Soton Equity and Trusts - alastairhudson.com

(F) The concept of fiduciary responsibility.
Reading: Hudson, section 2.3.3; and the essay comprising
chapter 14.
A trustee is an example of a fiduciary (along with, inter alia, company directors, agents, and
partners “acting in common with a view to profit”). So, it is important to understand what the
concept of fiduciary responsibility entails.
‘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. The 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.’
- Bristol and West Building Society v Mothew [1998] Ch 1 at 18, per Millett LJ
"A person will be a fiduciary in his relationship with another when and in so far as
that other is entitled to expect that he will act in that other's interests or (as in a
partnership) in their joint interests, to the exclusion of his own several interest."
Paul Finn, "Fiduciary Law and the Modern Commercial World",
in Commercial Aspects of Trusts and Fiduciary Relationships
(ed. McKendrick, 1992), p. 9.
See also: Finn, Fiduciary Obligations (1977);
Finn, "The Fiduciary Principle", in Equity, Fiduciaries and Trusts (ed. Youdan, 1989);
A.J. Oakley, Constructive Trusts (1997), Ch. 3;
A.J. Oakley (ed.), Trends in Contemporary Trust Law (1996) generally.
(G) The benefits of trusts
Reading: Hudson, section 2.5
A framework for understanding change in the law of trusts: three conceptions of the
trust - moralistic, individual property, capital management: see Cotterrell, "Trusting
in Law" (1993) 46 CLP 75, 86-90.
Proprietary right in the trust property for beneficiaries, not simply a personal claim
against the trustees.
Provides preferential rights in an insolvency. Important in giving priority for
beneficiaries in the event of the trustee’s bankruptcy.
A range of equitable remedies enforceable against the trustees and any third parties
by the beneficiaries in the event of loss.
Flexibility – useful in commercial and domestic situations, as considered below.
Usefulness in tax planning and estate planning generally.
A trust is a “gift over the plane of time” giving the settlor flexibility and control.
Trusts constitute the most significant players in UK securities markets in the form of
pension funds and investment funds (like unit trusts).
(H) Fundamental principles of trusts: the obligations of trustees and the rights of
beneficiaries
Reading: Hudson, section 2.4
**Westdeutsche Landesbank v. Islington [1996] 2 All E.R. 961, 988. [1996] AC 669
*Saunders v Vautier (1841) – the rights of the beneficiary
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