[2021] EWHC 175 (Ch)
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Neutral Citation Number: [2021] EWHC 175 (Ch) Case No: CR-2017-006113 IN THE HIGH COURT OF JUSTICE BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES INSOLVENCY AND COMPANIES LIST (ChD) Rolls Building, Royal Courts of Justice Fetter Lane, London, EC4A 1NL Date: 12/02/2021 IN THE MATTER OF KEEPING KIDS COMPANY AND IN THE MATTER OF THE COMPANY DIRECTORS DISQUALIFICATION ACT 1986 Before: MRS JUSTICE FALK - - - - - - - - - - - - - - - - - - - - - Between: THE OFFICIAL RECEIVER Claimant -and- (1) SUNETRA ATKINSON (2) CAMILA BATMANGHELIDJH (3) ERICA JANE BOLTON (4) RICHARD GORDON HANDOVER (5) VINCENT O’BRIEN (6) FRANCESCA MARY ROBINSON (7) JANE TYLER (8) ANDREW WEBSTER (9) ALAN YENTOB Defendants - - - - - - - - - - - - - - - - - - - - - Lesley Anderson QC and Gareth Tilley (instructed by Womble Bond Dickinson (UK) LLP) for the Claimant Rupert Butler (of Leverets) and Natasha Jackson (instructed by Leverets) for the Second Defendant Daniel Margolin QC and Daniel McCarthy (of Joseph Hage Aaronson LLP) for the Third Defendant George Bompas QC and Catherine Doran (instructed by Bates Wells) for the Fourth and Sixth to Ninth Defendants Andrew Westwood (instructed by Maurice Turnor Gardner LLP) for the Fifth Defendant MRS JUSTICE FALK Re Keeping Kids Company Approved Judgment Hearing dates: 19-22 and 26-29 October, 3-6, 9-12, 16-20, 23-26 and 30 November, 1-4, 7-9, 11 and 14-17 December 2020 - - - - - - - - - - - - - - - - - - - - - Approved Judgment I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic. …………….. Mrs Justice Falk 12 February 2021 14:27 Page 2 MRS JUSTICE FALK Re Keeping Kids Company Approved Judgment CONTENTS Paragraph INTRODUCTION ............................................................................................................... 1 BACKGROUND: A BRIEF HISTORY ............................................................................. 4 THE DEFENDANTS ........................................................................................................ 18 THE ISSUES IN OUTLINE ............................................................................................. 51 THE EVIDENCE .............................................................................................................. 61 The documentary evidence ............................................................................................... 61 The witness evidence ......................................................................................................... 65 Contacts between ex-employees: impact on evidence .................................................... 131 Similarities between defendants’ affidavits .................................................................... 136 LEGAL PRINCIPLES .................................................................................................... 139 Disqualification ............................................................................................................... 139 De facto director .............................................................................................................. 153 FACTUAL FINDINGS: GENERAL .............................................................................. 168 Kids Company’s business model .................................................................................... 172 General ......................................................................................................................... 172 Seasonality of income ................................................................................................... 185 Increasing scale: general ................................................................................................ 186 Increasing scale: Bristol ................................................................................................ 189 Financial position from 2012 onwards ........................................................................... 199 Warning signs in 2012? ................................................................................................. 201 Financial position during 2013: general ......................................................................... 212 Approval of the 2012 accounts (September 2013) .......................................................... 219 January to September 2014 ............................................................................................ 233 Approval of the 2013 accounts (September 2014): going concern issue ......................... 246 October to December 2014 ............................................................................................ 267 The outturn for 2014 ..................................................................................................... 282 January to March 2015 .................................................................................................. 289 April to July 2015.......................................................................................................... 307 HMRC .......................................................................................................................... 316 Relationship with the bank ............................................................................................ 335 Dependence on loans ..................................................................................................... 347 Mr Spiers’ loan ............................................................................................................. 360 12 February 2021 14:27 Page 3 MRS JUSTICE FALK Re Keeping Kids Company Approved Judgment Income: projections and accruals ................................................................................... 369 Income projections ........................................................................................................ 369 Accruals ........................................................................................................................ 379 Findings relating to the departure of senior managers.................................................. 389 Government funding ....................................................................................................... 437 History: NAO report...................................................................................................... 437 Interactions with Ministers and other senior figures ....................................................... 445 Government commissioned reports: PKF Littlejohn and Methods ................................. 501 Support from donors: risk of donor fatigue? ................................................................. 509 Reserves ........................................................................................................................... 528 Client spend (kids costs) .................................................................................................. 541 Allegation of dominance: general ................................................................................... 579 Alleged preferences in April 2015................................................................................... 595 Whether the restructuring would have succeeded ......................................................... 602 Non-implementation of a contingency plan before the July 2015 restructuring .......... 616 Timing of change to Ms Batmanghelidjh’s role ............................................................. 624 FACTUAL FINDINGS SPECIFIC TO MS BATMANGHELIDJH............................. 633 Role as CEO: financial aspects ....................................................................................... 634 Ms Batmanghelidjh’s approach to creditors and overoptimism ................................... 642 Failure to accept seriousness of deteriorating financial situation ................................. 648 Minutes ............................................................................................................................ 653 Contacts between staff and Trustees: general ................................................................ 660 Mr Kendrick.................................................................................................................... 663 WAS MS BATMANGHELIDJH A DE FACTO DIRECTOR?.................................... 669 The Official Receiver’s case ............................................................................................ 669 The case as put in Mr Hannon’s first report ................................................................... 669 The case as developed by Counsel ................................................................................. 676 The corporate governance structure .............................................................................. 682 The Articles of Association ........................................................................................... 683 Ms Batmanghelidjh’s employment contract ................................................................... 688 The Financial Procedures Manual .................................................................................. 690 Discussion ..................................................................................................................... 697 12 February 2021 14:27 Page 4 MRS JUSTICE FALK Re Keeping Kids Company Approved Judgment The CEO role and the role of the