Trustees : Fiduciary Duties Flashcards
Who can be a fiduciary?
Someone who has undertaken to act for or on behalf of another in a particular matter, in circumstances that give rise to a relationship of trust and confidence
What are the 2 core fiduciary duties within a trust?
Must not put themselves in a position where their own interests conflict with the interests of their piratical (no conflict rule)
Make an unauthorised personal profit from their position, or use their principals property to make such a profit (no profit rule)
If trustee breaches a fiduciary duty, what happens?
Trustee will be obliged to account for that profit.
When can trustees KEEP personal profits?
If authorised by declaration of trust
If all beneficiaries are age 18 or over, know full facts, and consent
Or,
This is authorised by a court order or statutory provision
What are the 6 breaches of fiduciary duties?
Self dealing
Competition with trust
Remuneration of trustees
Incidental profits in commission
Incidental profits on director salary
Use of information or opportunity
What is self dealing?
When a trustee may be tempted to sell or urachse property from the trust.
Effectively selling or buying from themselves.
Conflict of interest.
Is self dealing rule automatically void?
No, as the beneficiaries may decide that the transaction was a good deal as far as the trust was concerned. However, the beneficiaries CAN set the transaction aside for ANY reason within a reasonable period of time.
What is the breach of competition with the trust?
When the trust includes a business, the trustee must NOT set up their OWN business in competition.
If they do, wil be liable to account for any profit made by competing business.
What is the breach of remuneration of trustees?
Trustees CANNOT demand payment for their services, unless authorised by:
- express provision in trust deed
- beneficiaries consenting, if all ove 1 and know all facts
- court order
- the TA- a trust corporation, or a trustee who acts in a professional capacity and who is not the sole trustee, and has agreement in writing form other trustees.
When can a professional trustee recieve reasonable remuneration?
They can if the trustee acts ina. Professional capacity in the course of a profession or business that consists of or includes the provision of services in connection with the management or administration of trusts.
What is the breach of incidental profits of commission?
Prevents trustees from making incidental profits. Trustees must not make unauthorised profits “on the side”.
Eg- commission to a trustee if they have places trust business with a particular firm.
What is the breach for incidental profits, directors salary?
If the trust has a substantial shareholding in a company.
Trsutees should consider securing an appointment on board of directors so they can oversee.
However, trustee must surrender their salary, if they acquire directorship ONL BY VIRTUE of the trustee. If the votes used results, and wouldn’t have had it if not for the trust votes.
What is the breach of use of information or opportunity?
Trustee is liable to account for any profits they receive where they receive that profit by EXPLOITING an opportunity that belonged to the trust.
This is the case whether or not the trust could have taken advantage of the opportunity or was interest in the information.
What are the 2 remedies available for a breach of fiduciary duty of trustees?
A personal claim : surrender personal profit to trust.
Proprietary claim : claim to seek to recover property owned by trustee.
