Trusts, fiduciary duties and equitable remedies
Breach of Fiduciary Duty Lawyer in Singapore
Has someone used a position of trust for personal gain?
Book a Free Initial ConsultationA breach of fiduciary duty may arise where a director, trustee, partner, agent, employee or adviser uses a position, business opportunity, asset or confidential information for an unauthorised purpose.
Common concerns include:
- a director diverting a business opportunity;
- a partner secretly benefiting from a transaction;
- an agent receiving an undisclosed commission;
- a trustee placing personal interests ahead of beneficiaries;
- confidential information being used to establish a competing business;
- company assets being transferred to a connected person; or
- a person in control approving a transaction for personal benefit.
Justin Chan Chambers advises and represents claimants and defendants in Singapore fiduciary duty disputes.
What is a fiduciary duty?
A fiduciary duty is a duty of loyalty owed within a particular legal relationship and defined scope of responsibility.
A fiduciary may be required to:
- avoid conflicts between personal interests and the interests of the principal or beneficiary;
- avoid placing duties to different parties in conflict;
- refrain from making unauthorised profits;
- protect confidential information and property;
- act for a proper purpose; and
- disclose relevant interests before seeking informed consent.
Not every relationship involving trust, confidence or influence is fiduciary.
The claimant must identify:
- why a fiduciary relationship existed;
- the scope of the responsibility undertaken;
- the duty that applied to the disputed conduct;
- the conflict, profit or misuse alleged; and
- the remedy sought.
Common examples of breach of fiduciary duty
A possible fiduciary breach may involve:
- diverting a corporate or partnership opportunity;
- competing with the principal while still acting as fiduciary;
- receiving a secret commission or referral fee;
- entering into an undisclosed connected-party transaction;
- purchasing an asset that the fiduciary was engaged to acquire for another;
- selling property to the principal without proper disclosure;
- using confidential information for personal or competing purposes;
- causing a company to contract with a related business;
- misusing company, trust or partnership assets;
- placing personal interests ahead of the beneficiary or principal;
- retaining profits made through the fiduciary position;
- acting for parties with conflicting interests; or
- obtaining approval without full and informed disclosure.
The precise duty and scope of responsibility must be identified in each case.
Has someone used a position of trust for personal gain?
Who may owe fiduciary duties?
Fiduciary duties may arise in established relationships involving:
- company directors and the company;
- trustees and beneficiaries;
- partners and the partnership or other partners;
- agents and principals;
- solicitors and clients;
- employees in certain senior or entrusted roles;
- joint venturers in particular circumstances; and
- advisers or intermediaries who undertake loyalty-based responsibilities.
A person’s job title alone does not determine whether fiduciary duties exist.
The court will examine the actual relationship, authority, undertaking and function performed.
What should be established first?
The starting point is to define the relationship and the disputed conduct precisely.
The fiduciary relationship
Identify why the person is said to owe duties of loyalty. This may arise from office, agency, trusteeship, partnership, contract or the responsibilities actually assumed.
The scope of the duty
A fiduciary may owe duties only in relation to a particular transaction, asset, client, opportunity or function.
The alleged conflict or benefit
Identify the personal interest, competing duty, diverted opportunity, payment, asset or benefit said to give rise to the breach.
The relevant period
Establish when the fiduciary relationship began and ended, and whether the disputed conduct occurred within that period.
Disclosure and consent
Determine what was disclosed, to whom, when it was disclosed and whether the person or body giving approval had authority to do so.
The remedy sought
Clarify whether the claim concerns profit, property, compensation, confidential information or an ongoing transaction that should be restrained.
What evidence is important?
What evidence is important?
Fiduciary duty disputes often depend on reconstructing the decision, transaction and flow of benefits.
Relevant evidence may include:
- appointment and employment documents;
- agency, partnership or advisory agreements;
- company constitutions and shareholders’ agreements;
- board and committee minutes;
- declarations of interest;
- written approvals and resolutions;
- transaction and payment records;
- bank statements and accounting ledgers;
- emails, messages and internal communications;
- tender, valuation and acquisition documents;
- corporate registers and ownership records;
- records of commissions, fees or benefits;
- confidential business plans and customer information;
- evidence concerning competing entities; and
- documents showing who controlled or approved the transaction.
Original and complete records should be preserved. Do not access another person’s account, device or confidential records without authority.
How Justin Chan Chambers can help
We can:
- identify whether a fiduciary relationship existed;
- define the scope of the fiduciary undertaking;
- analyse conflicts of interest and competing duties;
- investigate diverted business opportunities;
- trace secret profits, commissions and connected-party benefits;
- review board approvals and conflict disclosures;
- assess whether consent was fully informed and properly authorised;
- examine misuse of confidential information or company assets;
- advise on director, trustee, agent and partnership duties;
- assess claims against third-party recipients or assistants;
- seek urgent injunctions or preservation orders;
- pursue or defend claims for an account of profits;
- advise on equitable compensation, restoration or tracing; and
- negotiate resignation, repayment, governance changes or settlement.
What must be proved in a fiduciary duty claim?
A claimant will generally need to establish:
- A fiduciary relationship existed
The relationship must create loyalty-based obligations recognised by law.
- The relevant duty applied
The scope of the duty must cover the transaction, opportunity or information in question.
- The fiduciary acted in conflict or obtained an unauthorised benefit
The conduct may involve self-interest, competing duties, secret profit, diversion or misuse of position.
- There was no effective informed consent
Consent may defeat or limit a claim only where adequate disclosure was made to a person or body with authority to approve the conduct.
- The remedy claimed is available
The appropriate remedy may focus on profit, property, loss or prevention of further misuse.
A claimant does not always need to prove dishonesty. Some fiduciary obligations are strict and may be breached even where the fiduciary believed the transaction was beneficial.
What is a conflict of interest?
A conflict of interest arises where a fiduciary’s personal interests, duties to another person or commercial objectives may interfere with the duty owed to the principal or beneficiary.
Examples include:
- a director approving payments to a business they own;
- an agent acting for both buyer and seller;
- a partner competing for the same commercial opportunity;
- a trustee acquiring trust property personally;
- an adviser recommending a transaction that generates an undisclosed commission; or
- a fiduciary using confidential information for another client or business.
A potential conflict can be legally significant even before actual loss occurs.
What is an unauthorised profit?
An unauthorised profit is a gain obtained through the fiduciary position without proper approval.
It may include:
- commissions;
- referral fees;
- shares or options;
- discounts or rebates;
- business opportunities;
- profits earned through a competing company;
- property acquired through confidential information; or
- benefits received by a relative or connected entity.
The fiduciary may be required to account for the gain even where the principal could not have obtained the same profit or suffered no direct financial loss.
What is a diverted business opportunity?
A diverted opportunity claim may arise where a fiduciary takes for themselves, or redirects to another person, an opportunity that properly belonged to the company, partnership, principal or beneficiary.
The analysis may examine:
- how the opportunity came to the fiduciary;
- whether it fell within the fiduciary’s responsibilities;
- whether company or partnership resources were used;
- whether confidential information was involved;
- whether the opportunity was disclosed;
- whether valid approval was obtained;
- when the competing entity became involved; and
- what profits or assets resulted.
The timing of resignation or termination may not by itself resolve the issue if the opportunity was obtained or developed while the fiduciary duty was operating.
What amounts to informed consent?
A fiduciary may avoid liability where the conduct was approved after full and informed disclosure.
The disclosure should ordinarily address:
- the nature of the conflict;
- the fiduciary’s personal interest;
- the expected benefit;
- the material risks;
- the identity of connected persons;
- the terms of the transaction; and
- any information necessary for a genuine decision.
General awareness that a fiduciary has other business interests may not be enough.
The person or body giving consent must also have legal authority to approve the conduct. For a company, this may require consideration of the constitution, board authority, shareholder approval and applicable statutory requirements.
What remedies may be available?
Depending on the nature of the breach, the court may grant:
- an account of profits;
- repayment of secret commissions;
- equitable compensation;
- restoration of property;
- rescission of a transaction;
- an injunction;
- delivery up or protection of confidential information;
- a declaration of rights;
- a constructive trust;
- tracing into substitute assets or proceeds;
- transfer of shares or property;
- removal from a fiduciary position; or
- other consequential relief.
The remedy must be matched to the breach proved.
Where several causes of action or remedies overlap, issues of election and double recovery may arise.
What is an account of profits?
An account of profits focuses on the gain made by the fiduciary rather than only on the loss suffered by the claimant.
The court may examine:
- the revenue received;
- the expenses properly attributable to that revenue;
- shares or assets acquired;
- commissions or benefits paid;
- profits earned through a connected company;
- substitute assets purchased with the proceeds; and
- the extent to which the gain resulted from the fiduciary breach.
Accurate tracing and financial records are therefore important.
Can compensation also be claimed?
Equitable compensation may be available where a fiduciary breach causes financial loss.
The claimant must identify:
- the conduct constituting the breach;
- the financial position before and after the transaction;
- the connection between the breach and the loss;
- any intervening events; and
- whether the loss overlaps with another contractual, statutory or tortious claim.
A loss-based claim should be distinguished from a gain-based claim seeking an account of profits.
How is a fiduciary claim different from contract or negligence?
The same conduct may give rise to several legal claims, but the legal duties and remedies differ.
Contract
A contract claim concerns obligations agreed between the parties.
Negligence
A negligence claim concerns a failure to exercise the required standard of care.
Fiduciary duty
A fiduciary claim concerns loyalty, conflicts, unauthorised profits and misuse of entrusted position or power.
A poor commercial decision or careless act does not automatically amount to disloyalty.
The claims should be analysed and pleaded separately, even where they arise from the same transaction.
What duties do company directors owe?
Company directors may owe fiduciary and statutory duties to the company.
Section 157 of the Companies Act 1967 requires a director to act honestly and use reasonable diligence in discharging the duties of office. It also restricts improper use of information acquired through the director’s position.
Director disputes may involve:
- diversion of corporate opportunities;
- undisclosed interests in transactions;
- misuse of company property;
- payments to connected persons;
- improper competition;
- secret profits;
- misuse of confidential information; or
- decisions made for an improper purpose.
The proper claimant must also be identified. In many cases, the duty is owed to the company rather than directly to an individual shareholder.
Can claims be brought against third parties?
A third party may face a separate claim where they received trust, company or partnership property, assisted in the breach or benefited from the transaction.
Potential issues include:
- knowing receipt;
- dishonest assistance;
- receipt of misapplied property;
- participation in a conflicted transaction;
- tracing into assets or proceeds; and
- transfers to relatives or connected companies.
The third party’s knowledge, benefit, consideration given and change of position should be analysed separately from the claim against the fiduciary.
When is urgent action required?
Prompt legal advice may be necessary where:
- a conflicted transaction is about to complete;
- a business opportunity is being diverted;
- confidential information is being used;
- assets or profits are being transferred;
- company or trust records may be destroyed;
- funds are being moved overseas;
- shares or property are being sold;
- the alleged fiduciary controls the relevant evidence; or
- a competing business is being established.
Possible urgent steps may include:
- an injunction;
- preservation of assets;
- orders protecting confidential information;
- disclosure or delivery-up applications;
- preservation of electronic evidence; or
- undertakings pending investigation.
Urgent relief requires evidence of a real and identifiable risk.
How does a fiduciary duty dispute usually proceed?
1. Define the relationship
Identify the legal basis of the fiduciary duty and the scope of responsibility undertaken.
2. Reconstruct the transaction
Prepare a chronology of the opportunity, disclosure, approval, payment and benefit.
3. Trace the gain or property
Follow money, shares, commissions, assets and benefits through the relevant persons and entities.
4. Assess consent and authority
Determine whether adequate disclosure was made and whether valid approval was obtained.
5. Consider overlapping claims
Review possible contractual, statutory, employment, company, trust or confidentiality claims.
6. Pursue the appropriate remedy
The matter may proceed through negotiation, repayment, an account of profits, resignation, governance changes, mediation or court proceedings.
Prepare for your consultation
Before meeting a fiduciary duty lawyer, gather:
- relationship and appointment documents;
- company, trust, agency or partnership records;
- a chronology of the disputed conduct;
- details of the opportunity or transaction;
- board or partner minutes;
- declarations of interest;
- communications concerning disclosure or consent;
- bank and payment records;
- details of connected companies or recipients;
- evidence of profits, commissions or benefits;
- confidential information believed to have been used; and
- details of any imminent transaction or transfer.
A clear transaction map can help identify the relationship, breach, benefit and available remedy quickly.
Frequently asked questions
Who may owe fiduciary duties?
Directors, trustees, partners, agents and some employees or advisers may owe fiduciary duties, depending on the relationship, undertaking and function.
Does every position of trust create fiduciary duties?
No. The legal relationship and scope of responsibility must be identified.
What must be proved in a fiduciary duty claim?
The claimant generally identifies the fiduciary relationship, the relevant duty, the conflict or benefit, the absence of effective informed consent and an available remedy.
What is informed consent?
Consent may be effective only after material disclosure to a person or body with authority to approve the conduct. General awareness of other interests may not be enough.
What is an unauthorised profit?
It is a gain obtained through the fiduciary position without proper approval. The gain may include a commission, opportunity, asset or benefit received through a connected person.
What is an account of profits?
An account of profits focuses on the gain made through the breach rather than only the loss suffered by the claimant. Accurate financial and tracing records may be required.
Is negligence the same as breach of fiduciary duty?
No. Negligence concerns the required standard of care, while fiduciary duty concerns loyalty, conflicts, unauthorised profits and misuse of entrusted position.
What duties do company directors owe?
Directors may owe fiduciary and statutory duties to the company. The proper claimant and the particular duty must be identified.
Can third parties face claims?
Potentially. Receipt, assistance, knowledge, benefit, consideration and tracing should be analysed separately from the claim against the fiduciary.
When is urgent advice needed?
Prompt advice may be needed where a conflicted transaction is imminent, confidential information is being used, assets or profits are moving, or evidence may be lost.