Fiduciary Obligations

A Trustee is a class of persons who have fiduciary obligations imposed on them by the law due to the nature of their office.

Fiduciary duties can be classified into two groups. The first group serves to bind the fiduciary to the discretions of his office. They are designed to ensure that there will be no failure on his part to exercise those discretions:

  • (i) a duty not to delegate discretions;
  • (2) a duty not to act under another’s dictation;
  • (3) a duty not to place “fetters” on discretions; and
  • (4) a duty to consider whether a discretion should be exercised

The second ground of duties binds the fiduciary in the actual exercise of the fiduciary’s discretions. This group of duties aims to ensure that the fiduciary is focused on the service of the beneficiaries interests:

  • (1) a duty not to act for his own benefit, or the benefit of any third person;
  • (2) a duty to treat beneficiaries equally where they have similar rights;
  • (3) a duty to treat beneficiaries fairly where they have dissimilar rights;
  • (4) a duty not to act capriciously or totally unreasonably.

Equity’s concern is to ensure that if and when a fiduciary exercises the fiduciary’s discretion this discretion will be made for an in the beneficiaries’ interests.

As a general rule, it is the province of the fiduciary to determine what actions are in the interests of his beneficiaries, where a discretion is allowed under the Trust Instrument. The courts are not entrusted with this discretion. On the other hand, it is the province of the courts to determine what actions are not in the beneficiaries’ interest, and an action will not be in the beneficiaries’ interest if it constitutes a breach of any of the specific duties listed above.


“A Fiduciary (Trustee) is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The Principal (ie beneficiary) is entitled to the single-minded loyalty of his fiduciary. The core liability has several facets. A fiduciary must act in good faith; he most not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of the principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary”.

–          Bristol & West Building Society v Mothew [1998] Ch 1 at 18 per Millet LJ

Broadly then, a fiduciary is one who owes legal duties of loyalty and utmost good faith in relation to another person.


A Trustee of a Government Regulated Superannuation Fund can “act under the dictation” or “take direction” for an Employer-Sponsor in limited circumstances as prescribed by Section 58 of the Superannuation Industry (Supervision) Act 1994 and Regulation 4.03 of the Superannuation Industry (Supervision) Regulations 1994.

Subsection 52(a) of the Superannuation Industry (Supervision) Act 1994 requires a Trustee to act honestly in all fund matters.

Subsection 52(c) of the Superannuation Industry (Supervision) Act 1994 requires that a Trustee’s duties and powers are performed and exercised in the best interests of the beneficiaries.


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