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Malaysian Banking Law — Does a Trustee Have Fiduciary Duty?
Yes.
A trustee always owes fiduciary duties.
In fact, a trustee is one of the clearest examples of a fiduciary in law.
Meaning
A fiduciary duty is a duty:
to act loyally, honestly and in the best interests of another person.
Since a trustee manages property or money for a beneficiary, the law requires the trustee to:
✔ every trustee owes fiduciary duties.
Why?
This is because:
Main Fiduciary Duties of a Trustee
A trustee must:
Example
Ali leaves RM1 million in trust for his daughter.
The trustee:
✔ must manage the money for the daughter only.
The trustee cannot:
✔ it is a breach of fiduciary duty.
Banking Law Position
In ordinary banking relationships:
✔ banks usually do NOT act as trustees.
This was established in:
Foley v Hill
The House of Lords held that:
the relationship between banker and customer is debtor–creditor, not trustee–beneficiary.
Thus:
✔ banks owe contractual duties;
✘ not general trustee duties over deposits.
Important Distinction
Every trustee is a fiduciary.
But:
✔ not every fiduciary is a trustee.
For example:
Case Scenario
Sarah appoints her uncle as trustee of her inheritance fund.
Instead of investing the money for Sarah’s benefit, the uncle secretly uses part of the money to buy shares for himself.
Result:
✔ breach of fiduciary duty;
✔ breach of trust.
The uncle violated his duty of loyalty and acted for personal gain.
Final Examination Rule
A trustee always owes fiduciary duties because the trustee manages property or money for the benefit of another person. These duties require the trustee to act honestly, loyally, in good faith, and in the best interests of the beneficiary while avoiding conflicts of interest and secret profits.
Yes.
A trustee always owes fiduciary duties.
In fact, a trustee is one of the clearest examples of a fiduciary in law.
Meaning
A fiduciary duty is a duty:
to act loyally, honestly and in the best interests of another person.
Since a trustee manages property or money for a beneficiary, the law requires the trustee to:
- act in good faith;
- avoid conflicts of interest;
- avoid secret profits;
- protect the beneficiary’s interests.
✔ every trustee owes fiduciary duties.
Why?
This is because:
- the beneficiary places trust and confidence in the trustee;
- the trustee has control over another person’s property;
- the trustee has power that can potentially be abused.
Main Fiduciary Duties of a Trustee
A trustee must:
- act honestly;
- act loyally;
- act for the beneficiary’s benefit;
- avoid conflicts of interest;
- avoid making secret profits;
- disclose relevant information honestly;
- protect trust property.
Example
Ali leaves RM1 million in trust for his daughter.
The trustee:
✔ must manage the money for the daughter only.
The trustee cannot:
- use the money personally;
- invest recklessly for personal benefit;
- secretly profit from the trust assets.
✔ it is a breach of fiduciary duty.
Banking Law Position
In ordinary banking relationships:
✔ banks usually do NOT act as trustees.
This was established in:
Foley v Hill
The House of Lords held that:
the relationship between banker and customer is debtor–creditor, not trustee–beneficiary.
Thus:
✔ banks owe contractual duties;
✘ not general trustee duties over deposits.
Important Distinction
Every trustee is a fiduciary.
But:
✔ not every fiduciary is a trustee.
For example:
- lawyers;
- agents;
- company directors;
- investment advisers
Case Scenario
Sarah appoints her uncle as trustee of her inheritance fund.
Instead of investing the money for Sarah’s benefit, the uncle secretly uses part of the money to buy shares for himself.
Result:
✔ breach of fiduciary duty;
✔ breach of trust.
The uncle violated his duty of loyalty and acted for personal gain.
Final Examination Rule
A trustee always owes fiduciary duties because the trustee manages property or money for the benefit of another person. These duties require the trustee to act honestly, loyally, in good faith, and in the best interests of the beneficiary while avoiding conflicts of interest and secret profits.
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