Equity and Trusts

Running Head: EQUITY AND TRUSTS
Equity and Trusts
Name
Affiliation
Instructor
Date

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Equity and Trusts
Equity and Trusts
Sarah and Henry
Fiduciary Obligations
Establishment of fiduciary duty
To start with, it is essential to establish whether a fiduciary obligation exists between Sarah
and her father- Henry. In a fiduciary relationship, confidence, loyalty as well as mutual trust
must be exhibited1. This means that when one is having a fiduciary duty, he or she acts on
the best interests of the other. In this case, Henry should have a fiduciary obligation over
Sarah. This, however, must be established. It is paramount that a fiduciary relationship must
prove the existence of a duty of care towards the individual whom the duty is owed to. This
formed the basis in the case of Beach petroleum V Kennedy.2 As such, the individual with the
fiduciary obligation should not act in any other way that may prejudice the relationship
between him and the benefactor. Loyalty must not be divided into a fiduciary relationship
because the division will break the trust hence and an indication that one does not adhere
to his or her fiduciary obligations3
While establishing a fiduciary relationship, the beneficiary is owed fiduciary obligations by
the fiduciary, (Re Speight (1883) 22 Ch D 727). In situations where the fiduciary abuses the
position he has so that he can obtain advantages at the expense of an existing beneficiary,
1 Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1986] QSC 226 [1988] 2 Qd.R.1.
2 Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 33 ACSR 1.
3 Ibid

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Equity and Trusts
the beneficiary can seek justice or relief from a Court of Equity so that he or she can prevent
the fiduciary from taking advantage. For the fiduciary to escape liability he must prove that
he has informed consent from the beneficiary.
1. Whether a trustee and beneficiary relationship exists between Henry and Sarah.
Henry is Sarah’s father. In addition, Sarah has been receiving money from Henry from the
family’s trust as well as providing financial advice for her. After her mother’s demise, Henry
suggested that Sarah should move to Brisbane so that she could be close to him. These facts
directly show that Henry and Sarah have a mutual understanding that is also made up of
trust and loyalty and confidence. More to this, Henry suggests that Sarah will contribute
20% of her income into the family’s trust account. It is thus evident that Henry is the trustee
while Sarah is the beneficiary. From this, Henry has a fiduciary obligation to Sarah and her
children.
2. Whether there is a breach of fiduciary duties by Henry
Fiduciaries have two duties which they must observe. One, he or she must not obtain profit
as a fiduciary4. The contributions towards the trust by Sarah must be determined to
establish whether the monies are for personal gains or not. Henry understands very well
that Sarah has many obligations especially because she is studying and providing for her
children. This should guide Henry in determining whether he should charge her or not. On
the other hand, Henry promised to buy a house in Brisbane for Sarah as well as providing all
financial needs that suit her lifestyle. There should also be an establishment of a “no-conflict
4 Chan v Zacharia (1984) 154 CLR 178.