Editorial Committee of the Cambridge Law Journal

Fiduciary Relationships
Author(s): L. S. Sealy
Source: The Cambridge Law Journal, Vol. 20, No. 1 (Apr., 1962), pp. 69-81
Published by: Cambridge University Press on behalf of Editorial Committee of the
Cambridge Law Journal
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 FIDUCIARY RELATIONSHIPS

L. S. SY

TEE branch of equity which deals with fiduciary relationships does

not receive a great deal of attention in legal works, and what has
been written is not usually very full or very precise. It is prb
posed, therefore, in this article, first, to explore something of the
background and development of this topic, secondly, to discuss the
problem of defining a fiduciary situation and, thirdly, to suggest,
in outline at least, a cIassification of the relationships and the
principles which apply to each class.

" CONFIDENCE," TRU8TS AND FIr)UCLARY RELATIONS}PS

Breach of trust, or confidence, is one of the traditional heads of

jurisdiction in Chancery:

These three give place in court of conscience,

Fraud, accident, and breach of confidence.l

From this branch of equity we derive, of course, the whole of our

law of trusts; but matters of confidence in earlier times covered a
good deaI more ground than trusts of property as we know thenX
today. In the reports of eighteenth- and early nineteenth-century
cases we find the word used in many different contexts. A was said
to have confidence reposed in him by B not only where B had
entrusted A with property to hold and deal with on behalf of him-
self or others-as in the trust strictly so called but also xvhere A
undertook to exercise a power, to conduct a sale, to supervise an
estate or business, or in some other way to become B's employee or
agent. Confidence was also reposed where B was dependent on A's
adnce, perhaps because A was a professional adwser or expert, or
more familiar with the subject-matter; because A was on the spot
and B at a distance; or because A was a trusted s.ervant or friend,
or a person of dominant character or position who was able to
influence B's decisions. Again, confidence might be iIIduced where
A by words or conduct represented to B that he would deal fairly
with him. In all these cases the broad general pnnciple applied
was

Quoted in Maitland, Equity (2na ea., Brunyate, 1932), 7n.; cf. Coke In
&4, 86.

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70 The Cambridge Law Journal tlo62]

that if a confidence is reposed, and that confidence is abused,

a court of eqliity shall give relief.2
Our ancestors did not mince words: many of these matters of
confidence were naturally called " trusts," whether there was any
strict trust of property or not.3 Nor, of course, has the 18w a
monopoly of this word today: it is good English, for instance, to
say that a person entering some employment or talring up an
appointment, whether public or private, is undertaking or accept-
ing a " trust." So, in the eighteenth century, in Charitable Cor-
poration v. Sutton,4 Lord Hardwicke said of the board of
" commlttee-men " of the corporation that they were
most properly agents to those who employ them in this trust,
and who empower them to direct and superintend the affairs of
the corporation
and later 5

Nor will I ever determine that a court of equity cannot lay

hold of every breach of trust, let the person be guilty of it
either in a private or public capacity.
An eartier chancellor,6 who svas asked to interfere in the choice
of a school which had been made by the guardians of ax} iIlfant, is
reported to have interrupted counsel to say " with some mrarmth "
that " the guardians were but trustees " and that
as the court would interpose, where the estate of a man was
devised in trust, so would it a fortiorz concern itself, on the
custody of a child's being devised to a guardian, who was but a
person intrusted in that case.... That if any wrong steps
had been taken . . . the court would interpose and order the
contrary; and that this was grounded upon the general power
and 3urisdiction which it had over all trusts, and guardianship
was most plainly a trust.
So long as the relief meted out by the Lord Chancellor followed
broad principles and involved a degree of discretion, a simple legal
socabulary relying on general words such as " trust " and " confi-
dence " was adequate. In times however, discretion based on
broad principles gave way to concrete rules, and as this process
neared completion, we can see from the reports that a standard
technical vocabulswy was gaining recognition. Improved case

2 l;Ord ThUrIOW in Gartside s. Isherwood (1788) 1 BrO.C.C. 668, 560, referNng to

Filmer v. GOtt (1774) 4 BrO.P.C. 230.
3 ACCOraing tO BlaCk8tOBe, the WOrd WaR regUI8rIY UBea IN COUrt8 Of COmmOn hW,
see 3 B1.CQmm. 482, and cf. 33 Halsbury (Eailsham ed.) 87n.} Coggs Y. Bernard
(1703) 2 LOra RaYm. 909, Jones s. Lewis (1751) 2 VeB.Sen. 240.
4 (1742) 2 Atk. J=OO, 405 (italics in origillal omitted).
s Ibid. 406.
6 Lord Macclesfield, in Duke of Beautort s. Berty (1721) 1 P.Wms 703, 704 705
(original italics). Cf. Ixord Hardwicke in Scroggs v. Scroggs (1755) Amb. 272,
273.

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C.L.J. Fiduciary Relationships 71

reporting and the publication of several textbooks 7 no doubt

assisted in this development. Descriptive wvords, like " conS-
dence," which once dominated this entire field, gave way to precise
terms, which were better sliited to the formulation zJf fixed rules.
One noticeable change was that the word " trust " came to be
recognised as a formal term with its modem technical meaning.
This was all very well; but it meant that the other situations
formerly described vaguely as " trusts " were now left without a
Ilame. The reports of cases decided in the early years of the nine-
teenth century show that there was considerable uncertainty at
that time whether these situations collld still be termed " trusts."
Counsel in York Buildings Co. v. MacKenzie,8 in 1795, was obn-
ously put to some pains to express himself w}}en he pleaded in
these words for the application of the traditional principles:

The office of a common agent 9 has already been described

in this case, and it is needless to enter into refixlements or
niceties as to the nature of trusts, or the speciSc name of
trusts. There is no magic in the term: He is a trustee (in
technical style) who is vested with property in trust for others;
but every man has a trust, to whom a business is committed
by another, or the charge and care of any concern IS confided
or delegated....

Before long it became customary to qualify the use of the language

of trust and trustee in this sense with some explanation or
apology; one spoke of a " quasi-trust," or said that the relation-
ship was " in some respects " or " for Iimited purposes " one of
trusteeship. In 1820, Lord Eldon said 10:

. . . there is a vast difference between things to which we

give the same denomination, I mean trusts. You have a trust
expressed; you have a trust implied; you have relations
formed between sudinduals in the matters in which they deal
with each other, in which you can hardly say that one of them
is a trustee and the other a cestui Que trust; and yet you
cannot deny, that to some intents and some purposes one is a
cestui que trust and the other a trustee.

Eventually, it seems to halre become the established usage to

concede that in these situations there was no trust, and instead to
assert merely that the relationship was similar to that between
trustee and cestui que trust. The word fiduciary (which earlier

7 Eoldssvorth (5Jol. 12,19>193) noteB that the only Bystematic textbook of equity
at the end of the eighteenth century was FonbIanque's edition of BAI1OW9B
Treatise of Equity (179S95); but in the next few decades were published (inter
alsa) Jeremy, Ijewin, Maddock, Mitford, Seton and Story.
8 (179$) 8 Bro.P.C. a, 64.
9 A 601icitor employed aB a judicial officer to superviSe auction sales in Scottish
liquidation proceedings.
° Cholmondeley v. Clinton (1821) 4 Bli. 1, 96.

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72 The Cambridge Law Journal [.1962]

had received very little judicial support) 11 was adopted to describe

these situations which fell short of the now strictlyZefined trust.

FIDUCL RY RELATIONSZIPS IN MODERN LAW

Today, the word " fiduciary " is still sometimes used in an

indefinite and descriptive sense, so that it embraces all trust-like
situations irzoluding the trust itself,l2 but it is more precisely used,
in contrast with trusts proper, in reference to those situations which
are in some respects trustlike but are not, strictly speakings trusts.
The law of trusts is well recogIlised as a separate branch of the lau,
with its own textbooks and its owvn rules and principles, now highly
developed. The law of fiduciary relationships will not, in general,
be found in those textbooks, but the rules and principles governing
these relationships arc in essence and in origin the same as those
of the 18W of trusts. This point W8S made by Fry J. in Ez p. Dale
* Co.; hesaidl3:

What is a fiduciary relationship ? It is one in respect of which

if a wrong arise, the same remedy ensts against the wrongdoer
on behalf of the principal as would exist against a trustee on
behalf of the cestui que trust.

E^ry J.'s definition 14 emphasises the essential quality of all fiduciary

relationships: every remedy which can be sought against a

11 AI1 early instance of the use of the word by B judge is in Bishop of Winchester
v. Knight (1717) 1 P.Wms. 406, 407, per Cowper I.C., in proceedings by a
landlord for an accouIlt of ore dug by a tenant: " . . . it is stronger in this
case by reason tboat the tenant i6 a sort of fiduciary to the lord and it is a
breach of the tru6t which the law repoves in the tenant, for him to take away
the property of the lord." Other early examples includo: Woodhoose v.
Meredith (1820) 1 Jac. & W. 204, 213 (counsel); Oliaer v. Court (1820) 8 Price
127 , 143 (counsel); Cholmondeley v. Clinton (1820) 2 Jac. & W. 1, 183
(Plumer M.R.); DocJcer v. Somes (1834) 2 My. &; E. 655, 6B5 (Lord
Brougham); but use iB uncommon before the 1850s. Much of the pioneering
work was done by ths testbook writer6: Jeremy (1828), IJewin (1837), Mad-
dock (3rd ed., 1837) and Story (id ed., 1839) all make use of the expression.
12 See, e.g. the learned editor of Maitland, Equiby (note 1, supra), 229; 33
Halsbury (Hailsham ed.) 88 and references cited ibid. In the American
Restatetnent of the Law of Trusts (2nd ed., 1969) Vol. 1, § 2, a trust is
(lefined as a type of fiduciary relationship.
13 Re West of EngZand and South Wales District Bank, es p. Dale j Co. (1879)
11 Ch.D. 772, 778. The decivion of Fry J. in thiB ca8e was disapproved by
the Court of Appeal in Re Hallett's Estate, Knatchbull s. Hallett (1880) 13
ChD. 696, but this passage was expre6sly approved by Je3sel M.R. at 713.
14 Other " definitions " found in the authorities are not very helpful. 80me are
expressed vaguely in terms of "confidence": e.g., Salmond and Williams
ContTacts (1945), 280, 1 Halsbury (Simonds ed.), 182; but attempts to define
n trust," * confidence '9 and 6 fiduciary relationship " in term3 of each
are unsatisfactory: cf. Maitland, Equity (note 1, 8upTa), 43. Ijord Greene
M.R. in Re I)iplock, Diplock v. Wintle [1948] Cb. 465, 640 resorted simply to
illustrations. The definition given by Asquith L.J. in Rendirg v. R. [.1949]
2 E.B. 232, 236 was not intended to be of general application.

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C.L.J. Fiduciary Relationships 78

fiduciary 15 is one which might be sought agsinst a trustee on the

same grounds. But it is really not a definition at all: although it
descnbes a common feature, it does not teach us to recognise a
fiduciary relationship when we meet one. Still less does it assist us
when we are faced with a particular relationship and asked the
practical question: does a certain principle of the law of trust and
trustee apply ? John is my agent and is therefore, on good authb
rity, in a fiduciary position towards me. Does this mean that he
must not mix with his own money the sums which he holds on my
account ? Is there a presumption of undue influence if I make him
a gift ? Is he disqualified from becoming the lessee of land formerly
held by me, after I have failed to secure a renewal of the lease for
myself? Do all the trust principles apply to this fiduciary situa-
tion? When we examine the authorities, we learn perhaps with
some surprise- that this is not so. The word " fiduciary," we
find, is not definitive of a single class of relationships to which a
fixed set of rules and principles apply. Each equitable remedy is
available only in a limited number of fiduciary situations; and the
mere statement that John is iIl a fiduciary relationship towards me
means no more than that in some respects lliS position is trustee-
like; it does not warrant the inference that any particular fiduciary
principle or remedy can be applied.
Fletcher Moulton I,.J. once warned against what he called " the
danger of trusting to rerbal formulae " in this way.lo After illu-
stratmg a nuxnber of fiduciary situations and describing the wvays in
which the courts had interfered to grant relief in these cases, he
said 17

Thereupon in some minds there arises the idea that if there is

any fiduciary relstion whatever any of these types of interfer-
ence is warranted by it. They conclude that every kind of
fiduciary relation justifies every kind of interference. Of course
that is absurd. The nature of fiduciary relation must be such
that it justifies the interference.
It is obnous that we cannot proceed any further in our search
for a general definition of fiduciary relationships. We must define
them class by class, and find out the rule or rules which govern
each class. In this tasl, we receive little help from the cases, or
even the textboolss.l8 The judges in most cases have been more

5 The 6ubstantiva1 use, atepted in America (where the usual counterpart iB

" beDefiCi5 ") i8 opted for &onvenience. There iB English authonty of
considerable stanaing for the uBe a6 a noun: Bee note ll, supra.
6 Re Coomber, coombeJ s. CoombeT tl911] 1 Ch. 723, 728.
17 Ibid. 729.
18 Those English writers who tackle the question gt all appear to adopt b purely
arbitrary approach. Kerly, History of Chancery (1890), 202 says that a
constructive tmstee iB not in a fiduciary position, and the learxIed editor of
Maitland, Equity (note 1, supra), 229 appearB to agree. Sheridan, Fraud

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74 The Ca1nbridge Law Journal rl962]

ready to find that the type of fiduciary situation upon which their
decision depends does or does not enst, than to say what, for that
purpose, amounts to such a fiduciary position. IIldeed, in very few
csses has there been anything more than a ruling that the situation
is or is not " fiduciary," without regard to the warning of Fletcher
MouIton L.J. that this is not taking the inquiry far enough. In
order to know whether a particular rule of equity is applicable we
must know whether the situation is ' fiduciary " in the appropriate
special sense.lo

A CLA8SIFICATION OF FIDUCL RY RELATION8EIP8

The authorities seem to suggest that there are four 20 categories of

fiduciary relationship. The first two classes are reasonably capable
of definition; the third and follrth, which are concerned with the
application of presumptions, are probably not deSnable except by
reference to precedent. A description of the four categories follows,
with a brief summary of the eqliitable rules which apply in each
case.

Category I
Where one person has control 21 Of property which (whatever
may be the position at law) 22 ill the view of a court of eqtiity is the

in Equity (1957) includes undue influence, but rules out fraud on a power-
Winder in " Undue Influencs and Fiduciary Relationship" (1940) 4 The Con-
teyancer (N.8.) 274 excludes undue influence. None of these writerB give3 any
explanation for his ruling. In Underhill, Trusts and Trustees (llth ed.,
1959), 214 it is suggested that a relationship may be more or less fiduciary and
that some rules will not apply tlnless " the agency is of an exceptionally
fiduciary character," but we are not told where to draw the line. Cf. also 1
lIal6bury (Simonds ed.) 182.
19 It would undoubtedly be simpler to keep " fiduciary " as a comprehensive
term, as most lawyere probably regard it; but the judges have very commouly
based their reasonlng on a finding that n party i8 or is not in a " fiduciar;y "
position in such a way that their statements sre intelligible only if the term is
underatood to have been u6ed in a very special limited sense; cf. note 26 and
note G7, snfra.
20 There is possibly a fifth sense in which the svord " fiduciary ' might be used,
in relation to the obligation of bankers, doctors, solicitors sna others not to
divulge confidential information. The authorities differ on the question
whether the disclosure by A of information concerning B i8 properly regarded
as a breach of a fiduciarg obligation; modern cases are usualIy based on con-
tract, express or implied, and the remedy sought iB damages, or damages and
an injunction. Cf. Toutnies s. National ProXoincial Bank rl924] 1 E.B. 461,
Carter v. Palmer (1842) 8 Cl. & F. 667, 707 and Robb v. Green [1895] 2 Q.B.
315. Of course, a fiduciary who llses information belon6ing to his beneficiary
for his own profit (Reyal (Hastings) Ltd s. Gulliser [1942J 1 All E.R. 378,
382) or sells it (Beaumont v. Boulfbee (1802) 7 Ves. 599, 607408) must
account to his beneficiery, but these situations are covered by categories I and
II in the text.
21 In the sense that he has power to diBpose of it; whether he has authority to
dispose of it iB irrelevant. Cf. :Kekewich J. in Re Batney, Borney s. ]3vrney
t1892] 2 Ch. 265, 276: " money under his control . . . means money which he
can, if he will, put into his own pocket or pay away as he pleases to some-
body elve."
The legal title msy be in the fiduciary, the beneficiary or some third party.

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C.L.J. Fiduciary RelationsEiips
57

property of another, the fiduciary position of the former is very

close mdeed to that of a trustee. Guardians, bailiSs and stewards
usually come into this category; and so also does a person who
receives property for a purpose which cannot be carried out.23
Agents, solicitors, company directors and promoters, partners and
even bankers are also included when they handle or hold property
on behalf of their beneficiarprovided that they do not hold the
propeBy as debtor.24 No trust can, of course, exist where there is
a debtor-creditor relationship: in equity, " restitution stopped
where repayment began." 25 The existence of this class of fiduciary
relationship wvas one of the grounds on which the original eqliitable
jurisdiction in account lay.26 Such a relationship must also be
established before the doctrine of tracing may be invoked in
eqliity.27 A fiduciary who falls within this category must keep the
property separate from his own, and he is debarred from tradlng
with it for his own benefit.28 The effect on the fiduciary's obliga-
tions of death,29 bankruptcy 80 and the lapse of time 81 iS, and
always has been, the same as applies in the case of a trustee.

23 e.g., the directors in Sinclair v. Brougham [1914] A.C. 398; see the judgment
of Ijord Parker at 441, and that of Viscount E[aldane L.C. at 421. Some
authorities would estend this rule 80 aB to include any " conscious v7rong-
doer" (Scott, " Constructive Trusts " (1955) 71 I.Q.R. 39, 48), e.g. z thief of
money or negotiable securities; but the better view would appear to be that,
although there iB a " continuing nght of property " (Re Diplock, Diplock v.
Wintle [1948] Ch. 465, 520) sufficient to invoke the doctrine of tracing there iB
not, without more, a fiduciary relationship. Scott, op. cit., seems to support
this view. Perhaps the rule stated in the test is confined to borrowing trans-
actions; cf. Buckley on the Companies AcS (13th ed., 1957), 25.
24 SS pp. 1, infra; cf. Siolair v. Brougham tl914] A.C. 398, 420.
25 R. Leslie Ltd. v. Shiell [1914] 3 E.B. 607, 618, per IJord Sumner.
26 The swpe of the onginsl equitab]e junsdiction in account was often an issue
in cases of agency. Account lay in equity against an agent on three principal
grouxIde: (i) that the accounts were mutual; (ii) that they uere complicatedX
(iii) that there existed a fiduciary relationship. In (iii) the ob}igation was to
account as trustee; ial (i) and (ii), aB debtor. See Ashburner, Principles of
Equity (2nd ea 1933), 349; Brunyate, Limttation of Actions in Equity
(1932) 91; Foley v. Hill (1848) 2 HIJ*caB. 28; Phillips s. Phillips (1852) 9
Hare 471. 27 See, however, note 23, supra.
28 Secu.s in early law: see, e.g., Grossenor v. Cartwfight (1679) 2 Ch.Cas. 21-
Linch v. Cappy (1680) 2 Ch.Cas. 35; Bromfield v. Wytherley (1718) Prec.Ch.
505 Other rules connected with that stated in the test are: first, if " trust "
money is mizced with other moneys in a bank account, drawings are governed
by the rule in Re Hallett's Estate, Knatchbull v. Hallett (1880) 13 Ch.D. 696
and not by the rule in Clayton's Case (1816) 1 Mer. 572; secondly, the rule
that a trustee cannot set off losses against gains does not apply where the
losses and gaiDs result from wrongful dealings with the same item of " trust "
property. See Eanbury, Modetn Equity (7th ed., 1957), 27NS71.
29 Cf. Charitoble Corpn. v. Sutton (1742) 2 Atk. 400, and IJord Hatheriey L.C.
in Oserend Gurney 8 Co. v. Gurney (1869) L.R. 4 Ch.App. 701, 713- Potter
History of Equitv and its Courts (1931), 8S87.
a° Gf. Lister j Co. v. Stubbs (1890) 45 Ch.D. 1, 15, per Lindley L.J.
81 Cf. Burdick v. Garrick (1870) I..R. 5 Ch.App. 233, 243, per (DiSard L.J.-
Metropolitan Bank v. Heiron (1880) 6 Es.D. 319, 325, per Cotton L.J.
Lyell v. Rennedy (1889) 14 App.Cas. 437, 463, per lJord MacDaghten; Ash-
burner (op. cit., note 26, 8upra), 610; Brunyate (op. cit., note 26t supra), 50
et seq.; preBton and Newsom. Limitation of Actions (3rd ed., 1953) 174 176

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 76 The Cambndge Law Journal [1962]

Category II

This type of fiduciary situation arises, in the words of Asquith

L.J. in Reading v. R.,32 " whenever the plaintiff entrusts to the
defendant a job to be performed." Any person wrill find himself in
such a situation if he has ulldertaken or is under an ob}igation (not
necessarily corltractual 83) to act on another's behalf or for
another's benefit, or is deemed in equity to have done so.84 In
this case the fiduciary has, in the eyes of equity, a " trust " in the
sense of employment, commission or charge. Sometimes the
" trust " wvill be self-imposed.85 But no property need be involved,
and so, although almost the whole of Category I will usually fall
also under this head, many other relatioIlships are included - - for
instance employer and employee, the Crown and its servantss36 and
solicitors, agents, partners, directors and promoters even when
their actinties do not involve the control of property.
The attitude of equity towards a fiduciary in this category is,
essentially, to see that he acts consistently wth his undertaking.
The fiduciary may be under no duty whatsoever; the obligation
may be merely a favour volllntarily undertaken, and not in any
sense enforceable either at law or in equity. But the court will
insist that, if a person who has engaged to act for the benefit of
another acts at all, he acts honestly, diligently and entirely as he
has undertaken; and it demands that neither he, nor anyone claim-
ing through him, should seek to uphold a situation which does not
fully accord with the intention which he has manifested or held
himself out as having. In particular, the undertaking by a fiduciary
to act for another carries with it the assumption that he will Ilot
act in his own interest; in the words of Lord Loughborough 37
he, who undertakes to act for another in any matter, shall not
in the same matter act for himself.
This principle has two main consequences.
82 [1949] S.B. 232, 236.
33 Cf. Sitt, " The Fiduciary Prige " (1949) 37 Ca}if.L.R. 639, I40: " A fidu
is 8 person who undertakes to act in the interest of another person.
immatenal whether the undertaking is in the form of a contract. It iB im
terial that the undertaking i8 gratuitous'; and IJord Macnaghten in Lyel
Kennedy (1889) 14 App.Cas. 437, 463 (speaking of a " category I " fidllcia
" Nor dO I think it can make any difference whether the duty arises fr
contract or i8 connected with some previous request, or whether it i8 se
impowed and undertaken without any authority whatever."
84 A promoter i8 8Ometime8 estopped from denying that he was at some mat
time acting on behalf of a company which he has later formed: Hicherz
Congrete (1&31) 4 Sim. 420; Gluckstesn v. Barnes [1900] A.C. 240- cf
Benson v. Heathotn (1842) 1 Y. &; C.C.C 326, 340.
as A8 in the promoter ca6e8.
86 Att.-Gen. v. Goddatd (1929) 98 L.J.K.B. 743; Reoding s. Att.-Gen. tls5
A.C. 507.
8t Whichcote s. Lawrence (1798) 3 Ves. 740, 760; cf. Ez p. Lacey (1@2) 6 Ve
625, 626, per Lord Eldon.

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 Fiduciary Relationships
77

C.L.J.

neb eht ,tszF

eb sah hcihw
isop s'rettal
tsenoh eht
m lapicnirp
ot deyolpme
tiilqe ,yldnoceS
enod sah eh
srup ni mih
i ,suhT .noit
e seitiruces
eht ecrofne
tifeneb eht
ta ytud on
alc ton yam
eb nwo sih
era hcihw
us ot dnuob
cudif eht yb
irporp a sah

Category IlI
Irl Keech v. Sandford 41 the trustee of a lease,42 who had been
unsuccessful in obtaining a renewal of the lease for his cestui que
fTUSt, took a renewal in his own name and claimed to be entitled to
it beneficially. The court, however, ruled that it must be held on
trust on the same terms as the original lease. This case is authority
for two propositions which are not always distinguished 43: fint,
the rale, which we have already discussed, that persons in a
" fiduciary " position may not make a profit from their situation;
and, secondly, the rule applicable to trustees, life-tenants, mort-
gagees in possession, and other persons with Iimited or partial
interests in property (usually leaseholds) whereby in certain cir-
cumstances renewed or additional 44 nghts obtained by any such
person are deemed to be an accretion to the original property, with

as e.g., Bothschild v. Brookman (1831) 6 BIi.(N.s.) 165.

a Fow; v. Mackfeth (1788) 2 Cow 320, Ex p. James (1803) 8 Ves. 337; Beed v.
Norns (1837) 2 My. d; Cr. 361. The same duty is owed by a surety.
4° Sec Att.-Gen. v. ^ Goddard and Reading v. Att.-Gen., note 36, supra; Fine
*ndustMal Commodities Ltd. s. PotDling (1954) 71 R.P.C. b3.
41 (1726) Sel.Cas.t.lRing 61.
42 Apparently renewabIe by cuaXm: see Norris v. Le Nexe (17B) 3 Atk. 26, ,
per Ijord Hardwicke.
43 Cf. the leamed editor's note in Maitland, EQuity (note 1, supra), 82.
44 The mle includes, in some circumstances, the acquisition of a reversion:
PhilEps v. Phillips (1885) 29 Ch.D. 673.

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78 The Cambridge Law Journal [1962]

the result that he is allowed no greater nghts in regard to the secre-

tion than he has or had in the property orinnally held. In so far
as Keech s. Sandford is authority for the first of these rules, the
relationship between the partles is " fiduciary " in sense II above.
There is, however, authority supporting the view that the term
" fiduciary " is, in a third special sense, of signiSicance in relation
to the 6econd of these propositions. Some authorities consider that
alt the relationships affected by either proposition are " fidu-
ciary " 45; others suggest that " fiduciary " describes only those
situations which give rise to an irrebuttable presumption of law
that the new property is held on the same terllls as the old (in
which case the " fiduciary " relationships include a life-tenant 46);
while others suggest that some only of this last class of relationships
should be termed " fiduciary," and uould exclude the life-tenant.47
The third of these usages is rather indefinite, but either of the other
uses of the term " fiduciary " requires us to recognise this as 8
6eparate category, for it includes a life-tenant at least.

Category IV

Here we are concerned with the doctnne of undue influence.

A contract between A and B may be set aside by A on the grounds
of B's undue influence; it may also be upset on the grounds that B
occupied a fiduciary position (Category II above) towards A, and
failed to disclose his interest in the transaction. It is probably
correct, in modern law,48 to distinguish between these two grounds
for the avoidance of contracts: the requirements of proof and
the defences open in each case are distingeshable.49 Moreover, the
doctrine of undue influence applies also to gifts. In defining the
relationships in which undue influence may occur, the authorities 50
use the term " fiduciary " in whsBt is, it is submitted, a fourth

45 Cf. 2 White and Tior's Leading Cases in Equity (9th ed., 1928) 649, 654 et
seq.; Eanbug, Essays in Equity (1934), 49; Hart, " The Development of the
Rule in Keech v. Sandford " tl905) 21 IJ.Q.R. 258, 261 semble, Parker J. in
Grifith v. Owen [1907] 1 Ch. 195, 20>204.
46 e.g., (semble) Collins M.R. in Re Biss, Biss v. Bise [1903] 2 Ch. 40; counsel
in GfiBith v. Owen [1907] 1 Ch. 195, 202.
47 e.g., Romer L.J. in Re Biss, Bi.ss v. Biss [1903] 2 Ch. 40, 61; Spence, The
Equitable Jllrisdiction of the Court of Chancery (1849) Vol. , 298 et seq.;
Lewin, The Lato of Trusts (15th ed., 1950),165 et seg.
48 In the time of Lord Eldon, it i8 probable that the two ca8e8 would have been
treated alike as breaches of " confidencs."
49 e.g., fairness may be relevant in cases of undue influence, but not in case6
based on the fiduciary principle: see 17 Halsbury (Simonds ed.) 674.
50 Pace Winder, op. cit. (note 18, supra), who is unwilling to sdmit any
suggested connection between " confidence " or fiduciary relationships and the
doctrine of undue influenceven to the estent of describing some remarka of
Lord Chelmsford as " unfortunste," and James L.J. as " enanared by the
analogy " (282); but, with respect, the learned contributor's view iB inconSi8-
tent with a long line of authorities going back to Eldonian times.

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 C.L.J. Fiduciary Relatzonships 79

sense. Once again, however, the authorities are not m full agree-
ment. Some take " fiducisry " as embracing all situatioxIs where
undue influence may exist.5l Others use this word to describe only
those out of this wider class of relationships which involve a pre-
sumption that undue inRuence has been exercised.52 In the third
place, it is sometimes suggested that while the scope of the doctrine
of undue influencer of the presumption referred to above 5B
includes fiduciary relationships, or some of them, it also extends to
certain other relationships which are not fiduciary.54 Either of the
first two of these uses of " fiduciary " is distinct from those iIl
categories I, II and III above, for, e.g., the priest-devotee relation-
ship is includedffi; the third use is indeterminate and probably
merely descriptive.

SIGNIFICANCE OF T2; CATEGORIES

The four categories of fiduciary relationship may overlap: a

guardian-ward situation may fall into all four, and a solicitor-
client relationship mto three at least. But that each is a distinct
head 5B will be appreciated when it is realised that the relationships
of master and servant, life tenant and remainderman, and priest
and devotee will usually come into the second, third and fourth
groups respectively, but will not, as such, be likely to fall into any
other.
Agents will always be classed in the second category, and some-
times also included in the first.57 Where an sgent handles property
st e.g., Vinter, Lato of Fiduciaty Relationship and Resulting Tr2zsts (3rd ed.,
1955), passim, Salmond and williamB Contracts (1945), 291 (where the use in
the sense of the next note iB also suggested); semble, Shendan top cit., note
18, supra), 87 88.
52 e.g., Powell v. Powell [19003 1 Ch. N3; cf. Be Coomber, Coomber v. Coomber
[1911] l Ch. 723; Tufton v. Sperni [1952] 2 T.I..R. 516; Ashburner, (op.
cit., note 261 supra), 303 304 (but cf. editor's note, 304); Snell, Principles of
Eq$ity (25th ed., 1960), 49SS01.
sa e.g., 17 Isbury (Simonds ed.), 678.
54 e.g., 17 Halsbury (Simonds ed), 678; Smith v. Kay (1859) 7 H.L.Cas. 750,
771, per Lord Cranworth; Tate s. Williamson (1866) I.R. 2 Ch.App. 55, 6>
61, per Lord Chelmsford.
55 Tufton v. Sperni (note 52, supra). Snell (op cit., note sa, supra), 498 499
liats the following relationships as affected by the presumption: parent and
child, guardian and svard, fianc and fiancde (but not husband and svife), reli-
giou8, medical and other advisers and those who consult them, solicitor snd
client. As regards fiancds, however, see now Zamet v. Hyman [1961] 1
W.l.R. 442.
56 Accepting, for the purpse of the present aiscussion. the more signifi
in categorie8 III and IV.
57 Eence the rather mi6leading statements in 14 Ealsbury (Simond8 ed.), 625n.:
' an agency is not nece88arily fiduciary " (cf. 1 Halsbury (Simonds ed.), 182)
and Piddocke v. Burt [1894] 1 Ch. 343 346: " it i8 not every agent who i8
Educiary." These statements fail to distinguish between the different mean
ings of the term: an agent iB always a fiduciary in sense II ie may not take
a bribc- but i8 not necessarily a fiauciary in Bense I, i.e., accountable as a
trustee for property which he receives.

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80 The Cambrtdge Law Jovfral [l962]

for his principal, it is often a difficult question of fact to de

whether the relationship is, at a certain time, to be classed 8S
" fiduciary " in sense I.58 The issue depends on the terms of the
agreement (if any) between the parties, and the basIs on which the
property is intended to be held. If it is intended to be held
throughout on the principal's behalf, and ultimately to be yielded
up (either in its origir}al form, or an altered form, or with the
increlnents it has produced) to the principal, then the beneficial
ownership of the principal is continuous, and the relationship is
fiduciary within Category I. In contrast, the intention may be
that the agent shall have and use the property as his own; his
obligation is not to pay or restore the property or money origitlally
receiveds but to hand over equivalent property or pay a similar
sllm, mth or without interest. The property either never has been
or at some point ceases to be beneficially the principal's. In ascer-
taining the intention of the parties, the court wsll have regard to
the wording of the contract,59 the conduct of the parties (especiaUy
the question whether the agent has kept the money separate from
his own 6°), mercantile usage,6l and any other endence which may
help to show the nature of the obIlgation assumed by the agent.
An illustration may clarify the matter.62 If I send my car to a
dealer to sell on my behalf, he is, like any other agent, in a fidu-
ciary relationship towards me in sense II: he may not tske a bribe
from the purchaser,63 or secretly buy the car himself.64 Up to the
time of sale, he is in a fiduciary relationship towards me in sense
I: he holds the car on my behalf.65 As from the time of sale,
however, he is almost certainly not in a " Category I " fiduciary
situation towards me as regards the proceeds.66 As in almost all

S8 Cf. Brunyate (Op, cit., note 26, supra), 80 et seq.; Maitland (Op. cit., rlote l,
supra), 236232- Preston and Newsom (Op. cwt., note 31, supta), 174176* 1
Ealsbury (Simonds ed.), 18S, 187 189, I.angdell, EquiX Junsdsotion (2nd
ed., 1908), 9g97; Hanbury, Mode;n Equity (7th ed., 1957), 291.
so Cf. Resd Netofoundland Co. v. Anglo-Amencan Telegraph Co. Ltd. tlgl2J

6° Cf, Lyell s. Ksenedy (1889) 14 App.Cas. 437 J267- Nenry r Hammond

tl9l3} 2 iE.B. 615, 621. ' '
61 Cf. Henry s. Hammond, ibid.; Foley v. Hill (1848) 2 H.IJ.Cas. 28. Mention
should perhaps be made of the wellwestzblishea distillction between cases of
general sgency (where the presumption i8 that the agent holds a6 tru6tee) and
single gency transactioD8 (where ha i8 normally regardea aB l debtor):
Makepeace ar. Rogers (1866) 4 De G.J. & S. 649, 654.
62 Cf. Brunyate (op. at., note 26, supra), 87; LangdeIl (op. at., noto 6S,
supra), 93.
68 Cf. Metropotitan Bank s. Heiron (1880) 5 Es.D. 319* Lister j Co. v. Stubbs
(1890) 46 Ch.D. 1.
84 Cf. Rothschild v. Brookman (191) 6 Bli.N.S. 166.
B5 Cf. Henry v. Hammond tl913] 2 }6.B. 615, 522; Neto Zealand and Australian
Land Co. v. Watson (1881) 7 Q.B.D. 374, 383.
ee See the authorities referred to in notes 62 and 65, supra.

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 C.L.J. Fiduciary Relationships 81

commercial transactions,67 it is understood that he will owe me the

amount of the sale price, but not that he will keep intact the actual
moneys which he has received and hold them for my benefit. He
is my debtor, not my trustee.
An even more difficult issue of fact arises in the case of a
solicitor employed to invest money. Whether he is in a fiduciary
relationship to his client in the first as well as the second sense is
likely to depend on whether he has assumed responsibility for the
selection of the securities.68
In the words of Fletcher Moulton L.J.69 " the danger of trust-
ing to verbal formulae " is clear. We cannot assume that a rela-
tionship properly described as " fiduciary " for some purposes is
also " fiduciary " in otier senses70

67 See Bmnyate (op. cit., note 26, aupra), 8H7. In early law, tbe presumption
uaa othernvise: Gf. Foley s. Htll (1848) 2 H.l.Cas. 28, 35.
68 See Brunyate (op. cit.), 82, 8789, and the authorities there cited.
69 Note 16, supra.
70 It i8 hoped to e2camine this subject further in a later article and, in particular,
to discuss Nocton v. LoTd Ashburton [1914] A.C. 932 and Woods v. Martin's
Bank, Ltd. tl959] 1 Q.B. 65.

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