16 - Trusts in commerce IV: fiduciary relationships, commerce and the trust

Summary

Introduction

Two previous chapters in this commercial section of the book (Chapters 13 and 15) have focused generally on the conscious use of a trust as a convenient method of achieving specific commercial objectives – thus falling within what was termed in Chapter 1 the ‘trust-twisting’ aspect of trust usage. The emphasis in this chapter shifts diametrically to the position where those engaged in some form of commercial activity may find themselves subject to fiduciary duties and, if in breach of those duties, may have imposed on them one or more of the equitable remedies, including constructive trusteeship, that the courts can call upon.

Consider the following examples of problems that might be encountered:

1. (1) Trustees appoint a solicitor, S, who, while carrying out their instructions, acquires confidential information about a company in which the trust fund has a substantial shareholding. Mistakenly believing that she has the trustees' and beneficiaries' consent, S acquires a large shareholding herself, reconstructs the company and makes a substantial profit for herself and the trust shareholding. A disgruntled beneficiary, whose proper consent was not obtained, claims that S's shares are trust property.

2. (2) A mining company, M, employs a geologist, G, to survey an area and report on any mineral deposits. G returns with relatively little information, but proceeds to stake claims to mineral deposits on her own behalf in the same area. M seeks to establish that the claims are rightfully its property.

3. (3) An employee of bank A mistakenly overpays a large sum of money to bank B. The mistake is discovered by B which takes no immediate action to rectify the position. B becomes insolvent and is put into liquidation before A discovers the error made by its employee. A wishes to recover the full amount overpaid.