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Fiduciary duties are those things professionals should not do

legal matters

Professionals are used to thinking about what they do in terms of having to meet positive obligations. Have you met the requirements of the contract? Have you exercised the skill and care of a competent architect? Failing to meet these standards is the cornerstone of professional negligence actions. But there is another raft of possible duties that it is worth knowing about: fiduciary duties. Rather than telling you what you should be doing, they tell you what you should not be doing.

While contractual duties, and duties to take care, come from the common law, fiduciary duties are creatures of equity. For those interested in a bit of history, equity came into being as a separate branch of the law during the Middle Ages. Someone unable to get the remedy they deserved at common law could ask the King to use his judicial powers to put things right. In time, the chancellor started to exercise this power in the King's name, and acted according to his 'conscience' - broadly meaning natural justice.

We no longer have separate courts of equity, but we still have distinct equitable principles. Although equity does not generally step into the rights and wrongs of a case and dispense justice in a super-hero kind of way, it plays an important role in many branches of the law. One of these is the law of trusts.A trustee has to act in the best interests of the trust's beneficiaries. Equity has extended this idea to people other than trustees who have to act loyally. That includes, in certain instances, a professional acting for his client.

Most of a professional's duties will be contractual and he will owe a duty of care, but he may also owe a fiduciary duty in respect of the aspects of his tasks he is required to carry out loyally. In dealing with those tasks, the professional must put his client's interests above his own. He should not put himself in a position where his own interest and his duty to his client conflict.Careful analysis is needed in any individual situation to decide to whom the professional is a fiduciary, and what obligations are owed.

Generalisations are difficult, but if the facts are such that the professional's conscience is affected, a fiduciary duty will arise.

Some professions are more likely to find themselves subject to fiduciary duties than others; solicitors probably coming top of the list. But anyone who finds themselves, for example, holding client funds, or in a position where they may make a personal gain, or acting for two clients whose interests potentially conflict, needs to think about what equity would expect of them.

But why, in practical terms, does this set of 'don't do' rules matter to lawyers? This is mainly because it may widen the scope of remedies available to the disgruntled client beyond those arising from breach of contract or a duty of care.

Damages may not be limited to the losses that were foreseeable before the breach, or losses that are not too remote from the breach, as they are with the common law.

Instead, they can extend to putting the claimant in the financial position he was in before the breach.

This principle used to be thought to be very extensive, thanks to a 1934 case in which Lord Thankerton (who, folklore has it, did his knitting in court) said that where a fiduciary had failed to tell his client material facts, it was irrelevant what would have happened had the facts been disclosed. This has subsequently been reined in by the courts, which have made it clear that there has to be a causal connection between the breach and the loss claimed.

Any unauthorised gain, even if not at the expense of the client, may be ordered to be handed over. Depending on the circumstances, the professional may not be able to rely on a defence that the client increased his loss by his own negligence. And the court may decide to award compound rather than simple interest on damages.

It is arguable that breach of fiduciary duty is not subject to the usual rules of limitation on bringing an action.

So, as well as 'must do' duties, you may also have a set of 'don't do' duties, which need to be considered.

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