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Who is a Fiduciary and what are his duties?

It is established that relationships such as those between solicitor and client, principal and agent and trustee and beneficiary automatically give rise to a fiduciary relationship under common law. A fiduciary relationship can, however, arise in a wide range of other relationships where there is a substantial degree of control over the property and affairs of one person by another. In determining whether a relationship is a fiduciary relationship consideration must be given to all of the facts of the particular case and not simply the label that is given to it.

Khouj v Acropolis Capital Partners Ltd [2016] EWHC 2120 (Comm) is a recent example of the courts’ approach to determining whether a fiduciary relationship exists and the extent of the fiduciary’s obligations.

Facts

The Claimant, Mr Khouj, was the administrator of the estate of the deceased former assistant Foreign Minister of the Kingdom of Saudi Arabia, Mr Mansouri. The proceedings concerned the role of Acropolis Capital Partners Limited (ACP) and Acropolis Capital Management (ACM), in the financial affairs of Mr Mansouri.

An agreement between ACP and AMP referred to ACP’s appointment as investment manager and advisor in respect of two funds, and provided for ACM and ACP to share premises and for certain ACM staff to dedicate time to ACP activities. ACP and ACM accepted that Mr Mansouri had been a client of the Multi Strategy fund but denied that they had any relevant relationship with or obligation to Mr Mansouri. They declined to assist Mr Khouji in finding out what had become of Mr Mansouri’s wealth.

Mr Khouj sought declarations that ACP and ACM were Mr Mansouri’s agents or fiduciaries between at least 2002 and his death. Mr Khouji said that as a result he was entitled to inspect any documents in their control relating to assets owned by Mr Mansouri and all the business activity undertaken by them on behalf of Mr Mansouri.

Decision

    1. It was settled law that fiduciary obligations might arise in a wide range of business relationships where a substantial degree of control over the property or affairs or one person was given to another person. As a general rule, it was a legal incident of the relationship of principal and agent that a principal was entitled to require production by the agent of documents relating to the affairs of the principal. The entitlement to require production by the agent of documents relating to the affairs of the principal survived termination of the agency.

 

    1. The circumstances of the case gave rise to the requisite relationship of trust and confidence on which a fiduciary relationship had been founded. ACP and ACM had been agents of Mr Mansouri in relation to the management of the assets forming the relevant investments.

 

    1. It was plain that the law should and did recognise a duty on the part of ACP and ACM to account and provide records to Mr Mansouri in relation to assets of his where their position as agent or fiduciary extended to those assets. That was the duty that was relevant to the relief sought in the present case. There was no written engagement letter or contract in the present case that attempted to affect the position. The nature of the commercial transaction only reinforced it.

 

  1. ACP and ACM owed: (i) a duty to account to Mr Mansouri in relation to transactions and other business conducted on his behalf (or jointly with another); (ii) a duty to keep and maintain proper records of any transaction or other business conducted on his behalf (or jointly with another); and (iii) a duty upon request to provide Mr Mansouri with originals or copies of and records of transactions and other business conducted on his behalf (or jointly with another).

Commentary

Some of the duties of a fiduciary are reasonably well known: “A fiduciary usually must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal” (Millet L J, in Bristol and West Building Society v Mothew (t/a Stapely & Co [1996] 4 All ER 698). However, often in order to assess whether the fiduciary has complied with those duties, a claimant must first invoke the duty to give an account of the relevant transactions. This fundamental fiduciary duty can be overlooked but it is the starting point for anyone alleging a breach of duty.

Gibson & Co.
December 2016