A reminder: the rule against self-dealing by trustees is very strict indeed!

It’s well worth remembering that the rule on self-dealing by trustees is a lot stricter than the rule on fair dealing. This has been underlined by a recent case which might be quite useful if you’re having to write an essay about fiduciary duties. (If you’ve got our LLB Equity guide you might add a link to this case to page 86. It’s page 374 in our GDL guide).

In the case of Caldicott v Richards [2020] trustees sold shares to one of their number at a valuation which was accepted to be fair and in circumstances where there was no bad faith and the parties had received legal advice. Notwithstanding all of this the court was prepared to set the transaction aside.

Two family trustees, who happened also to be solicitors, were involved in the sale by the trust of shares to one of them. This was to provide liquid funds for a loan to the claimant to allow him to seek discharge from bankruptcy.  The sale was at the probate value and the claimant was aware of the transaction. The dispute was around the option of the trust to repurchase the shares if the claimant repaid the loan and whether this option was only available for two years (as the trustees claimed) or without limit in time as alleged by the claimant. The court held the two year repurchase period had not been explained adequately to the claimant and set the transaction aside.

Does that seem a bit unfair or should the solicitor trustees have avoided the transaction completely (as it was they had sought the advice of counsel on it!). A discussion of this point might help you get more marks in any critical analysis section!