A fiduciary duty can be defined as the highest standard of care. Any person who owes the fiduciary duty to another person is known as the fiduciary, and the person to whom the duty is owed is known as the beneficiary or the principle. A fiduciary can be described as a person having ethnic or legal relationship of trust with the principle (other person). In general it is the responsibility of the fiduciary to take care of the money or assets belonging to another person. One party such as the directors are in a fiduciary relationship with the company as they have the duty of ensuring that they take proper care of the assets and money of the company.
In the case of Bristol and West Building Society v Mothew [1996] EWCA Civ 533 it had been stated by the court that a fiduciary is any person who has taken the responsibility of acting on behalf or for another person in a specific matter in situation which establishes a relationship of confidence and trust. Thus this case signifies that any person who has the responsibility of managing the money of any other person has to ensure that they act in the best interest of such person.
Purpose of memorandum
In this memorandum It has to be determined that whether an equitable fiduciary relationship between Jan and Peter, Jan and Marijke and Jan and Herman existed with reference to the circumstances arising between them. The memorandum also discusses what equitable fiduciary duties Jan owes to the three people in the light of the facts provided in the case study. The memorandum also analyses the breach of any fiduciary duty and the remedies available against the breach.
Existence
In the case of Coomber v. Coomber it has been stated by the court that the expression fiduciary duty refers to only those duties which are specific to fiduciaries and when these duties are breach they attract legal consequences which are not same as the consequences which arise upon the breach of other forms of Duty.
Further in the case of Coomber v. Coomber [1911] it had been stated by the court that not every Breath of Duty committed by your fiduciary is to be considered as a fiduciary duty breach. It has also been stated by the court in the case of dash that every legal claim which comes out of Afridicherie relationship will not result in a breach of fiduciary Duty.
A fiduciary duty is a highest standard of care in law or equity. Any person who has been determined to be a fiduciary is expected to be totally loyal to the person to whom such duties owed.
In the case of Henderson v Merrett Syndicates Ltd [1995] 2 A.C. 145 it has been stated by the court that for the purpose of a fiduciary duty to be identified it has to be shown the fiduciary had a representative capacity like a trustee in a fiduciary relationship. In addition where there is existence of remedy in other legal areas like contract law and tort law then the court would not very eager to recognise a fiduciary relationship between the parties.
Therefore it can be stated that a fiduciary relationship will exists between any person on whom the other person relies through trust and confidence and provide such person with the power of managing their assets. In addition fiduciary responsibility would not be created in situation where there or other forms of law such as contract law and tort law dealing with the situation.
Types of fiduciary duties
As identified by Maguire & Tansey v Makaronis [1997] HCA 23, there are a few specific duties which are specifically owed by the fiduciary to the beneficiary or the principal. These duties are as follows:
A fiduciary would have the liability to account in case it is proven that he has acquired a profit or gain from the relationship with the beneficiary through using three methods. First, there was a conflict of interest and duty. Second there was a conflict of Duty with another person. Third by taking advantage of the position of the fiduciary also the duty may be breached.
According to the duty of conflict of interest a fiduciary has the obligation of not to conflict with any other fiduciary duty. This conflict can mostly come up in situation where the fiduciary is acting for more than one client and the interest of the clients are contradictory to each other. For instance as provided by the case of Farrington v Rowe McBride & Partners situation where a lawyer has made an attempt to represent both the defendant and the plaintiff in the same matter it would be a breach of fiduciary duty and a conflict of Duty. The principal rule which has led to the formation of this duty is that the fiduciary cannot make the beneficiary’s interest the top priority if he has to beneficiaries and their interest are contradictory to each other.
This rule as provided by the case of Keech v Sandford simply states that no profit can be made by a fiduciary from the position provided to them by the beneficiary. This also includes any profit or benefit which may also not be related to the position of the fiduciary but has come because of the opportunity provided by the fiduciary position. In case there is a profit which is made by the fiduciary, it is the responsibility of the fiduciary to report the same to the beneficiary that they are making a profit because of the position provided to them by the beneficiary. The benefit may be kept by the fiduciary in case the beneficiary has provided a fully informed consent. In case the requirements and not meant then the court would deem that the fiduciary is holding the property on the constructive trust for the beneficiary. In the case of Lister v Stubbs it has been provided that secret Commission also falls under the rule of no profit. The fiduciary would be holding the commission in constructive trust for the principal.
In the case of Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Limited (2007) it had been stated by the court that a contract may include a clause through which an individual is allowed to avoid all fiduciary obligation within the course of dealing and does have the right to make personal profit or deal with other parties and continue to do task which may have been in conflict of interest otherwise if the clause was not present. However in the case of Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] it has been stated by the court that this sufficiency of disclosure has to depend on the Intelligence and sophistication of the person to whom the disclosure must be made.
In addition in the case of Armitage v Nurse [1997] it had been stated by the court that the liability of the fiduciary of acting in good faith where the fiduciary has acted in a dishonest or fraudulent manner cannot be avoided by incorporating an exclusion clause. This decision had been applied in Australia in the case of Reader v Fried .
Remedies
There are various remedies present in situation where a fiduciary duty has been violated. These include compensatory damages as per the case of Nocton v Lord Ashburton [1914], accounts of profit as provided in the case of Dart Industries Inc v Decor Corporation Pty Ltd [1993] and constructive trust as stated in the case of Giumelli v Giumelli [1999]. The fiduciary may be liable to pay damages to the principal in case they have suffered loss because of breach of Duty by the fiduciary. In addition the profit made by the fiduciary would be held on constructive trust on behalf of the beneficiary in case fiduciary duties have been violated.
Jan and Peter
It has been provided through the case study facts that Pieter has purchased 1000 ordinary shares at a price of $2 per share pursuant to the advice provided by Jan in the column of the Australian Business Times. Pieter is a avid reader of Jan’s column and also a subscriber of the newspaper. It has been provided through the provisions of a fiduciary duty discussed above that fiduciary relationship will exists between any person on whom the other person relies through trust and confidence and provide such person with the power of managing their assets. In the present situation Pieter has relied on the advice provided by Jan to purchase the the shares in the company. He had trust and confidence on the advice provided by Jan. Thus there is a fiduciary obligation.
In the present situation the fiduciary duty which is owed by Jan to Pieter is to not make any secret profit from the relationship. He should have informed Pieter via the newspaper advertisement itself that he has an interest in the company and he would gain from the increase in the share price of the company. However there has been a failure on the part of Jan to convey such information to Pieter. Jan has made a secret profit. Through the application of the case of Giumelli v Giumelli it can be stated that the profit received by Jan from selling of the shares would be held on constructive trust on behalf of the beneficiary Pieter as he had made secret profit without consent of the beneficiary.
Jan and Marijke (Exclusion clause)
The facts of the case study provide that Marijke is a 75 year old woman. She has also read the advertisement in the news paper about the investment. She is alone and has no one who can provide her advice. She had also made an appointment with Jan in relation to investment plans also after receiving a flyer sent by Jan stating himself as a “financial and wealth specialist”. As she had visited the Jan for financial advice and acted upon the advice of Jan she becomes the beneficiary and Jan becomes the fiduciary. In the situation the fiduciary duties which would be owed by Jan to Marijke include the duty of not making any secret profit, and the duty to avoid any conflict of interest. However in the contract which has been signed by Marijke there is an exclusion clause which is excluding the liability of Jan as a fiduciary. As per the case of ASIC v Citigroup Global Markets, exclusion clause can allow the fiduciary to avoid all fiduciary obligations within the course of dealing and does have the right to make personal profit or deal with other parties and continue to do task which may have been in conflict of interest otherwise if the clause was not present. Thus the exclusion clause will also limit the liability of Jan as a fiduciary. However in case of Farah Constructions Pty Ltd v Say-Dee Pty Ltd it has been stated by the court that this sufficiency of disclosure has to depend on the Intelligence and sophistication of the person to whom the disclosure must be made. In the given situation Marijke is 75 years old and has no intelligence of understanding the nature of the clause. Thus the clause will not be applicable. In addition the clause will also be applicable if the fiduciary is not acting in good faith. In this situation Jan also is not acting in good faith as he is making secret from the company. Thus the clause would not be applicable.
Jan and Marijke (Breach of duties)
In the present situation it is also clear that there has been a breach on the part of Jan with respect to his fiduciary duties owed to Marjike. This is because Jan owes to Marjke the duty of not making any secret profit and the duty to avoid any conflict of interest. In this situation, Marijke purchased $6,000 worth of Mercury Debenture on the advice of Jan. For this purchase Jan got a commission which he did not disclose to Marijke. Thus he breaches the duty of not making a secret profit. In this situation the commission received by him will be held as constructive trust on behalf of beneficiary Marjike as a remedy.
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