Fiduciary Duty CASES
In English law, a fiduciary duty is a duty of loyalty and good faith owed by someone in a position of trust to another party. It requires the fiduciary to act solely in the beneficiary’s interests, avoiding conflicts and unauthorised gains.
Definition and Principles
Fiduciary duties arise in relationships of trust and confidence, such as trustee and beneficiary, company director and company, or solicitor and client. Equity imposes strict obligations to prevent abuse of power and protect vulnerable parties.
Requirements for Establishing
- Relationship of trust: The fiduciary undertakes to act for or on behalf of another.
- Duty of loyalty: The fiduciary must not place personal interests above the beneficiary’s.
- No profit rule: Any unauthorised profit made in the course of the relationship belongs to the beneficiary.
- No conflict rule: Fiduciaries must avoid conflicts between duty and personal interest.
Practical Applications
Classic cases include Bristol and West Building Society v Mothew (1998), defining fiduciary obligations, and Boardman v Phipps (1967), where a fiduciary had to account for profits gained despite acting in good faith.
Importance
Fiduciary duties safeguard integrity in relationships of trust, ensuring that those with power act in the best interests of others. They remain central to equity, company law, and professional regulation.
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An insurance underwriter secretly planned to establish a competing business while still employed. He misused the employer's confidential information and solicited colleagues to join him. The High Court held this was a flagrant breach of his contractual and fiduciary duties. Facts The claimant, QBE Management Services (UK) Ltd (‘QBE’), a Lloyd’s of London managing agent, brought a claim against several of its former employees. The first defendant, Mr Dymoke, was a senior and highly remunerated underwriter for QBE’s Professional Indemnity business. While still employed by QBE, Mr Dymoke secretly planned to set up a new, competing business (codenamed ‘Project P’)
Mrs Morgan co-signed a mortgage over her home to secure her husband's business loan, advised by the bank manager. She later claimed undue influence. The House of Lords ruled that to set aside a transaction for presumed undue influence, a 'manifest disadvantage' must be proven. Facts Mr and Mrs Morgan were the joint owners of their matrimonial home. Mr Morgan’s business encountered financial difficulties, and a previous lender was seeking possession of the house. To prevent this, National Westminster Bank Plc agreed to provide a short-term bridging loan, conditional upon a legal charge over the home. Mrs Morgan was hesitant
An elderly farmer guaranteed his son's company's debts to a bank, using his farmhouse as security. The Court of Appeal set aside the transaction, finding a relationship of confidentiality had been breached, establishing the principle of undue influence through inequality of bargaining power. Facts Mr Herbert Bundy, an elderly farmer, was a long-standing customer of Lloyds Bank, as was his son’s plant-hire company. The company fell into severe financial difficulty. Over time, Mr Bundy had provided increasing guarantees for his son’s business overdraft, secured against his sole asset, his farmhouse. Finally, the bank’s assistant manager, Mr Head, visited Mr Bundy
