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Lecture

1 Fiduciary Duties

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Department
Law
Course
JSB171
Professor
All Professors
Semester
Spring

Description
I Fiduciary Duties (1) Nature = Requirement of proprietary of conduct exceeding tortious duty of care or obligations in contract; A must remain loyal to B. • Often coexist with other duties (contractual, duty of care, etc) • Prohibitive rather than prescriptive: Breen v Williams o No conflict duty—fiduciary cannot place himself in conflict of interests - Duty-interest conflict—between fiduciary duty and own interest - Duty-duty conflict—between fiduciary duty and other duty o No profit duty—fiduciary cannot without consent take advantage of relationship • Except in cases of fully informed consent o Gives rise to a positive duty to disclose relevant circumstances where this defence is claimed - all material of which the fiduciary is aware - all material the fiduciary has deliberately not acquired: BLB Corp v Jacobsen o Onus to prove fully informed on fiduciary: Oranje Inc v Kuys • Mostly only to defend economic or property interests: Breen v Williams • May coincide with contractual duties o NB fiduciary duties imposed; contractual duties agreed: US Surgical Corp v Hospital Products (1) Reasons for seeking to establish breach • Reasons o No action at common law o Opens door to other equitable remedies o Where common law relief excluded (eg limitations) or reduced (eg contributory negligence) • For this reason, courts reluctant to impose fiduciary duty too regularly (2) Duration • Until relationship ceases to satisfy fiduciary requirements o E.g. end of contract: Pilmer v Duke Group • In some cases fiduciary duties will subsist beyond relationship or contract o As may contractual duties (eg restraint of trade) (2) Establishing Fiduciary Duty • Based on characteristics of the relationship • Principle is uncertain and depends on the case: categories not closed (1) Presumed Categories o Rebuttable presumption—not conclusive • Trustee & Beneficiary: Keech v Sandford (original category) • Director & Company: Furs v Tomkies o Business opportunities: Industrial Development Consultants v Cooley (director usurping business opportunity of company) * Except if opportunity rejected: Peso Silver Mines v Cropper (company already resolved not to take opportunity = consent); Qld Mines v Hudson (director develops mines after company decides not feasible = no conflict of interest) o Regal (Hastings) v Gulliver (Directors make profit from shares purchased in subsidiary, since parent company did not have the capital = breach) * Not relevant that actions of directors were bona fide Andrew Trotter LWB240 Principles of Equity * Not relevant that actions of directors aided company to enter transaction to its benefit that it could not have otherwise (although note that decision that it could not have was made also by the directors) o Duty survives resignation where it is linked to desire to get business opportunity: Natural Extracts v Shotter * Alternative action—breach of confidence o Reservations: Strict application not appropriate - Not impermissible per se to be director of competitor: London and Mashonaland Exploration v New Mashonaland * Although cannot exercise powers as director of A for the sake of B or his own sake without A’s consent: R v Byrnes - Economic reality—directors are often shareholders; therefore can act in own interests in this role (voting): Whitlam v ASIS - No fiduciary proscription on directors enforcing loans or guarantees against their company: Lewis v Nortex (lest smaller companies could not get finance) • Lawyer & Client: Tyrell v Bank of London o In particular, cannot represent conflicting clients: Bristol & WBS v May May & Merrimans o Can act against previous clients (subject to keeping confidential information): Prince Jefri v KPMG (no current conflict of interest) * cf some Victorian decisions; may seek injunction (see breach) • Agent & Principal: Phipps v Boardman o Including commission agents (intermediaries rather than true agents with authority of principal, eg real estate agents): McKenzie v McDonald (RE agent misleads vendor as to price and purchases property himself) o Real Estate Agents nonetheless may act for multiple competing vendors— commercial reality: Kelly v Cooper • Partners towards each other: Chan v Zacharia o Can arise prior to partnership agreement—embarked upon venture but no precise terms settled: UDC v Brian o Can survive after dissolution of partnership—until dissolution wound up: Chan v Zacharia (Usurped lease held on constructive trust = breach) o Executors liable after death of offending partner: Birtchnell v Equity Trustees (executors liable for profits made through undisclosed agreement with client by one partner) • Stockbroker & Client: Daly v Sydney Stock Exchange • Guardian & Ward: Plowright v Lambert o But does not extend to duty to take care of safety (attempts to bring noneconomic loss / tort actions under fiduciary=equitable duty): Tusyn v State of Tasmania (sexual abuse) (2) Categories in which Fiduciary Duty may exist • Stockbroker giving investment advice: Daly v Sydney Stock Exchange • Banker to customer in advice or agency o In financial advice: CBA v Smith (induced old client to invest to own bank’s own interests) * No duty absent the role of advisor and legitimate expectation of loyalty: CBA v Finding (otherwise similar to CBA v Smith) • Financial Adviser: Daley v Sydney Stock Exchange (Stock broker held himself out as expert = legitimate expectation); Hodgkinson v Simms (advice to invest in units to defendants own interests, made loss = breach) o Expectations of loyalty determining factor—mere reliance because of expertise not sufficient: State of SA v Peat Marwick Mitchell Andrew Trotter LWB240 Principles of Equity o Reluctant to find breach outside these secret profit cases - Negligent advice = breach of tortious, contractual duties but not fiduciary: Pilmer v Duke (company takeover); Pavan v Ratnam (on tax liability) • Senior employee to employer: Green v Bestobell (company works on 1 stage of construction; employee successfully tenders for 2 stage = breach) - Vesting of confidential information determining factor > senior employee • Joint ventures if akin to partnership: United Dominions Corp v Brian o Test: partnership = joining in common undertaking to produce profit; joint venture = joining to produce profit to be shared amongst parties: UDC v Brian o Held: Akin to partnership: Say-Dee v Farah Constructions - Trust & confidence of one placed in another to act in joint interests - Dependence due to inexperience - Opportunity given to A that makes B entirely dependent on him (in this case, queries to council regarding land development); Hill v Rose (induced to purchase share in business; insolvency not disclosed) - Trust & confidence placed by one in another - Dependence due to greater knowledge o Held: Joint Venture not akin to partnership: LAC Minerals v International Corona Resources - (Canada; Mining case—LAC buys adjacent lot after advice procured in approach for joint venture, mines itself—not vulnerable; approach by LAC & divulgence of confidential information not relevant) - Not vulnerable - Any vulnerability corona placed itself in voluntarily incurred News Ltd v ARFL (superleague defection) - independence of business operations—clubs had own fundraising; had no claim to any part of profits of respondent - agreement showed entitlement to pursue own interests; no obligation to
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