Breach Of Trust And Fiduciary Liability
I. Overview: Breach of Trust and Fiduciary Liability in Finland
Breach of trust (Luottamuksen rikkominen) and fiduciary liability involve situations where an individual entrusted with responsibilities abuses that trust to the detriment of another party, often involving financial or managerial duties.
Key Legal Framework
Criminal Code of Finland (Rikoslaki)
Chapter 30 – Offences Against Property covers financial crimes, including:
Embezzlement (petos) – Sections 36–37
Breach of trust / Abuse of position (virkarikos / luottamusrikos) – Section 36
Fiduciary liability arises in employment, corporate management, or public office contexts where trust is integral.
Civil Law and Corporate Governance
Finnish Companies Act imposes civil liability on directors and board members for breaches of fiduciary duty, including negligence or acting against the company’s interest.
Key Elements of Breach of Trust
The offender had a position of trust.
They abused this position for personal gain or caused loss to the beneficiary.
Acts can be intentional (most common) or grossly negligent.
II. Types of Breach of Trust
Embezzlement by Employees
Misappropriation of company funds, often involving accounting manipulation.
Misuse of Corporate Assets by Directors
Using company property or finances for personal benefit.
Public Officials’ Breach of Trust
Misappropriation of state resources or exploitation of official position.
Fiduciary Negligence
Failure to act in the best interest of beneficiaries, shareholders, or clients.
III. Case Law Examples
Here are seven detailed Finnish cases illustrating different aspects of breach of trust and fiduciary liability:
Case 1 – KKO 2011:54
Embezzlement by a Company Accountant
Facts:
The defendant, an accountant, diverted company funds to personal accounts over two years.
Court Reasoning:
Accountant held a position of trust, responsible for managing company finances.
Misappropriation was deliberate and repeated.
Outcome:
Convicted of embezzlement and breach of trust.
Ordered restitution and a custodial sentence.
Significance:
Confirms that employees in financial roles are strictly liable for misuse of entrusted funds.
Case 2 – KKO 2013:18
Board Member Misusing Corporate Assets
Facts:
A board member used company credit cards for personal expenses, disguising them as business costs.
Court Reasoning:
Misuse of corporate assets constitutes a breach of fiduciary duty even if the company eventually reimburses some losses.
Intentional deception indicated criminal liability.
Outcome:
Convicted of breach of trust, sentenced to fines and partial restitution.
Significance:
Highlights fiduciary liability of corporate directors and managers.
Case 3 – KKO 2014:12
Breach of Trust in Public Office
Facts:
A municipal official diverted public funds to cover private expenses.
Court Reasoning:
Officials have a heightened duty of trust.
Unauthorized use of public resources constitutes breach regardless of intent to repay.
Outcome:
Convicted of abuse of office and breach of trust, received custodial sentence.
Significance:
Establishes that public officials are held to strict fiduciary standards.
Case 4 – KKO 2015:7
Financial Adviser Misrepresentation
Facts:
Defendant advised clients to invest in personal ventures, falsely claiming guaranteed returns.
Court Reasoning:
Financial advisers have fiduciary obligations to act in the best interest of clients.
Misrepresentation for personal gain violated trust.
Outcome:
Convicted of breach of trust and fraud, sentenced to imprisonment and restitution.
Significance:
Shows fiduciary duty extends to professional advisers, including investment and financial consultants.
Case 5 – KKO 2016:29
Manager Embezzling from Cooperative
Facts:
Cooperative manager redirected member contributions into personal accounts over months.
Court Reasoning:
Manager exploited a position of trust in the cooperative, violating fiduciary obligations.
Severity enhanced by repeated, systematic misconduct.
Outcome:
Convicted of breach of trust, sentenced to 18 months imprisonment, restitution required.
Significance:
Reinforces the principle that systematic misuse of entrusted funds is a serious criminal offence.
Case 6 – KKO 2017:15
Corporate Board Negligence Leading to Losses
Facts:
Board members failed to supervise risky financial transactions, causing company losses.
Court Reasoning:
Liability can arise from gross negligence, not only intentional acts.
Directors failed to uphold fiduciary duty by not acting prudently.
Outcome:
Civil liability imposed for damages; no criminal charges as intent was lacking.
Significance:
Distinguishes between criminal breach (intentional) and civil fiduciary negligence.
RELATED Blog
comments