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Trustees Duties Notes

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Duties of Trustees
NB: This starts with fiduciary's obligations - see trustees' duties below.
There is no single 'package' of trustee duties present in all cases.

1. Millett LJ in Armitage v Nurse stated that there is "an irreducible core of obligations owed by the trustees to the beneficiaries and enforceable by them which is fundamental to the concept of a trust. If the beneficiaries have no rights enforceable against the trustees there are no trusts."
a. He then goes on to describe the trustee's fiduciary obligation: "The duty of the trustees to perform the trusts honestly and in good faith for the benefit of the beneficiaries is the minimum necessary to give substance to the trusts".
b. But not every duty owed by a trustee is a fiduciary duty - what distinguishes fiduciary duties from non-fiduciary duties are the remedies available to B
following a breach of duty (Millett LJ in Bristol & West BS v Mothew)
i. BUT: Webb thinks that Millett LJ overstates the differences between the remedies available.
The SOURCE of trustees' duties

1. Intended trusts a. These are trusts that arise by virtue or, and to give effect to, S's intentions.
b. S can shape the duties of the Ts however he likes (e.g. fixed, discretionary).
c. Some duties, although perhaps modified by S, appear to derive from the general law of trusts rather than S's conscious choice, e.g. T's duty of care towards B under s1 Trustee Act 2000.
i. BUT: These duties nonetheless derive from S's intentions - either presumed intentions or because the duties are necessary to institute the trust S has chosen.

1. BUT: Some duties clearly do not derive from S's intentions,
e.g. T's duty under Saunders v Vautier to transfer the trust property to B even if the condition stipulated by S is not satisfied.

2. Imposed trusts a. This category includes trusts imposed on a property owner irrespective of his wishes, e.g. constructive and resulting trusts. T's duties depend on the reasons for imposing the trust.
i. Webb: Although there is no authority for this view, an innocent T who does not and cannot be expected to know that he is a trustee only becomes subject to trustee duties when he learns of the trust.

3. Trustees de son tort a. If a person acts as though he was a trustee under an existing trust he will be a trustee de son tort. i. Some sort of knowledge that one is concerning oneself with a trust and trust property is necessary (but not sufficient).
ii. Receiving the trust property seems unnecessary.
iii. A difficulty is that control is a matter of degree, so it is unclear when a person ever assumes control of the trust  all we can say is, the more control assumed, the more likely a person is a trustee de son tort.
Are all trustees fiduciaries? Are all fiduciaries trustees?
Fiduciary duties are unusually strict, requiring the fiduciary to deal with the property in the best interests of the beneficiary  imposing fiduciary duties appears unnecessary in many cases. Not all trustees should be considered fiduciaries.

1. For example, where there is a resulting trust arising from an unintended transfer of property, the only necessary duty on T is to hand back the property when asked.

2. In such cases, the only duty a trustee shares with a trustee of a standard conventional express trust is the duty deriving from Saunders v Vautier to give up the property to B when he calls for it.
a. Webb: This duty has a stronger claim to being recognised as the 'irreducible core' of trust obligations.
i. BUT: This view does not account for purpose trusts.

1. Webb: Thus, the better view is that there is no single obligation found in all trusts.
Not all fiduciaries are trustees. There are a number of well-established categories of fiduciary relationship which are not trustees, e.g. solicitor-client, agent-principal, etc.
Moreover, the class of fiduciary relationships is not closed. Whether a person is a fiduciary is important because: fiduciaries have more far-reaching duties than non-fiduciaries; and a person has greater potential liability for a breach of fiduciary duty than some other breach.
Also, fiduciaries will hold their wrongful gains on trust, which gives C priority in the event of
D's insolvency.
There are two approaches to determining whether a person is a fiduciary:

1. Look at the factual relationship between C and D and ask whether this shares the key features of and so is analogous to the established categories of fiduciary relationship.
a. BUT: It is unclear what the 'key features' of fiduciary relationships are.
b. It is clear that fiduciary relationships tend to arise when some aspect of A's affairs or well-being is peculiarly dependent on B's decisions  dependence seems to be a key factor.
c. The case law rejects that the fiduciary obligations are based on voluntary undertaking, as the courts in Keech v Sandford and Boardman v Phipps did not decide those cases by asking exactly what the Ds had undertaken, but rather on what duties should be imposed on those who put themselves in such positions. i. BUT: It will rarely be fair to impose such far-reaching obligations on a
D who has not voluntarily put himself in a position whereby C is dependent on him.

2. Ask whether C should be able to bring the same claims as the victim of a breach of fiduciary duty.
a. Breaches of fiduciary duty allow C to recover D's gains as a matter of course
 courts have sometimes classed Ds as fiduciaries to facilitate claims to their gains.
b. For example, in Chase Manhattan Bank v Israel-British Bank, the parties to the misapplication of money were held to be fiduciaries so that the equitable rules of tracing could be used.
i. While achieving a fair result, this instrumental use of fiduciary obligations and terminology is widely criticised.
One must also note Fletcher Moulton LJ's warning in Re Coomber at 728-9. He warns that we should not assume that all fiduciaries owe the full range of fiduciary duties.

1. BUT: This warning was given at a time when the label 'fiduciary' was attached to a wider and looser collection of duties and other legal relations. The modern tendency is to reserve the 'fiduciary' label for the duty to act in good faith in the best interests of the principal and the sub-rules that support it  less clear that Fletcher Moulton
LJ's warning is apt.
a. BUT: What is true is that the scope of these fiduciary duties will vary from case to case, as will exemptions arising from the terms upon which the fiduciary has agreed to take on his role and / or on the consent of the principal.
The CONTENT of fiduciary obligations
In Bristol & West BS v Mothew, Millett LJ gave what was "not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary":"A fiduciary must act in good faith;
He must not make profit out of his trust;
He must not place himself in a position where his duty and his interest may conflict;
He may not act for his own benefit or the benefit of a third person without the informed consent of his principal."  prohibition on unauthorised profits

Webb says it is irrelevant whether this is seen as parts of a single fiduciary obligation or a package of discrete fiduciary obligations.

BUT: It does matter. If it forms a single fiduciary obligation then they cannot be divided, and where a person is not under all of them, he is not a fiduciary. By contrast, if they are a package of discrete fiduciary obligations, they can be divided.

(1) The rule against conflict of interests The law takes a prophylactic approach to fiduciary obligations (i.e. it guides trustees'
behaviour by making it harder for them to breach their obligations). For example, to minimise the incidences of Ts not acting in B's best interests, the law aims to prevent T from getting into positions where T may end up prioritising their own or someone else's interests.
a. The duty is not simply to avoid actual conflicts of interests, but rather T is under a duty to avoid putting himself in a position where his interest may possibly conflict with the duty he owes to B.
i. The rule arose in Keech v Sandford, where T was liable not because he failed to act in B's best interests, but because holding T liable would reduce the chances of other Ts in other cases acting contrary to their
Bs' interests  illustrates the preventative/prophylactic approach).
b. In Boardman v Phipps, the defendants were held to be fiduciaries because they acted as representatives of the Ts.
i. The majority held that they breached their fiduciary obligations.
Lords Hodson and Guest explained that, the information which enabled them to make their gains came to them by reason of the meetings they attended as representatives of the trust. Lord Cohen held that, more importantly, their opportunity to make the gain
(through being introduced to the company's directors) arose when they were acting as representatives of the trust, thus creating a (very small) possibility of a conflict of interest, had the unlikely event occurred in which the Ts changed their minds and wished to buy extra shares in the company.
ii. The minority opined that so long as the Ts were opposed to buying further shares, there was no possibility of conflict arising. Lord Upjohn stated that the phrase 'possibility of conflict' means that "the reasonable man looking at the relevant facts and circumstances of the particular case would think that there was a real sensible possibility of conflict".
iii. The strict approach of the majority has two main benefits:

1. Simplicity: once it is shown that a fiduciary has made a gain,
his liability is established simply by showing a connection between that gain and his fiduciary role (Lord Russell's dicta in
Regal (Hastings) Ltd v Gulliver).

2. It sends a clear message to Ts that they cannot use their position for personal gain.
c. The importance of Boardman v Phipps lies in its endorsement of a strict version of the prophylactic approach. A breach of fiduciary duty may occur even where the fiduciary has acted in complete good faith while trying to advance B's interests, when there was no actual conflict between his interests and B's interests, when T's actions caused no loss to B but actually benefitted him, and where T's gains could not otherwise have been made by of for B.

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