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Introduction
In Singapore, fiduciaries owe a number of duties to their principals, including the duty to act in good faith, the duty to avoid conflicts of interest, and the duty not to profit from their position. A breach of fiduciary duty occurs when a fiduciary fails to meet one or more of their duties to their principal. This can lead to a number of consequences, including legal liability, financial penalties, and damage to the principal’s reputation.
This article will provide an overview of what constitutes a breach of fiduciary duty in Singapore. It will also discuss the potential consequences of a breach, and the steps that can be taken to protect oneself from being the victim of a breach.
What is a fiduciary?
A fiduciary is an individual who owes a strict legal duty to another person (the principal) based on circumstances which give rise to a relationship of trust and confidence. In most cases, this relationship has the following features:
- the fiduciary possesses power or discretion.
- the fiduciary is able to exercise that power or discretion in a way that will affect the beneficiary’s legal or practical interests; and
- the beneficiary is vulnerable or dependent upon the fiduciary.
In Singapore what is a fiduciary duty?
A fiduciary duty represents one of the highest standards of care expected of a person by law.
The fiduciary is expected to be completely loyal to his or her principal and is bound by strict legal obligations on the fiduciary, including the following:
Duty to act in good faith towards the principal
This is a duty to behave honestly at all times towards the principal and includes an obligation to disclose all information on potential conflicts of interest or sources of profit.
Duty to avoid a conflict of interest
This is a duty to avoid any potential conflict of duty between the fiduciary and principal. This means that the fiduciary’s financial interests cannot be in conflict with those of the principal.Additionally, the fiduciary cannot enter into other relationships which may prevent the fiduciary from being absolutely loyal to the principal. For example, a lawyer cannot act for two clients whose interests conflict, such as the husband and wife in a divorce case. Any failure to maintain these obligations may cause a breach of fiduciary duty.
Duty not to profit from his or her position
The fiduciary cannot profit from his position as a fiduciary unless the principal consents. For example, a director of a company may be in breach of fiduciary duty in Singapore if he usurps a business opportunity belonging to the company for himself, or accept commissions or other unauthorized payments from third parties for services or other benefits provided where these are connected with the relationship between the fiduciary and principal. However, the principal may waive the duty buy consenting to actions that would otherwise be a breach of the fiduciary’s duty.
How does a fiduciary duty arise?
Fiduciary duties arise out of certain classes of relationships between the fiduciary and the principal, for example, because the fiduciary has been entrusted with the principal’s property or authority to act on behalf of the principal for his or her benefit.
Importantly, the fiduciary is bound by these duties even if he or she was unaware that the relationship would give rise to fiduciary duties.
Fiduciary duties often arise from relationships between directors and their companies and shareholders, lawyers and their clients, and doctors and their patients.
Another common situation that gives rise to a fiduciary duty is a trust – a legal relationship in which one party, the trustor, transfers a property to a second party, the trustee, for the benefit of a third party, the beneficiary.
In this situation, the trustee is the legal owner of the property while the beneficiary has no legal title to it. However, the trustee is bound by a fiduciary duty to administer the property only for the benefit of the beneficiary and not for the trustee’s own benefit. In this way, the beneficiary is able to use the property without legally owning it.
What happens when a breach of fiduciary duty occurs?
If a fiduciary duty is breached, then the fiduciary may face a lawsuit from the principal.
In filing a lawsuit against the fiduciary, the principal must prove that the fiduciary duty existed, that it was breached, and that this breach has caused loss to the principal. Typically, the principal will then claim damages for the breach in the form of money for lost profits, income, or property.
However, damages are not the only remedy available from the Singapore Courts, as the following remedies are also available for breach of fiduciary duty:
- Rescission of a contract which involves a breach of fiduciary duty;
- Equitable compensation payable by the fiduciary to the beneficiary;
- An account of profits payable by the fiduciary to the beneficiary;
- Transferring title of the property from the fiduciary to the beneficiary
- Injunctions to prevent the fiduciary from committing a breach.
Cases involving Breaches of Fiduciary Duty
1. Ivanishvili, Bidzina and others v Credit Suisse Trust Ltd [2023] SGHC(I) 9
In this case, the defendant admitted that they had a duty to protect and safeguard the Trust assets of the plaintiffs; their failure to do so was deemed by the judge to be a breach of their fiduciary duties as advanced by the plaintiffs. As a result, orders were made for the defendant to pay costs to the plaintiffs.1
2. BIT Baltic Investment & Trading Pte Ltd (in compulsory liquidation) v Wee See Boon [2023] SGCA 17
This appeal sought additional damages from the defendant in the form of: (a) loss of interest on the Principal Sum; (b) the costs of the liquidator, and (c) the costs of the petitioning creditor owing to the defendant’s breach of fiduciary duty. The court allowed the appeal in part, and requested the defendant to pay the plaintiffs $30,000.2
3. CNA v CNB and another and other matters [2023] SGHC(I) 6
The judges ruled that the plaintiff owed the defendant fiduciary and equitable duties in relation to the exercise of its power to alter the defendant’s legal relations with CND / CNE. In entering into the 2017 Extension Agreement, CNA acted in haste and secrecy, without resolving important matters such as the scope of the SLA. It did so at CND / CNE’s instigation because CND / CNE wanted to rely on the change from the ICC Clause to the SHIAC Clause as a jurisdictional objection in the Present Arbitration. This was a breach of the plaintiff’s fiduciary duty and the defendant was entitled to and did avoid the 2017 Extension Agreement. As a result, the appeal was dismissed.3
How we can help
Should you find yourself in such a position, our team of experienced lawyers will be able to explain to you your various legal remedies and how to protect your reputation.
We strive to take care of our clients no matter the case. Your first consultation with us is usually free, and we wish to assist you. Please don’t hesitate to contact us at Hello@irblaw.com.sg or call at 6589 8913.
Glossary and Key Terms
Fiduciary: An individual who owes a strict legal duty to another person (the principal) based on circumstances which give rise to a relationship of trust and confidence.
Fiduciary duty: One of the highest standards of care expected of a person by law.
Frequently Asked Questions
Q: What are some examples of a breach of fiduciary duty?
A: Some examples of a breach of fiduciary duty include:
- A trustee using trust funds for their own personal benefit.
- A director of a company using their position to benefit themselves at the expense of the company.
- A lawyer representing a client and then using the client’s information to their own advantage.
Q: What are the consequences of a breach of fiduciary duty?
A; The consequences of a breach of fiduciary duty can vary depending on the specific circumstances. However, in general, the fiduciary may be liable to the principal for damages. The damages may include the principal’s financial losses, as well as their emotional distress.
Q: How do I prove a breach of fiduciary duty?
A: To prove a breach of fiduciary duty, the principal must show that the fiduciary owed them a duty, that the fiduciary breached that duty, and that the breach caused the principal harm. The principal must also show that they did not consent to the breach.
Q. What are some steps I can take to protect myself from a breach of fiduciary duty?
A: There are a number of steps you can take to protect yourself from a breach of fiduciary duty, including:
- Choosing a fiduciary who you trust and who has a good reputation.
- Getting everything in writing, including any agreements you make with the fiduciary.
- Monitoring the fiduciary’s activities to make sure they are acting in your best interests.
Q: If I think I have been the victim of a breach of fiduciary duty, what should I do?
A: If you think you have been the victim of a breach of fiduciary duty, you should first talk to the fiduciary. If the fiduciary is unwilling to resolve the matter, you may need to seek legal advice. An attorney can help you assess your legal options and file a lawsuit if necessary.
References
- https://www.elitigation.sg/gd/s/2023_SGHCI_9
- https://www.elitigation.sg/gd/s/2023_SGCA_17
- https://www.elitigation.sg/gd/s/2023_SGHCI_6
