Ch 11 - Fiduciary Duties Flashcards
What is the purpose of fiduciary duties for trustees?
Fiduciary duties prevent trustees from taking actions that could harm the trust’s interests and ensure loyalty to the trust.
What is the core duty of a fiduciary, such as a trustee?
A fiduciary must not let their personal interests conflict with the interests of their principal (the trust), and must remain loyal to the trust.
What is meant by ‘strict liability’ in fiduciary duties for trustees?
Trustees are strictly liable for breaches of fiduciary duty, meaning they must account for any profits made, even if no loss occurred or if they thought they were acting correctly.
When can trustees keep personal profits despite potential conflicts of interest?
Trustees may keep personal profits if:
- The action is authorized by the declaration of trust.
- Full disclosure is made to adult beneficiaries, who consent.
- The action is authorized by a court order or statute.
What is ‘self-dealing’ and why is it a breach of fiduciary duty?
Self-dealing occurs when a trustee buys from or sells property to the trust, creating a conflict of interest. Transactions can be set aside by beneficiaries within a reasonable time.
Can trustees compete with the trust?
No, trustees must not engage in business that competes with the trust’s interests. Any profits made must be accounted for to the trust.
When can trustees be paid for their services?
Trustees can be paid if authorized by the trust’s declaration or under the Trustee Act 2000. Professional trustees need agreement from other trustees to be paid, while non-professional trustees are not entitled to remuneration.
Can trustees keep commission from firms for placing trust business?
No, trustees must pay any commission received from firms for placing trust business to the trust.
What must trustees do if they secure a paid directorship due to trust-owned company shares?
Any salary earned from the directorship must be paid over to the trust.
What happens if a trustee encounters a valuable opportunity?
The trustee must offer the opportunity to the trust. If the trustee takes the opportunity for personal gain, they must account for any profits made.
How do fiduciary duties of trustees differ from those of company directors?
Company directors may not breach their duty under Section 175 of the Companies Act if the conflict of interest situation is unlikely. This exception does not apply to trustees.
What remedies can a trust pursue if a trustee breaches fiduciary duty?
The trust can pursue personal or proprietary remedies to recover any profits made by the trustee, aiming to strip the trustee of personal profits rather than compensate for loss.
