Children's Investment Fund Foundation (UK) v Attorney General and Others

Held, allowing the appeal (Lord Reed PSC dubitante but concurring in the order), (1) that a member of a charitable company limited by guarantee whose memorandum and articles of association contained restrictions preventing members from receiving profits from the company owed a fiduciary duty of single-minded loyalty to the charitable purposes or objects of the company; that, in the context of a resolution under section 217 of the Companies Act 2006 which involved a disposition of assets that would otherwise be available for application by the company towards those objects, that duty required a member to consider whether the resolution should be passed by considering only the best interests of the objects of the company; and that, accordingly, the fourth defendant was a fiduciary in relation to the objects of the claimant (post, paras 44–45, 50, 72, 78–83, 100–101, 200, 205, 215).

Liverpool and District Hospital for Diseases of the Heart v Attorney General [1981] Ch 193 considered.

(2) That (per Lord Briggs, Lord Kitchin JJSC and Lord Wilson), like other charitable trustees, the directors of a charitable company had the power to surrender to the court the exercise of their fiduciary discretion about a particular matter, which surrender the court might or might not accept; that once the court had accepted such surrender, it would exercise that discretion in accordance with what it considered would best further the charitable purposes of the company, after hearing evidence and submissions from interested parties and the Attorney General; that if the surrender related to the approval or disapproval of a particular proposed transaction the court would have to decide whether the transaction was, or was not, in furtherance of the company’s charitable purposes; that once the court’s decision on the merits of the transaction had been made it was binding and the duty of the charity’s fiduciaries, whether or not they had been joined as parties, was to use their powers to ensure that the decision was implemented, both generally and in accordance with any directions which the court had given for that purpose; that, therefore, since the claimant’s directors had surrendered to the court their discretion whether to make the grant and the court had decided that the making of the grant furthered the claimant’s charitable purposes, the fourth defendant would commit a plain breach of his fiduciary duty if he were to decline to vote on the resolution under section 217 of the 2006 Act in accordance with that decision; or that (per Lady Arden JSC) the exceptional circumstances of the present case represented an exception to the non-intervention principle under which the court would not substitute its judgment for that of a fiduciary unless he was acting, or threatening to act, in breach of duty; and that, accordingly, in the circumstances the court could exercise its jurisdiction over fiduciaries in relation to the fourth defendant (post, paras 137, 201, 206–208, 218).

(3) That the purpose of section 217 of the 2006 Act was not to veto transactions in which a director or a connected person had an interest but to ensure there was adequate disclosure and approval by the company in general meeting; that the protection given by Parliament by section 217 was, in any event, subject to being rendered less effective by the company exercising other powers, such as the right to attach special rights to shares; that, therefore, there could not be any policy objection from the perspective of company law preventing a court, under the law of charities, from directing a member how to vote on a section 217 resolution; that where the directors or trustees of a charity had surrendered their discretion to the court and the court had reached the unchallenged conclusion that it was in the best interests of the charity for the resolution to be passed, the court could give a direction to a fiduciary as to the manner in which to vote on the section 217 resolution and the 2006 Act did not by implication prevent the court from making such an order; and that, accordingly, it was open to the court to make an order which compelled the fourth defendant to vote on the section 217 resolution in a particular way (post, paras 157, 159, 162, 165, 173, 202, 205, 210).

Decision of the Court of Appeal [2018] EWCA Civ 1605; [2019] Ch 139; [2018] 3 WLR 1470 reversed.