Pilmer v Duke Group Ltd (in liq)

The High Court discussed the nature of fiduciary duty, citing from jurisprudence of the Supreme Court of Canada.[1]^{: par. 71}

The foundation and ambit of the fiduciary obligation are conceptually distinct from the foundation and ambit of contract and tort. Sometimes the doctrines may overlap in their application, but that does not destroy their conceptual and functional uniqueness. In negligence and contract the parties are taken to be independent and equal actors, concerned primarily with their own self-interest. Consequently, the law seeks a balance between enforcing obligations by awarding compensation when those obligations are breached, and preserving optimum freedom for those involved in the relationship in question. The essence of a fiduciary relationship, by contrast, is that one party exercises power on behalf of another and pledges himself or herself to act in the best interests of the other.[3]

Australian jurisprudence in the matter, however, draws from the High Court's decision in Hospital Products Ltd v US Surgical Corporation[4] and subsequently in Breen v Williams,[5][6] and accordingly fiduciary obligations are proscriptive rather than prescriptive in nature; there is not imposed upon fiduciaries a quasi-tortious duty to act solely in the best interests of their principals. In that regard, the trial judge was correct in his interpretation of the law. In addition, it could not be shown that a conflict of interest existed with respect to NWP's dealings with Kia Ora:

83. The conflicting duty or interests must be identified. Conflict is not shown by simply pointing to the fact that there had been past dealings between the appellants and interests associated with the Kia Ora directors. The fact that dealings are completed will ordinarily demonstrate that any interest or duty associated with those dealings is at an end and no continuing duty or interest was identified here. Nor is it sufficient to say generally that there was a hope or expectation of future dealings. That will often be so. Most professional advisers would hope that the proper performance of the task at hand will lead the client to retain them again. No real or substantial possibility of conflict was demonstrated.[1]

Although it was not a crucial point in the appeal, the High Court also held that "the actual decision in re White Star Line Ltd[7] may be understood as turning on the fact that both parties to the transaction knew that the consideration offered and received was not worth the sum attributed to it."[1]^{: par. 37}

Kirby J agreed that the appeal should be allowed. However, he held that Breen did not exclude a fiduciary obligation:

Although Breen was an invitation to enter new territory, this case is not. It is placed squarely in the middle of the kind of circumstance in which fiduciary obligations have been upheld on countless occasions: where the obligation of loyalty to the financial interests of identifiable persons who were specially vulnerable is abused by other persons entrusted with duties permitting them to make judgments, in effect, for others which called for the selfless pursuit of the interests of others, the independent performance of their duties and (if that be not possible) a refusal to be involved.[1]^{: par. 131}

He proceeded to summarize principles relating the nature of fiduciary obligations:

1. They are not confined to established relationships, or to exactly identical facts, as those that have given rise to them in the past.
2. It is not sufficient, to impose fiduciary obligations on an alleged wrong-doer, simply to point to the vulnerability of the person claiming to have been wronged.
3. The mere fact that a party may have remedies at law, whether in contract or tort, does not exclude the possibility that fiduciary obligations may also be imposed.
4. The greatest difficulty facing those who assert the existence of fiduciary obligations, outside the classic per se relationships, arises from the fact that the law has not formulated any precise or comprehensive definition of the criteria adopted for imposing such obligations.
5. The unifying principle of fiduciary obligations arises from the existence of a duty of loyalty that, reflecting "higher community standards or values", gives rise to a "legitimate expectation that the other party will act in the interests of the first party or at least in the joint interests of the parties and not solely self-interestedly".
6. To reduce the uncertainties that arise from the elusive "essence" of the "fiduciary principle", it is reasonable for courts to have regard to features commonly found in cases where fiduciary obligations have been upheld.