Fiduciary duties are at the heart of trust, honesty and accountability in business relationships. When a person in a position of trust acts against the best interests of the company or their client, it can lead to serious financial loss and legal consequences. Proving a breach of fiduciary duty in the UK requires careful evidence gathering and a clear understanding of the law.
This article explains what fiduciary duties are, common examples of breaches, how they can be proven and the legal remedies available to those affected.
What is a fiduciary duty?
A fiduciary duty arises when one party is legally bound to act in the best interests of another. In business, this often applies to company directors, trustees, partners, agents or professionals such as solicitors and financial advisers.
Fiduciaries must act with loyalty, honesty and good faith. They must avoid conflicts of interest and must not profit from their position without permission.
For example, a company director owes duties to act in the company’s best interests, avoid personal gain from company opportunities and not misuse confidential information. Breaching these obligations can give rise to a civil claim for damages or other legal remedies.
Common examples of fiduciary breaches
Breaches of fiduciary duty can occur in many ways, including:
- Misuse of company funds or property for personal benefit
- Failure to disclose a conflict of interest
- Diverting business opportunities away from the company
- Sharing or exploiting confidential information
- Acting in bad faith or for an improper purpose
Even if no financial loss occurs, the act of breaching a fiduciary obligation can still result in liability if it undermines the relationship of trust.
Legal basis for claims
In the UK, fiduciary duties are recognised under common law and statutory provisions such as the Companies Act 2006. For directors, key duties include:
- Acting within powers
- Promoting the success of the company
- Exercising independent judgment
- Avoiding conflicts of interest
- Declaring interests in proposed transactions
When these duties are breached, affected parties such as shareholders, partners or beneficiaries, may bring a civil claim in the courts.
How to prove a breach of fiduciary duty
To succeed in a claim, the claimant must prove the following:
1. A fiduciary relationship existed
You must show that the defendant owed a fiduciary duty. This typically arises where one person holds power or influence over another’s affairs, such as a director over a company or a trustee over a trust.
2. The duty was breached
You must provide evidence that the fiduciary acted against the interests of the person or organisation to whom the duty was owed. This could include financial records, correspondence, witness testimony or expert reports.
3. The breach caused harm or loss
While some breaches automatically entitle the claimant to remedies, others require proof of financial loss or damage. This may involve showing that company profits were diverted or confidential information was misused.
4. The defendant gained an unauthorised benefit
In many cases, proof that the fiduciary personally profited from the breach strengthens the claim. Courts may order the individual to return those gains even if no direct loss can be proven.
Gathering evidence
Collecting robust evidence is essential for success. Key steps may include:
- Reviewing company or trust records to identify financial irregularities
- Examining communications such as emails or board minutes
- Obtaining witness statements from colleagues or shareholders
- Consulting forensic accountants to trace misused assets or profits
Specialist business solicitors can help coordinate this process and ensure the evidence is legally admissible.
Possible defences
A person accused of breaching fiduciary duty may defend the claim by arguing that:
- Their actions were authorised by the company or beneficiaries
- They acted in good faith or relied on professional advice
- The claimant consented to the transaction or relationship
Courts will consider the specific facts and whether the fiduciary acted honestly, reasonably and within their powers.
Remedies for breach of fiduciary duty
If a breach is proven, the court has several remedies available, including:
- Compensation: To recover financial losses suffered by the claimant
- Account of profits: Requiring the fiduciary to repay any unauthorised gains
- Injunction: Preventing further misuse of assets or confidential information
- Removal from position: In cases involving directors or trustees
In serious cases, breach of fiduciary duty can also lead to disqualification from acting as a director under the Company Directors Disqualification Act 1986.
The importance of legal representation
Fiduciary duty disputes can be complex, particularly when relationships or financial structures are involved. Seeking early advice from experienced solicitors ensures that your case is properly investigated and presented. They can help identify the strongest legal grounds, gather evidence and represent you through negotiation or court proceedings.
Protect your interests
If you suspect a breach of fiduciary duty has occurred, swift action is essential to protect your rights and prevent further loss. With the right legal guidance, you can hold those responsible to account and recover the damages you deserve.
Please note that this article is solely for informational purposes. It’s not a substitute for legal advice. We encourage readers to contact Osbourne Pinner for case-specific guidance.
For confidential advice, contact Osbourne Pinner Solicitors. Our dispute resolution solicitors specialise in breach of fiduciary duty cases and can guide you through every stage of the process. We offer a free 30-minute consultation, either online or at our offices in Harrow, Canary Wharf, Piccadilly Circus and Manchester. Book today by calling 0203 983 5080, emailing [email protected] or filling out the form below.
