is a foundational case, deriving from

English trusts law English trust law concerns the protection of assets, usually when they are held by one party for another's benefit. Trust law, Trusts were a creation of the English law of English property law, property and English contract law, obligations, a ...

, on the

fiduciary A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (legal person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person. One party, ...

duty of loyalty. It concerns the law of trusts and has affected much of the thinking on directors' duties in

company law Corporate law (also known as company law or enterprise law) is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. The term refers to the legal practice of law relating to corp ...

. It holds that a trustee owes a strict duty of loyalty so that there can never be a possibility of ''any''

conflict of interest A conflict of interest (COI) is a situation in which a person or organization is involved in multiple wikt:interest#Noun, interests, financial or otherwise, and serving one interest could involve working against another. Typically, this relates t ...

. The case's importance derives partly from its historical context, with the

South Sea Bubble South is one of the cardinal directions or compass points. The direction is the opposite of north and is perpendicular to both west and east. Etymology The word ''south'' comes from Old English ''sūþ'', from earlier Proto-Germanic ''*sunþa ...

. Lord King LC, who decided the case, replaced the former Lord Chancellor, Thomas Parker, 1st Earl of Macclesfield who was tried and found guilty in 1725 for accepting bribes and speculating with and losing client money in the South Sea crash. Lord Macclesfield had, probably not coincidentally, previously held that a fiduciary was entitled to take money from a trust, invest it on their own behalf, and keep the profit, if they restored money to the trust. ''Keech'' reversed this, and the law in England and the UK has maintained a strict opposition to any possibility of a conflict of interest ever since. The remedy of granting a constructive trust over property, and the strict approach that all possibility of a conflict of interest was to be avoided, derived from the general outrage at the time.

Facts

A child had inherited the

lease A lease is a contractual arrangement calling for the user (referred to as the ''lessee'') to pay the owner (referred to as the ''lessor'') for the use of an asset. Property, buildings and vehicles are common assets that are leased. Industrial ...

on Romford Market near

London London is the Capital city, capital and List of urban areas in the United Kingdom, largest city of both England and the United Kingdom, with a population of in . London metropolitan area, Its wider metropolitan area is the largest in Wester ...

. Mr Sandford was entrusted to look after this property until the child matured. But before then, the lease expired. The landlord had told Mr Sandford that he did not want the child to have the renewed lease. There was clear evidence of the refusal to renew for the benefit of the infant. Yet the landlord was happy (apparently) to give Mr Sandford the opportunity of the lease instead. Mr Sandford took it. When the child (now Mr Keech) grew up, he sued Mr Sandford for the profit that he had been making by getting the market's lease.

Judgment

The

Lord Chancellor The Lord Chancellor, formally titled Lord High Chancellor of Great Britain, is a senior minister of the Crown within the Government of the United Kingdom. The lord chancellor is the minister of justice for England and Wales and the highest-ra ...

, Lord King ordered Mr Sandford should disgorge his profits. He wrote,

Significance

Mr Sandford was meant to be trusted, but he put himself in a position of

. Lord King LC was worried that trustees might exploit opportunities to use trust property for themselves instead of looking after it. Business speculators using trusts had just recently caused a stock market crash. Strict duties for trustees made their way into company law and were applied to directors and

chief executive officer A chief executive officer (CEO), also known as a chief executive or managing director, is the top-ranking corporate officer charged with the management of an organization, usually a company or a nonprofit organization. CEOs find roles in variou ...

s. The principle of strict and absolute duties of loyalty laid down in ''Keech'' was a decisive break with prior case law, seen in '' Holt v Holt'', '' Rushworth's Case'', and '' Walley v Walley''.(1687) 1 Vern 484 The influence of ''Keech'' has reached beyond the duties of trustees, into the fiduciary duties of company directors. The approach being taken in England (cf. the position in Delaware corporate law) is that any possibility of a conflict of interest means a breach of trust - unless the beneficiary of the trust consented to the conflict.

Notes

References

*S Cretney, 'The Rationale of Keech v. Sandford' (1969) 33 Conveyancer 161 *DR Paling, 'The Pleadings in Keech v Sandford' (1972) 36 Conveyancer 159 *J Getzler, 'Rumford Market and the Genesis of Fiduciary Obligation' in A Burrows and A Rodger (eds), ''Mapping the Law: Essays in Memory of Peter Birks'' (Oxford 2006) 577 *AD Hicks, 'The remedial principle of ''Keech v. Sandford'' reconsidered' (2010) 69(2) Cambridge Law Journal 287 *''Queensland Mines Ltd v Hudson'' (1978) 18 ALR 1 {{law United Kingdom company case law 1726 in case law 1726 in British law English trusts case law 1726 in Great Britain Exchequer of Pleas cases

Facts

Judgment

Significance

See also

Notes

References