EquityFiduciary duty - non-disclosure by fiduciary to principal - no abuse of confidence in relation to transaction where no property passed Johnson v EBS Pension Trustees Ltd and Another: ChD (Mr Justice Patten): 8 March 2001In 1986 D Ltd executed a legal charge in favour of four of the partners in a solicitors' firm, including the claimant, as trustees for named private investors.

The second defendant, who controlled D Ltd, was joined to the loan as surety.

Unlike an earlier loan arranged by the claimant, the investors and not D Ltd were liable to pay a service charge of 1.5% to the firm, but that had not been made clear to the second defendant prior to execution.

In 1990 the lease of D Ltd's business premises was assigned to the claimant and the defendants as trustees of the second defendant's pension fund.

In 1991 D Ltd ceased paying both the rent on its business premises and the repayments due under the 1986 charge, which was called in.

In 1995 the claimant settled the landlord's claim for rent arrears, insurance and interest and issued proceedings against his fellow trustees seeking an indemnity from the pension fund.

The second defendant counterclaimed for an order setting aside the 1986 legal charge on the basis, among other things, that it had been procured by the claimant's breach of fiduciary duty/abuse of confidence.James Behrens (instructed by Churchers, Fareham) for the claimant.

Clifford Darton (instructed by Bennett Griffin & Partners, Worthing) for the second defendant.

The first defendant did not appear and was not represented.Held, giving judgment for the claimant and dismissing the counterclaim, that the doctrine of abuse of confidence, which was all but identical to the requirements of the rule of fair dealing between trustee and beneficiary and existed to prevent a fiduciary from abusing his relationship of trust and confidence so as to procure an advantageous transaction at the expense of his principal, did not require conscious disloyalty before liability could be imposed for breach of duty but was confined to transactions in which property passed; that there had therefore been no abuse of confidence; that any non-disclosure had been entirely inadvertent, played no part in the second defendant's decision to enter into the surety covenant and did not affect the way in which the claimant had acted for him; and that the proper remedy for the second defendant's only claimed loss in respect of non-disclosure was to order an account of the service charge received and to set it off against the second defendant's liability under the surety covenant.