⇒ A fiduciary relationship is, in essence, a relationship of trust and loyalty
⇒ A fiduciary duty is a duty to act in the best interests of another, if necessary in preference to one’s own interests: Wollenberg case 2011 (Lewison J)
⇒ “A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence” → Bristol and West Building Society v Mothew 
⇒ There are a number of well established fiduciary duties
⇒ The following are some established examples where a fiduciary relationship was found:
⇒ In Reading v Attorney General  an army sergeant was involved in a smuggling operation. It was held that he had breached his fiduciary duty to the Crown; so the Crown could recover payments from him
⇒ In Attorney General for Hong Kong v Reid , Mr Reid was the Acting Director of Public Prosecutions for Hong Kong. He took bribes to stop the prosecution of criminals and used this money to buy some land in New Zealand
⇒ In Attorney General v Blake , Blake (ex-MI6) signed an agreement not to disclose any information about his work. He later wrote a book about his work and was found to be in breach of his fiduciary duty to the Crown.
⇒ In English v Dedham Vale Properties  a couple sought to sell land and were negotiating with Dedham. Dedham applied for planning permission on the land, which was granted, and therefore made the land more valuable. Dedham did not tell the couple this and bought the land at its original value. The couple subsquently sued.
⇒ In O’Sullivan v Management Agency and Music Ltd  a singer entered into an excluive management deal with a promoter, who induced him to sign contracts which were disadvantageous. It was held that there was a fiduciary relationship and the promoter should account for the profits he made
Employer and Employee:
⇒ It is usually held that there is not a general fiduciary relationship between employee and employer: University of Nottingham v Fishel . However, the particular circumstances of a specific role may impose fiduciary duties
⇒ Senior employees may also be in a fiduciary relationship to the company e.g. in Tesco Stores Ltd v Pook , Pook had liability for acquiring land for the development of new stores. In breach of his fiduciary duty to Tesco he took bribes and concocted false invoices
Doctor and patient:
⇒ In Sidaway v Bethlem Royal Hospital Governors , the claimant tried to establish that the doctor in question (who had performed an operation) owed the patient a fiduciary duty. Lord Scarman said that this attempt fails as there “is no comparison to be made between the relationship of doctor and patient with that of solicitor and client”
⇒ In addition to the duties imposed by the court, people in fiduciary relationships may have additional/specific duties under statute
⇒ The cases of Industrial Development v Cooley  and Guinness v Saunders  both said that where a director takes advantage of their position and makes a personal profit, those profits are to be held on behalf of the company on a constructive trust
⇒ The duties owed by directors to their company are now in the Companies Act 2006, Part 1
⇒ “No man can in this Court, acting as an agent, be allowed to put himself into a position in which his interest and his duty will be in conflict” → Parker v McKenna (1874) (Lord Cairns)
⇒ Duties owed by partners to each other are set out in the Partnership Act 1890 s30-32
⇒ Bristol and West Building Society v Mothew  listed some defining characteristics of the fiduciary duty, including good faith, not making a profit, and avoid conflicts of interest
⇒ To make a claim for breach of a fiduciary duty, there must be a relationship between the fiduciary relationship and the act which founds the claim
⇒ So what are these fiduciary duties?...
⇒ A person in a fiduciary relationship may not make a profit from the relationship; but they are entitled to remuneration (i.e. fair pay for a job)
⇒ See the following cases:
FOOL-PROOF methods of obtaining top grades
SECRETS your professors won't tell you and your peers don't know
INSIDER TIPS and tricks so you can spend less time studying and land the perfect job
We work really hard to provide you with incredible law notes for free...
The proceeds of this eBook helps us to run the site and keep the service FREE!
⇒ Fiduciaries also have a duty to act in good faith
⇒ See the case of Odyssey Entertainment Ltd v Kamp 
⇒ A conflict of interest will be held to arise where a fiduciary has a personal financial interest in a transaction affecting the person/company to whom they owe the duty.
⇒ Failure to declare such a conflict by a director is now a criminal offence: Companies Act 2006 s182-183
⇒ See the case of Isaac and others v Isaac 
⇒ In general, where a fiduciary is acting on behalf of one person, they cannot act on behalf of another in relation to the same issue without the informed consent of the beneficiary
⇒ The case of Hilton v Barker Booth (a firm)  listed two circumstances where a fiduciary may act on behalf of 2+ people in respect of the same matter:
⇒ Also see the case of Kelly v Cooper 
⇒ As well fiduciary duties, the trustees may also owe some other, non-fiduciary, duties
⇒ There is no defined list of trustee duties. However, some duties are defined by statute, in particular under the Trustee Act 2000.
⇒ Once a trustee accepts the office of trustee, that trustee is bound by all of the obligations in the trust instrument → so the general responsibilities are for the trustees to familiarise herself with the terms of the trust, the nature of the property involved, the range of objects within the contemplation of the trust, the identity of the other trustees, to consult all of the documentation connected to the trust and to familiarise herself with any other info pertinent to the management of the trust which is not recorded in documentary fashion
⇒ This duty is affirmed in the case of Hallows v Lloyd (1888): a trustee cannot just sit there without investigating the nature and extent of her obligations as trustee; a trustee will be liable for any matters of which she could be expected to have knowledge
⇒ Also see the case of Nestle v National Westminster Bank 
⇒ Where trustees have a discretion, they must exercise that discretion.
⇒ In McPhail v Doulton , Lord Guest said that if the trustees fail to exercise their discretion, the court can compel them to exercise the trust
⇒ In Re Locker's Settlement Trusts , there was a discretion in the trust to distribute income annually. The settlor of the trust, regardless of this discretion, gave instructions not to make distributions for 3 years. It was held that the trustees should have ignored the settlor and obeyed the trust instrument
⇒ In the case of mere powers, where there is no obligation to exercise the power, the trustees are still obliged to consider whether to exercise the power: Re Hay’s Settlement Trust 
⇒ Also see the case of Turner v Turner 
⇒ There is a general duty to preserve the trust property: this includes the duty to ensure that money is invested suitably; and that any chattels and real property are looked after.
⇒ Trustees are liable if trust property is lost or destroyed by their failure to take custody of it; but if they act with reasonable care, they are not accountable for losses caused by their agents/servants: See Jobson v Palmer  and see also Trustee Act 2000 s.23
⇒ See the following cases:
⇒ The classic statement of the duty of care is set out in Speight v Gaunt (1882) as the standard, when dealing with the trust property, of an ordinary man of business
⇒ This was amended in In re Whiteley (1886): the duty of care now required of the trustee is the care that “an ordinary prudent man would take if he were indeed to memke an investment for the benefit of other people for whom he felt morally bound to provide”
⇒ Case law principles have been displaced in part by sectionn 1 of the Trustee Act 2000
⇒ S.1 of the Trustee Act 2000 provides a statutory level of care: '...such skill and care as is reasonable in the circumstances, having regard -
⇒ The test is subjective in the sense that it is reactive to the trustee’s own knowledge and experience, and the standard of care that is required will be a standard of care which is reasonable for someone with that knowledge or experience
⇒ This statutory duty of care may be excluded by trust instrument (TA 2000 sch 1 para 7)
⇒ The principle effect of the TA 2000 has been to shift the ordinary obligations of trustees from a requirement that they act prudently to a requirement that they act reasonably → a subtle but significant shift! Prudence requires caution, whereas reasonableness may not
⇒ There is a duty on the trustee to take professional advice when required
⇒ See the case of Cowan v Scargill 
⇒ The duty to take advice is now statutory
⇒ “A trustee undertakes not to manage [the trust] for the benefit and advantage of himself” (Ex parte Lacey, per Lord Eldon)
⇒ There is authority that a trustee may, with full disclosure and for a fair price, buy the beneficial interest of the property from the beneficiaries (the fair dealing rule)
⇒ Tito v Waddell (No 2): where a trustee deals with the beneficial interest or acquires it, there will be an obligation to demonstrate fair dealing (Megarry VC) i.e. there is a burden of proof on the trustee to demonstrate no advantage was taken of the beneficiary and the beneficiary had full disclosure of nature of the transaction (if not, it will be set aside: Hill v Langley 1988)
⇒ Holder v Holder : in this case, someone was an an executor of a will and he bought some of the property. The court did not allow him to do this
⇒ Generally, trustees cannot be paid for acting as trustees, except as provided in the trust instrument: Bray v Ford
⇒ In Re Duke of Norfolk's Settlement Trusts : Although trustees must usually act for free as a general rule, the court has an inherent jurisdiction to authorise payment to the trustees even if there is no such provision in the trust instrument, but this jurisdiction is only exercised in exception circumstances e.g. where management of the trust was more burdensome than anticipated (as happened here: trustee had to do extra work involving Capital Transfer Tax)
⇒ However, the Trustee Act 2000 provides that trustees who are acting in the course of their profession, or trust corporations, may be paid for acting as a trustee. This does not override the trust instrument (See ss.28-29 TA 2000) e.g. solicitors
⇒ As a general rule, trustees of charities cannot be paid
⇒ In Boardman v Phipps  the solicitor was entitled to a fair payment for his services
⇒ A trustee is expected to act impartially between beneficiaries and between life tenants and the remainderman. See Nestle v National Westminster Bank 
⇒ However, “the trustees have a wide discretion” meaning that if you have property left for children for life, then remainder to grandchildren, you can (within limits) favour the life tenant at the expense of the remaindermen (Nestle v National Westminster Bank)
In re Hastings-Bass (decd); Hastings-Bass v IRC  (Buckley LJ) (now overruled)
⇒ If a trustee made a decision with adverse tax consequences for the trust (i.e. failed to consider the consequences) this would be a breach of trust. Therefore, in such a situation, the trustee could go to court for failure to consider a relevant matter to get the transaction void (thus avoiding the tax liability). The Court of Appeal overturned this rule in 2011
Pitt v Holt; Futter v Futter 
⇒ In this case the Court of Appeal overturned (or more accurately, explained) the rule in Hastings-Bass
⇒ As a result, trustees may no longer rely on the Hastings-Bass rule where they have acted within their powers and in accordance with professional advice, even if that advice prspanves to have been erroneous; If a trustee takes a decision in breach of this duty the transaction is voidable, not void → this means the transaction will remain valid until it is voided and any tax liability before it is voided remains
⇒ The trustees must keep accounts (i.e. keep information on the trust) and be able to produce them to beneficiaries (i.e. indicate to the beneficiaries the financial position of the trust)
⇒ Pearse v Green (1819): only beneficiaries with a right to the income of the trust are entitled to see all the accounts while, strictly speaking, a person with a remainder interest is only entitled to see accounts relating to their interest in the trust.
Learn how to effortlessly land vacation schemes, training contracts, and pupillages by making your law applications awesome. This eBook is constructed by lawyers and recruiters from the world's leading law firms and barristers' chambers.
✅ 60+ page eBook
✅ Research Methods, Success Secrets, Tips, Tricks, and more!
✅ Help keep Digestible Notes FREE