Fiduciary Duty

The clearest statutory illustration of fiduciary duty in UK law is the director-company relationship codified in the Companies Act 2006. The Act's Explanatory Notes explain that most of the general duties in ss.170-177 — the duty to act within powers, promote the company's success, exercise independent judgment, avoid conflicts of interest, and not accept benefits from third parties — are treated as fiduciary in character, tracing back to the equitable principles courts had developed for trustees and agents. The Notes are explicit that "in the company law field, the principles being applied will frequently be taken from other areas, in particular trusts and agency", which is why fiduciary duty is not confined to companies: it also describes the trustee's obligations to a beneficiary, a solicitor's obligations to a client, and an agent's obligations to a principal, all sharing the same equitable core of loyalty and avoidance of self-interest.

What distinguishes a fiduciary duty from an ordinary contractual or tortious duty of care is the remedy available when it is breached. Because fiduciary duties arise in equity, the consequences of breach go beyond compensating a loss — they extend to stripping out any unauthorised profit the fiduciary made from the relationship. In the director context, the Explanatory Notes record that remedies for breach can include "damages or compensation where the company has suffered loss", "restoration of the company's property", "an account of profits made by the director", and "rescission of a contract where the director failed to disclose an interest" — an account of profits being the classic fiduciary remedy, since it does not depend on the principal having suffered any loss at all, only on the fiduciary having made a gain they should not have kept. This is also why the one duty the Act treats as non-fiduciary — the duty to exercise reasonable care, skill and diligence — is remedied differently, through ordinary damages for negligence rather than equitable relief.