“The case law flowing from Keech v Sandford is too harsh. The strict rule that fiduciaries can
make no profit out of their position ought to be relaxed in favour of a more flexible rule that
fiduciaries should only be penalised where there has been a serious conflict between their
duty and interest. On the other hand, the decision of the Supreme Court in FHR European
Ventures LLP v Cedar Capital Partners LLC as to the availability of a proprietary remedy once
liability has been established is clearly justifiable.”
Discuss with reference to the module materials.
The strict rule that F must not profit from his position without authorisation emerges from Keech v
Sandford and has been consistently affirmed and extended in subsequent case law
For example, F cannot take advantage of an opportunity he received solely due to his role as
F (Regal (Hastings)), even if there is only a potential for conflict to arise (Boardman v
Philipps)
This rule operates alongside the no-conflict principle and reflects a broader duty of loyalty identified
in Bristol and West Building Society v Mothew
As a starting point, T is not entitled to receive renumeration for his work, unless specifically
authorised by trust instrument, the court or statute (Dale v IRC)
The following question presents two issues-
(1) Whether the strict no-profit rule is excessively harsh and should be relaxed
(2) Whether the proprietary remedy for breach affirmed in FHR European Ventures LLP v Cedar
Capital Partners LLC is justified
Ultimately, while the strict approach can produce harsh outcomes and has been subject to
persuasive criticism, it remains justified as a necessary deterrent and similarly, the proprietary
remedy recognised in FHR acts as a coherent and principled response to wrongdoing by F
Paragraph 1
The rule in Keech establishes that F must not profit from his position, even where the principal
could not have obtained the benefit himself
In Keech, there was held to be a conflict of interest and taking of unauthorised profit where T
sought to renew the lease for himself personally when landlord refused to renew for B, who
was still a minor
Similar conflict of interest arose in Regal (Hastings) v Gulliver where directors took shares in
a subsidiary company when the plaintiff holding company could not afford to take them up,
from which the directors made a profit when both the holding company and the subsidiary
were sold to a third party purchaser
The imposition of liability is strict (Recovery Partners v Rukhadze, where F still owed P a duty
to account for profit made after the termination of the F relationship) and it does not matter
that F took advantage of an opportunity that B was unable to (as seen in Regal (Hastings)
and Keech)
make no profit out of their position ought to be relaxed in favour of a more flexible rule that
fiduciaries should only be penalised where there has been a serious conflict between their
duty and interest. On the other hand, the decision of the Supreme Court in FHR European
Ventures LLP v Cedar Capital Partners LLC as to the availability of a proprietary remedy once
liability has been established is clearly justifiable.”
Discuss with reference to the module materials.
The strict rule that F must not profit from his position without authorisation emerges from Keech v
Sandford and has been consistently affirmed and extended in subsequent case law
For example, F cannot take advantage of an opportunity he received solely due to his role as
F (Regal (Hastings)), even if there is only a potential for conflict to arise (Boardman v
Philipps)
This rule operates alongside the no-conflict principle and reflects a broader duty of loyalty identified
in Bristol and West Building Society v Mothew
As a starting point, T is not entitled to receive renumeration for his work, unless specifically
authorised by trust instrument, the court or statute (Dale v IRC)
The following question presents two issues-
(1) Whether the strict no-profit rule is excessively harsh and should be relaxed
(2) Whether the proprietary remedy for breach affirmed in FHR European Ventures LLP v Cedar
Capital Partners LLC is justified
Ultimately, while the strict approach can produce harsh outcomes and has been subject to
persuasive criticism, it remains justified as a necessary deterrent and similarly, the proprietary
remedy recognised in FHR acts as a coherent and principled response to wrongdoing by F
Paragraph 1
The rule in Keech establishes that F must not profit from his position, even where the principal
could not have obtained the benefit himself
In Keech, there was held to be a conflict of interest and taking of unauthorised profit where T
sought to renew the lease for himself personally when landlord refused to renew for B, who
was still a minor
Similar conflict of interest arose in Regal (Hastings) v Gulliver where directors took shares in
a subsidiary company when the plaintiff holding company could not afford to take them up,
from which the directors made a profit when both the holding company and the subsidiary
were sold to a third party purchaser
The imposition of liability is strict (Recovery Partners v Rukhadze, where F still owed P a duty
to account for profit made after the termination of the F relationship) and it does not matter
that F took advantage of an opportunity that B was unable to (as seen in Regal (Hastings)
and Keech)
