High Court judicial review judgement re Kids Company

In February 2022, the Charity Commission published an inquiry report on the activities of Keeping Kids Company (Kids Company).

The former CEO of Kids Company brought a judicial review challenge to a number of findings outlined in the Charity Commission’s report. The long-awaited outcome of this process was determined by the High Court in its judgement published on 20 May 2025

In this article, Samantha Pritchard, partner in our charities team, and Ryan Douglas, paralegal in our charities team, take a closer look at the outcome of the High Court judicial review judgement.

The background

Kids Company was a high-profile charity established to support disadvantaged and vulnerable young people at a number of centres across London, Liverpool and Bristol. The charity went into insolvent liquidation in August 2015.

The Charity Commission commenced a statutory inquiry into Kids Company shortly after its liquidation. This was put on hold when the Official Receiver (an office of the Insolvency Service) brought criminal disqualification proceedings against each trustee and the CEO of the charity. The proceedings were brought on the basis that the trustees and CEO of the charity were “unfit” as they had caused and/or allowed Kids Company to operate an unsustainable business model, in breach of the duties they owed to the charity as trustees (and therefore directors under company law).

In that judgement, it was ruled that the Official Receiver had not demonstrated that the decisions made by the trustees were outside the range of reasonable decision-making. Additionally, in the judge’s view, the conduct of the trustees did not amount to incompetence of a high degree. As a result, the criminal proceedings were struck out.

Following this outcome, the Commission resumed its statutory inquiry into Kids Company, which was eventually published in 2022. The former CEO of Kids Company and others sought judicial review over the findings of the inquiry report.

The court case

It was argued that:

1.      The Charity Commission’s report was irrational overall, and more specifically, the Commission was irrational in making certain findings in the report criticising Kids Company regarding its record keeping, reporting methods regarding its beneficiaries, reserve funds, late payments to creditors and lack of skill on the board of trustees.

2.      The Charity Commission had a “pre-determination” to produce a report that was critical of Kids Company.

The claimants sought to rely on irrationality and pre-determination as grounds for the report to be declared to have been made unlawfully.

A judicial review case requires the judge to decide if a decision has been made lawfully, not necessarily if the decision was correct.

Having reviewed the arguments, the judge hearing the case, Mr Justice Sheldon (Sheldon J), found in favour of the claimants on two points:

“The top 25”

The Charity Commission stated in its report that: “it is possible that the charity might have been able to provide more assistance to more clients if expenditure on the top 25 beneficiaries had been reduced”.

It went on to say that there was “insufficient evidence of the decision making in relation to some of [the payments to the top 25] to be satisfied that they were justified or in the best interests of the charity”.

Sheldon J found that the overall effect of those two sections of the report inferred that the payments made to the top 25 may have been unjustified or not in the charity's best interests, and that the payments might have been spent better if given to other beneficiaries.

The judge criticised the Charity Commission’s observations for not taking into account all relevant evidence before making these statements in the report. The matter of payments to the top 25 had previously been discussed in the proceedings brought by the Official Receiver. In that case, the judge, Mrs Justice Falk (Falk J), found that expenditure on the top 25 had been scrutinised adequately by the trustees.

As the Charity Commission did not take Falk J’s reasoning regarding those payments into account, Sheldon J described the Commission's observations as “unbalanced and one-sided” and “extremely unfair”. Therefore, Sheldon J ruled that this specific section of the report created such extreme unfairness that it would not be lawful, i.e. that was irrational in public law terms.

The charity's reserves

The Charity Commission also stated in its report that “if the charity had had a higher level of reserves, it may have been able to utilise these to weather this storm and thereby avoid insolvency and/or wind up in a more orderly fashion.” The report also outlined that the charity could “merge with another organisation and therefore ensure ongoing care and support for its beneficiaries” and that the “trustees’ decision to operate with a low level of reserves meant they could not do so”.

Sheldon J found that this implied that it was the result of the trustees’ decision to operate with a low level of reserves that the charity was unable to weather the storm, including by avoiding insolvency entirely.

However, Falk J in the Official Receiver's proceedings reviewed this point and ruled that even if the charity had built up reserves of three months of operating expenditure, it would have been substantially short of what was required to save the charity from insolvency.

Sheldon J criticised the Charity Commission’s observations here for not taking the earlier judgement into account or explaining why the Commission had reached a different view, and declared this section of the report irrational.

Overall judgement

While the claimants succeeded on the two points above, all other grounds raised were rejected.

Overall, Sheldon J declared that the report, as a whole, was not irrational. He went on to say: “the fact that the report contains errors, and even a small number of irrational findings or observations, does not mean that the overall document is irrational”.

Sheldon J also ruled that the threshold to meet the legal test of pre-determination had not been met.

The case has generated a lot of attention, and both the claimants and the Charity Commission consider the outcome a success.

What you need to know

It is rare for a judicial review applicant to succeed on any grounds raised against a high-profile regulator; therefore, it is easy to see why the claimants would treat this outcome as a success for succeeding on two points, notwithstanding the overall judgement was that the report as a whole was not irrational.

The judgment identifies shortcomings in the Charity Commission’s approach, which resulted in its failure to properly consider all relevant evidence and to reach rational conclusions in parts of its observations.

However, the judgment also identifies certain failings of Kids Company and describes the unfortunate circumstances that led to the charity's abrupt closing and leaving its beneficiaries without any support.

Following the closure of Kids Company, the Charity Commission has set out lessons to be learned which are applicable to the entire sector. These are:

1.      The importance of checks and balances within the governance framework of a charity, and the right blend of skills and knowledge in charity boards.

2.      The requirement for operating models to robustly reflect the nature and scale of the charity.

3.      The role of financial planning and reserves policies.

4.      The considerations necessary when charities grow.

The case is an important reminder that charities of all sizes need to assess the potential risks applicable to their organisations (including financial risks) and have appropriate contingency plans in place to prevent and mitigate the impact of those risks.

Please contact Samantha Pritchard at [email protected] or at 0191 211 7905 or Ryan Douglas at [email protected] or on 0191 211 7868 if you have any questions regarding the governance or operation of your charity.