Lehtimaki & Ors v Cooper (Rev 1) [2020] UKSC 33

Following marital breakdown between CIFF's founders, trustees agreed a $360m grant to resolve governance issues. The Supreme Court held that members of charitable companies owe fiduciary duties to the charity's purposes and directed the sole unconflicted member to vote in favour of the grant.

Facts

The Children’s Investment Fund Foundation (UK) (‘CIFF’) is a charitable company limited by guarantee with assets exceeding $4bn, founded by Sir Christopher Hohn and Ms Jamie Cooper in 2002. Following the breakdown of their marriage, governance of the charity became difficult. To resolve matters, the parties agreed that CIFF would make a $360m grant (the ‘Grant’) to Big Win Philanthropy (‘BWP’), a new charity established by Ms Cooper, in exchange for her resignation as member and trustee of CIFF.

CIFF had only three members: Sir Christopher, Ms Cooper and Dr Marko Lehtimäki. Because the Grant constituted a payment for loss of office under section 215 of the Companies Act 2006, it required approval by members’ resolution under section 217, together with the prior written consent of the Charity Commission under section 201 of the Charities Act 2011. Sir Christopher and Ms Cooper were conflicted, leaving only Dr Lehtimäki to vote.

The trustees surrendered their discretion to the court. The Chancellor (Sir Geoffrey Vos) held the Grant was in CIFF’s best interests and directed Dr Lehtimäki to vote in favour of the section 217 resolution. The Court of Appeal reversed that direction. Ms Cooper appealed to the Supreme Court.

Issues

Three issues arose:

1. Whether Dr Lehtimäki, as a member of CIFF, was a fiduciary in relation to the charitable purposes.
2. If so, whether circumstances had arisen in which the court could exercise its jurisdiction over fiduciaries to direct him how to vote, in light of the ‘non-intervention principle’.
3. Whether section 217 of the Companies Act 2006 allowed the court to direct a member how to exercise his discretion where Parliament had entrusted the decision to the members.

Arguments

The appellant (Ms Cooper) argued that Dr Lehtimäki was a fiduciary, that the court’s inherent jurisdiction over charities was broad and could be exercised by direction, and that section 217 did not preclude the court’s intervention.

Dr Lehtimäki and Sir Christopher argued that members of charitable companies were not fiduciaries, that even if they were, the non-intervention principle precluded the court from directing how discretion should be exercised absent breach of duty, and that Parliament had specifically entrusted the decision to the members.

CIFF raised numerous practical difficulties arising from treating members as fiduciaries. The Attorney General supported the appellant’s position.

Judgment

Issue 1: Fiduciary status

The court unanimously held that Dr Lehtimäki owed fiduciary duties to CIFF’s charitable purposes in relation to the section 217 resolution. Lady Arden emphasised the liberal approach of courts to charities, the statutory recognition of charitable companies, and the decision in Liverpool and District Hospital for Diseases of the Heart v Attorney General [1981] Ch 193. The memorandum of association bound members to apply assets for charitable purposes. The fiduciary duties were tailored to fit the corporate vehicle, with the duty being one of single-minded loyalty to the charitable purposes. Lady Arden took a more nuanced view than the Court of Appeal, holding that the duty does not necessarily apply to every member power.

Issue 2 and 3: Jurisdiction to direct

The court was divided on reasoning but unanimous on outcome. Lady Arden held that the non-intervention principle permitted exceptional intervention where an impasse threatened the charity’s operation, and this was such an exceptional case. The court had jurisdiction to give directions without needing to make a scheme.

Lord Briggs (with whom Lord Wilson and Lord Kitchin agreed) took the ‘breach of duty route’, holding that once the court had decided, after proper proceedings, that a transaction was in the charity’s best interests, it would be a breach of fiduciary duty for a fiduciary party to the proceedings to vote contrary to that decision. The subjective element of fiduciary duty had to give way because there was no longer any legitimate debate on the question the court had decided. Lord Briggs stated that the fiduciary’s belief must be both bona fide and reasonable, citing Cowan v Scargill [1985] Ch 270.

On section 217, the court held that Parliament’s scheme was not interfered with: a resolution still had to be passed, and the Charity Commission’s consent under section 201 remained required. The provision did not preclude the court from directing how a fiduciary member should vote.

Lord Reed expressed reluctance but concurred in the outcome given the unanimity of the other members.

Implications

The decision establishes that members of charitable companies (at least those structured like CIFF without member benefits) owe fiduciary duties to the charitable purposes when exercising powers such as voting on resolutions that affect charitable assets. The court expressly left open the position of ‘mass membership’ charities such as the National Trust.

The judgment confirms that the court’s inherent jurisdiction over charities is broader than its jurisdiction over private trusts, and extends to giving directions (not merely schemes) in exceptional circumstances. Where trustees surrender their discretion and the court decides a transaction is in the charity’s best interests, fiduciary members who are parties to the proceedings may be directed to vote accordingly.

The case is significant for charity practitioners, trustees and members of charitable companies. It clarifies that fiduciary duties can be tailored to the corporate structure, with members entitled only to the information provided for by the Companies Acts and the company’s constitution. The decision reinforces the courts’ traditionally benevolent approach to charities and their willingness to intervene to ensure effective administration.

The judgment leaves certain questions unresolved, including the precise scope of member fiduciary duties in different contexts, the position in mass-membership charities, and how conflicts of interest are to be managed by members. The facts were described by Lord Reed as unlikely ever to be replicated, which may limit the wider application of the direction aspect of the decision.

Verdict: Appeal allowed. The Supreme Court restored the Chancellor’s order directing Dr Lehtimäki to vote in favour of the section 217 resolution approving the Grant, subject to the Charity Commission’s consent under section 201 of the Charities Act 2011.

Source: Lehtimaki & Ors v Cooper (Rev 1) [2020] UKSC 33