Part 1
Fiduciary relationships
The fiduciary duty is attached with properties of trust. Fiduciary relationship is called relationship of confidence that suits perfectly with traditional idea of equity itself. The relationships have many sides. As per this fact, fiduciaries should have understanding that a person who involved in specific relationship where there is exception by equity courts of high level of faith or accountability than on behalf of fiduciary. The fiduciary relationship is owed by fiduciary to the beneficiary. The trustee should maintain the relation of confidence with beneficiary. The equity has anticipations as how trustee will exercise powers and discharge his duties.
Fiduciary relationship includes trustee and beneficiary relationship. In fiduciary relationship, it is required by the trustees to perform wholly in beneficiary’s interest in respect of all matters in the scope of trust. It involves the way by which trustee deals and handles the property of trust. It also includes the way of managing the direct and indirect accrued incomes and benefits. The trustees are required to take advice from beneficiaries. They are required to accept instructions from beneficiaries.
In case Queensland Mines Ltd v Hudson, Hudson was appointed as managing director in Queensland Mining Ltd. The company thought to establish iron ore mining operations in Tasmania. Hudson took essential licences to establish the iron ore mines on the behalf of Queensland Mines Ltd. Later, the company denied to give funds because there was financial difficulties in the company. Hudson gave resignation from the post of managing director of the company and developed mines on his behalf with the knowledge of others directors of Queensland Mines Ltd. After eleven years, company sued Hudson for breach of fiduciary duty. The judgement has given in the favour of Hudson. Hudson was not liable because the establishment of mine was rejected by company itself. The directors had full knowledge about this.
The fiduciary relationship based on this fact that powers, obligations and duties are to be performed in other’s interest. The activities in relation to fiduciary obligation are controlled by others. The fiduciaries are not agent or mediator of beneficiaries of the fiduciary obligations. Fiduciaries are legal actors. They will be responsible in negligence as consequences in which they fail to perform their duties. Negligence can be measured by the standards of the person in the same position. Industrial Development Consultants Ltd v Cooley is good example on corporate opportunities doctrine. Cooley was appointed as architecture in Industrial Development Consultants Ltd. Cooley gave resignation to the Industrial Development Consultants Ltd and made contract with gas board. Cooley said that gas board did not want to enter into contract with company. Industrial Development Consultants Ltd filed a case against Cooley. The court said that Cooley breached his fiduciary duty because the contract was executed in personal capacity. Cooley was liable for the personal benefit.
The breach of fiduciary duties can be determined in different way. It is something different matter or problem. The solicitor is considered as fiduciary towards their clients. They are required to perform duty to care to the clients as professional consultant. The solicitors should act in the good faith. They are required to perform their duties in interest of clients. In case Boardman v Phipps, a solicitor observed the chance in account of corporation. The solicitor used this opportunity with knowledge of trustees and made profits. It was held by court that the solicitor was liable for his personal benefit because solicitor used the details for personal profit. The solicitor breached his fiduciary duty. The trustees did not give consent to profit.
The fiduciaries have degree of freedom of judgement which are required to be respected by court. The fiduciary can be disqualified if they exercise their power and duties in their own interest. They are required to perform their duty with loyalty. In case Regal (Hastings) Ltd v Gulliver, the directors purchased the shares with the intention of sell them at higher prices to make profit. They said that company had no funds to acquire the shares. It was held by the court that the directors and officers were in breach of duties. They violate their duty of loyalty.
In case Dickie v Torbay Pharmacy (1986) Ltd, it has been established that if joint association includes mutual confidence in each other then. The fiduciary relationship can be established despite the fact of partnership agreement. It was held by the court that in co-venture ship, fiduciary relationship can be occur.
A joint venture is called as temporary partnership. It is created to exploit specific chances or to carry out particular business. The fiduciary duties exist when one party places faith and confidence in other party. In case Chirnside v Fay, parties to the joint venture have a duty of loyalty and integrity. It is not required to establish partnership relationship. Chrinside disqualified Fay from joint venture. Chrinside was liable for some part of profit to Fay. The court gave the reasons to make differences between damages granted for breach of duties under common law and account of profit for breach of fiduciary duty. It was held by the court that there was existence of fiduciary relationship.
When a person in position of trust accepts bribe, then it can be tracked in any property purchased and is held on the constructive trust for beneficiary. Attorney-General for Hong Kong v Reid is good example, in which Charles Warwick Reid was New Zeland and Hong Kong Crown Prosecutor and public prosecution’s acting director. Thus Reid was in the fiduciary relationship with government of Hong Kong. Mr Reid accepted bribes to hide actions of criminals. Reid used bribe money to acquire land in New Zealand. Some bribe money was kept by wife of Reid and some of bribe money was given to solicitor of Reid. It was held by Privy Council that bribe money was held on trust by the Reid. It was to be given to government of Hong Kong. It was necessary to make sure that person in place of trust could not earn profit from the offence or misconduct. It was held that the person who accepts bribe in breach of duty, is required to return bribe money to government or relevant authority.
FHR European Ventures LLP v Cedar Capital Partners LLCis landmark decision given by UK court. This case states that bribe or secret commission which accepted by the agent or mediator, should held on trust for his principal. In this decision court overruled Sinclair Investment (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347 in the favour of Attorney General for Hong Kong v Reid.
In case Surrey v Speedy, the daughter sued against the mother because her mother had adopted her. The daughter had view that it was breach of fiduciary relationship. The daughter said that her mother breaches fiduciary duty towards daughter. It was held by high court that this case would be referred in some other jurisdiction.
In case L v Robinson, it was held that doctor or therapist or counsellor were under the obligation to perform fiduciary duty towards the patient. The doctors, therapists and counsellors had duty to not to involve in sexual activity with patient.
In case Watson v Dolmark, Watson had sold domestic goods in the Australia. Dolmark also started to sell products on its own behalf. Dolmark did not pay any royalty to Watson. The Watson sued Mr Davies who was the proprietor of Dolmark. Watson sued that Davies breached the fiduciary relationship. It was held by the court that fiduciary relationship exists where claimant delegates to defendant property including intangible property such as confidential information and trusts on offenders to deal with property for the benefit of claimant.
Part 2
Basis of findings in Proprietors of Wakatu v Attorney General [2017] NZSC 17
Following are the basis of key findings by the Supreme Court in decision Proprietors of Wakatu v Attorney General-
Limitations of finding
Strength of finding
Conclusion:
As per the above analyse, it can be concluded that fiduciary relationship requires the relationship of faith and confidence. The parties are required to perform obligations with honesty and loyalty. The trustees should not put their personal interest in front of interest of others. It is not required by trustees or solicitors to make secret profit without any information despite of action in good faith (bona fide). In the performance of all obligations and powers, trustees are required to perform in the best interest of beneficiary or beneficiaries of trust. Trustees should always act exclusively for beneficiaries. But it does not mean trustees are bound to take advice and instruction from the beneficiaries of the trust.
The fiduciaries have key role around the equity. The equitable authority has established mechanism to control conduct of people in relation to other persons. Generally fiduciaries are called persons who are subjected to some specific equitable duties to others as per the principle of equity rather than private agreement. It is not required by individual to describe himself as fiduciary because this is issue of legal intervention. It is all about relationship between persons that court will enforced the fiduciary relationship. Usually, this is relationship of disproportion, in which one party has powers against the other party in respect of property or business affairs.
In this essay the fiduciary relationship with help of case law is discussed and critically examined.
A Cases
Queensland Mines Ltd v Hudson [1978] 18 ALR 1
Law home, Fiduciaries, Equitable fraud and unconscionability (2017) <https://www.vanuatu.usp.ac.fj/courses/la302_equity_trusts_and_succession_1/LA302_topic5.html>
Proprietors of Wakatu v Attorney General [2017] NZSC 17
Watson v Dolmark [1992] 3 NZLR 311
L v Robinson [2000] 3 NZLR 499
Surrey v Speedy [2000] 2 SCR 860
Attorney General for Hong Kong v Reid [1993] UKPC 36
Sinclair Investment (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347
FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45
Chirnside v Fay [2006] NZSC 68
Dickie v Torbay Pharmacy (1986) Ltd [1995] 3 NZLR 429
Regal (Hastings) Ltd v Gulliver [1942] UKHL
Boardman v Phipps [1967] 2 AC 46 1967
Industrial Development Consultants Ltd v Cooley [1972] 1 WLR
B Other
Law home, Fiduciaries, Equitable fraud and unconscionability (2017) <https://www.vanuatu.usp.ac.fj/courses/la302_equity_trusts_and_succession_1/LA302_topic5.html>
LexisNexis, Wills and Succession (2018) <https://www.lexisnexis.co.nz/en-nz/products/wills-and-succession.page>
Law Teacher, Creation of Trust (2018) < https://www.lawteacher.net/free-law-essays/equity-law/creation-of-a-trust-equity-law-essay.php>
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