Read the summary and the most important questions on WS6. Running a trust. Fiduciary duties.

• 1 Who are fiduciaries?

  This is a preview. There are 1 more flashcards available for chapter 1
  Show more cards here

• 1.1 Status-based

• How do status-based fiduciaries differ from fact-based fiduciaries and what are some examples? 

  Status-based fiduciaries always have a fiduciary duty. Examples include not just trustees but also personal representatives, agents, directors, and senior employees with access to confidential information.

• 1.2 Fact-based

• What is the definition of fact-based fiduciaries and what are the examples? What are the main authorities?

  A fiduciary duty can be inferred where X acts for Y and Y reasonably believe that X will act exclusively in Y's interests or in their joint interests (LAC Minerals Ltd v International Corona Resources Ltd); (Murad and another v Al Saraj and another) (apply this if it does not fall into the list of recognised status based fiduciary relationships)

• Explain why the purchaser owed a fact-based fiduciary duty to the sellers in English v Dedham Vale Properties Ltd?

  A couple negotiated to sell land to the purchaser. The purchaser applied and was granted planning permission which increased the value of the land. The purchaser did not tell the couple and bought the land for the original value. It was held that the purchaser owed a fiduciary duty as they appointed themselves as agents of the couple. Therefore, the seller had to account for the profit from the planning permission.

• 2 Breaches of fiduciary duty

• 2.1.1 Self-dealing: Trustee purchases trust property from himself and his co-trustees

  This is a preview. There are 1 more flashcards available for chapter 2.1.1
  Show more cards here

• How has the self-dealing rule been applied?

  Strictly, meaning that the sale is voidable regardless of how fair the transaction was.

• Is it necessary for the courts to consider whether the trustee gained an unfair advantage? What is the main authority for strict application of self-dealing?

  The courts are unwilling to consider whether the trustee has gained an unfair advantage (Ex p Lacey).

• How is self-dealing strictly enforced in Ex p James?

  The purchase of the trust property is not permitted, 'however honest the circumstances', i.e. purchasing in good faith.

• Is the sale immediately void once the trustee has purchased some trust land from himself and his co-trustee?

  No, the sale is valid unless and until the beneficiaries decide to set it aside.

• Explain how the trustee can receive consent from the beneficiaries before buying the trust property?

  The beneficiaries must be sui juris (18 and above and possessing full mental capacity. The trustee must also show that the beneficiaries knew all the relevant facts and that the transaction was fair.

• Will arranging for the trust land to be sold at auction safeguard the sale?

  The sale of trust property by auction will not safeguard the sale. The trustee could choose to sell the trust property when market prices are low.

• Does the retirement of a trustee safeguard the sale of the trust property? Explain the case that was an exception to this rule?

  Disclaiming the trusteeship will not protect the sale as the trustee could have arranged the sale prior to retirement or use price-sensitive information during his position as a trustee. In the exceptional case of (Holder v Holder), a sale to a trustee (who thought that he had renounced the trusteeship and played no part in arranging the sale) was upheld.