Fiduciary relationships

kazzasingh's version from 2018-05-01 15:02


Question Answer
Boardman v Phipps [1966]Shouting the rule; whispering equity --> through deciding that the fiduciary had breached the inflexible rule, their lordships held that he should be paid for the work he had done to the great profit of the trust, and ‘that payment should be on a liberal scale’.
Regal Hastings v Gulliver (1942)‘The general rule of equity is that no one who has duties of a fiduciary nature to perform is allowed to enter into engagements in which he has or can have a personal interest conflicting with the interests of those whom he is bound to protect’
Re Mulholland’s WT [1949]; Sargeant v National Westminster Bank plc (1990)‘Positional’ breach --> when the fiduciary puts himself in a position of potential conflict of interest and duty
Williams v Scott [1900]‘the burden of proof that the transaction is a righteous one rests upon the trustee’.
Tito v Waddell (No. 2) [1977](1) The self-dealing rule: if a trustee purchases trust property from himself, any beneficiary may have the sale set aside ex debito justitiae, however fair the transaction. (2) The fair-dealing rule: if a trustee purchases his beneficiary’s beneficial interest, the beneficiary may have the sale set aside unless the trustee can establish the propriety of the transaction, showing that he had taken no advantage of his position and that the beneficiary was fully informed and received full value”.
Bristol and West BS v MothewThe fact that a person is not a party to a recognized category of fiduciary relationship does not mean that he does not owe a fiduciary duty – if a person owes a fiduciary duty, he is a fiduciary.
Bristol and West Building Society v Mothew [1998]A fiduciary must act in good faith: he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal.
Tate v WilliamsonThe courts do not place limits on the varieties of fiduciary relationship
SergeantThere was no positional breach of trust because the testator had put in them in that situation.
Boardman v Phipps (no bona fide defence)The fiduciary was held liable to account even though there had been no question of fraud and no suggestion that the fiduciary had acted other than in ‘an open and honourable manner’.
Re Drexel Burnham Lambert UK Pension PlanException to the positional breach rule --> A scheme to distribute surplus assets in a pension fund was approved, even though it had been proposed by trustees who were beneficiaries under the scheme. The trustees in this case had doubtless been selected as persons able to exercise their discretion properly, despite the potential conflict of interest.
Re Thompson’s SettlementFair-dealing can involve a genuine contract between two independent parties, whereas self dealing cannot, because at least one person will appear as a party on both sides of the transaction.
Holder v HolderTransactions carried out after retirement from trusteeship. Continuing trustees are permitted to sell trust property to a retired trustee as long as ‘there is nothing to show that at the time of retirement there was any idea of a sale.’ The onus is on the trustees to prove that it was a righteous one. EXCEPTION = Holder v. Holder --> there was insufficient causal connection between his gain and his position of trust.
Jefri Bolkiah v KPMGUnless the fiduciaries have the fully informed consent of both principals, their firm should decline to accept the new, potentially conflicting, instructions.
The ‘consent’ defenceThe consent defence is only relevant where a fiduciary no longer acts for the principal whose interests are at risk.
Brudenell-Bruce v Moore [2014]Trustee remuneration can be authorised by the court prospectively, and in exceptional cases retrospectively, and remuneration is presumed by statute in the case of professional trustees (Trustee Act 2000), but otherwise the strict rule is that a fiduciary must not make a profit.
Keech v Sandford (1726)A trustee had taken advantage of an opportunity to renew a lease in circumstances where the landlord had made it clear that he would not have permitted the beneficiary to enjoy the same privilege. Lord King LC said: ‘This may seem harsh that the trustee is the only person of all mankind who might not have the lease; but it is very proper that the rule should be strictly pursued, and not in the least relaxed’.
FHR v Cedar [2014]FHR purchased a Monte Carlo hotel company for €211.5 million. Cedar was FHR’s agent in the negotiation, but Cedar had secretly entered into a brokerage agreement with the vendor under which it received €10m. FHR argued that any unauthorized benefit (such as a bribe or secret commission) that is received by an agent by reason of his agency and in breach of fiduciary duty should be held on constructive trust for the principal. Lord Neuberger approved FHR’s argument as having ‘the merit of simplicity’, and the Supreme Court confirmed the High Court’s decision that Cedar held the €10m subject to a constructive trust in favour of FHR.
Crown Dilmun v Sutton [2004]Peter Smith J did not rule out the possibility that the fiduciary’s liability to account may be reduced where it would otherwise unjustly enrich his principal, but noted that in this area, ‘the law favours conferring benefits on the wronged even though that is at the expense of the wrongdoer’ and stressed that where the fiduciary has acted dishonestly there can be no question of reducing his liability to account