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Flashcards in Trusts V Fiduciary Duties Deck (16)
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1
Q

Define Fiduciary Duties

A

A person in a fiduciary position has a duty not to put himself in a position where his personal interests and his duties conflict (Bray v Ford)

Even if honest, if the they put themselves in a position where there is a conflict of interest, they will be accountable for any profit made.

2
Q

Status based fiduciary

TRAMP

A

Trustees

Personal Representative (will)

Agent (to their principals)

Manager (senior employees to confidential info to their employees and directors to their company)

Partners (to each other)

3
Q

Example of a fact-based fiduciary

A

LAC Minerals Ltd v International Corona Resources Ltd A duty exists where:

X has undertaken the duty to act for Y; and
Y reasonably believes that X act exclusively in Y’s interest/joint interests

This can also arise in a commercial context
(English v Dedham Vale Properties ltd)

4
Q

Two situations where trustees may purchase interest from himself, co-trustees and beneficiaries

A

the trustee purchases trust property (equitable interest) from himself and his co-trustees;

the trustee purchases the equitable interest of a beneficiary

5
Q

Where is it forbidden for a trustee to purchase the legal title of a property from himself/co-trustee

A

Since there is a inherent conflict of interest - the trustee will want to buy low and his duties will bind him to sell high.

The rule is enforced strictly against self-dealing so fairness and context is irrelevant (Ex p Lacey)

Beneficiaries can void the sale within a reasonable time if self-dealing has occurred

6
Q

Situation where a trustee can override the self-dealing rule

A

Trustee can seek court order for purchase or seek consent of beneficiaries if they are sui juris (aged 18 years or more, possessing full mental capacity).

Must prove that they have been informed of all the relevant facts, the transaction was fair and there was no undue influence.

7
Q

In what way the trustee will be excused when making a purchase from a beneficiary of the equitable title

A

Presumption of undue influence, but this can be rebutted by fair-dealing rule:

disclose all material facts;
transaction is fair and honest; and
no undue influence

8
Q

Definition of competition with the trust and the consequence when it is made by a trustee

A

Where the trust includes a business and trustee sets up his own business in competition, then the trustee is accountable for any profits and possibly an injunction (Re Thomson)

9
Q

When do trustees can demand payment for their services?

A

unless authorised by;
charging clause in the trust instrument
beneficiaries’ consent
beneficiaries consent (presumption of undue influence is rebutted by fair-dealing rule and sui juris beneficiaries)
court order (Re Duke of Norfolk’s Settlement Trusts) or

Trustees Act 2000

10
Q

Explain Trustees Act 2000 in terms of approving trustees remuneration

(6)

A

Trustees can receive remuneration:

s. 28(1) if there is a provision for remuneration in the trust instrument
s. 28(5) trustee acts in a professional manner (management/administration)
s. 29(1) a trust corporation can charge reasonable remuneration (even though a sole trustee)
s. 29(2) a sole trustee cannot charge fees. a trustee can do so only if the other trustees agree in writing
s. 29(3) reasonable remuneration = nature of services and attributes of trustee
s. 31(1)(a) trustees can be reimbursed for out-of-pocket expenses from the trust funds

11
Q

Meaning of an incidental profits

3 BLIP

A

Remuneration from a third party by virtue of being a trustee (Williams v Barton) or football agent (imageview Management Ltd v Jack)

Remuneration stemming from a position gained by virtue of trust property - e.g. company shares held on trust used to become a director (Re Macadam; Re Gee);

Assignment of business contacts upon dissolution(Breaking up) of a company (Don King Productions inc v Warren and Others)

Renewal of a trust lease: the trustees arrange to take the new lease or buy the freehold on their own, not as part of trust property. This is strict liability, therefore honesty of the trustee and circumstances are not taken into account (Keech v Sandford)

Use of information and opportunities - a trustee is accountable for profits made out of info/opportunities made available through trusteeship

  • can be awarded remuneration for honest behaviour that benefits the trust (Boardman v Phipps)
  • remuneration will be limited for cases that would not encourage other trustees to do the same (Guinness v Saunders)
12
Q

Nature of director’s duties

Statutory source of the duties

A

Strict liability also applies to company directors (Regal (Hastings) Ltd v Glliver; industrial Development Consultants v Cooley)

The fiduciary duties of directors are codified in Companies Act 2006

13
Q

4 rules where a director must observe to avoid breach with their fiduciary duties

(conflict of interest, authorization, third parties, with director’s own interests and companies)

A

A director must avoid a situation in which he has or may have a direct or indirect interest that conflicts or possibly may conflict with the interests of the company (s.175) - no exploitation of property, information or opportunity

The duty will not be breach if the situation cannot be reasonably regarded as likely to give rise to a conflict. if the company if incorporated before 1/10/08, such a conflict can be authorized by directors (s.175(4))

Directors cannot accept benefits from third parties unless authorised by shareholders (s.176) (Williams v Barton)

If director negotiate contracts between themselves and the company, they should disclose interest to other directors (s.177)

14
Q

A beneficiary can give consent only if

A

sui juris
consent is fully informed; and
there has been no undue influence

15
Q

Meaning of disgorgement

A

Stripping fiduciaries of any gain they make from a conflict situation

16
Q

Meaning of proprietary remedy (williams v barton)

A

proprietary remedy is a claim to the property derived from the profit

A proprietary remedy is preferable if i) the fiduciary is bankrupt ii) an asset has gone up in value

Proprietary remedy is always available