The contemporary relevance of the scope limitation

Abstract

This thesis concerns the rule of equity aimed at the maintenance of fiduciary loyalty. Generally known as the Conflict of Interest and Duty Rule, it is referred to in the thesis as the Basic Rule. The object is to show that the basic rule features two approaches of different content, the Profit Rule and the Conflict Rule, and that a constant yet largely unconscious competition between these two rules is producing undesirable reductions of principle. The development of these reductions may be seen to be mirrored in an established yet anomolous area of the basic rule, the scope limitation in partnership. It is the writer's thesis that the likely reappearance of that doctrine in a wider context illustrates the inadequacies of the contemporary basic rule and necessitates the adoption of a reformulated approach to the basic rule. In Chapter I the content of the two rules is met and it is seen that as a result of their competition the conflict rule is gaining primacy. It is further suggested that the substantive content of the conflict rule is too restricted to achieve the aims of the basic rule. In Chapter II the development and conceptual basis of the conflict rule are examined and it is suggested that, in addition to its inadequate content, the conflict rule also lacks a sound conceptual basis and foundation in precedent. As a consequence it is suggested in Chapter III that the basic rule be reformulated by the assimilation of the present content of the basic rule into one coherent principle and by the recognition of a duty to inform. It is seen that such a reformulation would, in addition to removing the undesirable competition of approach, go to remove the substantive deficiencies of the basic rules's present content. Preparatory to illustrating that the need for such a reformulation is by no means only recently apparent, Chapter IV briefly introduces the scope limitation in partnership and illustrates its divergence from the remainder of the basic rule. In Chapter V possible and suggested explanations of that divergence are considered and it is suggested that the scope limitation can only be seen as a product of the two-rule competition met earlier. This is confirmed in Chapter VI by an analysis of the development of the scope limitation with particular emphasis on the competition of the two rules. In Chapter VII the contemporary basic rule is seen to be unconsciously developing a content similar to the scope limitation and this development is seen, like the scope limitation, to be due to the two-rule competition. Finally it is concluded that the backward direction of the basic rule thus apparent reinforces the earlier conclusion as to the undesirable nature of the two-rule competition and gives added urgency to the need to adopt the reformulated approach suggested earlier.