Fiduciary Duties Flashcards
(17 cards)
Bristol & West Building Society v Mothew [1997] 2 WLR 436
’A fiduciary is someone who has undertaken to act for or on behalf of another … in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty’:
Boardman v. Phipps [1967] 2 AC 46
A fiduciary agent has to account to for any profits acquired by reason of the his fiduciary position and the opportunity or knowledge resulting from it, even if the principals could not have made the profits themselves with such opportunity or knowledge, unless the principal has given his informed consent
The profits will be held on constructive trust for the principal by the fiduciary agent, but the board may make allowance to the fiduciary agent for expenditure and work expended to acquire the profit
IDC v Cooley [1972] 1 WLR 443
- cooley was presented opportunity when acting as director at IDC - IDC rejected
- resigned position as directed and persued the opportunity
made loads of money - IDC sued him for breach
as he became aware of opportunity when he was a fiduciary - courts said what he had done was dishonest - although company rejected it initially, cooley robbed them of the chance to change their mind
Guinness plc v Saunders [1990] 2 AC 663
criticism of approach in boardman v phipps - not with outcome but that he was renumerated on generous scale because he was honest
almost an incentive for fid’s to breach their duty to make some money
relaxing the approach now- leaning more towards lord upjohn
Keech v Sandford
trustee managed the affairs of a child, a minor, one of the things they managed was the child had the benefit of a lease
children cannot hold title to land - cannot engage in valid contracts s1 6 LPA
lease was coming to end, trustee went to landlord and asked to renegotiate the lease for the child, landlord said no
arguably the trustee tried again, and landlord said no not for the child
trustee said, how about renewing it for me? landlord said yeah
child then sued the trustee in breach of fiduciary duty
the trustee only knew of this position because he was a fiducuiary - acted out of benenfit for child
Re Biss [1903] 2 Ch. 40
other side of coin
man had a boardingg house and rented it as such, he died and his estate was controlled by his widow and one of his children
they sought to renew the lease as their source of income
mr biss’s son from an earlier marriage, got the renewal
widow argued that he was in breach of fiduciary
courts said no, oldest son did not owe fiduciary duty as an individual who was able to freely negotiate and take advanatage of the opportunity
he did not become aware of the opportunity through being a trustee or fiduciaery
Ex parte Lacey (1802) 6 Ves. 625
clear self dealing rule - says that fiduciaries cannot buy and sell trust assets across the fiduciary relationship
eg we have trustee and beneficiary- if trust asset, held by trustee, is a house eg, then the trustee cannot buy the house - why? because they cannot negotiate the best price -
as a trustee, i want to get the best possible price i can for the house out of the best price in interest of beneficial
as a buyer, i want the best deal and pay as little as i can
how can you negotiate? cannot self deal - it is banned
whenever there is self dealing, it is void
because you can never be sure that the best possible deal to be done as thetre is an inherent conflict between the position of the trustee as an individual, and the trustee as a trustee
Tito v waddell
however (to Lacey), rather than buying the trust asset, youre buying the beneficial interest
if they want to acquire a beneficiaries equitable interest, they can do so as long as they pay a fair market price
is voidable if not a fair price
Holder v Holder
AN EXCEPTION
a guy died who owned lots of different farms - successful farmer, some farms managed by diff people
one of tenant farmers, was his son - managed one of the farms
when dad died, certain memebers of family, includimg son, were executers of his estate
and decided they wanted to sell the farms
son realised that he couldnt acquire the farm as an executer and tried to resign.- but couldnt through a technicality
still TECHNICALLy an exectuter at the time he bought the farm
soliciters saw this breach of technicality, and tried to say it was self dealing and should be void
but courts said even though he was still a fiduciary, his knowledge of the value of the farm, came from the fact he was a tenant farmer and not cause he was a fiduciary
also bought it at public auction - transaction happened subsiquently
court is saying that delay beats equity
court did not void the transaction
an exception to a normally struct rule
If the sale is to be avoided, there must be restitutio in integrum.
Bentley v Craven (1853) 18 Beav 75
sugar dealers, partnership of business dealing sugar
one in the partnerships role was to find good cheap sugar, for the other party to profiy
the first sold it to the other guys for a profit
found in breach, as partners owe eachother a fiduciary duty
the personal profit he made, was caught by constructive trust
when a fiduciary acquires an asset where they know they are in breach, they do so on constructive trust
they hold the benenfit
cicumstance of fiduciaries selling their own stuff is slightly diff
Cavendish Bentick v Fenn (1887) 12 App Cas 652 (HL)
if i owe no body a duty, i can buy anything in the world with no duty to anyone - perfectly okay
what happens if when stuff that i bought, after i become a fiduciary, the people i owe a fiduciary to have an interest in what i bought
im not a fiduciary when i acquired asset, but i am when i sold it
when selling a personal asset, but NOW a fid- the duty colours the way im allowed to sell my stuff
my fid duty extends to offer it to my principle as a fair price first, before selling it on the market for profit (and fid is discharged)
Re Macadam [1946] Ch 73
if a trustee uses trust assets, to acquire a benefit (paid position) then the profit is constructive trust - paid to them as trustee
Re Llewellin’s Will Trusts [1949] Ch 225
A trustee may retain remuneration they receive as a director in the following circumstances:
(a) If the trustee was appointed director before they became a trustee;
(b) If the trustee was appointed director independently of the votes of the trust (a trustee who owns shares beneficially may still vote on those shares for their own appointment); see also Re Gee, where the trustee would have been appointed director even if he had used the trust votes to vote against himself and so did not have to account;
(c) If the trust instrument authorises the trustee to appoint themselves directors and retain remuneration
Reading v A-G [1951] AC 507
was a sargent in brit army - who took quite a lot of bribe - some people smuggling cigs other contraband eg across the border - having difficulty getting through brit army checkpoints unmolested
paid sarg a lot of money to sit on back of truck in full uniform so they would be waved through
got caught, then gov realised how much money he ahd been making and sued them for money
he was acting as fiduciary to british crown
he held it as trustee to crown and had to give all money to the crown
Lister v Stubbs (1890) 45 Ch D 1
Lister v Stubbs (1890) 45 Ch D 1
old rule for constructive trust - only the amount that you could tie to the wrongdoing was caught by constructive trust
if you took bribe of 1000, its that that is constructive trust - solid rule until hong kong
AG for Hong Kong v. Reid [1994] 1 All ER 1
privy council decidison
not binding authority but highly persuasive
local authority- back when britain controlled hong kong - local gov official in hing kong took a large amount of money over years - bribes
but entrepeneurial - built up a property portfolio in new zealand and made millions
value of assets off shore was substantial
when local gov found out he was taking bribes, sued him and sacked him
said constructive trusts
he said fine ill pay money back - and under the old rule would just have to pay amount in bribes
changed the rule - council said wasnt adequate - everything that naturally flowed from his investements was caught by constructuve trusts
after this - most lawyers thought this is clearly direction of travel and when suitable case the old rule will be departed and take on hong kong - not what happened
