Use of information or opportunities (Breaches of fiduciary duty - FS Flashcards
(10 cards)
What is the fiduciary duty regarding the use of information obtained through fiduciary position?
Fiduciaries must not use information acquired in their fiduciary role to pursue personal gain. Doing so constitutes a breach of fiduciary duty, regardless of intention or benefit to the principal.
Can a fiduciary profit from an opportunity discovered through their fiduciary role if the trust declines to act on it?
No. Even if the trust decides not to pursue the opportunity, the fiduciary must not use the information for personal profit. This still amounts to a breach of duty.
What is the significance of strict liability in fiduciary duty breaches?
Strict liability means the fiduciary is liable for breaching their duty regardless of honesty or good faith. Even an honest profit derived from fiduciary information must be accounted for.
When does a conflict of interest arise in relation to fiduciary information?
A conflict arises when the fiduciary’s personal interest potentially or actually interferes with the interests of the trust or principal, especially when acting on insider knowledge.
Can fiduciaries retain profit if trustees consent to their actions?
Only if the trustees provide fully informed consent. If the fiduciary fails to disclose all material facts, the consent is invalid, and profit must still be accounted to the trust.
Does the fiduciary’s intention to benefit the trust excuse a breach of duty?
No. Even if the fiduciary’s actions improve the trust’s position, they remain in breach if they used fiduciary-derived information for personal gain without full authorisation.
In what scenario would a fiduciary be required to disgorge profits made from an investment?
When the investment opportunity came to their attention through their fiduciary role, and they profited from it personally, even if the trust would not have invested.
Can a fiduciary be rewarded despite breaching their duty through incidental profit?
Yes. Courts may award equitable remuneration where the fiduciary acted in good faith and demonstrably improved the trust’s financial standing, as seen in equitable remedies
What is required for a fiduciary to legally act on a trust-related opportunity?
They must receive fully informed consent from all relevant trustees or beneficiaries, or have explicit authorisation in the trust instrument or a court order.
Why is the use of internal trust information for personal investment decisions prohibited?
Because it creates a conflict of interest and undermines the fiduciary’s duty of loyalty. Any profit made from such use must be returned to the trust to preserve integrity.
