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

JurisdictionEngland & Wales
CourtChancery Division
JudgeSir Geoffrey Vos
Judgment Date09 June 2017
Neutral Citation[2017] EWHC 1379 (Ch)
Date09 June 2017
Docket NumberCase No: HC-2016-001810

[2017] EWHC 1379 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

The Rolls Building

The Royal Courts of Justice

7 Rolls Building, Fetter Lane,

London EC4A 1NL

Before:

Sir Geoffrey Vos, Chancellor of the High Court

Case No: HC-2016-001810

Between:
The Children's Investment Fund Foundation (UK)
Claimant
and
(1) H.M. Attorney General
(2) Sir Christopher Hohn
(3) Jamie Cooper
(4) Marko Lehtimaki
Defendants

Mr William Henderson (instructed by Linklaters LLP) appeared for The Children's Investment Fund Foundation (UK)

Mr Mark Mullen (instructed by the Government Legal Department) appeared for the Attorney-General

Mr Jonathan Crow QC (instructed by Withers LLP) appeared for Sir Christopher Hohn

Mr Simon Taube QC (instructed by Bates Wells & Braithwaite London LLP) appeared for Ms Jamie Cooper

Mr Guy Morpuss QC (instructed by Macfarlanes LLP) appeared for Dr Marko Lehtimaki

Mr Richard Vallat (instructed by the Solicitor for Her Majesty's Revenue & Customs) for Her Majesty's Revenue & Customs

Hearing dates: 8 th to 11 th May 2017

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Sir Geoffrey Vos, Chancellor of the High Court:

Introduction

1

The claimant is a substantial English registered charity called The Children's Investment Fund Foundation (UK) ("CIFF"). CIFF is a company limited by guarantee without a share capital, which was incorporated in 2002. Its claim form in this case is complex but, in essence, CIFF seeks the court's approval to make a grant of US$360 million (the "Grant") to another English registered charity, Big Win Philanthropy, also a company limited by guarantee without a share capital ("BWP"). The Charity Commission for England & Wales (the "Commission") has authorised these proceedings by an order dated 7 th June 2016 made under section 115 of the Charities Act 2011.

2

CIFF obtained the bulk of its funds from companies operated by a philanthropist and banker, Sir Christopher Hohn, the second Defendant ("Sir Christopher"). It now has assets of more than US$4 billion. CIFF was co-founded by Sir Christopher and his ex-wife, the third Defendant, Ms Jamie Cooper ("Ms Cooper"), who each contributed to its success.

3

BWP is a new charitable foundation incorporated by Ms Cooper in June 2015. BWP has already been funded as to US$40 million by a payment made by TCI Fund Management Limited ("TCIFML") on 20 th December 2016, pursuant to a Deed of Covenant made by Sir Christopher on 25 th July 2015. Ms Cooper has also executed a Deed of Covenant dated 9 th July 2015 under which she has covenanted to give or procure a gift of US$40 million to BWP on conditions including one that requires the Grant to be approved by the Commission or the court.

4

The establishment of BWP and the intention to make the Grant to BWP has arisen, in non-technical terms, as a result of the unfortunate break-up of both the marriage and the good relationship between Sir Christopher and Ms Cooper in late 2011. The matrimonial proceedings between them resulted in a payment of some US$530 million being made by Sir Christopher to Ms Cooper pursuant to a judgment of Mrs Justice Roberts delivered on 12 th December 2014. The couple were divorced on 3 rd April 2013.

5

Thereafter a series of Agreements were made in April 2015 (the "April agreements"). CIFF agreed to make the Grant to BWP provided that approval was obtained from either the Commission or the court. In addition, in broad terms at the same time, the two US$40 million payments were agreed, Ms Cooper irrevocably agreed to resign as a member and a trustee of CIFF once the Grant's approval application had been determined, and Sir Christopher agreed to use all reasonable endeavours to secure approval of the Grant. Specifically, Sir Christopher agreed to support the application for approval by writing a letter of support, but was not to be required to take any other supportive steps.

6

In July 2015, the April agreements were effectively implemented by a further series of documents (the "July agreements"). The deeds of covenant relating to the two sums of US$40 million were executed. Ms Cooper executed a Deed of Resignation dated 9 th July 2015 by which she resigned irrevocably as a member and trustee of CIFF. That resignation will, as matters have turned out, be effective when the court approves or refuses to approve the Grant. On 25 th July 2015, CIFF wrote a letter countersigned by Ms Cooper, agreeing to make the Grant conditional on either Commission or court approval and the two covenants to which I have referred.

7

There followed a lengthy and detailed correspondence between the members of CIFF, the trustees of CIFF, the Commission and their lawyers. Moreover, several distinguished counsel were instructed by the parties, whose opinions have been placed before me, alongside detailed evidence from the protagonists. I shall need to deal with some of this documentation, but it is useful first to consider the issues that have ultimately been thrown up by these proceedings. I provided the parties with a list of issues before the hearing began because the parties' skeleton arguments did not seem to be in complete agreement as to what the issues were that required determination. At the hearing, however, there was little disagreement that this list covered the main areas of dispute.

8

Before setting out those issues, however, I should mention an unexpected event that occurred on the second day of the hearing. It then became apparent to me that the central question in the case was likely to relate to the nature of the court's jurisdiction over the governance bodies of a charitable company limited by guarantee. That was because, if I determined, as submitted by Sir Christopher, that the payment of the Grant would be a "payment for loss of office to a director" of CIFF caught by sections 215 and 217 of the Companies Act 2006, the Grant would prima facie require to be sanctioned by a resolution of the members of CIFF before it could be paid. The question of whether any approval of the Grant by the court affected the need for that resolution was also a hotly contested one.

9

CIFF has only ever had a few members. They are now Sir Christopher, Ms Cooper and a Dr Marko Lehtimaki ("Dr Lehtimaki"), a university friend of Sir Christopher and Ms Cooper, who was a member between 2002 and 2009, and then again from 2012. In these circumstances, if a members' resolution of CIFF were needed to approve the Grant in the future, Dr Lehtimaki was likely to play an important role in such a resolution, bearing in mind the potential conflicts of interest of, and the agreements made by, the other members. For that and other reasons, it seemed to me that Dr Lehtimaki needed to be a party to these proceedings, and I joined him as the 4 th Defendant to the claim on the third day of the hearing, 10 th May 2017. Dr Lehtimaki appeared by counsel to resist his joinder, and I said that I would, and I shall, give my full reasons for having done so later in this judgment.

10

The identities of the trustees or directors of CIFF (the "trustees") are also important since they have fallen into essentially two groups, Sir Christopher and Ms Cooper on the one hand, and the independent trustees on the other hand. The independent trustees are now Mr Benjamin Goldsmith ("Mr Goldsmith"), Ms Masroor Siddiqui, and Dr Graeme Sweeney ("Dr Sweeney"). Former trustees include Dr Lehtimaki, Lord Mark Malloch-Brown ("Lord Malloch-Brown"), Mr Mark Dybul ("Mr Dybul"), Mr Gerry Elias ("Mr Elias"), Ms Joy Phumaphi, and Mr Rajan Pandhare ("Mr Pandhare"). The Governance Committee formed by the trustees comprises Mr Goldsmith and Dr Sweeney. Prior to 2 nd March 2016, that committee comprised Lord Malloch-Brown, Dr Sweeney and Mr Elias.

The issues

11

Against that background, the main issues for the court's determination are as follows:-

i) Is this a case in which the trustees seek the court's approval to a momentous decision they have, in their discretion, decided to take, or a case in which they have surrendered their discretion to the court?

ii) Would the Grant confer a material benefit, whether directly or indirectly, on Ms Cooper within the proper meaning of clause 5.2 of CIFF's Memorandum of Association, so as to require the written approval of the Commission in advance?

iii) Would the Grant be a payment for loss of office within the meaning of section 215 of the Companies Act 2006 so as to require the approval of CIFF's members under section 217 of the Companies Act 2006, because it would be (a) consideration for or in connection with Ms Cooper's retirement from her office as a trustee of CIFF, and either (b) a payment to a person connected with Ms Cooper, or (c) a payment to any person at the direction of, or for the benefit of, Ms Cooper or a person connected with her?

iv) If the Grant does require the approval of CIFF's members under section 217, are either or both of Sir Christopher and Ms Cooper (a) deprived of the right to vote because they owe fiduciary duties as members of CIFF and have a conflict of interest, (b) contractually deprived of the right to vote, and/or (c) contractually or otherwise obliged to vote in a particular way?

v) In any event, if the court approves the making of the Grant, does that abrogate the need for either (a) the Commission's written approval either under clause 5.2.5 of CIFF's Memorandum of Association and/or under section 201 of the Charities Act 2011, or (b) a members' resolution under section 217 of the Companies Act 2006?

vi) What factors should the court take into account in deciding whether to approve the making of the Grant, and in particular what weight should the court attach to the risk of tax being payable on the making of it?

vii) Should...

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