Leading advice on Fiduciary Duties
The law imposes obligations on people assume responsibility to exercise power on behalf of others. It recognises that, when the person on whose behalf the power is exercised is especially vulnerable to the misuse of that power, that person should be protected from misuse of that power. These obligations are known as fiduciary duties.
Classes of Fiduciary Duties
Some of the most well-known classes of people upon whom fiduciary duties are imposed are trustees, company directors, executors, and lawyers. A company has no capacity to act on its own other than through its directors and is wholly dependent on them to exercise their responsibilities in its best interests. Likewise, the beneficiaries of trusts or estates have no legal title to the property of the estate and rely on the trustee or executor to properly exercise their powers to hold, manage and distribute the property as directed by the trust deed or will. Lawyers often hold money on trust, but are often also empowered to take actions that are ultimately legally binding on clients.
The categories of fiduciary duty are not closed. Fiduciary duties often exist between business partners, adult guardians and their wards and agents and their principals. The terms of many kinds of contracts might create fiduciary duties, including employment contracts, brokerage contracts, joint ventures, distribution contracts, franchise agreements or managed investment schemes. Careful examination of the terms of the contract will reveal whether the relationship makes one party vulnerable to the misuse of power by another.
Some of the kinds of duties that can be imposed upon fiduciaries include:
- a duty to act in the best interests of another
- a duty to disregard the fiduciary’s own interests
- a duty to exercise care and skill
- a duty to disclose conflicts of interest or conflicts of duty
- a duty to refrain from making decisions where a conflict exists
- a duty to invest money
- duties of confidentiality
The difference we make
Charities and not-for-profits registered as charities, as well as some other forms of corporate entity, have additional statutory or regulatory obligations to systematise steps to ensure that fiduciaries comply with duties and ensure that delinquent fiduciaries are prevented from further breach or removed. We are experienced advising clients about those duties and assisting clients to remove office-holders that have breached their duties.
There is a broad range of remedies available to a person who has been wronged by fiduciaries. Fiduciaries can be required to reimburse the trust or the person from whom monies have been misappropriated. They can also be required to act as though they had not breached their duties by paying up or disgorging any profits they may have wrongfully received because of the breach. Action can be taken to discharge the fiduciary from his or her position and, if necessary, replace the fiduciary with someone more reliable. Any assets misused by the fiduciary can be traced and, in some cases, recovered from others. There may also be other statutory remedies or offences that can be pursued. We have advised clients how to identify the right remedy, or range of remedies, and take effective action to obtain them.
In recognition of the complexity of the responsibilities that some fiduciaries take on, some regimes have been set up to enable fiduciaries to apply to court for advice or directions about the administration of their duties. Where the court gives such judicial advice or directions, a fiduciary will be protected from suit by carefully following it. We have experience acting for a range of different parties to applications for judicial advice or directions.
Some examples of the kinds of services we provide to help create, identify, manage or enforce fiduciary duties include:
Structuring and setting-up:
- incorporated associations
- letters patent entities
- unincorporated associations or mutuals
- not-for-profits and charities
- managed investment schemes
Drafting bespoke contracts, including for:
- the sale of business
- the sale of property
- business transactions
- shareholders agreements
- joint ventures
- mergers and acquisitions
Drafting employment contracts
Drafting constitutions and corporate agreements
Drafting policies and procedures
Advising as to the existence and nature of fiduciary duties
Advising as to the removal of:
- management committee members
- other delinquent fiduciaries
Governance training and advice
Complaints to disciplinary bodies
Litigation and dispute resolution
Applications for judicial advice or directions