The existence of a trust establishes that the trustees would be holding legal property for the benefit of another party known as the beneficiary. Fiduciary duties are owned by all trustees as they are placed in positions which require loyalty and good faith to the beneficiary. Consequently, the trustees are required to suppress their own interests and fulfil their obligations having the beneficiary’s best interest at heart.
Therefore, the power given to trustees to manage the legal title of the property has a fiduciary obligation attached to it. When such is granted, it is prima facie given to them by virtue of their office and as such it may be exercised by a survivor. Further, powers given to two or more trustees to be exercised jointly may be exercised by the survivor or by the personal representatives of the last of them, pending the appointment of new trustees.
The specific features of fiduciary duties
A fiduciary carries specific duties in relation to the trust property and those include for him to act in good faith to the beneficiary, not to make a profit from the position they are in, not to place themselves in a position where their own interest will conflict with the fiduciary duties and not to act to their own advantage or the benefit of a third person without the beneficiary’s informed consent.
Acting in good faith
The essence of fiduciary duty requires the trustee to be always promoting the beneficiary’s interests. Therefore, the fiduciary is required to do all in their power to comply with their obligations in a lawful manner and acting in good faith in accordance with that interest.
Further, they need to be open and fully frank with their principles, depending on their capacity, to be able to perform the duties. This could additionally include taking into account the beneficiary’s wishes.
No profit rule
A fiduciary must not profit from his position of authority. The rule would also include any funds which even if unrelated to the original fiduciary position resulted from an opportunity presented through the fiduciary position. Therefore, the essence of the rule is not on making a profit per se but on abusing the position for personal gain even if such did not result in profit.
In practice, if a profit has been made by the fiduciary by virtue of his position then that fact must be communicated to the beneficiary. Following that act, the beneficiary then has the power to authorise the trustee to keep the amount as remuneration for his services.
Conflict of interest
The fiduciary is under obligation to work in accordance with the best interest of the beneficiary for whom he is holding the property. The role could be merely temporary nevertheless the obligations connected with that relationship require the fiduciary to be fully impartial. In order to safeguard the faith in the process, it is essential for the person with decision-making power not to be distracted by his personal gains and interests.
Therefore his impartiality must not to be prejudiced by having interests contrary to that of the beneficiary.
Benefit of his own or a third party
This element of the fiduciary duty requires him to obtain the full informed consent prior to engaging into actions which could benefit him personally or a third party. The essence of this rule provides for the frank relationship between a trustee and beneficiary. This exists to ensure that no disputes arise from the conduct of the fiduciary duties.
Duration of the obligations
It is important to keep in mind that fiduciary duties arise out of the existence of a trust relationship between the parties. Therefore, the obligations of the trustee would be in effect only for the duration of the trust and following the end of such, the duties would also cease. The obligations could also be terminated by the occurrence of a specific event as defined in the original settlement if such a provision is included.
Breach of duty
If the performance of the duties falls below the required standard or is directly contrary to the requirements in any of the above discussed elements, this can constitute a breach of fiduciary duty.
If a breach is established in court, an order could be made for the benefit gained by the fiduciary to be returned to the beneficiary as it would be unconscionable to allow him to retain the benefit.
This would be the outcome unless the fiduciary can show that he fully disclosed the matter to the beneficiary prior to the conflict or accruing of profit and the beneficiary authorised the course of action.