The Waltham Forest Islamic Association

Registered Charity Number 270323

You can also view the full colour PDF version of the The Waltham Forest Islamic Association Inquiry Report.

A statement of the results of an Inquiry into The Waltham Forest Islamic Association (registered charity number 270323).

Published on 28 June 2010

The Charity

1. The Waltham Forest Islamic Association ('the charity') was registered as a charity with the Commission on 14 November 1975.

2. The charity is governed by a constitution adopted on 31 May 1975 as amended on 10 February 1984 and by an Order of the court dated 23 November 2001 ('the governing documents').

3. The charity's objects are 'to promote the Islamic faith and in particular to support, expand and develop the charitable Islamic institutions in the London Borough of Waltham Forest', and 'the relief of poverty'.

4. The income of the charity for the financial year ending 31 March 2008 was £189,495.

5. In practice, the primary activity of the charity is the operation of the Walthamstow Mosque at Lea Bridge Road, Leyton, London, also known as the Lea Bridge Road Mosque, Walthamstow.

Source of Concern

6. The Commission had been engaging with the charity since October 2007 in connection with the election process within the charity that determines the appointment of charity trustees.

7. The Commission's view, at the time that the Inquiry was opened, was that the charity was managed by a committee whose term of office had, according to the governing documents of the charity, expired. This view was set out in a letter from the Commission to the charity on 6 November 2008. Those individuals who were at that time acting as the charity's committee ('the acting committee') were not validly appointed charity trustees and therefore did not have authority to hold and exercise the general control and administration of the charity1 .

8. The Commission was informed by a member of the public that the acting committee had exchanged contracts to purchase a property and were intending to complete the purchase. The property concerned was valued at £1.5 million and was to be purchased using £500,000 of the charity's funds, and a £1 million mortgage and was therefore a significant use of the charity's resources. It was not clear that the property would be used in furtherance of the charity's purposes for the benefit of the charity's membership in accordance with the charity's governing document.

Commission inquiry

9. The Commission received evidence confirming that the acting committee proposed to use a significant amount of the charity's funds to purchase the property. Given the context of the Commission's previous engagement with the charity, concerns regarding the proper use of the property, the funding arrangements for it, the significant value of the purchase and that the acting committee had no authority to act in this matter on behalf of the charity, the Commission opened a statutory inquiry ('the Inquiry') under section 8 of the Charities Act 1993. The Inquiry's focus was to protect and ensure the proper use of the charity's assets. The Commission's position at the time the Inquiry was opened, regarding the validity of the charity trustees, remained as set out in the letter of 6 November 2008.

Issues

10. The issue identified by the Inquiry was that the acting committee did not have any authority to purchase a property using a significant amount of the charity's funds and it was important to protect and ensure the proper use of the charity's assets in accordance with the charity's governing document.

Timescale of inquiry

11. The Inquiry was opened on 2 February 2009 and its substantive investigations concluded on 27 February 2009. The Inquiry concluded with the publication of this report on 28 June 2010.

12. The final stage of the Inquiry, which was to publish this report, was put on hold to allow the charity to seek assistance so they could resolve the problem of there being no validly appointed trustees in place within the charity and to allow those new trustees to take the action outlined in paragraph 34. The publication of the report was delayed so that this process was not hindered.

Findings

13. The Inquiry established that the acting committee had exchanged contracts on 17 December 2008 to purchase a property, despite having no authority to do so as they were not validly appointed.

14. The Inquiry established that the property in question was 119-121 Grove Road, Walthamstow, London, E17 9BU ('the Property').

15. The Inquiry found that, on the exchange of contracts, the acting committee had paid £150,000 out of the charity's funds as a non-refundable deposit to secure the Property.

16. The Inquiry was provided with a copy of the survey conducted on behalf of the bank lending the charity the mortgage. It was also provided with evidence that the price of the Property had been negotiated and reduced by £100,000 following the economic downturn, and with evidence that the acting committee had received professional advice that the charity could meet the terms of the mortgage.

17. The Inquiry received conflicting accounts about the use of the Property and whether it was intended to be used for the benefit of the charity's membership in accordance with the charity's governing document which gave cause for concern.

Conduct of inquiry

18. The Inquiry contacted the acting committee to establish which solicitors were acting for them in the purchase of the Property.

19. Following receipt of this information the Inquiry, on 3 February 2009, issued an Order under section 18(1)(iv) of the Charities Act 1993 to require the solicitors representing the acting committee not to part with any property (including money) which they held for or on behalf of the charity, without the prior written authority of the Commission.

20. The Inquiry was aware that the charity would lose its £150,000 deposit if the purchase of the Property was not completed. On the basis of the evidence provided to the Inquiry that the purchase represented value for money for the charity and in order to safeguard the charity's deposit, the Commission subsequently discharged the section 18(1)(iv) Order. This enabled completion of the property transaction to take place on 13 February 2009.

21. The Property was purchased in the names of the acting committee to be held in trust for the charity.

22. Following completion of the property purchase, the Inquiry took immediate action to protect the Property for the charity by exercising its powers under section 18 (1)(iii) of the Act and vested the Property in the Official Custodian for Charities.

23. The Official Custodian's role is to hold the title to land on behalf of charities. The charity could still use the Property but it could not be sold without the Official Custodian being a party to the transaction or the Commission authorising the disposal by Order. Therefore vesting the Property in the Official Custodian ensured that the Property could not be sold by individuals who were not validly appointed to run the charity.

Conclusions

24. The Commission concluded that those who were not validly appointed charity trustees should not have acquired a substantial asset using the charity's funds and have incurred a substantial liability, when they had no authority to do so.

25. It was necessary and proportionate for the Commission to take this particular regulatory action to protect a significant asset of the charity and also to ensure it would be used for the benefit of the charity's membership in accordance with the charity's governing document.

Regulatory action taken

26. An Order under section 18(1)(iv) was issued to prevent the solicitors representing the acting committee from parting with the funds they held for or on behalf of the charity. This enabled the Commission to obtain further details of the proposed purchase and the date of completion. When the solicitors provided this information demonstrating that the purchase of the Property represented value for money for the charity the Order was discharged and the purchase completed.

27. Upon completion of the purchase of the Property the Commission used its powers to issue an Order under section 18(1)(iii), the effect of which was to vest the Property in the Official Custodian for Charities.

Impact of Commission intervention

28. The Commission acted swiftly to protect a substantial asset of the charity valued at £1.5 million.

29. The Commission's actions put beyond doubt that the Property belonged to the charity for it to use for its charitable purposes for the benefit of the charity's membership in accordance with the charity's governing document.

30. The Property could not be transferred or sold without the Official Custodian being a party to the transaction or the Commission authorising the disposal by Order.

Resources applied

31. The Commission adopted a multi-disciplinary team working approach on this case both before and during the Inquiry. The team consisted of investigators and lawyers.

Action required by the trustees

32. At the conclusion of the substantive investigative stage of the Inquiry the Commission advised the charity that the Order vesting the Property in the Official Custodian for Charities would be reviewed at regular intervals, but would not be proportionate to keep in place when the Commission was satisfied that the charity had validly appointed trustees, and that they had made a decision about how the property should be registered.

33. The Commission assisted the charity in this by authorising an election board to conduct a trustee election in accordance with an agreed schedule. The election supervisor and independent chairman of the election committee confirmed that following a free and fair election taking place amongst the charity's members, new trustees were appointed2 .

34. The new validly appointed trustees informed the Commission that they wished the Land Registry documents for the property to be updated to show that a number of holding trustees, whom they had confirmed, were now in place and held the land in trust for the charity. The Commission took the view that the title to the property would be properly registered if this took place and that there would no longer be any risk to the property of the charity. The Order vesting the Property in the name of the Official Custodian was therefore discharged on 27 May 2010 and the Property was vested in the names of four holding trustees expressly to hold the property in trust for the charity.

Issues for the wider sector

35. Every charity must have validly appointed trustees.

36. Trustees are responsible for the overall management and administration of a charity and must ensure that they act at all times in accordance with their governing document.

37. Where a charity's membership elect individuals to serve as trustees for a specific period of time, it is important that the serving trustees put in place procedures for an election to be carried out in accordance with the governing document of the charity before their term of office ends.

38. The legal duties that charity trustees have mean that they need to take all reasonable steps to ensure that they have the necessary power or authority to purchase land. They need to ensure the property is suitable for the charity's intended use and, in particular, this is within the purposes of the charity and the land is not subject to any legal or planning restrictions or conditions which might conflict with that use, or with which it may be difficult for the trustees to comply. The Commission has the power to vest land or property without the consent of the charity in the Official Custodian for Charities as a temporary and protective measure where there has been misconduct or mismanagement in the administration of a charity or it is necessary or desirable to ensure that assets are protected for the benefit of the charity. Further information on the role of the Official Custodian is in our guidance The Official Custodian for Charities' Land Holding Service (CC13).

Paragraph

Issue

Charity Commission guidance

6 Requirement to hold an election to determine trustees Membership charities
8 Purchasing Land Acquiring Land (CC33)
22 Vesting Property in the Official Custodian for Charities

The Official Custodian for Charities' Land Holding Service (CC13)

Footnotes

1. The Commission had previously made a decision to appoint the acting committee to be interim trustees of the charity in March 2008 to supervise an election to be held by the end of May 2008. However following various submissions being received, and identifying a procedural issue, the Commission discharged this Order on 11 April 2008 on the basis that the election could not and would not be completed in this time in accordance with the terms of the Order. The Commission confirmed this to the acting committee.

2. This election process took place outside and separate to the Inquiry.

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