Cost of Kids Company trial to the public purse revealed

The Insolvency Service spent almost £740,000 on external legal costs during the 10-week Kids Company trial, Third Sector has learned.

The disqualification proceedings brought against Camila Batmanghelidjh and a group of former trustees of the collapsed charity Kids Company were dismissed at the High Court last week.

A request made under the Freedom of Information Act by Third Sector showed that the case cost the Insolvency Service £738,909 in external legal fees, including VAT.

But lawyers involved in the case warned that the true cost to the taxpayer for the entirety of the case would be far higher.

The High Court judgment rejected the case brought by the Official Receiver against Batmanghelidjh, Kids Company founder and former chief executive, and seven other trustees of the charity at the time it closed abruptly in 2015.

The court also found that the charity might have survived if what turned out to be unfounded claims of abuse involving service users had not been made.

In its response to the request, the IS said it did not hold information relating to the “full cost” of the trial, but in the interest of transparency it provided the costs incurred by the OR acting as a party to the proceedings for the secretary of state.

“The Insolvency Service is an executive agency for the Department of Business, Energy and Industrial Strategy and issued the proceedings on that basis.

“It does not hold any wider function in respect of the trial which is under the control of the court,” said the response.

It said that its costs were limited to costs incurred by the Official Receiver from the use of external legal services.

In response to a request for comment on the figures, the IS said it could not provide a more detailed breakdown of the costs as the information is commercially sensitive.

Lucy Rhodes is a senior associate in the charity and social enterprise department at law firm Bates Wells, who advised five of the trustees involved in the trial.

The firm has already described the case as a waste of taxpayers’ money and Rhodes said the figure represented only a fraction of the cost that the taxpayer would bear for this misconceived case.

“It does not include pre-trial legal costs, nor does it take account of the Insolvency Service’s own resources or those of the court over a 10-week trial, or the cost of compensating our clients and the other defendants,” she said.

“It is pretty extraordinary, given that the Official Receiver’s own allegations were, in essence, about financial mismanagement.”

Shivaji Shiva, partner at the law firm VWV, highlighted the importance of ensuring public funds were applied effectively as the judge, Justice Falk, highlighted in her judgement.

Falk said: “This was not a case alleging dishonesty or want of probity, but an allegation of incompetence against the directors and a manager of a charitable company, who had made no personal gain from any of the alleged conduct, and who with one exception were all unpaid.”

Shiva said: “The resources involved in bringing the proceedings, and the scale and nature of the case that the defendants had to defend, need to be carefully considered against this backdrop.”

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