Relationships
The most common circumstance where a fiduciary duty will arise is between a trustee, whether real or juristic, and a beneficiary. The trustee to whom property is legally committed is the legal—i.e., common law—owner of all such property. The beneficiary, at law, has no legal title to the trust; however, the trustee is bound by equity to suppress his own interests and administer the property only for the benefit of the beneficiary. In this way, the beneficiary obtains the use of property without being its technical owner.
Others, such as corporate directors, may be held to a fiduciary duty similar in some respects to that of a trustee. This happens when, for example, the directors of a bank are trustees for the depositors, the directors of a corporation are trustees for the stockholders or a guardian is trustee of his ward's property. A person in a sensitive position sometimes protects himself from possible conflict of interest charges by setting up a blind trust, placing his financial affairs in the hands of a fiduciary and giving up all right to know about or intervene in their handling.
The fiduciary functions of trusts and agencies are commonly performed by a trust company, such as a commercial bank, organized for that purpose. In the United States, the Office of Thrift Supervision (OTS), an agency of the United States Department of the Treasury, is the primary regulator of the fiduciary activities of federal savings associations.
When a court desires to hold the offending party to a transaction responsible so as to prevent unjust enrichment, the judge can declare that a fiduciary relation exists between the parties, as though the offender were in fact a trustee for the partner.
Relationships which routinely attract by law a fiduciary duty between certain classes of persons include these:
- Trustee/beneficiary: Keech v Sandford
- Conservators and legal guardians / wards
- Agents, brokers and factors / principals: McKenzie v McDonald
- Buyer agent (real estate broker) / buyer client
- Confidential advisor including financial adviser and investment advisor / advisee or client
- Lawyer/client: Sims v Craig Bell & Bond
- Executors and administrators / legatees and heirs
- Corporate partners, joint venturers, directors and officers / company and stockholders: Guth v. Loft Inc., In Plus Group Ltd v. Pyke, Peoples Department Stores Inc. (Trustee of) v. Wise, Regal (Hastings) v Gulliver
- Board of directors / company: Re Saul D Harrison & Sons plc, Woolworths Ltd v Kelly
- Partner/partner: Chan v Zacharia, Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd, Meinhard v Salmon
- Stockbroker/client: Hodgkinson v Simms
- Senior employee / company: Green & Clara Pty Ltd v Bestobell Industries Pty Ltd
- Retirement plan administrators (including 401(k) plans) / retirees and workers: Vivien v. Worldcom
- Promoters / stock subscribers
- Liquidator/company: Re Pantmaenog
- Mutual savings banks and investment corporations / their depositors and investors
- Receivers, trustees in bankruptcy and assignees in insolvency / creditors
- Governments / indigenous peoples: R. v. Sparrow, Seminole Nation v. United States
- Doctor/patient (Canada: McInerney v. MacDonald, Norberg v. Wynrib)
- Guardian/ward: Paramasivam v Flynn
- Teacher/student: Glover v Porter-Gaud
- Priest / parishioner seeking counseling: Doe v Evans, 814 So.2d 370 (Fla. 2002)
Roman and civil law recognized a type of contract called fiducia (also contractus fiduciae or fiduciary contract), involving essentially a sale to a person coupled with an agreement that the purchaser should sell the property back upon the fulfillment of certain conditions. Such contracts were used in the emancipation of children, in connection with testamentary gifts and in pledges. Under Roman law a woman could arrange a fictitious sale called a fiduciary coemption in order to change her guardian or gain legal capacity to make a will.
In Roman Dutch law, a fiduciary heir may receive property subject to passing it to another on fulfillment of certain conditions; the gift is called a fideicommissum. The fiduciary of a fideicommissum is a fideicommissioner and one that receives property from a fiduciary heir is a fideicommissary heir.
Fiduciary principles may be applied in a variety of legal contexts.
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