Fiduciary Duties Notes

Equity & Trusts : Fiduciary Duties

• Complementary with trustee duties.

• Trustee duties only bind trustees and beneficiaries.

• Fiduciary duties--apply to a much broader range of relationships. Including trustees.

Trustee duties

• Variety of trustee duties relating to their 2 roles: that of management/stewardship; and that of distribution.

  • On first being appointed, trustee must:

    • (1) ascertain terms of trust & identify beneficiaries;

    • (2) examine trust instrument and other documents (including notices, eg of assignments of beneficial interest); and, if it appears that a breach of trust has occurred, proceed against the trustee in breach;

    • (3) find out what trust propertt consists of and ensure it is vested in his name or that of a custodian.

  • Trustees continuing duties including:

    • To act unanimously;

    • To keep accounts & records;

    • To be even-handed/impartial.

    • To invest

    • To hand over trust funds to the right persons;

    • Not to delegate

    • To be adequately informed before exercising their powers: Pitt v Holt (2011), where the CA broadly meant all equitable duties of trustees and not the exclusively fiduciary duties discussed below identified by Millet LJ in Bristol & West v Mothew (1996).

• In addition to above equitable trustee duties, a trustee has an overarching fiduciary duty to beneficiaries: which do not stem from the trust instrument itself, but from the special relationship of trust and loyalty entered into.

The Concept of a fiduciary

• Someone who owes duties to another simply by virtue of the relationship they have.

• Definition, Bristol & West Building Society v Mothew (1998), Millet LJ

  • ‘A fiduciary is someone who 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. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary.’ (per Millett LJ)

  • ‘This core liability has several facets: a fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal ... [not an exhaustive list] ... ‘

  • So the ‘loyalty’ is the key thing--the principal is entitled to ‘single-minded loyalty’ of his fiduciary. So completely set aside your own interests.

  • In that case--Mothew was a solicitor, acting for the lender, the Building society.

• So fiduciary duties are wide-ranging, and are essentially duties of god faith—fundamentally, there are two proscriptive principles: (1) a fiduciary may not personally profit from their position; (2) an overriding duty to avoid conflict of interest between own personal interests and the duties they owe to their principal.

  • I.E. So (1) no profit; (2) no conflict the fundamental two principles of fiduciary duties.

• Examined by Conaglen in Fiduciary Loyalty (2010): fiduciary duties are the ‘no profit; no conflict’ rules.

• Bray v Ford (1895) earlier case but often referred to, --an ‘inflexible rule’

  • Lord Herschell: an ‘inflexible rule of equity that a person in a fiduciary position’ is not entitled to make a profit; or conflict of interest.

  • Courts don’t leave much leeway in enforcing fiduciary (and trustee) duties--very harsh, the duties enforced strictly.

  • So you must act in interest of principal--or in breach.

• If trustee makes a personal profit from their position as trustee, they must:

  • Account to the trust for that profit (i.e. pay it back);

  • OR hold it or assets bought with on constructive trust for the trust [[see remedies]].

  • Exception—can keep a profit if authorized by the trust instrument, or if made with informed consent of all beneficiaries (must be sui juris).

Why do we have fiduciary duties?

• Conaglen, Fiduciary Loyalty (2010):

  • Fiduciary duties are not there to provide punishment, but to act as a prophylactic--a preventative measure, to stop ppl acting in a particular way.

  • This means that fiduciary duties are meant to control how a fiduciary can act – they are there to ensure the fiduciary performs his/her other duties (e.g. trust investment) properly

  • To prevent bad conduct.

Trustee CF fiduciary duties

• So fiduciary duties are SEPERATE to and ADDITIONAL to a trustee’s general duties regarding the trust!

• They are not interchangeable, they are different things.

• Moffat: ‘All trustees are fiduciaries, but not all fiduciaries are trustees’.

• They are very flexible, no real guidance on when they can be imposed

  • Eg thieves & victims have been held to have fiduciary duties.

  • Used by courts sometimes to impose duties in order to get the result they feel is right.--Flexible.

• Some examples of the sort of relationships which always give rise to fid duties

  • Trustees.

  • Company directors to their company.

• Murad v Al Saraj--shows how flexible they are, Lord Wilberforce: if you are in a ‘position of trust and confidence’ fiduciary duties apply.

When are fiduciary duties implicit in a relationship?

• No comprehensive list in English law of the types of relationships

• Some relationships give rise to fiduciary duties per se: eg trustee/beneficiary; solicitor/client; company director/company; business partner/co-partner; principal/agent; mortgagee/mortgagor; confidential employee/employer; gov employee/Crown.

• Equity can find a fiduciary duty in other circumstances: where a person has undertaken to act for/on behalf of another in a particular matter in circumstances which give rise to a relationship of trust & confidence—Bristol & West Building Society v Mothew.

• Eg, general rule (now statutory—Company Act 2006, s170(1)) that a director owes fiduciary duties to the company and not to individual shareholders;

  • but a director can be held to owe fiduciary duties to a shareholder where special reliance has been placed on the director: Peskin v Anderson (2001).

  ...

Buy the full version of these notes or essay plans and more in our GDL Equity and Trusts Notes.