Trust 12 - Fiduciary relationship

Question 1

What types of duties do trustees owe?

Answer 1

• Trustee duties (e.g. comply with trust terms, reasonable care and skill)
• Fiduciary duties (no conflict, benefit)

Question 2

What are the 2 fiduciary duties trustees owe?

Answer 2

• No Conflict
• No Profit

Question 3

What is the no-profit rule and remedies for breach?

Answer 3

Won’t be able to retain profit: either
- account for profits (personal claim) or
- constructive trust imposed (proprietary claim)

Question 4

What is self-dealing and its effect?

Answer 4

• Trustees shouldn’t purchase trust property from trust or sell assets to trust as it’s breach of no-conflict rule
• Transaction = voidable
• For company in which they hold shares, if they have a controlling shareholding, can be seen as self-dealing, if not, not self-dealing but still breach of no conflict

Question 5

how can a trustee avoid liability for fair-dealing?

Answer 5

Fair Dealing = trustee buying beneficial interest off beneficiary

Voidable unless:

• full disclosure
• acted honestly and fairly
• did not take advantage of B
• get fully informed consent from principals (settlor)

Question 6

What are the consequences if breach of no-conflict rule?

Answer 6

Transaction = voidable
If it causes loss, can be sued personally
If principal profits from breach, can’t obtain a remedy, but if fiduciary also profits, they can recover this