Webcasts Flashcards
(40 cards)
How is a fiduciary expected to act?
Finn says in the interests of the other, to act selflessly and with undivided loyalty (also in Bristol v Mothew).
Give some examples of fiduciary relationships?
Trustee/beneficiary
Solicitor/client
Senior employee/company
What is a status based fiduciary relationship?
Those that give rise to a fiduciary relationship as a matter of law due to their status (mortgagor/mortgagee).
What are fact based fiduciaries?
Where the relationship exhibits certain characteristics that are indicative of a fiduciary relationship.
What case confirms that the list of fiduciary relationships is not closed and can be fact based?
English v Dedham Vale Properties
When determining if a fiduciary relationship exists what guidelines do we take into account?
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.
What are the typical characteristics of a fact based fiduciary relationship?
- 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
Give 2 case examples where a fiduciary relationship was held to exist?
English v Dedham Vale Properties
Reading v AG
What are the facts of English v Dedham Vale Properties?
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.
What are the facts of Reading v AG?
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.
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
A, C and D
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
A, B and D
What are the duties of a fiduciary?
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
Can a fiduciary have more than one relationship with the other person?
Yes, they can be in a fiduciary relationship and a contractual one.
What are the facts of Bristol & West v Mothew?
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.
What happens if a fiduciary breaches his obligations and there results a loss or profit?
He can be liable, he will have to account for the profits (hand them over).
What is a proprietary and a personal remedy?
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.
Name a case where there was a clear conflict of interest?
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.
Why does the rule ‘a fiduciary may not profit’ exist?
For reasons of policy. To avoid the remotest risk of a fiduciary being swayed from his duty of loyalty by his own self interest.
Name a case which deals with conflict of interest and bad faith?
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.
What was said in the case of regal Hastings v Gulliver?
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.
What is Boardman v Phipps a good illustration of?
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.
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
A, C and D.
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
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.