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Fiduciary

This article is about the legal term. For optical field-of-view markers, see Fiduciary marker.
The Court of Chancery, which governed fiduciary relations in England prior to the Judicature Acts

A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person. One party, for example, a corporate trust company or the trust department of a bank, acts in a fiduciary capacity to another party, who, for example, has entrusted funds to the fiduciary for safekeeping or investment. Likewise, financial advisers, financial planners, and asset managers, including managers of pension plans, endowments, and other tax-exempt assets, are considered fiduciaries under applicable statutes and laws.[1] In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance, and trust in another whose aid, advice, or protection is sought in some matter.[2]: 68 [3] In such a relation, good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts.

A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.

— Lord Millett, Bristol and West Building Society v Mothew[4]

Fiduciary duties in a financial sense exist to ensure that those who manage other people's money act in their beneficiaries' interests, rather than serving their own interests.

A fiduciary duty[5] is the highest standard of care in equity or law. A fiduciary is expected to be extremely loyal to the person to whom he owes the duty (the "principal") such that there must be no conflict of duty between fiduciary and principal, and the fiduciary must not profit from their position as a fiduciary,[6] unless the principal consents.[7] The nature of fiduciary obligations differs among jurisdictions. In Australia, only proscriptive or negative fiduciary obligations are recognised,[3]: 113 [8]: 198  [9] whereas in Canada, fiduciaries can come under both proscriptive (negative) and prescriptive (positive) fiduciary obligations.[10][11]

In English common law, the fiduciary relation is an important concept within a part of the legal system known as equity. In the United Kingdom, the Judicature Acts merged the courts of equity (historically based in England's Court of Chancery) with the courts of common law, and as a result the concept of fiduciary duty also became applicable in common law courts.

When a fiduciary duty is imposed, equity requires a different, stricter standard of behavior than the comparable tortious duty of care in common law. The fiduciary has a duty not to be in a situation where personal interests and fiduciary duty conflict, not to be in a situation where their fiduciary duty conflicts with another fiduciary duty, and a duty not to profit from their fiduciary position without knowledge and consent. A fiduciary ideally would not have a conflict of interest. It has been said that fiduciaries must conduct themselves "at a level higher than that trodden by the crowd"[12] and that "[t]he distinguishing or overriding duty of a fiduciary is the obligation of undivided loyalty".[13]: 289 

  1. ^ Lemke and Lins, ERISA for Money Managers, Chapter 1 (Thomson West, 2013)
  2. ^ Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64, (1984) 156 CLR 41 (25 October 1984), High Court (Australia).
  3. ^ a b Breen v Williams (Medical records access case) [1996] HCA 57, (1996) 186 CLR 71, High Court (Australia).
  4. ^ Mothew (t/a Stapley & Co) v Bristol & West Building Society [1996] EWCA Civ 533, [1998] Ch 1 (24 July 1996), Court of Appeal (England and Wales).
  5. ^ "Breach of Fiduciary Duty Law & Legal Definition". Legal Definitions Legal Terms Dictionary.
  6. ^ Keech v Sandford [1726] EWHC J76 (Ch), (1726) 2 Eq Cas Abr 741, 25 ER 223, High Court (England and Wales)
  7. ^ Queensland Mines Ltd v Hudson [1978] UKPC 2, (1978) 52 ALJR 399, Privy Council (on appeal from NSW, Australia)
  8. ^ Pilmer v Duke Group Ltd (in liq) [2001] HCA 31, (2001) 207 CLR 165, High Court (Australia)
  9. ^ Westpac Banking Corporation v The Bell Group (In Liq) [No 3] [2012] WASCA 157 at [897]-[902], Court of Appeal (WA, Australia).
  10. ^ McInerney v MacDonald, 1992 CanLII 57, [1992] 2 SCR 138, Supreme Court (Canada).
  11. ^ BLB Corp of Australia Establishment v Jacobsen (1974) 48 ALJR 372 High Court (Australia). LawCite Records.
  12. ^ Meinhard v Salmon (1928) 164 NE 545 at 546.
  13. ^ Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Limited (No. 4) [2007] FCA 963, [2007] 62 ACSR 427, Federal Court (Australia)

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