The Children's Investment Fund Foundation (UK) v Attorney General & Ors

A charitable company’s trustees may surrender their discretion to the court where the charity’s governance is impaired by conflicts and the court is asked to determine whether a momentous transaction is in the charity’s interests. A grant connected with a trustee’s retirement may be a payment for loss of office even where it is paid to another charity and the trustee receives no proprietary interest. Members of a charitable company limited by guarantee, without share capital, owe fiduciary obligations to act in the charity’s interests. In the exceptional circumstances of this case, after the court had exercised the surrendered discretion, the remaining unconflicted member could be directed to vote in favour of the necessary resolution. The statutory requirements for Commission consent and members’ approval remained applicable.

The claimant, an English charitable company, sought approval to make a substantial grant to another charity founded and controlled by one of its former trustees. The proposed grant formed part of agreements resolving serious governance difficulties following the breakdown of the relationship between two principal members and trustees.

The Charity Commission authorised the proceedings under section 115 of the Charities Act 2011, but declined to determine the contentious issues itself. The court had to decide whether the trustees had surrendered their discretion, whether the grant constituted a material benefit and a payment for loss of office, whether conflicted members could vote, whether further statutory approvals were required, and whether the grant should be approved.

1. Surrender of discretion. The trustees had surrendered their discretion to the court. The case fell broadly within the third category identified in Public Trustee v Cooper, namely surrender of discretion, rather than merely seeking the court’s blessing for a decision already taken.
2. Material benefit. The grant would confer a material benefit on Ms Cooper under clause 5.2 of CIFF’s Memorandum. Although she would acquire no proprietary interest in the money, she would benefit from being able to direct a substantially endowed charity and use her charitable expertise. The clause was a procedural safeguard requiring prior Commission approval, rather than an absolute prohibition.
3. Payment for loss of office. The grant would be paid as consideration for and in connection with Ms Cooper’s retirement as a trustee. The statutory regime in sections 215 to 217 of the Companies Act 2006 applied to charitable companies. BWP was a body corporate with which Ms Cooper was connected because she controlled 100 per cent of its voting power. A members’ resolution was therefore required.
4. Voting rights. Sir Christopher and Ms Cooper were contractually bound not to vote on the proposed resolution. The remaining member was not entitled to exercise a free vote after the court had approved the grant. Members of an exclusively charitable company limited by guarantee are part of the charity’s administration and must act in its interests.
5. Approval of the grant. The court approved the grant. The agreements had been entered into in good faith; approval would secure a further US$40 million for charitable purposes, enable the parties to devote their efforts to charity, and bring finality to the dispute. Those advantages outweighed the grant’s unprecedented nature, governance concerns and other negative features.
6. Further approvals and order. The court’s approval did not remove the need for the Commission’s consent under clause 5.2.5 and section 201 of the Charities Act 2011, or for a members’ resolution under section 217 of the Companies Act 2006. Subject to the Commission’s consent, Dr Lehtimaki was directed to vote in favour of the resolution. The direction was expressly confined to the unusual circumstances of the case.

First-instance decision. No appellate history is stated in the judgment.