2): The Fiduciary Relationship

Question 1

What is a fiduciary duty?

Answer 1

Obligation of loyalty

Act honestly and in good faith

Not profit from trust

Avoid conflicts of interest

Not act for own/third-party benefit without informed consent

Question 2

What are common fiduciary relationships?

Answer 2

Trustee and beneficiary

Director and company

Agent and principal

Solicitor and client

Business partners

Question 3

What is the rule on profiting from a fiduciary position?

Answer 3

No unauthorised profit (e.g. bribes, secret profits, commissions)

Strict rule: applies even without bad faith or trust loss

Any profit from trust property/position is held on constructive trust

Question 4

What is the Self-Dealing Rule?

Answer 4

Trustee buying trust property is voidable by any beneficiary

Risk of conflict of interest and unfair price

Question 5

What is the Fair-Dealing Rule?

Answer 5

Trustee buying a beneficiary’s equitable interest

Valid if:

Acts honestly

Makes full disclosure

Pays fair price

Does not exploit position

Question 6

What is the duty to avoid conflict of interest?

Answer 6

Fiduciary must not let personal interest conflict with duty

Core duty of loyalty to principal

Breach = liable to account

Question 7

Can a trustee accept paid employment?

Answer 7

Not if employment gained through position as trustee

Must account for salary/fees to trust

Exception: director role held before becoming trustee

Question 8

Can trustees compete with the trust?

Answer 8

No, if trust includes a business as part of its assets

Competing breaches fiduciary obligations