Fiduciary duty
Also called: Fiduciary relationship, trustee duty
A duty of loyalty and good faith owed by a person (the fiduciary) who holds a position of trust and power over another's interests.
Definition
A fiduciary duty is the highest duty known to the law. It arises in relationships where one party (the fiduciary) undertakes to act on behalf of, or in the interests of, another (the principal) in circumstances that give rise to a relationship of trust and confidence. Classic fiduciary relationships include: trustee and beneficiary; director and company; solicitor and client; agent and principal; and company secretary and employer. The core obligations of a fiduciary are: (1) the no-conflict rule — the fiduciary must not place themselves in a position where their personal interests conflict with their duty to the principal without informed consent; (2) the no-profit rule — the fiduciary must not profit from their position without the principal's informed consent. Breach of fiduciary duty gives rise to equitable remedies, including an account of profits (requiring the fiduciary to pay over any gain made), a constructive trust over property obtained in breach, and equitable compensation. Crucially, courts can award compound interest on equitable compensation where a fiduciary has wrongfully used another's money — see the <a href="/glossary/compound-interest" class="body-link">compound interest glossary entry</a>.
In practice
Fiduciary duties are most commonly encountered in company law (directors' duties under Companies Act 2006, ss.171–177, which codify the equitable duties), trusts, and professional relationships. If a director has entered into a contract that benefits themselves at the company's expense, or a solicitor has acted for both sides in a transaction without disclosure, fiduciary duty is engaged. Claims for breach of fiduciary duty must be brought in the Chancery Division. Time limits are governed by the Limitation Act 1980 or, for fraud, equity's general laches doctrine.