Webcasts

Question 1

How is a fiduciary expected to act?

Answer 1

Finn says in the interests of the other, to act selflessly and with undivided loyalty (also in Bristol v Mothew).

Question 2

Give some examples of fiduciary relationships?

Answer 2

Trustee/beneficiary
Solicitor/client
Senior employee/company

Question 3

What is a status based fiduciary relationship?

Answer 3

Those that give rise to a fiduciary relationship as a matter of law due to their status (mortgagor/mortgagee).

Question 4

What are fact based fiduciaries?

Answer 4

Where the relationship exhibits certain characteristics that are indicative of a fiduciary relationship.

Question 5

What case confirms that the list of fiduciary relationships is not closed and can be fact based?

Answer 5

English v Dedham Vale Properties

Question 6

When determining if a fiduciary relationship exists what guidelines do we take into account?

Answer 6

The power and position of one in relation to the other and the latters reasonable expectation that the former will act exclusively in their interests. This comes from the original fiduciary relationship between trustee and beneficiary.

Question 7

What are the typical characteristics of a fact based fiduciary relationship?

Answer 7

• the existence of an undertaking
• reliance placed on the alleged fiduciary by the other party
• property of the other party under the control of the alleged fiduciary
• vulnerability of the other party to the alleged fiduciary in that some power is vested in the latter which is capable of being used to affect the former

Question 8

Give 2 case examples where a fiduciary relationship was held to exist?

Answer 8

English v Dedham Vale Properties

Reading v AG

Question 9

What are the facts of English v Dedham Vale Properties?

Answer 9

Negotiations for buying some land the buyers, apparently acting for the sellers (without their knowledge) applied and obtained planning permission for the land. Buyers became self appointed agents for the sellers and therefore in a fiduciary relationship with them. Liable to account for the profits made from the granting of planning permission. The principle is he who takes it upon himself to act as a fiduciary will be treated as if he were appointed and will be a constructive trustee of profits.

Question 10

What are the facts of Reading v AG?

Answer 10

Army sergeant working in Cairo accepted bribes to let lorries carrying contraband through security check points. He would ride in his uniform so they would no be stopped. Held in a fiduciary relationship with the crown and had to account for his profits. He was using his position in the army to obtain money.

Question 11

Which of the following are examples of typical status based fiduciaries?
A) trustee/beneficiary
B) settlor/beneficiary
C) director/company
D) solicitor/client
E) any employee and their employer

Answer 11

A, C and D

Question 12

What are typical characteristics of a fiduciary? All that apply.
A) vulnerability of the principle
B) an undertaking given by the fiduciary
C) a financial debt owed by e fiduciary to the principle
D) the fiduciary holding a piece of property on behalf of the principal

Answer 12

A, B and D

Question 13

What are the duties of a fiduciary?

Answer 13

Bristol &West v Mothew said the distinguishing obligation is loyalty, including:

• duty to act in good faith
• duty not to profit from the trust
• duty not to place himself in the a position where his duty and his interest conflict
• not to act for his own benefit without the informed consent of his principal

Question 14

Can a fiduciary have more than one relationship with the other person?

Answer 14

Yes, they can be in a fiduciary relationship and a contractual one.

Question 15

What are the facts of Bristol & West v Mothew?

Answer 15

B&W offered a mortgage on condition the buyers did not resort to further borrowing. Solicitor was acting on behalf of both and failed to tell bank buyers were taking out another loan. No breach of fiduciary duty as no aspects were breached, it was simply a mistake. Bank knew solicitor was representing both parties and therefore gave fully informed consent to any potential conflict of interest. Solicitor was liable in negligence.

Question 16

What happens if a fiduciary breaches his obligations and there results a loss or profit?

Answer 16

He can be liable, he will have to account for the profits (hand them over).

Question 17

What is a proprietary and a personal remedy?

Answer 17

Proprietary meaning the actual property may be seized along with any increase in value and personal meaning that as an alternative the fiduciary had to pay back an amount equal to the profits he originally received.

Question 18

Name a case where there was a clear conflict of interest?

Answer 18

Guinness v Saunders - ward was a director of Guinness and received £5.2m for assisting the takeover of another company. W was a fiduciary as he was a company director, there was no bad faith but the money he received was a percentage of the total price of the takeover. W thought he had the permission of the board to receive the profit but it had only been agreed by the committee of the board. Held he made an unauthorised profit and there was a conflict of interest. His duty to Guinness would have been to get the lowest price possible but was in his own interest to get the highest.

Question 19

Why does the rule ‘a fiduciary may not profit’ exist?

Answer 19

For reasons of policy. To avoid the remotest risk of a fiduciary being swayed from his duty of loyalty by his own self interest.

Question 20

Name a case which deals with conflict of interest and bad faith?

Answer 20

IDC v Cooley - D was director of C company and was negotiating a contract with the Eastern Gas Board but it failed however the offered him the contract in his personal capacity. He pretended to be ill to secure a release from his directorship and accepted the contract. His personal interest was in conflict with his pre existing duty as company director. He was accountable for the profits.

Question 21

What was said in the case of regal Hastings v Gulliver?

Answer 21

Being liable to account for profits does not rely on fraud, it arises from the mere fact a profit has been made. Regal operated cinemas and wanted to buy others and set up a subsidiary however the company could only purchase £2000 of shares and they needed £5000. Company directors agree to purchase the remainder personally. Profit was made when the business transferred to new owners. Directors only acquired heir shares because of their fiduciary position.

Question 22

What is Boardman v Phipps a good illustration of?

Answer 22

The strictness of the principles of the duties of a fiduciary. This was a family trust and the fiduciaries were Mr B (solicitor to the trust) and Mr Phipps (beneficiary - deemed he acted as agent of the trust). Trust property was a minority share holding in an under performing company. Mr B suggested to he trustees that they obtain a major shareholding to take control of it and improve its performance. Solicitor and agent began obtaining information about the company and attempted to negotiate on behalf of the trust. They failed and the trust had no power to buy more shares. Using the knowledge they obtained through negotiating on behalf of the trust the pair bought shares for themselves, reorganised the company and made it profitable. The trust benefited by £47000 and solicitor and agent £75000. Held had to account for the profits as fiduciary relationship unless beneficiaries had given fully informed consent. The courts exercised discretion to award a sum of equitable compensation in recognition of the skill and work in obtaining the profits. Shows an honest fiduciary who profits may be awarded an allowance for the work involved in making the profit.

Question 23

Which of the following are duties of a fiduciary? All that apply.
A) the duty of loyalty to the principal
B) a duty not to receive remuneration of any form
C) a duty not to make unauthorised profits
D) A duty to avoid a conflict of interest

Answer 23

A, C and D.

Question 24

If a fiduciary breaches his duty, what type of remedy may be available to the principal?
A) a personal remedy only
B) a proprietary remedy only
C) both a personal and proprietary remedy

Answer 24

C. A personal one allows the principal to sue the fiduciary for compensation. Proprietary rights gives the principal rights in relation to property that has been taken from him and any unauthorised profits made.

Question 25

From the cases covered in the webcast, which of the following describe the nature of the duty not to make an unauthorised profit? All that apply.
A) it would only be breached if the fiduciary acted in bad faith
B) the duty can be breached regardless of whether the fiduciary was acting in good or bad faith
C) it is irrelevant whether the principle has profited as well
D) the fiduciary will not be in breach of he can show that the principal also made a profit

Answer 25

B and C.

Question 26

What is said with regards to fiduciaries profiting in Canada?

Answer 26

They are not automatically stripped of their profits providing they’re acting in good faith (Peso silver mines).

Question 27

Which case suggests the UK may be in favour of moving towards a more flexible approach?

Answer 27

Murad - hotel bought. He breached his fiduciary duty by not disclosing the true state of affairs and was liable.

Question 28

What are the facts of AG Hong Kong v Reid?

Answer 28

D accepted bribes to obstruct prosecutions in breach of his fiduciary duty to the crown. He purchased property with the money which rose in value. Bribes and property were held on constructive trust for the crown, the property was traceable and could be seized.

Question 29

What happened in Sinclair Investments v Versailles?

Answer 29

CoA refused to follow the decision in Reid. C could enjoy a personal remedy (sue D) to the funds plus interest rather than a proprietary interest of a constructive trust.

Question 30

What came of the case Cedar?

Answer 30

Confirmed that bribes received by a fiduciary are held on constructive trust for the principal. A principal can trace bribe money to assets purchased by the fiduciary and can be awarded a proprietary interest over any profit as well as the initial bribe sum.

Question 31

What is the duty of confidence?

Answer 31

An equitable duty rather than a fiduciary one as it lacks the core fiduciary duty of loyalty.

Question 32

How can you establish liability for a reach of the duty of confidence?

Answer 32

Coco v Clark said:

• the material communicated had the necessary quality of confidence AND
• the communication was made in circumstances entailing a duty of confidence AND
• there was an unauthorised use of the material

Question 33

When does information have the necessary quality of confidence?

Answer 33

Where the material is essentially private and not public.

Question 34

Give a case example showing when information has the necessary quality of confidence?

Answer 34

AG v Observer Newspaper - extracts of a book by an MI5 officer published in English paper before and after its release in America. Liable for breach of information before the release in America as the information was of limited public availability and they had to account for the profits.

Question 35

What are the facts of Campbell v MGN?

Answer 35

Daily mirror published article about Naomi Campbell being a drug addict and attending narcotics anonymous. Treatment was pertaining to a medical condition, medical information is confidential and so in breach of duty of confidence.

Question 36

What are the circumstances giving rise to a duty of confidence?

Answer 36

It can arise in any existing relationship between the claimant and defendant, the test is set out in AG v Guardian. If a reasonable man would have realised the information was being given to him in confidence, this would impose a duty of confidence.

Question 37

What will amount to unauthorised use and how long will the duty last?

Answer 37

As long as the information remains confidential (AG v Guardian; Blake).

Question 38

How does the human rights act relate to duty of confidence?

Answer 38

The courts will consider article 8 (right to privacy) and article 10 (freedom of expression).

Question 39

How did the HRA work with regards to Campbell v MGN?

Answer 39

Naomi’s right to privacy in relation to medical information outweighed the newspapers right to freedom of expression.

Question 40

Who is a fiduciary?

Answer 40

There is no definition. Finn suggests it is someone who undertakes to act for or on behalf of another in some particular matter or matters.