English Influences on the Historical Development of Fiduciary Duties in Scottish Law

Published date01 January 2014
Pages29-58
Date01 January 2014
DOI10.3366/elr.2014.0186
INTRODUCTION

In 1985 Sir Anthony Mason noted that: “The fiduciary relationship is a concept in search of a principle.”1

A Mason, “Themes and Prospects”, in P D Finn (ed), Essays in Equity (1985) 242 at 246.

More than twenty-five years later the search for principle continues,2

L Hoyano, “The Flight to the Fiduciary Haven”, in P Birks (ed), Privacy and Loyalty (1997) 169 at 170.

though in recent years a number of important theories have been advanced to explain the underlying theory of fiduciary obligations. Ambiguity surrounding a conceptual basis clearly poses continuing difficulties for the identification of rules that apply the elusive fiduciary concept. Yet there remains enduring dissensus among the judges and academics of the Common Law world about the fundamental nature and function of fiduciary law in different legal systems.3

M Conaglen, Fiduciary Loyalty (2010) 24–26; J Edelman, “Four fiduciary puzzles”, in E Bant and M Harding (eds), Exploring Private Law (2010) 299.

That is quite understandable given the Common Law family is not a single entity: commonality is not uniformity.4

The flexible plurality of ‘common laws’ generally is superbly illustrated by Glenn: H P Glenn, On Common Laws (2005).

Indeed, jurisprudential divergences can provide rich opportunities for evolution and cross-fertilisation. Debates across the Common Law world that foster new theories explaining the nature of fiduciary liability provide valuable guidance for the development of fiduciary liability in Scotland

In considering Scottish fiduciary law it is important to have regard to the historical development of fiduciary law within Scotland. It is equally important to consider events in England in particular because the two systems share common elements of development, and there is a shared heritage in this area of law in particular. Caution is required in weighing the interrelated development of the two systems, however. The historical development is undoubtedly one of close association but there are differences between the two systems – to have a shared development presumes that there are separate entities, each of which has something to share. From the perspective of the Scottish legal system, therefore, it should always be borne in mind that it is for one legal system to evaluate critically the merits and fit of a legal rule emanating from another system.5

On inter-systemic recognition see: N Jansen, “The development of legal doctrine in Europe: extracontractual liability for fault”, in N Jansen (ed), The Development and Making of Legal Doctrine (2010) 1 at 1.

With these general precepts in mind the purpose of this article is to consider the historical development of the doctrinal structure of fiduciary law in Scotland. Therefore the article necessarily uses a mixture of text writers and important cases to illustrate in broad brush the development of the fiduciary concept. As with many areas of law it is useful to consider the historical development of doctrine in a manner that allows us to understand the present structure of the law, so that in turn we might more adequately be prepared to tackle the task of considering its broader interstitial fit in the system of private law today. That is not to say that historical understanding is a substitute for considering the modern law – it is not. Law should, and indeed must, if it is to retain relevance and respect, be an organically dynamic institution that responds to the needs of its time. Acquaintance with an account of the past reveals the evolutionary processes that constitute the continuum of a doctrinal category's past evolution.6

A point encapsulated crisply by Ibbetson: “The real difficulty with doctrinal legal history is that its primary focus is ideas rather than facts or events.” D Ibbetson, “Historical Research in Law”, in P Cane and M Tushnet (eds), The Oxford Handbook of Legal Studies (2003) 863 at 874. Much depends on the purpose with which one approaches legal history: difficulty often gestates possibility.

An analysis according to these terms has been lacking in the literature on Scottish fiduciary law. This article seeks to give what appears to be the first tentative treatment of the historical development of fiduciary law in Scotland.7

There is a single article regarding modern fiduciary law: P Hood, “What is so Special about being a Fiduciary?” (2000) 4 EdinLR 308. See also L J Macgregor, The Law of Agency in Scotland (2013) ch 6.

A broader exercise in the same vein is to conceptualise historically a ‘tradition’ at a systemic level.8

On the systemic significance see N Walker, “Out of Place and Out of Time: Law's Fading Co-Ordinates” (2010) 14 EdinLR 13 at 20–21.

In modern Scottish academic writings there is frequent reference to the, or perhaps a, ‘civilian tradition’.9

For example: R Evans-Jones (ed), The Civil Law Tradition in Scotland (1995); N R Whitty, “The Civilian Tradition and Debates on Scots Law” (1996) Tydskrif vir die Suid-Afrikaanse Reg 227; D L Carey Miller and R Zimmermann (eds), The Civilian Tradition and Scots Law (1997).

The ‘civilian tradition’ is of course, in these works, a component of the broader ‘Scottish legal tradition’ which contains other influences – a monograph or article on the ‘common law tradition’ in Scotland has yet to appear.10

There are many texts about the ‘common law tradition’ generally: e.g. J H Baker, The Common Law Tradition: Lawyers, Books and the Law (2000); H P Glenn, Legal Traditions of the World, 2nd edn (2004); J W Head, Great Legal Traditions: Civil Law, Common Law, and Chinese Law in Historical and Operational Perspective (2011).

This may be because it has a greater, perhaps even a residual or default, presence. It would be an interesting tale. Historically grounding these constituent traditions does not entail the erection of a frozen interpretation of the past alone; rather, any understanding of these traditions and interface will be a dynamic one that is pregnant with possibilities for realigning thinking about the future. That task, with its attendant opportunity, can be similarly applied to the narrower examination of fiduciary law.11

On the concept of a ‘tradition’ see: Glenn, Legal Traditions (n 10) ch 1.

This article suggests that the historical development of fiduciary liability in Scotland grew from a distinctive Scottish basis, and then subsequent substantively similar rules to those regulating fiduciary liability in English law were grafted onto the Scottish law creating a shared collection of ideas and concepts. This confluence of ideas came about through the shared space inhabited by the legal systems within the United Kingdom. The effective rules in English and Scottish law came to rest upon similar moral or policy objectives as a result of each system employing separate formulations of equity that formed an apparent common linguistic point of entry. Yet those formulations of equity are institutionally distinct, and hence the normative doctrinal core in Scotland potentially differs from the structural framework in English law. One of the reasons for a continuing different doctrinal approach is the complicated nature of equity in Scotland, compared to in England where it has built solid institutional structures. These shared institutional spaces and moral imperatives were thus fused in a slightly uneasy fashion in Scotland. It is suggested that this examination of the historically distinct doctrinal framework opens up the possibility of a different scope for, and approach to, substantial rules regulating fiduciaries in Scotland, and indeed different remedial responses today.

HISTORICAL DEVELOPMENT OF FIDUCIARY LAW IN SCOTLAND An overview of doctrinal challenges

The idea of a class of persons with special rules of liability called fiduciaries is a comparatively modern one for Scottish law. While in the past there were a number of separate legal mechanisms which produced results which today we would recognise as being directed towards the protection of those dealing with fiduciaries, the idea of a commonality of office-based obligations that can be used to classify different office-holders as ‘fiduciaries’, is relatively new. Not only is it rather new, much of the flesh of the rules of the nominate concept in modern Scottish law is borrowed from English equity. It is frequently stated that the principles of fiduciary liability are one and the same in Scottish and English law, even by Scottish judges.12

Aberdeen Railway Co v Blaikie Bros (1854) 1 Macq 461 at 474 per Lord Chancellor Cranworth, pointing out the civilian heritage (D 18.1.34.7) and at 477 per Lord Brougham; Dougan v MacPherson (1902) 4 F (HL) 7, at 9 per Lord MacNaghten, and at 10 per Lord Shand; [1902] AC 197 at 204 per Lord MacNaghten, and at 205 per Lord Shand; Aberdeen Town Council v Aberdeen University (1877) 2 App Cas 544 at 554–555 per Lord O'Hagan (in the Law Reports his apposite citation of Stair 1.6.17 is reported but it is curiously omitted from Rettie), and at 558 per Lord Gordon (who also stated, a little incongruously given his comments in McPherson v Watt below, that the Scottish law rests upon the civil law, and that Scottish authority preceded English rules); (1877) 4 R (HL) 48 at 54–55 per Lord O'Hagan, and at 56 per Lord Gordon; McPherson v Watt (1877) 3 App Cas 254 at 270 per Lord Blackburn, and at 277 per Lord Gordon (who notes that the Scottish rules are based upon English authority); (1877) 5 R (HL) 9 at 20 per Lord Blackburn, and at 25 per Lord Gordon.

Yet, while it might appear, at first sight, that the law in Scotland and England is the same here, the picture is arguably more complicated notwithstanding repeated judicial assertions that the two are the same. Such assertions would in the ordinary course of things be conclusive. There is, however, a problem that cannot be ignored when stating that the two systems are the same. The structure of the English law relating to fiduciaries is heavily...

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