Lehtimäki and others v Cooper

A member of a charitable company may owe fiduciary duties to its charitable purposes when exercising a constitutional power affecting the application of charitable assets. The duty is tailored to the company’s constitution, statute and the particular power. It does not necessarily govern every act performed as a member.

Where the court has accepted the trustees’ surrender of discretion and finally decided, after hearing the member, that a transaction furthers the charity’s purposes, the member may be directed to exercise a fiduciary voting power so as to implement that decision. The majority held that a contrary vote would be a threatened breach of duty. Section 217 of the Companies Act 2006 still requires a members’ resolution, but does not prevent such a direction.

CIFF was a charitable company limited by guarantee. Its founders agreed that CIFF would make a grant of $360m to another charity established by Ms Cooper, after which she would resign as a member and trustee. Because the grant constituted a payment connected with a director’s loss of office, it required a members’ resolution under section 217 of the Companies Act 2006 and the Charity Commission’s prior written consent under section 201 of the Charities Act 2011.

The Chancellor, in a decision reported at [2018] Ch 371, accepted the trustees’ surrender of discretion, approved the grant as being in the charity’s best interests, and directed Dr Lehtimäki, the sole unconflicted member, to vote for the resolution. The Court of Appeal, [2018] EWCA Civ 1605; [2019] Ch 139, agreed that he was a fiduciary but set aside the direction under the non-intervention principle.

The central questions were whether the member owed fiduciary duties, whether the court could direct his vote without an established breach of duty, and whether section 217 prevented that direction.

1. Appeal allowed unanimously; the Chancellor’s direction restored. Lady Arden and Lord Briggs, with whom Lord Wilson and Lord Kitchin agreed, held that Dr Lehtimäki owed fiduciary duties when exercising his vote on the section 217 resolution. Lord Reed concurred in the order without adopting the reasoning.

2. A member of a charitable company may be a fiduciary in relation to powers affecting its charitable purposes. The duty is owed to those purposes, rather than to the company as such. Here, the vote controlled a proposed disposition of charitable assets in which the member had no proprietary or legitimate competing interest. It therefore attracted a duty of single-minded loyalty. The member had to consider the charitable purposes alone.

   The duty is context-specific. It is tailored by the corporate constitution, the Companies Act 2006 and charity legislation. It does not necessarily attach to every membership power, and it gives the member no greater right to information than company law and the constitution provide.

3. Lord Briggs, delivering the reasoning supported by Lord Wilson and Lord Kitchin on the decisive jurisdictional point, held that the court’s final determination changed the position. The court had accepted the trustees’ surrender of discretion, heard the company and the member, and decided that the grant furthered the charity’s purposes. There was then no reasonable basis on which a fiduciary member could veto the transaction. The member’s duty was to use his power to implement the court’s decision. A contrary vote would be a threatened breach of fiduciary duty, which justified a mandatory direction.

4. Lady Arden reached the same result by a different route. She rejected the proposition that disagreement with a decision made on the trustees’ surrendered discretion automatically constituted breach of the member’s subjective duty. In her view, jurisdiction arose because this was a rare exception to the non-intervention principle. The threatened impasse, the existential governance dispute, the trustees’ surrender and the court’s unchallenged approval justified intervention without an actual or threatened breach. Lord Briggs, Lord Wilson and Lord Kitchin accepted that analysis as an alternative if the breach-of-duty route were unavailable.

5. Section 217 did not impliedly restrict the court’s inherent charity jurisdiction. The statutory resolution remained necessary, but the court could direct a fiduciary member how to vote. Nor was section 201 of the Charities Act 2011 displaced: the Charity Commission retained its separate power to grant or withhold prior written consent.

1. United Kingdom Supreme Court: In Lehtimäki and others v Cooper [2020] UKSC 33 , the court unanimously allowed Ms Cooper’s appeal and restored the Chancellor’s direction that Dr Lehtimäki vote for the section 217 resolution.
2. Court of Appeal: [2018] EWCA Civ 1605 ; [2019] Ch 139. The court agreed that the members of CIFF owed fiduciary duties, but allowed Dr Lehtimäki’s appeal and set aside the direction because no breach of duty had been established.
3. High Court, Chancery Division: [2018] Ch 371. The Chancellor accepted the trustees’ surrender of discretion, approved the grant as being in CIFF’s best interests, and directed the sole unconflicted member to vote for the resolution.