Term
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Definition
Fiduciary = person owing the fiduciary obligations
Principal = person to whom the obligations are owed
'Trustees' are a sub-set of class of fiduciaries
The obligations restrict personal autonomy and are imposed because the fiduciary has the power to make decisions or exercise discretions in a way that affect the interests of the other party. |
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Term
| Obligations are proscriptive |
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Definition
Trustee may prefer their own interest
1. Set out to buy property him/herself
2. Might set out to sell to an associate who is not at arms length
3. Might invest trust property in which he/she has a personal interest or in which associate has a personal interest
4. Place him/herself in a position where he/she is tempted to pursue his/her own interest
Defence for fiduciary: informed consent - recall trustee can act w/o knowledge of beneficiary |
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Term
Nature of Fiduciary Obligations:
1. Concerned with 'loyalty' |
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Definition
Principal entitled to he single minded loyalty of the fidicuiary
Bristol & West Building Society v Mothew
“Breach of fiduciary obligation, therefore connotes disloyalty or infidelity. Mere incompetence is not enough. A servant who loyally does his incompetent best for his master is not unfaithful and is not guilty of a breach of fiduciary duty.’ |
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Term
Nature of Fiduciary Obligations:
2. Obligations are proscriptive |
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Definition
The principal has a right that the fiduciary refrain from pursing its own interests, but fiduciary obligations do not require that the principal be put in any stated end position.
· ‘No-Conflict Rule’ – fiduciary must not put themselves in a position where their self interest conflicts with their duty to the principal.
· ‘No-Profit Rule’- fiduciary must not make a profit for itself by virtue of their fiduciary position.
If the fiduciary pursues their own interests and makes a gain/profit, then equity requires that the fiduciary give up that gain.
Breen v Williams
"Equity imposes on the fiduciary proscriptive obligations… But the law of this country does not otherwise impose positive legal duties on the ficuciary to act in the interests of the person to whom the duty is owed.”
Held:
D held no fiduciary obligations because the obligation the P claimed was a positive and prescripted duty to do something
Note: other CL jurisdictions eg canada and US accept that fiduciary obligations may be prescripted |
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Term
Nature of Fiduciary Obligations:
3. Fiduciary Obligations are Prophylatic (condom-like lolz) |
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Definition
2 categories of fiduciary relationships:
1. Presumed fiduciary relationships:
a. Trustee/beneficiary
b. Agent/principal
c. Solicitor/client
d. Employee/employer
e. Company director/ company
f. Business partners/ co-partners
2. Fiduciary relationship that arises on the facts of the case |
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Term
| 2. Fiduciary relationship that arises on the facts of the case |
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Definition
Hospital Products Ltd v US Surgical Corp
Hallmarks of a fiduciary relationship (mason j):
1. Fiduciary has undertaken or agreed to act on behalf of someone else
a. generally arise in conjunction with some other positive obligation
b. Party reposing trust relies upon the other party to make decisions on his/her behalf on how the matter would be pursued
c. In a sense- it is delegation of control to the fiduciary
2. Fiduciary has a significant discretion to affect the interests of the other party, in a legal or practical sense
3. The power to affect the interests of the principal renders the principal vulnerable to abuse
Facts & Held:
HP given exclusive distribution of USSC manufactured surgical product - contract terms stated;
a. Hospital Products would use its best efforts to promote the sale of the product in Australia
b. Either party could terminate at any time
c. BUT did not include a term requiring any particular quantity to be sold
HP began designing and selling their own version.
Held:
Breach of contract unanimous
(3:2) - no fiduciary relationship:
Large commercial parties of equal bargaining power, Insufficient delegation of control, insufficient liability |
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Term
| Relationship between financial advisor/client |
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Definition
Generally not fiduciary if only advice rather than making decisions/carrying out transactions etc
Pilmer v Duke Group Ltd |
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Term
Identifying fiduciary relationships -
Consider also: |
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Definition
Breen v Williams (Brennan CJ):
· Identify the source of the fid relationship- presumed, or arising by virtue of a relationship of ascendancy or influence by one party over another, or dependence or trust on the part of the other.
Duty does not attach to every aspect of the fiduciary’s conduct-, so it is necessary to identify the subject matter over which the fiduciary obligations extend. Scope depends on the nature of the relationship and facts of the case (citing Hospital Products) |
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Term
| Content of fiduciary obligations |
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Definition
1. The no-profit rule
2. The no-conflict rule |
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Term
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Definition
Test - factual question:
was the profit made by reason of an opportunity, knowledge or information that the fiduciary acquired by reason of their position? - Regal (Hasting) Ltd v Gulliver
Regal (Hasting) Ltd v Gulliver
Held:
Found in favour of D
Lord Russell - must prove:
1. Fiduciary made a profit
2. profit made by reason of an opportunity, knowledge or information that the fiduciary acquired by reason of their position
Boardman v Phipps:
Held:
Breach of no-profit rule as D acquired knowledge and benefit as a result of his fiduciary position |
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Term
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Definition
fiduciary must not put themselves in a position where their personal interests conflicts with their positive duty to the principal (eg argument in Pilmer v Duke Group); potential conflict is sufficient:
Rationale: if the fiduciary has undisclosed private interest in respect of which fid is required to pursue interest of principal, there is a possibility that the fiduciary will be tempted to prefer their own interests to those of the principal.
Q: what is the subject matter/ scope of the positive duties that the fiduciary owes the principal? Q: what is the scope of the fiduciary’s private duties? Is there overlap? |
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Term
2. The No-Conflict Rule
Cases... |
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Definition
Consul Developments P/L v DPC Estates P/L
Test:
'The basis of the rule is that a person in a fiduciary position may not place himself in a situation where his duty and his interest conflict’.
Held:
Breach of no-conflict rule
Boardman v Phipps
Held (Obiter):
Breach of no-conflict rule - possibility Boardman would be called upon by the court to make declaration as to whether the investment was permissible.
Queensland Mines Ltd v Hudson
Adopted Boardman v Phipps 'real sensible possibility of conflict'
Chan v Zacharia
Held (Deane J):
'There needs to be a significant possibility of conflict'
Pilmer v Duke Group Ltd
Held:
No fiduciary duty
'What is required is an actual conflict, or a real or substantial possibility of conflict' |
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Term
| Specific Relationships that are applications of the rules |
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Definition
1. Trustees purchasing the trust property
2. Fiduciaries renewing leases
3. Employees receiving bribes or secret commissions
4. Doctor and patient
5. Real estate agents |
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Term
| 1. Trustees purchasing the trust property |
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Definition
a. The trustee purchases the trust property from the trust (self dealing rule)- trustee is both vendor and purchaser; conflict - trustees duty as a trustee to get the best possible price - personal interest as purchaser is to get the lowest possible price
i. Rule: if the trustee purchases the legal interest in the trust property, the beneficiary can have the sale set aside as a right;
ii. Ex parte James - Lord Eldon- the self dealing rules stands more on the principle than on the circumstances of the individual case. However honest the situation, the general interests of justice requires the purchase to be destroyed in every case.
iii. Wright v Morgan [1926]: Trustees purchased the trust property at public auction - Full value given - Sale could still be set aside by the beneficiaries.
b. The trustee purchases the beneficial interest in the trust property from the beneficiary(ies) (fail dealing rule)
- beneficiary is vendor, and the trustee is purchaser; by virtue of their fiduciary position the trustee could have acquired information that could have placed it at an advantage in negotiating the purchase of the beneficial interest.
i. Rule: The transaction can be set aside UNLESS the trustee can show that they have not taken advantage of their position; onus on the trustee to show that all information they had on the property was laid before the beneficiary, and they paid full value
ii. Coles v Trecothick (1804)- must be no fraud, no concealment, no advantage taken, by the trustee of information acquired by him in the character of trustee |
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Term
| 2. Fiduciaries renewing leases |
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Definition
- If you have a trustee/ fid who holds an interest as a lessee in a fid capacity, and that trustee renews the lease in his or their own name, there is a presumption that the renewal of the lease is in breach of fid obligation: per Gibbs in Chan v Zacharia
a. Keech v Sandford (1726): HELD:
trustee held the lease on constructive trust for the beneficiary, and had to account for all profits.
i. Application of no profit rule- Lord King LC: “This may seem hard, that the trustee is the only person of mankind who might not have the lease: but it is very proper that the rule should be strictly pursued, and not in the lease relaxed…”
b. Chan v Zacharia (1984): 2 Docs, P and D, were partners in a medical practice - 2 partners fell out - dissolve their partnership - lease the premises to Dr chan in his own name. Dr Zacharia brought proceeding for breach of fiduciary duty.
HELD per Gibbs:
if you have a trustee/fid who holds interest as a lessee in a fid capacity, and that trustee renews the lease in his or their own name, there is a presumption that the renewal of the lease is in breach of fid obligation.
HCA considered that partner’s fiduciary obligations extended to when all the affairs of the partnership had been wound up. Chan in breach, and held lease on constructive trust.
If there is evidence that the fiduciary obtains the lease by some other means than by virtue of their fid capacity, then the presumption can be rebutted. |
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Term
| 3. Employees received bribes or secret commissions |
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Definition
- Where the employee receives an amount of money to induce the employee into acting in a particular manner, there are effectively deflected from their duties to the employer to act in their best interests.
- Straight forward application of the no conflict rule
Lister v Stubbs
Facts & Held:
D placed substantial orders with Barley and coy, and D received substantial commissions for introducing the business. Duty breached. Remedy?
HELD by CoA- money that D received was NOT held on constructive trust. Ps were restricted to a personal remedy of account of profits. Imposing a constructive trust would have been to confound ownership and obligation. It would be disturbing the principles of insolvency law to impose a constructive trust because P would have received priority over other unsecured creditors.
Attorney- General for HK v Reid [1994]: D HK acting director of public prosecutions received bribes of 1.2million HK$. D used money to buy property in NZ.
i. Per Privy Council: properties were held on constructive trust. Lord Templeman held that a false fiduciary, who receives the bribe in breach of duty, must pay an account. That duty applies as soon as the bribe is received. Equity considers done as ought to be done. Thus as soon as the bribe is received, the false fiduciary held the bribe on constructive trust for the person injured. So… the moment the bribe was received, the money was held on constructive trust.
ii. Per Templeman- this is the only remedy that will ensure that the fiduciary gives up the full benefit they received.
iii. Artificial reasoning? Transformative remedy. It created a proprietary interest where there was none.
iv. Not binding in England or Aus b/c it is a decision of the Privy Council. Does not override Lister.
Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd
Breach of fiduciary duty case. Lord Neuberger MR declined to follow Reid as it ‘might be unsound’. A distinction was drawn between cases where: (i) a fiduciary enriches himself by depriving a claimant of an asset where there was a positive duty to get the asset for the claimant; and (ii) a fiduciary enriches himself by doing a wrong to the claimant against a negative duty. A constructive trust may be appropriate in category (i) as there was a purpose to acquire a particular asset. But in (ii), as here, the P’s claim was a personal one in equity: a claim to the proceeds of the sale of the shares. An account of profits was appropriate, not a proprietary claim.
Grimaldi v Chameleon Mining NL the Federal Court of Australia described the reasoning of Sinclair as ‘unconvincing’. Bribes are a category where the deterrent effect of a constructive trust was perhaps required. They differentiated their reasoning from Reid (constructive trust arises the moment there is a breach) and held that in Australia, a constructive trust is a discretionary remedy. However, they gave little concrete guidance as to actually when it will be granted: it depends upon practical justice and third party issues. |
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Term
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Definition
- Doctor/patient relationship may give rise to a fiduciary relationship.
Breen v Williams
Held HCA:
Doc/patient was a relationship that could give rise to a fiduciary relationship. There is also a contractual relationship, and CL duties to advise and treat the patient with reasonable skill and care.
Re fiduciary duty:
Brennan CJ: Dr W owed no fiduciary duty because the obligation that Mrs B contended was a positive and prescripted duty to do something for the patient (to have a right to access their medical records) it would go against the nature of fiduciary obligations, which are proscriptive in Australia
Duty must precede the breach. Argument rejected that there was a conflict b/w Dr W’s desire to prevent legal liability, and to act in the best interests of the patient. |
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Term
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Definition
Real estate agent may be a fiduciary, however the scope of the fiduciary obligations will be constrained by the express and implied terms of the contract of agency.
Kelly v Cooper (Privy Council)
P (Kelly) instructed the D estate agents to sell high value house for a 5% commission. D selling the adjacent house. D showed both houses to a prospective purchaser, who purchased the neighbouring house. Purchaser then offered to buy the P’s house- P accepted. P refused to pay commission and sued for damages for breach of no conflict rule.
i. Argument: Real estate agent had a vested interest in selling both properties, because they would get the commission from this. This conflicted with the estate agent’s duty to get the highest possible price, because they would have been pushing for a sale, rather than the best sale.
ii. @ Trial: D acted in breach of fiduciary duties- fact that purchaser were interested in both properties was material, and D, as agent, was under a duty to disclose. Found there was a conflict- damages + commission not payable.
iii. CoA: Allowed D’s appeal and awarded commission. The 2 sales were not legally interdependent, and no evidence that Perots (the purchasers) had a special interest in buying 2 adjoining properties.
iv. Privy Council: CoA incorrect in so far as there was evidence that Perots had a special interest in the adjoining properties for family purposes. Fiduciary obligations often arise out of contractual relationships, and you cannot have fiduciary obligations superimposed on those contractual obligations that would be inconsistent with the contractual obligations. Privy council said when a vendor enters into a contract with the estate agent, the vendor knows that:
1. the estate agent will be acting for other people,
2. the agent is going to obtain information in the course of dealing with other people, which the agent will not be able to disclose, and
3. the agent will be aiming to earn commission.
NB The court seemed to assume that a fiduciary relationship arose. No special discussion. However, applying the Hospital Products hallmarks:
a. agent has undertaken to act in the interest of the vendor
b. the agent has a power to act in a way that affect the vendor in a legal or practical sense as a vendor relies on the real estate agent who controls the flow of information.
C. This renders party 1 to potential loss |
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Term
| Defence of Informed Consent |
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Definition
- This is a defence to breach of fiduciary obligations. There must be full and informed consent. The fiduciary must disclose either the full extent of the personal interest, or the profit, to the principal.
Boardman v Phipps
Held:
On the facts, the trial judge found that no valid consent had been given, because one of the three trustees was suffering from dementia, and therefore lack legal capacity. Trial judge also found that B had not disclosed sufficient information to the beneficiaries for them to have given informed consent.
Pilmer v Duke Group Ltd
Kirby J, in dissent held:
there was a breach of fiduciary duty. This was not a case of informed consent. Such consent required full and frank disclosure of all the material facts, and all relevant information that is required for the beneficiary to make an informed decision. On the facts, no sufficient disclosure had been made, nor was there consent from either the shareholders of the directors.
QLD Mines Ltd v Hudson
Held:
Mr H had used the resources and good name of the coy to secure the licences- breach of the no profit rule. However, the fully informed consent of QLD Mines meant that Mr H was not liable for breach. |
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Term
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Definition
- Account of profits is the normal remedy for breach of fiduciary duty. Disgorgement remedy. Unwinds the improper conduct.
- Constructive trust may be available in certain situations BUT highly contentious. It is available in the case of fiduciaries renewing leases.
- Principal will be able to obtain a remedy irrespective of loss, or whether they have, in fact, benefitted. Eg Regal Hastings
- Principal has a right to elect between an account of profits and equitable compensation, and the election will bind the plaintiff: Warman International Ltd v Dwyer (1995)
A. Compensation
B. Account of Profits
C. Exemplary Damages |
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Term
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Definition
McKenzie v McDonald
Court asked the Q: what would the P’s position have been if the transaction had not gone ahead? The evidence was if the P had attempted to sell the property, she would not have been able to obtain the price of 4pounds 10 shillings- only the D was able to negotiate this price. If P had sold the property, she would only have been able to sell it at 4pounds 5 shillings/acre. She would have been able to sell it for 2,445 pounds. The court deducted 1,850 pounds, which is what the P had received, and this left you with the figure of 595 pounds.
Brickenden v London Loan and Savings Co
Mr B had acted in breach of fiduciary duty because he did have a personal interest in that transaction that he had not disclosed, and had taken positive steps to conceal. Mr B argued that the transaction would have gone ahead even if he had disclosed his personal interest. Argument rejected. When a party holding a fiduciary relationship commits a breach of fiduciary duty by non disclosure of material facts, which the principal is entitled to know, he cannot argue that the principal would no have been swayed by that information.
Maguire v Makaronis
- unnecessary to decide if the principal in Brickenden was good law- left the matter open.
Kirby J: it is often said that the principal laid down in Brickenden dispenses with the need for causation. Kirby did not think that was correct.
the dictum in Brickenden contains within their formation includes some element of causation. The non-disclosure must be material. Brickenden has the advantage of simplicity and the prophylactic benefit of discouraging fiduciary default. So.. must be causation, but the losses do not need to be reasonably foreseeable. |
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Term
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Definition
the fiduciary must disgorge profits arising from his disloyalty, but a discount will be made in favour of the fiduciary where the profits have been enhanced because of the fiduciary’s own input, whether in money or time, effort and skill (Boardman v Phipps)
Boardman v Phipps
The D may not be required to disgorge the full amount of the profit. Mr B put a huge amount of work in, and increased the profits made by the company. Mr B was entitled to an allowance of ‘on a liberal scale’ to represent his work and skill that had contributed substantially to the making of the profit. Emphasis was placed on the fact that Mr B had acted honestly and in the best interests of the trust. Suggestion was that if he had not acted with complete honestly, he may not have been provided this allowance for work and skill.
Warman International Ltd v Dwyer
HCA: in the case of a business, it may be inappropriate and inequitable to compel the errant fiduciary to account for the whole profit of his conduct of the business of his exploitation of the principal’s goodwill over an indefinite period of time. (D left P's coy to start coy and deal with Italian company which P declined) Mr D was entitled to an allowance for the part of the profit that was a consequence of his skill, efforts, property, resources, and risks taken. The onus is on the fiduciary to establish that it would be inequitable to order an account of the entire profits + to establish what extent is profit from own skill, efforts, property and resources.
Whether it is appropriate to make an allowance is a matter of judgment that will depend on the facts of the case. However, as a general rule, in conformity with the principle that a fiduciary must not profit from a breach of fiduciary duty, a court will not apportion profits in the absence of an antecedent arrangement for profit-sharing but will make an allowance for skill, expertise and other expense. |
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Term
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Definition
aka punitive damages
The object of punitive damages is to punish and deter.
Argument for: There are some cases at CL where one can obtain exemplary damages- punish- make an example of D.
· Eg where the D acted in a high-handed way, or with contumelious disregard for the rights of the P- perhaps most common in defamation cases. Not available for breach of contract.
· Why can’t we do the same in equity for deliberate, serious breaches?
· Fusion by analogy argument.
Arguments against: Private law should not be concerned w/ punishment or deterrence- that is the realm of criminal law. Exemplary damages is a historical anomaly.
Harris v Digital Pulse Pty Ltd
On appeal, Spiegelman CJ and Heydon J- it was not necessary or desirable to decide that you could never get punitive monetary awards in equity. What is crucial is how the fiduciary obligation had arisen. The fiduciary obligation, here, had arisen by virtue of a contractual relationship, therefore the relevant analogy here is with the law of contract. No punitive damages, as allowing punitive damages would be inconsistent with this position. HOWEVER, if you had a fiduciary obligation that did not arise from a contractual relationship, it would be possible to make an award of punitive/exemplary damages. |
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Term
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Definition
Barnes v Addy
Per Lord Selbourne: “Strangers are not to made constructive trustees… unless those agents receive and become changeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.”
· NB: accountable as a constructive trustee, means that the 3rd party can be made liable as if they were a trustee or fiduciary
Selangor United Rubber estates v Craddock
'The ct of equity says that the D should be liable in equity, as though he were a trustee. He is made liable in equity as trustee by the imposition or construction of the court of equity. This is done because in accordance w/ equitable principles applied by the court of equity it is equitable that he should be held liable as though he was a trustee.’
2 limbs per Barnes v Addy
1. Knowing assistance
2. Knowing receipt |
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Term
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Definition
a. Breach of trust or fiduciary duty
b. Which is dishonest or fraudulent
c. The 3rd party assisted in the breach of trust or fiduciary duty
d. With the requisite degree of knowledge (eng law moved to dishonesty Aus remained with knowledge) |
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Term
| a. Breach of trust or fiduciary duty |
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Definition
Consul Development v DPC Estates
HELD: breach of fiduciary duty. Also, where Consul Developments liable for knowingly assisting in Mr G’s breach of fiduciary duty? HCA held that where there is a knowing breach of fiduciary duty, the third party can be held liable. |
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Term
| b. Which is dishonest and fraudulent (dishonesty or fraud) |
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Definition
In England: no requirement to establish that the trustee or other fiduciary acted fraudulently or dishonestly: Lord Nicholls said there was a line of cases prior to Barnes v Addy where 3rd parties were held liable regardless of any dishonestly on the party of the trustee.
In Australia: Say-Dee Pty Ltd v Farah Constructions Pty Ltd
HCA rejected a submission that in Australian law that the dishonest and fraudulent design requirement had been superseded. Any breach of fiduciary duty relied upon must be dishonest or fraudulent. |
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Term
| c. The 3rd party assisted in the breach of trust or fiduciary duty (assistance) |
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Definition
i. Assistance= any type of participation in that breach of trust or fiduciary duty. Could include procuring the breach, encouraging the breach, performing acts that enable the trustee to commit that breach.
ii. Royal Airlines v Tan- Relevant breach was that the company had misapplied the trust monies. Companies can only act through it’s directors and employees. Mr T was managing director who had caused the money to be used by the ordinary business purposes of the company. Therefore, Mr T had assisted in the company’s breach of trust. |
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Term
| d. With the requisite degree of knowledge (English law has moved to a test of dishonesty, but Aus law still uses test of knowledge) |
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Definition
i. 5 categories of knowledge from Baden’s case
1. actual knowledge
2. willfully shutting ones eyes to the obvious
3. willfully and recklessly failing to make such inquires as an honest and reasonable man would make
4. Knowledge of circumstances which would indicate the facts to an honest and reasonable man
5. Knowledge of circumstances which would put an honest and reasonable man on inquiry (constructive notice)
ii. Consul Development v DPC Estates: the Q of knowing assistance hinged on whether Consul Developments (Mr Clowes) had sufficient knowledge/suspicions of Mr G’s breach of duty. Majority HCA:
1. Actual knowledge not required
2. Constructive notice (ie knowledge of circumstances which would put an honest and reasonable man on inquiry) not enough
3. Gibbs J @ 398- it may be going to far to say that a stranger will be liable if the circumstances would have put an honest and reasonable man on inquiry, where the stranger’s failure to inquire is innocent, and he has not willfully shut his eyes to the obvious. Actual knowledge not necessary either.
4. Findings of Fact of Trial Judge: Mr G had told Mr C that Mr W was in financial difficulties and was not in a position to make an adequate offer. Mr G was Mr W’s article clerk and knew that Mr W was in financial difficulties. It was understandable that Mr C was not suspicious. Mr C did not even have constructive notice of Mr G’s breach of duty.
iii. Say-Dee- helpful obiter- HCA said the effect of Consul Development was that categories 1-4 from Baden’s Case, but category 5 was not. |
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Term
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Definition
there is a personal claim against a 3rd party who has received trust property, or the traceable proceeds of trust property.
Requirements set out in El Ajou v Dollar Land Holdings by Hoffmann LJ:
a. Disposal of assets by a trustee or other fiduciary in breach of [trust or] fiduciary duty (Aus cts also assume that it applies to both breaches of trust or fiduciary duty: Say Dee)
b. Beneficial receipt by the 3rd party of the assets or the traceable proceeds of the sale for its own benefit (and not as the agent for someone else)
- Doneley v Doneley
Per QSC: Relevant Q was whether the 3rd party was a direct beneficiary of the breach through have received property, identifiable with trust property, that was the subject of the breach.
· Normally a bank will be acting as agent of another, so would not be liable for knowing receipt of trust property
c. 3rd party must have the requisite degree of knowledge -
· Suggestions in the case law that even constructive knowledge would suffice for knowing receipt- OLD view.
· Grimaldi v Chameleon Mining NL
Full FCA recognized that the orthodox view was there had been a different in the test of knowledge in knowing receipt and knowing assistance. Since the 1990’s, the weight of authority has shifted toward viewing the knowledge requirement as being the same for the purposes of knowing receipt and knowing assistance. |
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Term
| Equitable Duty of confidence |
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Definition
- NB: often overlap w/ contractual provision and statute
- Applies where one party has provided information, where the nature of the information is confidential/secret, or the circumstances indicate that it was intended to be confidential, to another for a particular purpose; law imposes an obligation of confidence on the person to whom the information is imparted; not limited to fiduciaries; duty applies so long as the info remains relatively private
- Often overlap b/w situations where fiduciary obligations arise, and where there will be a duty of confidence
1. Where the nature of the information is confidential:
2. Would the circumstances of the communication lead a reasonable person to believe that the information was being imparted for a particular purpose only? Objective Test |
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Term
| 1. Where the nature of the information is confidential: |
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Definition
- eg Non patented research development
- Needs to be more than idea- must be sufficiently detailed and developed that it would provide the other person with a springboard to do something.
Ansel rubber Co v Alfred Rubber Industries
some of the information was well known. People knew Ansel had developed a machine, and a certain amount of information could be gained by watching it in operation. The information that was publically available would not have been sufficient to replicate the machine. The information that the former employees had obtained as employees was sufficiently detailed and developed, and provided them with a springboard to replicate the machine. Breach of confidence. |
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Term
| 2. Would the circumstances of the communication lead a reasonable person to believe that the information was being imparted for a particular purpose only? Objective Test. |
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Definition
| Seager v Copydex Ltd [1967]: P was an inventor and had invented a carpet grip. P did not want to market the invention himself. P approached D and negotiated about entering into an agreement whereby they would manufacture this carpet grip for him. P had to disclose details of the invention for the purposes of negotiations. D then began to create their own market grip, that incorporated several features of the P’s product. Lord Denning said the information had been disclosed for the purposes of those negotiations, and nothing more than those purposes. The D should have realized they could not use that information for any other purpose. |
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Term
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Definition
- It will be a defence to the claim for breach of confidence if the disposal of information was in the public interest.
- Distinction is made between the type of information at issue. Easier to raise with govt info, than with private or commercial info.
AG (UK) v Heineman Publishers Aus Pty Lt
Majority of the NSWCA- govt information is info that is capable of being protected by a duty of confidence. There is a distinction between info that is imparted in private relationship, and info in the hands of govt that would require a different approach.
· McHugh J at 191- D in a private case would have to show that disclosure was in the public benefit to avoid liability; Where there is a case of govt info, the P would, in order to bring the claim, have to show that it is in the public interest to treat the information as confidential.
· HELD: the relevant public interest here is the public interest of England. McHugh stressed that the court should not be making a decision of public interest in a different country. Majority refused to say the public interest favoured keeping the information confidential.
Lion Laboratories v Evans
Commercial information. Lion manufactured a breathaliser devise that had been approved for police use. 2 former employees of Lion Laboratories internal correspondence that suggested that the breataliser may be unreliable and inaccurate. English CoA concluded that the public interest defence was available. This commercial information related to a broader public interest- the proper enforcement of the law and no one should be wrongly convicted of a serious offence.
Francombe v Mirror Newspapers
D had illegally tapped phone conversation showing that the P had breached certain provisions of jockey club regulations and committed criminal offences. P sought an injunction to prevent D from publishing. HELD (CA): There was a public interest aspect, but publishing the information in a newspaper was not the only way in which the public interest could be served. The public interest was seeing criminal prosecuted for their crimes, so the tapes could be given to the police, or the jockey club. Ds were liable for breach of confidence. |
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Term
| Remedies for Breach of Confidence |
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Definition
- Disgorgement
- Equitable compensation + injunction to prevent future harm |
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Term
| Trustees Duty to Provide Information |
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Definition
- interacts with the equitable duty of confidence
- Certain types of information are required to be disclosed to the beneficiaries:
(Re Londonsderry’s Settlement)
1. The trust instrument
2. Financial Records of administration of the trust
(Reason: in a sense, this is trust property; outlines entitlements of beneficiaries, and how the trust property is being managed)
· Documents that the trustees create for the purposes of administering the trust do not need to be disclosed to the beneficiary b/c trustees should be able to exercise their powers without constant interference from beneficiaries.
Hartigan Nominees Pty Ltd v Rydge
discretionary trust. Evidence showed that the trustees had in some instances refrained from making a distribution because the Memorandum didn’t provide for the distribution. Held that even if the trustees did not have a legal duty to follow the wishes in the memorandum, it was having a practical effect on the way the trustees were administering the trust. Potential beneficiaries wanted to get access to the memorandum of wishes. Majority of NSWCA said that the beneficiaries were not entitled to access the memorandum of wishes
o Marney and sheller JJ: doc does not become a trust document because it is prepared by the settlor for the administration of the trust (eg minutes of meetings and correspondence with the settlor). These are trustees documents. While the memorandum was not a document that the trustees had created, it was a document that they were bound to keep confidential. The very fact that the settlor had created a separate document, that suggested that what he wanted was that his wishes should remain confidential. Settlor intended that the beneficiaries could make decisions on distributions without unnecessary abrasion. Trustees under a duty of confidence with respect to that memorandum of wishes. |
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Term
| Note: review of Trusts Act |
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Definition
| currently being undertaken. The interim report para 6.257- preliminary view- they are proposing a statutory duty of disclosure. Commission goes on to say that the introduction of that statutory duty is not intended to change the law, but merely given guidance |
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