fbpx

New High Court Ruling on Trustee Investment Decisions

Jul 13, 2022

In the latest case of Butler-Sloss v Charity Commission, 2022 EWHC 974 Ch, the England and Wales High Court (EWHC) made a declaration as to whether Charitable Trustees can take environmental goals into account when deciding how to invest the Charity’s assets. The High Court in this case decided that Charitable Trustees can, in line with their duties, take the environmental goals into account and this is so even if the result will be a lower return on the investments.

The decision in Butler-Sloss has clarified the guidance in leading case Harries v Church Commissioners for England (1992), known as the Bishop of Oxford case, which provided that Charitable Trustees should seek to maximise the return on their investments; except where the investment is in explicit conflict with the Charity’s purposes.

Bishop of Oxford left the position of Trustees’ responsibilities uncertain and, not wanting to fall foul of their responsibilities, the Charitable Trustees in Butler-Sloss asked the Court to decide whether they would be in breach of their duties if they refrained from investing in profitable activities that they considered to be in conflict with their charitable purposes.

The principal purposes of the Charities in Butler-Sloss were environmental protection and improvement, and the relief of poverty. The investment policy that they were seeking to approve specifically excluded any investments that did not align with the Paris Climate Agreement.

When making his decision, the Judge in Butler-Sloss, Michael Green (“Green”), began by noting that the overriding duty of Charitable Trustees is to further the purposes of the Charity. Under the standard criteria set out in section 4 of the Trustee Act 2000, this would normally be achieved by maximising the financial returns on the investments that are made. However, where specific investments are prohibited from being made by the Trustees under the Trust Deed or governing instrument, the Trustees simply cannot make them.

Green reminded readers that “where Trustees are of the reasonable view that particular investments or classes of investments potentially conflict with the charitable purposes, the Trustees have a discretion as to whether to exclude such investments”. Green went on to confirm that Charitable Trustees “should exercise [this] discretion by reasonably balancing all relevant factors including, in particular, the likelihood and seriousness of the potential conflict and the likelihood and seriousness of any potential financial effect from the exclusion of such investments”.

In essence, Charitable Trustees are required to act “honestly, reasonably (with all due care and skill) and responsibly” in formulating an appropriate investment policy for the Charity and, where decisions are in respect of potential conflicts or reputational damage, the Trustees need to “exercise good judgment by balancing all relevant factors in particular the extent of the potential conflict against the risk of financial detriment”.

If the balancing exercise is “properly done” and a “reasonable and proportionate” investment policy is thereby adopted, Green confirmed that the Trustees “will have complied with their legal duties in that respect and cannot be criticised, even if the Court or other Trustees might have come to a different conclusion”.

Having welcomed the decision, the Charity Commission has confirmed that it will amend its investment guidance to reflect the decision and we look forward to reading this revised guidance accordingly.

You can find out more about the Trusts by clicking here. Or, you can contact Sophie Spencer directly at Sophie.Spencer@herrington-carmichael.com.

Sources:

STEP – EWHC rules trustees can make investment decisions that give lower returns

BAILII – England and Wales High Court (Chancery Division) Decisions

This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.

Sophie Spencer

Sophie Spencer

Solicitor, Private Wealth & Inheritance

Sign up

Enter your email address for legal updates on Private Client & Family Law.

Please see our privacy policy regarding use of your data.


Latest Articles & Legal Insights

Q&A: Understanding Power of Attorney

Q&A: Understanding Power of Attorney

By having a Lasting Power of Attorney (LPA) in place, it allows you to appoint one or two close friends or relatives to make decisions.

What happens to My Bitcoins when I die?

What happens to My Bitcoins when I die?

The lack of a central registry means that without having direct access to the virtual wallet valuing and indeed paying any tax due becomes impossible.

Unfairly left out of a Will?

Unfairly left out of a Will?

This article provides a brief explanation of who may claim, on what basis, and for how much award when they have been left out of a will.

Top Legal Insights

 

Contract Law

Material Breach of Contract

What is a ‘material’ breach of contract by a party to a commercial contract? This is a critical issue regularly considered by the courts. What constitutes a material breach and what are the remedies?

Property Law

Commercial Lease: The Financial impact on Landlord and Tenant

Coronavirus (COVID-19) and the restrictions now in place to control its spread, are having a significant effect on many business sectors.

Divorce and Family Law

Divorce in Lockdown: Can I get some discreet legal advice?

We have spoken to clients who are unfortunately experiencing some family issues, and would like to obtain expert legal advice, yet don’t know how...

Land & Property Dispute

Restrictive Covenants – The Price of Modification

Having identified that your land is burdened by a restrictive covenant and for the purposes of this article the covenant in question will be that only one residential building can be erected on the land. What do you do next?

Wills, Trusts and Probate

Why is having a will so important?

It is entirely up to you if and when you want to create a Will, but it is important to be aware of the consequences of not having a Will.

Award winning legal advice

We are solicitors in Camberley, Wokingham and London. In 2019, Herrington Carmichael won ‘Property Law Firm of the Year’ at the Thames Valley Business Magazines Property Awards, ‘Best Medium Sized Business’ at the Surrey Heath Business Awards and we were named IR Global’s ‘Member of the Year’. We are ranked as a Leading Firm 2023 by Legal 500 and Alistair McArthur is ranked in Chambers 2022.

Camberley
Building 2  Watchmoor Park, Riverside Way, Camberley, Surrey  GU15 3YL
+44 (0)1276 686 222

Reading (Appointment only)
The Abbey, Abbey Gardens, Abbey Street, Reading RG1 3BA
+44 (0)1276 686 222

Ascot (Appointment only)
102, Berkshire House, 39-51 High Street, Ascot, Berkshire SL5 7HY
+44 (0)1344 623388

London (Appointment only)
60 St Martins Lane, Covent Garden, London WC2N 4JS
+44 (0)203 326 0317

Wokingham (Appointment only)
The Workstation Wokingham, Markham House, 20 Broad Street, Wokingham, RG40 1AH

+44 (0)118 977 4045

Email: info@herrington-carmichael.com

Our Services

Corporate Lawyers
Commercial Lawyers
Commercial Property Lawyers
Conveyancing Solicitors
Dispute Resolution Lawyers
Divorce & Family Lawyers
Employment Lawyers
Immigration Law Services
Private Wealth & Inheritance Lawyers
Startups & New Business Lawyers

© 2022 Herrington Carmichael LLP. Registered in England and Wales company number OC322293.

Herrington Carmichael is authorised and regulated by the Solicitors Regulation Authority with registration number 446245.

Pay Online

Privacy Policy   |   Legal Notices, T&Cs, Complaints Resolution   |   Cookies 
Client Feedback   |  Diversity Data