EQUITY AND TRUSTS. TRUSTEES 3 FIDUCIARY DUTIES . Trustees as fiduciaries. The nature of the trustee’s duty is fiduciary Trusteeship one of number of fiduciary relationships Trustees subject to Fiduciary duties. Who is a fiduciary?. Classic statement is from Finn:
“someone who undertakes to act for or on behalf of another in some particular matter or matters”. Finn, Fiduciary Obligations (1977).
“ …a fiduciary relationship is one in which a person undertakes to act on behalf of or for the benefit of another, often as an intermediary with a discretion or power which affects the interests of the other who depends on the fiduciary for information and advice.” (para. 1.3).
Another definition comes from Professor Hayton:
“The relationship of trustee and beneficiary is the original fiduciary relationship and provides the guidelines for determining when other persons are in a fiduciary relationship to each other by virtue of the position and power of one in respect of the other and the latter’s reasonably induced expectation that the former will act exclusively in the interests of the latter...
Trustees are persons who are under a duty to act exclusively in the interests of the trust beneficiaries who are vulnerable if the trustees seek to abuse their position, because trustees have rights and powers that are capable of being exercised so as detrimentally to affect the beneficiaries. Thus, if such aspects are present in other relationships these are treated as fiduciary relationships as a matter of law…”
First: status based relationships I.e. those that arise as a matter of law from status:
Concept has been extended to cover situations outside the normal scope of fiduciary relations
i.e. “fact based fiduciaries” imposed in interests of justice because of claimant’s particular vulnerability of claimant to defendant upon whom he is relying.
See Reading v AG  AC 507 HL.
“I do not think that the categories of fiduciary relationships … should be regarded as falling into a limited number of straight-jackets or as being necessarily closed. They are, after all, no more than formulae for equitable relief.”
per Slade J, English Dedham Vale Properties Ltd  1 WLR 93 at 110.
For useful summary see: Bristol & West BS v Mothew, per Millett LJ:
(i) trust may authorise a purchase
(ii) Court can authorise
(iii) Bens can agree but must be sui juris
Refers to trustee purchasing beneficiary’s interest rather than the trust property
Most significant fiduciary obligation is not to profit from the trust
Even where no real prospect of conflict rule is designed to prevent even v remotest possibility of conflict
that principal suffers no loss / or even a gain i
that profit was gained using fiduciary’s own assets/skills/own risk
That fiduciary acted in good faith
NB - No profit without authority extends to all fiduciaries. Although we are concerned with trustees many of the examples we will look at are of e.g. company directors. But these are authoritative on the position of trustees.
Rule derives from continuous application of Keech v Sanford (1726) 2 Eq Cas Abr 741. Case concerned a lease of market held on trust for infant beneficiary. The trustee tried unsuccessfully to obtain a renewal of the lease for the trust and then took lease in his own right.
Court: Trustee held lease on trust for the minor beneficiary.
Trustees as using voting rights in company to obtain appointment as directors.
See Re Macadam  Ch 73 where trustees once appointed received fees. Trustees held liable to account for the remuneration Per Cohen J. the question is “Did the trustee acquire the position in which he drew the remuneration by virtue of his position as trustee?”
Remuneration will not be accountable to trust where trustee has already become director before becoming trustee Re Dover Coalfield Extension Ltd.  1 Ch 65
Trustees can receive money in various ways:
Regardless of method, any payments received as a result of the trustee’s position belong to the trust
Leading case HL in Regal Hastings v Gulliver  2 AC 134: R. could only purchase £2000 worth of shares in a subsidiary company set up for investment purposes. Directors agreed to purchase the remainder. Profit made when business transferred to new owners. Directors having acquired the shares by virtue of their fiduciary position were held liable to account for the profits made out of them.
Lord Russell: “ The rule of equity which insists on those, who by use of a fiduciary position make a profit, being liable to account for that profit, in no way depends on fraud or absence of bona fides; or upon such questions or considerations as whether the profit would or should otherwise have gone to the plaintiff, or whether the profiteer was under a duty to obtain the source of the profit for the plaintiff, or whether he took a risk or acted as he did for the benefit of the plaintiff, or whether the plaintiff has in fact been damaged or benefited by his action. The liability arises from the mere fact of a profit having, in the stated circumstances, been made.”
Points to note from the case:
Clearer case is that of Guinness v Saunders  2 AC 663
D held liable to account for the profit.
Honest fiduciaries maybe awarded allowance for the work involved
Contrast Boardman v Phipps (See next section) and Guinness v Saunders
One of the most important cases:
By 3 to 2 majority HL held information came through B acting on behalf of trustees:
It made no difference that:
Some confusion over the ratio of the case because of different judgments
“If a fiduciary acting honestly in good faith and making a profit which his principal could not make for himself becomes a trustee of that profit, then a fiduciary acting dishonestly who accepts a bribe must also be a constructive trustee.”
Before Reid inconsistency in the treatment of bribes and other profits was unsupportable. Personal liability to account only; no constructive trust for the principal. Courts seemingly treated dishonest fiduciaries more favourably than honest. See Boardman. Reid (as PC case) is only persuasive not binding. In AG v Blake  Lister was said to be binding. As a precedent is questionable. In recent case: Daraydan Holdings Ltd & Ors v Solland Int & Ors  EWHC 622 (Ch.) Reid to be followed - policy reasons – fiduciaries should not gain in this way. H/L affirmation?
Under s29(2) a trustee is entitled to “reasonable remuneration” for any services that he provides to the trust.
We have considered the following: