Home / Summaries / The Principles of Equity and Trusts / transaction-fiduciary-principal

Breach of Fiduciary Duty - The No-Conflict Rule - The Self-Dealing Rule

Q: Tito v Waddell (No.2) [1977]

This prohibits the fiduciary from dealing on behalf of himself and the principal in the same transaction,

Q: Pitt v Holt (Consequence of Breaching This Rule)

Breach of this rule renders the transaction voidable

Q: Reason Why Self-Dealing Transactions are Voidable

This is because there is a real danger of conflict between the fiduciary's personal interest in getting the cheapest price and his duty to the principal to obtain the highest price for the property. The risk exists regardless of the fairness of the transaction.

Q: Consequence of Breaching This Rule

The principal may rescind the transaction and need not prove that the transaction is unfair . The fiduciary will also be liable to account to the principal for any profits made from the transaction.

Q: Sargeant v National Westminster Bank plc

The self-dealing rule can be excluded by the relevant instrument that governs the fiduciary relationship

9 important questions on Breach of Fiduciary Duty - The No-Conflict Rule - The Self-Dealing Rule

Tito v Waddell (No.2) [1977]

This prohibits the fiduciary from dealing on behalf of himself and the principal in the same transaction,

Armstrong v Jackson

A trustee cannot sell his own property to the trust

Pitt v Holt (Consequence of Breaching This Rule)

Breach of this rule renders the transaction voidable

Reason Why Self-Dealing Transactions are Voidable

This is because there is a real danger of conflict between the fiduciary's personal interest in getting the cheapest price and his duty to the principal to obtain the highest price for the property. The risk exists regardless of the fairness of the transaction.

Consequence of Breaching This Rule

The principal may rescind the transaction and need not prove that the transaction is unfair. The fiduciary will also be liable to account to the principal for any profits made from the transaction.

Sargeant v National Westminster Bank plc

The self-dealing rule can be excluded by the relevant instrument that governs the fiduciary relationship

Exception to The Rule: Ex p James

However, the transaction will not be voidable where the fiduciary has obtained the consent of the court or the fully informed consent of the principal to the transaction

*** The fairness of the transaction may be relevant when assessing whether the consent was indeed fully informed.

Wright v Morgan [1926]

It was held that this transaction could be set aside because the self-dealing rule (buyer of the trust property had not obtain fully informed consent from the testator) had been infringed, even though the transaction had been fair.

Hillsdown Holdings plc v Pensions Ombudsman

This discretion had been recognised in this case.

***If this discretion is recognised generally, it has the potential to undermine the strict application of fiduciary duties generally and the self-dealing particularly.

The question on the page originate from the summary of the following study material:

The Principles of Equity and Trusts | 9780199570041 | Graham Virgo

View summary