an attempt to raise money by sale of part of the premises comprising the Property known as “Wayside”, an outbuilding. The purchaser was to be Vivienne. This idea was not proceeded with. Other ideas, including a sale of the entire Property, were considered, particularly, in discussions between Vivienne and PB. It was an overriding consideration, in the course of these discussions, that SS should be able to continue to reside at the Property for the rest of her life if possible.

[56]In the course of these discussions a proposal appears to have emerged that the Rolfes should buy the Property from the Trustees subject to a leaseback arrangement so that the School could continue to occupy the Property. From an attendance note of Mr Le Masurier of PB, of 4th January 2000, recording telephone discussions between himself, Mr Rolfe and Mr Hiscocks, it appears that the original suggestion of a sale and leaseback was made by him. His attendance note records that “he [Mr Rolfe] and Viv still like the proposal I put forward at the meeting with RWS and RHSH i.e. that they should purchase the whole school and do a leaseback arrangement which would enable the Trustees to continue spending money on the School and to provide for Georgina in her retirement.”

[57]The attendance note then continues:- “I explained that the difficulty was that there was no one objective and this pointed out the conflict of interest faced by himself, Viv and Georgina whose personal interests clashed with those of the trust. While it would be to the advantage of Doug, Viv and Georgina if Doug and Viv bought the school and used trust money to improve the fabric on what would then be a leasehold property, this arrangement would be to the detriment of the residuary beneficiaries, i.e. the Roman Catholic community in Andover, whatever Doug and Viv’s opinion might be of the needs of that body of persons. It had to be remembered that the money for the purchase of Penton Lodge had been advanced by the Renouf family and it was they who had set up the trust in the first place. It could not be assumed that they would have wished the last surviving member of the Benedictine order to become the owner of the land and buildings. Georgina Grundy Parker had not contributed in any way towards the land and buildings although she was the proprietor of the school business itself and had put her own funds into that enterprise. It was very important to appreciate the distinction between the ownership of the school as a business on the one hand and the ownership of the land and buildings on the other. Doug said he did appreciate this but still felt that something could be done to ensure that Georgina could continue living at the school for the rest of her life, i.e. after the school closed.”

[58]On 7th January 2000 a meeting took place of three of the four Trustees of the Property, SS, SM and Vivienne, Mr Holliday having indicated an intention to retire. The minutes show that also present were Mr Rolfe and Mr Le Masurier and Mr Hiscocks of PB. Minutes of the meeting show that the replacement of Mr Holliday as a Trustee by Mr Rolfe was initially discussed and appears to have been rejected, no doubt, because of the proposition, to which the meeting turned, that Mr Rolfe should purchase the Property from the Trustees. The discussion of this proposal is recorded in the minutes at paragraphs 4 to 8 as follows:- “4. Sister Scholastica and Douglas Rolfe confirmed that the school urgently needed an injection of cash for its survival; and a minimum sum of One hundred and fifty thousand pounds (£150,000) was quoted. This cash would be required to keep the school going for the next four to five years while arrangements were made to put it on a more business like footing. 5. The Trustees confirmed their wish and intention that the school should continue for as long as possible and indeed there was no other senior Roman Catholic School in the area. 6. Mr Douglas Rolfe indicated his willingness, subject to contract, to buy the whole of the freehold property Penton Lodge which he explained would provide the much needed cash for the running of the school subject to the terms of the 1987 Trust. 7. The Solicitors advised the Trustees that they should consider their powers of sale of the premises even though it was still the intention that the school should continue at the premises; and the Trustees should also consider whether they wished to sell the school. At the meeting the Trustees indicated that this would be the only way of raising cash given that any commercial mortgage to a bank would require repayments which the school and the Trustees could not meet in the present situation. 8. If the Trustees sold the freehold property, they would want an immediate leaseback for 21-99 years and Douglas Rolfe indicated that the lease would have to be a full repairing lease, non-transferable, non chargeable to a third party and providing for a rent to be paid in due course or a profit based rent.”

[59]Further at this meeting it was decided that the Trustees would be advised as to the value of the property to be sold by Cluttons or John D. Wood subject to the School’s occupation and that Mr Rolfe would be separately advised by solicitors Messrs Howard Kennedy for the purposes of the transaction, while the Trustees and SS would continue to be advised by PB.

[60]On 11th January 2000 Mr Hiscocks wrote to the three Trustees in which he advised them that:- “The immediate question for the Trustees to consider is whether they would be in breach of trust by selling the school premises and if not whether they are content to sell to Mr Doug Rolfe. Any such sale would in any event have to be supported by an independent valuation of the premises to confirm the price. If the sale was contemporaneous with a long leaseback for the benefit of the school, then the decision may be easier. However, the Trustees would wish to see a draft of the lease before committing themselves to any sale.”

[61]On 17th January Mr Hiscocks again wrote to the Trustees and advised them that:- “Our advice to the trustees is that they have power to sell the freehold of the whole of Penton Lodge. Under the Declaration of Trust of 20th May 1987 there is a specific power in clause 4(a) for the trustees to sell; and in this case the trustees would be considering that the part of the premises affected would be the freehold of the whole of the property, subject to effectively retaining a long leaseback in favour of the trustees. In any event, the trustees would have the power of selling the freehold property under the general law including the Trusts of Land and Appointment of Trustees Act 1996.”

[62]In the course of the remainder of January, February and March, Mr Holliday retired as a Trustee and the Property was transferred into the names of SS, SM and Vivienne as remaining Trustees. Cluttons were appointed by the Trustees to value the Property and they reported on 24th February 2000 that its vacant possession value was £1.1 million and that it would command a rent “in adequate repair and in a suitable condition for educational use” of £70,000. HK were instructed to act for Mr Rolfe in the purchase.

[63]On 20th March 2000 PB wrote to HK:- “We confirm we are instructed by the Trustees of St Benedicts Convent in connection with the proposed sale of this property to your client, Mr Douglas Rolfe, for the sum of £65,000. On completion of the sale, your client is to grant a lease back to our clients for a term of 50 years at an annual rent of £3,000 per annum subject to review. We are pleased to enclose a draft Sale Agreement and Lease, together with copies for your use. We have the following observations: 1. The sale price and rent have been determined by Messrs Cluttons. 2. We understand your client is preparing a Schedule of Works to be carried out to the property, together with a timetable and the intention is that this will be attached to the Lease. 3. It has specifically been agreed that the deposit will be held by us as agents. 4. We understand the parties wish to exchange Contracts by the end of the month.”

[64]The normal procedures in advance of an exchange of contracts were then commenced in the course of which it was pointed out by PB to HK that the sale of the Property would be subject to a right of occupation of SS and SM so that, if the School failed, the purchaser, Mr Rolfe, would only obtain vacant possession subject to that right.

[65]In April 2000 there was a marked decline in the health of James Rolfe. At paragraph 63 of Mr Rolfe’s first witness statement he describes his reaction to this as follows:- “63. James’s illness made me seriously question the wisdom of proceeding to purchase the Property. I continued to explain to the second Claimant my anxieties concerning James’ serious condition, and his future. I also explained to her that I was finding it very difficult to find the time to visit the Property and to involve myself with all of the necessary legal aspects of the purchase. The second Claimant listened to me and said she was very sympathetic and understood. However she repeated her concerns over the future of the school, and again expressed her desire to keep the school going. She said she was also concerned with her own position at the Property. She reminded me of a conversation that she had had with the second Defendant a few months previously, concerning her dread of being put into a nursing home if the Property had to be sold. I said to her that as long as I did not have to go down to the Property too regularly, I would continue with the transaction.” Mr Rolfe was not challenged in cross-examination on this paragraph of his witness statement. SS in evidence said that she could not remember the conversation there described. In any event, it seems that Mr Rolfe was persuaded to continue with the purchase.

[66]On 27th April Cluttons wrote to Mr Bevan-Thomas of PB who had the conduct of the sale on behalf of the Trustees. The letter was mistakenly written on the basis that the purchasers would be Mr Rolfe and Vivienne. However, the advice it gave was that a proper value of the freehold of the Property subject to a full external and structural repairing obligation on the lessor for fifty years at a rent of £3,000 per annum would produce a reverse premium payable by the Community as lessee i.e. by the Trustees. Such a reverse premium could not be afforded and so the sale proceeded on the basis that the leaseback would be for 21 years.

[67]Meanwhile in April 2000 a new head teacher for the School was appointed, Mrs Blowers, who wrote to existing parents informing them that the School would now be a day school only, that it would be co-educational accepting boys and girls between the ages of three and eleven years. Mr Rolfe had been undertaking repairs and improvements to the Property (in particular the portico over the main door which had collapsed) in accordance with the obligations that he would undertake under the proposed leaseback. He also started making advances of money to fund the continuing operations of the School, the first such payment being made on 24th March 2000.

[68]In May 2000 discussions between the Trustees and their advisors continued as to the final terms upon which the Property would be transferred to Mr Rolfe. It was suggested by Mrs Rolfe that the leaseback to be granted to the Trustees should be incapable of assignment by them and restrictions should be placed upon their powers of under-letting so that the Property could only be used as a school. It was suggested that Mr Rolfe would wish to be able to control the use of the Property and that SS would hate to have to share it with other than an educational institution. Mr Bevan-Thomas for PB advised against pressing for any provisions such as these to appear in the lease because they would have been inconsistent with the purpose of the proposed transaction which was to create for the Trustees, in the lease back, a valuable leasehold asset of which they could dispose in the event that the School failed.

[69]It was suggested by PB that the Trustees should apply to the Charity Commission for registration as a Charitable Trust. Both these questions were dealt with in a letter of 10th May 2000 from the Trustees to Mr Bevan-Thomas of PB. Since it shows the state of mind of the Trustees who consisted of the Second and Third Claimants and the Second Defendant, at this important stage leading up to the completion of the sale of the Property to Mr Rolfe, I will set it out in full:- “Further to the telephone conversation you had with Mrs Rolfe and Sister Scholastica yesterday, all three Trustees have now discussed together the details of that conversation concerning the lease back to the Trustees. As we understand Mr Rolfe will purchase the freehold and give back to the Trustees a 50 year lease to enable the school to continue as laid down in the Trust document. Mr Rolfe will be totally responsible for the upkeep repairs and maintenance of the grounds and building, whilst the Trustees will be responsible for the internal decoration, perhaps you can correct us if this is not so. We have now taken on a new head teacher as from 8th May. We have had favourable reports in the local paper and by word of mouth, and a number of enquiries from parents showing an interest in the resurgence of St. Benedict's. Mr Rolfe has been a tremendous help to the school over the last 10 years and especially financially over the last 4 years. We have every faith in his continuance in this matter. We do not feel it necessary to widen the lease to include other commercial interests. The Trust document states quite clearly that the premises are to be used for educational purposes only and that is how we wish it to remain. We understand now that you are saying under the 1992 Charities Act [or similar] that the Trust must now register as a charity and also must advertise the fact that it is selling assets to assist in the continuance of the school. We disagree with this. We have in fact today contacted the Charity Commissioners who inform us that the above is not necessary because the school is owned and run by a religious order that is registered as a Charity receiving tax benefits, the school does not therefore have to register. We have also complied with Section 36 of the Charities Act - Sub Section 6 and 7 by obtaining a valuation from an accredited surveyor ie Cluttons who have valued the property, taking into account the lease back position, with the landlord carrying out repairs and maintenance. We are informed that we do not need to seek their permission to sell. Under the Charities Act Sub-Section 6 and 7 1993 - if leasing back we do not need to advertise because we are replacing in theory a substitute premises for the continuation of the school as stated in the Trust document. Your Mr Bullen was adamant when he first put the Trust together that under no circumstances must we register as a charity and we agree with him. Our instructions to you are: To continue urgently with the exchange and completion of the sale of the freehold with Mr Rolfe and not to place any advertisement in any newspaper or any other news media advertising our private business. We require your response to these instructions.” Our instructions to you are: We require your response to these instructions.”

Our instructions to you are:

[70]I will also set out in full Mr Bevan-Thomas’s response of 12th May as follows:- “Thank you for your letter of 10th May. I have discussed the effect of the 1993 Charities Act on the proposed sale and lease back of Penton Lodge with various colleagues in the firm and our advice to you is as follows: 1. We have to distinguish between the three separate entities at St Benedicts. First, there is the Religious Order which I understand from Mrs Rolfe is registered as a charity. Secondly, there is the school which is run by the Religious Order. Third, there are the Trustees of the land used by the school. The land is held on the terms of the 1987 Trust Deed which make it clear that the land is held by the Trustees for charitable purposes i.e. for the purpose of providing education to the children professing the Roman Catholic faith. The Trustees of the land are a separate entity from both the Religious Order and the school and the best interests of the beneficiaries of the charitable trusts are not necessarily the same as those of the Religious Order and the school. 2. We are providing advice to the Trustees of the charitable trusts and not to either the Religious Order or the school. You must decide what is best for the charitable trust under which the land is held rather than what is best for the Religious Order or the school or yourselves personally. 3. The requirements of the 1993 Charities Act are as follows:(a) The 1993 Act requires the Trustees of all charities to register the charity with the Charity Commissioners. Our advice to you as Trustees is that you should now register the Trust with the Charity Commissioners. However, there is no reason why this in itself should delay the proposed sale and lease back arrangement with Mr Rolfe.

(b) Section 36 of the Charities Act 1993 applies to the proposed sale and lease back with Mr Rolfe. That Section requires the Trustees to obtain an Order of the Court or of the Charity Commissioners if they propose to sell, lease or dispose of land to a connected person. A connected person includes the husband or wife of one of the Trustees. I understand from Mrs Rolfe that she and Mr Rolfe divorced in 1992. When I discussed this point with Mrs Rolfe this morning, I told her we were checking to see whether a couple living together as man and wife would be connected persons even if they were not married. We have now researched the point and I can confirm that if Mr and Mrs Rolfe are living together as husband and wife, then they are connected persons for the purposes of the 1993 Act and the consent of the Charity Commissioners has to be obtained to the proposed sale to Mr Rolfe. You will appreciate that I am not familiar with Mr and Mrs Rolfe's domestic arrangements and therefore I must leave it to the Trustees to confirm whether or not, in light of this advice, Mr and Mrs Rolfe are connected persons. It is likely to take up to two months to obtain the Charity Commissioners' consent to the proposed transaction and it is likely that the Charity Commissioners will require the Trustees to register as a charity before giving their consent.

(c) (i) If Mr and Mrs Rolfe are not connected persons then the sale can proceed without an order from the Charity Commissioners provided the requirements of Sections 36 (3) and 36 (6) are complied with. Section 36 (3) requires the Charity Trustees to obtain a surveyor's report on the proposed transaction and to advertise the transaction in such manner as the surveyor advises (unless he advises that it would not be in the best interests of the charity to advertise the transaction). The Charity Trustees also have to decide, having considered the surveyor's report, that the terms upon which the disposition is proposed to be made are the best that can reasonably be obtained for the charity. The letter previously received from Mr Hampton of Cluttons does not in itself constitute a report for the purposes of the 1993 Act. However, I have spoken to Mr Hampton who has said that he is happy to provide the necessary report and he has also confirmed there is no need to advertise the proposed disposal provided that the disposal is upon the terms set out in his letter of 24th February 2000 and a subsequent letter of 27th April 2000. I attach a copy of his letter of 27th April 2000 for your information. (ii) Section 36 (6) requires the Charity Trustees to give public notice of the proposed disposal, inviting representations to be made to them within the time specified in the notice, being not less than one month from the date of the notice. The Trustees must also take into consideration any representations made to them within that time about the proposed disposal. Although the Trustees must consider the representations, they do not necessarily have to go along with them. The implications of Sections 36 (3) and 36 (6) so far as the proposed sale to Mr Rolfe is concerned are as follows. The surveyor's report has to be obtained before we exchange Contracts. The public notice of the proposed sale can be given after exchange of Contracts but the sale cannot be completed until the Trustees have considered the representations made to them following the notice. Therefore you could exchange Contracts conditional upon the notice being given and no representations being made which cause the Trustees to change their minds in connection with the proposed disposal. The next step is for you to confirm whether Mr and Mrs Rolfe are connected persons. If so, our advice to you is that under Section 36 of the Charities Act the consent of the Charity Commissioners has to be obtained to the proposed sale and lease back. If they are not connected persons, then we can proceed to an exchange of Contracts once a surveyor's report has been obtained from Cluttons. That Contract can be conditional upon the Trustees giving notice of the proposed sale as stated above. Please let me know if you would like me to clarify any of the points in this letter.” (a) The 1993 Act requires the Trustees of all charities to register the charity with the Charity Commissioners. Our advice to you as Trustees is that you should now register the Trust with the Charity Commissioners. However, there is no reason why this in itself should delay the proposed sale and lease back arrangement with Mr Rolfe. (b) Section 36 of the Charities Act 1993 applies to the proposed sale and lease back with Mr Rolfe. That Section requires the Trustees to obtain an Order of the Court or of the Charity Commissioners if they propose to sell, lease or dispose of land to a connected person. A connected person includes the husband or wife of one of the Trustees. I understand from Mrs Rolfe that she and Mr Rolfe divorced in 1992. When I discussed this point with Mrs Rolfe this morning, I told her we were checking to see whether a couple living together as man and wife would be connected persons even if they were not married. We have now researched the point and I can confirm that if Mr and Mrs Rolfe are living together as husband and wife, then they are connected persons for the purposes of the 1993 Act and the consent of the Charity Commissioners has to be obtained to the proposed sale to Mr Rolfe. You will appreciate that I am not familiar with Mr and Mrs Rolfe's domestic arrangements and therefore I must leave it to the Trustees to confirm whether or not, in light of this advice, Mr and Mrs Rolfe are connected persons. It is likely to take up to two months to obtain the Charity Commissioners' consent to the proposed transaction and it is likely that the Charity Commissioners will require the Trustees to register as a charity before giving their consent. (c) (i) If Mr and Mrs Rolfe are not connected persons then the sale can proceed without an order from the Charity Commissioners provided the requirements of Sections 36 (3) and 36 (6) are complied with. Section 36 (3) requires the Charity Trustees to obtain a surveyor's report on the proposed transaction and to advertise the transaction in such manner as the surveyor advises (unless he advises that it would not be in the best interests of the charity to advertise the transaction). The Charity Trustees also have to decide, having considered the surveyor's report, that the terms upon which the disposition is proposed to be made are the best that can reasonably be obtained for the charity. The letter previously received from Mr Hampton of Cluttons does not in itself constitute a report for the purposes of the 1993 Act. However, I have spoken to Mr Hampton who has said that he is happy to provide the necessary report and he has also confirmed there is no need to advertise the proposed disposal provided that the disposal is upon the terms set out in his letter of 24th February 2000 and a subsequent letter of 27th April 2000. I attach a copy of his letter of 27th April 2000 for your information. The implications of Sections 36 (3) and 36 (6) so far as the proposed sale to Mr Rolfe is concerned are as follows. The surveyor's report has to be obtained before we exchange Contracts. The public notice of the proposed sale can be given after exchange of Contracts but the sale cannot be completed until the Trustees have considered the representations made to them following the notice. Therefore you could exchange Contracts conditional upon the notice being given and no representations being made which cause the Trustees to change their minds in connection with the proposed disposal.

[71]In a further letter of 15th May Mr Bevan-Thomas recorded that he had received assurances that Mr Rolfe and Vivienne were not “connected persons” for the purposes of the Charities Act. The letter then deals in detail with the terms of the proposed transaction, in particular the proposed lease in which he makes plain that Mr Rolfe’s solicitor’s attempts to restrict the lessees powers of assignment and under-letting are to be rejected.

[72]Discussions as to the terms of the sale and leaseback continued throughout June 2000. It is not necessary for me to set these out in detail save to mention that in an attendance note of 20th June summarizing advice given in the course of a discussion between Mr Bevan-Thomas, Vivienne, Mr Rolfe, SS and SM, paragraph 3 reads:- “The School is owned by Sister Scholastica in her capacity as Mother Superior of the Order. The School has been run by the Order for many years. She is the last member of the Order. The question then arises as to whether she can bequeath the School in her will. This could be a matter of ecclesiastical law. In any event, she would have to obtain the approval of the bishop if she was to bequeath the School to someone other than a member of the Order e.g. Mrs Rolfe.”

[73]On 29th June 2000 SS and Vivienne executed a transfer of West Lodge into the sole name of Vivienne.

[74]Discussions continued in July which, again, it is not necessary for me to describe save that on 26th July a meeting took place between SS, SM, Mr Rolfe, Vivienne and Mrs Blowers the head teacher, to discuss the steps to be taken in making three of the teaching staff of the School redundant. It is clear from the minutes of this meeting that Mr Rolfe was to be given a role in this process. Paragraph 7 of the minute records Mr Rolfe explaining:- “That when all matters relating to the sale and purchase of Penton Lodge are finalised, monies will be placed on deposit and the School will be allocated funds from that account each month until such time as it becomes self-sufficient once more.”

[75]In early August 2000 HK on behalf of Mr Rolfe sought the advice of counsel, Mrs Francesca Quint as to the proposed sale and leaseback transaction. On 10th August he sent a copy of counsel’s instructions to Mr Bevan-Thomas. Mrs Quint’s opinion is dated 14th August. In the first two paragraphs of the opinion Mrs Quint summarizes her instructions in this way:- “1. I am asked to advise Mr Douglas Rolfe, who is contemplating(i) purchasing the freehold property known as Penton Lodge near Andover, now used as a school known as St. Benedict’s Convent,

(ii) granting a leaseback to the Trustees and

(iii) arranging for a company he controls to take an underlease for the purpose of continuing to conduct a school in the property. The matter is complicated by an unusual legal and factual background. 2. The principal question is whether the property is currently subject to charitable trusts. If so various restrictions will apply on any sale to Mr Rolfe and the scope for granting an underlease to Mr Rolfe’s company will be limited.”

[76]The idea that the School would subsequently be conducted by a company controlled by Mr Rolfe as sub-lessee of the leaseback was dropped. Mrs Quint’s opinion is important for her view of the charitable status of the Trust under which the Trustees held the Property and the Trust purposes for which they held it.

[77]Having pointed out that the authorities establish that religious orders are not necessarily charitable institutions, Mrs Quint’s conclusion, inter alia, from her knowledge of Benedictine orders was that “the correct assumption, therefore, must be that the Order itself is established for charitable purposes even though it has not been registered. The only safe assumption, therefore, for Mr Rolfe, is that the Order is established for charitable purposes and therefore any funds or other property held for purposes of the Order are held on charitable trust.”

[78]Turning to the Trusts upon which the Property was held, Mrs Quint said this at paragraph 15:- “15. The substantive trusts declared by the Declaration of Trust [of 1987] are not intended to take effect until the death of the last survivor of the members of the Order. Thus it appears that the oral trusts were intended to remain in force for the time being, but must have been designed to come to an end when the Order ceased to exist. If the oral trusts were in fact intended to remain in existence indefinitely, there would have been no scope for the subsequent execution of the Declaration of Trust, adding new purposes to those contained in the oral trusts. On that basis the Declaration of Trust would be ineffective. There is no evidence, however, that such is the case, and a court will normally construe documents in the manner which gives legal effect to them.”

[79]At paragraph 18 of her opinion Mrs Quint considers the effect of the 1987 Trust Deed in the circumstances of the closure of the Order upon the death of SS:- “18. What is not clear is whether the gift over takes effect on failure only of the express trusts, i.e. after the closure of the Order, or whether “the trusts hereinbefore described” refer also to the oral trusts mentioned in the recitals. On balance it seems to me that the expression is apt to refer only to the expressed trusts and not to those merely mentioned in the recitals: in other words that there can be no gift over while the Order still exists. 19. On these assumptions, the trustees hold the land and buildings on charitable trusts which are required to be registered under the Charities Act 1993 (see s 3(5)(c)(ii)). There is no penalty for late registration.”

[80]Mrs Quint then considers the Trustees’ power of sale dealt with at paragraphs 21 and 22 of her opinion:- “21. It is clearly arguable that the statutory provisions contained in s 6 of the Trusts of Land and Appointment of Trustees Act 1996 apply, enabling the trustees to sell the freehold and take a lease back of the premises, or part of them, provided that they follow the detailed procedure laid down by s 36(2)-(4) and (6) of the 1993 Act and the Charities (Qualified Surveyors' Reports) Regulations 1992, or obtain the formal consent of the Charity Commission. The powers conferred by s 6 of the 1996 Act, however, are exercisable only 'for the purposes of the trust' and would not, on the above analysis, enable the trustees to dispose of the property entirely. 22. Secondly, if there were to be a lease of the premises (or part of them) back to the trustees, the trustees would not then be in a position to sublet to a commercial company, whether or not controlled by Mr Rolfe, for the purposes of another school. The essence of the oral trusts (so far as they can be ascertained) and the Declaration of Trust is that the existing school should continue in the premises. A disposal designed to lead to this result would not be permitted by s 96 of the 1996 Act because the contemplated purpose would be different from the existing purposes of the trust.”

[81]Mrs Quint then considers the positions of SS, Mr Rolfe and Vivienne:- “Position of Sister Scholastica23. Sister Scholastica, as the surviving member of the Order, the headmistress of the School and a trustee of the property, is obviously a key person. She has several different roles, but in my view they are all in her official capacity as a member of the Order and not in her personal capacity as Miss Georgina Grundy Parker. In my view the School undertaking is not her personal property, and she has no power to dispose of the property or any funds by will because she is merely a trustee.

24. It would therefore be wholly unsafe, in my view, for Mr Rolfe to proceed on the basis that Sister Scholastica is the proprietor of the School or de facto owner of the assets used by the School, let alone that she has any legal interest in the land and buildings vested in the trustees. All that she and the other residents appear to have [been given is] informal permission to reside in the premises so long as (in her case) she is a member of the Order and (in all cases) they are providing services to the School. Position of Mr Rolfe and Mrs Rolfe

25. Mr Rolfe was formerly married to one of the trustees, Mrs Vivien Rolfe, but is not now married to her and so is not her “spouse” and thus not a “connected person” within the meaning of Schedule 5 to the Charities Act 1993 (see paragraph 1(e) and 2(2)). The formal consent of the Charity Commission is therefore not required under s 36(1)(2)(a) of the 1993 Act.

26. I am not told whether Mrs Rolfe is financially dependent on Mr Rolfe, but, if she is wholly or partially dependent on him, she ought not, in my view, to take part in any decision regarding the sale of land and buildings to him since her participation would be tainted by personal interest. It is a general principle of trust law that a trustee should not be placed in a situation whether his/her duty to the trust may conflict with his/her personal interest.”

Position of Mr Rolfe and Mrs Rolfe

[82]It is not necessary to summarize the remainder of Mrs Quint’s opinion since it has been superseded by the further opinion which Mrs Quint wrote for the Trustees to which I will shortly refer.

[83]On 25th September 2000 a conference took place with Mrs Quint at the Property attended by SS, SM, Mr Rolfe and Vivienne and representatives of PB and HK. Mrs Quint was jointly instructed by the Trustees and Mr Rolfe to advise on the proposed sale and leaseback transaction. The purpose of the conference was to gather information and to give interim advice pending the writing of a further opinion. As a result of the conference Mrs Quint asked that SS produce a document recording her account of the “oral trusts” under which the Property was purchased in 1946 and which are mentioned in clause 3 of the 1987 Deed. As a result SS produced a document which she sent to PB under cover of a letter of 29th September 2000 and which reads as follows:- “I have been asked to write down what I remember of the oral trust upon which this Benedictine House was founded. Before starting I must point out that our Community, like most other Benedictine Communities, is autonomous so cannot ask other Communities for help and as laid down by St. Benedict, the work we undertake should be continued within our Convent (or monastery). Most women's communities are dedicated to education: this is the work the sisters have undertaken. The property known as Penton Lodge was bought with funds raised by the Kendall family (Mother Eugene) and the Renouf family (Mother Philomena) and a loan from Barclays Bank on the understanding that the property would remain solely in the hands of the Community, not the school, and that the Community had the right to sell part or all of it should the need arise. The deeds are held by Barclays Bank and always had the names of three sisters on them who held the property for the Community. As sisters died and so we became less than three, the names of two lay people were put on the deed. I am the third. The Bishop of Portsmouth and Vicar for Religious wrote several letters over the years reiterating that the property belonged to the Community and they had the sole right to sell the whole or part of the property should need arise. The governors had no rights over the property, they were appointed to advise and help with the running of the school. (Incidentally, over half the property was subsequently sold to clear the debt at Barclays Bank.) The sisters were to be looked after and cared for by the Community here at the Convent for the rest of their lives unless, for medical reasons, this proved to be impossible, but the cost of their care had to be met by the Community. All sisters after their initial 5 - 6 years have made a solemn promise of stability to this community. The Community was absolved from the promise of care of a sister if, of her own free will, she left the Community, but the Community had to restore to her any dowry she brought with her and the Bishop and Vicar for Religious had to be informed should a sister be found guilty of a serious criminal act, then she could, acting on the advice of the Bishop, be asked to leave and again her dowry would be returned. If she came without a dowry the Community was to give her a sum of money to help her settle in her new life. Towards the end of her life, Mother Philomena was asked to put all this in writing as I was the only member of the original Community left. She did this when she was 99, very ill, and under the influence of morphine. Had she been in her normal right mind she would never have signed the document she signed, nor ordered me to sign it without first letting me read it then submitting it to the Bishop and Vicar for Religious for approval. We therefore believe this Declaration of Trust of 1987 to be invalid. Incidentally, the Bishop gave us permission to have our own chapel provided it was made semi-public (i.e. members of the public may attend services) and we paid for our own Chaplain on the understanding that, should the need arise, he would help out in the parish.”

[84]On 9th October 2000 Mr Hampton of Cluttons wrote to Vivienne:- “I have given some further thought as to what Mr Rolfe should pay to acquire the freehold subject to a 21 year lease in favour of the charity at a rent of £3,000 and on the basis that the landlord is responsible for all external and structural repairs. I have reworked the figures from scratch and the mathematical calculation is that the value of the freehold on the same assumptions as I have made previously but taking into account the terms of the revised lease is £155,000. I think I may have confused you with regard to the £50,000 in my letter of 27th April. This was a negative value which naturally the school would have to pay if they wanted the landlord to be responsible for all repairs and they wanted a 50 year lease but want their rent fixed at £3,000 per annum. This figure compared with £65,000 for the same term, if the property was let on a full repairing and insuring basis. I hope these figures may he of some help to you but if you would like to discuss the matter or would like to meet, please do not hesitate to let me know.”

[85]In November 2000 the Trustees contacted a firm of specialist charity lawyers, ILAS, to advise them on the proposed transaction jointly with PB. The person from that firm concerned was Miss Michelle Wilson (“MW”). On 19th January 2001 MW wrote to Mr Glick of HK:- “It does seem that the transaction is slightly simpler than Ms Quint seems to assume. She envisages a sale by the trustees and a leaseback, and then an underlease to a commercial company, which will run the school. It seems simpler to me to have a sale and a leaseback, but before the leaseback is granted the trustees could direct Mr Rolfe to grant the lease to a company limited by guarantee, which the trustees would form. This company would apply for charitable registration in its own right. It may even be possible for us to do without the need for the trustees to direct. I would like to hear Ms Quint's views on this. Incidentally, I think that the trust deed which we have seen is not yet effective, since there is a member of the order still alive (Sister Scholastica), and it cannot take effect until she dies. We are therefore reliant on the oral trusts, whatever they may say. I would like to ask Ms Quint if the sale and leaseback will mean that the trust deed is either pre-empted entirely, or whether after the death of the last member of the order the trusts will attach to the proceeds.”

[86]In pursuance of MW’s recommendation, ILAS set in hand the incorporation of a charitable company limited by guarantee for the purpose of receiving the 21-year lease to be granted by the Trustees and thereafter to carry on the business of the School. On 15th March 2001 a further conference took place with Mrs Quint on the joint instructions of ILAS and HK. The purpose of the conference was to gather further information from the proposed parties to the transaction with a view to Mrs Quint writing a further opinion. That further opinion is dated 19th March 2001 and I set out below the material passages from it:- “3 It is intended that the trustees should sell the property to Mr Rolfe and that Mr Rolfe should grant a lease, probably of 21 years, to a new company to be set up to take over the running of the school which is currently carried on in the property. If and in so far as Mr Rolfe might wish to make use of unoccupied parts of the property, he would be obliged to pay the new charity a market rate for such use. I confirm that so long as the trustees follow the following course of action there is no legal requirement for them to obtain the prior consent of the Charity Commission:(1) They should first satisfy themselves that there is no prospect that the school can survive without a substantial injection of cash, and that there is no prospect of their being able within a reasonable timescale to sell Penton Lodge and acquire alternative premises of a suitable character and in a suitable area in which they could conduct the school successfully in future. They will need to seek advice on both aspects of the matter, and record their decisions and the reasons for them.

(2) Assuming that they are satisfied that it is necessary to enter into a transaction of the kind offered by Mr Rolfe, they will need to obtain a report in writing from an independent, qualified, surveyor acting exclusively for the trustees (and not for Mr Rolfe), advising on the terms of the transaction and in particular whether they are the best reasonably available in the interests of the trust. The surveyor will have to advise on whether he considers that it would be desirable to market the property, and if so in what way, or whether he advises against any marketing, and, if so, why, and otherwise comply with the Charities (Qualified Surveyors' Reports) Regulations 1992. (3)The trustees must then decide whether they are satisfied that the proposed transaction is the best available in the interests of the trust. (4) If the decision is in favour of proceeding, in view of the possibility that the property is held on oral trusts which provide that it is to be used for the purposes of a school, the trustees should then advertise in the area giving public notice of the intended transaction and inviting anyone who so wishes to make written representations within a specified period of not less than one month, and consider any representations received during that time: see s 36(6) of the Charities Act 1993. (5) Assuming that no reason to defer the proposed transaction emerges from the advertisement, the trustees may then enter into a binding contract with Mr Rolfe without any reference to the Charity Commission. … 5 Mrs Rolfe in the course of the conference explained that Sister Maura had been originally taken on to assist Mother Philomena and had received the permission of the Bishop to remain living with the Order, although she was not formally a member of it. She also mentioned the valuable contribution Sister Maura makes, both to the school itself and, through her teaching work at Buckfast Abbey, to the income of the Order. In the circumstances I cannot advise that Sister Maura is a member of the Order (but see below). Rights of occupation 6 It is my view that neither Sister Maura nor Sister Scholastica has a right of occupation at the property although it may well be that Sister Scholastica is a beneficiary under the oral trusts referred to in the Declaration of Trust. On that basis the trustees could (in law) require both Sisters to leave the property, provided that - in Sister Scholastica's case certainly and in Sister Maura's case probably - they ensured that suitable alternative accommodation was available (but see below). Generally 7 In my view it is essential that the objects clause of the draft memorandum of association of the new charitable company should be widened to include the religious work of the Order as well as the educational work carried on in the school. If the new charity had those wider objects and, preferably, specific powers exercisable in furtherance of the objects, it could properly enter into an agreement with Sister Scholastica and Sister Maura respectively, setting out the conditions on which each of them would be provided with accommodation, subsistence and general support in the property in which the new charitable company would be taking a leasehold interest. 8 It could be made clear that Sister Scholastica and Sister Maura would be responsible for overseeing the arrangements for safeguarding the spiritual welfare of the pupils attending the school, and for the religious services in the chapel. In Sister Maura's case an additional requirement should be that she should contribute materially and/or practically to the activities at the property. It seems to me reasonable that the agreement with Sister Scholastica should specify that provision would be made for her for her life, whereas with Sister Maura it might be wise to leave the possibility open of terminating the arrangement on adequate notice (eg 12 months). 9 I was informed that a new Chaplain has recently been recruited, is paid for his services and provided with board and accommodation although he spends much of his time away from the property. His position would need to be formalised by the new charity, and it would be important to ensure that he had no more than a service licence as respects his sleeping quarters. Future employees could only be engaged by the directors. 10 It is likely that those seeking to establish the new charity would encounter serious difficulties with the Charity Commission in seeking registration under the Charities Act 1993 if either Sister Scholastica or Sister Maura were to be a director (and thus a 'charity trustee' as defined in the Act). This is because they would be receiving personal benefits from the charity's property and would thus be subject to an unavoidable conflict of interest and duty. In addition, trusteeship of a charity has become much more onerous in recent years, and the Charity Commission are showing far less indulgence when dealing with charity trustees who appear to them to have fallen short of best practice. Furthermore, in this case there would be the additional burdens of compliance with the Children's Act and other requirements relating to the conduct of schools. I would therefore recommend most strongly that neither Sister should be a director but that both should be given the special role of Spiritual Adviser to the new charity, and preferably referred to by name in the powers contained in the memorandum.” Rights of occupation

Generally

[87]On 2nd April 2001 the Trustees wrote to PB informing them that it was their intention to instruct ILAS in their place to complete the transaction. Mr Hiscocks for PB willingly accepted this change.

[88]On 14th August 2001 St. Benedict’s Convent School (“the Company”) was incorporated as a company limited by guarantee. The objects set out in the memorandum were to be “to acquire, conduct or develop the Roman Catholic school known as St. Benedict’s Convent School at Penton Lodge Penton Mewsey Andover Hampshire for the continued use of the same for the purpose of providing education for Roman Catholic children (with or without other Christian or non-Christian children)”. The initial directors of the Company were Vivienne, Mr Fisher, Mrs Blowers and Wessex Company Secretaries Limited, an administration company of PB. Clause 5.1 of the Company’s memorandum provided that “the income and property of the Company shall be applied towards achieving the objects of the Company as set out in this Memorandum of Association. No part shall be paid or transferred directly or indirectly to the members of the Company and no director shall be appointed to any office of the Company paid by salary or fees or receive any payment or other financial benefit from the Company”. Succeeding sub-clauses of clause 5 contain provisos allowing the Company to pay bona fide charges for goods and services rendered to it. The subscribers to the memorandum were Vivienne and Mrs Blowers. At clause 3.1 of the Articles of Association the membership of the Company is defined as “the subscribers to the Memorandum of Association and such other people as the Company shall admit to membership.”

[89]Mrs Blowers resigned as head teacher in December 2001 to be succeeded by Mrs Murphy. In January 2002 ILAS applied to the Charity Commission for registration of the Company as a charity. On 20th May 2002 a meeting took place at the Property attended by Mr Hiscocks of PB as a director of Wessex Company Secretaries, directors of the Company, with Vivienne, SM, SS and MW. The transaction had still not been completed, the terms of the lease not having been finalised, although it appears from the minutes of the meeting that there was a prospect that completion would take place shortly. The minute records a discussion in which “we discussed briefly other alternatives to the present scheme but there was no other which suited the School so well, namely ability to stay on at Penton Lodge property which is so suitable for the School and gives marvellous facilities for 2½ to 7 year olds; not having to find the several hundred thousand pounds needed to repair the property and at least 21 years further life. If by then the School has gone from strength to strength then it will not matter paying a full market rent after the 21 years.” That the School was starting to go from strength to strength is evidenced by an attendance note of a conversation with Vivienne on 15th July 2002 recording that “50 children have now signed on and for next term there may be 70.”

[90]On 17th June 2002 Cluttons reported to the Trustees for the purposes of the Charities Act 1993 and the Charities (Qualified Surveyors Reports Regulations) 1992. Having noted the proposed sale and leaseback transaction and described the Property, not including West Lodge, at paragraph 7 Cluttons give their “Advice on Transaction” as follows:- “7. Advice on Transaction We consider that the proposed transaction is extremely advantageous to the Charity. The proposed consideration of £155,000 takes account of the very concessional terms of the proposed lease and we do not think it will be possible to obtain a purchaser on the open market who would offer equivalent, let alone better terms.”

[91]Then, at paragraph 9, their valuation:- “9. Valuation At the time terms were finalised in April 2001, we considered that the value of the whole property was £1,100,000 (one million, one hundred thousand pounds) with vacant possession. The consideration now offered of £155,000 in our opinion reflects the concessional terms now offered by the proposed purchaser under the proposed lease and takes account of the substantial obligations in respect of repairs and refurbishment which the landlord will be taking on. Given the needs of the School, the only other way they could be satisfied would be by the sale of the property with vacant possession and replacement with an alternative building. We understand that the Trustees have assessed their future needs and think they will need a building of equivalent size to the existing school. On this assumption it seems that the school would fundamentally be replacing like with like. In addition they would have to suffer all the costs and upheaval of the move. A replacement building of equivalent size is likely to cost more than the vacant possession value of Penton Lodge although it is likely to be in better condition. We have no knowledge of any suitable replacement building and it is probable that even if such a building were available, it would not be such an attractive property and would not be on such a good site. On balance it seems to us that the proposed sale and lease back on the agreed terms is the best way of satisfying the requirements of the school for the foreseeable future.”

[92]On 20th August 2002 Mr Le Masurier wrote to Vivienne a letter, the contents of which I will set out in full because they are important:- “Having had an opportunity of reviewing the files on their return from our Andover office, there are a couple of points I feel I should just raise with you concerning the lease to St Benedict’s. I believe Michelle Wilson has also made reference to these matters and I do apologise for repeating the points she has made but I felt that I should bring them to your attention in any event. As you may appreciate it is extremely difficult to advise you separately in this case (separately that is from Doug) because although you are strictly not “connected persons” for the purposes of the Charities Act, the involvement which you both have with the school is not only immense and hugely beneficial to the school but is also very obviously a team effort. Furthermore without the substantial payments made by Doug to enable the staff salaries to be paid (and there is a schedule of these payments in the file) it is clear that St Benedict’s would have disappeared from view a long time ago. From your own point of view as Director (and formerly a Trustee) of the school you should note (and I’m sure you already have) that at the end of the 21 year term of the present lease any subsequent lease will be on the basis that the school is responsible for the maintenance and upkeep of the building under a full repairing lease. For that reason it will be important to ensure that during the initial 21 years, the building is properly maintained so that when the school takes over liability at the end of the term the premises are in good order and not in need of extensive repairs. At that time the rent will also increase substantially as the landlord will be entitled to charge a commercial rent. The other matter concerns the consequences of a possible failure by the school to continue trading during the initial 21 year term. If for any reason the school fails, you as a Director might have hoped that you would be able to assign the lease at a premium to some other person or institution. Under the terms of the lease however the school must instead offer the premises to Doug for no payment. In raising these matters I’ve done no more than repeat the observations contained in Michelle Wilson’s report dated 15th May 2002, and I am sure that you have already considered them carefully. I shall assume unless I hear from you to the contrary that your instructions remain that we are to get matters completed as soon as possible and I shall report to you further very shortly.”

[93]Consequent on this letter and the advice of Miss Wilson, the terms of the transaction were changed so that, in the event of the School closing during a 21 year term and the Company having no further use for it for its own purposes, the Company could dispose of the lease at market value. It follows that, as a result of this change, the position proposed for the Company was stronger than that under consideration at the time of Cluttons’ report of 17th June 2002.

[94]On 17th April 2003 contracts were exchanged for the sale of the Property on the terms which had finally been arrived at between SS, SM and Vivienne (the Trustees) as vendors, to Mr Rolfe, as purchaser, subject to the grant of the leaseback to the Company, which was completed by a transfer entered into on the same day and the grant of a 21 year lease by Mr Rolfe to the Company at a rent of £3,000 per annum, Mr Rolfe accepting, by the terms of the lease, an obligation to undertake extensive works of refurbishment and maintenance over a period of ten years. Upon the expiry of the 21 year term of the lease the Company was to have a right to renew but at a market rental. At the same time Mr Rolfe signed a side letter addressed to the Company and the Trustees which stated that in consideration of their completing the transaction he confirmed on his own behalf and his successors in title that so long as the Company’s lease existed he would allow the Company to underlet part or parts of the Property provided that:- - “The underletting or underlettings are of the whole or part of the buildings shown shaded blue on the attached plan - You obtain my prior written consent to any proposed underletting - Any underlease is excluded from the security of tenure provisions contained in the Landlord and Tenant Act 1954 In return for this concession you agree that you will give favourable consideration to any application by me for licence to use any part or parts of the Premises for commercial activities on reasonable and economic terms. This concession is not assignable.” Further at completion the Company entered into two licences to SS and SM giving them a licence to continue to occupy their existing apartments in the Property as part of their appointment as “spiritual advisors” to the School and so long as they continued to hold that position. Copies of all the documents associated with the transaction, which were entered into on 17th April 2003 are included in a schedule to this judgment.

[95]In April 2003 Mrs Murphy’s employment as head teacher was terminated and she was replaced by Mrs Sherwood-Clarke who retained that position until the School closed and was a witness in these proceedings.

[96]In the meantime Mr Rolfe’s “investment” in the Property and the School had continued, in the course of which he undertook works of refurbishment and improvement to the Property in partial discharge of his obligations under the lease to the Company and he made advances to the Company to finance the continued operation of the School. By the date of completion of the transaction, these advances exceeded the consideration payable on completion of £155,000. Accordingly the Company entered into a charge of its lease of the Property to Mr Rolfe to secure repayment of this excess.

[97]The remaining background facts may be taken reasonably shortly. In May 2003 SS and SM started to complain about the actions of Mr Rolfe and the governors of the School which do not have to be described in detail, but continued on and off until the closure of the School. Suffice it to say that, during that period, SM moved from her lodgings in the outbuildings to occupy a room on the first floor of the main building adjoining the apartments occupied by SS with a fine view over the adjoining land. There was evidence that she was pleased by this move. Their complaints appear to have been caused by relatively minor restrictions on their use of the Property and its garden and on the access of outsiders who formed a small congregation to attend worship in the small chapel maintained by SS and SM.

[98]On 11th July 2003 Mr Rolfe entered into a Deed of Trust in which he declared himself to hold the Property upon trust for a company, Penton Lodge Estates Limited (“Penton Lodge”) absolutely. Recital (B) to the Declaration states “the purchase price and all costs and expenses and stamp duty in relation to the purchase [of the Property by Mr Rolfe] were provided by the Company [Penton Lodge]”. It was Mr Rolfe’s evidence that his refurbishments of the Property and loans to the Company were financed by bank borrowings, initially, from HSBC and latterly from Allied Irish Bank, lent by those banks to the Company and Penton Lodge and guaranteed by him.

[99]On 22nd August 2003 Mr Rolfe was registered at the Land Registry as the owner of the Property. On 5th January 2004 the Charity Commission wrote to PB informing them that the Company was registered as a charity.

[100]On 19th March 2004 SM wrote to the Bishop a letter giving voice to the complaints of SS and herself as to the then current situation at the Property. In the course of that letter she describes Mr Rolfe as the “new owner” and gives her description of the transaction whereby he became such owner. The cause of the letter was a problem which had arisen as a result of the then chaplain of the Community, Fr. Watts, refusing to move from the rooms in the outbuildings of the Property where he was accommodated, into the main building in order that works of conversion for the purposes of the School could be embarked upon. This letter was followed by a letter from Vivienne to the Bishop of 31st March 2004 seeking his help in solving the difficulty with Fr. Watts, but also describing, in greater detail, the transaction whereby the Property had been sold to Mr Rolfe. There is no response to these letters from the Bishop in evidence.

[101]On 20th May 2004 the School’s accountants sent to Vivienne copies of its accounts for the year to 31st August 2003 signed by Mr Fisher. In the course of that letter he writes:- “As you will see from the accounts, the turnover, notwithstanding the effective donation of £155,000 [from the Community], has increased with the success of the development of the school with the result that the brought-forward loss of £79,441 has been almost completely wiped out. Mr Rolfe’s loan account now stands at a figure of £129,054, which reflects the debit for the sale of the freehold and also a credit in respect of approximately £52,000 worth of additional loan monies injected into the school during the year. All other items are self-explanatory, although it should be pointed out that I have amortized the lease over its 21-year life and I have also credited Mr Rolfe’s account with the annual rent of £3,000 which was due at the date of the lease.”

[102]On 8th July the Company’s leasehold title was registered at the Land Registry.

[103]On 23rd June 2005 OFSTED inspected the School and reported “there are currently 140 children aged 3 months to 5 years on the roll. The quality and standards of care are good. The registered person meets the national standards for under-8s day care and child minding. The quality and standards of the nursery education are outstanding.”

[104]On 28th October 2005, without, apparently, any prior warning to the School, the Defendants or the Community, the Bishop applied to enter a restriction on the title to the Property. At box 13 of the application, “evidence that the applicant has sufficient interest”, the following appears:- “Edwin Douglas Rolfe was stated to have paid £155,000 for this property (and other property) on 17th April 2003. Prior to this time the property formed part of a trust. The trust was formed in the 1940s and was for a considerable period of time an oral trust, evidenced in writing by a Declaration of Trust dated 20th May 1987. A copy of this document accompanies this application. It is alleged that the trustees in 2003 acted in breach of trust by causing or permitting the property to be transferred to the now-registered proprietor and that that breach of trust was to the detriment of the ultimate beneficiary, as listed at paragraph 7 … [i.e. the Bishop as applicant]. Notice of this application was given by the Land Registry to Mr Rolfe on 31st October 2005.”

[105]In December 2005 the Bishop petitioned the Holy See in Rome seeking an order for the “suppression”, i.e. dissolution, of the Community and that he be granted “competency to recover and protect all ecclesiastical property enjoyed by and vested in the Community”…. At paragraph 11.5 of the petition, having noted that the School was being conducted by the Company, the petition states that “throughout this period, there has been no attempt to regularize the status and rights of occupation of the School over the [Property]. There is nothing to suggest that the Company had been granted any formal lease over any part of the Property”. At paragraph 15.6.2 the petition states that “following the purchase, a lease would be granted to St Benedict’s School, the occupation rights retained by [SS] and other residents were reduced to a personal licence, terminable upon reasonable notice.” At paragraph 16 the petition states that “further such transactions were devised and implemented at a time when those involved had concerns regarding the ability of [SS] to manage her affairs.” At paragraph 17.6 and 17.7 the petition states that “the purported alienation of the Property was at a manifest undervalue (£150,000 as against in excess of £1.5 million)… The beneficiary of the purported disposal of the Property was within the prohibited degrees of affinity being the husband of Mrs Rolfe previously referred to”.

[106]On 12th January 2006 Mr Fisher wrote to the Charity Commission informing them of the details of what was occurring. On 24th January the Holy See made a decree of suppression of the Community. On 17th February Mr Rolfe’s solicitors wrote to the Bishop’s solicitors challenging their locus standi to register a restriction against the Property. There then followed a series of letters protesting at the effect which the restriction would have on the ability of the School to obtain funding from its bankers.

[107]Those protests, which evinced no response from the Bishop, having failed, on 7th April 2006 the Company’s bankers, Allied Irish Bank, made demand for immediate repayment of its overdraft of £49,000 and called on Mr Rolfe to honour his guarantee to the Bank of the Company’s account. On 21st April 2006 the School closed at a time when it had 170 children on its books and 42 staff.

[108]These proceedings were commenced by a claim form of 10th August 2006 alleging “breach of fiduciary duty, breach of trust, knowing assistance in breach of trust, knowing receipt of trust property and breach of trust.” On 20th September 2006 a winding up order was made against the Company. On the ground, apparently, that the restriction on the title to the Property rendered the leasehold unmarketable, the Liquidator has subsequently disclaimed the Company’s lease of the Property. On 7th November 2006 at an interlocutory hearing of the proceedings, Mr Justice Lawrence Collins made an order that unless the Bishop gave an undertaking as to damages in support of the restriction on the Property which he had obtained, that restriction was to be vacated. That undertaking was subsequently given. There then followed pleadings.

[109]At the commencement of the hearing it occurred to me that the claim constituted charity proceedings and that the Charity Commission should be notified of its commencement. Following a short adjournment to enable this to be done, pursuant to an application in that behalf, the Attorney General was joined as a party to the proceedings for charity and I have had the benefit of the submissions of counsel instructed by her.

The Claimants’ pleaded case

[110]Paragraph 2 and following of the Particulars of Claim pleads as follows:- “2. [The Bishop] is and was at all material times the ecclesiastical authority for the Roman Catholic diocese of Portsmouth and in pursuance thereof was and remained entitled to all rights in the Property and assets of the Community upon its demise. 3. Further and pursuant to a decree issued by the Holy See on 24th January 2006, the Religious Institute formerly comprised in the Community was suppressed pursant to CIC and all causes of action vested in and/or previously enjoyed by the Community over or in connection with inter alia the Property and West Lodge were vested in [the Bishop]. 4. [SS] is and was at all material times to these proceedings the last surviving canonical member of the Community and together with [SM and Vivienne] was registered beneficial owner of the Property subject to the trusts hereafter pleaded… 9. From the commencement of the Community, assets were acquired including the Property and West Lodge. All such assets were held under express or implied resulting and/or constructive trusts for the sole and exclusive benefit of the Community… ”

[111]Between paragraphs 11 and 14 are pleaded the recognition of the Community in 1956, its adoption of its constitution and incorporation of provisions of the Code of Canon Law 1917 and the promulgation in place of that code of the CIC. Then at paragraph 15 it is pleaded:- “15. Accordingly from November 1983 the Community and all those participating in the management and administration of its affairs, including its assets, became subject to the CIC.”

[112]Various provisions of the CIC are pleaded at paragraph 16 as regulating the affairs of the Community of which the following appear relevant:- “16.7 The acquisition of property and the administration of assets (c 635); 16.12 The requirement for obtaining episcopal and/or pontifical permission for the proposed alienation of assets of significant value; 16.13 The destiny and entitlement to the assets of the Community upon its suppression by the Holy See.”

[113]The pleading continues:- “17. As at the time of the events material to these claims, the only canonical member of the Community was [SS] who was herself related by consanguinity and/or affinity to [Mr Rolfe and Vivienne]. In consequence, and by reason of the absence of any canonical chapter, finance officer or council [there being only one surviving member of the Community] no transaction was capable of being adopted in compliance with the CIC, save with the written permission of the diocesan bishop and/or the Holy See.”

[114]The acquisition of the Property and West Lodge for the purposes of the Community are pleaded at paragraph 19 and as being subject to trusts as pleaded in paragraph 20, but, in particular, as pleaded in paragraph 20.3:- “20.3 All or any property would be administered and preserved in accordance with the obligations imposed under Canon Law applicable from time to time. 20.4 All or any property would be held, preserved and safeguarded as temporal goods of a Religious Institute of Diocesan Right and would constitute the temporal goods of the same within the meaning of Canon Law and subject only to those transactions expressly permitted by the constitution and/or the code of Canon Law… 21.2 In accordance with CIC it was not open for [SS] to dispose of any property held by or on behalf of the Community; 21.3 Absent any amalgamation with any other Religious Institute, the Community would cease its apostolate upon the death of [SS] and all or any assets vested in and/or subject to trusts in favour of the Community would revert and devolve to the hierarchical superior in the form of [the Bishop] in accordance with the CIC. … 24. Further, and for the reasons previously recited, the parties to the declaration [the Declaration of Trust of 1987] enjoyed no authority or competence to dispose of or otherwise subject the assets there identified to the trusts declared or at all.”

[115]At paragraph 35 of the Particulars of Claim it is pleaded that:- “the transactions forming the subject matter of these proceedings [the disposition of West Lodge and the Property] were implemented and adopted by [the Defendants] acting in concert for the advancement of their own interests and in relegation of those of the Community and/or [SS and SM] and that the transfers were:

“35.1 in breach of the express and/or implied and/or constructive trusts to which the Property and West Lodge were subject;” 35.2 effected by [Mr Rolfe and/or Vivienne and/or the Company] at a time when they (and each of them) were knowingly assisting in breach of trust and/or knowingly receiving property in breach of trust; 35.3 adopted in breach of fiduciary duty and constituted infringement of the rule against self-dealing (whether in equity or in CIC); 35.4 borne of undue influence. 36. In the premises, the Property and West Lodge are and remain impressed with a constructive trust in favour of the Community represented since the decree of suppression of 24th January 2006 by [the Bishop].”

[116]Between paragraphs 37 and 44 the circumstances of the acquisition by the Trustees of West Lodge and its subsequent transfer to SS and finally to Vivienne are pleaded. Notwithstanding this pleading, it is accepted that only the first of the transactions involving West Lodge now fall to be examined, namely the Declaration of Trust and transfer by the Trustees both dated 29th August 1996, whereby West Lodge was transferred by the Trustees to SS. If that transfer cannot be set aside, it is accepted that the subsequent transfers of West Lodge by SS must stand. These proceedings are not brought by SS in her own right to recover West Lodge from Vivienne. It follows that, unless SS was absolutely entitled beneficially to West Lodge as at the date of that transfer, it must be set aside as a disposition in breach of trust. Whether it was such a disposition must turn on whether West Lodge formed part of the assets of the Community after it was repurchased by Sisters Renouf, Coyne and SS in January 1976 for £8,000.

[117]The disposal of the Property to Mr Rolfe is dealt with in the Particulars of Claim between paragraphs 50 and 67. At paragraph 51 it is pleaded that:- “In or by January 2000 [Mr Rolfe and Vivienne] were desirous of continuing the operation of the School in which they were by now the guiding minds, and sought to arrange the acquisition of the Property from the registered owners including [Vivienne] as trustee, with a view to a sale and leaseback of the Property to a newly-created legal entity independent from the Community. In short the disposal by the Trustees of what by then was the Community’s only asset.”

[118]Having set out the various legal advisers to the parties to the transaction and pleaded that neither SS nor the Community were independently advised and neither the Bishop or the Holy See were consulted, the pleading continues at paragraph 54:- “54. Both [Mr Rolfe and Vivienne] were connected persons for the purposes of the proposed transaction on the grounds that they:54.1 had formerly married;

54.2 pursuant to CIC remained married absent any canonical proceeding for annulment;

54.3 were connected persons for Canon Law purposes on the grounds that they were related to [SS] by consanguinity and/or affinity;

54.4 resided at the same residential address;

54.5 participated in directorships in related business;

54.6 conducted themselves in a manner consistent with financial interdependence;

54.7 shared all intelligence and advice relative to the dealings of the Community and its affairs;

54.8 conducted themselves in a manner which was inconsistent with transactions at arms length both as between themselves, third parties and other organisations which they purported to represent.”

[119]Between paragraphs 55 and 62, having, at paragraph 55 pleaded that the Defendants had actual or constructive knowledge that the Property was held upon trust “and/or that any proposed transaction necessarily required the clearance and approval of the ecclesiastical authorities”, the pleading then sets out facts leading up to the transaction of sale in April 2003. The pleading then continues at paragraph 63:- “63. The transfer of the Property was in breach of the rule against self-dealing in that63.1 The same represented a transaction between connected persons; namely [Mr Rolfe and Vivienne]

63.2 [Mr Rolfe] was at all times and remained a fiduciary and actual trustee and/or trustee de son tort in connection with the Community and its affairs [i.e. under the trusts of the Property and West Lodge upon which they were originally purchased] … 64. Further the transfer was made at a time when [Mr Rolfe and Vivienne] well knew and understood and/or ought to have known that:

64.1 The transaction was inconsistent with the purposes of the trust then extant;

64.2 The transaction was to the manifest disadvantage of the Community;

64.3 The transaction culminated in the disposal of the only remaining asset of the Community and/or by reason of the value of the asset, the same required consideration and approval of the ecclesiastical authorities. 65. Further and/or in the alternative [SS and SM] participated in the said transaction by reason of undue influence. In support of such contention [the Bishop] relies upon the following matters:

65.1 The absence of any financial or other benefit to the Community;

65.2 The failure to secure independent legal advice for the benefit of the Community and/or [SS and/or SM];

65.3 The disparity between the open market value of the Property [sic] and the absence of any form of leaseback in favour of the Community; [the disparity here referred to must be the difference between the contractual price and the open market value with vacant possession at the date of the transaction]

65.4 The absence of any monetary consideration payable to the Community.

65.5 The absence of any grant of rights of occupation from [Mr Rolfe] to the Community and/or [SS or SM].” 63.1 The same represented a transaction between connected persons; namely [Mr Rolfe and Vivienne] 63.2 [Mr Rolfe] was at all times and remained a fiduciary and actual trustee and/or trustee de son tort in connection with the Community and its affairs [i.e. under the trusts of the Property and West Lodge upon which they were originally purchased] … 64.1 The transaction was inconsistent with the purposes of the trust then extant; 64.2 The transaction was to the manifest disadvantage of the Community; 64.3 The transaction culminated in the disposal of the only remaining asset of the Community and/or by reason of the value of the asset, the same required consideration and approval of the ecclesiastical authorities. 65.1 The absence of any financial or other benefit to the Community; 65.2 The failure to secure independent legal advice for the benefit of the Community and/or [SS and/or SM]; 65.3 The disparity between the open market value of the Property [sic] and the absence of any form of leaseback in favour of the Community; [the disparity here referred to must be the difference between the contractual price and the open market value with vacant possession at the date of the transaction] 65.4 The absence of any monetary consideration payable to the Community. 65.5 The absence of any grant of rights of occupation from [Mr Rolfe] to the Community and/or [SS or SM].”

[120]At paragraph 66 the allegation that the Defendants had knowledge of the trusts upon which the Property was held is repeated and it is alleged that they also knew that the permission of “the ecclesiastical authorities” was needed for the sale to proceed. At paragraph 67 it is alleged that “in fact, pursuant to provisions of CIC, the said transaction required the approval of the Holy See on the grounds that:67.1 The value of the asset exceeded the threshold for permission;

67.2 The Property represented the patrimony of the Community;

67.3 The Community was under Canon Law incapable of divesting itself of any property by reason of the fact that the requirements of the constitution would not be complied with.”

The 1946 Trust

[121]It is first necessary to define the trusts upon which the Property, including West Lodge, was held, initially by Miss Kendall and Miss Renouf. I have had the benefit of submissions, written and oral, from Mr William Henderson on behalf of the Attorney General directed to this question. It is his submission that where a property has been conveyed to purchasers “as joint tenants” it is necessary to look at the conduct of the parties both before and after the acquisition to determine upon what trusts that property was acquired: see Stack v Dowden

[2007] 2AC 432

per Lady Hale at paragraph 61 approving a passage from the judgment of Lord Justice Chadwick in Oxley v Hiscock

[2005] Fam 211

. However, as the House of Lords recognized in that case, the presumption that beneficial ownership follows the legal ownership is stronger where the property is purchased for domestic purposes as opposed to a case, such as the present, where the property was purchased for the purposes of providing accommodation for a convent and a school.

[122]No witness survives from the purchase of the Property in 1946. It follows that the intentions of the parties to the transaction of purchase have to be discerned from contemporary documents both before and after acquisition. SS became a member of the order as a postulant in 1957. Mr Henderson has helpfully added, as an appendix to his written submissions, a schedule of the documents which he submits are relevant to this issue. They are numerous and I will not attempt to set them out or separately summarize their effect. Suffice it to say that the most important of those documents are the deed of 20th May 1987, made by MP (who was one of the original purchasers) and SS and, in particular, the recitals to that deed which I have set out above and the document created by SS consequent on the conference with counsel of 25th September 2000 which again I have set out above, see paragraph 83.

[123]I accept Mr Henderson’s submission that the Community bears a strong similarity to the “Sisters of Charity of St. Paul at Selley Oak” described in the case of Cocks v Manners [1871] LR 12 Eq 574 at page 576of whom “the primary object of the congregation [was] the personal sanctification of the members, who, as a means thereto employ themselves in the exercise of works of piety and charity, principally in teaching the children of the poor and in nursing the sick, that they are enjoined to employ themselves sedulously to acquire sufficient skill and knowledge to enable them to become teachers in school and nurses of the sick, and when found to be fully competent they are chiefly employed in those capacities in localities where their services are required”. The congregation in question was of Roman Catholic women living together in premises at Selley Oak or otherwise at locations to which they were sent as part of their work. The congregation was held to be a charitable institution and the gift to it provided for under the will in issue in the case was held to be good.

[124]As in the Cocks v Manners case, in the present case the Community was active as opposed to contemplative. Thus although an object of the Community was self-sanctification, that was to be brought about by charitable work for the benefit of the community at large, namely, the provision of education.

[125]I accept Mr Henderson’s submission that the Property was purchased and thereafter held upon trust to provide a residence for the Community and for the promotion of the Christian religion in accordance with the Roman Catholic rite by means, inter alia, of the provision of a school primarily for children living in the area of Andover. Mrs Quint’s opinion was that the oral trusts under which the Property was held after its acquisition were charitable and I agree with her. The individual beneficiaries of the trust, besides charity, were the members of the Community for the time being for their maintenance and support in the charitable work they were undertaking.

The effect of the adoption of the 1956 Constitution

[126]The first point to be made on this question is that, as a matter of fact, it seems clear that no-one involved was aware of the existence of the 1956 Constitution at the time the transactions sought to be attacked were entered into. Indeed it has only recently come to light. Nobody was able to tell me precisely when this happened but it seems that the Constitution was “discovered” in the course of the preparation of the petition seeking the “suppression” of the Community as a result of researches in the Vatican archive. It is true that from time to time there appears in the correspondence and other documents the suggestion that the Bishop’s permission might be required for any part of the Property to be sold but these suggestions are not made by reference to any constitution of the Community. It is also true that SS refers to the 1956 Constitution in her witness statement as if she has been aware of its existence at all material times. I regret to say that I find this hard to accept particularly in the light of the terms of the 1987 Declaration of Trust which she made with MP and records of the discussions which preceded it, some of which I have set out above. Nowhere in those discussions do we see any mention of a constitution of the Community which one would have expected to be fundamental to what was being proposed. In particular, the existence of a constitution regulating the conduct of the Community and its purposes is nowhere mentioned in SS’s declaration of 29th September 2000. Accordingly its potential effect is not dealt with by Mrs Quint in either of her opinions.

[127]I have summarized above the Claimants’ pleadings and have quoted a number of its provisions. It is apparent from that pleading that the First Claimant’s claim is based on the incorporation of Canon Law into the 1956 Constitution and, in particular, as to the destination of the assets of the Community on its dissolution as a result of suppression. The crucial paragraphs of the Points of Claim are paragraph 15, 18, 20.4, 21.2, 21.3 and 36, the latter paragraph reading:- “36. In the premises, the Property and West Lodge are and remain impressed with a constructive trust in favour of the Community represented since the Decree of Suppression of 24th January 2006 by [the Bishop]”

[128]It was Mr Henderson’s submission and I accept that the incorporation of Canon Law into the affairs of the Community as a result of its acceptance of the 1956 Constitution was capable of having an effect on the Community and the 1946 trust on two levels. On the first level it was capable of altering the charitable objects of the trust and its beneficiaries so as to import the Roman Catholic Church generally as an ultimate beneficiary on dissolution. On the second level the 1956 Constitution was capable of importing Canon Law to govern the day-to-day affairs of the Community and, in particular, the maintenance and safeguarding of its property.

[129]It was Mr Henderson’s submission and I accept that, in the absence of a scheme under United Kingdom charities legislation, the new constitution could not alter the objects of the 1946 trust so as to import the Roman Catholic Church generally as the ultimate beneficiary of the Community on dissolution. Thus in Halsbury’s Laws of England 4th edition 2001 reissue on charities at paragraph 138 the following appears:- “When a charitable trust has once been declared and established the trust cannot be varied or added to by the founder whether an individual or a body of subscribers or by the trustees unless a valid power of appointment or revocation was reserved at the time the trusts were declared. In general only the court or the Charity Commissioners in the exercise of the jurisdiction to make cy-près schemes can alter charitable trusts once they are declared.”

[130]In the absence of any formal constitution a monastery or convent would constitute an unincorporated association. On any view that was the situation of the Community before 1956. It is open to such an association, in the absence of specific rules, unanimously to adopt regulations governing the conduct of its members: see Re Bucks Constabulary Widows’ and Orphans’ Fund Friendly Society (2)

1979 1WLR 936

. Thus it would be open to the members of the Community at a Chapter meeting i.e. a meeting of the whole of the membership, unanimously to adopt the 1956 Constitution and this may be what occurred. The effect of doing so would have been to import the rules of Canon Law in so far as they governed the conduct of the members of the Community in their day-to-day affairs. In fact the Constitution contained an express provision which was probably consistent with Canon Law, restricting the alienation of the Community’s property worth more than £2,000 unless approved by the Bishop and/or the Holy See. However it would be equally possible, as a matter of English law, by a similar process, for the members of the Community to abrogate the 1956 Constitution or parts of it. SS, as the last surviving member of the Community, could effect such a change of her own motion but not so as to alter the objects of the Trust.

[131]It follows from this that, to the extent that the 1956 Constitution by incorporating Canon Law into the regulations governing the Community without an appropriate scheme, purported to make the Roman Catholic Church generally, as represented by the Bishop, a beneficiary of the 1946 trust on a dissolution of the Community, it was ineffective to do so. It follows from this that the Bishop had no locus standi to bring these proceedings since he was not a member of the Community and he was not able to represent any party or institution having a beneficial interest or potential beneficial interest in the assets subject to that trust.

[132]Further it seems to me that SS, by joining in the transfer to herself of West Lodge and, as a trustee, joining in the transfer of the Property to Mr Rolfe, must be taken as having abrogated the restriction on the disposition of assets of the Community contained in chapter III sub-paragraph (v) of the 1956 Constitution. It follows that the fact that the transfers of property in issue in these proceedings would have breached that rule is not a matter which can be relied on to establish that the parties to those transactions were in breach of trust.

[133]By its terms the 20th May 1987 Declaration of Trust does not come into effect until the death of the last surviving member of the Community. However it seems to me that, for the same reasons that I have found that the 1956 Constitution was ineffective to alter the beneficial interests under the 1946 trust, that deed was ineffective to do so as well.

Breach of trust: the transfer of West Lodge

[134]It does not seem to me that SS can have locus standi to attack the transfer of West Lodge to herself for nominal consideration as a breach of trust. I entertain considerable doubt that SM, as a bare trustee of West Lodge (assuming that prior to the transaction in question it was an asset of the 1946 trust) has locus standi to do so either. However the Attorney General is a party, representing charity, and, as such, has locus standi to challenge the transfer.

[135]It would perhaps be helpful if I briefly recap the background facts leading up to the transfer of West Lodge to SS on 29th August 1996. West Lodge originally formed part of a property purchased by the two nuns in 1946 and was therefore thereafter subject to the 1946 trust. The purchasing nuns as trustees sold West Lodge on 5th April 1951 to a Mr Colmar for £700. It was repurchased on 29th January 1976 by three nuns Miss Renouf (MP), Miss Coyne and SS for £8,000. On 29th August 1996 SS, SM and Vivienne, as successors in title to the purchasers in 1976, entered into a Declaration of Trust that they held the property in trust for SS “in fee simple” and simultaneously executed a transfer of West Lodge to SS. Thereafter in 1997 SS transferred West Lodge into the joint names of herself and Vivienne and in 2000 they transferred West Lodge into the sole name of Vivienne. None of these transfers were for full consideration.

[136]The issue here is whether West Lodge was subject to the 1946 trust when transferred to SS on 29th August 1996. If so, that transfer for nominal consideration must have been in breach of trust.

The formal documents

[137]As already noted the original transfer of 29th January 1976 contained the words “the transferees declare that the survivor of them can give a valid receipt for capital money arising on a disposition of the land.” It is submitted by Mr Isaac for Vivienne, and I accept, that “this contemporaneous declaration makes it clear that West Lodge was held by Renouf/Coyne and SS as beneficial joint tenants and is wholly inconsistent with the same being held on trust for the Community.”

[138]Notwithstanding the form of the transfer, the Declaration of Trust of 20th May 1987 made by MP and SS, both parties to the repurchase of West Lodge, shows West Lodge, (title no. HP5447) as being part of the property of the Community: see paragraph 4 of the recitals and the schedule.

[139]On 29th August 1996, as part of the transfer of West Lodge to SS, SS, SM and Vivienne (the then trustees of the Property subject, as I have found, to the 1946 trust) entered into a Declaration of Trust in favour of SS, having the following recitals:- “Whereas(1) This Declaration is supplemental to a transfer (pursuant to a contract of 1975) made by Mrs Bown and her son Mr Bown of the freehold property known as West Lodge, Penton Mewsey, Andover, Hampshire, now registered at HM Land Registry under title no. HP5447 (hereinafter called “the Property”) to the Purchasers at the time in fee simple in consideration of the sum of eight thousand pounds (£8,000) paid by the Purchasers at the time.

(2) The Trustees are the successors in title to the Purchasers in 1975.

(3) The above-mentioned sum of eight thousand pounds (£8,000) was provided by Mother Philomena and Sister Benedicta [Miss Coyne] both of St. Benedict’s convent aforesaid and Sister [SS] as joint tenants in equity as the Trustees acknowledge.

(4) Sister Benedicta died on the thirtieth day of November 1985 and Mother Philomena died on the twenty-fourth day of April 1991 and since when the Trustees have held the Property as trustees for Sister [SS] absolutely.” (1) This Declaration is supplemental to a transfer (pursuant to a contract of 1975) made by Mrs Bown and her son Mr Bown of the freehold property known as West Lodge, Penton Mewsey, Andover, Hampshire, now registered at HM Land Registry under title no. HP5447 (hereinafter called “the Property”) to the Purchasers at the time in fee simple in consideration of the sum of eight thousand pounds (£8,000) paid by the Purchasers at the time. (2) The Trustees are the successors in title to the Purchasers in 1975. (3) The above-mentioned sum of eight thousand pounds (£8,000) was provided by Mother Philomena and Sister Benedicta [Miss Coyne] both of St. Benedict’s convent aforesaid and Sister [SS] as joint tenants in equity as the Trustees acknowledge. (4) Sister Benedicta died on the thirtieth day of November 1985 and Mother Philomena died on the twenty-fourth day of April 1991 and since when the Trustees have held the Property as trustees for Sister [SS] absolutely.”

[140]This Declaration of Trust, if good, would have been effective to correct the recitals in the 20th May 1987 Declaration (which I have found to be ineffective) and demonstrates that West Lodge was, in the view of the parties to it, never an asset of the Community subject to the 1946 trust since it was sold away by the then trustees on 5th April 1951.

The other documentary evidence

[141]In a letter of 2nd March 1992 from SS to the Test Valley Borough Council concerned with the possible necessity of planning permission to re-erect a fence blown down in gales, SS says “I have my eye on West Lodge as my future retirement home….” As already noted, on 7th April 1993 SS wrote to Mr Hiscocks of PB instructing him to change her will so as to make Vivienne an executor and to bequeath West Lodge to Vivienne. On 13th August 1993 SS, writing to the planning authority in search of planning permission for improvements to West Lodge, says “It is our intention eventually to use it as a retirement home for us Sisters when the School no longer requires us.” In a letter to a Mr Floyd of August 1994 SS says “I think I explained to you that it was my intention that I was going to make it [West Lodge] my home when I was no longer of use to the School. At the moment due to the present financial crisis, there is no possible way we could pay someone to take on my duties but West Lodge is my home.”

[142]On 6th April 1994 SS, in applying for a grant to help finance improvements to West Lodge, signed a declaration that she had “an owner’s interest in the dwelling or building and I, or a member of my family, intend to live in the dwelling in the building as my (or that member’s) only or main residence for a period of not less than twelve months beginning on the certified date.”

[143]It seems that the local authority’s reaction to SS’s statements of ownership of West Lodge was to require her to pay council tax in respect of it. This was followed by a lengthy correspondence in which SS contended for a number of reasons, but not including that she was not the owner of West Lodge, that she was not required to pay the tax.

[144]In evidence are minutes of a meeting of 3rd November 1994 between representatives of the local authority and SM, the secretary of the Community, Mr Rolfe and Vivienne “to sort out the grant application for renovation of West Lodge.” This meeting proceeded on the basis that, whereas the property was held by trustees, SS was “the freeholder”.

[145]As already noted, on 16th October 1994 SS wrote to Mr Rolfe and Vivienne asking for their help in effecting repairs to West Lodge, required urgently because of a threat that the local authority would compulsorily purchase the building. It is apparent from a succeeding letter of thanks that that assistance was given.

[146]Inconsistently with the previously noted documents, on 31st October 1994 SS wrote to Vivienne “It suddenly occurred to me that Sister Maura, Mr Wheelwright [then a trustee of the Property] and your names are on the deeds of the Property so I suppose in a way that the trustees do own it but it is held in trust for the Community. Nothing can be sold without the consent of the four Trustees.”

[147]As already noted a draft will of SS dated 13th October 1995, shows SS bequeathing her interest in West Lodge to Vivienne. On 20th May 1996 Mr Hiscocks wrote to SS as follows:- “Enclosed is a copy of a plan showing the land belonging to the Trustees. You will see that this appears to include what I believe is the West Lodge land. Before I prepare the codicil for you to sign (the draft of which you approved on 9th May) can we please discuss the question of ownership of the different pieces of land at St. Benedict’s.”

[148]SS’s response is in a letter of 21st May 1996 also signed by SM. At paragraph 35 above I have set out the text of this letter and Mr Hiscocks’ response of 24th May, which concludes by him saying “I am having second thoughts about the draft of your will and codicil: do you think it inappropriate to include any reference at all to …the Lodge?”

[149]It appears that on 10th June 1996 SS had a meeting with Mr Hiscocks in which the subject of her inclusion of West Lodge in her will was raised. An attendance note of that meeting is in evidence which reads, so far as material,:- “He pointed out that on the face of it West Lodge is part of the trust property held under the terms of the May 1987 trust deed i.e. with a licence to the School to use the real property for as long as it likes and thereafter upon educational trusts for the local Roman Catholic community. Sister said that in fact this education trust should be for all denominations as a lot of the money for buying Penton Lodge in the first place was put up by non-conformists. However, Sister said that in fact when West Lodge was bought back the clear intention was that it should be the personal property of Sister Scholastica and the late (sic). Therefore she could see that there was every reason why the trustees should sign a transfer of that particular property in favour of Sister. We discussed the matter at length. It further transpired that Mrs Rolfe (the proposed beneficiary in Sister’s will) had paid at least £60,000 and spent a great deal of time in the restoration of West Lodge. We discussed whether this loan might be an interest-free loan by Mrs Rolfe to Sister: but in the event Sister concluded that really Mrs Rolfe had acquired a share in West Lodge: therefore the transfer of West Lodge should be from the trustees to Sister and Mrs Rolfe in equal shares absolutely; the existing will of Sister of 13th October 1995 referring at clause 8 to Vivienne Grundy (now Vivienne Rolfe) and giving all the share in equity in West Lodge to Mrs Vivienne Rolfe could stand. …Sister said that she will approach the trustees and she did not anticipate any disagreement from either Mr Wheelwright or [SM or Vivienne] (herself one of the trustees): and the fourth trustee is Sister herself.”

[150]Following the meeting of 10th June Mr Hiscocks wrote to SS a letter dated 3rd July 1996 as follows:- “Following our meeting on 10th June, your Secretary will have been in touch with my Partner Richard Le Masurier about Mrs Msonthi. Meanwhile, thank you for showing me the splendid restoration of West Lodge. You explained to me that the property was bought back with capital money provided by Mother Philomena (and yourself). As a result, I understand that the West Lodge property now belongs to you alone (and not the trustees of the remainder of the Penton Lodge property occupied by the school). To put the record straight, we would need to ask the trustees to sign a Declaration of Trust showing that since the property was reconveyed to them, they have in fact been merely nominees for Mother Philomena and yourself (and latterly you alone). We would also ask the trustees to sign a transfer deed of West Lodge to you: this could then be registered at the Land Registry; and we could apply for new deeds showing that the West Lodge property belongs to you alone.”

[151]On 16th July 1996 SS and Vivienne entered into a lease of West Lodge to a Mr Ayling at a monthly rental of £525.

[152]It appears, however, that SS’s belief that the trustees of the Property would not object to West Lodge being transferred to her and Vivienne was misplaced. On 19th July Mr Wheelwright wrote to Mr Hiscocks expressing concern at being asked “to sign a document which …I understand removes West Lodge from the Trust and gives it to Sister Scholastica.” Mr Hiscocks’ response was by a letter of 24th July enclosing the proposed Declaration of Trust and suggesting a meeting to discuss it and continuing:- “Our understanding is that the purchase monies raised for West Lodge in 1975 were provided by the Sister [s?] personally. On this basis that West Lodge property was never Trust property (sic) but was personal to the Sister [s?] and the survivor of them. This would mean that the Trustees have been holding this part of the land as nominees. There would be no intention of removing any property from the land which was intended to be part of the Trust property. Please let me have your views…”

[153]It appears that Mr Wheelwright’s worries were not assuaged and, rather than enter into any transfer of the property to SS, preferred to retire as a trustee. Accordingly this was provided for in a deed of retirement also dated 28th August 1996 which was executed by the parties to it.

The oral evidence

[154]Hannah Alderton was called to give evidence by the Claimants. At paragraph 10 of her witness statement she said:- “10…My belief was that West Lodge belonged to Sister Scholastica, because she referred to it as her property, and told me that it was her retirement bolthole. This was my understanding from when I first arrived at the School, and West Lodge was at various stages rented out to privately paying tenants. I deal further with the situation regarding West Lodge below.”

[155]Her statement continues at paragraph 24:- “24. From the time I began to know Sister Scholastica well (probably therefore from about 1993) I understood that West Lodge was to be a retirement home for her, or at the very least would provide her with a retirement fund.25. I knew that West Lodge had been bought back and my understanding (from Sister) was that [it was?] Sister and another nun who had brought it back. The property was rented out to a young couple, and it was then rented out to a single gentleman.

26. I knew that at one point Sister was looking for the Deeds in order to prove that West Lodge was hers. I have been shown various documents dating from 1996 when I witnessed the signatures of Vivienne Rolfe, Sister Scholastica and/or Sister Maura. I was rather surprised at West Lodge being signed over, but I presumed that some arrangement had been made for Sister and her retirement. I just couldn’t imagine Sister agreeing to hand over the property and not having anything to fall back on.

27. I also recall I was aware that Mr Wheelwright was not very happy about the transfer, and that Sister had to prove it was hers. My understanding (I believe from Sister) was that everyone else thought that West Lodge wasn’t hers.

28. I have no specific recollections in relation to the documents I was asked to witness. I was just asked to sign. I knew it was to do with West Lodge but I was not told anything. My impression at the time was that West Lodge was being transferred into Vivienne’s name. I just assumed that it was being signed over to Vivienne Rolfe so that she was the sole owner. I was surprised at this because of the conversations with the Rolfes in which they had said they planned to buy a house in Penton with a granny annexe for Sister. I simply assumed that Sister knew what she was doing, and it was not for me to ask questions about matters such as that.

29. I do not recall any major renovation work being carried out at West Lodge, but I think that some work was done before the second lodger moved in. As far as I was aware the Rolfes did not stay at West Lodge whilst I was employed at the School.”

[156]SS gave her evidence on the claim to recover West Lodge at paragraphs 34, 37 and 38 of her witness statement as follows:- “34. From the time of my arrival at Penton Lodge, West Lodge was rented out. There were occasional periods when there was no tenant and the property stood vacant. It has always been my understanding that West Lodge was Community property. When rent was paid by tenants, it was allocated, by the Community itself, partly for the benefit of the School and partly for the benefit of the Community itself. If I remember rightly, in or about April 1997, the last year rent was paid, it amounted to about £8,000 a year and was allocated equally to the School and the Community. In Mother Philomena’s time, West Lodge had been regarded as the eventual retirement home for members of the Community. That is why, after it was sold to the Bowns, we were pleased to be able to repurchase it in 1975 for the same price (£8,000), restoring it once more for the benefit of the Community.37. In the years following Mother Philomena’s death, I became less attached to the idea of retiring to West Lodge. It was small, it had basic facilities inside, it had no garden to speak of and stood close to the road. When Vivienne asked to move into it, it was empty and I saw her occupation as a potential solution to the problem of what to do with it. A lot of money had been spent on it to bring the structure up to an acceptable standard but I was concerned that, in due course, more money would have to be spent on it. In this context, when Vivienne subsequently asked me to transfer the property to her, I eventually agreed to do so. This was on the basis that, as the last member of the Community for whom it was intended as a retirement home, I did not see myself living there. By then, Vivienne had spent time on the restoration of West Lodge and she was actively involved in the administration of Penton Lodge and the School. She gave me the impression that her relationship with her husband Douglas was a troubled one and that she would benefit from a secure base of her own. In this context, I thought that transferring West Lodge to her would be appropriate.

38. I appreciate now that this was in breach of the terms of the trust upon which that property was held. West Lodge, in common with the rest of the Community’s property, was held for the benefit of the Community. The Community received nothing from the transfer to Vivienne of West Lodge. I can only say that the transfer occurred at a time when I felt deeply indebted to Vivienne and to a lesser extent Douglas Rolfe. It was at their instigation and insistence. It was entered into at a time when I felt vulnerable, upset and depressed, burdened by difficulties and problems that I felt needed Vivienne and Douglas’ help and support to resolve. I did not discuss my motives for transferring the property with Sister Maura nor with anybody else, particularly anyone from the Bishop’s office, either at the time of the transfers or subsequently.”

[157]In the light of the evidence of Hannah Alderton, called by the Claimants, and of the documentary evidence which I have set out above, it is apparent that SS’s account of the dealings with West Lodge, upon which she was cross-examined by Mr Isaac, is entirely misleading and I reject it.

Conclusion

[158]I have found that the effect of the words used by the transfer from the vendors of West Lodge to MP, Sister Benedicta, and SS as purchasers rendered the purchasers joint tenants beneficially of West Lodge. Following the approach of the House of Lords in the Stack v Dowden case to which I have already referred, there is therefore a presumption that the beneficial ownership of West Lodge followed the legal ownership. Unless that presumption is rebutted it would lead to the conclusion that the purchasers of West Lodge on 29th January 1976 were purchasing for themselves and not for the Community and that SS, by survivorship, was absolutely entitled to West Lodge when it was transferred to her on 29th August 1996 and that it ceased to be an asset of the Community to which the 1946 trust applied from 5th April 1951 when it was sold away by the then trustees of that trust.

[159]The burden of proof, therefore, rests on the Claimants to show that West Lodge was purchased for the Community in 1976 by, for instance, demonstrating that the purchase price was paid from funds of the Community. There is no direct evidence of how the purchase price was found as, for instance, by the production of documentary evidence of the passage of money. The presumption is not, in my view, rebutted by evidence that the purchasers were nuns who had entered into vows of poverty, particularly, in the light of the documentary evidence which I have set out above.

[160]In my judgment the Claimants have failed to discharge the burden of proof which rests on them. I am satisfied on the evidence that SS was absolutely entitled beneficially to West Lodge at the time it was transferred to her on 29th August 1996. It is accepted that these proceedings are not for the purpose of enabling SS to recover West Lodge from Vivienne. Accordingly it suffices for me to say that the Claimants’ claim in these proceedings to recover West Lodge fails.

The claim to the Property

[161]It was Mr Henderson’s submission that the sale of the Property to Mr Rolfe by the Trustees on 17th April 2003 was “probably” a breach of trust for a number of reasons set out in his written submissions. I will deal with those in turn.(a) “The consent of the Bishop and the Holy See was required and was not obtained.” I have already dealt with this and, in any event, Mr Henderson conceded that this was not a ground upon which a finding of breach of trust could be based.

(b) “On the footing that the trusts remain trusts which were to be administered in accordance with the rules of the Community, it was SS and SS only (if anyone) who had power to make decisions concerning the administration and sale of the Property. The Trustees were, in substance, merely “holding trustees”. I confess that I do not follow the gravamen of this charge considering that SS, as one of the Trustees, was party to the transaction herself and, if she wanted, could have stopped it. The decision to proceed with the sale was taken by the Trustees after the advice of two firms of solicitors, PB and latterly, and in the period immediately leading up to completion of the sale, ILAS, a firm specialising in charity work. In addition the Trustees were advised by counsel, Mrs Quint, also a charity specialist, specifically as to the form the transaction should take. It was expressly accepted in argument that the Claimants’ case was not based on any alleged breach of charity law. No criticism of Mrs Quint’s advice was put forward by the Claimants. It is not suggested that there has been any departure from her advice, or certainly not at the time of completion. Further, the Trustees were advised by Messrs. Cluttons as to the value of the Property and the proposed 21-year lease to be given back to the Company and which resulted in the price payable by Mr Rolfe. I have heard no criticism of the advice ultimately tendered by the lawyers to the Trustees leading up to completion of the transaction. The Claimants called expert evidence of the value of the Property at the time of sale. Both their expert and Cluttons’ expert, Mr Hampton, were cross-examined. I do not regard the differences between them in valuation as being so significant as to undermine the valuation given to the Trustees by Messrs. Cluttons when the transaction was under consideration.

[163]The incorporation of a company limited by guarantee to take the leaseback in place of the Trustees followed the advice of Miss Wilson of ILAS. The subscribers to the Company’s Memorandum of Association, Vivienne and Mrs Blowers and its first directors were constituted charity directors Trustees under the 1946 trust and so were bound to exercise their powers in conformity with the purposes of that trust.

[164](c) “Throughout it was understood that an unexpressed term of the arrangements was that SS and SM would obtain permanent rights of residence. They were thus in positions of substantial conflict.” Attention is then drawn to a letter from Miss Wilson to HK of 16th May 2002 and the passage “the Trustees could not be seen to sell the Property whilst retaining a benefit….”

[165]The future occupation of part of the Property by SS and SM is specifically dealt with by Mrs Quint in her opinions and the form of the licences granted followed her recommendations, namely, that the licences should be tied to a position at the School and were terminable on vacation of that position. Thus the licences granted to SS and SM did not take the form offered in the second paragraph of Miss Wilson’s letter of 16th May 2002.

[166](d) “SS and the Trustees did not properly consider the interests of the trust because: i) the trusts were undefined and unclear, so it was impossible for them properly to consider its interests” and references made to the Interchange report of 15th May 2002 and in particular the passage at paragraph 1.4 of that report where Miss Wilson says, “There is some confusion regarding the exact status of the Trustees. Are they trustees of Penton Lodge for the purpose of the convent and the School or are they trustees for the founders and original members of the religious community?” I have already found that the Trustees were trustees “for the founders and original members of the religious community” i.e. of the 1946 trust, having a combined religious and educational purpose. It is clear that Mrs Quint’s advice was given on the basis that the Trustees might be, and probably were, trustees of the “oral trusts”, namely what I have called the 1946 trust. She nonetheless was prepared to advise the Trustees that they could proceed with the sale subject to the conditions outlined in her second opinion. I find it hard to accept that trustees of a charity whose trusts are oral and therefore “undefined” have their hands tied so that they are unable to deal with the assets of their trust even in its best interests. “ii) terms of the sale and leaseback were substantially altered after SS and SM were last advised about them and executed the relevant documents. In particular the provision as to the landlord being obliged to pay for a surrender appears only to have been added after the 15th May 2002 report and the 20th May 2002 meeting re completion…” There then follow references to a number of documents highlighting the unsatisfactory nature of the provision in the proposed lease dealing with any future surrender of the lease to Mr Rolfe the landlord. The matter was the subject of debate in correspondence between the solicitors for Mr Rolfe and the solicitors advising the Trustees and, as I have already pointed out, the provision actually included in the lease would have enabled the Company to realise the residual value of the lease if, during its term, the Company ceased to operate the School or have any other permitted use to which it could be put. I cannot see that it is a serious matter for complaint that the clause ultimately agreed on, which substantially improved the position of the tenant company, was agreed after 15th May 2002 report and 20th May 2002 meeting. There is no evidence directly on the point (but see paragraphs 92 and 93 above) but it does not seem to me to follow that the Trustees were not consulted by their solicitors before the relevant clause was finally agreed. “iii) They appear to have confused the interests of the trust and the School”. This was a “confusion” which bedevilled the whole history of this matter. The fact remains that there were no separate “interests”. The School operation and its assets were at all material times the property of the Community which was liable for that operation’s debts and entitled to its profits. The subscribers to the Company were bound to exercise their powers as trustee directors for the religious and educational purposes of the Community and, in the absence of fault, would have been entitled to look to the Community to indemnify them against any call under their guarantees. There is no evidence that this “confusion” continued up to completion of the sale. There is no indication that the Trustees’ advisers were, by then, still confused.

[167]For these reasons it does not appear to me that the criticisms of the Trustees, advanced by the Attorney General for charity, in selling the Property to Mr Rolfe demonstrate that the Trustees were guilty of breach of trust in completing that sale.

[168]I turn to consider the Claimants’ case against the Defendants on the basis that even if SS and SM do not have locus standi to advance that claim as trustees of the Property under the 1946 trust, the Attorney General may advance it in the interest of charity. It seems to me that as against SS and SM the Defendants have an unanswerable defence of laches, in the absence of any allegation of dishonesty against the Defendants.

Undue influence

[169]The principles under which the courts set aside transactions brought about as a result of undue influence exercised by one party on another and which are set out in the speech of Lord Nicholls in Royal Bank of Scotland v Etridge (No. 2)

[2002] 2AC 773

at paragraphs 6 & 7 are well known and do not need repeating here. It is alleged by the Claimants that by reason of the relationship between the Defendants and, primarily, SS who, in turn, was in a position to influence SM, SS and SM were persuaded to go along with the transaction of sale of the Property by the Trustees to Mr Rolfe. The case therefore turns on whether the court can take the view that the assent of SS to the transaction was procured by the Defendants’ undue influence upon her.

[170]A review of the history of this case and in particular the documents and correspondence which record it must lead to the conclusion that such was not the case. It is now five years since the completion of the sale and in those five years the age of SS has advanced to 83. However, my observation of SS under cross-examination convinced me that she was alert and highly intelligent and a determined character. The same is plainly true of SM also. Mr Warwick reminded me of a passage in the Bishop’s evidence where he described SS and SM as “quite determined ladies”. I have rejected SS’s evidence in relation to West Lodge as misleading. I believe that was caused by understandable loyalty to her Bishop and the case that he was presenting to the court. It was not, in my judgment, an indication that she was easily persuaded to take a course inimical to her own interests, those of the Community or her church.

Knowing assistance in breach of trust

[171]As Mr Warwick points out, it is a necessary ingredient of a claim under this head that the claimant pleads and proves that the defendant acted dishonestly in the course of the transaction complained of: see per Lord Nicholls in Royal Brunei Airlines v Tan 1995 2AC 378 at 392F. It is not pleaded against Mr Rolfe that, in entering into the purchase of the Property from the trustees of the Community, he acted dishonestly, let alone proved that he so acted.

Knowing receipt of trust property

[172]Both Mr Warwick and Mr Henderson cite the judgment of Lord Justice Nourse in BCCI v Akindele

[2001] CH437

as showing the necessary ingredients for the grant of relief under this head. In his judgment at page 448 of the report Lord Justice Nourse says:- “The essential requirements of knowing receipt are stated by Hoffmann LJ in El Ajou v Dollarland Holdings plc

[1994] 2All ER 685

at 700: For this purpose the plaintiffs must show, first, a disposal of his assets in breach of fiduciary duty; secondly, the beneficial receipt by the defendant of assets which are traceable as representing the assets of the plaintiff; and thirdly, knowledge on the part of the defendant that the assets he received are traceable to a breach of fiduciary duty.”

Lord Justice Nourse continues at page 455:

[173]- “There is now a single test of dishonesty for knowing assistance, so ought there to be a single test of knowledge for knowing receipt. The recipient’s state of knowledge must be such as to make it unconscionable for him to retain the benefit of the receipt.”

[174]I have found that the Trustees joining in the transaction whereby the Property was sold by the Trustees to Mr Rolfe was not a breach of trust by them. It follows that on completion of that transaction Mr Rolfe could not have received title to the Property in circumstances where it was unconscionable for him to retain it and that he is entitled to rely, as a purchaser, on the protection of the Land Registration Act 2002.

Breach of the rule against self-dealing

[175]This claim is pleaded at paragraph 63 of the Points of Claim.

[176]There are in fact three rules. There is what one may call the “primitive self-dealing rule” which does not require any trust or fiduciary relationship but results from the fact that no-one can contract with himself and any attempt to do so is ineffective.

[177]The second rule, usually referred to as the “self-dealing rule”, is “that if a trustee sells the trust property to himself, the sale is voidable by any beneficiary ex debito justitiae, however fair the transaction.” See Tito v Waddell (No. 2)

[1977] Ch.106

at 241.

[178]The third rule, commonly known as the “fair dealing rule”, is “that if a trustee purchases the beneficial interest of any of his beneficiaries, the transaction is not voidable ex debito justitiae, but can be set aside by the beneficiary unless the trustee can show that he has taken no advantage of his position and has made full disclosure to the beneficiary, and that the transaction is fair and honest.” See Tito v Waddell ibid at 241.

[179]The “primitive self-dealing rule” does not apply here.

[180]The self-dealing rule cannot apply to Mr Rolfe because he did not have, in any sense, a trust relationship with the Property. He was not a trustee of the trust under which the Property was held. He was not a trustee de son tort of that trust as alleged in paragraph 63.2 of the Points of Claim. There is no evidence that he, at any stage, assumed the role of a trustee of the Property (as opposed to governor of the School). He was not in any sense a fiduciary so far as the Property was concerned, and more particularly, so far as title to the Property was concerned.

[181]No specific allegation is made in the Points of Claim against Vivienne under this head although she was, of course, at the material time a trustee of the 1946 trust. Nonetheless I will consider her position under these rules. She, with SS and SM, authorised the sale of the Property to her ex-husband. It was suggested in the course of the argument that that was not the true position and that, notwithstanding that they had been divorced since 1988, their relationship was close, they were in fact living as man and wife or if not they were financially interdependent. There was no reliable evidence to support these suggestions. I have dealt with the historical relationship between Mr Rolfe and Vivienne earlier in this judgment between paragraphs 4 and 10. At paragraph 44 of her witness statement SS alleges that “leaving aside the civil (not religious) nature of the divorce proceedings, they [Mr Rolfe and Vivienne] continued to live as man and wife and bring up their children in one family home.” I reject this evidence in the face of the evidence of Mr Rolfe and Vivienne of the history of their relationship. Vivienne was joining with her co-trustees in authorising a sale of the Property to her ex-husband with whom she was not at any material time living as man and wife but with whom she was cooperating in looking after their handicapped son and to whom she had given financial assistance by making her property available as security for the borrowing of money by his companies but upon whom she had not, at any material time, been financially dependent herself. I have found that in selling the Property to Mr Rolfe the Trustees did not act in breach of trust.

[182]For all these reasons, in my judgment, the claim to set aside the sale by the Trustees of the Property to Mr Rolfe fails.

[183]Notwithstanding that Mr Rolfe was cross-examined at length about the extent to which he has in fact refurbished the Property, and the value of such works of refurbishment, and to what extent he advanced money to the Community to fund the School, no alternative claim is made, under the contract of 17th April 2003 or under the leaseback to the Company of the same date, to enforce their provisions.

[184]I would not wish to leave the case without drawing attention to the inequity of this result, bearing in mind that the Company was wound up and its liquidator disclaimed its lease of the Property from Mr Rolfe, before the Company was dissolved.

[185]In the course of submissions I enquired why this had been allowed to happen since, on any view, the lease was a valuable asset of the Company, albeit one which, as a result of the restriction placed on the Property by the Bishop, was not capable of being immediately realised for value. By Section 178(2) of the Insolvency Act 1986 a liquidator may disclaim “any onerous property”. Subsection (3) defines “onerous property” as:- “(a) any unprofitable contract, and (b) any other property of the company which is unsaleable or not readily saleable or is such that it may give rise to a liability to pay money or perform any other onerous act.”

[186]I am unable to understand why the liquidator was not prepared to await the result of this litigation before exercising his power to disclaim, particularly since the rent payable was minimal having regard to the potential value of the lease and, in any event, there is no indication that Mr Rolfe threatened to enforce payment of the rent. I do not wish to cast any slur on either of the Defendants. The fact remains that if the present situation is allowed to stand as it is, Mr Rolfe will have obtained a freehold interest in the Property unburdened by the remaining period of the lease for which he will have paid much less than the Property was worth at the time of sale and its likely current value.

[187]In my view the Attorney General should consider taking proceedings on behalf of charity to restore the Company’s name to the register, to appoint a new liquidator who should apply to annul the disclaimer thereby bringing the lease back to life. It may even be that the Defendants might wish to restart the School.

[188]I am of course very conscious that, tragically, much time and expense has been incurred since the School was closed as a result of the Bishop’s intervention which I have found to be unjustified. Equally I do not know the extent of the Company’s debts at the time it was dissolved. I simply suggest that the unexpired portion of the lease of the Property with a right to renew at a market rent ought to be realisable for the benefit of the 1946 trust or to be available to be applied cy-près pursuant to a scheme.