Fiduciary Duties: Directors and Employees

Citation

Wright, F. (2010), "Fiduciary Duties: Directors and Employees", International Journal of Law and Management, Vol. 52 No. 5, pp. 405-406. https://doi.org/10.1108/17542431011076044

In their recent book Fiduciary Duties: Directors and Employees, Andrew Stafford QC and Stuart Ritchie engage in an extended analysis of the scope of fiduciary duties owed by directors and employees and the remedies available when there is a breach of those duties.

The topic is an important one but it is one that tends to fall outside the purview of writing on both fiduciary duties and employment law, at least where the writing is aimed at practitioners and/or students. Academics writing about fiduciary duties regard the trustee as the paradigm fiduciary. They certainly discuss cases where the fiduciary was a director or even an employee, but the inter‐relationship between employment law and equity is not explored in any detail. At the same time, a brief survey of chapter headings in employment law texts reveals that equitable remedies such as account of profit or constructive trust, and the potential liability of third parties for knowing receipt of trust property or dishonest assistance in a breach of trust has no place in student and practitioner focussed texts. Where remedies are discussed, they tend to be remedies available to the employee rather than the employer, and the focus is very much on lower‐level employees, not those at director or senior management level. Yet Human Resources Departments will have to deal with employees across the board. This book seeks to fill that gap.

Stafford and Ritchie's approach is two‐pronged. They seek to explain the background law on fiduciary duties and its application to directors and employees. There are chapters on fiduciary duties in general, fiduciary duties of employees, fidelity and contractual issues, unlawful competition between a fiduciary and their company/employer, bribes, and several chapters on remedies including accessory liability, the difference between personal and proprietary remedies and limitation periods. In the process, the authors do more than merely summarise the law: they express some strong opinions, sometimes differing from judicial and standard academic views. This is not a textbook, as such, and while it may be useful for the reader dipping in and out in order to understand a particular topic of interest, the book also presents a clear argument about how the law on fiduciary duties of directors and employers should develop.

The book starts by outlining two contrasting approaches to fiduciary duties. A “proscriptive” approach limits them to the familiar “no profit” and “no conflict” rules. A “prescriptive” approach requires, in addition, positive steps to be taken by the fiduciary. As Stafford and Ritchie explain, English case‐law has not come down firmly on one side or the other. Into this unsettled arena has come the Companies Act 2006, which codifies directors’ duties but without clearly distinguishing between those duties which are fiduciary and those that have some other foundation. The Act is described as “exquisitely ambiguous” (at page 5) but essentially it treats virtually all of the director's duties as fiduciary. The categorisation of duties impacts on remedies there is always cross‐fertilisation between fiduciary fields. It is likely therefore that the resolution of disputes under the Companies Act 2006 will have an impact on case‐law on other categories of fiduciaries. This is important for employers, because of the increasing use of the fiduciary concept in resolving disputes between employers and employees. A wider view of fiduciary duties in one arena may have the unintended effect of a wider view in other arenas.

Stafford and Ritchie themselves favour the proscriptive approach to fiduciary duties: “Equity does not tell the fiduciary what he should do. It tells him what he must do” (at 12). However, this does not mean that the content of the no profit and no conflict rules are identical for all fiduciaries. The approach in the Companies Act is, they suggest, appropriate for directors, because questions of profit and conflict are present in every aspect of the director's role. This should not, though, be taken to mean that all fiduciaries have this wider collection of duties. Fiduciary obligations, they argue, should not be imported into the employment contract if their effect is to put an employee under additional positive obligations that are not contained in the express or even implied terms of their employment agreement.

This is, therefore, a book that tries to straddle the space between the manual/practitioner's text and the academic monograph. Individual cases are not just described but are critically analysed, and the sources used are wide‐ranging. Scholarship from a range of jurisdictions is considered. It is a book that would repay a thorough, page‐by‐page reading as opposed to the skim read many legal texts are destined for. However, it is well written, has plenty of headings and sub‐headings to help, and the reader who chooses to dip in and out will still learn a great deal, even if the subtleties of the overall argument are missed. Despite its cost, this book has a place on the academic bookshelf, but it will not be out of place on the manager's shelf either.