Remarkable precedent on foundation law from the Supreme Court
Attorneys Antti Hannula and Pinja Hoffrichter successfully advised Riihi Säätiö s.r. in a precedent on foundation law in the Finnish Supreme Court (KKO:2024:35). The Supreme Court confirmed our view of interpretation of the law, and the judgement was delivered in early summer in favor of our client Riihi Säätiö s.r.
Common experiences between Nordia and Riihi Säätiö s.r. started as early as 12 February 2008, when Mr. Hannula advised the supervisor of foundation authority, the Finnish Patent and Registration Office, which demanded that Riihi Säätiö s.r. shall be abolished or that the entire board of the foundation shall be dissolved. The basis of the Patent and Registration Office’s claim was that the foundation’s board had breached its own by-laws and violated the foundations Acts. Firstly, the District Court ordered the dissolution of the foundation, but the final judgement of the Court of Appeal held instead to dissolve the Board of the foundation but did not order the foundation to be abolished.
In the dissolution case, the foundation had its own attorney. In addition, the trustees of the foundation’s board resolved that the foundation would cover the costs of attorneys for each trustee of the board.
When the Court of Appeal ordered the board to be dissolved, a new board was elected for the foundation. When the law firm representing the former trustee charged the foundation for its services, the new board of foundation stated that it was not in its interest and purpose to pay the former board trustee’s legal fees in a case that assessed the impropriety of the trustee’s actions in the foundation’s activities. This was not an expense of the foundation and payment would have been contrary to the Foundation Act and by-laws of the foundation.
The Supreme Court precedent concerns whether the foundation could validly settle and subsequently pay the former trustee’s legal expenses in the above-mentioned litigation. The Supreme Court held clearly that decision to compensate the costs was null and void as it was contrary to the Foundations Act and by-laws of the foundation. According to the interpretation of the old Foundations Act and legal literature, the capacity of a representative of the foundation to act on behalf of the foundation is limited to acts in accordance with the purpose of the foundation. Unlike the District Court and the Court of Appeal, the Supreme Court discharged the foundation from the obligation to pay the law firm’s fees and ordered the law firm to reimburse the foundation for the costs of the proceedings at all instances.
The Supreme Court held that there was no basis in the by-laws of the foundation, that could allow the foundation to commit to pay legal fees of its trustees. Therefore, the board of the foundation had exceeded its capacity in concluding the agreement. The foundation was not bound by the agreement to pay the fees of the law firm.
