Keech v. Sandford


Keech v. Sandford

"Keech v. Sandford" (1726) Sel Cas. Ch.61; [1558-1774] All ER Rep 230 is a foundational case on the fiduciary duty of loyalty. It concerns the law of trusts and has affected much of the thinking on directors' duties in company law.

Facts

A child had inherited the lease on a market in Romford, London. 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. ["Keech v. Sandford" [1558-1774] All ER Rep 230] 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.

“A person being possessed of a lease of … a market, devised his estate to trustee in trust for the infant; before the expiration of the term the trustee applied to the lessor for a renewal for the benefit of the infant, which he refused, … there was clear proof of the refusal to renew for the benefit of the infant, on which the trustee sets a lease made to himself.”

Judgment

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

“I must consider this as a trust for the infant, … if a trustee, on the refusal to renew, might have a lease to himself, few trust-estates would be renewed to the cestui que use; though I do not say there is a fraud in this case, yet [the trustee] should rather have let it run out, than to have had the lease to himself. This may seem hard, that the trustee is the only person of all mankind who might not have the lease: but it is very proper that rule should be strictly pursued, and not in the least relaxed; for it is very obvious what would be the consequence of letting trustees have the lease, on refusal to renew to cestui que use.” ["Keech v. Sandford" (1726) Sel Cas. Ch.61, at 175]

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

Influence

The influence of "Keech v. Sandford" has reached beyond the duties of trustees, into the fiduciary duties of company directors. The approach being taken in England (c.f. the position in Delaware corporate law) is that any possibility of a conflict of interest means a breach of trust.
*"Whelpdale v. Cookson" (1747) 1 Ves Sen 9
*"Bray v. Ford" [1896] A.C. 44 at 51-52, per Lord Herschell, the no possibility of conflict rule is “based upon the consideration that, human nature being what it is, there is danger of the person holding a fiduciary position being swayed by interest rather than duty….”
*"Regal (Hastings) Ltd v. Gulliver" [1967] 2 AC 134n
*"Boardman v. Phipps" [1967] 2 AC 46
*"Industrial Development Consultants v. Cooley" [1972] 1 WLR 443
*"Bhullar v. Bhullar" [2003] EWCA Civ 424; 2 BCLC 241

ee also

*Corporate law
*Business judgment rule

Notes


Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Guth v. Loft Inc. — Guth v. Loft, Inc. , 5 A. 2d 503 (Del. Ch. 1939) is a Delaware corporation law case on corporate opportunities and the duty of loyalty. It deviated from the 200 year old rule laid down in Keech v. Sandford [ Keech v. Sandford (1726) Sel Cas.… …   Wikipedia

  • Romford Market — is a large open market with 270 stalls, [http://www.havering.gov.uk/index.cfm?articleid=386 Havering London Borough Council] Romford Market] located in Romford, London Borough of Havering, East London, England. The market is open on Wednesdays,… …   Wikipedia

  • Fiduciary — One party, for example a corporate trust company or the trust department of a bank, holds a fiduciary relation or acts in a fiduciary capacity to another, such as one whose funds are entrusted to it for investment. In a fiduciary relation one… …   Wikipedia

  • Peter King, 1st Baron King — PC, FRS (c. 1669 ndash;22 July 1734), lord chancellor of England, was born at Exeter in 1669. In his youth he was interested in early church history, and published anonymously in 1691 An Enquiry into the Constitution, Discipline, Unity and… …   Wikipedia

  • Daniel J. Layton — Supreme Court Chief Justice of Delaware Attorney General of Delaware (1932–1933) Chief Justice of Delaware Supreme Court (1933–1945) Personal details Born August 1, 1879(1879 08 01) Georgetown, Delaware Died …   Wikipedia

  • Regal (Hastings) v Gulliver — and Ors , [1967] 2 A.C. 134 is a leading English decision on the companies law rule against directors and officers from taking corporate opportunities in violation of their duty of loyalty. The Court held that a director cannot take advantage of… …   Wikipedia

  • United Kingdom company law — Beside the River Thames, the City of London is a global financial centre. Within the Square Mile, the London Stock Exchange lies at the heart of the United Kingdom s corporations. United Kingdom company law is the body of rules that concern… …   Wikipedia

  • Industrial Development Consultants v. Cooley — [1972] 1 WLR 443 is a UK company law case on the corporate opportunities doctrine, and the duty of loyalty from the law of trusts.FactsMr. Cooley was an architect and the managing director of IDC. The Eastern Gas Board has a lucrative contract… …   Wikipedia

  • Boardman v. Phipps — [1967] 2 AC 46 is an English trusts law case concerning the duty of loyalty and the duty to avoid conflicts of interest.FactsMr Boardman was the solicitor of a family trust. He and a beneficiary, Tom Phipps, went to a shareholders general meeting …   Wikipedia

  • In Plus Group Ltd v. Pyke — [2002] EWCA Civ 370 is a UK company law case concerning the fiduciary duties of directors, and in particular the doctrine concerning corporate opportunities. In the course of his judgment, Sedley LJ cast serious doubt on the correctness of the… …   Wikipedia


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.