DUTIES FOR FIDUCIARIES AND LIABILITY FOR BREACH
Lectures 5-6 (12-02-26 – 13-02-26)
A fiduciary is ‘someone who has undertaken to act 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 [1996])
A trustee is a prime example of a fiduciary as fiduciary duties are imposed to prevent trustees from
abusing their position by acting in their own interests at the expense of the interests of the
beneficiary
Other fiduciary relationships include-
Agent and principal (FHR European Ventures v Cedar Capital Partners [2014])
Solicitor and client (Re Hallett’s Estate [1880])
Director and company (Regal (Hastings) v Gulliver [1967])
Partners within a partnership (Aas v Benham [1891])
Fiduciary duties prevail when a person makes decisions on behalf of another and the exercise of
that judgment must be done in the interests of the principal and their interests alone
Duty of even-handedness also carries over where beneficiaries have conflicting interests
which a trustee has to balance
Obligation of loyalty (Mothew) effectively encompasses the ‘no conflict (of interest)’ and ‘no
profit’ rules as the duties to act in good faith, not to make a profit, not to allow their duty
and their own interest to conflict, not to act for their own benefit or the benefit of others
without consent, to act in the best interests of the principal, to promote the purpose of the
trust and to act even-handedly
A breach of fiduciary duty only occurs in the case of conscious or deliberate acts and it is not possible to
‘negligently’ breach fiduciary duties through mere incompetence (Mothew)
Distinction made in Bartlett v Barclays Bank [1980] between non-feasance (breach of trust) and
misfeasance (breach of fiduciary duty through introducing conflict or profit)
Liability is strict and does not consider the trustee’s motives or intent
Liable in all circumstances where the trustee introduces unauthorised conflict or profit
Includes even the potential for conflict or profit as seeks to have a deterrent effect of even
possible abuse (Hamilton v Wright [1842])
However, if the beneficiary authorises the conflict or profit generated, this is not a breach
Fiduciary responsibilities exist in the discretionary spaces between instructions given to a trustee
and breaches of trust and breaches of fiduciary duty generally relate to different things
In trust arrangements where the exercise of all duties and powers is objectively specified
and the trustee simply needs to follow instructions to satisfy their obligations, there will be
no exercise of judgement and no need to invoke the fiduciary relationship (breach of trust)
Where the trustee is given discretion to make decisions within the scope of their duties and
powers, say discretion in distribution, or discretion relating to investment decisions, it is in
the exercise of this discretion that the fiduciary duty of loyalty is found
, Breach of trust where a trustee acts in a way that is inconsistent with their instructions or
fails to act as per their instructions (including breach of duty of care)
Breach of fiduciary duty where a trustee exercises their judgement (or discretion) in
performing those instructions in a way that conflicts with the interests of the beneficiary,
either through preferring their own interest or that of another, or makes an unauthorised
profit
For example, if a trustee is permitted a broad power of investment and chooses to invest in
shares of their own company, this is not a breach of trust as the act of investing is
authorised by the trust instrument, but falls to be a breach of fiduciary duty as creates a
conflict of interest
The obligation to act even-handedly is often a negligent breach falling under a breach of
trust and only the deliberate introduction of a conflict of interest would qualify this as a
breach of fiduciary duty
The starting point of the duty of loyalty is that a fiduciary must (1) not put themselves in a position of
conflict of interest and (2) not make profit out of the fiduciary position that is not authorised
Trustees are therefore not entitled to receive remuneration for their work, unless it is specifically
authorised by the trust instrument, the court or statute (Dale v IRC [1954])
S29 TA 2000 allows for ‘trust corporations’ or a trust with multiple (not singular) professional
trustees to take ‘reasonable remuneration’, provided the trust instrument does not state
otherwise
S31(1) TA 2000 (a) entitles a trustee to be reimbursed from the trust funds, which may be
(b) paid out of the trust funds when properly incurred by him when acting on behalf of the
trust
The court can exercise their inherent jurisdiction to authorise the provision of remuneration,
either for services already performed or for future work (Guinness v Saunders [1990]), even
where there has been a breach of fiduciary duty (Recovery Partners GP Ltd & Anor v
Rukhadze & Ors [2023])
The courts are cautious with the exercise of this jurisdiction and will only authorise
remuneration where it cannot have the effect of encouraging the trustees in any way to put
themselves in a position where their interests conflict with their duties as trustees (honest
and well-intentioned breach)
The rule of self-dealing prohibits a fiduciary from purchasing property from their principal as
otherwise creating a conflict of interest (trustee as both vendor and purchaser)
Effectively excludes a trustee from selling trust property to himself
Any purchase is voidable and will be set aside (Campbell v Walker [1800])
The rule applies strictly due to the inherent risk of conflict of interest, irrespective of the
actual interests or motives of the trustee (Ex p James [1803])
A trustee cannot retire as a trustee in order to later purchase that property (exception
confined to its facts in Holder v Holder [1968])
Lectures 5-6 (12-02-26 – 13-02-26)
A fiduciary is ‘someone who has undertaken to act 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 [1996])
A trustee is a prime example of a fiduciary as fiduciary duties are imposed to prevent trustees from
abusing their position by acting in their own interests at the expense of the interests of the
beneficiary
Other fiduciary relationships include-
Agent and principal (FHR European Ventures v Cedar Capital Partners [2014])
Solicitor and client (Re Hallett’s Estate [1880])
Director and company (Regal (Hastings) v Gulliver [1967])
Partners within a partnership (Aas v Benham [1891])
Fiduciary duties prevail when a person makes decisions on behalf of another and the exercise of
that judgment must be done in the interests of the principal and their interests alone
Duty of even-handedness also carries over where beneficiaries have conflicting interests
which a trustee has to balance
Obligation of loyalty (Mothew) effectively encompasses the ‘no conflict (of interest)’ and ‘no
profit’ rules as the duties to act in good faith, not to make a profit, not to allow their duty
and their own interest to conflict, not to act for their own benefit or the benefit of others
without consent, to act in the best interests of the principal, to promote the purpose of the
trust and to act even-handedly
A breach of fiduciary duty only occurs in the case of conscious or deliberate acts and it is not possible to
‘negligently’ breach fiduciary duties through mere incompetence (Mothew)
Distinction made in Bartlett v Barclays Bank [1980] between non-feasance (breach of trust) and
misfeasance (breach of fiduciary duty through introducing conflict or profit)
Liability is strict and does not consider the trustee’s motives or intent
Liable in all circumstances where the trustee introduces unauthorised conflict or profit
Includes even the potential for conflict or profit as seeks to have a deterrent effect of even
possible abuse (Hamilton v Wright [1842])
However, if the beneficiary authorises the conflict or profit generated, this is not a breach
Fiduciary responsibilities exist in the discretionary spaces between instructions given to a trustee
and breaches of trust and breaches of fiduciary duty generally relate to different things
In trust arrangements where the exercise of all duties and powers is objectively specified
and the trustee simply needs to follow instructions to satisfy their obligations, there will be
no exercise of judgement and no need to invoke the fiduciary relationship (breach of trust)
Where the trustee is given discretion to make decisions within the scope of their duties and
powers, say discretion in distribution, or discretion relating to investment decisions, it is in
the exercise of this discretion that the fiduciary duty of loyalty is found
, Breach of trust where a trustee acts in a way that is inconsistent with their instructions or
fails to act as per their instructions (including breach of duty of care)
Breach of fiduciary duty where a trustee exercises their judgement (or discretion) in
performing those instructions in a way that conflicts with the interests of the beneficiary,
either through preferring their own interest or that of another, or makes an unauthorised
profit
For example, if a trustee is permitted a broad power of investment and chooses to invest in
shares of their own company, this is not a breach of trust as the act of investing is
authorised by the trust instrument, but falls to be a breach of fiduciary duty as creates a
conflict of interest
The obligation to act even-handedly is often a negligent breach falling under a breach of
trust and only the deliberate introduction of a conflict of interest would qualify this as a
breach of fiduciary duty
The starting point of the duty of loyalty is that a fiduciary must (1) not put themselves in a position of
conflict of interest and (2) not make profit out of the fiduciary position that is not authorised
Trustees are therefore not entitled to receive remuneration for their work, unless it is specifically
authorised by the trust instrument, the court or statute (Dale v IRC [1954])
S29 TA 2000 allows for ‘trust corporations’ or a trust with multiple (not singular) professional
trustees to take ‘reasonable remuneration’, provided the trust instrument does not state
otherwise
S31(1) TA 2000 (a) entitles a trustee to be reimbursed from the trust funds, which may be
(b) paid out of the trust funds when properly incurred by him when acting on behalf of the
trust
The court can exercise their inherent jurisdiction to authorise the provision of remuneration,
either for services already performed or for future work (Guinness v Saunders [1990]), even
where there has been a breach of fiduciary duty (Recovery Partners GP Ltd & Anor v
Rukhadze & Ors [2023])
The courts are cautious with the exercise of this jurisdiction and will only authorise
remuneration where it cannot have the effect of encouraging the trustees in any way to put
themselves in a position where their interests conflict with their duties as trustees (honest
and well-intentioned breach)
The rule of self-dealing prohibits a fiduciary from purchasing property from their principal as
otherwise creating a conflict of interest (trustee as both vendor and purchaser)
Effectively excludes a trustee from selling trust property to himself
Any purchase is voidable and will be set aside (Campbell v Walker [1800])
The rule applies strictly due to the inherent risk of conflict of interest, irrespective of the
actual interests or motives of the trustee (Ex p James [1803])
A trustee cannot retire as a trustee in order to later purchase that property (exception
confined to its facts in Holder v Holder [1968])
