Charities and the Fiduciary Paradigm

Abstract

In Lehtimäki v Cooper [2020] UKSC 33 the UK Supreme Court held that members of a charitable company limited by guarantee owed a fiduciary duty to act in good faith in the interests of the company in certain circumstances. The decision is, however, arguably fact-specific and is distinguishable for the purposes of Australian law due to different charity law and regulatory frameworks. There are, in addition, strong policy reasons why the imposition of fiduciary duties on members is undesirable. This article critically analyses the decision. It argues that members are instead subject to restrictions based on the rule in Barnes v Addy. This position arises due to the unique nature of charitable companies (and other charitable entities), which in turn results in the existence of a fiduciary relationship between responsible persons and the charitable entities they govern.

Keywords: charities, fiduciary duties, members, Charities Act 2011, Companies Act 2006, Barnes v Addy, equity and trusts

JEL Classification: K10, K11, K20, K22