 FIDUCIARY OBLIGATIONS
INTRO
 Relationship of confidence between Fiduciary and Confiding Party (principal).
 E may step in to prevent Fidary abusing position – no conflict of interest and no profit
o Maguire v. Makaronis (1997) 188 CLR 449 at 465; 144 ALR 729 at 738 by Brennan CJ,
Gaudron, McHugh, Gummow JJ:
“Equity intervenes … not so much to recoup a loss suffered by the plaintiff as to hold the
fiduciary to, and vindicate, the high duty owed to the plaintiff … [T]hose in a fiduciary
position who enter into transactions with those to whom they owe fiduciary duties labour
under a heavy duty to show the righteousness of the transaction.”
 Aus: Fid does not impose positive obligations – but proscriptive/negative obligations: Breen v.
Williams (1996) 186 CLR 71
 Strict liability – no need for intention to breach or CP to suffer loss.
STATUS/CATEGORY FIDUCIARIES
 Presumed fid rel – established categories:
o Solicitor/client eg. Phipps v. Boardman [1967] 2 AC 46
o Trustee/beneficiary;
o Agent/principal;
o Director/company
o Partner/partner
 BUT – never closed or universal: HPI v USSC (1984)
FACT BASED FIDUCIARIES
o Fid rel may be inferred/arise from nature and factual circumstances of the case.
o Relevant factors are:
o an undertaking by the fiduciary to act on behalf of or for the benefit of another person;
o a discretion or power which affects the interests of that other person;
o (possibly) the peculiar vulnerability of that other person to the fiduciary as manifested by
factors such as dependence upon information and advice, a relationship of confidence and
the significance of the transaction for the parties.
WHO IS A FIDUCIARY ?
Breen v. Williams (1996) 186 CLR 71 at 92, per Dawson and Toohey JJ:
 Doc refuse to give P medical records.
 HELD: no breach of Fid. File was made for Doc’s own use.
 THUS: there is no “precise or comprehensive definition of the circumstances in which a person is
constituted a fiduciary in his or her relations with another”
Hospital Products Ltd. v. United States Surgical Corporation (1984) 156 CLR 41 at 96-7; 55 ALR 417
at 454, per Mason J:
 Fid rel can co-exist with Contractual Rel – Con is foundation and Fid must accommodate to Con.
Cannot be superimposed on Contract to alter its construction.
 “The accepted fiduciary relationships are sometimes referred to as relationships of trust and
confidence or confidential relations …The critical feature of these relationships is that the fiduciary
undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise
of a power or discretion which will affect the interests of that other person in a legal or practical
sense. The relationship between the parties is therefore one which gives the fiduciary a special
opportunity to exercise the power or discretion to the detriment of that other person who is
accordingly vulnerable to abuse by the fiduciary of his position. The expressions “for”, “on behalf
of”, and “in the interests of” signify that the fiduciary acts in a “representative” character in the
exercise of his responsibility…”
LAC Minerals Ltd v. International Corona Resources Ltd [1989] 2 SCR 574 at 597; (1989) 61 DLR
(4th) 14 at 61 per Sopinka J
3 essential elements of fid rel:
 Fid exercise some discretion/power
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 Fid can unilaterally exercise that discretion/power to affect Ben’s legal/practical needs
 Ben is peculiarly vulnerable/dependent on Fid.
C-Shirt Pty Ltd v. Barnett Marketing and Management Pty Ltd (1996) 37 IPR 315 at 336, Lehane J
said:
 “I do not think that in Australian law ‘vulnerability’, though it may be a characteristic of some of
those to whom fiduciary duties are owed, is the touchstone of fiduciary obligation: the fundamental
question is for what purpose, and for the promotion of whose interests, are powers held?”
EXAMPLE OF FID DUTY:
Keech v. Sandford (1726) Sel Cas T King 61; 25 ER 223:
 Lease on Trust expire. Trustee want renewal for Ben. LL refuse. T try renew for own benefit.
 HELD: Irrebuttable presumption that T hold new L on Trust for Ben, where Fid is Trustee (even if
LL refuse L on original benefit to Ben).
 Trustee cannot renew lease for his own benefit = conflict between duty to do his best to obtain a
renewal and his own interest
Chan v. Zacharia (1984) 154 CLR 178, per Deane J, at CLR 201:
 Med practice partnership in receivership. L for renewal. 1 partner renew L on own account.
 HELD: partnership still exist and held on trust BUT  rebuttable
 Deane J: if Fid is Trustee (irrebuttable) but in partner (other Fid type rel)  rebuttable
Phipps v. Boardman [1967] 2 AC 46
 B (solicitor for Trust) and TP (Ben) bought shares in comp to takeover comp in which Trust had
investment. After, success and profit for Trust, TP and B. TP and B had written to other Bens
advising of plan and got consent, except senile Ben. 1 Ben sue account of profits against TP and B
and say shares they bought on Trust for them.
 HELD: 1 Ben win – TP and B got info about good takeover bcos, while being rep of Trust.
 Reason: conflict of interest with personal profit (breach of Fid), info was confidential, failed to
inform/consent from senile Trustee.
 THUS:
o Intention of Fidary is irrelevant – can breach while acting in good faith and no intention to
defraud
o Ben does not need to suffer loss to claim breach – can even claim if profit!
DUTIES OF FIDUCIARY
English Law Commission:
‘(a)the no conflict rule A fiduciary must not place himself in a position where his own interest
conflicts with that of the person on whose behalf the fiduciary is acting(the customer). There must be a
“real sensible possibility of conflict”;
 Example: Phipps v. Boardman [1967] 2 AC 46
(b)the “no profit” rule A fiduciary must not profit from his position at the expense of his customer;
(c)the undivided loyalty rule A fiduciary owes undivided loyalty to his customer and must not place
himself in a position where this duty towards one customer conflicts with his duty to another customer.
A consequence is that the fiduciary must make available to a customer all the information that is
relevant to the customer’s affairs;
 Example: solicitor in a law firm
(d)the duty of confidentiality A fiduciary must use information obtained in confidence from his
customer, for the benefit of the customer and must not use it for his own advantage or for the benefit of
any other person.’1
COMMERCIAL SITUATIONS
News Ltd. v. Australian Rugby Football League Ltd (1996) 139 ALR 193
 ISSUE: club member of league owe fid duty to other member? NO
Keith Henry & Co P/L v. Stuart Walker & Co P/L (1958) 100 CLR 342
 Gen, agent owe fid duty to principal.
1
See paragraph 2.4.9 of Fiduciary Duties and Regulatory Rules A Consultation Paper (The Law Commission England
Consultation Paper No 124).
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
BUT fid duty can be ousted by agency contract. Cts more likely to find ouster in “commercial
agency” agt:
HPI v. USSC (1984) 156 CLR 41 at 149; 55 ALR 417 at 494, per Dawson J: DISTRIBUTOR REL
 FACT: HPI distributor rel with USSC for surgical staples. HPI duty to promote USSC. HPI start
own business and promote itself. USSC argue breach of CL contract and Fid Duty.
 ISSUE: terms of distributor agreement create Fid rel?
o Maj (Gibbs, Wilson, Dawson): NO.
 Commercial arrangement between parties  expect each to act in OWN interest
 Clause that HPI would promote USSC was common clause commercial clause
o Min (Mason): YES – limited fid rel duties
 Some part of agreement NOT fid – but HPI RESPONSIBLE for promoting USSC
 Have to disregard own interests in favour of USSC
o Min (Sir Deane): NO – calculated breach of contract.
 Though no fid rel  would still grant E remedy (HPI unconscionable).
 NOTE:
o E courts reluctant to intrude on commercial dealings where parties are on equal footing.
o If impose fid duty in contractual relationship  must be consistent with contract.
o If commercial rel is that they let parties pursue own interest/personal profit  unlikely to
find fid rel.
o Unlikely to impose fid duty  cause uncertainty/confusion by creating obligations
outside of contract terms
o Should not impose fid rel (just because better remedies) where contract/tort remedies are
already available.
Cf. Elders Pastoral Ltd. V. Bank of New Zealand [1989] 2 NZLR 180 (NZCA)
 FACT: EP (agents) for farmer. Farmer stock Mg from Bank – pay proceeds of stock sales to Bank
(contract). EP take proceeds and apply to farmer’s debt.
 HELD: EP fid for farmer – impose ConT.
o Cf to HPI v USSC – less cautious approach
United Dominions Corporation Ltd v. Brian (1985) 157 CLR 1: JOINT VENTURE
 B and UDC develop SPL’s land. Make financial contribution and buy SPL shares. UDC Mg to SPL
(thus, both shareholder and Mgee) in collateralisation clause (secured money lent AND other monies
owed). B argue UDC breach fid rel (joint venture) by having hold on major real property asset.
 HELD: YES – fid rel.
Australian Securities & Investment Commission v. Citigroup Global Markets Australia Pty Limited
[2007] FCA 963 (28 June 2007):
 Citybank (2 parts) – investment bank and proprietary body. CB act for Toll in takeover. Rumour that
Toll takeover Patricks. Dealer in proprietary body buy shares etc. ASIC claim breach of insider
trading rules and CC had fid duty to Toll.
 HELD: NO fid rel.
o Clause: “CC is retained as an independent contractor and not in any other capacity eg.
fiduciary”
o Commercial relationship and Toll aware that CC involved in proprietary trading.
 NOTE: Court respect contractual rel/clause and reluctant to find fid rel.
COMPANY DIRECTORS
 Directors must:
o Act bona fide in interest of company
o Not make profit outside their proper fees (no profit rule) or put themselves in a conflict of
interest (no conflict of interest rule)
o Act for the purpose given by company and no other collateral purpose
Regal (Hastings) Ltd v. Gulliver [1967] 2 AC 134
 Comp get comp subsidiary. But not enough money to buy shares. Directors buy some in own name.
Comp taken over and director’s shares also bought – directors get personal profit.
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

HELD: breach of fid duty  personal profit EVEN though not fraudulent/intentional
Lord Macmillan at AC 153:
“The point was not whether the directors had a duty to acquire the shares in question for the
company and failed in that duty. They had no such duty. We must take it that they entered into
the transaction lawfully, in good faith and indeed avowedly in the interests of the company.
However, that does not absolve them for accountability for any profit which they made, if it was
by reason and in virtue of their fiduciary office as directors that they entered into the
transaction.”
Industrial Development v. Cooley [1972] 2 All ER 162; [1972] 1 WLR 443
 Comp director neg with local gas board. Tender unsuccessful. Gas want to deal with director
personally, not corp. Director resign and set up own company.
 HELD: breach of fid duty.
“… the question whether or not the benefit would have been obtained but for the breach of
trust has always been treated as irrelevant”; per Roskill J at 173-5.
Peso Silvermines v. Cropper (1966)
 Comp reject mining offer. Directors take up personally.
 SC (Canada) HELD: NO fid rel  had gotten business opportunity as an ordinary member of the
public and NOT by virtue of his position (info from public sources)
Green and Clara P/L v. Bestobell Industries [1982]
 FACT: officer with responsibility in 1 State. Bids in competition against his comp for contract in 2
state.
 HELD: liable, even if obtains opportunity sought by his comp, even if it is OUTSIDE the ambit of
his responsibilities/role.
8. The Scope & Content of fiduciary relationships
 Mere fact of Fid Rel does NOT prohibit Fid from acting in all activities  there is a LIMIT to which
Fid Rel controls Fid’s actions.
News Ltd. V. Australian Rugby Football League Ltd (1996) 139 ALR 193
 Whether or not what the fiduciary does is within the scope of the relevant fiduciary obligation is a
question of fact in each case.
Phipps v. Boardman [1967] 2 AC 46 at 127 per Lord Upjohn
 If Fid get info about particular investment opportunity  can make known to ALL Bens.
 THUS: information is not prohibited.
Hospital Products Ltd v. USSC (1984) 156 CLR 41 at 102 per Mason J.
 Contract and fid rel can co-exist  fid rel accommodate itself to terms of con
 Con may qualify fid rel – eg. fid able to work for its own interest at some points.
Consul Developments v. DPC Estates (1975)
 FACT: sol, clerk and employee do property investment.
 HELD: fid rel (part of employment rel) between law firm and clerk  prevent from doing prop
development.
Clark Boyce v. Mouat [1994] 1 AC 428; [1994] 4 All ER 268.
 FACT: mother and son go to law firm. S debt to 3rd party. M gives Mg to secure S’s debt. Sol act for
S and tell M to get independent legal advice. M did not. M lost Prop and sued Sol.
 ISSUE: Sol tell M financially undesirable to enter into Mg (financial advice)?
 PC HELD: NO – retainer confined Sol to legal advice (not financial)
10. Particular classes of application / categories of fiduciary obligations
(i)
Benefits derived to the exclusion of another – Renewal of leases
Chan v. Zacharia (1984), per Deane J, at CLR 199:
“Stated comprehensively in terms of the liability to account, the principle of equity is that a person who
is under a fiduciary obligation must account to the person to whom the obligation is owed for any
benefit or gain
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(i)
which has been obtained or received in circumstances where a conflict or significant
possibility of conflict existed between his fiduciary duty and his personal interest in the
pursuit or possible receipt of such a benefit or gain or
(ii)
which has been obtained or received by use or by reason of his fiduciary position or of
opportunity or knowledge resulting from it.”
Phipps v. Boardman [1967] 2 AC 46 at 124, per Lord Upjohn
 Possibility of conflict must be “real sensible possibility” to be accountable
(ii)
Fiduciary enters transaction with person to whom he owes the duty
McKenzie v. McDonald [1927]
 P widow sell farm. MD (real estate agent) persuade P to swap farm for house. But farm actually
worth much more.
 HELD: fid rel – P won equitable compensation (not fully informed as to valuations of prop).
 LAW: a fiduciary may not deal with those to whom he owes duty, except in cases of informed
consent
(iii)
Bribe cases
Reading v. R [1949] 2 KB 232; [1949] 2 All ER 68 (Court of Appeal); [1951] AC 507; [1951] 1 All ER
617 (House of Lords)
 R sergeant on security checkpoint. Got bribes to let in trucks with alcohol and contraband.
 HOL: soldier breach of fid duty to Crown  accountable for all profits.
DEFENCE: INFORMED CONSENT
o Fid may act in breach of duty IF  full disclosure and informed voluntary consent from Ben.
o NOTE: Fid must not INDUCE CP to consent  should rec they get independent advice.
1.
Question 1: From WHOM must you get informed consent?
Regal (Hastings) Ltd v. Gulliver [1967] 2 AC 134
 Directors should have held general meeting of company  fully disclose all relevant facts and allow
them to make personal investments.
 Consent must be given by SHAREHOLDERS in general meeting – not from the BOARD.
Queensland Mines v. Hudson (1978) 18 ALR 1
 FACT: Comp director got consent of board BUT participated in board decision himself (did not
absent).
 PC: notwithstanding this:
1. Consent by BOARD was sufficient (no need for shareholders) cf Regal
2. Director could participate in board decision
Consul Developments P/L v. DPC Estates P/L (1975) 132 CLR 373 at 399-400, per Gibbs J.
 Cf with Queensland Mines: Fid should not induce/influence the consent.
2.
Question 2: How much information is “informed”?
o No precise formula for deciding WHAT and HOW MUCH information would be “informed”.
Phipps v. Boardman [1967] 2 AC 46, per Wilberforce: TP/B acted openly, discussed with trustees and
attempted to inform by letter.
 BUT – insufficient disclosure
o Neglected to inform senile Trustee – should have done correct procedure for trustee unable to
represent own interest.
o Letters inadequately detailed  value of assets, info, that they could buy shares themselves
B’s communication did not have any sense of the struggle that the takeover triggered
Maguire v. Makaronis (1997) 188 CLR 449 at 466-7
o Ben need to get independent advice from 3rd party.
ASIC v. Citigroup Global Markets Australia Pty Limited [2007] FCA 963 (28 June 2007):
 Defence: Toll KNEW CC involved in proprietary banking.
 HELD: notwithstanding retainer letter (even if in fid rel)  would have been “consented” to.
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REMEDIES
 Injunction
 Rescission (if fast enough)
o McKenzie v. McDonald [1927] VLR 134: RE agent convince P to sell farm for his cheap
shop/dwelling. Agent then sold to 3rd party.
 HELD: D pay P the difference (loss) – damages.
 Rescission inappropriate – 3rd party interest in farm already
o Armstrong v. Jackson [1917] 2 KB 822
 Prop conveyed through innocent misrep  no rescission allowed.
 NOTE: debatable.
 Account of profits (eg. Boardman v Phipps)
 Constructive trust:
o HPI: Trial/COA: granted CT over whole of HPI busness
 HPI: HC (Mason dissent): account of profits.
 Equitable lien:
o Timber Engineering v. Anderson [1980] 2 NSWLR 488: employee set up separate company
to appropriate profits.
o HELD: imposed E lien over their shares, BUT gave some allowance for work done in
building up the separate companies.
 Equitable debt:
o Lister v. Stubbs (1890): agent took bribes
 Eng COA: no CT but allow equitale debt (quantum of bribes received).
 Disputed case but followed in Daly v. The Sydney Stock Exchange (1986) 160 CLR
371
o Attorney-General of Hong Kong v. Reid [1994] 1 NZLR 1: R employee of HK ASIC. Bribe
from potential Ds in actions. Bought prop in NZ with bribe money.
 HELD: Overturned Lister. Where A receive bribe  impose constructive trust.
 Put caveats on NZ properties and impose CT
 Equitable compensation:
o Nocton v. Lord Ashburton [1919] AC: sol for LA in prop development borrow money. LA
release his security (Mg to 3rd party). N also owe money to this 3rd party – 2nd Mg become
1st. N sue solicitor.
 HELD: liable  E compensation (first case on this).
o Re Dawson (dec’d) (1966)
 Street J: E comp is must simpler than CL damages.
 CL is restitution of loss (foreseeability, remoteness, causation)  irrelevant for EC
 Only need to ask: BUT FOR breach would loss occur? And what is the loss exactly?
o Day v. Mead [1987] 2 NZLR 443: Sol advise client to invest in comp Sol interest in. Client
suffer loss.
 HELD: damages – but reduced!
 Client neglect getting own finan advice.
 Fusion: imported ideas of contributory negligence.
o Duke Group Ltd (in Liq) v. Pilmer (1999) 73 SASR 64
o Pilmer v. Duke Group Ltd (in liq) (2001) 180 ALR 249; 75 ALJR 1067
 PG accounting with KPMG. PG not client anymore. KPMG instructed as forensic
accountants to investigate comp in which PG involved. PG worry info by KPMG (1st
instructions) will be used against him. Defence: KPMG claim separate teams, but
leaky information.
 HELD:
o “severe conceptual difficulties in the path of acceptance of notions of
contributory negligence as applicable to diminish awards of equitable
compensation for breach of fiduciary duty.”
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
o Kirby J: “the attempt to push common law notions of contributory negligence
… into equitable remedies collapses in the face of insurmountable
obstacles.”
o Canson Enterprises v. Boughton (1991): sol for P and subP. SubP not aware of P. SubP
suffer when land subsidence.
 HELD: sol not responsible for subsidence.
 4 judges import ideas of remoteness and mitigation
 4 judges say extreme circ.
Tracing: proprietary relief if Fid’s gain is identifiable (can trace)
o NOTE: useful in bankruptcy/insolvency  prop does not become part of bankruptcy assets
o Chase Manhattan Bank v. Israeli British Bank [1981] Ch 105; [1979] 3 All ER 1025:
 Fid rel between bank and customer.
 DOUBTFUL case – not good authority.
o Sinclair v. Broughham [1914] AC 398: building society in financial difficulty – predators
were depositors and lendors.
 ISSUE: if deposits ultra vires (beyond power)  depositors get nothing?
 HELD: NO – get proportionately
 NOTE: Unclear authority – just because fid rel between depositor and bank?
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