What is a fiduciary duty?
This is the legal relationship between two parties (the fiduciary and the beneficiary) where one must act in the best interest of the other. It is based on the utmost trust and confidence arising from a position of power and obligation; the Latin term, ‘fiducia’ literally translates to trust, confidence, faith, and reliance.
It has been adeptly described in the case of Bristol and West Building Society v Mothew (1998):
“A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. 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. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary.”
When does a fiduciary duty arise?
This can come from and also supplement any other obligation and duty which arises from contract and/or legislation.
A few common examples are set out below
This is the most common form that a fiduciary duty arises in.
They can be appointed under a Will or separate Trust Deed which may set out their obligations and responsibilities for managing the assets of an estate or trust fund.
In addition, they would be bound by statue under the Trustee Act 1925, Trusts of Land and Appointment of Trustees Act 1996, and the Inheritance and Trustees’ Power Act 2014 to name a few.
The retainer between a client and their solicitor will normally govern their legal contractual relationship.
In addition, the tort of negligence will imply concurrent duties on a solicitor to act in the best interest of their clients.
Furthermore, solicitors will also have statutory and regulatory obligations to uphold, a breach of which could lead to fines, strike off or even at the most serious, imprisonment.
A director is accountable to a shareholder in a number of ways; their duties will be set out in the Articles of Association as well as being embodied in legislation such the Companies Act 2006 and in addition, they also have to comply with various statutory and regulatory obligations.
What remedies are available to me where there has been a breach of a fiduciary duty?
There are two classes of remedies available – personal and proprietary. The personal remedy would be as against the fiduciary themselves, whereas proprietary is a tracing of property/funds (which can also include an account of monies).
The personal remedy for damages or compensation will aim to put the beneficiary back into the position they would have been but for the breach of fiduciary duty and is subject to the normal rules of causation, foreseeability, mitigation and quantification.
But in addition a remedy in breach of fiduciary duty cases to trace and recover or substitute unlawful gains.
Be aware of the protection in law
This is a very complicated area of law and for those who are placed into a fiduciary position, you should be aware of the very stringent obligations that can be placed upon you and the remedies that can result if you breach those duties (whether intentionally or not).
Beneficiaries should correspondingly be assured of the level of protection that exists in law for their benefit when something goes amiss.
If you would like advice on this area you should contact a specialist solicitor who will be able to advise you on your options.