A more recent version of these Fiduciary Duties notes – written by Cambridge/Bpp/College Of Law students – is available here.
The following is a more accessble plain text extract of the PDF sample above, taken from our GDL Equity and Trusts Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
Topic 10 - Fiduciary Duties??Fiduciary duties = duties of good faith, to act solely in the interests of the other party in circumstances which give rise to a relationship of trust and confidence (Millet LJ in Bristol & West v Mothew). o = Millet LJ in Bristol & West v Mothew - modern formulation of fiduciary duties where core obligation is one of 'loyalty' (to their principal). o Nb - Bray v Ford = talks about fiduciary duties as an 'inflexible rule' as enforced extremely strictly (always falls down on side of duty of fiduciary if also have a personal interest). Why have fiduciary duties (Conaglen 'fiduciary loyalty') = fiduciary duties act as a prophylactic - there to prevent conduct on part of fiduciary. To prevent unwanted conduct. o Means that FD are meant to control how a fiduciary can act, ensure he performs other duties properly - guidelines to help fiduciary to prevent unwanted conduct o NOTE = separate to and additional to trust duties (all trustees are fiduciaries, but not all fiduciaries are trustees):
? Trustees = subject to both trustee duties (ring-fenced don't overlap) AND bound by separate fiduciary duties
? Fiduciary = just have fiduciary duties. o = NOT interchangeable Some arise from statute/others from common law. Essentially fiduciary may (1) not personally profit from his position and has (2) overriding duty to avoid a conflict between his personal interests and the duties he owes to his principal.
= Fiduciary duties are the 'no profit, no conflict' rules to act in good faith Trustee = trust placed by Settlor, they receive LT from Settlor, who they hold it for Beneficiary - person in whom absolute ownership will reside. Onerous duties imposed on you o Trustee Duties:
? Primary duty - carry out the terms of the trust (and familiarize themselves with the trust, as ignorance is not a defence)
? Stewardship of trust property - safeguard trust assets (i.e. money, trustee by not mixing trust funds with their own funds)
? Act unanimously
? Act in good faith - equally and even-handedly between the beneficiaries (no preferences). No personal feelings affecting decisions about beneficiaries.
? Bookkeeping - Keep accounts/records of trust property (transactions and dispositions)
? Be even-handed (impartial)
? Duty to Invest - must invest it, otherwise liable for any profit/money that property should have gained. AND diversify, not allowed to invest in single scheme by spreading risk.
? Obligation to distribute property according to trust instrument
- Hand over trust funds to right persons. Trust must be carried out
? Not to delegate
??Be adequately informed before exercising their powers (Pitt v Holt =
'fiduciary duties meant all equitable duties of trustees not exclusively fiduciary duties identified by Millet LJ in Bristol & West v Mothew)
= Otherwise breach of trust and personally liable!
Duties imposed on trustees and other fiduciaries = Fiduciary duties don't just apply to trustees (2 roles of Managerial and Distributive role) BUT anyone in a fiduciary relationship per se: o Agent to principal, o Solicitor to client, o Business partner to co-partner, o Company director to the company, o Employee to employer, o Government employee to Crown. o = any positions of trust and confidence (Muraj v Al-Saraj) Fiduciary duties 'position of trust and confidence' flexible so can be imposed by courts in many circumstances - way to impose duties on people widely.
Fiduciary nature of certain relationships
? Equity can also find a fiduciary duty to arise in other circumstances =
where a person has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence (Bristol and West Building Society v Mothew). o Thus whilst distinguishing feature of a fiduciary relationship is Millet's singleminded duty of loyalty covering the 'no profit, no conflict' rules, the exact content of particular fiduciary relationships will vary (different duties owed by trustees than by company directors).
? Reading v Attorney General =
o British army sergeant bribed by Egyptians to help pass checkpoints, held in fiduciary relationship with Crown, and liable to account for his bribe to Crown (could not recover money from British authorities)
? AG for Hong Kong v Reid =
o DPP accepted bribes and used money to purchase properties in New Zealand. Held money received in breach of fiduciary duty to Crown and properties on constructive trust for Crown. Privy Council rejected argument Crown only entitled to personal claim for money.
? AG Guardian Newspaper =
o Sunday Times liable to account to Crown for profits made by publishing Spycatcher, book written by former secret services in breach of fiduciary duty to Crown.
? CF AG v Blake =
o Former member of security services who disclosed info in book didn't owe fiduciary duty to Crown, as info was no longer confidential, but ordered to pay profits from book as damages for breach of contract with Crown not to disclose info without consent (exceptional case where account of profits ordered as damages for breach, whereas usually only ordered as a remedy for breach).
Recent case where FD found in context of joint property venture - Murad v Al-Saraj o Persuaded 2 others into JV to buy hotel, by fraudulently representing to them he would contribute 500k in cash to purchase. His contribution was setting off a secret commission that hotel vendor agreed to pay him. Held fiduciary relationship between him and 2 others in relation to JV (as they reposed trust and confidence in him by virtue of their relative positions).
= usually FD imposed where there is a pre-arranged relationship of trust/confidence, where 1 party expected to act in interest of another. Court gone further - imposed FD as artificial remedial device to correct injustice (Chase-Manhattan Bank NV v Israeli-British Bank (London) o C paid 1m to D bank by mistake - held by virtue of mistaken payment that D bank had a fiduciary duty to C bank and held money on constructive trust for them. C thus retained an equitable proprietary interest in the money and entitled to make a tracing claim to it on D's insolvency
Fiduciary duties of trustees/other fiduciaries - List of things that a trustee cannot do:
? 1. Remuneration = (charge for their services) o Trustee not entitle to make a personal profit from their position (Bray v Ford) - must account to the trust for that profit (i.e. pay it back) or hold it or assets bought with it on constructive trust for the trust. o Not allowed to put himself in a position where his interest and duty conflict. Thus, trustee who ran a business on behalf of trust not entitled to remuneration for doing so (Barnett v Hartley) = trustee cannot charge for their services and get paid (general answer) o Rule applied to solicitor-trustee employing his own firm to carry out trust's legal work (Re Gates). o Doesn't apply to reimbursement from the trust fund for expenses properly incurred by acting on behalf of trust S31(1) Trustee Act 2000
? Exceptions where remuneration permitted: o A. Authorisation by the court under its inherent jurisdiction
? Re Duke of Norfolk's ST = (nothing in trust instrument to allow remuneration) inherent jurisdiction to authorise payment of remuneration of trustees, and to be paid for their services and if it is in the interest of the beneficiaries to increase remuneration (as new property added to the settlement).?Also applies to constructive trustees (Boardman v Phipps) = award fiduciary remuneration 'on a liberal scale' for the work he had done in making a profit for the trust. O'Sullivan v Management Agency and Music Ltd = management company in breach of fiduciary duty from undue influence against musician, but allowed to keep a small share of profits for their skill/labour. Scope restricted to authorise remuneration (Guinness plc v Saunders)
= director received fee for providing services with Guinness takeover, held in breach of FD and refused to authorise payment for work. ONLY
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