Equity and Trusts Assignment PDF

Running head: EQUITY AND TRUST
Equity and Trust
Name of the Student
Name of the University
Author note

1EQUITY AND TRUST
Essence and purpose of a fiduciary relationship is to serve exclusively the interests of
another person or group of persons
When there is a situation of ethical or legal relationship, the probability of fiduciary
duty arises that is based on the trust. Fiduciary duty exists when a management of money
arises between two or more parties. Such kind of a relationship is created based on trust and
confidence. The term fiduciary refers to a situation when one party acts on behalf of the
other1. As per law, the theory of fiduciary monitors and examines the standard of care while
executing in what he is associated. For instance, a fiduciary relationship defines a situation
when the shareholders play the role of the principals. Therefore, shareholders are both the
fiduciary as well as principals. Fiduciary relationship is a concept where one of the parties is
not in a strong position and hence reposes in good faith, confidence, advice and trust when
required. Generally, the fiduciary to act and carry out the duties is beneficial for the principal.
Fiduciary duties usually require stricter and higher code of behavior as per the duty of
care as mentioned under the law of torts. The purpose of the fiduciary is to supervise the
exclusive loyalty to the existing principal and not place him in a position where there is a
kind of personal conflict of interest happens with the principal. A party needs to prove the
fiduciary that must not expose the liability of his in the court of law2. It has been observed in
the matter of Youyang Pty Ltd v Minter Ellison Morris Fletcher, the statement of the judge
explained that a man being fiduciary is not enough to deduce the liability in case of fault.
Instead, an individual has to prove all the existing obligations as a fiduciary to whom he is
obligated and to the extent of facing the consequences for the failure. Every relationship does
not give rise to the fiduciary duties. The most common kind of fiduciary relationship is that
one which exists between a trustee and a beneficiary. In this kind of relationship, a legal
1 Frazer, Andrew. "The employee's contractual duty of fidelity." (2015): 53.
2 Degeling, Simone, and Michael Legg. "Fiduciary obligations of lawyers in Australian class actions: Conflicts
between duties." UNSWLJ 37 (2014): 914.

2EQUITY AND TRUST
relationship rests with the trustee of the property that is entrusted to him by the trustee3. In
spite of such situations, the trustee is generally compelled under the equity to subordinate his
own benefit to the trustees. The purpose is to monitor the entrusted estate to the basic
advantage of the beneficiary. This theory makes sure that the beneficiary gets the share of
returns for the property in spite of not having a regular control over it. Fiduciary obligations
of the shareholders are usually invested in the directors of a company. For instance, fiduciary
duty vests on the directors of the bank for protecting the respective deposits of their clients.
Fiduciary obligations are contractual and therefore it can be stated that fiduciary duties can be
distinguished from the common law. However, there are other relationships that consists of
the fiduciary duties. The company and the liquidators, lawyers and clients and heirs and
administrators are few of the examples of this theory.
In case of a partnership business, the partners involved owe fiduciary duties to each
other. Such a scenario is not usually observed in joint stock companies because fiduciary
duties do not arise. However, in case of joint ventures are carried out as partnership, the
courts have the authority and power to establish grounds based on fiduciary obligations
amongst the partners of the joint venture. Arklow vs. MacLean Privy Council (1999), the
judgment of this case stated that a partner of a joint venture generally has a few fiduciary
duties for the purpose to withhold the private information and not to put it to use according to
merits and demerits. However, a fiduciary is usually held liable if evidence have been
provided stating that the person had a profit from the relationships formed. If there has been
any conflict of the fiduciary duties and the personal interests. Secondly, if there is any kind of
conflict of the fiduciary duty that is owed to two individuals by obtaining benefit from it.
These are the three main provisions based on, which the fiduciary is obligated to ignore such
3 Campbell, Joseph. "Fiduciary Relationships in a Commercial Context." (2014).