Five years after its high-profile collapse, the demise of Kids Company played out in a High Court trial at the end of 2020. The case reignited conversations in the sector about the role of trustees in a charity’s governance, and where ultimate responsibility for an organisation’s sustainability and solvency lies.
Third Sector attended more than a dozen days of the trial as it progressed under strict social distancing guidelines, with press and the public viewing proceedings via a live video link. Some key moments of the wide-ranging and extensive case are outlined below.
The Official Receiver is seeking to disqualify former Kids Company chief executive Camila Batmanghelidjh and seven former trustees of the charity, including Alan Yentob, former creative director at the BBC, for up to six years.
Its case, in part, is that the trustees ran an unsustainable business model, and should have been able to see the charity was heading for financial meltdown. The OR has also argued that Batmanghelidjh was a de facto director of the charity by virtue of her position as chief executive.
Batmanghelidjh and the former trustees roundly reject the accusations and say the periods of disqualification being sought are extreme, unsupported and unfairly presented.
George Bompas QC, of 4 Stone Buildings, acting on behalf of three former trustees including Yentob, described some of the stories relating to the charity’s expenditure as salacious and designed to create hysteria.
He argued the court should get rid of a third of the documentation put forward by the OR, stating that its only use was to give the media a feeding frenzy.
On a separate occasion, defence lawyers criticised evidence during the questioning of William Tatham, who had investigated Kids Company on behalf of the Insolvency Service.
Examples were cited showing Tatham had left out parts of answers during the interview process of his investigation, that could have run contrary to the allegation that spending policies were not being correctly followed. Lawyers used this to argue that the OR’s case was “thoroughly unfair”.
Questions about the ability to access government grants came up repeatedly throughout the proceedings, as it struck at the heart of the charity’s business model.
Under questioning, Anthony Hannon, who had investigated Kids Company on behalf of the OR, revealed that Yentob talked about being “fobbed off” by the government over funding requests at least 82 times.
Diane Hamilton, who served as interim finance director at Kids Company between July 2014 and January 2015, was also questioned about a meeting with the Charity Commission that took place just weeks before Kids Company collapsed.
The recorded minutes of the meeting described cash flow projections as “fictional” – however, the accuracy of this description was contested by defence lawyers.
The OR argued that Kids Company had become reliant on short-term loans amounting to several hundred thousand pounds made by the charity’s donors, on the basis that they would be paid back in a specific time frame.
In a day of testy exchanges between Lesley Anderson QC, who acted on behalf of the OR, and Batmanghelidjh, Anderson said the inability to keep to a number of short-term loan agreements amounted to “broken promises”.
Yet Batmanghelidjh defended the decision to obtain short-term loans as a way of managing the charity’s cashflow problems, insisting that she had good relationships with donors, and always had respect for them. “It was not my intention to break promises,” she said.
The proceedings laid bare governance disputes. When Richard Handover, a former trustee and ex-WHSmith chief executive, took to the stand, Anderson suggested Batmanghelidjh had “kicked back” against trustees’ attempts to impose financial controls in the charity’s final months.
This included requiring trustee approval before new financial commitments were made. Batmanghelidjh maintains that she was battling to hold the charity together in the face of insubordination, rumour and misinformation. And when the OR sought to spotlight apparent disagreements between her and the trustees, several of the defendants pushed back.
Handover admitted there had been a breakdown in some relationships within the organisation toward the end, but said it was not a surprise that such tensions should arise at the time, given the structure of the charity.
Vincent O’Brien, who served as a trustee between 2007 and 2015 and whose evidence session was littered with references to rock stars, Star Trek, and the satirical novel Catch-22, dismissed any notion that Batmanghelidjh was disruptive or unmanageable. All disagreements, he said, were “healthy”, “all human progress being down to unreasonable people”.
Andrew Westwood of Maitland Chambers, who represented O’Brien, also addressed the questions of unfitness in the context of a charitable company.
“The courts have always recognised that where criticisms are made of the past conduct of charity trustees, which does not involve dishonesty or wilful misconduct, a benevolent approach should be adopted,” he said.
When Yentob took to the stand, he made an impassioned defence of the charity and Batmanghelidjh, becoming visibly upset.
In a series of exchanges about the charity’s financial practices between 2012 and 2014, Anderson said she was trying to understand the “propriety of decision-making”, and asked what situation would have been sufficient for the charity’s contingency plans to be triggered.
Yentob said the trustees believed that they would still get additional government support, later adding that they did their best and “were not hiding anything from the government”.
Anderson questioned why the charity was “slogging so hard” for government funding when, as Yentob had suggested, it had the support of many private donors.
Yentob replied: “We wanted to change the nature of the organisation […] and we believed it was the government’s responsibility [to fund the services] – and, if I may say so, so did many people in government.”
The defence concluded bullishly, with a warning that disqualifying Batmanghelidjh and the trustees from similar roles would set a precedent that would make any trustee unwise to join a charity confronted by difficulties.
“If the OR is right about this – I don’t for a second think it is – the Charity Commission should now have, loudly, in red letters on its website: ‘If you’re thinking of joining a charity as a trustee, look at its financial position; if there is any uncertainty, don’t’,” Bompas said.
The High Court’s verdict is expected at the end of January.