Adrian Richard Stanway (Plaintiff) v 1. HM Attorney General and Another
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr.Justice Lloyd,Mr.Justice Lloyd |
| Judgment Date | 21 October 1999 |
| Judgment citation (vLex) | [1999] EWHC J1021-10 |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | CH 1998 S NO.5023 |
| Date | 21 October 1999 |
[1999] EWHC J1021-10
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Hon. Mr.justice Lloyd
CH 1998 S NO.5023
Andrew Walker instructed by Nabarro Nathanson for the Plaintiff
William Henderson instructed by the Treasury Solicitor for the First Defendant
Philip Jones instructed by Berrymans Lace Mawer for the Twenty-fourth, Thirty-first and Thirty-third Defendants
Hearing date: 28 September 1999
I direct that no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic.
This is a striking out application brought by Mr R. Duncan, Dr. C.G. Chinnery and Mr. R.J. Bishop, the 24th, 31st and 33rd Defendants to this action. I will call them the Applicant Defendants. The Claimant is the receiver and manager, appointed by the Charity Commission, of the charity known as the Royal Masonic Hospital, to which I will refer as the Charity. The application is based on non-compliance with an order of this court, and to that extent on CPR rule 3.4(2) (c) , but otherwise, and mainly, on the inherent jurisdiction of this court, preserved by CPR rule 3.4(5) .
The action was begun before 26 April 1999, but the application was made in August. By virtue of the Practice Direction to CPR 51, para. 15(2) , there having been no express direction as to how the CPR are to apply, the general presumption is that the CPR do apply. Accordingly the substance of this application is to be decided in accordance with them. In Biguzzi v. Rank Leisure plc (unreported 26 July 1999) the Court of Appeal had to consider the transitional application of the CPR. That case demonstrates two particular points. First, things done or omitted before 26 April 1999 have to be assessed in accordance with the rules then applicable. Secondly, the consequences of those things, and of what has happened since 26 April 1999, are to be decided in accordance with the rules now prevailing, and in particular by reference to the wider range of powers which the court now has.
The first thing I need to do, however, is to set out such of the facts and the history of the litigation as is necessary for the purposes of my judgment.
The Charity was an unincorporated association, established for the charitable purposes of providing hospitals and other establishments for the relief of the sick for the benefit of Freemasons and their relatives. It ran a large hospital in West London for this purpose. It had an ancillary power to treat persons other than Freemasons and their relatives. By the 1980's use for the main purpose of treating Freemasons and their relatives had declined considerably. Questions therefore arose, in the management of the Charity, as to what should be done. Moreover, by 1988–9 the hospital was running at a substantial deficit. In 1992 the Board of Management of the Charity considered and approved a proposal that an existing nursing home or private hospital should be acquired (the Humanitas project) . This was indeed bought in October 1992 for some £3 million. By then the three Applicant Defendants had joined the Board of Management. Dr Chinnery became a member in 1987, Mr Duncan on 10 March 1992, and Mr Bishop on 16 June 1992. I will describe later the provisions of the constitution of the Charity that deal with the role of the Board of Management.
Two contracts were entered into, in October and December 1992, with a management company called Associated Nursing Services plc ("ANS") in relation to the management of the Humanitas project. By May 1993, however this contract was terminated, and the project was in difficulties. At this time (on 8 May) Mr Duncan resigned from the Board of Management, on 22 July Dr Chinnery also resigned and on 2 December Mr Bishop did likewise.
The sixtieth anniversary of the Charity fell in 1993, and the Board of Management organised a celebration in July. This in itself gave rise to two problems: the celebrations involved a loss to the funds of the charity of some £152,000, and the associated fund-raising effort was at least in part for the sake of activities (including building a health centre in Romania) outside the objects of the Charity. Mr Bishop was a member of the Diamond Jubilee Committee.
There were also some other transactions which are said to have been outside the objects of the Charity and to have led to smaller losses. I do not need to go into the details of these.
On 27 January 1994 the Charity Commission appointed a receiver and manager, acting under section 18 of the Charities Act 1993. He was a Mr London, a partner in Coopers & Lybrand. On 27 October 1995, after his retirement, he was replaced by Mr Stanway, the present receiver and manager. The receiver and manager was given all the powers and duties of the Board of Management.
It was proposed, and resolved by the Charity at a special general meeting, that the Charity be wound up. Despite proceedings designed to prevent a sale, on 14 December 1994 Lightman J ordered that the hospital be sold. Further attempts by litigation to prevent the sale were made by other parties (not including any of the Applicant Defendants) but these did not succeed. Eventually contracts for the sale were exchanged on 6 September 1996, but the sale was not completed until June 1997, with vacant possession, after the operations of the hospital had been brought to an end.
In the meantime, on 8 March 1996, ANS issued proceedings against 19 Defendants, as members of the Board of Management (including Mr Bishop, Dr Chinnery and Mr Duncan) and (in 2 cases) also trustees, and against the receiver and manager, seeking to establish the existence and validity of the management contract. I am told that the contract contained an arbitration clause, so that any issue as to the rights or obligations under the contract, and in particular whether it was terminated wrongfully or not, would have been dealt with in an arbitration. That action ("the ANS action") was defended by at least some of the Defendants (including the three Applicant Defendants) , and in particular in June 1996 the receiver and manager served a Defence and Counterclaim. The Defendants to the Counterclaim were ANS and the 19 Defendants to the action other than the receiver and manager himself. The receiver and manager alleged that the purchase of the Humanitas home was outside the objects of the Charity, and denied that the management contract was within the objects of the Charity. It was also alleged that entry into the agreement, or its ratification, was a breach of duty on the part of the Board of Management, and that the operation of the home was in breach of trust and of fiduciary duty on the part of the memebers of the Board of the Management, and had given rise to loss to the funds of the charity of over £1 million. On that basis, the receiver and manager denied that any member of the Board of Management was entitled to an indemnity out of the funds of the charity against any liability to which they might be subject towards ANS. By the Counterclaim the receiver and manager asked for declarations that the management agreement was outside the objects or powers of the Charity and that the funds of the Charity were not applicable in or towards any liability owed to ANS arising under the agreement. Those Defendants who had defended the action also served defences to the Counterclaim. The Applicant Defendants denied that they had been in breach of any trust or fiduciary duty and asserted a right of indemnity in case, contrary to their primary position, they were found liable to ANS under the contract. In March 1997 the Attorney-General was joined as a party to the ANS action and soon after that to the Counterclaim as well.
The ANS action continued, with substantial discovery being given in August 1998. Some witness statements were served, including on the part of Mr Bishop and Dr Chinnery. They were only concerned with the Humanitas aspect of the history. However, in about November 1998, a compromise was reached between the receiver and manager and ANS, on what the receiver and manager says were purely pragmatic grounds, and which involved the payment of some £115,000 out of the funds of the Charity to ANS. Thus, the Charity suffered yet further loss as a result of the Humanitas transaction. ANS then discontinued its action as against some of the Defendants. Because the action remained live against some of them, the receiver and manager did not at that stage discontinue the counterclaim. Eventually ANS discontinued against all Defendants (other than the Attorney-General) and at the end of August this year the receiver and manager served notice of discontinuance on all Defendants to the Counterclaim. The ANS action had in the meantime been fixed to come on for trial in November this year, with a time estimate of 10 days. On 14 July last it came before Lightman J for two purposes. First a Mr Ford, one of the Defendants, appealed against a Master's order. Secondly, however, the Attorney General had applied for an order that ANS and the receiver and manager clarify the issues remaining to be tried, and for directions for the trial. The judge dismissed Mr Ford's appeal. On the application for directions, he required ANS and the receiver and manager to disclose certain information to the other parties, and directed that there be a pre-trial review of the ANS action and the counterclaim. He had also directed that the receiver and manager attend the hearing in respect of the present action, which was not otherwise before him. In that respect he directed that the receiver and manager should notify the Defendants to the present action by 4 August whether he intended to proceed with the...
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