FLK2 · Trusts

Fiduciary duties & liability

SQE1 revision notes — the key rules, leading cases and common traps for this topic, in plain English and current to 2026.

TR.10 — Fiduciary Duties & Liability

Who is a fiduciary? A person who undertakes to act for another in circumstances giving rise to a relationship of trust and confidence. Trustees are the classic example, but so are agents, partners, company directors, and solicitors. The relationship can also be ad hoc.

The core duty: undivided loyalty. A fiduciary must act in the principal's best interests. Bristol & West BS v Mothew [1998] is the key statement: the distinguishing obligation is loyalty, breach of which is not the same as negligence. The duty is proscriptive (a duty not to do certain things), not prescriptive.

Two limbs flow from loyalty:

  • No-conflict rule — a fiduciary must not place themselves in a position where duty and interest conflict (or duty conflicts with another duty).
  • No-profit rule — a fiduciary must not profit from the position without informed consent.

Leading cases (strict, no-fault liability):

  • Keech v Sandford (1726) — trustee renewed a lease for himself when the trust's was refused; held on constructive trust despite good faith.
  • Boardman v Phipps [1967] — agents made a profit using information/opportunity acquired qua fiduciary; liable to account even though the trust benefited and they acted honestly (a quantum meruit allowance was given for skill/effort).
  • Regal (Hastings) v Gulliver [1942] — directors liable to account; bona fides and benefit to the company are no defence.

Escaping liability — only by (i) informed consent of fully-informed beneficiaries, or (ii) authorisation in the trust instrument. Directors: see Companies Act 2006 ss.175–177.

Remedies: account of profits; equitable compensation; constructive trust over property/profits (giving a proprietary claim — survives insolvency, captures traceable proceeds and increases in value). FHR European Ventures v Cedar [2014] confirmed bribes and secret commissions are held on constructive trust (proprietary, not merely a personal account).

Common SQE traps:

  • Liability is strict — honesty, good faith, and benefit to the principal are irrelevant to the no-profit/no-conflict rules.
  • A breach of loyalty (fiduciary) is conceptually distinct from breach of the duty of care/skill (negligence) — don't conflate them (Mothew).
  • The duty is proscriptive; a fiduciary is not obliged to be selfless in all things, only to avoid unauthorised conflicts/profits.
  • Proprietary vs personal claim matters most on the fiduciary's insolvency and where the profit has grown — always reach for the constructive trust.
  • Trustee remuneration needs authority (trust instrument, court, or Trustee Act 2000 s.29 for trust corporations/professional trustees).

Try a real SQE1 question

This question is taken from the bank. Answer it to see the worked reasoning and the tutor. You do not need to sign up to try it.

A woman is the treasurer of a small amateur football club. Members pay £20 each month in cash. Under the club rules she accepted on becoming treasurer, she must bank the subscriptions into the club's dedicated account within seven days. One month she receives £200 in subscriptions and spends the cash on her own gas bill that same day. She intends to replace the money from her wages before anyone notices, and pays an equivalent £200 into the club account two weeks later. Which statement best explains how section 5(3) of the Theft Act 1968 applies to the subscriptions when she pays the gas bill?

Practise at the real standard

Strong on this topic? SQE1 tests 137 of them, and 58% did not pass in July 2026. See where you stand across all of them.

Complete includes

  • ✓An AI tutor on every question. The tutor already knows the correct answer
  • ✓5 full timed mock papers, plus unlimited drilling — no daily cap
  • ✓The whole 2,263-question bank, with worked answers and references, all 137 topics
  • ✓Your weak-spot map: exactly where you’re losing marks
See what it costs →or try 25 questions free

One payment, nothing recurring. The 25-question diagnostic is free with no card.

More Trusts topics

See all topics in the FLK2 guide or the full SQE1 syllabus.

Independent SQE1 revision notes for study — not legal advice; check primary sources before relying on any point. Exam rules are set by the SRA; see the official SQE site.

Fiduciary duties & liability — SQE1 revision notes (FLK2) | Lawdojo