Chapter 15 Self-Test Questions

What is a fiduciary?

Someone who is expected to act in another person's interests to the exclusion of their own interests.

Someone who manages the affairs of another.

Someone who owes administrative duties to another.

Someone who is entitled to expect another to act in their interests.

'The list of fiduciary relationships is exhaustive.'

True.

False.

Which of the following statements are accurate?

All trustees are fiduciaries.

All fiduciaries are trustees.

Some trustees are not fiduciaries.

No fiduciaries are trustees.

Which two conditions were identified by the Supreme Court of Canada as being required for the recognition of an ad hoc fiduciary relationship?

One party has total and complete control over the legal and practical interests of the other.

Undertaking by one party to act in the best interests of the other.

The party making the undertaking has a discretionary power to affect the other's legal or practical interests.

One party purports to act as an agent for the other.

In which circumstances will a fiduciary have breached their duty?

Deliberate breach of duty.

Breach of duty by an intentional act.

Breach of duty by unconscious omission.

Breach of duty by acting with the fully informed consent of the principal.

What is the requisite level of fault for a breach of fiduciary duty?

Subjective dishonesty—the fiduciary believed they were being dishonest.

Objective dishonesty—a reasonable person would consider the fiduciary's behaviour to be dishonest.

Qualified objective dishonesty—what a reasonable person would consider to be dishonest based on the knowledge of the fiduciary.

No level of fault—strict liability.

'It is possible to modify or exclude fiduciary duties.'

True.

False.

How do fiduciary duties work?

Fiduciary duties tell a fiduciary what to do.

Fiduciary duties tell a fiduciary what to do and how to do it.

Fiduciary duties tell a fiduciary what not to do.

Fiduciary duties both tell a fiduciary what to do and what not to do.

Where do fiduciary duties derive from?

Fiduciary duties derive entirely from legislation.

Equitable principles are relevant only to the interpretation of fiduciary duties deriving from statute.

Not all fiduciary duties derive from statute.

It is unknown where fiduciary duties derive from.

'Fiduciary duties are so strict because they ensure the fiduciary is not distracted by serving their personal interests.'

True.

False.

'The high standards of fiduciary relationships cannot be justified.'

True.

False.

How does Conaglen categorize fiduciary duties?

Fiduciary duties are subsidiary; they are there to enhance the performance of non-fiduciary duties.

Fiduciary duties derive from morality and require the fiduciary to act loyally in all endeavours.

Fiduciary duties are a deterrence preventing the misuse of property by a fiduciary.

Fiduciary duties are imposed to encourage high standards of behaviour.

In which circumstances can fiduciaries profit from their position?

The no-profit duty is clear: a fiduciary can never profit.

A fiduciary can profit with the prior authorization of the principal.

A fiduciary can profit as long as doing so does not harm the interests of the principal.

A fiduciary can profit as long as they inform the principal within a reasonable period of doing so.

When will a fiduciary be liable for a breach of the no-conflict rule?

If there is a potential conflict.

If there is an actual conflict.

Only if they profit from the conflict.

Only if the conflict harms the interests of the principal.

What is the consequence of a trustee selling trust property to themselves without the beneficiary's consent?

The transaction is void.

The transaction is voidable.

There is no consequence as long as the trustee paid a fair price.

The beneficiary can sue the trustee in tort.

'Fiduciaries cannot act for more than one principal.'

True.

False.

In what circumstances can a fiduciary act for more than one principal?

Fiduciaries cannot act for more than one principal at a time.

Fiduciaries can act for more than one principal at a time, but they can never have conflicting interests.

A fiduciary can act for more than one principal at a time, even if they have conflicting interests.

There are no restrictions on the possibility of a fiduciary acting for more than one principal.

Fred is a fiduciary for Aaron and Brian. Fred obtains confidential information about Aaron which would be beneficial to Brian. In which of the following situations is Fred in breach of the no-conflict rule?

Fred does not tell Brian the confidential information.

Fred does tell Brian the confidential information.

Fred tells Brian only the absolutely necessary confidential information.

Fred tells Aaron that he is going to tell Brian the confidential information.

In what circumstances can a fiduciary act for two principals with conflicting interests?

A fiduciary can never act for two principals with conflicting interests.

A fiduciary can act for two principals with potentially conflicting interests but must resign in the event that there is an actual conflict.

A fiduciary can act for two principals with conflicting interests if both have given their fully formed consent.

A fiduciary can only act for two principals with conflicting interests if the principals are corporations.

'The no-conflict rule and the no-profit rule are essentially the same thing.'

True.

False.

What is the nature of liability for the no-conflict and no-profit rules?

The no-conflict rule is strict liability.

The no-profit rule is strict liability.

The no-conflict rule is fault-based liability.

The no-profit rule is fault-based liability.

Why was the solicitor awarded an equitable allowance in Boardman v Phipps?

He was not a true fiduciary.

The decision was unjust.

His services had made the company more profitable.

He acted in good faith.

A fiduciary resigns for legitimate reasons. They later obtain an opportunity to compete with the principal.
If the fiduciary acts on the opportunity are they in breach of duty?

The fiduciary's duties continue even after their resignation; the fiduciary will be in breach.

The fiduciary would be in breach if they resigned in order to exploit the business opportunity.

The fiduciary is not in breach as they resigned for legitimate reasons and the fiduciary relationship had ended.

The fiduciary will be in breach as they did not obtain the fully informed consent of the principal.

A fiduciary arranges contracts between their principal and a third party. The fiduciary receives a 10 per cent commission on the successful completion of the contracts. Has the fiduciary acted in breach?

The fiduciary is in breach because they received a secret commission.

The fiduciary is in breach because there are no circumstances whatsoever in which the fiduciary can receive a personal benefit or profit.

The fiduciary is not in breach because there is a benefit to the principal.

The fiduciary is not in breach because they are entitled to be remunerated for their services.

'Where a transaction is entered into as a result of a breach of fiduciary duty, rescission will always be available.'

True.

False.

'Equitable compensation is unavailable in the event of a breach of fiduciary duty.'

True.

False.

What advantages are there to finding that a fiduciary holds profits on constructive trust for the principal?

If the value of the profit increases, the principal will be entitled to the increase.

If the profits are received by a third party, the principal will have a proprietary claim against the fiduciary and the third party so that the principal can recover more.

If the fiduciary becomes insolvent, the principal will gain priority over other creditors.

If the profit is lost and becomes untraceable, the principal will retain a proprietary claim against the fiduciary's other property.

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