The
Solicitor-General: I was much taken with the question
posed by the hon. Member for Somerton and Frome, as to whether a
Minister is in a fiduciary relationship in dealing with questions in
Committee. It
is debatable, in that my duty is to the Crown as a Minister and
secondarily, probably, to Parliament as a whole. Am I in a fiduciary
relationship with the hon. Gentleman? Those questions are perhaps
academic.
It is
important that we are clear about what the law says. The law has to
cope with a vast array of different circumstances which arise from time
to time. The danger that we have seen with the 1968 and 1978 Acts is
precisely the problem that the hon. Member for Torridge and West Devon
appeared to be anxious to repeat here. He said that particularity is
vital. However, the Law Commission defines the problem with the law on
deception as over-particularisation of the definitions that are
imposed. The world has moved on—there have been technological
developments and changes in the way in which our society behaves. The
legislation was not able to cope with that because it was
over-particular. We need to avoid that. Those amendments aim to reduce
the scope of clause 4. They would go against the recommendations of the
Law Commission, which have already been mentioned by the hon. Member
for Rugby and Kenilworth (Jeremy Wright).
Mr.
Cox: Will the Solicitor-General give
way?
The
Solicitor-General: Let me make the point and then I will
give way to the hon. Gentleman. Let us look at the whole paragraph. The
hon. Gentleman quite fairly looked at the final part of that paragraph.
The hon. Member for Somerton and Frome asked, “So who is he and
where does the relationship arise?” The hon. Member for
Beaconsfield asked “Is it all in order?” It is more than
that. It is also more than a mere fiduciary
relationship. The Law
Commission
states: “The
necessary relationship will be present between trustee and beneficiary,
director and company, professional person and client, agent and
principal, employee and employer, or between partners. It may arise
otherwise, for example within a family, or in the context of voluntary
work, or in any context where the parties are not at arm’s
length. In nearly all cases where it arises, it will be recognised by
the civil law as importing fiduciary duties, and any relationship that
is so recognised will suffice. We see no reason, however, why the
existence of such duties should be essential. This does not of course
mean that it would be entirely a matter for the fact-finders whether
the necessary relationship exists. The question whether the particular
facts alleged can properly be described as giving rise to that
relationship will be an issue capable of being ruled upon by the judge
and, if the case goes to the jury, of being the subject of
directions.” The
Conservative amendment seeks to provide that clause 4 will apply only
if a person has a fiduciary relationship to safeguard the interests of
another. The Liberal Democrat amendment refers only to a duty. By that
I assume that it means some kind of legal duty, which may or may not go
wider than a fiduciary duty. I assume from how the hon. Member for
Somerton and Frome put it that he was referring merely to a fiduciary
duty. My concern is
that the criticism made of the Government—that the measures will
lead to legal wrangling—is the very issue that might arise if
the amendments were accepted. Lawyers would have the opportunity for a
lot of discussion about precisely where a fiduciary relationship
arises. We should remind ourselves—
Mr.
Cox: Will the Solicitor-General give
way?
The
Solicitor-General: Let me first quote Lord Justice Millet,
because what he said about fiduciary relationships is
important: “He
is not subject to fiduciary obligations because he is a fiduciary; it
is because he is subject to them that he is a
fiduciary.” The duties
create the nature of the relationship; the relationship is not of
itself the cause of the fiduciary
duties.
Mr.
Grieve: Will the Solicitor-General give
way?
The
Solicitor-General: I shall give way to the hon. Member for
Torridge and West Devon first and then to the hon. Gentleman, but I
want to develop my
argument.
Mr.
Cox: Will the Solicitor-General incorporate into the
development of his argument his understanding that the concept of
fiduciary duty is flexible in law? The categories of fiduciary duty are
not closed. At its heart is the concept of trust. The law will extend
fiduciary duties where it recognises the hallmarks and characteristics
of a relationship based fundamentally on trust, specifically trust
relating to the management of property and
finance. The amendment
would give greater soundness and solidity to the question of what
relationship the accused party should have, and would exclude—I
ask the Solicitor-General to incorporate this question into his
argument—employees who would otherwise be faced with exposure to
abuse. The concept is flexible. I am sure that he understands
that.
The
Solicitor-General: The concept of a fiduciary was set out
in 1996 by Lord Justice Millet in the Court of Appeal, in Bristol West
building society v. Mothew. He
said: “A
fiduciary is someone who has undertaken to act for or on behalf of
another in a particular matter in circumstances that give rise to a
relationship of trust and confidence. The distinguishing obligation of
a fiduciary is the obligation of loyalty. The principal is entitled to
the single-minded
loyalty”— that
phrase is
important— “of his
fiduciary. This core liability has several facets. A fiduciary must act
in good faith; he must not make a profit out of his trust; he must not
put himself in a position where his duty and interest may conflict; he
may not act for his own benefit or that of third person without the
informed consent of his
principal”. He
goes on to make the point that I referred to earlier:
“He is not subject to
fiduciary obligations because he is a fiduciary; it is because he is
subject to them that he is a
fiduciary.” The
obligations may not be present in a range of informal personal
relationships and it would be difficult for the prosecution to prove
the existence of fiduciary relationships in certain informal
circumstances, even though it would be clear to the man on the Clapham
omnibus or the man in the street—however the hon. Gentleman
wants to describe it—that one person occupied a position in
which he was expected to safeguard the interests of another. We do not
want to get ourselves into a situation where a complex legal argument
about
the nature of a fiduciary relationship and whether it exists is the
subject of the case, rather than the court and jury looking at the
relationship as a whole and taking a view as to whether those
circumstances produced a relationship where there is a legitimate and
proper expectation that there was a duty owed and someone was expected
to safeguard or not to act against the financial interests of another
person, and that position was dishonestly
abused. I will take
interventions from the hon. Members for Rugby and Kenilworth and for
Beaconsfield, but I still have to develop the argument and it might be
easier if they waited until then before they intervened. However, I
will happily give
way.
Mr.
Grieve: I shall try not to intervene too much, but we are
having a good dialogue. What I found rather odd was that the
Solicitor-General developed the argument about fiduciary duties and
read out Lord Justice Millet’s judgment, but in fact that
precisely encapsulated the sort of behaviour and person we wanted to
cover. The hon. and learned Gentleman emphasised that fiduciary
relationships are not fixed and that the category can be expanded, but
that again provides me with greater reassurance that that is the
correct
definition. The
problem is that once we start moving into such informal relationships
we get into an area where things become indefinable. I gave an example
earlier. I would be interested how the Solicitor-General would respond
to the young man who takes advantage of his aunt’s benevolence
but does not owe or is not specifically being asked to safeguard her
financial affairs, even though he takes advantage of the trust she
places in him to get a financial advantage for himself. Is that
intended to be covered by the
legislation?
The
Solicitor-General: I disagree with the hon. Gentleman only
to some extent. In my view, a fiduciary relationship includes those
relationships that we wish to see part of the clause, but does not
encapsulate—to use his word—the whole of the nature of
those relationships. I will come to the auntie and employees in a
moment, if I
can.
Jeremy
Wright: I rise to reinforce the point of my hon. Friend
the Member for Beaconsfield. From the Solicitor-General reading out
that definition, it already seems clear that the inherent advantage of
the amendment is that we can clearly define a fiduciary duty. As far as
I am aware, there is no comparable definition of a person who is
expected to safeguard the interests of
another.
The
Solicitor-General: If the hon. Gentlemen had waited, they
would have seen how the argument has developed and why it has developed
as a result of the consultation. It would be difficult in some
circumstances for prosecutors to argue that a particular relationship,
which members of the public may well see as a relationship where
someone is expected to safeguard the interests of another, was
necessarily a fiduciary relationship. While in most cases the measure
would apply to circumstances where a duty clearly exists, there would
be some cases where a formal legal
duty may not exist. Those cases will arise particularly in personal and
family relationships. The great majority of those who responded to the
consultations in 2004 supported clause 4 and some made comments that
were pertinent to the debate. For example, in welcoming clause 4, the
Institute of Legacy Management referred to the need to tackle the
financial abuse of the elderly, an issue that was increasingly causing
it concern. It said
that “charities have
noticed an alarming rise in estates where the testator’s funds
had been misappropriated prior to
death”. It cited the case
of a tradesman who, having helped an old lady with odd jobs, gained
increasing influence over her and misappropriated funds from her
account. 11.45
am The North of
England trading standards group also said that, in most cases when
vulnerable elderly people were deprived of property unlawfully, the
perpetrators were either relatives or workers who were supposed to be
supporting the victims’ independent lifestyle. Many elderly
people are looked after by helpers who do not have formal power of
attorney, but take various degrees of responsibility for their
finances. Few abuse their position, but it would not be right that
those who do so should escape prosecution for fraud just because they
have no full legal or fiduciary duty to that elderly person or because
the Crown Prosecution Service has a difficulty proving that fiduciary
duty beyond reasonable
doubt. We see no
problem in a jury determining when one person is in a position to
safeguard the interests of another. Furthermore, in most cases the
crucial issue will not be the relationship between the defendant and
the victim, but whether the defendant’s actions were, in its
sum, dishonest. A
number of questions and examples have been put to me. As for the auntie
and the nephew to whom the hon. Member for Beaconsfield referred, that
depends on the nature of the relationship and what has been taken. If,
of course, the nephew had stolen a bust there would be no doubt about
what had happened. However, difficult cases always make for an
interesting analysis. On the face of it, the particular item was no
longer in the aunt’s possession. She had dispensed with it. He
obtained information about its value, so he decided to buy it. If there
were a relationship in which he was supposed to be looking after her
interests in a particular way, that relationship might produce a
expectation, but it does not seem on the face of it that that is likely
to happen if it were merely the case that he happens to come across the
information, purchases the bust and makes some money on it. That is
just a receipt of information that results in his becoming slightly
wealthier. It may be immoral; perhaps he should have shared it, but I
do not think that it would be unlawful unless the relationship was a
more particular relationship than the one that he
described. Paragraphs
21 to 23 of the notes on clauses cite several examples involving
employees. One is
about “an employee who
fails to take up the chance of a crucial contract in order that an
associate or rival company can take it up instead at the expense of the
employer, commits an offence under this
clause.”
Another example concerns an
“employee of a software company
who uses his position to clone software products with the intention of
selling the products on would commit an offence under this
clause.” The notes also
refer to an
example “where a person
who is employed to care for an elderly or disabled person has access to
that person’s bank account and abuses his position by removing
funds for his own personal
use.”
Mr.
Grieve: It is impossible to understand why that last
example, from paragraph 23, was included, because the person would
simply have committed theft. That highlights my anxiety that this will
turn into the catch-all provision to get round the need to charge other
perfectly clear offences. It is not needed in the context that is
claimed in the explanatory
notes.
The
Solicitor-General: It may be theft, but the individual may
also have the right to remove items from the account and only later
take them for his personal use. Whether that were so would depend on
the precise circumstances that might
arise. The
hon. Member for Torridge and West Devon gave an example of an employee
disclosing commercial information to another potential employer. The
question arises about whether that employee is acting dishonestly. The
prosecution would have to prove that there was a particular
relationship, that the information was the subject of that
relationship, that the employee ought to have known that and that the
employee acted dishonestly to better himself. I was surprised by the
intervention by the hon. Member for Hammersmith and Fulham, who took
the view that that would virtually bring down the whole City and the
clause would bring the financial set-up in the UK crashing down around
us. I do not think that it will do
so. The clause says
that a relationship, which can and in most cases will be fiduciary, may
sometimes—as we have seen from our consultation—go beyond
a fiduciary relationship and may involve a relationship where there is
a legitimate expectation on the part of a potential victim that the
person who has access to their money, or whatever, should not behave in
a way that abuses that position. That may go beyond a fiduciary
relationship. I do not want to end up with the problem of the
over-particularisation of a clause, from which we are trying to extract
ourselves with the
Bill. The clause
enables us to deal with the fiduciary problems that hon. Gentlemen have
suggested exist, and it goes beyond that. A number of those who replied
to the consultation indicated that there are issues beyond fiduciary
relationships—so, too, has the Law Commission. In view of the
fact that both the Law Commission and those consultees have put to us
strong points to the effect that a fiduciary relationship is important
but not adequate, we should enable the clause to go beyond that. I hope
that, in view of that explanation, the hon. Member for Beaconsfield
will ask leave to withdraw the
amendment.
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