Equity 05, 06 - Fiduciary Obligations
The test of a possible conflict of duty and interest means that a reasonable person looking at the circumstances would think that there was a "real sensible possibility of conflict". Boardman v Phipps (1967)
The "No Conflict" rule
The rule directed against fiduciaries who take some benefit from the relationship with their principal, or pursue profitably some opportunity or knowledge presented to them by virtue of their fiduciary position, where the profit or gain is not something to which they are properly entitled.
The "No Profit" rule
Directors-Company: The beneficiary of the obligation is the ..., not the individual shareholders. - Coleman v Myers [1977]
- Company
HP v USSC (1984)
*F:* - Aus company agent to US company and contracted to sell their products in Aus. - US company's products not patented - Aus company established its own company and was in competition with the US company *H:* - Unanimous - A breach of contract - BUT no fiduciary r'shp
JAC v White City (2010)
*F:* - MOU provided that B would acquire a portion of A's land and sell it to C, in return for an option to purchase part of it. - Cl 3.7 B promised to exercise its option on behalf of A if granted a 99-year lease to D. - Argued that a fiduciary was created by Clause 3.7 of the MOU. - After MOU, three agreements entered between (A, B, C, E & F) giving F to an option to acquire part of the land. - Dispute arose, MOU terminated - F exercised its option to purchase *I:* - A claimed fiduciary B owed a fiduciary duty under Cl 3.7. *H:* 3:2, no fiduciary - Fiduciary duty must conform with the contractual foundations - *Fiduciary duty CANNOT be superimposed on to the contract*
A real estate agent may take on different clients who have conflicting interests, for this is the nature of real estate business. - Case
- Kelly v Cooper [1993]
The Crown does not owe obligations to citizens, even overseas and at risk of torture Habib v Cth (No 2) (2008) c.f. Canada - Toohey J in Mabo v Qld (No 2) (1992)
- May be an area of future development
Scope of fiduciary obligations - Chairperson of a board of directors Vs Ordinary member of the Board Woolworths Ltd v Kelly (1991), Mahoney J at 225
- the chairperson of a board of directors may have wider fiduciary obligations than an ordinary member of the Board.
Relationships where fiduciary obligations have been found, but are not yet recognised as 'nominate' categories
Ad-Hoc
Bailee-Bailor Licensee-Licensor Employee-Employer Stockbroker-Client Banker-Customer Joint Venturers Doctor-Patient Chartered Accountant-Client Crown-Indigenous Peoples
Ad-Hoc examples
A fiduciary relationship involving authority or capacity in one person to create or affect legal relations between another person and third parties
Agent-Principal
EMPLOYEES may owe fiduciary obligations if they are in positions of "trust and confidence" and are given particular powers or discretion, such that the EMPLOYER is in a position of vulnerability if the trust is abused.
Employee-Employer
Brunninghausen v Glavanics (1999)
F: H:
Canadian Aero Service Ltd v O'Malley
F: H:
Southern Real Estate Pty Ltd v Dellow
F: H:
Clay v Clay [2001]
F: H:
Farah v Say-Dee (2007)
F: - A and B purchased #11 in a joint ventureship for redevelopment. A to manage the property - Rejected by council for property being too narrow - Council directly told A that it would be accepted if it were amalgamated with neighbouring properties. - B declined to be involved in purchasing properties. - A purchased #13 and #15 and redeveloped himself H: - Had broken the conflict and profit rule. - Breach of fiduciary duty - BUT the defence of: *fully informed consent.* - B had been given full disclosure and rejected the offer. - Declining was enough to indicate consent
Regal (Hastings) Ltd v Gulliver [1967] [UK] Fiduciary Obligations
F: - Directors of Company A formed subsidiary company. - Intention that Company A owned all shares in subsidiary company. - Directors sought lease for cinemas - Lease only granted if £5000 paid in capital. - Could only pay £2000 in capital and the rest was made up by the investors with that share of the profit going to the directors. - Landlord not prepared H: Directors had to account their profits to Company A
Breen v Williams (1996)
F: - Doctor-patient relationship. - Patient argued doctor had owed a fiduciary duty to give the patient medical records. H: - Fiduciary duties are proscriptive, not prescriptive. - No right to medical records.
Phipps v Boardman [1967]
F: A, a solictor for a trust. A was one of the beneficiaries. Both unhappy with the state of the company. - Jointly acquired shares to take over the company - While acting as a solicitor he became privy to information that enabled A to successfully take over the company. - B, a another beneficiary, sought an account of profits H: - A fiduciary breach
- involving trust, especially with regard to the relationship between a trustee and a beneficiary
Fiduciary relationship
Guardians - appointed by courts or tribunals to care for adults who have become incapable of making decisions for themselves or children.
Guardian - Ward
- relationships such as partnerships and joint ventures - trust and confidence
Horizontal relationships
Partners owe fiduciary duties to each other. - HP v USSC
Partner - Partner
Fiduciary obligations: prescriptive or proscriptive? - Case
Proscriptive. Compel you NOT to do something. Do not compel you to do something. - Breen v Williams (1996)
1. Trustee and Beneficiary 2. Director and Company 3. Solicitor and Client 4. Agent and Principal 5. Partner and Partner 6. Guardian and Ward
The Nominate Categories
The scope of any fiduciary obligation will depend on - the circumstances of the relationship and - the facts of each particular case. - on the terms of engagement or agreement Can be expressly limited by contract
The scope of any fiduciary obligation
- The clearest paradigm of the fiduciary relationship, per HP v USSC, Gibbs CJ at 68
Trustee-Beneficiary
- relationships such as those between principal and agent or employer and employee - voluntary assumption.
Vertical relationships