Fiduciary Obligations

Cases
1. Keech v Sandford
  1. Lease taken by trustee instead of on behalf of child beneficiary, so when beneficiary of age sue for account of profits
  2. Basic rule: a Trustee owes a strict duty of loyalty so that there can never be a possibility of any conflict of interest
2. Clark Boyce v Mouat (same matter conflict)
  1. Lawyer acted for both son and mother
  2. Conflict of interest because asked to act for both in arrangement of large insurance on mother's house to secure loan for the son, if he can't pay it back, SHE loses the house
3. Reading v Attorney General (secret profiteering/misuse of the principal's property)
  1. British army soldier paid to ride in smuggling lorries to reduce chances of a search
  2. He was only able to get money due to respect of uniform as a servant of the Crown (principal), and must therefore hand money over to the Crown
4. Fair dealing conflicts (fiduciary has personal interest in outcome)
  1. Witten-Hannal v Davis
    1. Lawyer and client in same land transaction
  2. Day v Mead
    1. Lawyer and client and lawyer's company
Characteristics
1. One party is in a position of trust and confidence
2. One party has influence over someone in a vulnerable position
3. One party undertakes to act in the interests of another
  1. Loyalty: to client/beneficiary. Not take advantage
  2. Good faith: honesty, important to advise client if there is a conflict of interest
Avoidance of liability in conflict situations
1. Must be sufficient. Documentation must be specific, and fiduciary MUST explain all details of the transaction
2. Must disclose any possible or existing COI to all parties
3. Contractual arrangement between parties may restrict conduct
4. Must be timely. Disclosure MUST be given before transaction takes place
5. Chinese walls
  1. Organisational device within an organisation designed to prevent confidential info flowing from one part to another
What do fiduciary duties require?
1. No conflict (in transactions)
2. No profits (for self)
3. No competition (with the boss)
4. No misuse of property (NOT use the boss's property)
5. May owe obligations of confidence and must not breach confidence
  1. E.g. former client conflicts may arise when an advisor who acted for A in the past is hired by B to act for him/her in a matter that involves A
Remedies
1. Account of profits
  1. Fiduciary hands over all profits made, regardless if principal incurred a loss
2. Because of the position of trust that a fiduciary is in, remedies for breaches extend beyond damages
10 key points
1. Equity
  1. Created by Law of Equity
  2. Equity enforces stringent duties of loyalty and propriety which go far beyond the common law obligations in contract or tort
2. Loyalty to another
3. No conflicts of interest
4. Keech v Sandford
5. Clark Boyce v Mouat
6. Witten-Hannal v Davis
7. Day v Mead
8. Reading v A-G
9. Avoid liability how?
10. Equitable remedies
When do fiduciary obligations arise?
1. Status based relationships (traditional)
  1. Trustees - beneficiaries
  2. Partners - fellow partners
  3. Agents - their principals
  4. Directors, promoters, liquidators of a company - the company itself (not shareholders)
2. Outside traditional categories
  1. Joint venturer - co-venturer
  2. Employer - employee
    1. employees owe duty to their employers

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Fiduciary Obligations

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	Created by Meredith Jeory about 10 years ago