The Children’s Investment Fund Foundation (CIFF) was set up in 2002 with an endowment of about $5bn (US) by Sir Christopher Hohn and Jamie Cooper. The breakdown of their marriage created challenges in administering the charity. However, a divorce settlement in 2014 agreed that CIFF should make the grant to Big Win Philanthropy, a charity set up by Cooper, provided that approval was obtained from either the Charity Commission of England and Wales (Commission) or the Courts. The Commission recommended that the decision should be made by the courts.
In 2017, the High Court ruled that the grant should go ahead. But CIFF’s third trustee, Dr Marko Lehtimaki – the only trustee with no conflicts – indicated that he might not vote in favour of the resolution.
Lehtimaki took the case to the Court of Appeal, which overturned the ruling that the grant must take place.
Cooper appealed to the Supreme Court which ordered that the grant of £277m should be made to Cooper’s charity.
The Supreme Court noted that the case was unique and unlikely to occur again, but it did make its views known on several general principles about charitable companies. These are:
- Charitable companies (and probably incorporated associations and other types of social enterprise) are not like for-profit companies and able to change their purposes on a whim. Their purposes may form a trust (or trust-like) obligation based on company law, contract and trust law.
- Members of charitable companies are not similar to shareholders of a for-profit company who are free to act and vote in their own economic interests. Charity company members have an obligation to use their rights and exercise their vote in the best interests of the purposes of the charity of which they are a member.
- The conduct of members when voting or exercising other rights in a general meeting for mergers, acquisitions, divestments, and disputes will need to consider their choices carefully and not be directed to vote in factions or blocks.
Australian Courts have not endorsed or adopted these principles but the trend of judicial authority is headed in this direction. Charitable companies with large memberships will want to look carefully at articulating the scope of the duty owed by their members in their constitutions.
It is reported that CIFF’s latest accounts for the year to December 2019, show that the case has cost the charity £6.85m.