To all those reading this I am David Gibbs; I am a Lecturer in Company and Commercial Law at the University of Hertfordshire.

I created this blog as a general out-let of ideas for my research, as well as keeping those interested up-to-date on my research and general interests.

I completed my PhD thesis at the University of East Anglia in 2014. The thesis was recommended for the award of PhD with no corrections. My external examiner was Prof. Simon Deakin (Cambridge) and internal examiner was Prof. Morten Hviid.
My PhD research centred on directors' duties and company law. The thesis was titled 'Non-Executive Self-Interest: Fiduciary Duties and Corporate Governance'. It was a doctrinal and empirical study on whether self-interest was suitably controlled amongst non-executive directors.

My supervisors were Prof. Mathias Siems, Prof. Duncan Sheehan, Dr. Sara Connolly and Dr. Rob Heywood

All opinions of any existing or future blogpost are my own. They do not necessarily represent the views of any of my associated institutions.
ORCID 0000-0002-6596-8536

Friday, 22 August 2014

Fiduciary Maxims: Some proposals

There is a concerted effort to organise fiduciary law in to a set of coherent rules. With this in mind I thought I would list some general maxims or principles in respect of fiduciaries. Some are more well-known than others but all, I believe, are of general accuracy albeit require some fine tuning with the wording. I give a very brief description next to each one This may be of use to new students to the concept as well as those more experienced. However, this is a very rough guide and some maxims may be refined or combined, nor is it meant to be exhaustive, so comments and/or additional maxims welcome.

1) Loyalty is the defining characteristic of a fiduciary - Therefore loyalty makes someone a fiduciary

2) Loyalty is an obligation owed when specific facts present themselves - Linking with above, calling someone a fiduciary is in some senses redundant. You must look for specific facts to identify the individual as a fiduciary

3) Anyone can be classed as a fiduciary if those facts present themselves - Since loyalty is owed on specific facts it is possible for anyone in any relationship that involves control over another's interests to owe the duty, similar to a duty of care. e.g. a director may owe fiduciary duties to the company, but also to an individual that the company is dealing with, if the director is shown to have undertaken the duty of loyalty to that third party

4) Loyalty is owed when you agree to advance the interests of another to the exclusion of your own or others; or when collaborative partners agree to combine resources to achieve a specific collaborative goal, both to the exclusion of their own personal interests - Loyalty requires the suspension of self-interest. Therefore it is only when you agree to do so will the duty be owed.

5) Where you are responsible for another's interests, there is a presumption you will be loyal to them - Since you are acting to assist another loyalty must be presumed unless 6 evidences otherwise.

6) Express or implied terms of the undertaking evidence whether the fiduciary undertook to behave in such a way - Whilst you may agree to be responsible for another's interests, this does not always mean loyalty will be owed if the terms of the agreement evidence that you did not agree to be loyal. For example, a term stating that 'best efforts' would be applied would be inconsistent with the duty being owed. Commercial/contractual arrangements therefore are not normally fiduciary.

7) Loyalty operates to regulate self-interest - A fiduciary who is incompetent is not disloyal. Where one agrees to advance another's interest, the concern is that they will use that control to advance their own. This is a concern since where an individual is personally interested in their undertaking to the principal, they may not perform that undertaking to the best of their ability, if at all.

8) A breach of loyalty is in respect of conflicts of interest, self-dealing and/or bribes and secret commissions - These acts all relate to situations where there is a risk one might have acted to advance their own interests. Best interests, duty of care etc. are not fiduciary in nature but are generally owed by those classified as such

9) Strict liability is imposed for breaches of loyalty - Courts cannot assess if someone was actually disloyal. Therefore liability is strict. The only consideration is whether there was a conflict, was there self-dealing, was a bribe accepted. Good faith, ability to take the asset, ownership or beneficial interest etc. over the asset are all irrelevancies.

10) A breach of loyalty is when personal or other interests are placed above the principal's - Self-interest must be suspended in the performance of the undertaking

11) Once it is established the duty is owed, the onus is on the fiduciary to prove they were not disloyal - If the onus was on the principal, who is in the weaker position, this in itself may evidence disloyalty. Once you are shown to owe the duty because you are responsible for their interests it is for the fiduciary to show they were not disloyal.

12) Only the principal can determine what it is interested in - A fiduciary cannot determine the interests of a principal in an attempt to avoid liability for disloyalty. Attempts by the fiduciary are not to the point. The point is whether there was a risk of disloyalty in respect of their undertaking.

13) There is only a breach if duty/undertaking conflicts with principal's interests - you cannot expect loyalty in respect of interests the fiduciary did not take responsibility for.

14) The duty/undertaking is determined by looking at the contract and agreement as a whole - Whilst the contract may identify the interests the individual took responsibility for, the courts will look at the whole agreement between the parties. This is particularly important where there is no written or verbal contract to consider.

15) Any benefit derived from the undertaking is rightly that of the principal - Linking in with above on strict liability, the fiduciary is acting for the principal. Therefore any benefit derived from that undertaking is rightly that of the principal. Again, arguments of good faith, ownership, whether the benefit was intended for the principal are all irrelevancies. For example, accepting a bribe. If not for the fiduciary's act the principal has missed the opportunity to obtain a higher or lower price, depending on the scenario, than if it had done it itself.

16) Where no benefit is derived the fiduciary is liable to compensate the principal - Fiduciaries do not always derive a benefit from being disloyal. Therefore they may claim compensation but this is subject to limiting principles for remedies such as causation.

17) Any benefit obtained by a third party in respect of the fiduciary's breach is subject to limiting remedial principles - This is perhaps a much more uncertain principle as to what can be recovered from a third party. A lot depends on whether they knew the benefit received was from a breach of fiduciary duty. Even if they did know, questions of limiting remedial principles are not well answered in the courts as to what the third party would be liable for.