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 trustee (L) declined to say how he would cast his decisive vote. When giving approval, the court had made an order for L to vote in favour of the transaction. He now appealed against that order.
Held: His appeal succeeded. He had not threatened to act contrary to his fiduciary duty, since he had stated that he intended to act in what he considered would promote CIFF’s charitable purposes.
A member of the charity was part of the internal workings of the charity and his powers were exercisable for the benefit of the charity. However, that the position might be different in relation to companies with a large membership, which it called ‘mass-membership charities’: ‘It does not necessarily follow that members of charities such as the National Trust also have fiduciary obligations. Since we are not dealing with such an organisation, we do not need to decide whether their members are in the same position as CIFF’s. There may possibly, moreover, be scope for argument as to whether it is less reasonable to expect those belonging to mass-membership charities to act exclusively in the charities’ interests. That said, it is far from clear that it should be legitimate for members of, say, the National Trust to vote to obtain benefits for themselves from an entity with exclusively charitable objects.’
The members of a charitable company have no proprietary rights. As to the content of their fiduciary duty, it was unnecessary: ‘to rule on the precise scope of the fiduciary duties owed by members of CIFF. It is sufficient to say that a member of CIFF owes, in our view, a duty corresponding to that specifically imposed on members of CIOs by section 220 of the Charities Act 2011. In other words, the member must exercise the powers that he has in that capacity in the way that he decides, in good faith, would be most likely to further the purposes of CIFF. It should be stressed that this duty is subjective: in other words, that what matters is the member’s state of mind (compare eg Regentcrest plc v Cohen [2001] 2 BCLC 80, para 120, dealing with company directors).’
Lady Justice Gloster (Vice-President of the Court of Appeal, Civil Division), Lord Justice David Richards and Lord Justice Newey
[2018] EWCA Civ 1605, [2019] 1 All ER 845, [2019] Ch 139, [2018] WLR(D) 423, [2018] 2 BCLC 478, [2018] 3 WLR 1470, 2018] WTLR 491
England and Wales
CitedIn 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 . .
CitedLiverpool 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 . .
Appeal fromThe 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 . .

Cited by:
Appeal from (CA)Lehtimaki and Others v Cooper SC 29-Jul-2020
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 . .

Lists of cited by and citing cases may be incomplete.
Updated: 25 August 2021; Ref: scu.618970