White & Ors v Williams & Ors [2011] EWHC 494 (Ch)

[2011] EWHC 494 (Ch)Case No HC08C01133
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 10/03/2011
Before
MR JUSTICE BRIGGS
Between
(1) MICHAEL WHITEClaimant(2) MONICA KNIGHTClaimant(3) CLAUDETTE BROWNClaimant(4) GENIE WHITEClaimant(5) YVONNE PALMERClaimant(6) MICHAEL CLARKEClaimant(The Charity Trustees of the Tabernacle Ministries of Great Britain)ClaimantALISTAIR ABRAHAMSClaimant(1) LYNWAL WILLIAMSClaimant(2) KAY DUNCANClaimant(3) DAVID OGUNLANAClaimant(4) LEON WILLIAMSClaimant(The Charity Trustees of the Bibleway Church of our Lord Jesus Christ Worldwide (United Kingdom)Claimant(5) HM ATTORNEY GENERALClaimant(6) HAROLD C McFARLANEClaimant(7) CLINTON P McFARLANEClaimant(8) SELWYN L FORTEClaimant(9) JENNIFER ELEVIQUEClaimant(10) DIANA N JACOBSClaimant(The Charity Trustees of the Built On the Rock International Ministries)Claimant(11) BEVERLEY CARTER-ALLENClaimant(12) RITA BAILEYClaimant(13) EUSTON COPELANDClaimant(14) SANDRA COPELANDClaimant(The Charity trustees of the Rhema Church Ministries)ClaimantCase No 9W100412ClaimantFROM THE WILLESDEN COUNTY COURTClaimantLYNWAL WILLIAMSClaimantKAY DUNCANClaimantDAVID OGUNLANAClaimant- and -, (1) LYNWAL WILLIAMS (2) KAY DUNCAN (3) DAVID OGUNLANA (4) LEON WILLIAMS (The Charity Trustees of the Bibleway Church of our Lord Jesus Christ Worldwide (United Kingdom)(5) HM ATTORNEY GENERAL (6) HAROLD C McFARLANE (7) CLINTON P McFARLANE (8) SELWYN L FORTE (9) JENNIFER ELEVIQUE (10) DIANA N JACOBS (The Charity Trustees of the Built On the Rock International Ministries)(11) BEVERLEY CARTER-ALLEN (12) RITA BAILEY (13) EUSTON COPELAND (14) SANDRA COPELAND (The Charity trustees of the Rhema Church Ministries), AND Case No 9W100412, FROM THE WILLESDEN COUNTY COURT, BETWEEN ALISTAIR ABRAHAMS Claimant-and-(1) LYNWAL WILLIAMS (2) KAY DUNCAN (3) DAVID OGUNLANA (The Charity Trustees of the Bibleway Church of our Lord Jesus Christ Worldwide (United Kingdom) Defendants for (1) MICHAEL WHITE (2) MONICA KNIGHT (3) CLAUDETTE BROWN (4) GENIE WHITE (5) YVONNE PALMER (6) MICHAEL CLARKE (The Charity Trustees of the Tabernacle Ministries of Great Britain) ClaimantsMr Andrew Gore (instructed by Irena Spence & Co, 68-70 Castle Street, Cambridge CB3 0AJ) for Lewisham TrusteesMs Araba Taylor (instructed by Irena Spence) for Bethnal Green TrusteesMr Geraint Martyn Jones (instructed by Irena Spence) for Mitcham TrusteesThe Defendants appeared in person for in person for HM Attorney General did not attend and was not representedHearing Hearing dates: 25 th February and 28 th February - 1 st March 2011Approved Judgment (No 2)I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.…………………..............................MR JUSTICE BRIGGSMr Justice Briggs:

INTRODUCTION

[1]This judgment follows the further hearing of the proceedings by which cy-près schemes are sought in relation to the remaining church buildings of the Bibleway Trust. At the same time the court heard the adjourned proceedings by Alistair Abrahams seeking a charging order over the Lewisham Building, which were commenced in the Willesden County Court in February 2009 and transferred to the Chancery Division following the making of an interim charging order. I shall refer to the proceedings as the “the cy-près proceedings” and “the charging order proceedings” respectively.[2]Following the trial of the cy-près proceedings in April 2010 I gave judgment on 5th May directing that there should be cy-près schemes for the transfer of each of the Lewisham, Bethnal Green and Mitcham Buildings to be held by the charitable trustees, established since the schism in the Bibleway Church in 1997, for each of the Lewisham, Bethnal Green and Mitcham Congregations. On the same day I gave directions for the joinder of the Bethnal Green and the Mitcham trustees as additional defendants to the cy-près proceedings, for the further hearing of those proceedings and the charging order proceedings to take place together, for Mr Abrahams (if so advised) to have permission to apply to be joined as an additional defendant to the cy-près proceedings, for advertisement for creditors of the Bibleway Trust, and for the other steps necessary to enable both proceedings to be finally concluded. I shall in this judgment adopt abbreviations and expressions used in my May 2010 judgment without further explanation.[3]The issues remaining to be decided in the cy-près proceedings arise mainly from the fact that the transfer of the three remaining church buildings will divest the Bibleway Trust of the entirety of its remaining assets, leaving nothing with which to satisfy any entitlement of the Bibleway Trustees to an indemnity, and nothing with which to meet the claims of any creditors of the Bibleway Trustees (as trustees). Accordingly, I concluded in my May 2010 judgment that it was necessary both for advertisement to be made for the purpose of identifying any such creditors, and for the Bibleway Trustees to have an opportunity to make and prove any claim which they wished to advance for an indemnity as against the assets of the Bibleway Trust.[4]Advertisements were duly placed in the Cambridge News and a national newspaper, The Voice, red by many people of Afro-Caribbean descent in May and June 2010, inviting creditors to notify the claimants’ solicitors in writing of any claims by 5th July 2010. No written notifications were received, but a firm of solicitors, Davis & Co, telephoned to request that they be added to the list of creditors. When asked to identify their claim in writing, no response was received.[5]The Bibleway Trustees have themselves pursued a claim for an indemnity, acting as before as litigants in person, with Bishop Williams both making submissions and giving evidence on their behalf. In summary they claim reimbursement for personal expenditure which they and certain others claim to have incurred for the benefit of the Bibleway Trust, indemnity against outstanding liabilities to solicitors and accountants retained by them on behalf of the Bibleway Trust, and an indemnity in respect of their liability to Mr Abrahams under the default judgment which he has obtained against them. In addition they claim reimbursement in respect of their costs of these proceedings, but I directed that the determination of that claim be dealt with as part of the wider question as to the costs of these proceedings, after handing down of this judgment.[6]For his part Mr Abrahams did not seek to be joined as a defendant in the cy-près proceedings. Nor, after service of my May 2010 judgment together with the pleadings in the cy-près proceedings, did he serve further evidence. Nonetheless he appeared as a litigant in person at the further combined hearing of the cy-près proceedings and his charging order proceedings. He decided during the course of that hearing that he wished to give evidence and, pursuant to my direction, provided over the intervening weekend a written statement of his evidence which he thereafter confirmed on oath, and upon which he was cross-examined.[7]Having been joined as additional defendants, the Bethnal Green and Mitcham trustees adduced substantial further evidence and, at Bishop Williams’ request, their deponents attended for cross-examination. Bishop Williams was himself also cross-examined, by counsel on behalf of each of the three groups of trustees (Mr Gore for Lewisham, Ms Taylor for Bethnal Green and Mr Jones for Mitcham) and by Mr Abrahams.[8]Each of the three groups of trustees also entered into correspondence with the Charity Commission with a view to reaching agreement, if possible, upon the terms of schemes for the transfer of each of the Lewisham, Bethnal Green and Mitcham buildings to the trustees of their respective congregations. Considerable progress was made, and a broad measure of agreement reached. Neither the Charity Commission nor Her Majesty’s Attorney General sought to appear or be represented at the further hearing.[9]Application was made in writing by the Bibleway Trustees for an adjournment of the further hearing and rejected by me, again in writing, on 15th February 2011. Bishop Williams made a renewed application orally at the beginning of the further hearing, this time mainly upon the grounds that the Bibleway Trustees wished for more time in which to complete their evidence. Again, I rejected that application. I acknowledge that as litigants in person who (probably) lack the means with which to employ professional solicitors or accountants to present their claim for an indemnity, the Bibleway Trustees have faced real difficulties in presenting their claim. I am nonetheless satisfied that they have during the almost ten months since I gave the relevant directions had more than sufficient time in which to prepare and present their claim and, for that purpose, to collate and present the documents available to them in support of it. Having now heard that claim in full, I am confirmed in my conclusion that its inadequacies would not have been significantly reduced, still less remedied, by the giving to the Bibleway Trustees of yet further time to prepare.[10]For his part Mr Abrahams complained that the Lewisham trustees had failed to comply with the appropriate procedural time limits within which to lodge evidence by way of objection to his application for a charging order. I am however satisfied that those trustees served on Mr Abrahams their evidence by way of objection to his application in September 2009. In my judgment Mr Abrahams has, both from that evidence, from the documents served on him in connection with the cy-près proceedings (including my May 2010 judgment) and from his participation in the recent hearing had sufficient notice of the reasons why the court has been invited not to make a final charging order in his favour, for him to have had a fair opportunity both to pursue his application and to resist the objections to it made by the Lewisham trustees. I should add that I found Mr Abrahams to be an intelligent, articulate, concise and persuasive witness and advocate in his own cause, who lost nothing of substance from his choice to represent himself rather than retain solicitors and/or counsel.

THE FURTHER FACTS

[11]Many of the facts relevant to my determination of the remaining issues in these proceedings will be found in my May 2010 judgment. Nonetheless the findings of fact in that judgment were made in proceedings to which neither the Bethnal Green and Mitcham trustees nor Mr Abrahams were parties. To a significant extent the participation of the Bethnal Green and Mitcham Congregations, and of Mr Abrahams, in the affairs of the Bibleway Trust was a necessary part of the factual matrix calling for determination in that judgment. Nonetheless it has been necessary for me to review my findings about those matters in the light of the further evidence and submissions now presented by those two additional groups of trustees and by Mr Abrahams himself. For the most part the Bethnal Green and Mitcham trustees accepted and adopted the factual findings in my May 2010 judgment. Nonetheless, albeit without a formal challenge, Ms Taylor and to a lesser extent Mr Jones did invite me to reconsider the basis upon which I concluded that each of the Bethnal Green and Mitcham Buildings had been vested in the Bibleway Trustees.[12]In my May 2010 judgment I concluded that the Lewisham Building had been vested in the Bibleway Trustees not for members of the Lewisham Congregation beneficially, nor upon special trusts, but upon the terms of the 1971 Trust Deed. Nonetheless I concluded that it was so vested on the basis of a clear expectation by the Lewisham Congregation (which paid for it) that it would be held for use by that congregation as its place of worship and witness and that, if for any reason it ceased to be suitable or sufficient for that purpose, it would be dealt with, whether by sale or mortgage or otherwise, so as to make continuing provision for the worship and witness of the Lewisham Congregation, for as long as that congregation should survive. That was the “spirit of the gift” in relation to the Lewisham Building: see paragraphs 71 to 75 of my May 2010 judgment.[13]I reached the same conclusion as to the spirit of the gift in relation to both the Bethnal Green and Mitcham Buildings: see paragraph 76. I reached no express conclusion as to whether those buildings were vested in the Bibleway Trustees for the members of those congregations beneficially, or upon special trusts, or more generally upon the terms of the 1971 Trust Deed, and the facts relevant to that question in relation to each of the Bethnal Green and Mitcham Buildings are not, or at least not quite, the same.[14]Common to the purchase of each of the three buildings (and the Cambridge Building as well) are the facts that they were each purchased from contributions made by the relevant local congregation rather than with any financial assistance from the national church, and that they were purchased and vested in the Bibleway Trustees on the express understanding that the entire responsibility for the maintenance, insurance and outgoings connected with each building, and the repayment of any mortgage borrowing which contributed to its purchase, should be the responsibility of the relevant local congregation.[15]For present purposes the relevant factual differences may be summarised as follows. First, Bishop White, the chairman of the Bibleway Trustees at the time and the spiritual head of the Bibleway Church in the United Kingdom, was not the founder or pastor of the Bethnal Green, Mitcham or Cambridge Congregations, as he had been of the Lewisham Congregation. Thus, the analysis in paragraph 74 of my May 2010 judgment that, in relation to the Lewisham Building, Bishop White acted as much as the representative of the donor as the chairman of the donee trustees, is not applicable to the Bethnal Green or Mitcham Buildings.[16]Taking the Bethnal Green Building first, the evidence provided since May 2010 fully confirms the accuracy of the letter referred to in paragraph 78 of my May 2010 judgment, to the effect that the building at Herald Street was acquired in 1992 with contributions from the Bethnal Green Congregation, supported by a loan on first mortgage from National Westminster Bank plc of £70,000 and a second mortgage loan from J.H. & J Ltd. It appears that the Bibleway Trustees acted both as contracting purchasers and borrowers in relation to the purchase. Nonetheless the written evidence of Apostle Harold Carl McFarlane, who has been the pastor of the Bethnal Green Congregation throughout, confirmed in cross-examination, was that, as between his congregation and the Bibleway Trustees, the whole responsibility for repayment of the two mortgages was to fall on the Bethnal Green Congregation. Further, he said that: “”Bishop White always made it clear that they [the Bibleway Trustees] held the legal title as a bare custodian for the individual church, that they had no rights over the premises and accepted no responsibility for the maintenance and upkeep of the buildings or for the payment of any mortgage taken out by an individual church.”[17]As for the Mitcham Building, there was evidence at the April 2010 trial from its former associate minister Pastor Paul Bailey that, as recorded in paragraph 80 of my May 2010 judgment, it had been acquired entirely from contributions from the Mitcham Congregation. That evidence was confirmed by the three witnesses for the Mitcham trustees at the further hearing, but none of them appear to have been as closely involved in the purchase as had Pastor Bailey himself. Nonetheless there was produced a letter dated 19th July 1985 from the solicitors who had acted for the Bibleway Trustees on the purchase of the Bethnal Green Building, addressed to the then pastor of the Mitcham Building, Pastor Daley, requiring on Bishop White’s behalf that any purchase be taken in the name of the Bibleway Trustees (described as “the National Trustees”), and threatening proceedings if the building was proposed to be acquired in any other persons’ names.[18]Although the case for a conclusion that the relevant building was held upon the trusts declared by the 1971 Trust Deed is weaker in relation to the Bethnal Green and Mitcham Buildings than in relation to the Lewisham Building, I have nonetheless come to the conclusion that all three of them, as well as the Cambridge Building, were held on those trusts. Apostle McFarlane’s evidence was that Bishop White regarded all four buildings as held on the same terms, and that he saw no distinction between the basis upon which the Lewisham Building (sometimes described as the mother church) was held, merely because he was also pastor of that congregation. In my judgment Bishop White had the de facto authority as the spiritual leader of the Bibleway Church in the UK to prescribe how individual buildings should be held, and this authority was accepted by each congregation which paid for the acquisition of a church building, even if, in relation to Mitcham, that authority had to be backed up by a threat of legal proceedings.[19]Nonetheless, the evidence now available fully confirms, in relation to all four buildings, the expectation shared both by the contributing congregations and by the then Bibleway Trustees, led by Bishop White, that each building would, under the umbrella of the Bibleway Trust, be treated as a separate asset or fund, with each congregation bearing the cost and enjoying the use of that building as its place of worship. It was clearly part of the understanding both of the contributing congregations and of the Bibleway Trustees prior to the schism in 1997 that no individual congregation could look to any other congregation, or to the asset constituted by that congregations’s building, as a means of financial support, nor be expected to contribute to, or have its building used as a means of supporting, one or more of the other congregations. I am satisfied that, until the schism, the assets of the Bibleway Trust, which consisted predominately of those four buildings, were indeed administered precisely upon the basis of that understanding.[20]The further evidence which has become available since April 2010 sheds no useful light on the administration of the Bibleway Trust between 1997 and 2004, save that there was produced for the first time during the further hearing copies of accounts purporting to be accounts of the Bibleway Trust for the years ended 1st April 2004 and 2005, prepared by a firm of accountants named P Karia & Co and approved by Bishop Williams, Reverend Ogunlana and Mrs Duncan as trustees. It appears likely that the 2004 and 2005 accounts were prepared and approved some time after the accounting periods to which they relate. The 2006, 2007 and 2008 accounts were before the court in 2010.[21]In paragraph 25 of my May 2010 judgment I described the then available accounts from March 2006 onwards as raising more questions than they answered, even after detailed cross-examination of Bishop Williams and Reverend Ogunlana. The belated provision of the 2004 and 2005 accounts answered few of those questions, so that the picture of the financial position of the Bibleway Trust now available from accounts for the five years 2004 to 2008 inclusive must be treated with considerable caution. Making all due allowances however, and having regard to the other available evidence, including Bishop Williams’ further testimony and the additional documents provided, they justify the following conclusions relevant to the claim for an indemnity.[22]First, it is plain that, from the time when they obtained de facto control of the affairs of the Bibleway Trust, due to the departure of other trustees, the present trustees treated the financial affairs of the Cambridge Congregation as part and parcel of the financial affairs of the Bibleway Trust, making no distinction of any kind, either in relation to income or expenditure, between items attributable to the Trust and items attributable to the Cambridge Congregation. In fact, the overwhelming majority of specific itemised amounts both on the income and expenditure side of the accounts appeared to relate to the income and expenditure attributable to the Cambridge Congregation. Most of the items could only have arisen in connection with the affairs of the Cambridge Congregation, although a small number of them could at least in theory have included expenditure upon matters which, prior to the schism, were the responsibility of the national church rather than any particular congregation. There is not a single item which is unequivocally attributable to national rather than Cambridge matters. Thus, even though there are references such as “Jamaica Church”, “Missionary Retreat” and “Convention” which at first sight look more like national rather than Cambridge related activities, it remains perfectly possible that these items merely represent expenditure which the Cambridge Congregation decided to incur in supporting church related activities outside its immediate locality.[23]Secondly, none of the income and expenditure of the other congregations is included in any of these accounts. This is not in itself surprising since, following the schism, the Lewisham, Bethnal Green and Mitcham Congregations all seceded from the Bibleway Church and provided nothing by way of income or any information about their separate financial affairs to Bishop Williams and his fellow Trustees.[24]Thirdly, the accounts all purport to identify all three of the Lewisham, Bethnal Green and Mitcham Buildings (and the Cambridge Building before its sale) as forming part of the assets of the Trust. In each of 2004 to 2006 (inclusive) they are shown as having increasing estimated values, namely £1.403 million (2004), £1.559 million (2005) and £1.732 million (2006). Thereafter the aggregate value appears to fall but, as noted in paragraph 87 of my May 2010 judgment, only because of a decision to deduct the amount of debts secured on the Cambridge Building from that aggregate value.[25]Fourthly, it is clear that the Trustees’ stewardship of the combined affairs of the Bibleway Trust and the Cambridge Congregation during the five year period covered by these accounts gave rise to a constant excess of expenditure over income, even though the income and expenditure accounts for three of the five years purported to show modest surpluses. This appearance of surplus is mainly because the Trustees chose to include loans received during each year as income. Thus in 2004 the largest single item of income was described as “loan” in the amount of £38,472.92. Allowing for “loan repayment/refund” of £1,446.61, the net loan income was therefore £37,026.31. If stripped out it turns a reported surplus of £21,540.01 into a real deficit of £15,486.30. Applying the same calculation to the 2005 accounts turns a reported deficit of £21,409.71 into a real deficit of £46,269.66. In the 2006 accounts, the same calculation turns a reported surplus of £35,744.21 into a real deficit of £7,652.58. In 2007 the calculation converts a reported deficit of £11,706.32 into a true deficit of £21,689.94.[26]The year ended 31st March 2008 is complicated by the sale of the Cambridge Building, from which the Trustees reported receiving a net £23,302.98. In fact the completion statement from the trustees’ solicitors shows net proceeds of £28,693.85. On the income and expenditure account loan repayments exceeded new loan credits by £15.236.06. If loans and the net capital amount reported as received on the sale of the Cambridge Building are stripped out of the income and expenditure account, a reported surplus of £838.29 is converted to a real deficit of £7,228.63.[27]Finally, the reported balance sheet surpluses in the accounts for those five years depend critically upon the Trustees’ assumption that they had the right of unlimited recourse to the estimated value of the Lewisham, Bethnal Green and Mitcham Buildings, as well as the Cambridge Building, as assets of the Bibleway Trust. This is best illustrated by focusing on the position as at 31st March 2006 at a time when from other documents it is apparent that the Trustees placed a value on the Cambridge Building of £400,000. Deducting that figure from the estimated value of all four freehold properties of £1,732,500 produces an estimated aggregate value of the Lewisham, Bethnal Green and Mitcham Buildings of £1,332,500 against a net assets figure of £1,397,500. On the Trustees’ own figures therefore, it must have been apparent to them that their stewardship of the combined affairs of the Cambridge Congregation and the Bibleway Trust had exhausted all but £60,000 of the available equity in the Cambridge Building, so that if they continued to incur a shortfall of income against expenditure as they had been doing continuously until then, they would face insolvency unless they could have recourse to the value inherent in the other three buildings.[28]When the understanding upon which the Bibleway Trustees had become vested with the legal ownership of each of the four buildings (as I have described it) is borne in mind, it might have been expected of reasonable trustees that they would have taken urgent steps, not later than in 2006, to reduce their expenditure so that it did not exceed their income, rather than to continue to operate the combined affairs of the Trust and the Cambridge Congregation at a loss, as in fact they did. In fact the Bibleway Trustees clearly assumed, and intended to exercise, a right to have recourse to the value of the other three buildings as a means of making good that continuing shortfall.[29]Among the documents recently disclosed by the Bibleway Trustees is the minute of a meeting of the Trustees on 22nd January 2006. Under paragraph 2 headed ‘The Charity Commission’ the Trustees are recorded as having agreed that the Charity should not be “split”; a reference to a suggestion from the Charity Commission that the Trustees consider a voluntary division of the Trust’s assets among the pre-schism congregations, essentially along the lines now sought to be achieved by cy-près schemes. Under the heading ‘Buildings’ the minutes record in some detail how the Trustees considered that each of the Bethnal Green, Lewisham and Mitcham Buildings should be sold following (in relation to Lewisham) the eviction of its congregation.[30]The minutes of a further meeting on 30th January 2006 record the Trustees as discussing the possibility of applying for a bridging loan to cover “the expenses of the Charity for the next 6 months, while we continue to seek cooperation of the other factions” by which is meant those in de facto control of the Lewisham, Bethnal Green and Mitcham Buildings. Further, in a minute of a trustee meeting on 27th March 2006 Bishop Williams is recorded as having:
“… added that it may be wise to have some funds from the sale of Mitcham Church as the National account was only £280.”
[31]Far from recognising a need to economise, a minute of a purported “National Executive Meeting” of the Bibleway Church UK on 23rd September 2006 records grandiose schemes for the holding of international, national and regional conventions, for which those present (largely from the Cambridge Congregation but with two persons attending from its daughter churches), recognised the need for substantial additional funding.

BREACH OF TRUST

[32]In paragraphs 95 to 100 of my May 2010 judgment I recorded, on a provisional basis, serious concern about the propriety of the use to which the Bibleway Trustees put a substantial part of their expenditure, as recorded in the accounts, in particular in relation to foreign missionary activity (outwith the express terms of the 1971 Trust Deed) and in the promotion and operation of various limited companies, two of which in due course went into insolvent liquidation. I noted at paragraph 99 that it was unnecessary and, at that stage in the proceedings, potentially unfair to reach conclusions on questions of breach of trust, but that it might be necessary to do so if the Bibleway Trustees pursued an indemnity claim. The Trustees were therefore on notice that if, as they have done, they chose to pursue such a claim, they would be likely to need to justify those aspects of their conduct.[33]Unfortunately, nothing in the evidence and submissions of the Bibleway Trustees has done anything to deal with those concerns. On the contrary the evidence as it now stands has aggravated them, and it is necessary for me now to decide whether aspects of the Trustees’ conduct amounted to breaches of trust. This is not because any claim is being pursued at present for an account, but because the question whether the Trustees should now receive an indemnity requires the court to consider breach of trust in two respects. The first is whether the specific expenditure and liabilities in respect of which an indemnity is now sought were themselves incurred in breach of trust. The second wider question is whether any net amount for which the Trustees might otherwise be entitled to an indemnity is offset by an equivalent or greater liability to account for breach of trust in relation to other matters.[34]The headings under which breach of trust has been pursued at this further hearing may be summarised as follows: i) Mixing the affairs of the Cambridge Congregation with those of the Bibleway Trust. ii) Operating the combined affairs of those two bodies at an ongoing loss, at the expense of the capital assets of the Trust. iii) Undertaking imprudent corporate ventures outwith the objects of the Trust but at the Trust’s expense. iv) Receiving (in the case of Bishop Williams) and approving (in the case of the other Trustees) the payment of unauthorised remuneration to a trustee. v) Financing their activities by unauthorised borrowing. vi) Failing to retain suitably qualified advisers. vii) Failing to keep proper accounting records or, upon request, to provide a proper account of their stewardship.[35]In addressing the question whether all or any of these alleged breaches of trust are made out as against the Bibleway Trustees, the starting point is to identify the broad thrust of their duties in the undoubtedly difficult and unexpected circumstances created by the schism in 1997. I have described its causes in paragraphs 7 and following of my May 2010 judgment. It was largely inherited from a schism in the parent church in the USA, and concerned matters of leadership and governance rather than doctrine, belief or worship. The result of it was that there continued, as before the schism, to be substantially the same congregations practising the same faith by worship and witness in and from the same church buildings, but no longer united by a national association or leadership.[36]At its most general level the duty of trustees of a charity is well defined by the following passage in Picarda’s Law and Practice Relating to Charities (4th edition) at page 629, under the heading ‘Duty to protect trust property’:
“In performing this duty of safe custody he is not bound to look with more prudence to the affairs of the charity than to the management of his own affairs. But this assertion requires a gloss. Much more is in fact expected from trustees acting for a permanent charity than can be expected from the ordinary prudence of a man in dealings between himself and other persons. A man acting for himself may indulge his own caprices, and consider what is convenient or agreeable to himself, as well as what is strictly prudent, and his prudent motive cannot afterwards be separated from the others which may have governed him. Trustees of a charity, within the limits of their authority, whatever they may be, should be guided only by desire to promote the lasting interest of the charity.”
Under the heading ‘Duty of loyalty’, the author continues at page 633 as follows:
“A private trustee must be loyal to the interests of the beneficiaries. The charity trustee owes his duty of loyalty to the public.”
As noted in Picarda at page 633 to 634, the duty of loyalty involves a duty to act gratuitously, save where authorised to receive remuneration by the terms of the trust, or by authority from the Charity Commission.[37]The application of those general principles to the circumstances of the Bibleway Trustees following the schism leads in my judgment to the following conclusions. First, the Trustees continued to be obliged to serve the public interest in promoting the Christian worship and witness of all the congregations which had constituted the Bibleway Church prior to the schism, regardless whether they recognised the authority of Bishop Williams in matters of faith or discipline. Secondly, in relation to congregations for the worship and witness of which the Trustees held land and buildings on trust (i.e. Lewisham, Bethnal Green, Mitcham and Cambridge) the Trustees continued to be under the duty to preserve those buildings in the same way as pursuant to the arrangements made prior to the schism, that is by enabling each congregation to continue to maintain and pay for outgoings (including mortgage repayments) referable to its particular building, but not to treat the asset represented by a particular building as a source for the maintenance or support of some other building or congregation. I consider that continuing duty to have arisen as a consequence of the arrangements pursuant to which each congregation provided the financial contributions for the purchase of its particular building, and as a matter of basic fairness as between the congregations for whose worship and witness the Bibleway Trust was established as a support.[38]Thirdly, it was in particular incumbent upon the Trustees to continue, as had been done before the schism, to maintain a clear distinction between the financial affairs of any particular congregation with which each Trustee or the Trustees as a whole were associated, and the affairs of the national church and the Bibleway Trust itself. As explained in my May 2010 judgment, this distinction was maintained by the Bibleway Trustees prior to the schism, at a time when they were mainly associated with the Lewisham Congregation. The parting of the ways between the various Bibleway Congregations which resulted from the schism made the need for the maintenance of this distinction all the more important.[39]Finally, it was incumbent on the Trustees following the schism to consult with the leaders of the various congregations, and in particular those with buildings held by the Trustees, so as to administer those buildings in a manner best calculated to advance the worship and witness of the particular congregation using each of them.[40]Against that analysis, it is manifestly clear that the Bibleway Trustees administered the affairs of the Trust, once control of it had devolved upon them after the schism, in a manner wholly at variance with their duties. At the heart of their failure lay a perception, revealed both by their conduct and by the minutes of their meetings which I have described, that their right and duty was to advance the worship and witness only of those members of the Bibleway Church UK which had, following the schism, chosen to adhere to the faction led by Bishop Williams, as, in effect, a daughter church of the Rogers faction which emerged from the schism in the USA. They appear to have regarded the congregations which seceded, including those in Lewisham, Bethnal Green and Mitcham, as little better than heretics in unlawful occupation of Bibleway Church buildings, fit to be negotiated with as potential purchasers of those buildings, but otherwise liable to eviction.[41]This led inevitably to a perception that the Cambridge Congregation, which (with its daughter churches) was the only long term adherent to Bishop Williams’ leadership, was indistinguishable from the Bibleway Church UK, in particular after the last of the other independent congregations (at East Dulwich) seceded in or about 2006. The same misguided attitude also led to the Bibleway Trustees treating the Lewisham, Bethnal Green and Mitcham Buildings as assets potentially available for the support of the loss-making activities of the Cambridge Congregation, and the ownership of those other buildings as a justification for continuing those loss-making activities up to and beyond the point at which they wholly exhausted the remaining equity value in the Cambridge Building. Thus the first three allegations of breach of trust which I have listed in paragraph 34 above are fully established against the Bibleway Trustees. I have already sufficiently described the loss making corporate ventures established in Cambridge by the Trustees in my May 2010 judgment.[42]The fourth, namely Bishop Williams’ receipt of unauthorised remuneration, is also fully established by the evidence. The Trust accounts from 2004 to 2008 show wages as an expense in every year, starting at a modest £232.50 in 2004, rising to £15,842.48 in 2005, £12,266.98 in 2006, £14,649 in 2007 and rising to £27,260 in 2008. In cross-examination Bishop Williams accepted that he was the only person employed directly by the Trust and that all those wages were, in effect, his stipend, mainly for his work as pastor of the Cambridge Congregation.[43]In addition, in each of the years 2004 to 2008 inclusive the Trustees incurred expense payments in favour of S&A (Greater Bibleway S&A Centre Limited), a company established by the Trustees, which provided administrative services for the running of the Trust and the Cambridge Congregation. Bishop Williams was a paid employee of S&A and I infer from his cross-examination, supported by limited documentary evidence, that a significant part of the Trustees’ payments to S&A found their way back to him in the form of additional remuneration.[44]The 1971 Trust Deed contained no provision permitting remuneration to be paid to trustees. Although the aggregate of the amounts received by Bishop Williams was by no means excessive in relation to the work he did and might, as counsel accepted, have been approved on an application to the Charity Commission, no such application was made. The evidence satisfied me that the Trustees were aware of, and consented to, Bishop Williams being remunerated both directly and indirectly from the combined assets of the Trust and of the Cambridge Congregation. The remuneration was not an authorised expense of the Bibleway Trust, and it was a breach of trust both for Bishop Williams to receive it and for the other Trustees to approve it.[45]Bishop Williams could have avoided this predicament by keeping the income of the Cambridge Congregation separate from the Trust, and ensuring that his remuneration was paid entirely out of that income. In reality the voluntary giving of the Cambridge Congregation was the principal source of the combined income of that congregation and the Trust, apart from loans obtained on the security of the Cambridge Building. This is a telling example of the way in which the trustees’ conflation of the affairs of the Trust and the Cambridge Congregation lay at the heart of their difficulties.[46]The allegation of unauthorised borrowing is central both to the claim for an indemnity and to the charging order proceedings. The text books, and Charity Commission guidance, do not speak entirely harmoniously on the question whether charity trustees have a power to borrow unsecured. Furthermore, since those in the present proceedings (namely the Bibleway Trustees and Mr Abrahams) with an interest to argue that the borrowing from Mr Abrahams for which the Bibleway Trustees now seek an indemnity was authorised have appeared as litigants in person, I am reluctant to go further into this ill-charted territory than strictly necessary.[47]The starting point is that the 1971 Trust Deed (as amended by a Deed of Variation dated 31st May 1978) authorised the Trustees to raise money by mortgage, subject to the consent of the Charity Commissioners (or anybody for the time being replacing the same), but contained no express power to borrow unsecured.[48]Section 38 of the Charities act 1993 permits the mortgage of land held on charitable trusts if done pursuant to an order of the court or of the Charity Commission or pursuant to written advice of the type specified in subsections (1) to (4). Relevant matters about which advice must be taken are, pursuant to subsection (3):
“(a) whether the loan or grant is necessary in order for the charity trustees to be able to pursue the particular course of action in connection with which they are seeking the loan or grant; (b) whether the terms of the loan or grant are reasonable having regard to the status of the charity as the prospective recipient of the loan or grant; and (c) the ability of the charity to repay on those terms the sum proposed to be paid by way of loan or grant.”
[49]Section 6 of the Trusts of Land and Appointment of Trustees Act 1986 confers on trustees of land all the powers of an absolute owner, for the purpose of exercising their functions as trustees. Section 6(5) requires trustees of land to have regard to the rights of the beneficiaries. Subsection (6) provides that:
“The powers conferred by this section shall not be exercised in contravention of, or of any order made in pursuance of, any other enactment or any rule of law or equity.”
Subsection (8) provides that where any other enactment confers authority subject to restrictions, limitations or conditions, trustees of land may not exercise the powers under section 6 to do any act which they are prevented from doing under the restriction, limitation or condition in that other enactment.[50]It is plain therefore that section 6 confers no wider power in relation to the obtaining by charity trustees of secured loans than that regulated by section 38 of the Charities Act 1993. I do not consider that section 6 has any bearing on the obtaining of unsecured loans by charity trustees, since it is concerned only with the exercise of the powers of the owner of land. Unsecured borrowing involves no exercise of any power derived from the ownership of land, since it involves merely the undertaking of a personal obligation to repay, and to pay interest, in consideration of the receipt of the sum lent.[51]In Tudor on Charities (9th edition) at paragraph 6-008 it is stated that:
“Charity trustees who hold land have power to borrow for a purpose in connection with the land they hold. The trust instrument may contain an express power to borrow. It is debatable whether a general power to do “or such other lawful things as are necessary for the achievement of the objects” is sufficient to imply a power to borrow. Charity trustees may, however, seek an Order under section 26 of the 1993 Act from the Charity Commissioners conferring power to borrow.”
[52]In the Charity Commission’s Operational Guidance paper under the heading ‘Borrowings and Mortgages – Power to Borrow’ the opinion is stated that a power to borrow unsecured for a purpose relating to the repair, maintenance, improvement etc of the buildings and land which the charity trustees own is within the land management powers conferred by section 6 of the Trusts of Land and Appointment of Trustees Act. Nonetheless the Charity Commission acknowledges that its view is not shared by all major corporate lenders, but that some of the dissentients appear to accept that in particular circumstances charity trustees may have an implied power to borrow money unsecured.[53]In relation to unsecured borrowing it is in my judgment a slight misnomer to describe the question as one of power. An unsecured borrowing involves the undertaking, even by trustees, of a purely personal obligation, for which they remain liable to the lender, regardless whether the borrowing was, or was not, a breach of trust. The real question is whether, in relation to any particular unsecured borrowing, the trustees are entitled to an indemnity as against the trust property, in respect of that personal liability. That will largely depend upon whether the purpose for which the money was raised by an unsecured borrowing was a proper purpose of the trust, such that the borrowing and expenditure of the money was not a breach of trust. The question is not far removed from that which arises when a trustee uses his own money for the fulfilment of the purposes of the trust.[54]In many cases such as, for example, where the trust has a temporary shortage of cash, trustees may properly use their own money, for example to pay a debt incurred on behalf of the trust which falls due in advance of the receipt of anticipated trust income, and properly expect an indemnity from that trust income, once received, so as to recoup that personal payment. Similarly, I consider that trustees may borrow unsecured, for example for the same purpose of dealing with a short term cash-flow shortage, and properly expect an indemnity for their personal liability as borrowers, as against trust income later received, provided that there is a proper basis for the trustees’ expectation that the necessary income will be forthcoming by the time when repayment becomes due.[55]There may also be circumstances where trustees may borrow unsecured in emergencies, so as, for example, to stave off the re-possession of trust property by mortgagees in advance of what they reasonably anticipate to be an imminent sale at a price better than would be obtained by the mortgagees, and sufficient to discharge both the mortgage debt and the short term unsecured borrowing.[56]In contrast, trustees who habitually incur expenditure in excess of income, and who resort to unsecured borrowing when borrowing on the security of trust property is exhausted, cannot expect an indemnity, because their recourse to unsecured borrowing is simply the result of their own improvidence. Furthermore, unsecured borrowing, even for a proper purpose of the trust, may be a breach of trust if it exposes trust property of a permanent nature to attrition, for example by enforcement proceedings by an unpaid lender. As is recognised by section 38(3)(c) of the 1993 Act in relation to secured borrowing, a critical question for charitable trustees when deciding to borrow unsecured will always be whether there will be a ready means of repayment which is itself consistent with the lasting interests of the charity.[57]I must now return to the facts about the Bibleway Trustees’ unsecured borrowing from Mr Abrahams. By the beginning of 2007 the Cambridge Building had, for several years, become so dilapidated that it could not be used as a place of worship for the Cambridge Congregation. The Trustees had concluded, reasonably in my judgment, that the best that could be done with it was to realise its development value as a site for new houses and had obtained planning permission for that purpose. An attempt to sell it for £400,000 had foundered shortly before a planned exchange of contracts. The Trustees appear then to have turned their minds to a redevelopment of the site themselves, in a joint venture with a developer. Alternative planning permission was sought, but not obtained, and Bishop Williams’ evidence (at the trial in 2010) was that the Trustees identified Mr Abrahams as a potential joint venture partner.[58]The Cambridge Building had been originally acquired mortgage free by contributions from the Cambridge Congregation. By the beginning of 2007 it was the subject of charges in favour of Lancashire Mortgage Corporation and Barclays Bank, incurred as security for borrowings raised to fund the constant excess of expenditure over income, mainly in connection with the affairs of the Cambridge Congregation. Further borrowing had been obtained from Mr Fullarton, secured by an additional charge on the Cambridge Building. By March 2006 the aggregate secured indebtedness exceeded £330,000, and nothing in the evidence suggests that the Trustees had attempted, let alone found, a way of ensuring that the combined activities of the Cambridge Congregation and the national church could be carried on at a cost which did not exceed the available income.[59]In paragraphs 90 to 92 of my May 2010 judgment I briefly described the circumstances in which Mr Abrahams’ loan was made, and then not repaid. I did so on the basis of an appraisal of the loan agreement and Bishop Williams’ evidence about the circumstances, but in the absence of any evidence from Mr Abrahams. In the light of Mr Abrahams’ evidence now available, I need to review and supplement those findings. I found him to be a credible witness and, to the extent that his evidence differs from that of Bishop Williams, I have no hesitation in preferring that of Mr Abrahams. His account, which I broadly accept, was as follows. He was introduced to Bishop Williams by a mutual friend early in 2007, who informed him that Bishop Williams and his church were in financial difficulties. At a meeting in London Bishop Williams explained that his church had cash-flow problems but hoped either to sell or develop the Cambridge Building. He described his congregation as facing imminent repossession by Lancashire Mortgage Corporation and sought temporary assistance. He described his church as owning properties in Cambridge, Lewisham, Bethnal Green and Mitcham, with the result that Mr Abrahams felt confident that, even if he lent unsecured, he would in due course be repaid. He said that both his own solicitors and the solicitors acting for the Trustees (Messrs Frasers) assured him that the Trustees had power to borrow unsecured, but was advised by his solicitors that a secured loan would require further steps, including written advice to the Trustees from a qualified accountant.[60]As what he described as an act of charity, he lent £25,000 unsecured by direct payment to Frasers in April 2007, from which Frasers deducted some £5,000 odd on account of their fees, remitting the balance to Lancashire Mortgage Corporation in discharge of arrears. Thereafter, he made four further payments of a little less than £5,000 each to discharge further mortgage instalments due to Lancashire Mortgage Corporation, and two final payments of £5,000 and £30,000 for what, in a schedule, Bishop Williams described as “loan refunds and outstanding bills”. He also paid or contributed £530 towards the survey fee pursuant to which the Cambridge Building was, in September 2007, valued at £400,000, the amount for which it was sold in November 2007.[61]Mr Abrahams acknowledged that during the period April to September 2007 Bishop Williams sought to interest him in a joint venture with the church for the redevelopment of the Cambridge site, and acknowledged that he had some experience in property development. He said, and I accept, that he eventually decided not to participate due to what turned out to be a correct perception that the residential property market had peaked. He accepted that he had through an acquaintance of his introduced Emerald Strike Holdings as the eventual cash purchaser of the Cambridge Building, but said (and I accept) that he had no interest of his own in that entity.[62]Mr Abrahams said that the written loan agreement made in October 2007 with the Trustees came about as the result of his request for assurance of repayment while the sale to Emerald Strike was being progressed towards completion. The agreement provided for repayment interest free until 1st January 2008, with a fixed interest sum of £10,950 immediately payable if the loan remained outstanding thereafter, and with additional interest accruing from 2nd January 2008 at 15% per annum.[63]Mr Abrahams said that he was assured by Bishop Williams that he would be repaid in full out of the proceeds of sale of the Cambridge Building. He said that he was entirely unaware of the additional secured loan from Mr Fullarton which, when aggregated with the amounts due to Lancashire Mortgages and Barclays, left only some £28,600 odd available for repayment to him out of the agreed purchase price of £400,000. He said that he had been shocked later to discover the £70,000 due to Mr Fullarton and secured on the Cambridge Building. It was evident that he regarded himself as having, in that respect, been deceived by Bishop Williams.[64]Mr Abrahams could not explain why no part of the £28,600 odd received by the Trustees as the net proceeds of sale of the Cambridge Building had been applied in part repayment of his loan. He said that Bishop Williams had, after 1st January 2008, promised that he would be repaid in twelve months, from funds generated from a refinancing of the other church properties, which Mr Abrahams understood to be a reference to the Lewisham, Bethnal Green and Mitcham Buildings. He said that Bishop Williams described the Lewisham Congregation as the Trustees’ tenants of the Lewisham Building who were in a dispute with the Trustees over ownership, a dispute which the Bishop said that he expected to win. Finally, Mr Abrahams said that he sought a charging order over the Lewisham Building, after obtaining an unsatisfied default judgment against the Trustees, having noted that in their own accounts the Trustees of the Lewisham Congregation claimed no beneficial interest of their own in the building, but recorded a substantial building fund of their own in excess of £500,000.[65]In my judgment the Bibleway Trustees’ unsecured borrowing from Mr Abrahams, for which they remain liable to him pursuant to the default judgment which he has obtained, is not a liability in respect of which the Trustees are entitled to an indemnity from the remaining Trust property constituted by the Lewisham, Bethnal Green and Mitcham Buildings. My reasons follow. First, to the extent that it was a proper borrowing at all, its only legitimate purpose was the rescue of the Cambridge Building from imminent repossession, so that the Trustees might have been entitled to indemnify themselves out of the proceeds of the sale of that property by reducing the amount owing to Mr Abrahams.[66]But on no view was it consistent with the Trustees’ duties to expose the Lewisham, Bethnal Green or Mitcham Buildings (i.e. the remainder of the property of the Bibleway Trust) to any liability to Mr Abrahams, either by way of the exercise of a right of indemnity of their own, or by way of Mr Abrahams’ obtaining of a charging order. In my judgment the position is broadly analogous with Fraser or Robinson v. Murdoch (1881) 6 App Cas 855, in which trustees segregated the trust property into two distinct funds, incurred expenses in relation to one of them, and failed to obtain an indemnity which extended to the assets of the other fund. At page 873 Lord Blackburne, having referred to the general principle entitling trustees to an indemnity for expenses incurred in the execution of a trust, continued:
“But this, I think, does not extend so far as to enable them to apply all funds, part of the property which they took in trust, and of which they are not divested, in relief of expenses incurred on behalf of a separate branch of the trust, and not at all on behoof (sic) of the funds from which it is sought to obtain relief.”
That was, of course, a Scottish case about a private rather than public trust, where there had been a severance pursuant to which different beneficiaries were interested in the separate funds. Nonetheless I consider that the underlying principle is fully applicable to the particular circumstances of the Bibleway Trust, in which separate church buildings were acquired from the financial contributions of separate congregations and held by the Bibleway Trustees pursuant to an understanding that each building would be both for the use and also the financial responsibility of the congregation which had paid for its purchase. Even though no special trusts were declared in relation to each building, I consider that the basis upon which they were acquired was sufficient to bring into play the analysis as to the limitations of the trustees’ indemnity applied in Fraser v. Murdoch.[67]Secondly, the perceived need for the Abrahams loan arose entirely in relation to the Trustees’ conduct of the affairs of the Cambridge Congregation. It was that congregation’s building which was threatened with repossession, and the constant excess of expenditure over income in the administration of the affairs of that congregation which gave rise to the cash-flow shortage which had created that threat. Furthermore it was the same cash-flow shortage which, no doubt, led the Trustees to use the £28,600 odd net proceeds of sale for purposes otherwise than the partial repayment of Mr Abrahams’ loan.[68]Thirdly, I was by no means persuaded by the evidence that the threat of repossession by Lancashire Mortgage Corporation was an emergency which necessitated substantial further borrowing. The Trustees chose to proceed with unsuccessful plans for a joint venture redevelopment rather than to obtain an early sale of the Cambridge Building at a price which, had it been achieved in early of mid-2007, would have been sufficient to pay off all secured borrowing, and the initial £25,000 loan by Mr Abrahams. I consider that to continue to borrow from Mr Abrahams in excess of that amount was reckless conduct on the part of the Trustees, in which they persisted without any proper basis for satisfying themselves that Mr Abrahams could, in due course, be repaid from the only property which was properly available to them for that purpose. The reality was, as Bishop Williams himself told Mr Abrahams, that the Trustees wrongly thought that they could have recourse to the other properties for that purpose.[69]That analysis makes it unnecessary for me to decide whether the liabilities to Lancashire Mortgage Corporation, for the discharge of which most of Mr Abrahams’ loan was used, were themselves the result of unauthorised borrowing. The evidence as to that was inconclusive at the trial in 2010, and nothing adduced thereafter takes the matter any further. My analysis therefore assumes, but without deciding, that the original borrowing from Lancashire Mortgages was authorised by some process of advice taking pursuant to section 38 of the Charities Act 1993. Even if authorised, it may nonetheless have been a breach of trust if, as I consider probable, its purpose was to enable the Trustees to sustain the improvident incurring of expenses in the administration of the affairs of the Cambridge Congregation in excess of that congregation’s sustainable income.[70]I am by contrast not persuaded that it was a breach of trust for the Bibleway Trustees not to have obtained specialist advice throughout. It is clear that the Trustees incurred substantial liabilities (most of which appear to have been paid) in engaging solicitors and accountants in connection with the combined affairs of the Trust and the Cambridge Congregation. The criticism, persisted in by Ms Taylor, was that they had used professionals with insufficient expertise in charity matters.[71]The Bibleway Trustees failed, despite request, to produce written records of the advice which they had received, or even to bring copies of it to court, in advance of a determination whether any claim to privilege could be made in relation to that advice, for as long as the Trustees were claiming an indemnity for the outstanding cost of its provision. The result is that I have been unable to determine what advice the Trustees took or received. Nonetheless there was real force in Bishop Williams’ response to this allegation in cross-examination, to the effect that he would expect competent professionals to tell him if he needed to go to advisers more specialist than they were. The evidence did not show that the Trustees had ignored any specific invitation to take advice from a more specialist source.[72]The final allegation of breach of trust consisted of the alleged failure by the Bibleway Trustees to keep proper records or deliver proper accounts. While I start with some sympathy for the predicament which the Trustees faced when inheriting the affairs of a trust connected with a church in schism, and having to deal with former trustees with whom they had fallen out, I am nonetheless satisfied that this allegation is made out against the Trustees. I noted in my 2010 judgment how unsatisfactory was the evidence of Bishop Williams and his co-Trustees at the 2010 trial in term of their lack of preparation to explain, and their lack of understanding of, the financial affairs of the Trust, and of the Cambridge Congregation. Despite having had nearly a year in which to prepare their case for an indemnity, and despite further requests for information from the Lewisham Trustees after judgment in May 2010, the Bibleway Trustees’ presentation of financial matters thereafter, and their provision of relevant documents, has continued to justify a conclusion that it was lamentable. Its inadequacies in detail will become apparent when I address the specific heads pursuant to which the Trustees claim an indemnity. More generally, I have noted both in this and in my May 2010 judgment the unreliability of the Trust accounts. Above all, the accounts make no attempt to present, separately from the affairs of the Cambridge Congregation, the legitimate financial dealings of the Bibleway Trustees as such, for the reasons which I have already given.[73]The combined effect of the breaches of trust which I have found to have been proved against the Bibleway Trustees is such that they would (were any claim pursued against them) be liable to account for having brought about and exposed the Bibleway Trust to losses arising from their mismanagement of its affairs in an amount substantially in excess of their indemnity claims, even if those claims had been established by reliable evidence.[74]I have considered whether this is a case which provides any scope for the application of section 61 of the Trustee Act 1925, pursuant to which the court may relieve a trustee wholly or partly from personal liability for breach of trust, where the trustee has acted honestly and reasonably, and ought fairly to be excused. The question arises only indirectly, in the sense that the Bibleway Trustees’ claim to an indemnity is vulnerable to being set off against their liability to account for breach of trust.[75]I do not consider that there is any scope for the application of section 61. While I accept that, save perhaps in relation to the concealment from Mr Abrahams of the additional loan from Mr Fullarton, the Trustees acted honestly, the evidence comes nowhere near to justifying a conclusion that they acted reasonably. Although it appears that, from time to time, they took legal and accountancy advice, they have despite invitation entirely failed to explain what that advice was, or to begin to demonstrate, beyond mere assertion, that they acted in accordance with advice received.[76]While not without sympathy for the predicament of trustees responding to the consequences of a church schism, I have concluded that the origin of their disastrous stewardship of the combined affairs of the Bibleway Trust and the Cambridge Congregation was a misguided perception that they were entitled to treat the charitable objects of the Bibleway Trust as confined to the furtherance of that remnant of the original church which adhered to Bishop Williams’ leadership thereafter. Whether or not that misguided attitude to their duties is capable of being understood as the product of any religious motivation, by no objective standard can it be described as having been reasonable. On the contrary, it led the Bibleway Trustees to treat the buildings paid for and maintained by each of the Lewisham, Bethnal Green and Mitcham Congregations as assets available to fund the activities of Bishop Williams’ adherents, mainly in Cambridge, without consultation with or approval from those other congregations and, to a large extent, without them even being aware of what was being planned and done to their detriment. It was, in my view, conduct which fully merited the sense of moral indignation exhibited by those members of the adversely effected congregations who attended the two hearings in 2010 and 2011 which, to their credit, most of them kept well under control.

THE INDEMNITY CLAIMS

[77]Before addressing each claim separately, it is to be borne in mind that the question in every case is not whether the Bibleway Trustees are entitled to an indemnity generally, but whether they are entitled to be indemnified out of the assets represented by the Lewisham, Bethnal Green and Mitcham Buildings. Having sold the Cambridge Building and exhausted its net proceeds of sale in the loss-making activities of the Cambridge Congregation, there are no other assets out of which they could be indemnified.[78]The Bibleway Trustees broke down their indemnity claim under seven headings. Although not entirely free from overlap, I shall adopt them for the purposes of analysis.

Standard Trust Liability of £40,000

[79]This at first sight uninformative heading was revealed in the Trustees’ evidence to amount to claims for an aggregate of £68,452.90, being the combined amounts of payments made by members of the Cambridge Congregation from their own resources to meet what the Trustees claim to have been Trust liabilities, or payments by way of loan to the Trustees. They also include outstanding liabilities to Davis & Co solicitors in the amount of £3,000 and to an accountancy firm known as Tish Leibovitch, in the amount of £6,000. Since those two items are separately claimed later in the Trustees’ list, I will deal with them below.[80]The remaining items under this heading appear to me to have been voluntary contributions by members of the Cambridge Congregation towards the expenses of its administration rather than payments for the proper purposes of, or to meet the liabilities of, the Bibleway Trustees as such. For the reasons already given, those items cannot therefore form the basis of an indemnity claim, as against the assets represented by the Lewisham, Bethnal Green and Mitcham Buildings.

Previous Legal Costs - £20,000

[81]The Schedule which supports this claim suggests that it relates mainly to the fees of Attwells solicitors and of counsel from May 2008 onwards, as well as a sum claimed for the cost of a mediation and for the hire of a hall (for an unspecified purpose but which may have been to do with the mediation). The total itemised is £18,925.10. It appears to relate to costs incurred in connection with the present dispute at a time before the Bibleway Trustees became litigants in person. As such I shall deal with it after handing down this judgment, as part of the costs of this litigation.

Current Legal and Personal Costs

[82]This amounts to a claim for some £5,500, sought to be justified as earnings and expenses of Bishop Williams, David Ogalana and Mrs Duncan while acting as litigants in person in these proceedings, charged at an hourly rate with additional amounts for travel. Again, I shall address costs of this type after handing down judgment.

Outstanding Balance of the Loan from Mr Abrahams - £102,000

[83]This breaks down into the aggregate of the amounts advanced of £73,185.00 plus interest thereafter. For the reasons already given, I do not consider that the Bibleway Trustees are entitled to an indemnity in respect of this undoubted personal liability of theirs, as against the remaining assets of the Bibleway Trust, having exhausted the net proceeds of sale of the Cambridge Building.

Outstanding Legal Costs Liability of £3,000 to Davis & Co

[84]By contrast, the cost of retaining solicitors would prima facie qualify for an indemnity, provided that the evidence demonstrated that the amount still outstanding was properly attributable to the obtaining of professional advice and assistance in relation to the affairs of the Bibleway Trust, as opposed to those of the Cambridge Congregation. It appears probable that part at least of the work done by Davis & Co did relate to the affairs of the Bibleway Trust but, equally, a substantial part of their fees have already been paid. It is noteworthy that, after inquiry on the telephone, the firm did not respond to the invitation to make a written claim as a creditors of the Bibleway Trust. That suggests that Davis & Co did not think that they could demonstrate that the £3,000 or other outstanding amount was attributable to qualifying work. I do not therefore consider that a claim to an indemnity has been made out in relation to this item.

Outstanding Legal Accountancy Work of Tish Leibovitch

[85]I accept that this accountancy firm did do some work for the Bibleway Trustees the fee liability for which would prima facie qualify for an indemnity, if still unpaid. The court received at a late stage during the hearing prior to this judgment a letter from that firm which enclosed an earlier letter of 24th June 2010 to Bishop Williams claiming no less than £16,602.59 by reference to an itemised summary of fees alleged to be owed by “the Greater Bibleway Church of Our Lord Jesus Christ and its Associated Companies and Allied Matters”. The Schedule supporting that claim relates to eight separately numbered file references, the earliest of which describes its client as “Great Bibleway of Our Lord Jesus Christ”, for which £2,955.00 is claimed. The other seven files name the clients as S&A, Bishop Williams, Freedom Music Management, Sean Williams, the Freedom Gospel Community Channel Ltd, CATT and Mrs Duncan. Of those, the three largest claims are £8,541.17 for CATT, £3,220.00 for S&A and £1,192.22 for Bishop Williams himself.[86]The evidence (including materials sent by Tish Leibovitch) does not explain what proportion of the total chargeable work done by Tish Leibovitch for the eight identified clients is represented by the amounts outstanding, still less whether payments had been made from the funds of the Bibleway Trust in relation to work done for clients other than the Trust itself. Furthermore it is not clear whether the client described as “Great Bibleway of Our Lord Jesus Christ” is a reference to the Bibleway Trust, to the Cambridge Congregation or to some other entity. Nor is the date when the amount claimed from that client became due identified in the evidence, save for the fact that that file reference appears to have been the earliest. Overall, it appears likely that this work was done more than six years ago.[87]The result of all this unsatisfactory evidence is that I do not consider that the Bibleway Trustees have proved an entitlement to an indemnity in relation to outstanding fees payable to Tish Leibovitch. All Other Potential Creditors that may arise from the Notice placed in the Cambridge News and the Voice[88]As for this heading, no other creditors’ claims have been notified in writing.[89]The result of the foregoing analysis is that the Bibleway Trustees claim for an indemnity fails in its entirety.

MR ABRAHAMS’ CHARGING ORDER

[90]The charging order is a form of enforcement of a debt available not as of right, but by exercise of the court’s discretion. In relation to unpaid loans, the occasion for its use arises precisely because the lender has not insisted from the outset upon being secured.[91]Section 1(5) of the Charging Orders Act 1979 provides that:
“In deciding whether to make a charging order the court shall consider all the circumstances of the case and, in particular, any evidence as to— (a) the personal circumstances of the debtor, and (b) whether any other creditor of the debtor would be likely to be unduly prejudiced by the making of the order.”
In the notes to CPR Part 73 at paragraph 73.4.5 of volume 1 of the 2010 White Book (at page 1926) the useful summary of the general principles applicable to the exercise of the court’s discretion includes the following:
“(2) The burden of showing cause why an interim order shall not be made final is on the judgment debtor. (5) The court should exercise its discretion equitably having regard to the interests of all parties involved, including other unsecured creditors, as well as those of the judgment creditor and the judgment debtor. The above principles stated in Roberts Petroleum Ltd v. Bernard Kenny Ltd [1982] 1 WLR 301 CA are not affected by the reversal by the House of Lords [1983] AC 192.” (a) the personal circumstances of the debtor, and (b) whether any other creditor of the debtor would be likely to be unduly prejudiced by the making of the order.”
[92]Section 2(1)(b)(i) of the Charging Orders Act 1979 expressly contemplates that a charging order may be imposed on an interest held by a person as trustee of a trust, where the judgment or order in respect of which the charge is to be imposed was made against that person as trustee of the trust. In the present case, the judgment which Mr Abrahams obtained against the Bibleway Trustees was against them as Trustees. It was nonetheless a default judgment, which the Bibleway Trustees had no reason to oppose on the ground that in incurring the loan they were acting in, or as the result of, breach of trust, as I have concluded.[93]This is not a case in which there are other creditors who would be prejudiced by the making of a charging order in favour of Mr Abrahams. There are, as it now appears, no other creditors of the Bibleway Trust. Rather, there are the members of the congregations which paid for, used and maintained the Lewisham, Bethnal Green and Mitcham church buildings whose voluntary contributions, and whose witness and worship, may be adversely affected by the imposition of a charging order. Most obviously this affects the Lewisham Congregation but, in the event that a charging order were made final, it would be difficult to envisage how the burden of it could be left to fall entirely on the Lewisham Building and Congregation, in the context of a trio of cy-près schemes whereby all three buildings are to be placed in trust primarily as places for worship and witness for those congregations, and where it was little more than happenstance that caused Mr Abrahams to seek and obtain an interim charging order only on the Lewisham Building.[94]Counsel for the affected congregations were reluctant, in advance of having to do so, to make submissions as to how that burden might fairly be shared, but none of them suggested that it should justly fall solely on the Lewisham Congregation. Mr Gore submitted that the trustees for, or members of, the affected congregations ought to be regarded as tantamount to creditors, in particular because, to the extent that the burden of discharging any charging order fell upon them, they would be entitled to claim against the Bibleway Trustees for breach of trust. I prefer to regard the trustees and members of the affected congregations simply as other persons interested in the grant or refusal of a charging order. In the unusual context of a charging order over the assets of a charitable trust, I consider that the public interest is also to be taken into account.[95]In favour of the grant (or making final) of a charging order are the following circumstances: i) Mr Abrahams advanced his money, initially interest free, bona fide for the assistance of what was described to him as a charity in short term need, rather than as a commercial transaction. ii) He did so on advice that the Bibleway Trustees were authorised to borrow unsecured, and without knowledge of any matters suggesting that their conduct amounted to, or resulted from, breach of trust on their part. iii) There is, as I have said, no insolvent estate which would lead to Mr Abrahams obtaining an unfair advantage over other creditors. iv) There is good reason to believe that, at least without seeking to enforce against their homes, none of the Bibleway Trustees will be able, individually or collectively, to discharge the whole of the judgment debt in Mr Abrahams’ favour. He is, understandably and to his credit, reluctant to enforce his judgment if to do so would render anybody homeless. v) The Lewisham Trustees appear to have amassed a buildings fund which would be sufficient to discharge any continuing charge on the Lewisham Building, albeit that fund is the result of voluntary contributions made for an entirely different purpose, namely to enlarge or improve church facilities which are proving inadequate for the worship and witness of the large congregation.[96]Against the grant or making final of a charging order are the following considerations: i) Mr Abrahams knew, upon advice, when making his loan that there was scope for obtaining security if certain steps were taken by the Bibleway Trustees, upon which he did not insist. He may be said to have chosen to lend unsecured. ii) To confer security in the form of a charging order now would be to afford to Mr Abrahams security prohibited by section 38 of the Charities Act 1993 when the conditions about which he was advised had, to his knowledge, not been satisfied at the outset. It can be said that he would thereby obtain by the back door what he knowingly did not insist on obtaining by the front door. In fact, for the reasons which I have given, the section 38 conditions could not have been satisfied in relation to his loan, in relation to security over the Lewisham Building. iii) Mr Abrahams will retain a full right of personal recourse against the Bibleway Trustees and their private assets. iv) The obtaining of unsecured lending from Mr Abrahams was in fact a breach of trust or, at the very least, the result of serious and repeated earlier breaches of trust by the Bibleway Trustees, the consequences of which ought not lightly to be visited upon the assets still available for the fulfilment of the Trust’s charitable purposes. v) The exposure of the Lewisham Building to a charging order, in particular by Bishop Williams’ encouragement to Mr Abrahams to believe that it was an asset of the Bibleway Trust available for repayment of his debt, was wholly inconsistent with the basis upon which the Lewisham Building had been vested in the Bibleway Trustees. vi) Mr Abrahams did not insist on having his loan repaid, or at least reduced, out of the net proceeds available to the Bibleway Trustees from the sale of the Cambridge Building, or upon obtaining any security for repayment over that building, for the rescue of which he had lent in the first place. vii) Neither the trustees nor the other members of the affected congregations (Lewisham in particular) did anything to permit or encourage the exposure of the Lewisham Building to a charge in support of liabilities incurred in connection with the Cambridge Congregation, or even knew about it when it was happening.[97]In my judgment the considerations adverse to the grant or making final of a charging order substantially outweigh those in favour of it. It is a case in which two innocent parties (taking the affected congregations as one) are the potential victims of the Trustees’ misconduct. Although Mr Abrahams is entitled to considerable sympathy for his predicament, I consider it fairer that he rather than the affected congregations should have to take the consequences of his having lent unsecured. Accordingly I decline to make the charging order final, and set aside the interim charging order thus far obtained.

THE CY-PRÈS SCHEMES

[98]At the conclusion of my May 2010 judgment I indicated that I was minded to require that the terms upon which the Lewisham Building should be transferred to the Lewisham Trustees by a scheme should include, by way of limitation of the purposes to which the building or its value could be put, some reference to the spirit of the original gift. A satisfactory form of limitation to that effect has since been negotiated between the Lewisham, Bethnal Green and Mitcham Trustees on the one hand and the Charity Commission on the other, with which all parties are apparently satisfied. The language differs slightly in each case, but I am content with each version of it.[99]I have considered whether it would also be appropriate to limit by way of special trust the use of the asset represented by the building to be transferred to the identified charitable purposes only within the United Kingdom, as provided in the 1971 Trust Deed. To a large extent the requirement in the special trust to be applied to each building that it be available primarily for the worship and witness of the relevant congregation, so long as that congregation should exist, will achieve that purpose, without any additional limitation.[100]All three of the groups of trustees encouraged me not to impose any further territorial limitation by way of special trust. I acknowledge that the charitable objectives of each group of trustees are in no sense limited to the United Kingdom and, in the circumstances, I am content not to require the imposition of that further limitation.[101]As to procedure, the scheme should, as recommended by the Charity Commission, be achieved by the introduction by amendment into each relevant trust deed of the special trusts upon which the relevant building, once transferred to the Official Custodian for Charities, is to be held and administered, followed by the making of simple schemes by the Charity Commission pursuant to section 16(2) of the Charities Act 1993, with liberty to apply to the court in the unlikely event that further difficulties arise. The three trust deeds all contain powers of amendment sufficient for that purpose.[102]At a late stage in the proceedings the trustees of the Lewisham Congregation invited me to consider whether the Lewisham Building should be vested not for administration by them as trustees, but by a guarantee company recently formed by them as a charity and known as The Tabernacle Global Ministries. Mr Gore was unable to commit his clients to a decision one way or another on that question, not least because of the recently perceived need to consider whether the Statement of Beliefs which constitutes a Schedule to the Articles of Association of that company needs amendment to make it fully compliant with the Equality Act 2010.[103]I am content that the Charity Commission should make the final decision, in consultation with Mr Gore’s clients, as to whether the trustees or the guarantee company should be the administrators of the Lewisham Building, provided always that the special trust to which I have referred governs its use and application, and that in the event of disagreement, the parties and the Charity Commission be at liberty to apply to the court.[104]Finally, the outstanding mortgage on the Bethnal Green Building, which is strictly a liability of the Bibleway Trustees, will need to be addressed in such a way that they are discharged from any further liability in relation to it. I was told by Ms Taylor that there is now only a small sum outstanding, which can if necessary be discharged from available funds held by the Bethnal Green trustees. Alternatively a discharge of the Bibleway trustees will need to be negotiated with the mortgagee.

Cited in 3 later judgments