Michael-Karim Kerman, R (on the application of) v Charity Commission for England and Wales

A statutory regulator’s report is subject to ordinary public-law principles, including process and outcome rationality. The court must consider the report in its overall context and from the perspective of the reasonable reader. An error is unlawful only where it has a materially adverse effect and results from an irrational process or produces an irrational conclusion. A regulator may reach conclusions different from those in earlier proceedings, but must treat material findings as relevant considerations and explain any significant departure. Apparent predetermination requires a real risk that the decision-maker formed its view before the proper time. The claim succeeded in two respects: the report unfairly omitted material findings about scrutiny of expenditure and irrationally implied that higher reserves could have prevented insolvency.

The claimant continued judicial-review proceedings originally brought by the former chief executive of Keeping Kids Company, following her death. The challenge concerned a report published by the Charity Commission after its statutory inquiry into the charity’s administration, governance and financial management.

The claimant alleged that the report was irrational, both in its individual findings and overall, and that the Commission appeared predetermined to criticise the charity. The Commission relied on its broad statutory discretion and on the distinction between the inquiry and earlier proceedings in which Falk J dismissed disqualification proceedings against the charity’s trustees and chief executive. The central issues were whether the report’s criticisms were rationally supported, whether the Commission had properly addressed material findings in the earlier judgment, and whether the process disclosed apparent predetermination.

1. Disposition. The judicial review was allowed in two respects and the remainder of the challenge was dismissed.
2. Applicable approach. The Commission had broad statutory discretion under the Charities Act 2011 as to the conduct of an inquiry and publication of its results. That discretion remained subject to public-law principles. Process rationality required attention to mandatory considerations, avoidance of logical gaps, proper engagement with relevant evidence, and reasonable steps to inform the decision. Outcome rationality required the conclusion to remain within the range of reasonable decisions. The report had to be read as a whole by the reasonable reader. A minimum material effect on those criticised was required, but substantial prejudice was unnecessary.
3. Records and beneficiaries. The findings about destroyed or uncreated records, the methodology for counting beneficiaries, and limited records concerning some payments were rationally open to the Commission. The Commission had a sufficient evidential basis and was not required to investigate every further source. The criticism of expenditure on the ‘top 25’ beneficiaries was different. The report’s omission of Falk J’s specific finding that the trustees had adequately scrutinised that expenditure created an unfair and irrationally one-sided implication that the payments might not have been justified.
4. Reserves. It was rational to describe the business model as high risk and to regard building reserves as prudent. However, the statement that the trustees’ low-reserves decision meant that the charity could not weather the criminal investigation and avoid insolvency contradicted Falk J’s material finding that even three months’ reserves would have been insufficient. The Commission failed to grapple with that finding or explain its departure. The related conclusion that higher reserves may have allowed the charity to avoid liquidation was likewise irrational to that extent.
5. Other findings. The finding of financial mismanagement based on repeated late payments to HMRC, workers and other creditors was rationally open to the Commission. So too were observations about trustee skill gaps and the desirability of wider experience.
6. Predetermination. The fair-minded and informed observer would not see a real risk that the Commission had predetermined the report. Its broad evidence base, suspension of the inquiry, reconsideration after Falk J’s judgment and extensive Maxwellisation process indicated an open mind.

First instance judicial review. No earlier decision in the same proceedings is stated. The judgment discusses separate disqualification proceedings concerning Keeping Kids Company, reported as [2021] EWHC 175 (Ch), but that decision was not under appeal in this claim.