Fiduciary Obligations Flashcards
Nature of fiduciary relationship
The principal is entitled to the single-minded loyalty of his fiduciary. (Bristol v West Building Society)
Attractions of fiduciary relationships
Remedial advantage: only in equity can you get compound interest by way of pre-judgement order
Development of Fiduciary Law
1) Trustee responsible for property and subject to strict obligations which would ensure the trustee would be loyal to the beneficiaries and only act in their interests, not their own
2) Court of chancery started applying this to other standards of behaviour
3) Became relationships of trust and confidence
4) Overlap with trust law and law on confidential information
Standard of Fiduciary Obligation?
Common law insists on honesty, diligence and due performance of contractual obligations….Equity insists on loyalty, fidelity, integrity, respect for confidentially and the disinterested discharge of obligations of trust and confidence. It exacts higher standards than those of the marketplace (Rt Hon Sir Peter Millett)
Original statement of duties
Moss v Moss
No person in a fiduciary position may use that position to obtain a private advantage and that no person in a fiduciary position may enter into any engagement in which his personal interest conflicts, or may possibly conflict his duty
Chan v Zacharia
Relationship can extend beyond the term of the partnership – scope may not be coincidental with the actual length of the formal legal relationship. Extended over duties relating to the partnership property.
A person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain:
(1) Which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain, OR
(2) Which was obtained or received by use or by reason of his fiduciary position or opportunity or knowledge resulting from it
Breen v Williams
Wanted medical records from doctor who performed procedure for purposes of litigation
Argued surgeon had positive prescriptive fiduciary obligation to give her access to the records. Rejected that ground as only recognise proscriptive fiduciary duties
Surgeon can be a fiduciary and are subject to proscriptive duties but they will not help here
Fiduciary relationship existed, but what the claimant was alleging the doctor had done was not within the scope of that particular relationship.
Boardman v Phipps
Trustee had acted honestly and with good intentions and the beneficiaries of the trust had succeeded
Assessed on a generous scale – recognise profits only possible because of Boardman and Phipps’ skill
CONFLICT: Duty to advise trustees on wisdom of seeking court permission, conflicted with personal interest in acquiring shares for himself and making personal profit
Dissent: A reasonable person ‘looking at the relevant facts and circumstances of the particular case, would think that there was a real sensible possibility of conflict
Grimaldi v Chameleon Mining NL
Finn J: ‘a person will be in a fiduciary relationship with another when and insofar as that person has undertaken to perform such a function for, or has assumed such a responsibility to, another as would thereby reasonably entitle that other to expect that he or she will act in that other’s interest to the exclusion of his or her own or a third party’s interest…’.
Howard v Commissioner of Taxation
The fiduciary duties of a director are no profit, no conflict; proscriptive not prescriptive.
HCA confirmed that if a director diverts an opportunity that came to the director in the course of or as a result of holding office as director, it will give rise to a director’s
breach of his/her obligations to the company
It does not matter whether the company would or would not have (or even if they could not have) exploited the opportunity
‘If, when it is his duty to safeguard and further the interests of the company, [a director] uses the occasion as a means of profit to himself, he raises an opposition between the duty he has undertaken and his own self interest, beyond which it is neither wise nor practicable for the law to look for a criterion of liability.’
Keech v Sandford
Property included the lease, lessor refused to renew the lessee for infant beneficiary.
Trustee took a renewal of the lease in his own name, not as trustee.
Illustration of the profit rule: cannot profit from their fiduciary position
The trustee was the only person of all mankind who might not have the lease
Farrington v Rowe McBride and Partners
Relationship: solicitor - client
Scope: advice on investing settlement money within scope of relationship. Owed a duty to client to obtain a proper and adequate security to protect his advances (from damages)
Investment the respondents obtained for him was closely tied up in the firm itself. Personal interest in the matter – possibility needs to be guarded against that the solicitors interests may take priority over the client’s interests
Glavanics v Brunninghausen
Courts generally have not found that directors owed fiduciary duties to their shareholders.
However, in present case, company’s personality and structure is ‘greatly diminished in circumstances of 2 kinds both of which are present here’
(1) when director deals w/ shareholders for purchase of sale/shares, especially if there are direct dealings and transaction is not anonymous
(2) where there are very few members and directors have close relationships with them
Due to the small size of company (them being the 2 shareholders) and G and B’s close
dealings, B owed a fiduciary duty as director to G as shareholder
McKenzie v McDonald
Relationship: Principal - Agent
Facts: defendant assumed position of confidence advising woman to sell her farm to him at below asking price and advising her to buy his property above the value of it
Kelly v Cooper
Agency contract defines the scope of F’s obligation. Necessary to give business efficacy to this contract that we imply a term that the (real estate) agent is able to act for more than one principal and not disclose confidential information whilst acting for another principal and receiving commission from sales. Built into contract that agent can do that without being in breach of his fiduciary obligations.
If parties in contractual relationship, can’t impose fiduciary relationships on top of that in a way which is in conflict with the contract. Contract determines scope of the relationship.
