The concept of fiduciary relationships law equity essay

Programme: Bachelor of Arts (Hons) in LawProgramme Code: CW_BRLLW_B_4CarlowCW_BKLLW_B_4WicklowCW_BXLLW_B_4 Wexford


Assignment weighting: 20%

Submission Date: 4th March 2013

Lecturers: Ms Lorraine Gillick (CW)Ms Mary Bunyan (WX)Assignments must be submitted to your lecturer on night indicated – please ensure that they are signed in. LLL extension policy applies as outlined in the student handbook. Extensions will only be granted under exceptional circumstances and by those indicted below: Brian McQuaid, Anne Meaney or John O’Neill (LLL Carlow & Wicklow)Allison Kenneally (LLL Wexford)Assignments submitted late (without extension granted) will be corrected but this mark will not be included for grading purposes. All script assignments must be submitted via TurnItin through blackboard.

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An Individual declaration is required by each student for joint projects. Where projects are submitted electronically, students are required to type their name under signature. The Institute regulations on plagiarism are set out in Section 10 of Examination and Assessment Regulations published each year in the Student Handbook.‘ A Trustee is a fiduciary. He owes elaborate fiduciary duties to the beneficiaries under the trust. He may breach his fiduciary duties in a number of ways, for example, by making unauthorised personal profits, by taking unauthorised remuneration, or by placing himself in a position of conflict of interest’. Discuss this statement with reference to case law. Word count: 2000 – 2500


To consider the question and nature of the duties alluded too, it is first helpful to consider the legal meaning of the key terms in the question posed; i. e.


Precise definition of the modern concept of ‘ Trust’ has caused many difficulties for writers on the subject mainly because of the wide variety of situations in which it has come to be applied[1], Perhaps the most comprehensive definition and one approved of in Snell’s Equity is that suggested by Keeton and Sheridan as follows;” A trust is a relationship which arises wherever a person (called the Trustee) is compelled in equity to hold property, whether real or personal, and whether by legal or equitable title, for the benefit of persons (of whom he may be one and who are termed beneficiaries) or for some object permitted by law, in such a way that the real benefit accrues, not to the Trustee, but to the beneficiaries or other objects of the Trusts”.[2]There are several ways in which Trusts can be classified, for example, by the manner of their creation, by virtue of their objects which they seek to benefit or the nature of the duties which they impose on the trustee, this has resulted in many species of Trusts being developed and placed in various legal categories , all have these have their own distinguishing legal features & characteristics and further discussion on these is beyond the scope of the question posed above, suffice to say that all fall within the definition above and all place certain fiduciary duties on Trustees. Trust Law although originating from the Courts of Equity in response to the sometimes harsh result of strict application of the common law, and as a result of tax avoidance schemes of the feudal system (Uses) , is now governed in Ireland by a variety of legislation.[i]3


Although, as will be seen below, a precise definition is not possible, a fiduciary relationship has been described, in broad terms, as:―one in which a person undertakes to act on behalf of or for the benefit of another, often as an intermediary with a discretion or power which affects the interest of the other who depends on the fiduciary for information and advice.[4]The concept of ‘ fiduciary relationships‘ is arguably one of the most important to have arisen from the courts of equity. Although much has been written on the nature and scope of fiduciary relationships, a precise definition of the term fiduciary‘ has proved elusive.[5]Finn has described the term fiduciary as one of the most ill-defined, if not altogether misleading terms in our law[6]. Although there have been attempts at providing a definition[7], courts and commentators have concluded that the term defies definition[8]and some have gone even further and argued that attempts at a definition are unwise or inappropriate.[9]Shepherd concluded that a fiduciary relationship exists whenever any person receives a power of any type on condition that he also receive with it a duty to utilise that power in the best interests of another, and the recipient of the power uses that power.[10]


Is the person [natural or legal] appointed to the Trust to give effect to the words creating the Trust on the subject matter of the Trust, for the benefit of the objects of the Trust.


is the person or persons who are entitled to the benefit of any trust arrangement.. It is well established that a trustee stands in a fiduciary relationship to the beneficiaries of the trust.[11]The relationship between trustees and beneficiaries is generally viewed as the archetype of a fiduciary relationship[12], other examples of recognised fiduciary relationships include company directors and their company[13], principals and their agent[14]and solicitors and their client[15]. Furthermore, fiduciary duties are the cornerstone of the relationship between trustees and beneficiaries. Not only is a trustee subject to the specific obligations imposed by the terms of the trust instrument, the fiduciary position of a trustee subjects him to onerous negative obligations in equity.[16]Shepard identified two distinct features of all types of fiduciary relationships[17],(a) discretion and power, fiduciaries invariably have discretion or power to act on behalf of or for the benefit of another party[18].(b) Duties and Obligations, which is the feature we are concerned with by the question posed here. The creation of duties arises from the fiduciaries scope to use their discretion and power to the detriment of the interests of the beneficiary. And thus in equity a duty arises to protect the interests of the beneficiary[19], the nature and scope of fiduciary duties is not fixed. Fiduciary duties are principles which require flexibility in their interpretation and application. A classic example of this is found in the development of the standard of care required of trustees in exercising their powers of investment. Historically caution and conservatism were held as the cardinal principles in determining whether a trustee had displayed the requisite standard of care[20]. However the standard required has evolved over time to reflect the realities of modern investment and fiduciary decision-making. Consequently, it will now be generally acceptable for a trustee to take a prudent degree of risk in order to generate a greater profit for the trust[21].