Volume 8 | Issue 2 Article 3

12-1-1996

Comparing Apples and Oranges: The Fiduciary Principle in Australia and Canada after Breen v Williams

Shaunnagh Dorsett

Recommended Citation

Dorsett, Shaunnagh (1996) "Comparing Apples and Oranges: The Fiduciary Principle in Australia and Canada after Breen v

Williams," Bond Law Review: Vol. 8: Iss. 2, Article 3.

Available at: http://epublications.bond.edu.au/blr/vol8/iss2/3

[extract] Until the recent High Court decision in Breen v Williams, it has been difficult to determine the

extent of the schism (division) between the two Jurisdictions. That decision has, however, confirmed that the High

Court is unwilling to follow the Canadian approach to the fiduciary principle, and that a clear divergence will

continue between the two Jurisdictions.

This article will consider the pro-active approach of the Supreme Court of Canada to the imposition of

fiduciary duties, and to the remedies available for breach of fiduciary duty, and contrast this with the more

traditional approach towards the fiduciary principle in Australia, as exemplified by the High Court's decision

in Breen v Williams.

fiduciary principle, Australia, Canada, Breen v Williams, unconscionability

My thanks to Professor John Dewar and Ms Sharon Erbacher for reading drafts of this article. Responsibility for all errors remains, of course, that of the author.

COMPARING APPLES AND ORANGES:

THE FIDUCIARY PRINCIPLE IN AUSTRALIA AND CANADA AFTER BREEN V WILLIAMS

By

Shaunnagh Dorsett*

School of Law

Griffith University

Gold Coast

Recent years have seen an increasing schism between Australian and

Canadian courts as to the fiduciary principle. In Canada, the principle has

dramatically expanded, and has been used by the courts as a means of

allocating liability in areas traditionally considered the province of tort and

and the courts have increasingly utilised the doctrine of unconscionability,

course, both the fiduciary principle and the doctrine of unconscionability

simply offer differing standards of protective liability. In Professor Finn's

regulates unconscionable behaviour. Until the recent High Court decision in

between the two Jurisdictions. That decision has, however, confirmed that

the High Court is unwilling to follow the Canadian approach to the fiduciary

principle, and that a clear divergence will continue between the two

Jurisdictions.

This article will consider the pro-active approach of the Supreme 

Court of Canada to the imposition of fiduciary duties, and to the remedies

available for breach of fiduciary duty, and contrast this with the more

traditional approach towards the fiduciary principle in Australia, as

exemplified by the High Court's decision in Breen v Williams. Part Two

considers the conceptual foundations of the fiduciary principle, and

determines that in both Australia and Canada, loyalty is still considered the

basis of fiduciary duties. In light of this, Part Three examines recent case law

in Canada, and the elevation of the fiduciary principle to a source of positive

rights. It is concluded that the Court's formulation of "guidelines" for

identifying fiduciaries, coupled with an emphasis on vulnerability as a key

indicia of fiduciary duties, has contributed to the broadening of the

principle. There is also a brief discussion of the part played in this process

by remedies. Finally, Part Four is principally concerned with the decision in

Breen v Williams, but also considers other causes of action which have

been used in Australia in place of an expanded fiduciary principle.

It is clear that there exist a core number of relationships which are

indisputably fiduciary in nature. The archetype of these is, of course,

trustee and beneficiary. To that relationship can be added the following:

guardians and wards; agents and principals; lawyers to clients; executors to

legatees; partners; directors and companies; master and servant; trustees in

bankruptcy; and liquidators. The courts have stated on numerous

occasions that the categories of fiduciary relationships are not closed. The

addition of new relationships to this category, however, remains

problematic. Recent decisions of the Supreme Court of Canada have seen a

number of new relationships deemed fiduciary. In that jurisdiction at least,

fiduciary. In Australia, by comparison, the parent/child relationship, as well

as that of doctor/client would be considered to have fiduciary aspects, but

generally are seen as relationships where a presumption of undue influence

or as cases where the relationship between the parties is properly regulated

by tort law. In the United States, several additional relationships belong to

In Australia the fiduciary principle can still be seen as a proscriptive (narrow-minded)

connotation of positive duties on the part of the fiduciary to the

activated when a fiduciary seeks improperly to advance his interests in or as

the full range of equitable rules that are associated with that position.

The close relationship between the term "fiduciary" and the concept

of loyalty has been recognised by a number of commentators. Shepherd

notes that "the duty of loyalty is, of course, the essence of the fiduciary

... the process of finding the existence of a fiduciary relationship is the

process of finding the existence of a duty of loyalty owed by one person to

another.17

It appears, in fact, to be still widely accepted in both jurisdictions that

the duty of loyalty is fundamental to any relationship which is categorised

... while both negligent misrepresentation and breach of fiduciary duty arise

in reliance-based relationships, the presence of loyalty, trust and confidence

distinguishes the fiduciary relationship from a relationship that simply gives

rise to tortious liability. Thus, while a fiduciary obligation carries with it a

duty of skill and competence, the special elements of trust, loyalty, and

confidentiality that obtain in a fiduciary relationship give rise to a

corresponding duty of loyalty.18

His Honour later adds that:

10 Hammonds v Aetna Casualty & Sur. Co ., 237 F.Supp 96 (1965); Lockett v Goodill, 71 Wash 2d

654 (1967).

11 MacDonald v Clinger, 446 NYS 2d 801 (1982) held that physicians are fiduciaries with respect to

confidential information.

12 Hines v Anchor Motor Freight Inc, 424 US 554 (1976) held that the a union as statutory

representative of the employees is subject always to complete good faith and honesty of purpose in

the exercise of its discretion (at 564).

13 Finn, PD, 'The Fiduciary Principle', above n 3 at 25. Breen v Williams, above n 4 at 20.

14 Ibid at 28.

15 Ibid at 25.

16 Shepherd, JC, The Law of Fiduciaries, Carswell (1981) at 48.

17 Ibid.

18 Hodgkinson, above n1 at 173.

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[t]he concepts of unequal bargaining power and undue influence are also

often linked to discussions of the fiduciary principle. ... Indeed, all three

equitable doctrines are designed to protect vulnerable parties in transactions

with others. However, undue influence focuses on the sufficiency of consent

and unconscionability looks to the reasonableness of a given transaction, the

fiduciary principle monitors the abuse of a loyalty reposed.19

The fact that the notion of loyalty is central to the fiduciary principle

is reflected in the rules to which equity subjects one who is classed a

fiduciary. The main proscriptions that a fiduciary faces are those against

fiduciaries to avoid situations in which there may be conflict between

interest and duty. The strictness of the rule is reflected in the fact both

actual conflict, as well as a significant possibility of conflict, must be

avoided. Despite some indications that courts may now apply these rules

more flexibly, it is still true to say that the honesty of the fiduciary in any

account to the principal for any benefit or gain obtained or received in

circumstances where there existed that conflict of personal interest, or

significant possibility of such conflict with the duty or loyalty she or he has

It is an inflexible rule of a Court of Equity that a person in a fiduciary

position ... is not, unless otherwise expressly provided, entitled to make a

profit; he is not allowed to put himself in a position where his interest and

duty conflict. It does not appear to me that this rule is, as has been said,

founded upon principles of morality. I regard it rather as based on the

consideration that, human nature being what it is, there is danger, in such

circumstances, of the person holding a fiduciary position being swayed by

interest rather than by duty, and thus prejudicing those whom he was bound

to protect.24

Thus, the fiduciary acts in the interests of the beneficiary. In fact, the

distinguishing characteristic of the fiduciary relationship is the loyal

securing of the beneficiary's interests above those of the fiduciary; hence

the fact that the serious possibility of conflict is sufficient to found a breach

of fiduciary duty. The fiduciary's purpose in that relationship is to secure

the interests of the beneficiary above his own (or their joint interests in the

case of a partnership). Finn suggests that it is in these rules that the true

nature of the fiduciary is revealed:

19 Ibid at 173-4.

20 Evans, M, Outline of Equity and Trusts, Butterworths (1988) at 86.

21 See Youdan, TG, 'The Fiduciary Principle: The Applicability of Proprietary Remedies', in Youdan,

TG (ed), above n 3 at 94.

23 Bray v Ford [1896] AC 44.

24 Ibid at 51-2.

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[the fiduciary principle] has been used, and is demonstrably used, to

maintain the integrity, credibility and utility of those relationships perceived

to be of importance in a society. And it is used to protect interests, both

personal and economic, which a society is perceived to deem valuable.25

It originates, self-evidently, in public policy: in a view of desired social

behaviour for the end this achieves. To maintain the integrity and utility of

those relationships in which the (or a) role of one party is perceived to be

the service and interests of the other, it insists upon a fine loyalty in that

service.26

These words are echoed by Mason CJ (as he then was) in a recent

article. Mason comments that the Court's use of the fiduciary principle is in

response to standards expected by the community in certain relationships:

The absence of clear definition has enabled the courts to classify as

fiduciaries persons who would not have been so regarded at an earlier time.

The reason why the classification has been more extensive is that the courts,

reflecting higher community standards or values, perceive in a wide variety

of relationships that one party has a legitimate expectation that the other

party will act in the interest of the first party or at least in the joint interests

of the parties and not solely self-interestedly.27

The distinguishing feature of loyalty can be discerned in those

relationships which it was noted above form the "core" of those

relationships considered fiduciary by nature. By placing the interests of the

beneficiary above those of the fiduciary, the loyalty of the fiduciary is

ensured. As Finn states:

[i]f no issue of disloyalty is involved, such matters will be actionable through

those primary bodies of law which constitute or govern the ordinary

incidents of the relationship in question - negligence, breach of contract, or

breach of trust.28

There is no doubt, therefore, that both in Canada and in Australia

loyalty, and its associated notions of trust and confidence, are still the

foundations of the fiduciary principle. Yet despite these common

foundations, the contours of the principle now appear markedly different in

each jurisdiction. This begs the question of how and why the Courts in

each jurisdiction diverged.

25 Above n 3 at 26.

26 Ibid at 27.

27 Mason, AF, 'The Place of Equity and Contemporary Equitable Remedies in the Common Law

World', (1994) 110 LQR 239 at 246.

28 Above n 3 at 28.

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In Canada, the last decade has seen the increasing prominence of the

fiduciary principle as a primary means for ascertaining liability in nontraditional

areas, or areas traditionally the province of tort law. The 1984

the Crown was under a fiduciary duty to First Nations Peoples with regard to

the use made of Indian reserves after surrender, is one obvious example of

this. In addition, however, in several recent cases there has been a

"recognition" by the courts that fiduciaries can be split up into different

categories. These were outlined by La Forest J in the Supreme Court

Honour suggested that confusion has arisen in the fiduciary area primarily

due to the use of the term in differing circumstances. He stated that there

According to La Forest J, the first category of use concerns those

relationships in which, by reason of their inherent purpose or presumed

factual or legal incidents, there will be a presumption of a fiduciary

as fiduciary: for example, trustee and beneficiary; principal and agent; and

director and company.

The second category concerns fiduciary obligations which arise out

of the specific circumstances of a relationship. In this case there is no legal

relationship in existence which is deemed by the court presumptively to give

rise to fiduciary obligations. Rather, the specific facts of a case, and the

conduct of one or other of the parties, will cause a fiduciary obligation to

arise even though the relationship is one which would not normally be

expected to give rise to fiduciary obligations. The existence of this

obligation is a question of fact to be determined from an examination of the

with this category there is no presumptively fiduciary relationship. Rather,

the court may find that some aspects of a relationship are fiduciary in nature

because of the particular facts at hand. This category is clearly closer to the

Australian approach to the fiduciary principle outline in Part III. In LAC

29 Guerin v R (1984), 13 DLR (4th) 321 [hereinafter Guerin].

31 Ibid at 28.

32 According to La Forest J, the third use of the term "fiduciary" occurs where fiduciary language is

resorted to in order to achieve a desired result, eg. the granting of a tracing order, even though there

is no real fiduciary obligation. See eg. Goodbody v Bank of Montreal (1974) 47 DLR (3d) 335,

where a thief was considered to be a fiduciary so as to be able to grant a tracing order.

33 LAC Minerals, above n 30 at 28.

34 Ibid at 29.

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fiduciary relationships. The second class are often referred to as fiduciaries

It is suggested that the classification by the Canadian courts of

these two categories of fiduciaries has materially affected the development

of the law in this area. If differing classifications of fiduciary are recognised,

it then becomes necessary to answer two separate questions: namely, when

will a relationship be presumed to be fiduciary in nature, as opposed to when

can it be said that although there is no fiduciary relationship, fiduciary

obligations or duties have arisen between two parties? In addition, how is it

decided which question to ask? Although such a distinction may seem

artificial, the Canadian Supreme Court has chosen differing approaches to

answer each of these questions. In Hodgkinson v Simms La Forest J stated

that:

In Lac Minerals I elaborated further on the approach proposed by Wilson J

in Frame v Smith. There I identified three uses of the term fiduciary ... The

first is in describing certain relationships that have as their essence

discretion, influence over interests, and an inherent vulnerability. In these

types of relationships, there is a rebuttable presumption, arising out of the

inherent purpose of the relationship, that one party has the duty to act in

the best interests of the other party ... In seeking to determine whether new

classes of relationships are per se fiduciary, Wilson J's three-step analysis is

a useful guide.

As I noted in Lac Minerals, however, the three step analysis proposed by

Wilson J encounters difficulties in identifying relationships described by a

slightly different use of the term 'fiduciary', viz., situations in which

fiduciary obligations, though not innate to a given relationship, arise as a

matter of fact out of the specific circumstances of that particular

relationship. In these cases, the question to ask is whether, given all the

surrounding circumstances, one party could reasonably have expected that

the other party would act in the former's best interests with respect to the

subject-matter at issue.36

Recent cases have been primarily concerned with identifying

owes the other fiduciary duties. The approach of Canadian courts has been

to identify "guidelines" which if applied can provide guidance in identifying

new fiduciary relationships. Notably, these guidelines have emphasised a

requirement that the beneficiary be particularly vulnerable to the fiduciary.

Peculiar or particular vulnerability has come to be seen as the stamp of a

fiduciary relationship. A comparison of these guidelines with the nature and

35 Ibid at 16.

36 Hodgkinson, above n 1, at 176.

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purpose of the fiduciary principle reveals a doctrine which is becoming

increasingly divorced from its conceptual underpinnings.

One of the earliest decisions in which an attempt was made to

formulate "guidelines" is the decision of Wilson J in the Supreme Court of

the plaintiff against his former wife, who had been granted custody of the

children of the marriage, alleging that she had deliberately interfered with his

right of access to the children, resulting in expense, as well as emotional and

psychiatric distress. The majority of the court failed to find any cause of

action. Wilson J, however, while acknowledging that there was no cause of

action in tort or for violation of any common law right of access, held that

there was a cause of action for breach of fiduciary duty. In reaching this

conclusion, her Honour laid down a three fold "test" for the existence of a

fiduciary relationship. This "test" has subsequently been adopted with

Relationships in which a fiduciary obligation has been imposed seem to

possess three general characteristics:

(1) The fiduciary has scope for the exercise of some discretion or power.

(2) The fiduciary can unilaterally exercise that power or discretion so as

to affect the beneficiary's legal or practical interests.

(3) The beneficiary is peculiarly vulnerable to or at the mercy of the

fiduciary holding the discretion or power.39

discretion, power and vulnerability can be observed. Wilson J noted that

the element of vulnerability arises from the inability of the beneficiary to

prevent the injurious exercise of power or discretion, coupled with the grave

inadequacy or absence of other legal or practical remedies to redress the

exercise of the discretion or power. Because of the requirement of

vulnerability, for example, fiduciary obligations are seldom present in arms

an equal footing.

Unfortunately, as Lee notes, Wilson J does not make it clear from

Court are equally unclear, both as to the source of the vulnerability, and

37 Frame v Smith (1987) 42 DLR (4th) 81.

38 See LAC Minerals above n 30 at 29 per La Forest J; Hodgkinson, above n 1 at 176, per La Forest J;

Norberg above n 1 at 489 per McLauchlin J.

39 Frame v Smith, above n 37 at 99.

41 Ibid at 100.

42 Lee, E, 'Fiduciary Duty and Family Obligations: The Supreme Court of Canada Signals Change',

(1993) 57 Sask LR 457 at 463.

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indeed as to whether it is even an essential ingredient of a fiduciary

Forest J noted that vulnerability is not essential. Rather it is one of a number

of indicia that a fiduciary relationship exists. In Hodgkinson v Simms, he

further de-emphasised the role of vulnerability. His Honour stated that:

From a conceptual standpoint, the fiduciary duty may properly be

understood as but one of a species of a more generalised duty by which the

law seeks to protect vulnerable people in transactions with others. I wish to

emphasise from the outset, then, that the concept of vulnerability is not the

hallmark of fiduciary relationships [sic] though it is an important indicia of

its existence.44

In LAC Minerals, on the other hand, Sopinka J identifies vulnerability

as "[t]he one feature ... which is considered to be indispensable to the

J in Hospital Products, the minority in Hodgkinson considered that

vulnerability is not the hallmark of the fiduciary relationship, it appears that

lower courts persisted in the assumption that this is the key to the

the Alberta Court of Appeal, McClung JA, speaking for the court, stated

that:

Central to any fiduciary relationship is a finding that the beneficiary is at the

mercy of the fiduciary, or even vulnerable to the other who administers the

discretion or power over their relationship ...48

His Honour did, however, decline to find that the relationship

between a divorcing couple is fiduciary in nature, primarily because of the

impossibility of realistically expecting two parties negotiating a marital

In addition, there has been a tendency on the part of Canadian

Courts to assume that vulnerability is derived from the factual matrix

surrounding the case, rather than from the inherent nature of the relationship

between the parties. An example of this is the decision of the Federal Court

of mineral rights in an Indian reserve in 1940 to the Crown "in trust to lease

the same" and invest the proceeds for the Indian band's benefit. Several

43 LAC Minerals above n 30.

44 Hodgkinson above n 1 at 173.

45 LAC Minerals above n 30, at 63.

46 Hodgkinson above n 1 at 218-9.

47 Murray v Murray (1995) 119 DLR (4th) 47.

48 Ibid at 58.

49 Ibid at 54.

50 Apsassin et al v The Queen in Right of Canada (1993) 100 DLR (4th) 504 (FCA) [hereinafter

Apsassin].

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years later, in 1945, the band surrendered the entire reserve on similar terms.

The band argued that the Crown was under a fiduciary duty to them prior to

the surrender of the reserve and breached that duty by failing to advise the

band against surrendering the lands, as well as a duty after surrender to

lease or sell the land in their best interests, which was breached by failing to

reserve the mineral rights when the reserve land was sold to the Director of

the Veteran's Land Act.

Their Honours considered the question of whether the relationship

between the Crown and First Nations Peoples is fiduciary in nature: i.e. does

that relationship belong in the category of relationships which are

of the courts to dichotomise fiduciary relationships into categories. Stone

JA, in answering this question, relied on the three stage "test" laid down by

Wilson J in Frame v Smith. By applying the "test" outlined in these cases,

Stone JA came to the conclusion that a fiduciary relationship existed

between the Crown and Indian band prior to surrender. Stone JA indicated

that the Indians were in a position of great vulnerability, being trappers with

little or no formal education, and lacking sophistication in matters of

business. In addition, they were dependent on the Crown for its advice and

procedure at a time when it was under pressure to provide lands for

determined that the relationship between the Crown and First Nations

people was one that should be characterised as fiduciary in nature.

It is undoubtedly true that many First Nations Peoples are

disadvantaged and vulnerable to the Crown due to such factors as outlined

above by Stone JA. However, it is questionable whether vulnerability

should be sourced in external factors such a relative levels of education. Of

the Crown is under a fiduciary duty to Indigenous Peoples. However, in

recognising that the vulnerability of the Meriam Peoples is the result of the

structure and nature of the relationship between those Peoples and the

Crown, Toohey J arguably remains truer to the traditional fiduciary principle.

If vulnerability is determined to be a key indicator of a fiduciary relationship,

and in determining the existence of vulnerability a plethora of external

factors are taken into account, then the potential to "discover" fiduciary

relationships is correspondingly high.

Similarly, in Norberg, La Forest J sourced the plaintiff's vulnerability

to sexual exploitation by her doctor in her matrimonial, financial and personal

51 Ibid at 565.

52 Ibid at 567-8.

53 Ibid at 567.

54 Mabo v State of Queensland (No 2) (1992) 175 CLR 1 [hereinafter Mabo No 2 ].

55 Norberg, above n 1 at 462.

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In the same case, McLachlin J attempted to reconcile the differing

views as to the part played by vulnerability. Her Honour applied the test

outlined by Wilson J in Frame v Smith to the doctor-patient relationship. In

relation to that test her Honour stated that:

[t]he third requirement is that of vulnerability. This is the other side of the

differential power equation which is fundamental to all fiduciary

relationships. In order to be a beneficiary of a fiduciary relationship a

person need not be per se vulnerable. As Frankel put it, at p.810:

... the entrustor's vulnerability to abuse of power does not result from an

initial inequality of bargaining power between the entrustor and the

fiduciary. ... The relation may expose the entrustor to risk even if he is

sophisticated, informed and able to bargain effectively. Rather, the

entrustor's vulnerability stems from the structure and nature of the fiduciary

relation. (Emphasis in original.)

It is only where there is a material discrepancy, in the circumstances

of the relationship in question, between the power of one person and the

vulnerability of the other that the fiduciary relationship is recognised by law.

Where the parties are on a relatively equal footing, contract and tort provide

Only recently, has the notion of peculiar or special vulnerability

become so closely connected with this theory. In the Supreme Court

decision in Guerin decided in 1984, vulnerability played almost no part.

Further, the emphasis on vulnerability which has become associated with

this theory has allowed the courts to widen the cases in which it has been

found that the parties are in a fiduciary relationship beyond the conceptual

underpinnings of the principle. Undivided loyalty no longer appears

necessary to the relationship. It is suggested that the better view is that

vulnerability may or may not be present, but is clearly not indispensable.

Rather, as Gautreau notes, it is the natural result of reliance by the principal

As well as evidence of a return by some members of the Supreme

Court to a more traditional view of the part played by vulnerability in

identifying a fiduciary relationship, La Forest J's judgment in Hodgkinson

identified loyalty and relinquishment of self-interest as key criteria by which

to determine whether one party to a relationship is a fiduciary. Hodgkinson

concerned an action brought for breach of fiduciary duty to recover losses

made on four investments which were recommended by the respondent, an

56 Ibid at 491. In Hodgkinson, above n 1, La Forest J also appears to accept that vulnerability arises

from the structure of the relationships between the parties, rather than in external factors. His

Honour stated that: "The first [sense in which the term fiduciary is used] is in describing

relationships that have as their essence discretion, influence over interests, and an inherent

vulnerability". (at 176, emphasis in original).

57 Gautreau, M, 'Demystifying the Fiduciary Mystique', (1989) 68 Can Bar Rev 1 at 5.

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accountant. All members of the Court agreed that the relationship of

financial adviser and client is not one which should be considered fiduciary

per se. The majority, however, (La Forest J, with whom Gonthier, L'Heureux-

DubÈ and Iacobucci JJ agreed) found that in the circumstances a fiduciary

obligation had arisen. La Forest J stated that:

... while both negligent misrepresentation and breach of fiduciary duty arise

in reliance-based relationships, the presence of loyalty, trust and confidence

distinguishes the fiduciary relationship from a relationship that simply gives

rise to tortious liability. Thus, while a fiduciary obligation carries with it a

duty of skill and competence, the special elements of trust, loyalty, and

confidentiality that obtain in a fiduciary relationship give rise to a

corresponding duty of loyalty.58

...

... given all the surrounding circumstances, could one party have reasonably

expected that the other would act in the former's best interests with respect

to the subject matter at issue. Discretion, influence, vulnerability and trust

are non-exhaustive evidential factors to be considered.

Thus, outside the established categories what is required is evidence of a

mutual understanding that one party has relinquished its own self-interest

and agreed to act solely on behalf of the other party.59

In the earlier case of LAC Minerals La Forest J also considered the

circumstances in which a fiduciary relationship in the second sense will

arise. His Honour concluded that:

... the issue should be whether, having regard to all the facts and

circumstances, one party stands in relation to another such that it could

reasonably be expected that that other would refrain from acting in such a

way contrary to the interests of that other.60

La Forest J's approach in Hodgkinson and LAC Minerals to the

question of when a fiduciary obligation will arise clearly resembles that of

Professor Finn to the fiduciary principle more generally:

That one party is entitled to expect that the other will act in his interests in

and for the purposes of the relationship. Ascendancy, influence,

vulnerability, trust, confidence or dependence no doubt will be important in

making this out, but they will be important only to the extent that they

58 Hodgkinson, above n 1 at 173.

59 Ibid at 176-177.

60 LAC Minerals, above n 30 at 40.

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foundation exists for the "fiduciary expectation". Such a role may generate an

actual expectation that the other's interests are being served. ... But equally,

the expectation may be judicially prescribed because the law itself ordains it

to be that other's entitlement. This may be so either because that party

should, given the actual circumstances of the relationship, be accorded that

entitlement..., or because the purpose of the relationship itself is perceived

to be such that to allow disloyalty in it would be to jeopardise its perceived

social utility.61

outlined the circumstances in which a fiduciary obligation would arise. Her

Honour emphasises loyalty and relinquishment of self-interest as being

central to the fiduciary concept:

... a fiduciary obligation arises where one person possesses unilateral power

or discretion on a matter affecting a second "peculiarly vulnerable" person...

. The vulnerable party is in the power of the party possessing the power or

discretion which is in turn obligated to exercise that power or discretion

solely for the benefit of the vulnerable party. A person cedes ... his power

over a matter to another person. The person who has ceded the power trusts

the person to whom power is ceded to exercise the power with loyalty and

care. This is the notion at the heart of the fiduciary obligation.62

Although McLachlin J does note that the beneficiary is someone

who is "peculiarly vulnerable", it is clear from her decision in Norberg,

above, that she considers that the vulnerability arises from the inherent

nature of the relationship, rather than external factors.

It is arguable that the emphasis of the majority in Hodgkinson on

loyalty, coupled with a recognition that vulnerability is an indicia, not the

hallmark, of fiduciary obligations signals a move away from the broad

approach which has characterised decisions of the Supreme Court of Canada

in recent years. However, whether it signals a return to a more "traditional"

approach is debatable. Certainly in recent lower court decisions there is

evidence that courts are still willing to utilise the fiduciary relationship in

61 Finn, PD, 'The Fiduciary Principle', above n 3 at 46-47, emphasis added. Cited with approval by

Kirby P in Breen v Williams (1994) 35 NSWLR 522 (the Silicone Breast Implants Case)

[hereinafter Breen].

62 Blueberry River Indian Band v The Queen in Right of Canada (1996) 139 DLR (4th) 193, at 209,

emphasis in the original. The Federal Court of Appeal's decision in this case was indexed as

Apsassin v The Queen in Right of Canada, see above n 50.

63 In R v Audet (1995) 155 NBR (2d) 369, Ayles J (in dissent) was prepared to categorise the

relationship of teacher/student as fiduciary. To the same effect see also the earlier case decision of the

British Columbia Supreme Court in Lyth v Dagg (1988) 46 CCLT 25. In Muir v Alberta (1996) 132

DLR (4th) 695 Viet J, in the Court of Queen's Bench, characterised the relationship between the

provincial government and a woman who was wrongfully admitted to a training school for mental

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A number of factors has been identified above as contributing to a increased

use of the fiduciary principle in non-traditional areas, particularly the use of

"guidelines", and an increased emphasis on vulnerability. In addition, it

appears that in some cases the Court has resorted to the fiduciary principle

as a means of either circumventing procedural problems such as statutes of

be available for a tort action. Other factors which can be identified include

States.

In Norberg, although the plaintiff clearly had an action in battery and

assault against a physician who had given her drugs in return for sexual

favours, McLachlin J preferred to analyse the relationship in fiduciary terms,

as the fiduciary principle more accurately reflected the nature of the wrong

done:

I do not find that the doctrines of tort or contract capture the essential nature

of the wrong done to the plaintiff. Unquestionably, they do catch aspects of

that wrong. But to look at the events which occurred over the course of the

relationshipÖfrom the perspective of tort or contract is to view that

relationship through lenses which distort more than they bring into focus.

Only the principles applicable to fiduciary relationships and their breach

encompass it in its totality.65

With respect, however, either the facts fit the cause of action, or they

do not. A principle does not encompass the incidents of a relationship if it

must first be modified or extended to do so.

In deciding that a fiduciary relationship existed between custodial

and non-custodial parents in Frame v Smith, Wilson J was influenced by the

fact that a wider range of remedies would be available than if the action were

framed in tort:

[w]hen considering breaches of equitable duty and awarding equitable

remedies the court has a wide scope for the exercise of discretion which does

not exist in respect of common law causes of action. In the context of breach

of fiduciary duty this discretion would allow the court to deny relief to an

aggrieved party or grant relief on certain terms if that party's conduct has

disabled him or her from full relief Ö There is neither precedent nor historical

defectives and sterilised, as fiduciary. In Australia the appropriate cause of action in both cases

would lie in tort.

64 See, for example, M(K) v M(H) above n 1.

65 Norberg above n 1 at 484.

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basis for the exercise of such a discretion in the case of a common law tort

action.66

Traditionally, a wide array of remedies has been available for breach

of fiduciary duty: these include injunction, an account of profits,

constructive trust and equitable compensation. Equitable compensation

was, until recently, considered a more flexible and hence more attractive

remedy than damages at law for breach of either contract or tort. Notably,

although equitable compensation has been available as a remedy for breach

of fiduciary duty in Canada for some time, it was not until the decision in

Warman v Dwyer that any indication was given by the High Court that this

However, recent Canadian cases, in particular the Supreme Court

principles of law and equity when it is necessary to achieve what the court

considers a just remedy. Thus, in Canson Enterprises the majority of the

Supreme Court of Canada limited the equitable compensation available in a

secret profit case by reference to principles of causation and remoteness of

damage.

Canson Enterprises concerned a solicitor who, in effect, acted for

both a purchaser and a sub-purchaser (Canson) of land. Canson was

unaware of the intermediate purchaser and thought that he was acting

directly with the vendor. The solicitor ensured that Canson did not become

aware of the first purchaser, nor of the profit which the purchaser made in

on-selling the property. Canson constructed a warehouse on the land and it

collapsed due to subsidence, caused by the negligence of soil engineers and

a pile-driving company. The contractors were sued and held liable, but their

finances were such that full damages awarded against them could not be

recovered. The appellant brought an action against the solicitor to recover

the balance of the loss plus the secret profit and consequential damages. It

was conceded that the solicitor acted in breach of his fiduciary duty.

The Supreme Court held unanimously that the solicitor was not liable

for the balance of the loss caused by the construction. However, the court

was split in its reasons for limiting the solicitor's liability to loss that arose

before the intervention of the third parties. La Forest J, with whom Sopinka,

Gonthier and Cory JJ concurred, limited liability by importing common law

notions of remoteness of damage into equitable compensation. His Honour

agreed that the loss would not have occurred "but for" the solicitor's breach

of fiduciary duty, but held that the subsequent loss due to subsidence was

too remote from the breach. La Forest J based his decision in the fusion of

law and equity, and noted that:

66 Frame v Smith above n 37 at 105.

67 Warman International Ltd v Dwyer (1995) 182 CLR 544.

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[t]he rubric 'breach of fiduciary duty' has come to encompass so many

different types of liability that it is not now possible to determine the

appropriate remedy by defining the wrong simply as "breach of fiduciary

duty". It is necessary, instead, to look through the categorization of the

wrong as a "breach of fiduciary duty" to the true nature of the wrong, and to

move from there to determination of the remedy. The nature of the wrong

and the nature of the loss, not the nature of the cause of action, will dictate

the scope of the remedy.

Ö

My understanding of the effect of the fusion of law and equity is not simply

that both systems are administered together by a single structure of courts,

but that common law remedies may be awarded for what are purely equitable

wrongs, and vice versa, and, in addition, that remedies which have aspects of

both systems may be awarded for wrongs that have aspects of both

systems.69

McLachlin J, with whom Lamer CJC and L'Heureux-DubÈ J agreed,

denied that damages for breach of fiduciary duty should be measured by

ignores the nature of the fiduciary relationship, and its foundations in trust,

Further, her Honour noted that measures of damages in tort itself can vary,

depending on the tort at issue.

Disagreement between members of the Supreme Court of Canada as

to the correct measure of equitable compensation for breach of fiduciary

the principles of law and equity can be merged if it is necessary to achieve a

just remedy. His Honour quoted his own judgement in Canson Enterprises:

Only when there are different policy objectives should equity engage in its

well-known flexibility to achieve a different and fairer result. The foundation

of the obligation sought to be enforced Ö is "the trust or confidence reposed

by one and accepted by the other or the assumption to act for the one by

that other". That being so, it would be odd if a different result followed

solely on the manner in which one framed an identical claim. What is

required is a measure of rationalisation.73

70 A similar conclusion was reached by Stevenson J, who agreed with La Forest J, except on the issue

of the "fusion" of common law and equity, and the resulting importation of principles of remoteness

into equitable compensation: ibid at 165.

71 Ibid at 154.

72 Gonthier, Cory and Iacobucci JJ concurred.

73 M(K) v M(H) above n1 at 337, quoting Canson Enterprises, above n 59, at 152.

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Therefore, as his Honour was of the opinion that the same policy

objectives underlie breach of a parent's fiduciary duty and incestuous sexual

assault, he denied additional compensation for breach of fiduciary duty, just

as in Canson Enterprises he had determined that the same policy objectives

underlie breach of fiduciary duty and tortious misstatement. McLachlin J

again disagreed that the measure of damages for a tort action (in this case

assault and battery) and for breach of fiduciary duty should be the same, as

the wrong encompassed by the actions in tort and equity may well be

different.

Finally, in Hodgkinson, a case already noted for the Supreme Court's

drawing back from its broad application of fiduciary principles, La Forest J

(speaking for the majority) noted that:

Canson held that a court exercising equitable jurisdiction is not precluded

from considering the principles of remoteness, causation, and intervening act

where necessary to achieve a just and fair result. Canson does not, however,

signal a retreat from the principle of full restitution; rather it recognizes the

fact that a breach of a fiduciary duty can take a variety of forms, and as such

a variety of remedial considerations may be appropriate.

Ö

Put another way, equity is not so rigid as to be susceptible to being used as a

vehicle for punishing defendant's with harsh damages awards out of all

proportion to their actual behaviour. On the contrary, where the common

law had developed a measured and just principle in response to a particular

kind of wrong, equity is flexible enough to borrow from the common law.74

Therefore, according to La Forest J, in Canson, the solicitor's breach

was of a "lesser type", so as to make it appropriate to limit the principle of

full restitution. It was analogous to an innocent and honest bit of bad

advice, rather than tantamount to deceit and theft. The defendant solicitor

simply failed to warn his client that the vendors were pocketing a secret

The above cases show an interesting trend. The availability of

compensation as a remedy for breach of fiduciary duty was influential in

making the action attractive as opposed to common law actions based

primarily in tort, and to a lesser extent in contract. Reflecting this, liability for

breach of fiduciary duty has been imposed in an increasingly wide array of

factual situations, including those in which it is questionable whether any

loyalty has been reposed or breached. Conversely, however, the increasing

use of the fiduciary principle in novel factual situations has led to a

recognition that not all breaches are "equal", and that the quantum of

compensation awarded should reflect this fact. Thus, it would now appear

74 Hodgkinson above n 1, at 201-2.

75 Ibid.

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that unless the circumstances warrant equity's particular concern, the

"flexible" remedy of compensation is to be narrowed by reference to the

remedies available for the very common law actions that breach of fiduciary

duty has begun to displace.

Recent years have not, unlike Canada and the United States, seen a

burgeoning of fiduciary cases in Australia. In general, the courts show no

obvious inclination to widen the fiduciary principle. In the last decade, it

appears that there has been a notable decrease in the number of cases where

breach of fiduciary obligation has been argued outside of recognised

categories. In fact, since 1990 virtually no cases have succeeded on the

ground of breach of fiduciary duty. In those cases in which the fiduciary

principle was relied on, the court has clearly indicated a reluctance to

broaden the traditional fiduciary principle. Further, any reliance on

vulnerability as a key indicator of fiduciaries is notably lacking in Australian

case law.

application by an Aboriginal plaintiff for damages for negligence, false

imprisonment, breach of statutory duty and breach of fiduciary duty against

the Minister administering the Aboriginal Land Rights Act 1983 and the

State of New South Wales. The plaintiff argued that she was caused serious

psychological and physical disturbance and damage by her wrongful

removal, first from her mother and later from an institution which cared for

aboriginal children, to an institution which cared exclusively for white

children. These decisions were taken by the then Aborigines Welfare

Board, which was constituted under the Aborigines Protection Act 1909.

The plaintiff was in the custody and control of that Board between 1942 and

1960.

action was barred by the Limitation Act 1969. Kirby P, with whom Priestly

JA agreed, dealt very briefly with the issue. His honour analogised the

relationship of the Board and the plaintiff to that of a recognised category of

fiduciary relationship, and therefore did not consider more generally the

imposition of fiduciary duties:

76 Williams v Minister, Aboriginal Land Rights Act 1983 (1994) 35 NSWLR 497 [hereinfter

Williams].

77 Despite the fact that Williams was heard on the same day as Breen, the Court of Appeal was

differently constituted. Only Kirby P sat on both benches.

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[t]he Board was in the nature of a statutory guardian of Ms Williams. The

relationship of guardian and ward is one of the established fiduciary

categories. ... The Board was, in my view, arguably obliged to Ms Williams

to act in her interest and in a way that truly provided, in a manner apt for a

fiduciary, for her "custody, maintenance and education". I consider that it is

distinctly arguable that a person who suffers as a result of a want of proper

care on the part of a fiduciary, may recover equitable compensation from the

Powell J dissented. He noted, the question of the applicable

limitation period aside, that the plaintiff had failed to establish a viable cause

reluctant to allow actions for breach of fiduciary duty to intrude into areas

traditionally the province of tort law:

[f]or my own part, I am content to accept that a person, or body, which

accepts under his, or its, control, or takes control of, a person (see eg.

Howard v Jarvis (1958) 98 C.L.R. 177), or who, or which, adopts the role

of a parent, or guardian, in relation to an infant, or other person under some

form of disability ... becomes subject to a duty of care to that person or

infant, the content of which duty of care will vary with the circumstances.

This notwithstanding, I am unable to accept that the law has yet reached that

stage where, in a case such as that with which we are now concerned to deal,

that duty of care is not to be regarded as having been subsumed within, or as

having been overreached by, some broad expansive fiduciary duty of the

type contemplated by the Supreme Court of Canada in KM v HM (1992)96

DLR (4th) 289 to which decision Kirby P has referred in his judgment; ...

...

I am unable to see the slightest reason, or justification, for seeking further to

extend the range of fiduciary duties cases upon a person, or body, adopting

the role of an agent, or guardian, so as to constitute as breaches of fiduciary

duty - and thus, as actions constituting an abuse of the relevant relationship -

founded upon what were then even if they are not now, the accepted

standards of the time - that they were in the best interests of, and for the

furtherance of the welfare of, the person fulfilling the role of the child in the

relevant relationship.80

Powell J further noted that there was no reason of public policy to

extend the fiduciary principle to cover, for example, cases involving abuse of

78 Williams above n 76 at 511.

79 Ibid at 519.

80 Ibid.

81 Ibid.

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Priestly JA specifically noted that although he was broadly in

agreement with Kirby P's orders, it was desirable that the plaintiff have the

opportunity to argue the substantive issues of the case at trial, as some of

the legal propositions at issue "[are] novel [and] require careful

The most obvious example of a recent decision in which Australian courts

Supreme Court of Canada in McInerney v McDonald, which concerned an

application by a patient for access to her medical records.

Briefly, the facts of Breen v Williams are as follows. In 1977, Ms

Breen had silicone implants inserted in her breasts. After over a decade of

problems relating to these implants, Ms Breen had them removed. In 1993,

she became involved in a class action in the United States of America

against Dow Corning, the company which manufactured the implants. As

part of that litigation, Ms Breen was given an option to "opt in" to a

settlement. It was a condition of opting in that she do so before 1 December

1994 and that she file with the relevant United States court copies of medical

records in support of any claim she wished to make. Rather than securing

access to the medical records by an order for discovery of records or by way

of letters rogatory, Ms Breen commenced an action in the Supreme Court of

New South Wales claiming a declaration that she was entitled to access to

any records held by the respondent with respect to herself. Ms Breen relied

on contract, tort, fiduciary duty and a common law right to access to support

her claim.

In that case the majority rejected a submission that the doctor-patient

relationship is one which should be categorised as fiduciary. The majority

of the Court of Appeal declined to follow the Canadian decision in

McInerney, which concerned substantially the same factual situation.

Mahoney J denied that the relationship between doctor and patient is

generally fiduciary in nature, despite the fact that "the law requires a doctor

to act with the utmost good faith and loyalty to his patient and to hold

that:

[t]hose obligations [of good faith and loyalty] will, if necessary, be enforced

by injunction or the award of damages. But, with respect, it is wrong to

infer from such obligations that a more general relationship - trustee or

fiduciary - exists. The relationship between a doctor and patient is not, in

82 Ibid at 516.

83 Breen, above n 61, at 566.

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this State, "the same relationship as that which exists in equity between" the

persons in question: it is not "a fiduciary for trust relationship" as those

terms are used in the law of this State.84

With respect to the use of the term "fiduciary" his Honour noted:

"[t]he apparent disparity in the use of terms of this kind in courts in Canada

Meagher J also concluded that the doctor-patient relationship is

not of a fiduciary nature so as to generate in a patient a right to inspect the

doctor's notes and records. He was, however, willing to concede that the

relationship between doctor and patient may be fiduciary in some respect,

but that relationship would only generate the usual fiduciary duties not to

profit at the patient's expense or to put her or himself in a position of

conflict. As to when a fiduciary duty will be imposed, his Honour stated

that: "[a] fiduciary relationship usually arises where one dominant partner

Notably, Meagher J did not mention the question of whether one

party is vulnerable to another as being relevant to the question of when

fiduciary duties will be imposed on one party to a relationship. Further, his

Honour stated, somewhat scathingly, that:

[Canadian cases] illustrate a tendency, which has been commented on

elsewhere, to widen the equitable concept of a fiduciary relationship to a

point where it is devoid of all reasoning. In other words, when analysing the

Canadian jurisprudence in this field, one has the uneasy feeling that the

Courts of that country, wishing to find for a plaintiff, but unable to discover

any basis in contract, tort or statute for his success, simply assert that he

must bear the victor's laurels because his opponent has committed a breach

of some fiduciary duty, even if hitherto undiscovered.87

Kirby P, on the other hand, found that a fiduciary relationship existed

between the two parties in this case. In coming to this conclusion, his

generally that:

[t]he unifying concept behind the imposition of fiduciary obligations appears

to be the secure observance of these fundamental duties in relationships in

which it is the role of one party to act in the service and interests of the

other who is specially vulnerable to harm if that party does not conform to

such duties.88

84 Ibid.

85 Ibid.

86 Ibid at 570.

87 Ibid.

88 Ibid at 543.

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Kirby P's approach is a synthesis of that of Gibbs CJ and Mason J in

Hospital Products, being concerned both with purpose and vulnerability.

Even so, it is arguably a more restrictive approach than is characteristic of

cases from other jurisdictions, as in Kirby's formulation vulnerability is a

result of the inherent nature of the relationship under consideration.

The High Court unanimously rejected Ms Breen's appeal. Before the High

Court the appellant mainly based her arguments on three grounds: breach of

fiduciary duty, contract, and property in the information contained in the

records. It is only intended to discuss the first ground, namely that of

breach of fiduciary duty.

In essence, the High Court's views on the nature of the fiduciary

principle, and the circumstances in which fiduciary duties will be imposed,

has changed little since Hospital Products. The Court reiterated its

reluctance to outline a "test" or "guidelines". McHugh and Gaudron JJ

stated that:

Australian Courts have conscientiously refrained from attempting to provide

a general test for determining when persons or classes of persons stand in a

fiduciary relationship with one another. This is because Ö the term

"fiduciary relationship" defies definition.89

The Court's reluctance to apply a "test" to determine the existence of

fiduciary obligations stems from its recognition that a person may be a

fiduciary for some purposes, but not for others:

"[f]iduciary relationships are of different types, carrying fiduciary

obligations Ö and a test which might seem appropriate to determine whether

a fiduciary relationship existed for one purpose might be quite inappropriate

for another purpose".90

This directly contrasts with the approach of the Supreme Court of

Canada, which has been to attempt to determine whether a particular

relationship is fiduciary in nature, or whether merely ad hoc fiduciary

obligations have arisen. The High Court has clearly avoided the pitfalls of

attempting to categorise relationships as fiduciary or not. Several members

of the Court did, however, identify a number of characteristics which "point

These include: a relationship of confidence, inequality of bargaining power,

trust and confidence, agency, an undertaking by one party to perform a task

or fulfil a duty in the interests of another, the scope for a unilateral exercise

89 Breen, above n 4 at 284 per Gaudron and McHugh JJ.

90 Ibid at 266 per Brennan CJ, quoting Gibbs CJ in Hospital Products above n 40 at 69.

91 Breen, above n 4 at 284 per Gaudron and McHugh JJ.

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only one of a series of factors and is given no more weight than any other

indicators. Loyalty, it seems, still remains the cornerstone of the fiduciary

principle:

the law of fiduciary duty rests not so much on morality or conscience as on

the acceptance of the implications of the biblical injunction that "[n]o man

can serve two masters". Duty and self-interest, like God and Mammon,

make inconsistent calls on the faithful. Equity solves the problem in a

practical way by insisting that fiduciaries give undivided loyalty to the

persons whom they serve.93

In a similar vein, Dawson and Toohey JJ noted that:

It has been observed that what the law exacts in a fiduciary relationship is

loyalty, often of an uncompromising kind, but no more than that.94

All members of the Court agreed that some aspects of the doctorpatient

relationship could be fiduciary in nature. In general, however, the

Court restricted this to financial matters, or confidential information.

Brennan CJ noted that the relationship of doctor and patient is one of trust,

which would cast upon the doctor an onus to prove that any gift received

trust reposed in him by Ms Breen related to the giving of medical treatment.

Refusal to grant access to medical records did not deny her any benefit she

Toohey JJ noted that:

Öit is conceivable that a doctor may place himself in a position with

potential for a conflict of interest - if, for example, the doctor has a financial

interest in a hospital or pathology laboratory - so as to give rise to fiduciary

obligations. But that is not the case.97

Gummow J also confirmed that a fiduciary, including a doctor, would

be brought to account for any benefit received from the patient because of

conflict or use of knowledge gained from the relationship. However, that

Any fiduciary obligations can only arise from those aspects of the

relationship which exhibit the characteristics of a fiduciary relationship:

trust, confidence, ascendancy and loyalty, and are confined to the subject

matter of that trust, confidence and loyalty. Whilst the first three of these

92 Ibid. See also comments by Brennan CJ at 266.

93 Ibid at 285, per Gaudron and McHugh JJ, footnotes omitted.

94 Ibid at 274, quoting from Finn, P above n 3 at 28.

95 Ibid at 266.

96 Ibid.

97 Ibid at 274.

98 Ibid at 306-7.

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are present in some aspects of the doctor-patient relationship, it fails to

exhibit the key indicator of the fiduciary principle: loyalty. The Court

rejected the view that a doctor has a duty to act with "utmost good faith and

by the Court as inappropriate to the doctor-patient relationship:

Öit is not possible to regard the doctor-patient relationship as one in which

the doctor is under a general duty "to act with utmost good faith and

loyalty" to the patient. When a medical practitioner undertakes to treat or

advise a patient on a medical matter, "[t]he law imposes on a medical

practitioner a duty to exercise reasonable care and skill in the provision of

professional advice and treatment", not a general duty "to act with the

utmost good faith and loyalty".100

Further, the imposition of a duty of "utmost good faith" was seen by

the Court as clearly inappropriate in light of earlier decisions that a doctor is

under a duty of care to treat her or his patient with reasonable skill and

an expansive manner so as to supplement tort law and provide a basis for

reiterated that the fiduciary principle in Australia is proscriptive only.

Brennan CJ stated that:

In Canada, the Supreme Court has held that the relationship between

doctor and patient casts on the doctor a fiduciary duty to provide the patient

with access to his or her medical records: McInerney v McDonald. But in

this respect the notion of a fiduciary duty in Canada does not accord with

the law of fiduciary duty as understood in this country. There is simply no

fiduciary relationship which gives rise to a duty to give access to or to

permit the copying of the respondent's records. There is no relevant subject

matter over which the respondent's fiduciary duty extended.103

Gummow J also noted that:

[i]t would be to stand established principle on its head to reason that because

equity considers the defendant to be a fiduciary, therefore the defendant has

a legal obligation to act in the interests of the plaintiff so that failure to fulfil

that positive obligation represents a breach of fiduciary duty.104

Finally, Gaudron and McHugh JJ stated that:

99 McInerney v McDonald (1992) 93 DLR (4th) 415 at 423 per La Forest J.

100 Breen above n 4 at 288 per Gaudron and McHugh JJ, footnotes omitted. See also ibid at 274 per

Dawson and Toohey JJ.

101 Rogers v Whittaker (1992) 175 CLR 479.

102 Breen above n 4 at 289 per Gaudron and McHugh JJ, quoting Finn, P, above n 3 at 25-26.

103 Ibid at 266.

104 Ibid at 308.

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[h]owever, Australian courts recognise only proscriptive fiduciary duties.

This is not the place to explore the differences between the law of Canada

and the law of Australia on this topic. With great respect to the Canadian

Courts, however, many cases in that jurisdiction pay insufficient regard to

the effect that the imposition of fiduciary duties on particular relationships

has on the law of negligence, contract, agency, trusts and companies in their

application to those relationships. Further, many of the Canadian cases pay

insufficient, if any, regard to the fact that the imposition of fiduciary duties

often gives rise to proprietary remedies that affect the distribution of assets

in bankruptcies and insolvencies.105

Thus, the High Court seems determined to maintain a sharp

distinction between fiduciary law and tort law. Where an abuse of loyalty is

not at issue, and no conflict has occurred, any action must necessarily be

founded in negligence or breach of contract.

Rather than an increase in actions based on breach of fiduciary duty, the last

decade has seen an increasing reliance by the Courts on the doctrine of

decisions by the courts that the imposition of a remedial constructive trust is

available for actions for both breach of confidence and unconscionable

passport to proprietary relief and have focused attention on other equitable

amended by the insertion of Part IVA, entitled "Unconscionable Conduct".

Section 51AA essentially codifies the common law, while s 51AB extends

the common law notion of unconscionability, but is limited in context to the

Of more importance is the impact of s 52 of the Trade Practices Act,

which is rapidly becoming pervasive in Australian law. The chief attraction

of using the Trade Practices Act, rather than a common law or equitable

action, for example that of breach of fiduciary duty, lies in the wide array of

available remedies. As mentioned earlier, it was not even certain until the

decision in Warman that equitable compensation was available for breach of

fiduciary duty in this jurisdiction. The Court in that case gave no indication

of whether it would follow its Canadian counterparts and incorporate

105 Ibid at 289.

106 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 and Taylor v Johnson (1983)

151 CLR 422. See also Tarzia v National Australia Bank, unreported decision of the Federal Court

of Australia No 907/95, and Krambousanos v Jedda Investments, unreported decision of the

Federal Court of Australia No 144/96, as examples of recent actions based on unconscionability.

107 See, for example, Mushinski v Dodds (1985) 160 CLR 583.

108 Mason, AF, above n 30 at 248.

109 See, for example, Qantas Airways v Cameron, unreported decision of the Federal Court of Australia,

No 349/96.

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notions of causation and remoteness into the remedy. Given the Court's

views on the fiduciary principle in Breen, that would seem unlikely.

A comparison between the different causes of action relied on by

plaintiffs in Canada and Australia is provided by the recent Canadian

concerned the liability of a bank for what were essentially misleading

statements to a customer. The Toronto-Dominion Bank advised one of its

clients (Vita Health) that a third party, also a client of the bank, was

creditworthy. At the same time the bank reduced its line of credit to that

third party as it was in fact concerned about that party's credit worthiness.

Eventually the third party went bankrupt, causing loss to Vita Health.

Judgment in the case was awarded to Vita Health on the basis that the bank

stood in a fiduciary relationship to them, and had breached that duty. In

addition, the court found the bank liable in negligent misrepresentation. In

Australia, on the other hand, there is no doubt that such a factual situation

would be dealt with under the ambit of s 52 of the Trade Practices Act. That

Act is commonly used in situations involving misrepresentation and would

provide a simpler route to finding liability than to argue that the bank stood

as a fiduciary to its customer. In addition, of course, an action based on

negligent misstatement would also be available in Australia.

110 Vita Health Co Ltd v Toronto-Dominion Bank (1995) 118 DLR (4th) 289 (Manitoba Court of

Appeal).

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http://epublications.bond.edu.au/blr/vol8/iss2/3

(1996) 8 BOND L R

circumstances. In Australia, the fiduciary principle remains a mechanism for

monitoring the loyalty and trust reposed in a fiduciary. In contrast, in

Canada the fiduciary principle not only provides for relief in many situations,

but can also form a source of positive obligations, which if not fulfilled will

lead to an action for breach of fiduciary duty. It has become more than just a

"tort surrogate". In Breen v Williams there was no breach of the duty of

care owed to a patient. Thus, in the absence of using the fiduciary principle

to found a positive obligation on Dr Williams to provide access to medical

records, as occurred in McInerney v McDonald, there was no cause of

action available. The integrity of the traditional fiduciary principle has

apparently been maintained. Where loyalty is not at issue, then the

appropriate cause of action will lie in tort or contract. Equity will not provide

one. The High Court's decision will undoubtedly disappoint many.

However, it at least provides a clear indication of the role expected of the

fiduciary in Australia. The schism between Australian and Canadian

fiduciary law is destined to remain.

27

Dorsett: The Fiduciary Principle in Australia and Canada

Produced by The Berkeley Electronic Press, 1996