ABUSE OF FIDUCIARY RELATIONSHIPS OF CONFIDENCE

Sometimes the relationship between the claimant and the defendant is such that it is possible to identify a duty of confidence owed by one of the parties to the other. The relationships which are relevant for these purposes are those which can be characterized as fiduciary, such as the relationship between solicitor and client,[1] trustee and beneficiary and agent and principal and other similar relationships.[2] Where there is a transaction between the fiduciary and the principal, it is presumed that the fiduciary exploited the other party and so the burden is on him or her to establish that the transaction was fair[3] [4] [5] and that there has been full disclosure of everything which is or may be material to the other party’s decision to enter into the transaction.[6] Whether the principal was advised to obtain independent and competent advice will be a particularly important consideration in determining whether the transaction was fair. In Tate v Williamson[7] Lord Chelmsford LC identified the essential features of this principle:

Wherever two persons stand in such a [fiduciary] relation that, while it continues, confidence is necessarily reposed by one, and the influence which necessarily grows out of that confidence is possessed by the other, and this confidence is abused, or the influence is exerted to obtain an advantage at the expense of the confiding party, the person so availing himself of his position will not be permitted to retain the advantage, although the transaction could not have been impeached if no such confidential relation had existed.[8]

  • [1] retained the shares which he had acquired from the claimant: Mahoney v Purnell [1996] 3 All ER 61, 90. Butthe remedy which was awarded was assessed by reference to the value of the shares received by the defendantand so can clearly be characterized as restitutionary. 153 See Wright v Carter [1903] 1 Ch 27.
  • [2] BCCI v Aboody [1990] QB 923, 964. See Financial Institutions Services Ltd v Negril Holdings Ltd [2004]
  • [3] UKPC 40 where it was recognized that, exceptionally, the relationship between a banker and his or her
  • [4] customer might be characterized as fiduciary, but equitable relief is only available if the relationship has been
  • [5] abused. 155 Moody v Cox and Hatt [1917] 2 Ch 71.
  • [6] Demerara Bauxite Co Ltd v Hubbard [1923] AC 673.
  • [7] (1866) LR 2 Ch App 55. 158 Ibid, 61.
  • [8] 159 National Westminster Bank plc v Morgan [1985] AC 686, 703 (Lord Scarman). For an example of
 
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