Matthew Conaglen

PROPRIETARY REMEDIES FOR BREACH OF FIDUCIARY DUTY

FHR bought a long lease for €211.5 million. Cedar Capital conducted the negotiations on FHRs behalf, but also received a €10 million commission from the vendor. On becoming aware of this commission, FHR sought to recover it from Cedar Capital. As its negotiating agent, Cedar Capital owed fiduciary duties to FHR, and had not obtained FHRs fully informed consent to the commission. Cedar Capital therefore had to account to FHR for the commission. However, applying the Court of Appeals decision in Sinclair Investments (UK) Ltd. v Versailles Trade Finance Ltd. [2011] EWCA Civ 347, [2012] Ch. 453, Simon J. held that the remedy was purely personal; FHR could not assert a proprietary constructive trust over the €10 million: FHR European Ventures LLP v Mankarious [2011] EWHC 2999 (Ch). The Court of Appeal allowed an appeal as to remedy, distinguishing the facts from those in Sinclair v Versailles , but also casting some doubt on the correctness of that decision: [2013] EWCA Civ 17, [2014] Ch. 1. The Supreme Court was thus required to pass judgment on the voluminous debate as to whether English law should follow Lister & Co. v Stubbs (1890) 45 Ch.D. 1, or Attorney-General for Hong Kong v Reid [1994] 1 A.C. 324.

Exploring Private Law: Good faith: what does it mean for fiduciaries, and what does it tell us about them?

Introduction Good faith is said to be central to fiduciary duties: it is said to be one of the core duties of a fiduciary in the execution of his office. Yet it is equally true that duties of good faith apply to others, who are undoubtedly not fiduciaries. How can this apparent inconsistency be explained? How can a central duty affecting fiduciaries be a duty which, if far from ubiquitous, is apparently much more common than its application to fiduciaries? Answering these questions is vital to understanding the scope and function of fiduciary doctrine. The way forward is to recognize the fundamental point that legal duties, like all other things, can be categorized in different ways for different purposes: it is conceptually meaningless to categorize other than in a teleological fashion. This chapter addresses the application of that observation to duties of good faith in order to show that it is possible for such duties to apply to persons who are not fiduciaries, while at the same time meaning something unique when they are applied in the fiduciary context. Some introductory observations on legal categorization In seeking to understand a complex set of duties, such as the duties that apply to fiduciaries, one can legitimately ask different questions about those duties, to different ends. There is more than one way to skin a cat.

Directors’ duties and legal safe harbours: a comparative analysis

Directors’ duties are a core element of corporate governance, yet a range of legal safe harbours ultimately shape the contours and stringency of these duties in practice. Although the standards of conduct that constitute directors’ duties (so-called ‘conduct rules’) are often relatively strict, legal safe harbours can dilute those rules, resulting in the application of more lenient standards of judicial review (‘decision rules’). The potential gap between conduct rules and decision rules, which has been labelled ‘acoustic separation’, is particularly striking in the context of the duty of care and diligence (‘duty of care’). Directors’ duties and legal safe harbours can also involve complex interaction between equitable and common law (‘general law’) principles on the one hand, and statutory regimes on the other. This paper explores, from a comparative law perspective, differences in the shape of directors’ duties and the legal safe harbours that accompany those duties. The paper examines directors’ duties in the United States (focusing on Delaware law), the United Kingdom and Australia. It considers the nature, operation and enforcement of directors’ duties in these three jurisdictions, with particular attention to the duty of care and two related legal safe harbours - the business judgment rule and exculpatory clauses. The chapter explores how differences in relation to these various aspects of directors’ duties can alter ‘acoustic separation’, by expanding or reducing the gap between conduct rules and decision rules concerning directors’ duties. This issue has a direct bearing on the effectiveness of directors’ duties as a regulatory technique in the United States, the United Kingdom and Australia.

THE ENFORCEABILITY OF ARBITRATION CLAUSES IN TRUSTS

This article considers the enforceability of arbitration clauses which are included in trust documentation. It focuses on two main questions. The first is whether internal trust disputes are capable of being settled by arbitration. The article offers arguments in favour of the arbitrability of such disputes. It then addresses the question of whether parties to an internal trust dispute can be forced to arbitrate, rather than litigate, where the trust documentation contains an arbitration clause. It is argued that there are real difficulties in the argument that such clauses can be enforced as arbitration agreements, under the ordinary arbitration statutes, but that the court could potentially enforce such a clause under its inherent jurisdiction to control its proceedings.

Protectors as fiduciaries: theory and practice

This article considers whether trust protectors owe fiduciary duties. The question cannot be answered categorically, because the law contains no accepted definitions of ‘fiduciary’ or ‘protector’, but there are relevant considerations to be taken into account in answering the question in a particular case. Ultimately, the question is one of construction: did the settlor intend that this particular protector would owe fiduciary duties, and in what way?

THE EXTENT OF FIDUCIARY ACCOUNTING AND THE IMPORTANCE OF AUTHORISATION MECHANISMS

This article is concerned with the extent of a fiduciarys obligation to account for profits that have been made in breach of fiduciary duty. In particular, it responds to suggestions made recently by some senior judges that the courts ought to have a wide-ranging discretion to alter the degree to which a fiduciary must account for profits. It is well-settled that a fiduciary must account for profits that have been generated from his fiduciary position or in circumstances involving a conflict between the fiduciarys duty and his interest. The fiduciary need not account if the profit or conflict was properly authorised, in which case there was no breach of fiduciary duty. But in the absence of such authorisation, the fiduciary must account for all of the profit that has been made in breach of fiduciary duty, other than insofar as the court grants an equitable allowance to the fiduciary for work done in generating that profit. The question addressed here is whether the court ought to have a wider discretion to award an account of only part of the profits that a fiduciary has made in breach of fiduciary duty, leaving the remainder of the profits in the fiduciarys hands?

A RE-APPRAISAL OF THE FIDUCIARY SELF-DEALING AND FAIR-DEALING RULES

I N Tito v. Waddell (No. 2) , Megarry V.-C. famously described, and differentiated, the two dealing rules, the “self-dealing rule” and the “fair-dealing rule”, that apply to those occupying fiduciary positions: The self-dealing rule is … that if a trustee sells the trust property to himself, the sale is voidable by any beneficiary ex debito justitiae, however fair the transaction. The fair-dealing rule is … that if a trustee purchases the beneficial interest of any of his beneficiaries, the transaction is not voidable ex debito justitiae, but can be set aside by the beneficiary unless the trustee can show that he has taken no advantage of his position and has made full disclosure to the beneficiary, and that the transaction is fair and honest.