Fiduciary duties Flashcards
When trustees can make a personal profit
If:
a) this is authorised be the declaration of trust;
b) all the beneficiaries are aged 18 years or over, know the full facts and consent; or
c) this is authorised by a court or by statutory provision.
Remuneration of trustees
a) Express provision in the trust deed.
b) The beneficiaries consenting.
c) Court order.
d) the TA 2000:
(i) a trust corporation;
(II) a trustee who acts in a professional capacity and who is not a sole trustee, and where the other trustees have agreed in writing.
Incidental profits: comission
Fiduciary duty prevents trustees from making incidental profits from the trust, ie the receipt of money from third parties. Trustees must not make a profit ‘one the side’.
An example of an incidental profit is the payment of comission to a trustee when that trustee places trust business with a particular firm. The comission received by the trustee has to be accounted to the trust.
Incidental profits: director’s salary
The appointment of a director requires over 50% of the votes cast to be in favour of the appointment. If the trust fund includes shares in the company, the trustees will be able to exercise the votes attached to those shares to vote themselves into office. If those shares were the reason why the trustee became a director, the trustee must surrender any salary they subsequently receive to the trust.
If someone was a director of a company before they became a trustee of a trust that has shares in the company, the director can keep their salary. They did not become a director by virtue of the trust.
Use of information or opportunity
A trustee is liable to account for any profits they receive where they received that profit by exploiting an opportunity that belonged to the trust. A trustee who makes use of confidential information for their own personal gain when they only became aware of the information due to their trusteeship will have to account for any profits they receive.
Remedies
If the trustee obtains a personal profit in breach of fiduciary duty, the beneficiaries can either (a) bring a personal claim against the trustee requiring the trustee to account fro their profits (whether or not the trust has suffered a loss) or (b) bring a proprietary claim if the trustee has used their personal profits to purchase property.
