Fiduciary Duties Flashcards
Fiduciary definition
A trusteeship, fiduciary arises from custody and control of someone’s wealth and property and the power and discretion afforded in managing it.
- Keech v Sandford
Negative obligations = obligation of loyalty
Meinhard v Salmon
A trustee is held to something stricter than the morals of the market place
Ex p Dale
wrong arises…same remedy between wrongdoer and principal as between a trustee and beneficiary
Canson Enterprises
one party pledges herself to act in the best interest of the other
Categories Boardman v Phipps Guinness plc Docker v Somes Mothew Featherstonhaugh v Fenwick Kelly v Cooper Eze v Conway
Trustee-beneficiary Director-company executor-legatee solicitor-client partner-partnership agent-principal non-fiduciary agent
Hospital Products
commercial transaction parties are dealing at arms length…reluctant to impose a fiduciary duty
Galambos v Perez
voluntary assumption of responsibility
power imbalance not necessary
Voltaire
strictness of fiduciary duty is salutary
Bray v Ford
No Profit
inflexible rule of equity that a person in a fiduciary position…unless expressly provided, entitled to make a profit
Bray v Ford
He is not allowed to put himself in a position where interest and duty conflict
Boardman v Phipps
Facts
A testamentary trust for widow and 3 children was set up
Boardman obtained approval from Fox and Noble for plan to buy shares personally, he did not seek approval from the widow
Loyalty: Penner
“The application of the rules governing fiduciaries is not about ensuring loyalty. The rule addresses the fact that where an exercise of a power is taken in cases where the trustee’s judgment is impaired, that exercise can be set aside”
If you are in a position to act in a way that is not in the best interests of the principal, it is hard to not make an unbiased decision. This rule protects you from yourself
Positions of conflict do not depend on any fault, but rather from breaching a duty owed
Fiduciary: Motive
Your motives are irrelevant to whether it is a breach of fiduciary duty or not. It is enough that there is a mere possibility of conflict even if on the facts there was no possibility
Boardman v Phipps (Lord Hodson)
“Even if the possibility of conflict is present between personal interest and the fiduciary position the rule of equity must be applied”
Self-Dealing
Tito v Waddell:
“the self-dealing rule is that if a trustee sells the trust property to himself, the sale is voidable by any beneficiary ex debito justitiae, however fair the transaction”
Risk of potential for exploitation. The transaction is voidable regardless of how fair the transaction was
Wright v Morgan
self-dealing
Fair-Dealing
If you purchase the beneficial interest as a beneficiary, the court will look at the character of that transaction
Tito v Waddell:
“the fair-dealing rule is that if a trustee purchases the beneficial interest of any of his beneficiaries, the transaction is not voidable ex debito justitiae, but can be set aside by the beneficiary unless the trustee can show that he has taken no advantage of his position and has made full disclosure to the beneficiary, and that the transaction is fair and honest”
Coles v Trekowick
fair-dealing
Remedies for breach of FD
Account of profits: the gains you make as an unauthorised profiteer must be handed over to the principal
Constructive trust: the principal has a proprietary interest in the money or assets
Rescission of transaction
Equitable compensation: a requirement to make good to the trust fund
Such claims will have the advantage of the avoidance of limitation periods
Moody v Cox
conflicting duties
Commercial Situations
Lord Briggs, The Denning Society Annual Lecture
The problem about having such a broad principle of equity is that it “can only be expressed at such a high level of generality that it provides little useful guidance” (Lord Walker in Cobbe v Yeoman’s Row)
The growing role of professional fiduciaries in an economy focussed on services coincides with the need to impose higher standards of conduct on them that has not been met by regulation. Thus, equity has become the dominant source of relevant law, as regulation has not provided a satisfactory alternative
Mothew + Fiduciary Duties
A
“The expression “fiduciary duty” is properly confined to those duties which are peculiar to fiduciaries and the breach of which attracts legal consequences differing from those consequent upon the breach of other duties. “ per Millet LJ
Fiduciary relationships impose specific obligations that may coincide and be concurrent with other duties, but the fiduciary duties are narrower and are linked to the specialness of the relationship
First Principles
Hospital Products
“accommodate itself to the terms of the contract”
- An undertaking to act in the interests of another
- Delegation of power and discretion
- Need for self-denial
- Vulnerability
- Danger of sub-horning autonomy of the principal (power imbalance)
Remedies
Account of Profits (Disgorgement)
FHR v Chester - proprietary constructive trust
CMS - fiduciary pay money (NDR)
Murad - ‘but for’ not needed
Equitable Compensation
loss > gain
Swindle - fiduciary disprove cause of loss
Election
no double recovery
Tag Man Sit - one over other
Birks - remedies mutually exclusive
Measure, Apportionment, Allowance
CMS - costs for profits
Guinness - allowance not contrary to deterrent
Docker - personal money = apportionment
Forfeiture of Remuneration
To forfeit salary paid for work
Keppel v Wheeler - breach of good faith - loss or FoR
Kelly v Cooper - dishonesty = sufficient
Imagineview - “harmless collaterality”
Recission
transfer = reversed
Tito v Waddell
self and fair-dealing
Shipway (Chitty J)
real evil is not the payment of money but the secrecy attaining it
Oranje
full and frank disclosure of material facts
Ross River
Consent
Consent is narrow
Kelly v Cooper
Consent
Consent is strict/narrow
Boulting
“properly and honestly give services to advantage of both
First Principle Fiduciaries
Examples
Ross River - joint venture Fishel - employee Sinclair - sales puff Eze - chivvier Oranje general secretary
Armitage v Nurse
Dishonesty connotes a minimum of intention -
D was knowing or recklessly indifferent to contrary of interests
Cooke v Deeks
Breach - No-Profit
interception of corporate oppurtunity
Boardman v Phipps
No Profit
profit with no suffering of principal
Aas v Benham
Scope
No satisfaction of no conflict rule
Ship building and ship broking is separate
Lord Wilberforce (Oranje)
may be an FD where quoad some parts his activities are not quoad to other parts
