Faith, Governance and Trustee Disputes

What Happened in Bashir v Charity Commission and Another?

This decision concerned The Mohiuddin Trust (the Charity) which had been established by a venerated religious scholar and high priest of the Islamic faith. Around the time of April 2016, the founder had expressed that, should he pass away, his two sons along with a son-in-law and a grandson should continue the work of the Charity. Shortly after this, the founder died and an internal conflict in the Charity ensued. The conflict came to the attention of the Charity Commission as the names of trustees were entered and deleted from the Register, and the Charity’s bank froze its bank account due to the frequent changes in signatories.

The Charity Commission decided to investigate and found that loyalties were divided amongst the two sons, with each appearing to have a supporting group. Each group claimed to be the properly appointed trustees, to the exclusion of the other group. The Charity Commission met with each group and said the groups should mediate, however this proved unsuccessful.

Following a Statutory Inquiry under section 46 of the Charities Act 2011 (the Act), the Charity Commission appointed an Interim Manager (IM) under section 76(3)(g) of the Act, to the exclusion of anyone purporting to be a trustee of the Charity. The IM met with each of the two sons. Following this, the Charity Commission made an Order under section 80(2)(b) of the Act, appointing six trustees (including Bashir) and varying the terms of the IM's appointment (under section 76(3)(g)), so that the IM was appointed alongside the new trustees. The purpose of section 80 is to provide the Charity Commission with the power to remove or appoint trustees with the aim of protecting the Charity.

The IM was later discharged from her duties and the Charity Commission issued an Action Plan stating what the trustees should be doing to progress to a secure future in the governance and work of the Charity. The Statutory Inquiry was closed and an inquiry report published.

The Appeal

The appeal was brought by Bashir, one of the trustees appointed by the Charity Commission under the Order, to oppose the appointment of other appointees under that same Order.

Bashir's appeal relied on grounds that:

1. "The Charity Commission was responsible for sowing the seeds of an internal dispute which was then used to justify drastic measures of dissolving the board and placing the charity into administration.
2. The method by which the Charity Commission assigned the Interim Manager recruited new trustees was flawed and illegal.
3. One or more newly appointed trustees had conflicts of interest which the Interim Manager chose to ignore during the recruitment process.
4. The Charity Commission removed former trustees that were the backbone of the charity with track records of delivering successful projects."

Bashir asked the Tribunal to:

1. "restore the former trustees
2. remove 'new trustees that have conflict of interest'
3. advertise new trustee positions with due care and attention within the target community"

What Did the Tribunal Decide?

The Tribunal concluded that the statutory criteria under section 80(2)(b) of the Act were met at the date of the appointments. As the Charity Commission appointed an IM to the exclusion of any trustees, this meant there were no trustees were appointed to the Charity. As such, the Charity Commission was able to appoint trustees to the Charity.

The Tribunal was satisfied that, on the balance of probabilities, the appointments were appropriate. It concluded:

"We would ourselves have made the Order at the time it was made and that we would appoint the same trustees in that Order now".

Bashir's appeal against the Charity Commission’s Order was consequently dismissed.

Comment on the Decision

The Charity Commission's approach to the appointments of trustees in a situation of dispute could be deduced as: reaching a point where it can be said there are no trustees; appointing an IM; having the IM advertise and interview for trustee appointments, and then relying on section 80 of the Act to appoint the trustees selected by the IM.

The Tribunal appeared to speculate whether a determination by the court as to the appointment the trustees at an early stage would have been an option, and also speculate whether proceedings at the personal cost of interested parties (rather than the charity) could be an option. However, the feasibility of this approach is questionable due to the costs involved. 

The Tribunal also speculated as to what its decision might have been had the Charity Commission or another party submitted that Bashir ought not to have been appointed.

What Lessons Can Be Learned?

The Tribunal concluded by encouraging the trustees not to allow their feelings about other trustees to impede the charity from fulfilling its objects. Trustees should focus on re-building trust and carrying out good work, and not focus solely on 'winning' any internal disputes that may arise.

It is a policy of the Charity Commission to adopt a risk-led approach to intervention, intervening when it is proportionate to use its resources to undertake direct regulatory action or engagement with a charity. It is therefore preferable for charities to resolve manageable internal disputes without the intervention of the Charity Commission. However, creating the conditions where such resolutions are possible is not easy and takes concerted effort.

As charities commonly encounter internal disputes following the retirement of a prominent leader, trustees in such a situation should bear in mind the Tribunal's advice and should seek legal advice at an early stage if there are signs that relationships are fraying.

If your charity would benefit from advice in relation to internal conflicts or wider issues around charity governance, please contact Shivaji Shiva in our Charities team on 07788 313 298, or complete the form below.