How Contractual Terms Determine Fiduciary Duties: A Two-Stage Process

A new article, co-written with Dr David Gibbs. We untangle the role of contract in determining the scope of fiduciary duties, which has two distinct roles in two distinct stages. An abstract and blog post follows. Link to the article here: (2019) 70 NILQ 241.

Abstract

The determination of the scope of the fiduciary duty of loyalty, when created by contract, is not a unitary process. It is raised following a multi-factorial enquiry, which considers the nature of the engagement, in a first stage. Here, no single factor is conclusive. It is then, in a separate, second stage, reduced by qualifying contractual terms, which are applied almost strictly logically. This second stage uses the contractual doctrines of interpretation and implication. However, since it is a form of the fiduciary doctrine of authorisation, those contractual doctrines are modified according to fiduciary principles. We argue this follows from the underlying nature of the fiduciary obligation as a way of resolving its internal tensions. While this division has not yet been fully recognised in the cases, the courts have been inching towards it. However, not fully recognising this inevitable division and eliding the two stages has led to defective reasoning and outcomes.

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How to determine the scope of the duty of loyalty, or fiduciary duty, is clouded in uncertainty. The cases yield little more than vague dicta holding that the fiduciary relationship must be consistent with the terms of the contract and must accommodate itself to them. The conventional wisdom is thus that the duty of loyalty is determined in a single-stage process. One starts with a blank slate, and then positively implies the duty of loyalty if the nature of the engagement – defined by the terms of the contract – demands it.

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Impact and Advocacy: Property Guardians

We’re all supposed to be generating ‘impact’ these days. This includes disseminating our research beyond its traditional audience of other academics, practitioners and, perhaps students. Getting it to policymakers seems to be the holy grail. Now, doing this for its own sake is inimical to the purpose of academic research – which is to have the time to consider matters in detail in the wider public interest whether or not the public find it interesting or interesting right now.

If I invited you for an after-work drink to discuss the indemnity for fraudulent rectification of the land register, you would probably decline. But if you came back from holiday to find your house had been sold by a rogue to an innocent party, who were currently living there, you would probably be very interested in who would get the indemnity, and who would get to keep the house. Prioritising the need for immediate impact risks undermining research of less flashy, but equally important, subjects.

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Article: Old Issues, New Incentives, New Approach? Property Guardians and the Lease/Licence Distinction

Property guardianship is a form of short term residential occupancy of disused buildings. Guardian companies wish to make sure their occupiers (the ‘guardians’) have only licences rather than leases of their quarters in order that they do assume statutory obligations towards the occupiers. In this article, I examine, at the doctrinal level, how the legal test for a lease or a licence has been applied in this situation. The article is not concerned with the rights and wrongs of the underlying policy – essentially whether to give imprimatur to a status of second-class tenant – but instead it is concerned to explain how this objectionable position has been reached through the back door.

Citation: Derek Whayman, ‘Old Issues, New Incentives, New Approach? Property Guardians and the Lease/Licence Distinction’ (2019) 83 Conv 44

Keywords: Lease; licence of land; repair obligations; notice to quit; property guardians.

Syndication: The Conveyancer and Property Lawyer is available on Westlaw. Click here after logging in to Westlaw.

Article: Obligation and Property in Tracing Claims

In this article, I challenge some a central orthodoxy of tracing, namely that it is merely a process and independent of the underlying claim.

Keywords: Fiduciary duty; Jurisprudence; Real property; Tracing

Abstract: Tracing is said to be merely a process and separate from claiming. It is then characterised as a set of pure property identification rules which cannot vary from claim to claim. However, the development of tracing in equity relied heavily on the fiduciary obligation to support its rules. While many of tracing’s rules can be justified independently of the fiduciary obligation or rationalised as evidential presumptions, others cannot. This means it is impossible to detach the process from the claim. Furthermore, it would be undesirable to do so because it would reduce the flexibility of tracing.

Citation: Derek Whayman, ‘Obligation and Property in Tracing Claims’ [2018] Conv 157

The Conveyancer and Property Lawyer is syndicated on Westlaw. Click here for the article after logging in to Westlaw.

Article: Equitable allowances or restitutionary measures for dishonest assistance and knowing receipt

Keywords: disgorgement; equitable allowances; remoteness of gain; dishonest assistance; knowing receipt.

Abstract: This article considers the credit given to dishonest assistants and knowing recipients in claims for disgorgement, with greater focus on dishonest assistance. Traditionally, equity has awarded a parsimonious ‘just allowance’ for work and skill. The language of causation in Novoship (UK) Ltd v Mikhaylyuk [2014] EWCA Civ 908 suggests a more generous restitutionary approach which is at odds with the justification given: prophylaxis. This tension makes the law incoherent. Moreover, the bar to full disgorgement has been set too high, such that the remedy is unavailable in practice. Therefore, even if the restitutionary approach is affirmed, it must be revised.

This article has been published in the Northern Ireland Legal Quarterly. Click here for volume 68(2).

Citation: Derek Whayman, ‘Equitable allowances or restitutionary measures for dishonest assistance and knowing receipt’ (2016) 68 NILQ 181–202.

Who are the real Villains of the Leasehold Ground Rent Escalator Scandal?

The conveyancers who acted for the purchasers. They have the greatest moral culpability and there are other legal principles at work that suggest they should bear the loss. There are numerous difficulties and obstacles, though.

N.B. Throughout this post, I assume the conveyancers did not explain the ground rent escalator clauses properly, spelling out the grave effects, to their clients. Doing so properly would satisfy their obligations to them. The criticism only applies to a conveyancer who did not do so.

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More on the Target Holdings Saga: Creggy v Barnett (Case Note): [2017] Conv 139

Oh No, I hear you cry. Not another piece on the wrangling over the remedy for breach of trust in Target Holdings Ltd v Redferns [1996] 1 AC 421 (HL). But there are two reasons to take heart. First, I am swimming against the stream of academic articles hostile to that case and its successor, AIB Group (UK) Plc v Mark Redler & Co Solicitors [2014] UKSC 58, [2015] AC 1503. Second, the reviewer asked him or herself the question of whether I had anything useful to add and decided the answer was yes.

Abstract: Discusses the Court of Appeal’s obiter ruling in Barnett v Creggy on whether a claim for equitable compensation for the breach of trust of paying away trust money without authorisation engaged the Limitation Act 1980 s.29(5)(a), with the effect that the trustee’s acknowledgement of the debt or other liquidated sum restarted the limitation period. Considers its implications for determining the nature of the remedy for the breach of trust.

The Conveyancer and Property Lawyer is syndicated on Westlaw. Log in, then click here to read my note, or navigate to [2017] Conv 139.

Broadly speaking, I identify additional reasons for the dicta in Ex p Adamson (1878) 8 Ch D 807 (CA) suggesting that the remedy is like a debt (thus not susceptible to the legal principles of causation and going against the ratio in Target Holdings). These are found in the rules for the acknowledgement of the equitable liability, which was then transmuted into a legal debt. However, my view is that this is a purely historic restriction emanating from the old form of action, which did not admit legal principles such as causation. We should not allow the forms of action to rule us from their graves, as Maitland nearly said. Just as other claims under this form eventually admitted legal principles (particularly restitution for unjust enrichment in change of position), so should this one.

Remodelling Knowing Receipt as a Gains-Based Wrong

The day has finally arrived. My new article is out in the Journal of Business Law:

Derek Whayman, ‘Remodelling Knowing Receipt as a Gains-Based Wrong’ [2016] JBL 565

It is syndicated on Westlaw – log in using your usual account then click here.

Abstract

This article analyses the nature of knowing receipt. It finds its previous characterisations as a form of unjust enrichment or trustee-like liability wanting in the face of newer authority and complex commercial situations. It argues that knowing receipt is a gains-based profit-disgorging wrong and this best describes its remedies.

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