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09.06.17

Judgment in The Children’s Investment Fund Foundation (UK) v HM Attorney General

Mark Mullen appeared for HM Attorney General before the Chancellor of the High Court in The Children’s Investment Fund Foundation (UK) v HM Attorney General and others [2017] EWHC 1379 (Ch) in which the claimant (‘CIFF’), a company limited by guarantee and a registered charity, sought approval of the making of a grant of $360 million to a new charity established by one of its trustees.

CIFF was founded by the Second Defendant, Sir Christopher Hohn, and his then wife, the Third Defendant, Ms Jamie Cooper. It had assets in excess of $4 billion and its charitable activity was focused on children’s health in the developing world. As a result of the breakdown of the relationship between Sir Christopher and Ms Cooper, the charity encountered governance difficulties and, to resolve these, it was agreed that Ms Cooper would found a new charity, Big Win Philanthropy (‘BWP’), and retire as a trustee of CIFF. Subject to the approval of the Court, CIFF would make a grant of $360 million to BWP and it was further agreed that Sir Christopher would cause a further $40 million to be donated to it. If the grant were to be approved by the Court, Ms Cooper agreed that she would donate a further $40 million to the new charity.

The Court approved the grant in the exceptional circumstances of the case, but determined that it would constitute a ‘material benefit’ to Ms Cooper such as to require the approval of the Charity Commission under the terms of CIFF’s constitution. It further constituted a payment to a director for loss of office for the purposes of sections 215 and 217 of the Companies Act 2006 and would thus require approval by a resolution of members of the company, with the prior consent of the Charity Commission.

The Court went on to consider the nature of the interest of a member of a charitable company and whether such a member could be directed to vote in favour of a resolution approving the payment of the grant under 217 of the Companies Act 2006.  The Chancellor concluded that the members of CIFF owed fiduciary duties to act in its best interests and not to act under a conflict of interests when considering the resolution. The members of the company were part of the administrative machinery of the charity and subject to the Court’s inherent jurisdiction over its administration. The sole unconflicted member was bound by his fiduciary duty and could not gainsay the decision of the Court that the making of the grant was in the charity’s best interests. The Court had jurisdiction to direct him to vote in favour of the resolution.

The decision is the first to consider the nature of the interest of members of a charitable company and provides helpful consideration of the extent of sections 215 and 217 of the Companies Act 2006.  The full judgment is available here.

Mark Mullen’s profile can be viewed here and details of Radcliffe Chambers’ charity expertise can be found here.

You can read press coverage of the judgment in The Financial TimesThe Times and The Daily Telegraph.