Fiduciary obligations

Question 1

Fiduciary duty

Answer 1

Trustee must not allow her personal interest to come into conflict with the beneficiaries’ interests i.e. best interests

Question 2

Distinguishing the fiduciary duty from other duties

Answer 2

Obligation of loyalty (Bristol & West Building Soc v Mothew)

Question 3

When fiduciary duties arise (not all fiduciaries are trustees, and only express trustees are fiduciaries)

Answer 3

Settled categories

Ad hoc

Question 4

Settled categories of fiduciary duties

Answer 4

• Trustee-beneficiary (Aberdeen Town Council v Aberdeen University)
• Agent-principal (Boston Deep Sea Fishing v Ansell)
• Partners (Aas v Benham)
• Director-company (Regal v Gulliver)
• Solicitor-client (Hilton v Barker Booth Eastwood)

Question 5

Ad hoc fiduciary relationships

Answer 5

Key factors: presence of discretion, power in managing someone else’s affairs (Arklow Investments v Maclean)
Usually not in commercial settings

Question 6

Scope of fiduciary duties

Answer 6

Duty of loyalty (Bristol & West Building Soc v Mothew), not competence

Question 7

Nature of fiduciary duty of loyalty

Answer 7

Proscriptive versus negative duties

Orthodoxy: no proscriptive duties, because not exclusively owned by fiduciaries

Question 8

Academic opinion on fiduciary duty of loyalty

Answer 8

Conaglen: function of insulation from temptation

Smith: fiduciaries to make better decisions by requiring them to exercise disinterested judgment

Penner: does not agree with loyalty, instead, deliberative exclusivity

Question 9

Disability vs Duty

Answer 9

Transition from disability debate to primary duty

Question 10

Duty of good faith

Answer 10

C Mitchell: honesty and good faith at the core, even if fiduciary can stand to benefit; focus on the practice of self-denial

Question 11

No conflict rule

Answer 11

Only need to show that there is a real sensible possibility of conflict from reasonable man’s perspective (Boardman v Phipps)

Question 12

No conflict rule: Duty v duty

Answer 12

(Bristol & West Building v Mothew)

Question 13

No conflict rule: Interest v duty

Answer 13

1. No self-dealing rule (Tito v Waddell, Re Thompson’s Settlement)
2. Fair dealing rule (Tito v Waddell)
   Conaglen: existence of consent as the most crucial
   Davies: not convinced about overriding character of consent

Question 14

No profit rule

Answer 14

Strict application even in good faith (Keech v Sandford, Boardman v Phipps)

Question 15

Boardman v Phipps: the breach

Answer 15

a) Agents and intermeddlers
b) Conflicts of interest for Boardman

Dissent by Lord Upjohn: information received was not property; no real conflict –> a legitimate no profit rule separate from the no conflict rule

Question 16

Relationship between no conflict and no profit rules: affect the duty versus disability debate

Answer 16

No profit rule is a subset of no conflict rule (FHR European Ventures LLP v Cedar Capital)

Conaglen: not a separate rule

Smith: separate rules

Question 17

Remuneration for fiduciaries

Answer 17

Generally don’t have until expressly provided for or reasonable to ask e.g. professional trustees

Remuneration IS possible (Re Duke of Norfolk)

Question 18

Remedies for breach of fiduciary duty

Answer 18

a) Rescission
b) Equitable compensation
c) Equitable allowance
d) Account of profits
e) Constructive trusts

Question 19

Rescission

Answer 19

Usually granted
Burden of proof on the fiduciary, high threshold

a) Self-dealing, fair-dealing
b) Pecuniary rescission (third party rights making rescission impossible, can claim money sum instead)

Question 20

Equitable compensation

Answer 20

Rationale
disability - cannot recover
duty - can recover

a) Causation test (Brickenden v London Loan and Savings)
b) Remoteness and intervening cause (Canson Enterprises v Boughton, Swindle v Harrison – but unsure what test)
c) Contributory fault not a defence (Nationwide Building v Balmer Radmore)

Question 21

Accounts of profits

Answer 21

Fiduciary cannot make an unauthorised profit - concern is setting expenses against receipts, not with tracing property into substitute property (Ultraframe, Grimaldi v Chameleon)

Hypothetical situations should not be explored, full profit awarded (Murad v Al-Saraj)

Unsure what test, but not causation (Novoship)

McFarlane and Mitchell: causal link preferred

Question 22

Equitable allowance

Answer 22

Possible (Boardman v Phipps)

As long as it won’t discourage fiduciaries from putting themselves in positions of conflict (Guinness v Saunders)

Question 23

Constructive trusts

Answer 23

For renewal of lease (Keech v Sandford)
Misappropriation of profit making opportunity that came in fiduciary capacity (Boardman v Phipps)
Bribe money (Lister v Stubbs, AG v Reid, FHR European Ventures)

Question 24

Choosing remedies

Answer 24

a) goals of remedies
b) goals of imposing fiduciary duties
- incentivise fiducaries to resist temptation of misconduct
- principals would have evidential difficulties

Tang Man Sit v Capacious: claimant can make an elections for types of remedies