[95] Valsan, “Conflict of Interest,” op. cit. cit., note 8, p. 4. See also ibid., p. 13 (“The idea that trust law aims to discipline legal actors by deterring temptations corresponds to many influential theories of private law” ×.). An alternative would be to relax the stringency of conflict of interest obligations. Valsan rejects arguments in favor of this option, particularly those of J.C. Shepherd,[139] John Langbein,[140] Charles Mitchell,[141] and Murad v. Al-Saraj. [142] He submits that, as the interdisciplinary view of conflict of interest profoundly demonstrates, the prohibition of conflict of interest cannot be reduced, since even potential conflicts influence the way trustees assess the interests of their beneficiaries. [143] In his view, the arguments in favour of relaxing the stringency of the duty are based “on a superficial understanding of the concept of conflict of interest and the primary role played by interdiction functions.” [144] The claimant must prove that the breach of trust caused actual harm. Without damages, there is generally no reason for breach of fiduciary duty.
The more accurate, the better. For example, a trustee could be sued for selling a beneficiary`s property too cheaply. If the buyer is a relative of the trustee, this is clearly a conflict of interest, but a dollar amount on the beneficiary`s loss is required to prove a breach of fiduciary duty. Because of its use of general principles rather than strict rules, the fiduciary concept has proved more difficult to articulate than its common law cousins. The malleability inherent in fiduciary principles is therefore both a blessing and a curse. Their innate flexibility allows them to be applied to a variety of interactions, no matter how strange or unique. At the same time, however, their lack of fixation also makes it difficult to fully understand the unique principles of the fiduciary concept and their onerous functions for lawyers of all stripes. As mentioned earlier, the fiduciary concept emphasizes behaviors that must be attributed to those who have power over the interests of others in certain socially and economically necessary or important interactions of high trust. These core fiduciary values – which I referred to in a previous article as the “holy grail” of trust[152] – are very different from those that exist in contract, tort and unjust enrichment. Contrary to the fiduciary concept, these latter forms of civil law duty, “while respecting fairness in content, are not associated with an iconic reference similar to what is just.” [153] Warren Seavey and Austin Scott also assert that while contract and tort focus on “injustice and harm,” the remedy is based on the objective of justice. [154] While they point out that the concept of trust is also based on justice, they point out that the legal forms contemplated by the concept of trust differ considerably from those sought by restitution.
[155] Despite the findings of the Freshfields Report, many investors continue to point to their fiduciary duties and the need to provide financial returns to their beneficiaries as reasons why they cannot do more for responsible investing. In 2011, in a case of insider trading, the U.S. Securities and Exchange Commission filed charges against a friend of a Disney intern, alleging that he owed a fiduciary duty to his girlfriend and violated her. The friend, Toby Scammell, allegedly obtained and used inside information about Disney`s acquisition of Marvel Comics. [65] [66] When a fiduciary duty is imposed, fairness requires a different and stricter standard of conduct than comparable tort duty of care at common law. The fiduciary has a duty not to be in a situation where private interests and fiduciary duties conflict, not to be in a situation where his fiduciary duty conflicts with any other fiduciary duty, and a duty not to take advantage of his fiduciary position without his knowledge or consent. Ideally, a trustee would not have a conflict of interest. It has been stated that trustees must behave “at a higher level than that struck by the crowd”[13] and that “the distinctive or overriding duty of a trustee is the duty of undivided loyalty.” [14]:In paragraph 289, spouses also have mutual fiduciary duties. Each spouse is obliged to act in the interest of the other in all economic and other transactions, i.e. he or she is obliged to disclose in full.
Contracts between spouses therefore require a certain level of disclosure of information and warning of possible conflicts that are not found in a typical contract, and if these disclosures are not made, a spouse can often terminate a contract. It has been found that such fiduciary duties apply even to fiancées who are about to get married. A bank or other trustee who has a legal right to a mortgage can sell prime shares to investors, creating a participating mortgage. Valsan`s assertion that there is no valid justification for prophylactic regulation of trust against conflicts of interest[131] is therefore incorrect. The strength of his contention that there is no justified reason for the stringency of the rule is disproportionate to his own analysis of what might justify the imposition of such a rule in the first place and to the present examination. He acknowledges that “some landmark decisions have emphasized the importance of eliminating a conflict between interests and duties,”[132] but concludes that even this limited jurisprudential reference has been overshadowed by the desire to control human nature`s tendency to place self-interest above altruism. [133] Curiously, his analysis does not ask why the prophylactic rule was introduced in the first place. This information does not necessarily come directly from case law, but requires extrapolation from the rationalization behind the creation of the fiduciary concept, the fairness function and the existence of the fiduciary concept as an expression of equitable principles. While a fiduciary duty can be inadvertently breached, it is still an ethical violation.
And for most people, a deliberate breach of fiduciary duty is considered particularly insidious. A fiduciary is held liable if it is proven that he or she made a profit, benefit or profit from the relationship in one of three ways:[1] [17] The mere possibility of a conflict of interest as opposed to a proven conflict of interest is a fundamental principle of fiduciary responsibility dating back to Keech.