Tito v Waddell (No 2)
The self dealing rule and the fair dealing rule are distinct: a trustee who buys a beneficiary's interest must show that he acted fairly and disclosed everything.
Facts
The British Phosphate Commissioners mined phosphate on Ocean Island in the Pacific for many years. The islanders, the Banabans, brought claims against the Crown, alleging that it had been in breach of trust in its dealings with them, including in buying their land and mining rights. The case was one of the longest civil trials in English legal history.
Legal principle
Megarry V-C held that the Crown was not a trustee in the strict sense, so most of the claims failed. In the course of his judgment, he explained the difference between the self dealing rule and the fair dealing rule. Under the self dealing rule, if a trustee sells trust property to himself, the sale is voidable by any beneficiary ex debito justitiae, however fair the transaction. Under the fair dealing rule, if a trustee buys a beneficiary's beneficial interest, the transaction is not voidable as of right, but will be set aside unless the trustee can show that he has taken no advantage of his position and has made full disclosure to the beneficiary, and that the transaction is fair and honest.
Related cases on fiduciary duties
- Attorney General for Hong Kong v Reid [1994] 1 AC 324
- Boardman v Phipps [1967] 2 AC 46
- Bray v Ford [1896] AC 44
- Bristol and West Building Society v Mothew [1998] Ch 1
- Re Duke of Norfolk's Settlement Trusts [1982] Ch 61
- FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45, [2015] AC 250
- Guinness plc v Saunders [1990] 2 AC 663
- Holder v Holder [1968] Ch 353
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This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
