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Contents TOPIC 3 – FIDUCIARY RELATIONSHIPS and BREACH of FIDUCIARY DUTY

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Contents TOPIC 3 – FIDUCIARY RELATIONSHIPS and BREACH of FIDUCIARY DUTY Contents TOPIC 3 – FIDUCIARY RELATIONSHIPS AND BREACH OF FIDUCIARY DUTY ......................................................... 2 IS THERE A FIDUCIARY RELATIONSHIP? ................................................................................................................. 2 SCOPE OF FR .............................................................................................................................................................. 7 BREACH OF FD ............................................................................................................................................................ 9 DEFENCES ................................................................................................................................................................. 15 THIRD PARTY LIABILITY – THE RULE IN BARNES v ADDY ................................................................................... 16 REMEDIES .................................................................................................................................................................. 21 TOPIC 4 – PERSONAL REMEDIES IN EQUITY ............................................................................................................ 21 SPECIFIC PERFORMANCE ....................................................................................................................................... 21 INJUNCTION AND SPECIFIC DELIVERY .................................................................................................................. 23 DECLARATIONS ......................................................................................................................................................... 24 EQUITABLE RESCISSION ......................................................................................................................................... 25 ACCOUNT OF PROFITS ............................................................................................................................................ 29 EQUITABLE COMPENSATION .................................................................................................................................. 32 DAMAGES IN LIEU OF SP ......................................................................................................................................... 35 COMMON LAW PRINCIPLES AND EQUITABLE REMEDIES? ................................................................................. 37 TOPIC 5 – EQUITABLE PROPRIETARY REMEDIES ................................................................................................... 38 CONSTRUCTIVE TRUST ........................................................................................................................................... 39 EQUITABLE LIEN ....................................................................................................................................................... 42 BANKRUPTCY ............................................................................................................................................................ 43 TRACING ..................................................................................................................................................................... 43 TOPIC 6 - ASSIGNMENTS ............................................................................................................................................. 50 VALID LEGAL ASSIGNMENT ..................................................................................................................................... 50 VOLUNTARY ASSIGNMENTS OF LEGAL PROPERTY THAT ARE INCOMPLETE AT LAW .................................. 52 ASSIGNMENTS OF PRESENT PROPERTY THAT ARE RECOGNISED ONLY IN EQUITY ................................... 55 ASSIGNMENTS OF FUTURE PROPERTY ................................................................................................................ 56 (NOT EXAMINED) TOPIC 2 – BREACH OF CONFIDENCE ......................................................................................... 60 SPECIFICITY............................................................................................................................................................... 60 QUALITY OF CONFIDENCE ...................................................................................................................................... 61 CIRCUMSTANCES OF ACQUISITION ....................................................................................................................... 65 BREACH OF DUTY ..................................................................................................................................................... 67 DEFENCES TO BOC .................................................................................................................................................. 69 1 3. Turning on scope (Patrick’s favourite way to think about it) – at the time, it was huge – not just in terms of money – huge as news in the whole country – prominent falling out and split in corporate Australia (headline news) At all times, the board knew what Hudson was doing. Hudson wasn’t speaking about it behind their back – Hudson had tried and tried to get the board to agree with him. He resigns and very publicly takes up this thing himself Just as in Spincode, where Patrick suggested that the solicitors can’t unilaterally quit and remove the vulnerability on behalf of the plaintiff, so here the company can’t unilaterally hang on, even when it knows that Hudson has walked away and knows why and how that’s happened and everyone can see that there is no longer a reposing of QLD Mine’s vulnerable interest into the hands of Hudson Anti spincode- split between the parties so public and well known on all parts and so deliberate that it can no longer be said that QLD Mines has any vulnerability on Hudson – they have taken back everything from him and he has willingly handed it back and done his own thing BOARDMAN v PHIPPS Boardman was the solicitor to the trustees. He used information acquired as a fiduciary to purchase shares in a company as he and Tom Phipps attempted to improve the value of the shares held by trust. These shares couldn’t be purchased for the estate, because of the trust terms). He made a profit for himself and the beneficiaries. John Phipps then sued. Majority held that Ds had acted in BoFD. JUDGEMENT No defence of consent because there was more than one trustee and he only discussed with one trustee. The other trustee was old Mrs Phipps. The matter hadn’t been discussed with her in part because she wasn’t competent and so couldn’t have given consent even if asked No one went to a guardianship court either setting her aside as trustee or giving consent on her behalf Couldn’t rely on consent because only spoke to one trustee not all In trust situation, even if trustees had not consented, if all the beneficiaries consented, that would be enough because trustees act in the interest of the beneficiaries – but there wasn’t consent from all the beneficiaries because one of the beneficiaries is actually suing So no consent because right people weren’t approached CONCLUDE – BREACH OF FD OR NOT? THIRD PARTY LIABILITY – THE RULE IN BARNES v ADDY P may also be able to hold X liable as a third party (TP) for BoFD under the ‘two-limbs’ of Barnes v Addy. Liability under the first limb arises when the D has knowingly received property in breach of fiduciary duty. Liability is imposed under the second limb on a D who knowingly assists the commission of a breach of fiduciary duty Note however, that third parties can be held accountable on other equitable grounds, for example for knowingly inducing or procuring a breach of fiduciary duty Deliberate involvement in the management of a trust by a non-trustee may result in the non trustee being held accountable in equity as a trustee de son tort (by reason of his own wrongdoing) A CL claim can sometimes be brought in unjust enrichment against the third party which does not require proof of a breach of fiduciary duty (see Fistar v Riverwood Legion; Great Investments; Warner) NOTE: this is not a secondary claim – if a trustee has committed breach of trust with assistance of his solicitor, you can seek compensation for loss from the solicitor rather than the trustee. NOTE: purely personal cause of action (Barnes v Addy) In cases where fiduciary breaches are committed by a corporation formed and controlled by the fiduciary – eg formed for sole purpose of misappropriating trust property – then the corporation is regarded as the ‘alter ego’ of the trustee. So corporation is regarded as the trustee, not as third party (Farah). BARNES v ADDY FACTS Addy was a co-trustee of a family trust and appointed Barnes as the other trustee. Barnes improperly diverted trust money into his own business. Beneficiaries brought proceedings against A and the two solicitors who assisted in the breach (drawn up the deed of appointment, drafted some of the documentation required to make the appointed). FIDUCIARY LAW IS FAULT BASED, confirmed by HCA in Farah JUDGEMENT Lord Distinguished between agents who “receive and become chargeable” with trust property and agents Selborne who “assist with knowledge in a fraudulent and dishonest design on the part of the trustees” LC 16 constructive notice – fiduciary gives a gift to a friend or family member and the family member says that’s a lovely gift I
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