[hasi]

hey guys can you give me some pointers?

in which area of equity and trust is this rule based on?

It is a rule of English law that a person is accountable for unauthorised gains made in their fiduciary position. Critically evaluate both the principle and application of this rule, with specific reference to relevant case law.


thank you in advance

[Forum User]

Well, I suppose the area is just 'breach of trust' / 'breach of fiduciary duty' but you don't have to be a trustee to be a fiduciary.

Don't have any notes or anything with me right now but you should consider the various responsibilities of fiduciaries, whether that be a trustee, a solicitor with his client, or a company director with his company.

Few good cases to look at would include the one where a trustee (some solicitor) made an unauthorised profit by investing his own money to enable the trust fund and him together to become majority shareholder in a business and thus run the business more efficiently making both parties a profit. That was held to be a breach of trust *even though the beneficiaries made no loss, in fact they made more*. It does not matter that the trust fund doesn't lose, as the rule is against unauthorised gains. (I seem to remember on the facts that the solicitor did manage to get a quantum meruit for the extra work he had put in assisting the trust, but didn't get to keep his 'profits').

There are probably some company law cases where no loss has been caused but a director has made an unauthorised gain by taking a business opportunity for himself, that he came across during his work for the company. No loss because the company wasn't involved in that area or wouldn't have taken the opportunity for one reason or another, but yet it was an unauthorised gain because there are some fairly strict rules about how a company director must clear his conduct with other company directors before taking advantage of the opportunity. (In fact, all the directors together aren't allowed to form a 'group' and take advantage of the opportunity 'themselves' rather than for 'the company', as this would effectively defraud shareholders).

You could also look at how fiduciary duty is imposed rather arbitrarily on people to avoid unjust enrichment. For example in AG Hong Kong v Reid, Reid (the *former* AG) was found to be a fiduciary when it came to bribes received during the course of his employment - i.e. from criminals who would rather pay him than be prosecuted. Again there was no loss, but rather a prevention of Reid making an 'unauthorised' gain as a result of his position. He was held to have the proceeds of his bribes on constructive trust for Hong Kong.

Note that unauthorised gains being held on constructive trust is a rather important idea as otherwise people could still gain from a breach of fiduciary duty by investing the proceeds and profiting from those investments. With a constructive trust, *all* of the funds will be repayable.

Sorry for the rather rambling answer, I don't have any notes with me and haven't studied Equity enough to remember the case names in detail. Hope it helped a bit.

[jjarvis]

(Original post by Forum User)
Well, I suppose the area is just 'breach of trust' / 'breach of fiduciary duty' but you don't have to be a trustee to be a fiduciary.

Don't have any notes or anything with me right now but you should consider the various responsibilities of fiduciaries, whether that be a trustee, a solicitor with his client, or a company director with his company.

Few good cases to look at would include the one where a trustee (some solicitor) made an unauthorised profit by investing his own money to enable the trust fund and him together to become majority shareholder in a business and thus run the business more efficiently making both parties a profit. That was held to be a breach of trust *even though the beneficiaries made no loss, in fact they made more*. It does not matter that the trust fund doesn't lose, as the rule is against unauthorised gains. (I seem to remember on the facts that the solicitor did manage to get a quantum meruit for the extra work he had put in assisting the trust, but didn't get to keep his 'profits').

There are probably some company law cases where no loss has been caused but a director has made an unauthorised gain by taking a business opportunity for himself, that he came across during his work for the company. No loss because the company wasn't involved in that area or wouldn't have taken the opportunity for one reason or another, but yet it was an unauthorised gain because there are some fairly strict rules about how a company director must clear his conduct with other company directors before taking advantage of the opportunity. (In fact, all the directors together aren't allowed to form a 'group' and take advantage of the opportunity 'themselves' rather than for 'the company', as this would effectively defraud shareholders).

You could also look at how fiduciary duty is imposed rather arbitrarily on people to avoid unjust enrichment. For example in AG Hong Kong v Reid, Reid (the *former* AG) was found to be a fiduciary when it came to bribes received during the course of his employment - i.e. from criminals who would rather pay him than be prosecuted. Again there was no loss, but rather a prevention of Reid making an 'unauthorised' gain as a result of his position. He was held to have the proceeds of his bribes on constructive trust for Hong Kong.

Note that unauthorised gains being held on constructive trust is a rather important idea as otherwise people could still gain from a breach of fiduciary duty by investing the proceeds and profiting from those investments. With a constructive trust, *all* of the funds will be repayable.

Sorry for the rather rambling answer, I don't have any notes with me and haven't studied Equity enough to remember the case names in detail. Hope it helped a bit.

The solicitor case is Boardman v Phipps, I think.

The AG of HK was certainly a fiduciary to the government. Holding that a civil servant is a fiduciary wasn't the controversial point in Reid (see Reading v AG). The constructive trust issue deals with the slightly different question of remedies/accounting. Worth noting that he was the AG when he received the bribe, so he was certainly acting in breach of his duties.

OP, you really need to look at Sinclair Investments v Versaile Trade Finance Ltd, which is the most recent judgment on secret/unauthorised profits and probably supersedes Reid, at least for the time being.

[hasi]

thank you to both of you this info helped me alot and i guess i know where to start now. again thank you.

[Festina lente]

Conaglen, Fiduciary Loyalty is a pretty good read for this sort of question. I second the reference to Sinclair, too.

[jjarvis]

(Original post by Festina lente)
Conaglen, Fiduciary Loyalty is a pretty good read for this sort of question. I second the reference to Sinclair, too.

He's lecturing us on this at the moment. He's fantastic.

[hasi]

(Original post by Festina lente)
Conaglen, Fiduciary Loyalty is a pretty good read for this sort of question. I second the reference to Sinclair, too.

thank you im such a tubelight i was thinking what is conaglen and sinclair but just figured out its a book thank you i will have a look at it

[Forum User]

JJarvis, are you doing the Cambridge LLM? Commercial Equity course? It sounded really interesting from the subject presentation at least !

[Festina lente]

(Original post by jjarvis)
He's lecturing us on this at the moment. He's fantastic.

Wow! I really enjoyed the book much better written than many others. I can imagine his lectures would be similar!

[jjarvis]

(Original post by Forum User)
JJarvis, are you doing the Cambridge LLM? Commercial Equity course? It sounded really interesting from the subject presentation at least !

No, I'm on the BA. I thought commercial equity looked interesting when I glanced over the LLM modules (not that I applied for the LLM). He's lecturing us in plain old equity at the moment. We have the other two commercial equity lectures at some point, as well.

(Original post by Festina lente)
Wow! I really enjoyed the book much better written than many others. I can imagine his lectures would be similar!

Yes, his lectures are very clear and well-organised. He disagrees with plenty of people on some aspects of fiduciary doctrine, but his explanations are coherent and seem to accord with principle as well as with the case law. If you like his work, he wrote a really interesting article on backwards tracing in the 2011 LQR. (Did you do equity recently enough to read it? Or did you read it while on the BCL? Or just out of interest in the subject? I know you did the BCL, but can't remember how recently you graduated.)

[Festina lente]

(Original post by jjarvis)
Yes, his lectures are very clear and well-organised. He disagrees with plenty of people on some aspects of fiduciary doctrine, but his explanations are coherent and seem to accord with principle as well as with the case law. If you like his work, he wrote a really interesting article on backwards tracing in the 2011 LQR. (Did you do equity recently enough to read it? Or did you read it while on the BCL? Or just out of interest in the subject? I know you did the BCL, but can't remember how recently you graduated.)

Just out of interest (sad I know). The backwards tracing article sounds even more fun, thanks, I shall look out for it!

[Life-by-Law]

Hi everyone, im currently working on a seen question but i jst need confirmation on the points!!

So, 1st thing is about a beneficiary who requests an explanation for her payment (which was a discretionary trust) and goes on to request a copy of the trusts accounts for the past 3 years..... I wld go in the direction of answering with Watts' explanation

'One of the most significant duties is the duty to render accounts to the beneficiaries as to their management of the trusts affairs. The accounts are required to give and accurate record of the trustees’ management of the trust together with supporting documentation such as reciepts'

2nd scenario - a business that a trustee invested in is detiorating and amidst the detioration the trustee had failed to respond to letters sent by the business manager.nd when one trustee was questioned, he claimed he knew nothing about the project as it was the other trustees project.... so here, clearly, sufficient management or care has taken place as the trustee didnt respond or take adequate measures to prevent a close-down... ALSO, the other trustee has not taken sufficient care either as he is required to monitor the assetts .

3rd scenario is where the trustee who clamied to kno nothing.. owns a business with the similar theme a few doors awayhis business is doing well though. .... this trustee has maxde a clear breach as he's clearly competeing and therefore not acting in the best interest of the beneficaries.


What do you guys think? am i on the right track??

[sabiah]

(Original post by hasi)
hey guys can you give me some pointers?

in which area of equity and trust is this rule based on?

It is a rule of English law that a person is accountable for unauthorised gains made in their fiduciary position. Critically evaluate both the principle and application of this rule, with specific reference to relevant case law.


thank you in advance

The fidicuary duties/breach of duties; duty of loyalty/personal gain/conflict of interests are few of many : )