Charitable Company- Directors’ Status and Duties
A married couple set up a charitable foundation to assist children in developing countries. When the marriage failed an attempt was made to establish a second foundation with funds from the first, as part of W leaving the Trust. Court approval was obtained, but the court ordered the remaining non-interested director to vote in favour of the transaction. He appealed successfully against that order, and W now herself appealed.
Held: The appeal raised several issues.
Lady Arden discussed whether L was a fiduciary when acting as a member of CIFF. The defining characteristic of a fiduciary is that he has a single duty to his trustor. A member of a charitable company has that duty, the company itself being in a position of trustee. The position of the member was as under a trust given shape by statute and the company’s own constitution.
The application having been made to the court to approve such an arrangement, the Court’s answer governed the decision on what was in the charity’s best interests, and therefore the member no longer retained discretion to vote against it, and had to work to implement it. If the member disagreed, his remedy was to appeal.
Lady Arden, dissenting, saying that the fiduciary duty was in its nature subjective, and could not be ousted in favour of an objective direction.
Lady Arden confirmed the capacity of the Court to direct a member’s vote under section 217 of the 2006 Act.
Otherwise: Children’s Investment Fund (UK) v Attorney General
Judges:
Lord Reed, President, Lord Wilson, Lord Briggs, Lady Arden, Lord Kitchin
Citations:
[2020] UKSC 33, [2020] 2 BCLC 463, [2020] 3 WLR 461, [2020] WTLR 967, 23 ITELR 273, [2021] 1 All ER (Comm) 757, [2021] 1 All ER 809, [2022] AC 155
Links:
Bailii, Press Summary, Issues and Facts
Statutes:
Companies Act 2006 217, Charities Act 2011 201
Jurisdiction:
England and Wales
Citing:
Cited – In re The French Protestant Hospital ChD 1951
The charity was an incorporated body created by a Royal Charter granted in 1718. The governor and directors sought to exercise a power conferred on them by the charter to amend the byelaws to enable the directors’ professional firms to be . .
Cited – Von Ernst and Cie SA v Inland Revenue Commissioners CA 1979
The assets of a corporate charity were held on charitable trusts: ‘We were referred to certain authorities which give support to the view that a company incorporated for exclusively charitable purposes is in the position of a trustee of its funds or . .
Cited – Liverpool and District Hospital for Diseases of the Heart v Attorney-General ChD 1981
Charitable Company is Trustee of Assets
The court was asked as to the distribution of surplus assets of a charitable company which was in winding up, and the question whether or not s 257 et seq. Companies Act 1948 applied, including s 265 which made provision for the distribution of . .
Cited – The Attorney-General, at The Relation of W Izard v Brown, And Forty-Seven Others 3-Apr-1818
The Crown has a role as parens patriae or protector of charities.
Lord Eldon LC said: ‘It is the duty of the King, as parens patriae, to protect property devoted to charitable uses; and that duty is executed by the officer who represents the . .
Cited – John Shaw and Sons (Salford) Ltd v Shaw 1935
The members of a company cannot interfere with the decisions of the trustees and directors unless they amend the articles to enable them to do so. . .
Cited – Re Egerton Trust Retirement Benefit Scheme ChD 2000
(No Date) Robert Walker J identified four categories of case in which the court has to consider actions taken or to be taken by trustees, as follows:-
‘ . . it seems to me that, when the court has to adjudicate on a course of action proposed . .
Cited – Public Trustee v Cooper 2001
The court looked at the circumstances required when a court was asked to approve a proposed exercise by trustees of a discretion vested in them. The second category of circumstances was (quoting Robert Walker J): ‘Where the issue was whether the . .
At First Instance – The Children’s Investment Fund Foundation (UK) v Attorney General and Others ChD 9-Jun-2017
The court considered the propriety of a payment made by a charitable company to a director for her loss of office. The charity was to transfer a substantial sum to a new charity headed by the departing director.
Held: The court approved the . .
Appeal from (CA) – Lehtimaki v The Children’s Investment Fund Foundation (UK) and Others CA 6-Jul-2018
A charity established by H and W wanted to transfer part of its fund to a new charity headed by W in return for her resignation from the first charity on the breakdown of the marriage. Court approval was sought for a transfer, but the remaining . .
Cited – Hope Community Church (Wymondham) v Phelan and Others ChD 22-May-2020
The Church, a private company limited by guarantee, sought a declaration that it had the right to enfranchise its church premises under the 1920 Act. . .
Cited – Pender v Lushington CA 1877
After stating that the Court would not restrain the exercise of certain votes by members of a company merely because the holder of the votes had a motive for voting them which the Court might not approve, his Lordship said: ‘I am confirmed in that . .
Cited – The North-West Transportation Company and James Hughes Beatty v Henry Beatty and Others PC 21-Jul-1887
(Canada) . .
Cited – Allan v Gold Reefs of West Africa Ltd CA 19-Feb-1900
The company had altered its articles so as to give itself a lien on paid up shares in respect of the failure of the shareholder to pay calls on other shares which had not been fully paid up. The effect of the amendment was to alter the contractual . .
Cited – Arbuthnott v Bonnyman and Others CA 20-May-2015
Appeal from refusal of unfair prejudice petition.
After listing cases: ‘I would extract from them the following principles:
(1) The limitations on the exercise of the power to amend a company’s articles arise because, as in the case of . .
Cited – Northern Counties Securities Ltd v Jackson and Steeple Ltd ChD 1974
Walton J reiterated that, when a shareholder is voting for or against a particular resolution, he is voting as a person owing no fiduciary duty to the company and who is exercising his own right of property to vote as he thinks fit. . .
Cited – Letterstedt v Broers PC 22-Mar-1884
(Supreme Court of the Cape of Good Hope) Lack of harmony may be of itself a good reason for a trustee to resign or be dismissed. Lord Blackburn approved a passage in Story’s Equity Jurisprudence, s 1289: ‘But in cases of positive misconduct, courts . .
Cited – Bolton v Madden QBD 25-Nov-1873
The Court of Queen’s Bench on appeal from the Lord Mayor’s Court held that they could ‘find no legal principle to justify us in holding that the subscriber to a charity may not give his votes as he pleases’. Blackburn J said that ‘The general rule . .
Cited – SEC v Chenery Corporation 1-Feb-1943
(United States Supreme Court) Frankfurter J held: ‘to say that a man is a fiduciary only begins analysis; it gives direction to further inquiry. To whom is he a fiduciary? What obligations does he owe as a fiduciary?’ . .
Cited – Goldcorp Exchange Ltd and others v Liggett and others PC 25-May-1994
(New Zealand) The non allocated claimants purchased gold bullion from a company for future delivery on a non allocated basis. The company stored and insured the metal, but the claimants had a right to call for delivery of their part within 7-days. . .
Cited – Bolton v Madden QBD 25-Nov-1873
The Court of Queen’s Bench on appeal from the Lord Mayor’s Court held that they could ‘find no legal principle to justify us in holding that the subscriber to a charity may not give his votes as he pleases’. Blackburn J said that ‘The general rule . .
Cited – Mothew (T/a Stapley and Co) v Bristol and West Building Society CA 24-Jul-1996
The solicitor, acting in a land purchase transaction for his lay client and the plaintiff, had unwittingly misled the claimant by telling the claimant that the purchasers were providing the balance of the purchase price themselves without recourse . .
Cited – F and C Alternative Investments (Holdings) Ltd v Barthelemy and Another (No 2) ChD 14-Jul-2011
The court was asked as to the fiduciary obligations owed by members of the board of a limited liability company.
Held: Sales J said that: ‘there is nothing in the Act to qualify the usual fiduciary obligations which an agent owes his principal . .
Cited – Grimaldi v Chameleon Mining NL (No 2) 21-Feb-2012
Federal Court of Australia
CORPORATIONS – Corporations Act 2001 (Cth), s 9 – ‘director’ – ‘officer’ – de facto director – no single test for determining whether a person is such – assuming or performing the functions of a director of the . .
Cited – Chinachem Charitable Foundation Ltd v The Secretary for Justice 18-May-2015
(Court of Final Appeal of Hong Kong) Lord Walker of Gestingthorpe NPJ referred to a proposed scheme as ‘a written instrument approved by the court to regulate, in whole or in part, the future management and administration of the trust’ . .
Cited – Income Tax Special Commissioners v Pemsel HL 20-Jul-1891
Charitable Purposes used with technical meaning
The House was asked whether, in a taxing statute applying to the whole of the United Kingdom and allowing for deductions from and allowances against the income of land vested in trustees for charitable purposes, the words ‘charitable purposes’ . .
Cited – National Anti-Vivisection League v Inland Revenue Commissioners HL 2-Jul-1947
The main object of the Society was political viz, the repeal of the Cruelty to Animals Act 1876, and for that reason the Society was not established for charitable purposes only and was not entitled to exemption from tax. An organisation whose aims . .
Cited – Construction Industry Training Board v Attorney-General CA 1973
The principal issue was whether a body set up by statute and subject to the control of a minister of the Crown was a ‘charity’ within the meaning of section 45(1) of the Charities Act 1960, for which purpose it had to be subject to ‘the control of . .
Cited – Armitage v Nurse; etc CA 19-Mar-1997
A clause in a trust deed may validly excuse trustees from personal liability for even gross negligence. The trustee was exempted from liability for loss or damage ‘unless such loss or damage shall be caused by his own actual fraud’.
Held: The . .
Cited – Gaudiya Mission and others v Brahmachary CA 30-Jul-1997
The High Court had found the plaintiff to be a charity, and ordered the Attorney-General to be joined in. The A-G appealed that order saying that the plaintiff was not a charity within the 1993 Act. The charity sought to spread the Vaishnava . .
Cited – Ex Parte Lacey 5-Feb-1802
Trustee Not To purchase Property of Trust
Lord Eldon held that equity imposed stringent duties on persons who were appointed trustees of trusts and that these duties were imposed with ‘relentless jealousy’ in order to ensure that trustees fulfilled their duties, and that trustees had to be . .
Cited – Citibank Na and Another v QVT Financial Lp CA 22-Jan-2007
Securitisation of Channel Tunnel debts.
The controlling noteholder of a series of notes issued by the company and secured by a trust deed argued that its extensive powers, while its notes remained outstanding, to direct the trustee of the . .
Cited – Stanway v Attorney-General CA 5-Apr-2000
Sir Richard Scott V-C said: ‘Charities operate within a framework of public law, not private law. The Crown is parens patriae of the charity and the judges of the courts represent the Crown in supervising what the charity is doing and in giving . .
Cited – Arklow Investments Ltd and Another v Maclean and Others PC 1-Dec-1999
PC (New Zealand) Land was offered for sale. A potential buyer, the appellant was approached by a merchant bank with a proposal for finance. When he sought finance elsewhere, a company associated with the bank . .
Cited – Assenagon Asset Management Sa v Irish Bank Resolution Corporation Ltd ChD 27-Jul-2012
The court considered the right of a company member to vote as he wishes. Briggs J said: ‘The basis for the application of that principle in relation to powers conferred on majorities to bind minorities is traditionally described as arising from . .
Cited – The Attorney-General v The Dean and Canons of Christ Church CA 28-Mar-1822
Devise to the Dean and Canons of Christ Church in trust to constitute and support a grammar school at P, to appoint a master and usher, and pay them certain salaries; and the Dean and Canons to direct the management of the school.
Held: 1 That . .
Cited – Attorney-General v The Bishop Of Worcester 8-Nov-1851
If a scheme for the regulation of a charity, settled by a decree, does not operate beneficially for the charity, and the attorney-general considers that the interests of the charity would, consistently with the foundation, usage and law, be promoted . .
Cited – Girls Public Day School Trust v Minister of Community and Country Planning ChD 1951
A company was formed for the purpose of establishing in England, public day schools for the education of girls. The position on the day appointed by the minister of Town and Country planning under the 1947 Act, section 119, namely July 18th 1948, . .
Cited – Chapman v Chapman HL 25-Mar-1954
It was suggested to the House that: ‘A judge of the Chancery Division of the High Court of Justice has an inherent jurisdiction, in the execution of the trusts of a settlement, to sanction, on behalf of infant beneficiaries and unborn persons, a . .
Cited – Re Royal Society’s Charitable Trusts 1956
The Society, a charitable company regulated by statute, requested that it be permitted inter alia, to consolidate various different trust funds of which it was trustee for investment and accounting purposes.
Held: The application did not come . .
Cited – In re J W Laing Trust ChD 1984
The trust was first created in 1922 with a gift of 15,000 shares worth pounds 15,000 ‘the proceeds of which and the dividends thereon from time to time declared and paid … to be devoted to charitable purposes, it being understood that the capital . .
Cited – In re Steed CA 26-Jan-1960
The court considered an application under the 1968 Act to vary a trust. The testator had shown in the terms of his will a particular purpose in creating a protective trust; that was to protect the life tenant from improvident dealings with property . .
Cited – Re Ashton Charity CA 3-May-1856
The Court of Chancery has jurisdiction to alien the real estate of a charity, and it can do so upon an application under Sir Samuel Romilly’s Act: ‘upon an information, the Court of Chancery has a general jurisdiction, as incident to the . .
Cited – The Attorney-General v The Governors Of The Free Grammar School Of Queen Elizabeth In Dedham The Attorney-General v Ellis The Attorney-General v Grignon In The Matters Of The 52 Geo 3, C 101, The Charitable Trusts Act, 1853, And Of The Several Speci 30-Jan-1857
The jurisdiction of the court was not ousted where the charity obtained a charter subsequent to its founding . .
Cited – Ex Parte The Governors Of Christ’s Hospital 10-Dec-1864
. .
Cited – Attorney General v British Museum ChD 27-May-2005
The trustees brought a claim against the Attorney-General seeking clarification of their duties and powers to return objects which were part of the collection in law, but where a moral duty might exist to return it to a former owner. Here drawings . .
Cited – Clephane and Others v Magistrates of Edinburgh SCS 30-Oct-1869
This case came before the Court on a petition by the defenders, dated 21st May 1869, to apply the judgment of the House of Lords. The Kirk-session lodged a minute, asserting their interest in the matter, and craving to be sisted as parties to the . .
Cited – Andrews v McGuffog 1886
Applications to court – partial decree not granted – directions where scheme of founder cannot be carried out – commingling of different funds
Pursuers in an actio popularis in re a public trust have no right to demand a partial decree which . .
Cited – Hampden v Buckinghamshire (Earl of) ChD 24-Apr-1893
(ChD and CA) By sect. 11 of the Settled Land Act, 1890 (which Act and the Settled Land Act, 1882, are to be read and construed together as one Act): ‘Where money is required for the purpose of discharging an incumbrance on the settled land or part . .
Cited – Attorney-General v Governors of Christ’s Hospital 3-Mar-1896
The Attorney-General proposed a scheme to except certain endowments from the 1869 Act. They would be made over to another governing body in augmentation of the endowments held by them subject to the provisions of that Act.
Held: The court . .
Cited – Royal Society for the Prevention of Cruelty to Animals v Attorney-General and others ChD 26-Jan-2001
The right to freedom of association could be exercised by a society choosing to remove from its membership individuals who held views which it saw as inimical to its purposes. Such a removal did not infringe the members’ rights of freedom of speech. . .
Cited – In re Steed CA 26-Jan-1960
The court considered an application under the 1968 Act to vary a trust. The testator had shown in the terms of his will a particular purpose in creating a protective trust; that was to protect the life tenant from improvident dealings with property . .
Cited – In re S (an infant) CA 1965
A boy was received into the care of the local authority in 1954, when he was 5 weeks old. The local authority entrusted him to foster parents, who signed an agreement that the boy could be removed from them when required by an authorised person. In . .
Cited – Attorney General v Haberdashers’ Company 7-May-1791
Where a surplus to be distributed is an uncertain sum, the Master ought to report the shares in aliquot parts, not in money. The only way of administering a charity is under general direction to trustees; in case of misbehaviour there must be a new . .
Cited – Attorney-General, At The Relaion Of Barrett And Hayman v The Mayor, Bailiffs, And Commonalty Of The City Of Exeter, Defendants 10-Mar-1826
Semble. It is not a general rule of a court of equity, that a charitable gift for the benefits of the poor is to be confined to such poor as do not receive parish relief. Where trustees of a charity, under an instrument of doubtful construction, . .
Cited – Randell, In re; Randell v Dixon ChD 10-Feb-1888
A testatrix bequeathed pounds 14,000 on trust to pay the income to the incumbent of the church at H. for the time being so long as he permitted the sittings to be occupied free : in case payment for sittings was ever demanded, she directed the . .
Cited – Garnham v PC and Others 13-Mar-2012
(Royal Court – Samedi) . .
Cited – Cowan v Scargill and Others ChD 13-Apr-1984
Trustee’s duties in relation to investments
Within the National Coal Board Pension scheme, the trustees appointed by the NCB were concerned at the activities of the trustees of the miners, and sought directions from the court. The defendants refused to allow any funds to be invested abroad. . .
Cited – McPhail v Doulton (on appeal from In re Baden’s Deed Trusts) HL 6-May-1970
The settlor asked whether the test for validity, in point of certainty of objects, is the same for trusts and powers, or whether the test for trusts is more demanding.
Held: The test is the same. The context was a provision, held to be a . .
Cited by:
Cited – Butler-Sloss and Others v The Charity Commission for England and Wales and Another ChD 29-Apr-2022
Principles allowing Ethical Investment by Trustees
Should charities, whose principal purposes are environmental protection and improvement and the relief of poverty, be able to adopt an investment policy that excludes many potential investments because the trustees consider that they conflict with . .
Lists of cited by and citing cases may be incomplete.
Charity, Company
Updated: 04 May 2022; Ref: scu.652834
