02_Fiduciaries - Equity and Trusts 02 Fiduciaries Jaani...

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Unformatted text preview: Equity and Trusts 02 Fiduciaries Jaani Riordan 2006 Page 1 of 95 http://www.jaani.net/ P ART II F IDUCIARY R ELATIONSHIPS I Introduction A The Meaning of Fiduciary The word fiduciary derives from the Latin fiducia , meaning trust. In equity, it is used in at least four different senses; namely, to: 1 Describe the position of a person who in equity owes fiduciary obligations; 2 Denote the special character of a relationship between a fiduciary (used in the first sense) and their principal (the person to whom they owe obligations); 3 Denote the character of an obligation owed by one person to another as falling within the class of duties which in equity are viewed as fiduciary, breach of which will give rise to a remedy for breach of fiduciary duty; and 4 Express that particular circumstances are such as to create a fiduciary (used in the second sense) relationship. Certain judicial aberrations notwithstanding, the essence of a fiduciary relation is true to its name, being trust . This is why it was instructive to begin this Part with an etymological analysis. B The Nature of a Fiduciary In the ordinary course of things, a fiduciary relationship arises when a person (the fiduciary) undertakes to act in anothers best interests, or is obliged so to act, and that other reposes confidence in the person so to do: Hospital Products Ltd v United States Surgical Corp (1984) ( Hospital Products ). Confidence may also be deemed ( Whitehouse v Carlton Hotel Pty Ltd ), and its reposition need not amount to a confidential relationship ( Chan v Zacharia ). It is exceedingly difficult to define in anything but the vaguest generality the circumstances capable of giving rise to a fiduciary relation. To derive from the case law any criteria of universal application is all but impossible. For this reason, scholars (most notably Paul Finn) have described the notion of a fiduciary as a concept in search of a principle. There is some truth to this assertion. The character of a fiduciary is difficult to articulate because of the flexible, ephemeral nature of its treatment by equitable doctrines. Determining whether a particular relationship is of a fiduciary character is important because certain consequences flow from its existence. These consequences take the form of obligations placed on the fiduciary (ie, the party obliged to act in the others best interests) over and above any other duties in contract or tort. Breach of a fiduciary duty may give the principal an equitable remedy. Equity and Trusts 02 Fiduciaries Jaani Riordan 2006 Page 2 of 95 http://www.jaani.net/ C Categories of Fiduciary Relationship The following section outlines a method for determining whether a fiduciary relationship does (or ought to) exist between two parties. It begins by noting that there are, broadly, three classes or categories of fiduciary relationship: Presumed categories Established circumstances in which fiduciary obligations are deemed to be owed;...
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02_Fiduciaries - Equity and Trusts 02 Fiduciaries Jaani...

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