Conflicts of Interest

Introduction

1. The law regards a trustee as being in a 'fiduciary' position - i.e. occupying a position of confidence, power or trust in relation to someone else.
2. It is a basic principle that trustees should not enter into transactions which conflict (or which may conflict) with their fiduciary duties.
3. The law has sometimes taken a pragmatic view of conflicts of interest. Examples are the powers of sale etc. of a tenant for life under the Settled Land Act 1925 (the legitimate exercise of which may disadvantage subsequent beneficiaries for whom the tenant for life acts as trustee) and the provisions in Section 14 of the Trustee Act 2000 about delegation by trustees (which recognise the fact that a trustee may delegate to, say, a fund manager who has a material interest).
4. A more accessible example of legal pragmatism is the fact that solicitors are sometimes permitted to act simultaneously for both trustees and beneficiaries in a transaction, notwithstanding a potential (but not actual) conflict of interest.
5. The principle of 'proportionality' needs to be borne in mind.

Identification of 'Conflicts of Interest'

6. In the context of the LDF, conflicts of interest may arise in various ways, but the most obvious are the following:-
   1. Where an individual member is in a position where the interest of his/her own parish may conflict with that of the Diocese as a whole.
   2. Where an individual has a direct or indirect personal financial interest in a matter being discussed.
   3. Where the LDF is involved in a transaction in more than one capacity - e.g. as one party in its own right but as the other party in its capacity as custodian trustee / Diocesan Authority.
   4. Where land or other investments are held jointly by the LDF and on behalf of some other party (e.g. a parish or charitable trust) in stated proportions.

Action to be Taken

7. Taking each of the above situations in turn:-
   1. The individual member should always declare his/her interest. Having done so, the member may feel it inappropriate to participate in discussion, but this depends on the circumstances and the individual. There is no absolute rule.
   2. The member should always declare his/her interest. Unless the Chairman otherwise directs, the member should not participate in the discussion and should withdraw from the room.
   3. The key point here is that separate valuation advice should be obtained on behalf of: (i) the LDF and (ii) the party for whom the LDF holds as trustee.

      In the event of a transaction being proposed to the Finance Committee where the decision could, on the one hand, benefit the Fund but, on the other hand, may not be as advantageous to the parish (e.g. where the Fund acts on the one hand as owner and as custodian trustee on the other) the following procedure will be followed:

      1. Inform the PCC of the precise nature of the potential conflict of interest, encourage the parish to seek appropriate expert advice, independent of the LDF, in relation to such transaction allowing time for this to be done.
      2. Present to the Finance Committee the full aspects of the case including the benefits and disadvantages of any decision to the LDF and to the parish respectively, showing the draft Finance Committee paper to the parish before it is presented.
      3. Present the PCC case in its own words to the Committee alongside the LDF officers' report.
      4. Both the report to the Finance Committee and its Minutes should record that the foregoing process has been undertaken.
      5. The full facts of the case would be reported by the Finance Committee to the Bishop's Council who alone would make the final decision, althoughin urgent cases, provided that the PCC has taken separate written, professional valuation advice, the Finance Committee would not need to wait for an actual decision of the Bishop's Council.
   4. In most cases there will be mutuality of interest - e.g. in the case of a
      sale the LDF and the other beneficiary will have a mutual interest in obtaining the best price.

   If there is a dispute as to whether or not a sale should proceed or about a proposed transposition of investments, the legal position will depend on the terms of any relevant trust instrument. In practice, it will usually be prudent for separate professional valuation and/or investment advice to be obtained on behalf of the respective beneficiaries. Ultimately a price will need to be agreed which both valuers can recommend for acceptance.

Potential Breach of Trust

8. When acting as a trustee, the LDF has a fiduciary duty to act in the best interests of the beneficiary, not itself. If it fails to do so, this is not a case of conflict of interest, but of breach of trust.

(2004)

(Note: This document is currently being revised. 31 July 2009)