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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Setchim & Anor v Secretary of State for Foreign & Commonwealth Affairs & Ors [2014] EWHC 2218 (Ch) (04 July 2014) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2014/2218.html Cite as: [2014] EWHC 2218 (Ch) |
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CHANCERY DIVISION
COMPANIES COURT
Rolls Building, London, EC4A 1NL |
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B e f o r e :
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IN THE MATTER OF THE COMMONWEALTH INSTITUTE (IN MEMBERS' VOLUNTARY LIQUIDATION) AND IN THE MATTER OF THE INSOLVENCY ACT 1986 RICHARD SETCHIM IAN OAKLEY SMITH (AS LIQUIDATORS OF THE COMMONWEALTH INSTITUTE) |
Applicants |
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- and - |
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THE SECRETARY OF STATE FOR FOREIGN AND COMMONWEALTH AFFAIRS THE ATTORNEY GENERAL THE CHARITY COMMISSION THE TRUSTEES OF THE COMMONWEALTH EDUCATION TRUST |
Interested Parties |
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Peter Arden QC, Tim Akkouh and Anna Scharnetzky (instructed by The Treasury Solicitor) for the Secretary of State for Foreign and Commonwealth Affairs
Hearing dates: 2-4 April 2014
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Crown Copyright ©
Mr Justice David Richards :
Introduction
History and background
"The Imperial Institute Trustees shall hold the Imperial Institute Building and the Endowment Fund and all other property for the time being vested in them for the purposes of this Act or for any of those purposes to which the same may be applicable."
Section 2(1) of the 1925 Act provided that the II Trustees should be the Lord President of the Council, the First Commissioner of His Majesty's Treasury (the Prime Minister), the Secretary of State for India, the President of the Board of Trade, the Secretary of the Department of Overseas Trade (Development and Intelligence), and three other persons having colonial, financial or commercial experience appointed by the responsible minister.
"The Imperial Institute Trustees may if requested by [the responsible minister] with the consent of the Board of Governors hereinafter constituted sell lease or otherwise dispose of any real or personal estate held by them and apply any proceeds for the purpose of carrying out the objects of this Act or any of those objects to which the property disposed of was applicable but in the case of the proceeds of sale only in a manner in which capital money is properly applicable."
"All property real or personal all rights and obligations and all debts or liabilities which at the commencement of this Act are the property rights obligations debts or liabilities of the Secretary of State for the Colonies in pursuance of the Acts of 1902 and 1916 … shall become the property rights obligations debts or liabilities of the responsible minister and the responsible minister for the time being shall have any powers necessary to enable him to hold any such property."
"(1) The Imperial Institute Building or so much thereof as is not for the time being leased or otherwise disposed of shall be used and all property transferred to the responsible minister under this Act and the income of the Endowment Fund and all sums received by the responsible Minister in respect of the exercise of any of his powers and duties under this Act shall be used and applied by the responsible minister so far as practicable in carrying out the purposes of the Imperial Institute set forth in the First Schedule to this Act…
(2) The responsible minister shall receive and hold any sums of money or property given or entrusted to him for any purpose for which property transferred to him under this Act may be used and shall apply any such sums of money or property for the purposes for which they are so given or entrusted to him.
(3) The income of the Endowment Fund shall be paid over by the Imperial Institute Trustees to the responsible minister and the Imperial Institute Building shall be under the management of the responsible minister."
"The responsible minister shall take such steps, make such arrangements and employ such persons as he thinks necessary or expedient for carrying out his duties under this Act."
"There shall be paid out of moneys provided by Parliament –
(1) in each year during the five years after the commencement of this Act a sum of nine thousand pounds towards the expenses of the Imperial Institute and thereafter such sum (if any) as Parliament may determine; and
(2) such additional sum (if any) towards the maintenance of exhibition galleries as Parliament may from time to time determine."
"There shall be established for the purpose of carrying on the management of the Imperial Institute under the responsible minister a Board of Governors constituted in accordance with the provisions of the Second Schedule to this Act."
Issues
i) Whether the proceeds of sale of the Kensington Building were and are held by CIC or CET absolutely or whether they were subject to any other interests or to any special trusts pursuant to section 2(4) of the 1925 Act.ii) In any event, for the avoidance of doubt, whether an order should be made by the court in the exercise of its cy-près jurisdiction that the liquidators pass the remaining proceeds of sale and other assets held by them to the trustees of the CET to be held by them and applied towards its charitable objects.
iii) Whether CIC has any contractual rights in respect of the associated entitlements and if so what, if any, steps the liquidators should take to enforce such rights.
iv) Whether a sum of £594,836 (the unspent amount) is repayable by CIC to the Secretary of State under the terms of the Severance Agreement.
v) Whether title to the works of art, artefacts and other objects comprising the Collections passed under the deed of gift executed in January 2003, free from any restriction other than that contained in the trust deed of the transferee.
vi) Whether the liquidators should take any steps, including legal proceedings, for the purposes of bringing assets into the liquidation of CIC arising out of, or in connection with, the circumstances surrounding the severance arrangements.
The proceeds of sale of the Kensington Building
"(2) The Commonwealth Institute Trustees shall hold the Imperial Institute building and the Endowment Fund and all other property for the time being vested in them for the purposes of this Act or for any of those purposes to which the same may be applicable.
(4) The Commonwealth Institute Trustees may if requested by the [Secretary of State] with the consent of the Board of Governors hereinafter constituted sell lease or otherwise dispose of any real or personal estate held by them and apply any proceeds for the purpose of carrying out the objects of this Act or any of those objects to which the property disposed of was applicable but in the case of the proceeds of sale only in a manner in which capital money is properly applicable. "
"12.4 The Property is held in trust by the Transferor as custodian trustee for the Charity known as the Commonwealth Institute a non-exempt Charity but this Transfer is one falling within Paragraph (b) of Section 36(9) of the Charities Act 1993.
12.5 The Property will as a result of this Transfer be held by or in trust for the Charity known as the Commonwealth Institute a non-exempt charity and the restrictions on disposition imposed by Section 36 of the Charities Act 1993 will apply to the Property (subject to Section 36(9) of that Act)."
"to any disposition of land held by or in trust for a charity which (i) is made to another charity otherwise than for the best price that can reasonably be obtained, and (ii) is authorised to be so made by the trusts of the first mentioned charity."
Cy-près
Associated entitlements
"I am advised that legislation will in any case be required before the Institute can properly be removed from its present building. The legislation could also give such financial powers as may be necessary, and in particular determine the compensation, if any, to be paid to the trustees for the loss of their rights in the present building."
A sub-committee was established to examine the matter in detail and to make recommendations.
"In addition to providing alternative accommodation, a "package deal" which would put the Institute in a proper position to continue, would have to include financial arrangements in substitution for those at present enjoyed by the Trustees. At present, apart from the grants from the United Kingdom and Commonwealth Governments, the Institute enjoys free services valued at £17,500 a year, and about £14,000 a year in rent for that part of its premises which is sub-let."
The Home Affairs Committee expressed its general agreement with the report at its meeting on 17 December 1954. It was at that stage considered that legislation might be avoided, a point which the Attorney General was to consider further. It was also considered that the Institute might be re-housed within the redeveloped premises of Imperial College.
"It will be understood that if the Institute moves to a new building the government will compensate the Institute for any consequential losses in income – e.g. the Institute now receives certain free services and some income from sub-tenants. This would be done by an adjustment in the grant-in-aid which the Institute receives annually from the Ministry of Education."
"We are not being given extra accommodation in place of that which we now own but rent to the Colonial Office, but, instead, are being guaranteed, as part of our grant-in-aid, revenue equivalent to the rent now being paid to us by the Colonial Office."
"It is true that the Imperial Institute Act sets out the obligations of the Trustees vis-a-vis disposal of the Institute only in general terms, but I would consider it contrary to the intention of the Act and to all the obligations that usually fall on Trustees to agree to a settlement under which the Institute was offered new assets (i.e. new buildings) which were of less value than the existing assets."
"Quite apart from the building, the Government has undertaken to compensate the Institute for any consequential losses in income which will arise from its move. The Institute at present receives certain free services and some income from sub-tenants. The Government will see that the Institute does not lose, by adjusting the grant-in-aid which the Institute receives from the Ministry of Education annually."
"I am now in a position to put before my fellow Trustees definite proposals by the Government to enable the Imperial Institute to move from its present site and buildings."
"3. Annual Grant
The Government propose that when the building has been completed an annual grant will be made as at present. As already stated in the memorandum which I circulated earlier, in assessing the grant for the expenses of management of the institute, the Government propose, when the new building has been completed, to include the estimates [sic] value of the free services and the rents from sub-tenants which the Institute now enjoys and will lose.
4. Legislation
Legislation will be needed to enable the Trustees to surrender their sub-lease to their immediate landlord, the Ministry of Works, in consideration of the new site (which would be named in the Bill) and of the money they will receive for erecting the new building. The trustees will be required to hold the site and the building, when erected, for the purposes of the Institute, as they do the present site and building.
5. Conclusion
After careful consideration I have come to the conclusion that the offer made by the Government is one which I, in my capacity as a Trustee, can regard as proper compensation for the loss of the present site, building and services. I hope that my fellow Trustees will be able to reach a similar conclusion. I hope also that it will be possible for the Government's offer to be accepted at an early date so that negotiations for the site can be concluded, the necessary legislation introduced into Parliament and above all the first steps taken in regard to the choice of architect and the preparation of plans, so as to reduce as far as possible the disruption of the Institute's activities."
"Many thanks for your letter of 2 January setting out the Government's proposals to enable the Imperial Institute to move from its present site and buildings. The proposals are entirely acceptable to me in my capacity as a Trustee of the Institute."
"Finally, you mention the question of finance. There are two categories of Exchequer expenditure covered by the Bill. First, the cost of providing the new site and building, which will be fully met by the Exchequer. Second, the annual expenses of the Institute which will continue as now to be met partly by income from the Endowment Fund, partly by other income and partly through the Vote of the Ministry of Education. The only change here is that in estimating what is necessary under the last heading and seeking parliamentary authority for the expenditure we shall need to take account of certain items of expenditure (on maintaining the buildings and so on) which have hitherto been carried on the Vote of the Ministry of Works and merely noted in the Estimates of this department."
"(1) Any expenses incurred by the Trustees in performing the obligations imposed, or exercising the rights conferred, on them by or by virtue of the lease shall be defrayed by the Minister of Education.
(2) Any expenses defrayed by the said Minister under the foregoing subsection and any expenses incurred by him in connection with the Commonwealth Institute shall, except in so far as they are defrayed out of the income of the Endowment Fund or out of sums received by him for the purposes of the Institute or otherwise in the exercise of his powers and duties under the principal Act, be paid out of moneys provided by Parliament."
The effect of sub-section (2) is that any expenses paid by the Minister in connection with the Commonwealth Institute would be paid out of moneys provided by Parliament, save to the extent that there were other sources of income.
The unspent amount
"Of the payments to be made to the Company by the Secretary of State under this Agreement, the sum of £3,996,435 shall be used by the Company for the following restoration and access improvement works ("the Building Works"):-
[List of works]
as more fully set out in the Company's application (Ref. HF/97/01397) to the Heritage Lottery Fund."
"If, according to audited accounts, the aforesaid sum exceeds the amount actually spent on the Building Works, the excess shall be returned to the Secretary of State within 30 days of the publication of the audited accounts relating to the accounting period within which the final Certificate of Satisfactory Completion was issued."
Paragraph 4 provided that all moneys received for the building works under the agreement should be separately identified within CIC's accounting records and published accounts.
The Collections
Claims arising out of the severance arrangements
Conclusion