A fiduciary duty is imposed by the common law to a range of relationship of trust and confidence, including trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners.[1] The person who owes the duty – such as a trustee, agent or solicitor – is referred to as a fiduciary. The primary obligation of a fiduciary is an obligation not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is “a conflict or a real or substantial possibility of a conflict” between personal interests of the fiduciary and those to whom the duty is owed, other than with the informed consent of the other party.[2]
The existence of fiduciary obligations is not confined to established relationships.[3] A fiduciary duty can exist alongside a contractual relationship.[4] The foundation of such a duty arising can include is a relationship of trust and confidence, inequality of bargaining power, one party undertaking to perform a task in the interests of another party, the scope for one party’s unilateral exercise of a discretion to affect the rights or interests of another, and a dependency or vulnerability of one party that causes reliance on another.[5] For fiduciary obligations, vulnerability to wrong-doing and trust are relevant considerations but are not determinative.[6]
The person owed the duty has the right to sue for breach. The measure of compensation in respect of losses sustained by reason of breach of duty by a trustee or other fiduciary is determined by equitable principles and does not necessarily align to damages available in tort or contract.[7] The fiduciary must account for any profits made as a result of breach of duty and restore the beneficiary to the position they would have been in if the duty had been complied with.[8]
[1] Hospital Products Limited v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 96 – 97 Mason J.
[2] Pilmer v Duke Group Limited (In Liquidation) [2001] HCA 31; (2001) 207 CLR 165 per McHugh, Gummow, Hayne and Callinan JJ at [78].
[3] Pilmer n 2 per Kirby J at 217 [136].
[4] Breen v Williams (1996) 186 CLR 71 at 132 per Gummow J; Pilmer (n o.2, per McHugh, Gummow, Hayne and Callinan JJ at 197 [72].
[5] Breen (n o.3, per Gaudron and McHugh JJ at 107.
[6] Pilmer (n 2, per Kirby J at 217 [136]
[7] Bennett v Minister of Community Welfare [1992] HCA 27; (1992) 176 CLR 408 per McHugh J at 426-427; Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449 per Brennan CJ, Gaudron, McHugh and Gummow JJ at 467-475, per Kirby J 488-495; McCann v Switzerland Insurance [2000] HCA 65; (2000) 75 ALJR 325 per Gleeson CJ at 328 [15]-[19], per Hayne J at 348-349 [135]-[141].
[8] Breen. above n. 3, at [93].