Fiduciary Duties Flashcards
What is the general maxim that brings about a fiduciary’s liability to account?
“Equity will not allow a person to profit from their wrongdoing.”
Why was the Law Society in Swain not declared a fiduciary?
Its rate-setting for professional indemnity insurance was a public, not private duty.
What is the confusion in Tito v Waddell?
That some government obligations are not fiduciary, yet some are. It is not clear where or what the boundary is.
What is the justification for holding fiduciary to account?
They are established in their position by virtue of trust and confidence; that they are a stronger party in relationship with weaker party (due to power/knowledge imbalance) means they should not use that position to advantage themselves.
Bray v Ford.
Per L Herschell:
- Cannot profit from fiduciary position.
- Fiduciary must not allow personal interest to prevail over duty to principal.
What is an exception?
If the trustees are already beneficiaries as appointed by the testator, Sergeant v National Bank.
What happens if profits made by ‘trustee’ are made illicitly?
Per Reading v Attorney-General (soldier selling contraband), Attorney-General for Hong Kong v Reid: property held on constructive trust for employer (even if, as in case of HK, employer was not owner of property to begin with).
Why was Blake not entitled to the property in his possession?
In Attorney-General v Blake, Blake had been acting as spy for government, and sold secrets in his memoirs. Per L Nicholls: Blake has earned his profit by doing the very thing he promised not to do.
Contrast Blake with Versailles.
In Sinclair v Versailles, it was held that giving and receiving of bribes was not unauthorised remuneration.
What is the self-dealing rule?
Whereby trustee as fiduciary buys property from beneficiary. Due to power imbalance, void at instance of beneficiary. Per VC Megarry in Tito v Waddell, “any beneficiary can void or overturn the transaction where the trustee buys the property, it makes no difference whether the transaction was honest and/or open.”
Why according to court in ex p Lacey should there be an absolute self-dealing rule?
“It would be almost impossible to find out whether trustee had bought property for good motive.”
Wright v Morgan
If the trustee is retired, they may legitimately purchase the property from the beneficiary.
How did Holder v Holder alter earlier case law?
Court required, in order for B to void transaction, that the claim is brought in a timely manner; anything in excess of that could be unconscionable.
Re Thompson’s Settlement
The fiduciary is a large shareholder in the company, to such extent that he is the company.
How is fair dealing rule addressed in Coles v Trescothick?
An innocent beneficiary may choose to uphold transaction or not; but it is valid for fiduciary to show that their buying an interest in property, so as to become beneficiary themselves, was done fairly, honestly and without appearing to exploit the situation.
Where there is a prior conflict of interest and duty (between contractual and fiduciary obligations) what occurs?
Per Re Mulholland’s Will Trust, the trustee is allowed to retain the property, because otherwise would be in breach of contract.
What links 1. Armstrong v Jackson, 2. Bentley v Craven?
Both involve fiduciary selling to beneficiary. Both were held to be invalid, due to power imbalance. A v J regarded selling of shares, B v C the selling of sugar between partners - held to be conflict of interest and duty.
Target v Redfern
The fiduciary was acting for both the borrower and the lender. They were to make commission from anyone who brings business. Held to be liable for any losses if potential conflict not disclosed.
Keech v Sandford
No unauthorised benefit or profit may be made by fiduciary, including through use of information. In this case, the trustee had been acting on behalf of child for land lease. The trustee had to account for all profits, no matter how honest their behaviour.
Protheroe v Protheroe
A wife was entitled to 50% profit from a freehold as joint tenant without needing to make any investment of their own.
Competition law has replaced what case?
Re Thomson - fiduciary cannot compete with the beneficiary.
Queensland Mines v Hudson
H, as managing director of QM, obtains mining licence. After being assured QM wanted no part of potential mining investment, went on to profit from venture. Held that H was entitled to profits.
Peso Silver Mines v Cropper
Similar facts and outcome to QM v H. The company made “a deliberate act in refusing to take up opportunity.”
What was granted to fiduciary in Badfinger v Evans?
The fiduciary, though losing out on profits, was able - as in Boardman v Phipps - to claim for expenses, which were similar in quantum of profits. The fiduciary was so entitled by virtue of his expertise.
