The legal responsibility for ultimate faithfulness and loyalty amongst people or toward one another is termed as Fiduciary. It relates to the principle stating that fidelity and good faith are the main duties every master deserves from their agents and servants. One owing to the duties comes out of a court of equity imposing obligations of fidelity and good faith as matters of conscience, or from contractual laws. Basically Fiduciary goes hand in hand with the term trustee as one form of fiduciary relationship.
Powers belonging to a fiduciary also belong to another person. In order to benefit from the benefits of the beneficiary, the fiduciary has to exercise certain rights to the latter. He or she must never let any personal conflict of interest to determine their decision making, relationships and responsibilities to the beneficiaries and instead should practice high levels of goodwill and care in promoting or protecting the interests of the other. It is forbidden to practice many forms of permissible behaviors when it comes to observing the ties pertaining to fiduciary. The fiduciary duties are effective not to trustees for clients, and solicitor or agent and principal. In the past years, the bone of contention to whether a specific relationship is subjected to fiduciary duties and commitments can be handled by looking into the forms of relationships that had similar scenarios. The beneficiary might highly or uniquely be vulnerable or rather at the mercy of the fiduciary having the control of the power and discretion, he can have the scope to excursing power and the fiduciary can unilaterally use the discretion bestowed upon them to interfere with the beneficiary’s practical or legal interests as evident in the fiduciary obligation.
Fiduciary duties bestow the most responsibility to the parties that hold the duties that the fiduciary. It also acts altruistically in that the main gain the beneficiary to the detriment of the fiduciary. Despite the faults, the fiduciary obligations must always give some outcome to the vulnerable parties. Guarantors are not fiduciaries because they never breach their duties by not obtaining the desired outcomes for the beneficiary. Schism has been observed between Canada and Australia following the fiduciary obligation that the both got divergent option or view on the matter. The courts in Canada widely use the principle in allocating g the liabilities in the parts that a traditionally deemed as contract law and also the province of tort. On the other hand, Australia, experiences less fiduciary cases as the courts have been utilizing the doctrine of unconscionability and turning the provisions of the Trade Practice Act. The doctrine of unconscionability and fiduciary principle gives diverging sets of standards of protective liability.
Union officials, physicians, psychiatrists and the majority of minority shareholders are the additional fiduciary class of people in the United States. The same fiduciary principle is considered proscriptive in Australia. Meaning that connotation of positive duties on the part of the beneficiary and the fiduciary s not incorporated in the fiduciary principle. The main concern is the maintaining of loyalty which comes to work when fiduciaries sought after personals gains by improperly taking advantage of the relationship. Loyalty and fiduciary have some close relationships as identified by many commentators. The concept of unequal bargaining and undue influence can be linked to the fiduciary principle because they are designed to protect vulnerable parties while transacting with others who might take advantage of the relationship. On the other hand, undue influence shades more light on unconscionability appearances and sufficiency of consent. Basically, the fiduciary obligation helps in monitoring the wrong use of loyalty.
Equity subjects are centered on fiduciary principle because the loyalty involved.Fiduciary fights against improper gain and conflict of interest. When situations causing conflicts between improper gain and that of personal interest are to be avoided, a duty is imposed on fiduciaries thus reflecting the strictness of the rule in both cases as well as showing a possibility of conflict that must be shunned. In spite of the indications that courts put to make these laws flexible, the results of obtaining still give the notion that the transparency of the fiduciary is still an incomplete defense. Where conflicts of personal interest exist, or there is a possibility of a significant conflict with duty or loyalty that one has partaken, the fiduciary will be deemed liable to account for the principal of gains or any benefits received or obtained. The jurisdictions by which these rules are found and Lord Herschell states that it is very inflexible of Court of Equity when a one in a fiduciary takes advantage of a situation or relationship by positioning their interest first and making profits for themselves. The rules never appear to him to be founded upon the societal principle of morality and therefore regards the rules to be suited for the human nature that can change time by time. It is dangerous when a person holding a fiduciary gets moved to satisfy their own interest thus ending up prejudicing the persons that they ought to be protecting.
The fiduciary binds to have actions in the interest of the beneficiaries and that explains the main juxtaposing characteristics of the fiduciary relationship that is complete loyalty to securing the beneficiaries’ interest other than that of the fiduciary thus when a conflict of interest comes up it is an ultimate breach of fiduciary duties. The purpose of a fiduciary in a relationship is securing only the interests of the beneficiary but not their own. The fiduciary principle when used or demonstrated to maintain the integrity, utility, and credibility of the persons in the relationship hence protecting the interest of the society. The valuable societal personal and economic interest are protected by this law. In order to maintain utility and integrity of the relationships which the roles of a patty is somehow perceived to be I the service of the other then we have to insist upon a fine loyalty in that particular service.
The distinguishing factor of loyalty can be discerned in the case where relationship considered to be fiduciary in nature and the placing interests of the loyalty of the fiduciary can be ensured. There is no doubt that in Australian as well as Canada, loyalty and its associated notions of confidence and trust are the foundations of fiduciary principle. Another foundation that contours the principle currently appears to mark differently in each of the jurisdictions. And we are left wondering where, how and why the Courts in each jurisdiction became divergent.
Unlike in the United States and Canada, in the recent years, Australia has encountered burgeoning of fiduciary cases. The courts, in general, have shown no obvious inclination to broaden the fiduciary principle and obligation. It has appeared to notable decrease in the number of cases whereby a breach of fiduciary obligation has been handled outside the stipulated categories. To be specific, since 1990 there has been no successful cases of fiduciary duty breach. And the cases in which fiduciary principle relies on the Australian courts always indicated a reluctance to widen the traditional stipulated fiduciary obligations. Moreover, any reliance on vulnerability as a key indication if fiduciaries are lacking in Australian case law. The imposition of a duty of ultimate good faith has been by the Court as clearly inappropriate in light with the earlier cases that a doctor is in a duty of care of treating his or her patients with reasonable integrity and skills. The Court denies that the fiduciary obligation should be applied in an expensive way so that it can act as a supplement tort law and aid in providing a basis for creating the new forms of civil wrongs. In accord, all the members of the Courts reiterated that fiduciary principle in Australia is only but deemed proscriptive. The High Court seemed so determined in maintaining a sharp distinction between fiduciary law and tort law whereby an abuse of loyalty is not as an issue and no conflict has occurred, in any action that must be necessary founded in breach of contract or in negligence.
The Courts on the doctrine of unconscionability have increasingly been in reliance in the last decades rather than increasing in the actions based on breach of fiduciary duty. As Mason CJ recently noted in the Courts that imposition of remedial constructive trust is available for actions for both breach of unconscionable conduct and breach of confidence taking pressure off the fiduciary relationship as the [passport to the propriety relief and therefore having a focused attention on other equitable doctrines. Also, the enacted Trade Practices Act got amended by inserting the IVA, entitled with the Unconscionable Conduct Section 51AA which essentials codifies the common law while in the other hand s51AB extends the common law notion of unconscionability though it is li9mited in context to the supply of good and services. Of most importance is the effect of s52 of the Trade Practices Act and arguably it becoming the most rapidly persuasive law in Australia. The core center of attraction of using g the Trade Practices Act, rather than equitable actions or common law, for instance, that of breach of the law of fiduciary duty that lies in the wide array of available remedies. The Trade act is used mostly in circumstances that are in the misinterpretation thereby providing a concise route to finding liabilities than arguing that the bank is standing as fiduciary to the customers. Additionally, in Australia, the actions based on negligence of misstatements can be available.
In the s9 of the Corporations Act, 2001 means a person’s validly appointed as the director, a person even though not validly appointed and for simplicity purpose, a director will be used. The Corporation Act 2001 four main duties for directors. Diligence and Care is the first duty. The duty requires directors to act with high degrees of care and intelligence with a reasonable person and the same is applied in common law.
Insolvent trading stipulates that directors got the duty in ensuring that accompany does not trade while insolvent or when suspected to be insolvent. Financial information, on the other hand, gives the directors the mandate to take reasonable steps in ensuring compliance with the obligations of Corporation Act 2001 which relates to keeping the recording of financial reports.
The Act encourages the disclosing of matters pertaining to the company affairs in which they have a personal interest in. Further, it encourages the shareholder approval for relating party transactions for public companies. Also, the director’s market interest is disclosed. For the companies listed there is a continuous disclosure to the market information which is available and may affect the company’s share price value. A breach of duty comes out when a company enters a risky transaction without a prospect of making a profit or when a manager does not inform the board of the investments. The business judgment rule can aid in the safe harbor of the situation of the directors in relation to claiming breach for diligence and care.
Good faith principle requires a director’s action in the best upholding of the companies’ interest and purpose. This includes reveling and managing the conflicts within thus ensuring g transparency, fidelity, and trust commonly known as a fiduciary duty which is imposed by common law and duty required in the Corporation Act 2001.
Breaching directors’ duties laws leads to numerous. First off Criminal sanctions whereby there are extreme penalties for failure to comply with the duties and laws put by the corporation acts and the other laws guiding the companies’ activities. For instance, in the cartel conduct under the competition law can lead to 10 years imprisonment or high fines as well. It is illegal for a corporation to indemnify its officers against all costs or any financial penalties. This can be considered must be in line with the good faith duties and is deemed as dishonesty and recklessness and thus can attract a 5-year imprisonment. Civil sanctions stipulate in the Corporations Act that directors are liable to substantial fine. Shareholders, in turn, can take actions against directors who fail to comply with duties. Australian Securities and Investments Commission (ASIC) and courts have the power to disqualify directors for long periods of time for failure to comply with their duties under Corporations Act.
