Fiduciary obligations Flashcards
Fiduciary duty
Trustee must not allow her personal interest to come into conflict with the beneficiaries’ interests i.e. best interests
Distinguishing the fiduciary duty from other duties
Obligation of loyalty (Bristol & West Building Soc v Mothew)
When fiduciary duties arise (not all fiduciaries are trustees, and only express trustees are fiduciaries)
Settled categories
Ad hoc
Settled categories of fiduciary duties
- Trustee-beneficiary (Aberdeen Town Council v Aberdeen University)
- Agent-principal (Boston Deep Sea Fishing v Ansell)
- Partners (Aas v Benham)
- Director-company (Regal v Gulliver)
- Solicitor-client (Hilton v Barker Booth Eastwood)
Ad hoc fiduciary relationships
Key factors: presence of discretion, power in managing someone else’s affairs (Arklow Investments v Maclean)
Usually not in commercial settings
Scope of fiduciary duties
Duty of loyalty (Bristol & West Building Soc v Mothew), not competence
Nature of fiduciary duty of loyalty
Proscriptive versus negative duties
Orthodoxy: no proscriptive duties, because not exclusively owned by fiduciaries
Academic opinion on fiduciary duty of loyalty
Conaglen: function of insulation from temptation
Smith: fiduciaries to make better decisions by requiring them to exercise disinterested judgment
Penner: does not agree with loyalty, instead, deliberative exclusivity
Disability vs Duty
Transition from disability debate to primary duty
Duty of good faith
C Mitchell: honesty and good faith at the core, even if fiduciary can stand to benefit; focus on the practice of self-denial
No conflict rule
Only need to show that there is a real sensible possibility of conflict from reasonable man’s perspective (Boardman v Phipps)
No conflict rule: Duty v duty
(Bristol & West Building v Mothew)
No conflict rule: Interest v duty
- No self-dealing rule (Tito v Waddell, Re Thompson’s Settlement)
- Fair dealing rule (Tito v Waddell)
Conaglen: existence of consent as the most crucial
Davies: not convinced about overriding character of consent
No profit rule
Strict application even in good faith (Keech v Sandford, Boardman v Phipps)
Boardman v Phipps: the breach
a) Agents and intermeddlers
b) Conflicts of interest for Boardman
Dissent by Lord Upjohn: information received was not property; no real conflict –> a legitimate no profit rule separate from the no conflict rule
Relationship between no conflict and no profit rules: affect the duty versus disability debate
No profit rule is a subset of no conflict rule (FHR European Ventures LLP v Cedar Capital)
Conaglen: not a separate rule
Smith: separate rules
Remuneration for fiduciaries
Generally don’t have until expressly provided for or reasonable to ask e.g. professional trustees
Remuneration IS possible (Re Duke of Norfolk)
Remedies for breach of fiduciary duty
a) Rescission
b) Equitable compensation
c) Equitable allowance
d) Account of profits
e) Constructive trusts
Rescission
Usually granted
Burden of proof on the fiduciary, high threshold
a) Self-dealing, fair-dealing
b) Pecuniary rescission (third party rights making rescission impossible, can claim money sum instead)
Equitable compensation
Rationale
disability - cannot recover
duty - can recover
a) Causation test (Brickenden v London Loan and Savings)
b) Remoteness and intervening cause (Canson Enterprises v Boughton, Swindle v Harrison – but unsure what test)
c) Contributory fault not a defence (Nationwide Building v Balmer Radmore)
Accounts of profits
Fiduciary cannot make an unauthorised profit - concern is setting expenses against receipts, not with tracing property into substitute property (Ultraframe, Grimaldi v Chameleon)
Hypothetical situations should not be explored, full profit awarded (Murad v Al-Saraj)
Unsure what test, but not causation (Novoship)
McFarlane and Mitchell: causal link preferred
Equitable allowance
Possible (Boardman v Phipps)
As long as it won’t discourage fiduciaries from putting themselves in positions of conflict (Guinness v Saunders)
Constructive trusts
For renewal of lease (Keech v Sandford)
Misappropriation of profit making opportunity that came in fiduciary capacity (Boardman v Phipps)
Bribe money (Lister v Stubbs, AG v Reid, FHR European Ventures)
Choosing remedies
a) goals of remedies
b) goals of imposing fiduciary duties
- incentivise fiducaries to resist temptation of misconduct
- principals would have evidential difficulties
Tang Man Sit v Capacious: claimant can make an elections for types of remedies
