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Melbourne
Law School
Legal Studies Research Paper
No. 367
Two Fiduciary Fallacies
Matthew Harding
This paper can be downloaded without charge from the
Social Science Research Network Electronic Library
at: ssrn.com
Articles
Two fiduciary fallacies
Matthew Harding*
In this article, I argue that two fallacies may have characterised the way the
courts handled the fiduciary dimensions of the recent case that ultimately
reached the High Court of Australia as Farah Constructions Pty Ltd v
Say-Dee Pty Ltd. The first fallacy is in the proposition that there is a distinct
and freestanding fiduciary obligation of disclosure. The second fallacy is in
the proposition that there is a fiduciary obligation to give a profit-making
opportunity to the principal. These two fallacies persist despite clear
statements of authority pointing them out and warning against them. If
fiduciary law is to achieve rationality, and if parties are to know what may and
may not be pleaded when bringing fiduciary claims, it is important that courts
expose these fallacies whenever they are relied on in argument, and not
endorse them or pass over them in silence, as appears to have happened in
Farah.
The saga that led ultimately to the High Court of Australia’s decision in Farah
Constructions Pty Ltd v Say-Dee Pty Ltd is by now well known to those
interested in private law.1 A dispute between parties who embarked on a
property development joint venture that failed led to litigation in the NSW
Supreme Court, the NSW Court of Appeal and, finally, the High Court itself.2
Much judicial attention in the appellate courts was directed at questions
relating to the grounds of liability under Barnes v Addy3 as well as the proper
relationship between so-called ‘in personam’ claims and the indefeasibility of
Torrens title. And much judicial and academic attention has been and will
continue to be directed at those questions in light of what the High Court said
in Farah.4 But the ratio decidendi of Farah had nothing to do with Barnes v
Addy liability or Torrens title. Instead, the case turned on the question whether
there had been a breach of fiduciary obligation.
* Lecturer, Law School, University of Melbourne. As always I am grateful to Michael Bryan
for sharing his knowledge with me, and I also thank Katy Barnett, Belinda Fehlberg and Lisa
Sarmas for stimulating discussions about the subject of this article.
1 (2007) 236 ALR 209; [2007] HCA 22; BC200703851 per Gleeson CJ, Gummow, Callinan,
Heydon and Crennan JJ (Farah).
2 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2004] NSWSC 800; BC200405608 per
Palmer J (Farah trial judgment); Say-Dee Pty Ltd v Farah Constructions Pty Ltd [2005]
NSWCA 309; BC200507416 per Mason P, Tobias and Giles JJA (Say-Dee); Farah, above
n 1. In Say-Dee, Tobias JA delivered a judgment with which Mason P and Giles JA agreed.
In what follows, when I refer to the ‘judgment’ of the Court of Appeal, I mean the judgment
of Tobias JA.
3 (1874) LR 9 Ch App 244 per Lord Selborne LC.
4 See, eg, Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557; [2007] NSWCA
191; BC200706350; M Bryan, ‘Recipient Liability under the Torrens System: Some
Category Errors’ (2007) 26 Uni of Queensland L Jnl 83; J Dietrich and P Ridge, ‘“The
Receipt of What?”: Questions Concerning Third Party Recipient Liability in Equity and
Unjust Enrichment’ (2007) 31 MULR 47; M Harding, ‘Barnes v Addy Claims and the
Indefeasibility of Torrens Title’ (2007) 31 MULR 343; as well as the papers presented at the
1
2 (2007) 2 Journal of Equity
The relevant facts were these.5 Farah Constructions and Say-Dee acquired
land situated at 11 Deane Street in the Sydney suburb of Burwood. The land
was transferred to the parties as tenants in common in equal shares. Under a
joint venture agreement, Say-Dee undertook to help finance the development
of the land, and Farah Constructions undertook to manage the development
project. That undertaking extended to preparing and lodging with the
Burwood Council applications for necessary planning permits. Farah
Constructions lodged such an application on behalf of the joint venture but it
was rejected for the reason that the proposed development was too large for
the site. In a report, sent to Farah Constructions, setting out the reasons for the
rejection, the council expressed its view that ‘[t]he site needs to be
amalgamated with adjacent sites to maximise its development potential’. At
trial, the parties disputed what happened next. According to Say-Dee, Farah
Constructions did not disclose to it the council’s view about amalgamation but
instead secretly procured the acquisition of 13 and 15 Deane Street with a
view to developing for its own benefit a larger site made up of all three
adjoining blocks of land. According to Farah Constructions, it disclosed to
Say-Dee the council’s view and invited Say-Dee to join with it in acquiring 13
and 15 Deane Street, but Say-Dee declined the invitation and consented to the
acquisition of those properties for the benefit of Farah Constructions alone.
At trial, Palmer J upheld Farah Constructions’ claim for the appointment of
a trustee for sale of 11 Deane Street, and dismissed a cross-claim by Say-Dee
seeking a declaration that 13 and 15 Deane Street were held on constructive
trust for the benefit of the parties to the joint venture.6 In doing so, Palmer J
made findings of fact and a ruling on the question whether there had been a
breach of fiduciary obligation by Farah Constructions. First, his Honour found
that, on the facts, there had been no breach of fiduciary obligation.7 Secondly,
Palmer J ruled that Farah Constructions owed no fiduciary obligation to
Say-Dee that could have been breached on the facts.8 Both the findings of fact
and the ruling were reversed by the Court of Appeal.9 In the High Court,
Palmer J’s findings of fact were restored,10 but his ruling was not.11
Consequently, a different view of the fiduciary dimensions of the case was
taken at each stage of the litigation.
In this article, I argue that two fallacies may have characterised the way the
courts handled the fiduciary dimensions of the Farah case. Both fallacies were
manifest in the way that the issues for determination were formulated at trial.
One of them appeared to be present in the judgments of the Court of Appeal
and the High Court, and the judgment of the Court of Appeal appeared to
Restitution in Commercial Law Conference, University of New South Wales, 3–5 August
2007, which will be published as S Degeling and J Edelman (Eds), Unjust Enrichment in
Commercial Law, Thomson, Sydney, 2008.
5 What follows is a simplified account of the facts as stated in the judgment of Palmer J:
Farah trial judgment, above n 2, at [6]–[53].
6 Farah trial judgment, above n 2, at [78]–[79].
7 Ibid, at [55]–[62].
8 Ibid, at [72]–[75].
9 Say-Dee, above n 2, at [65]–[131] and [178]–[179].
10 Farah, above n 1, at [90]–[99]. The High Court also added a finding of fact of its own that
assisted the defendant’s case: see below n 29.
11 Farah, above n 1, at [103]–[105].
Two fiduciary fallacies 3
leave a door open to the other one. The two fiduciary fallacies that arose in the
Farah case did so despite clear statements of authority pointing them out and
warning against them. If fiduciary law is to achieve the rationality that has
always eluded it, and if parties are to have the certainty of knowing what may
and may not be properly pleaded when bringing fiduciary claims, courts must
seek to expose these fallacies whenever they are relied upon in argument, and
not endorse them or even pass over them in silence.
I First fallacy: There is a fiduciary obligation
of disclosure
A The law
In Australian law, there is no distinct and freestanding fiduciary obligation
requiring a fiduciary to disclose information to their principal. As the High
Court made clear in Breen v Williams, fiduciaries, qua fiduciaries, owe only
two obligations: the obligation not to be in a position where there is a
substantial possibility of conflict between self-interest and duty; and the
obligation not to derive unauthorised profits from the fiduciary position.12
These obligations are proscriptive in that they describe what a fiduciary is not
permitted to do. Prescriptive obligations — those that describe what a
fiduciary is required to do — are unknown to the law regulating fiduciaries in
Australia.13 An obligation to disclose information, being an obligation the
discharge of which requires action on the part of its holder, is a prescriptive
obligation. In light of Breen v Williams, it follows that an obligation to
disclose information can never be fiduciary in character. Despite occasional
suggestions to the contrary,14 this has been recognised in the case law since
Breen v Williams was handed down,15 and in the academic literature on
fiduciaries.16 It must now be regarded as settled law in Australia.
Despite the fact that fiduciaries, qua fiduciaries, owe no obligation of
12 (1996) 186 CLR 71 at 113 per Gaudron and McHugh JJ, 137–8 per Gummow J; 138 ALR
259. See also Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165; 180 ALR 249 at [74]
per McHugh, Gummow, Hayne and Callinan JJ. But see now Trevorrow v South Australia
(2007) 98 SASR 136; [2007] SASC 285; BC200706102 per Gray J.
13 Such obligations are, however, known in Canada. See, eg, McInerney v McDonald (1992) 93
DLR (4th) 415 at 423 per La Forest J.
14 See, eg, A Duggan, M Bryan and F Hanks, Contractual Non-Disclosure: An Applied Study
in Modern Contract Theory, Longman Professional, Melbourne, 1994, pp 51–71; G M D
Bean, Fiduciary Obligations and Joint Ventures, Clarendon Press, Oxford, 1995, Ch 11; and
Biala Holdings Pty Ltd v Mallina Holdings Ltd (1993) 13 WAR 11; 11 ACSR 785 at 831–2
per Ipp J (Biala Holdings). Note, however, that these two books and Ipp J’s judgment
pre-date Breen v Williams. Note also that all of the authorities to which Ipp J refers in his
judgment to support the proposition that there is a freestanding fiduciary obligation of
disclosure locate the source of an obligation of disclosure, at least in partnerships and
analogous joint venture relationships, in a non-fiduciary duty of good faith.
15 See, eg, National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd
[1998] FCA 564; BC9802104 per Lindgren J; Aequitas v AEFC (2001) 19 ACLC 1006;
[2001] NSWSC 14; BC200101950 per Austin J.
16 See, eg, P Finn, ‘The Fiduciary Principle’ in T G Youdan (Ed), Equity, Fiduciaries and
Trusts, The Carswell Co, Toronto, 1989, pp 1, 29–30; R Nolan, ‘A Fiduciary Duty to
Disclose’ (1997) 113 LQR 220 at 224; R Flannigan, ‘Fiduciary Duties of Shareholders and
Directors’ [2004] Jnl of Business Law 277 at 300.
4 (2007) 2 Journal of Equity
disclosure, questions of disclosure are often central in cases entailing fiduciary
relationships. In Farah itself, the critical question was one of disclosure: had
Farah Constructions disclosed to Say-Dee the council’s view as well as the
existence of the opportunity to purchase 13 and 15 Deane Street? Given the
significance of questions of disclosure in fiduciary cases, it is important to be
clear about the role that disclosure plays in fiduciary law. The editors of
Meagher, Gummow and Lehane’s Equity Doctrines and Remedies describe
that role in the following terms:
If a person occupying a fiduciary position wishes to enter into a transaction which
would otherwise amount to a breach of duty, he must, if he is to avoid liability, make
full disclosure to the person to whom the duty is owed of all relevant facts known
to the fiduciary, and that person must consent to the fiduciary’s proposal.17
In other words, a breach of fiduciary obligation — either the obligation not
to be in a position of conflict of interest and duty or the obligation not to make
unauthorised profits — may be averted or cured by the consent of the principal
to whom the obligation is owed, and the principal’s consent will be effective
only if the fiduciary has first disclosed to the principal any relevant material
information.18 Rather than constituting the discharge of a fiduciary obligation,
disclosure which leads to informed consent confers on a fiduciary immunity
from liability for the consequences of actions that would ordinarily amount to
breaches of fiduciary obligation.19 And the immunity-conferring function of
disclosure and informed consent provides a complete explanation of the role
of disclosure in fiduciary law.
To say that disclosure and informed consent have an immunity-conferring
function in fiduciary law is not to say that a person who is performing a
fiduciary role never owes an obligation to disclose material information to
their principal. In fact, an obligation of disclosure is owed by some fiduciaries.
But they do not owe that obligation because they are fiduciaries. To put it
another way, the explanation and justification of an obligation of disclosure
never depends on the fact that its holder performs a fiduciary role, even if its
holder happens to perform such a role. The source of the obligation is always
elsewhere. It follows that the breach of an obligation of disclosure may not be
described as a breach of fiduciary obligation, even where the person who has
breached the obligation is a fiduciary. In this regard, it is worth recalling
Millett LJ’s timely reminder in Bristol and West Building Society v Mothew:
‘it is obvious that not every breach of duty by a fiduciary is a breach of
fiduciary duty.’20
The non-fiduciary sources of an obligation of disclosure are various and
differ depending on the nature of the relationship between the holder of the
17 R P Meagher, J D Heydon and M J Leeming (Eds), Meagher, Gummow and Lehane’s Equity
Doctrines and Remedies, 4th ed, Butterworths, Sydney, 2002, para 5-115.
18 New Zealand Netherlands Society ‘Oranje’ Incorporated v Kuys [1973] 1 WLR 1126
at 1131–2 per Lord Wilberforce; [1973] 2 All ER 1222; Breen v Williams (1996) 186 CLR
71 at 125–6 per Gummow J; 138 ALR 259; Maguire v Makaronis (1997) 188 CLR 449
at 466–7 per Brennan CJ, Gaudron, McHugh and Gummow JJ; 144 ALR 729.
19 In Paul Finn’s words, the effect of informed consent is to ‘displace the fiduciary’s duty’:
Fiduciary Obligations, The Law Book Company, Sydney, 1977, p 242.
20 [1998] Ch 1 at 16; [1996] 4 All ER 698. See also Hilton v Parker Booth and Eastwood
(a firm) [2005] 1 All ER 651 at 660 per Lord Walker of Gestingthorpe.
Two fiduciary fallacies 5
obligation and the person for whose benefit the obligation is held.21 Given that
the relationship between Farah Constructions and Say-Dee was one of joint
venture, I will concentrate on whether a non-fiduciary obligation of disclosure
may be owed in such a relationship and the source of any such obligation. To
the extent that an analogy may be drawn between a joint venture relationship
and a partnership, one would expect to find sources of a joint venturer’s
obligation of disclosure in partnership law.22 And indeed this is the case.
Partners owe to each other a general law obligation to display ‘complete’23 or
‘utmost’24 good faith in all partnership dealings and transactions. Entailed in
the obligation of good faith is a more specific obligation, to disclose to one’s
partners all material information affecting the partnership. This obligation of
disclosure, which flows from the obligation of good faith, is reinforced
explicitly in the partnership legislation.25 Joint venturers, whether their
relationship satisfies the definition of partnership or is analogous to
partnership, owe to each other this obligation of good faith and the associated
obligation of disclosure.26 In addition, it is arguable that joint venturers, even
those whose relationship is not analogous to partnership, may owe an
obligation of disclosure the source of which is an implied contractual
obligation of good faith.27 However, for present purposes it is unnecessary to
pursue that thought further, given that joint venturers whose relationship either
is a partnership or is analogous to partnership clearly owe to each other a
non-fiduciary obligation of disclosure whose source is to be found in
partnership law, and given that in Farah it was not disputed that the
relationship between Farah Constructions and Say-Dee was, at the least,
analogous to a partnership.28
To recap, then: there are three points to keep in view when considering
questions of disclosure in cases entailing fiduciary relationships. First, there is
no distinct and freestanding fiduciary obligation of disclosure in Australian
law. Secondly, the role of disclosure and informed consent in fiduciary law is
explained by their immunity-conferring function in situations where liability
for breach of fiduciary obligation would otherwise arise. And thirdly, a person
who is a fiduciary may owe a non-fiduciary obligation of disclosure. Where a
21 P Finn, ‘Good Faith and Disclosure’ in P Finn (Ed), Essays on Torts, Law Book Company
Ltd, Sydney, 1989, p 150 discusses a number of such sources.
22 Some argue that, in certain cases, the joint venture relationship simply is a form of
partnership; others argue that, although the joint venture relationship is by definition never
a form of partnership, where a given joint venture is sufficiently analogous to a partnership
it ought to be governed by similar principles of law. For a discussion of the issues, see B H
McPherson, ‘Joint Ventures’ in P Finn (Ed), Equity and Commercial Relationships, Law
Book Company Ltd, Sydney, 1987, p 19.
23 R C l’Anson Banks, Lindley and Banks on Partnership, 18th ed, Sweet and Maxwell,
London, 2002, para 16-01.
24 United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 6 per Gibbs CJ; 60
ALR 741.
25 See, eg, Partnership Act 1892 (NSW) s 28: ‘Partners . . . are bound to render true accounts
and full information of all things affecting the partnership to any partner or the partner’s
legal representatives.’
26 N Thompson, ‘The Nature of the Joint Venture’ in W D Duncan (Ed), Joint Ventures Law in
Australia, 2nd ed, Federation Press, Sydney, 2005, p 1, para 1.11.4.
27 Ibid, para 1.11.5.
28 Say-Dee, above n 2, at [36].
6 (2007) 2 Journal of Equity
fiduciary is a joint venturer, the source of such an obligation may be
partnership law.
B The judgments in Farah
1 Palmer J
To what extent did the courts in Farah keep these three points in view? At
trial, Palmer J found that Farah Constructions had disclosed to Say-Dee
information about the opportunity to acquire 13 and 15 Deane Street.29 That
finding resolved one of the issues that Say-Dee had presented to his Honour
for determination: whether Farah Constructions had failed to disclose the
information in question ‘in breach of its fiduciary duty’.30 Having made the
finding, Palmer J continued:
The consequence of this finding is that, even if Farah [Constructions] had a fiduciary
duty to Say-Dee to offer it the possibility of participation in the development of Nos
13 and 15, Farah [Constructions] discharged that duty.31
His Honour was correct to refrain from stating in this passage that Farah
Constructions had a fiduciary obligation to disclose information to Say-Dee.
Moreover, as his Honour went on to point out, Farah Constructions did not
owe a fiduciary obligation to offer any possibilities to Say-Dee.32 This was
also correct. The proposition that there can be a fiduciary obligation requiring
a fiduciary to give a profit-making opportunity to their principal is a fallacy.
I consider it in detail below.33 Thus, in so far as it referred to disclosure,
Palmer J’s judgment was consistent with an understanding of disclosure in
fiduciary cases that attributes to it, when it leads to informed consent, an
immunity-conferring function. It is true that Palmer J made no reference to the
possibility that Farah Constructions owed Say-Dee a non-fiduciary obligation
of disclosure. However, that is to be expected given that his Honour thought
that relevant material information — at least that relating to the opportunity to
acquire 13 and 15 Deane Street — was, in fact, disclosed.34 In short,
Palmer J’s judgment kept in view the three points about disclosure that
I discussed above.
29 Farah trial judgment, above n 2, at [55]. Justice Palmer stated that he was ‘prepared to find’
that information about the council’s view was not disclosed ‘in terms’ to Say-Dee: at [66].
However, his Honour thought that nothing turned on that lack of disclosure: at [67]–[76].
The Court of Appeal made much of this finding in reaching its view that Farah Constructions
had acted in breach of fiduciary obligation: Say-Dee, above n 2, at [41]–[64]. However, the
High Court found that, even if information about the council’s view was not disclosed ‘in
terms’, it was nonetheless disclosed ‘in effect and substance’: Farah, above n 1,
at [39]–[42].
30 Farah trial judgment, above n 2, at [5].
31 Ibid, at [62].
32 Ibid, at [75]–[77].
33 See Part II below.
34 It is arguable that Palmer J should have explicitly recognised a breach of a non-fiduciary
obligation of disclosure given his finding that information about the council’s view was not
disclosed ‘in terms’ to Say-Dee. However, his Honour stopped short of making any firm
finding on the question of disclosure of the council’s view. It appears that he did not have
to because the question of a breach of a non-fiduciary obligation of disclosure with respect
to the council’s view was not raised in argument, despite the fact that one of the issues put
Two fiduciary fallacies 7
2 The NSW Court of Appeal
In the Court of Appeal, Palmer J’s findings of fact on the question of
disclosure were reversed.35 Moreover, the court stated that Farah
Constructions had a ‘duty’ to disclose to Say-Dee the information about the
council’s view and the opportunity to acquire 13 and 15 Deane Street.36 The
court was not referring to a non-fiduciary obligation of disclosure arising from
partnership law. So much is clear from the court’s description of Farah
Constructions’ duty as ‘the fiduciary’s duty of disclosure so as to avoid acting
to the detriment of the interests of the party to whom the duty is owed’.37
Arguably, the court was employing the word ‘duty’ in a loose sense to
convey the idea that disclosure and informed consent confer immunity on a
person from liability for breach of fiduciary obligation. Such an imprecise use
of the language of duty when it comes to questions of disclosure by fiduciaries
is far from unknown in the case law and, indeed, has been defended
judicially.38 To the extent that the Court of Appeal was simply employing the
word ‘duty’ loosely to describe the immunity-conferring function of
disclosure and informed consent, its judgment must be regarded as entirely in
accordance with orthodox principles of fiduciary law. And, indeed, reasons for
favouring this interpretation may be found in the judgment itself. For instance,
the references to a ‘duty’ of disclosure followed an extended passage of the
judgment in which the court applied orthodox principles governing
proscriptive fiduciary obligations in Australian law to the facts of the case
before it.39 And the reference to the function of disclosure being ‘to avoid
acting to the detriment’ of the principal carried with it the clear inference that
disclosure is not an end in itself but rather is to be understood with reference
to some consequence that it brings about. This was consistent with
understanding disclosure as immunity-conferring.
However, reasons for regarding the references to a ‘duty’ of disclosure in
the Court of Appeal’s judgment as a departure from orthodox principles of
fiduciary law may also be drawn out of that judgment. First, the language
employed by the Court of Appeal — ‘Farah [Construction]’s duty was to
disclose fully and accurately to Say-Dee’ — most easily bears a meaning
consistent with the proposition that a fiduciary is obligated to disclose material
information.40 Secondly, although the court’s reference to the function of
disclosure being ‘to avoid acting to the detriment’ of the principal rightly
inferred that disclosure is to be understood with reference to its consequences,
it seemed to misunderstand the consequences of disclosure. Far from ensuring
that a fiduciary avoids acting to the detriment of the principal’s interests,
disclosure and informed consent, because of their immunity-conferring
function, ensure that a fiduciary may so act without attracting liability for
before him for determination was whether there was information ‘which it was the duty of
Farah [Constructions] to disclose to Say-Dee’: Farah trial judgment, above n 2, at [5].
35 Say-Dee, above n 2, at [37]–[131].
36 Ibid, at [132], [133], [177].
37 Ibid, at [177].
38 Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566; [2001] FCA 1628;
BC200107154 at [32]–[33] per Finkelstein J.
39 Say-Dee, above n 2, at [169]–[176].
40 Ibid, at [177].
8 (2007) 2 Journal of Equity
breach of fiduciary obligation. Thirdly, earlier in its judgment, the court had
referred with approval to the judgment of Ipp J of the Supreme Court of
Western Australia in Biala Holdings,41 and the court cited that judgment again
when making its findings on the question of breach of fiduciary obligation.42
In Biala Holdings, Ipp J had stated that there was a distinct and freestanding
fiduciary obligation of disclosure.43
To the extent that the judgment of the NSW Court of Appeal may be
interpreted in more than one way on the question of the role of disclosure in
fiduciary law, that judgment was ambiguous. Because of this ambiguity, the
possibility cannot be ruled out that the reasoning of the Court of Appeal
depended on a fallacy, the fallacy being in the proposition that there exists a
distinct and freestanding fiduciary obligation of disclosure. As I discussed
above, the High Court exposed and criticised the basis of this fallacy in Breen
v Williams.44 However, in Farah, not only did the High Court appear to ignore
the possibility that the judgment of the NSW Court of Appeal had rested on
the fallacy; the judgment of the High Court appeared to rest on the fallacy as
well.
3 The High Court
The High Court restored the findings of fact of Palmer J on the question of
disclosure.45 However, like the Court of Appeal, the High Court referred in its
judgment to the ‘duty to disclose’, and elsewhere to the ‘obligation to
disclose’, that Farah Constructions owed to Say-Dee.46 Their Honours did not
explicitly describe the duty to disclose as a fiduciary one, but their judgment
contained the following passage:
The information about the council’s attitude came to Farah [Constructions] in its
fiduciary capacity; and while the other items of information [about 13 and 15 Deane
Street] did not, they represented opportunities which it was not open to Farah
[Constructions] to exploit, consistently with its fiduciary duty, unless Say-Dee gave
its informed consent to a contrary course. That is because to exploit those
opportunities without informed consent would be to place Farah [Constructions] in
a position of conflict between its self-interest and its duty to Say-Dee in relation to
No 11 [Deane Street].47
To a degree, this passage reflected orthodox principles. However, in one
respect, it incorporated the fallacy that may also have been present in the
judgment of the Court of Appeal.
The passage reflected orthodox principles to the extent that their Honours
recognised the immunity-conferring function of disclosure. Their Honours
recognised that Farah Constructions would have been in breach of the
obligation not to be in a position of conflict of interest and duty if it had
attempted to acquire 13 and 15 Deane Street without disclosing the existence
of the opportunity to do so to Say-Dee and seeking Say-Dee’s consent to that
41 (1993) 13 WAR 11; 11 ACSR 785.
42 Say-Dee, above n 2, at [74] and [181].
43 (1993) 13 WAR 11; 11 ACSR 785 at 832.
44 (1996) 186 CLR 71; 138 ALR 259.
45 Farah, above n 1, at [43]–[99].
46 Ibid, at [103] and [105].
47 Ibid, at [103].
Two fiduciary fallacies 9
acquisition. Moreover, their Honours recognised that informed consent would
have displaced Farah Constructions’ obligation not to be in a position of
conflict of interest and duty, enabling Farah Constructions to acquire 13 and
15 Deane Street even though a conflict of interest and duty would thereby
arise. In other words, their Honours recognised that informed consent would
have conferred on Farah Constructions an immunity from liability for breach
of fiduciary obligation when it came to the acquisition of 13 and 15 Deane
Street. To that extent, their references to a ‘duty’ or ‘obligation’ of disclosure
ought not to be read literally.
However, there is a troubling phrase in this passage of the High Court’s
judgment that is not easily reconciled with orthodox principles. Having
referred to Farah Constructions’ obligation to disclose information about the
council’s view to Say-Dee, their Honours said this: ‘[t]he information about
the council’s attitude came to Farah [Constructions] in its fiduciary
capacity’.48 How is this statement, read in context, to be understood? It
appears that the statement was intended to reveal the reason why Farah
Constructions had to disclose the information in question. If this is what the
statement was intended to do, then the statement was a departure from
orthodoxy. It is never true to say that the reason why a fiduciary must disclose
material information to their principal is because that information has become
known to the fiduciary qua fiduciary. To say that is to assert that there is a
distinct and freestanding fiduciary obligation of disclosure which, as I have
discussed above, is a fallacy. There are only two reasons why a fiduciary has
to disclose material information to their principal: first, if they wish to gain
immunity from liability for breach of fiduciary obligation; and/or secondly,
depending on the case, because they owe their principal a non-fiduciary
obligation so to disclose.
To the extent that this passage of the judgment of the High Court referred
to a fiduciary obligation of disclosure, the judgment not only left undisturbed
a fallacy that may have characterised the judgment of the Court of Appeal, it
also incorporated that fallacy. Their Honours should have avoided the fallacy
by pointing out: first, that there is no fiduciary obligation to disclose material
information that a fiduciary has come to know qua fiduciary; secondly, that
nonetheless in some cases there may be a non-fiduciary obligation to disclose
material information that a fiduciary has come to know, for instance, qua joint
venturer, partner or agent;49 and thirdly, that in all cases disclosure and
informed consent have an immunity-conferring function in fiduciary law.
C The hypothetical case of Farah II
It might be objected that this analysis of the judgments of the Court of Appeal
and the High Court in the Farah case makes too much of what were, in
48 Ibid, at [103].
49 Indeed, there is no reason why a fiduciary may not have a non-fiduciary contractual
obligation to disclose material information that the fiduciary has come to know qua
fiduciary. In such an unlikely situation, the circumstances in which disclosure is required
will be identical to those in which it would be required were there a fiduciary obligation of
disclosure. However, that does not make the former type of obligation a fiduciary obligation.
Its character depends on what explains and justifies it, and it is fully explained and justified
by the existence of a contract.
10 (2007) 2 Journal of Equity
essence, unimportant distinctions. To the extent that the language of ‘duty’ and
‘obligation’ was employed loosely in those judgments to convey the idea that
disclosure has an immunity-conferring function in fiduciary law — and that
appears to have been the case, in part, in both judgments — this objection has
force. But, as I hope to have shown above, the passages in the judgments of
the Court of Appeal and the High Court dealing with the question of disclosure
may not be explained away entirely by pointing to the imprecise use of
language. And the conceptual distinctions between a fiduciary obligation of
disclosure, the immunity-conferring role of disclosure, and a non-fiduciary
obligation of disclosure are far from unimportant.
To illustrate the point, imagine a hypothetical case, Farah II, whose facts
are identical to the facts of Farah, except as follows. In Farah II, Farah
Constructions receives the report expressing the council’s view about
amalgamation but, because it considers the acquisition of adjoining blocks of
land to be manifestly beyond the means of the joint venture, does not disclose
the council’s view to Say-Dee. In light of the rejection of the planning
application, and not knowing the council’s view, Say-Dee loses interest in the
joint venture and sells its interest in 11 Deane Street to Farah Constructions.
At the time of sale, Farah Constructions has no intention to pursue a larger
development with adjoining blocks of land. Rather, it intends to lodge a
further planning application proposing a smaller development at 11 Deane
Street. Farah Constructions lodges its further planning application and this too
is rejected. Only now, having reviewed its position in light of the council’s
latest rejection and having gained access to a new source of finance, does
Farah Constructions approach the owners of 13 and 15 Deane Street with a
view to acquiring those properties. The properties are acquired by Farah
Constructions. Say-Dee discovers that the council’s view was never disclosed
to it. Say-Dee sues Farah Constructions, seeking a declaration that Farah
Constructions holds a proportion of 13 and 15 Deane Street on constructive
trust for Say-Dee. Say-Dee argues that had disclosure been made, it (Say-Dee)
would have sought to purchase 13 and 15 Deane Street, either by itself or
together with Farah Constructions.
In Farah II, if Say-Dee demonstrates that Farah Constructions has acquired
13 and 15 Deane Street as a consequence of a breach of fiduciary obligation,
Say-Dee might obtain its declaration of constructive trust.50 Here is where the
conceptual distinctions between a fiduciary obligation of disclosure, the
immunity-conferring role of disclosure, and a non-fiduciary obligation of
disclosure become important. Imagine that, in Farah II, the court accepts the
proposition that Farah Constructions’ failure to disclose the council’s view is
a breach of a distinct and freestanding fiduciary obligation of disclosure. In
consequence, the court is also likely to find that Farah Constructions’
acquisition of 13 and 15 Deane Street is, to an extent, a direct consequence —
in a ‘but for’ sense — of its breach of fiduciary obligation.51 More precisely,
50 As happened in Boardman v Phipps [1967] 2 AC 46; [1966] 3 All ER 721 and was
contemplated by Mason J in Hospital Products Ltd v United States Surgical Corporation
(1984) 156 CLR 41; 55 ALR 417.
51 Indeed, Say-Dee will not even have to prove this causal link: Say-Dee, above n 2, at
[186]–[193]. See generally Brickenden v London Loan and Savings Co [1934] 3 DLR 465.
Two fiduciary fallacies 11
the court is likely to find that, but for its breach of fiduciary obligation, Farah
Constructions would only have acquired a proportion – say, half — of 13 and
15 Deane Street, because Say-Dee would have insisted on acquiring at least a
half share in those properties. Accordingly, the court may find that, because
Farah Constructions has acquired a proportion of 13 and 15 Deane Street that
it would not have acquired but for its breach of obligation, it is required to
disgorge that proportion to Say-Dee by way of a constructive trust.52
Therefore, in Farah II the availability of a disgorgement remedy like the
constructive trust may turn on whether or not the court recognises a fiduciary
obligation of disclosure. This conclusion is strengthened once it is observed
that Farah II is not a case entailing a breach of the fiduciary obligation not to
be in a position of conflict of interest and duty or the fiduciary obligation not
to make unauthorised profits.53 In Farah II, Farah Constructions’ interest in
developing a larger site made up of 11, 13 and 15 Deane Street does not arise
until after its fiduciary relationship with Say-Dee has ended. As a result, that
interest cannot conflict with any duty that Farah Constructions owes to
Say-Dee because Farah Constructions owes no duty to Say-Dee at the relevant
time. For a similar reason, Farah Constructions cannot be in breach of the ‘no
profit’ rule. It does not learn of the opportunity to acquire 13 and 15 Deane
Street until after its fiduciary relationship with Say-Dee has ended, and
therefore any profit that it makes from taking up that opportunity is beyond the
reach of the rule.
Moreover, even though, in Farah II it is likely that Farah Constructions
owes Say-Dee an obligation of disclosure whose source is partnership law,
and even though Farah Constructions appears to have breached that obligation
by not disclosing the council’s view to Say-Dee, it is not open to the court to
declare a constructive trust over 13 and 15 Deane Street in response to liability
for this breach of non-fiduciary obligation. Partners, and arguably also
non-partner joint venturers whose relationship is analogous to that of partners,
owe an obligation to disgorge profit derived from transactions concerning the
partnership or by use of the property, name, or a business connection, of the
partnership.54 Failing, in good faith, to disclose a fact in light of which a
profit-making opportunity might be attractive to a partner, and then, again in
good faith, taking up that opportunity for oneself and profiting after the
partnership has ended cannot be characterised as a derivation of profit from a
partnership transaction nor does it entail the use of the property, name or a
business connection of the partnership. Consequently, there is no basis for
disgorgement of that profit according to partnership law.
In a case like the hypothetical Farah II, the remedies available to a plaintiff
depend, in part, on how a fiduciary’s actions are characterised. If, in such a
case, a fiduciary’s actions are characterised incorrectly as a breach of fiduciary
obligation, a plaintiff may be awarded a remedy to which they are not entitled.
And this is precisely what may happen if a fiduciary’s failure to disclose
52 Indeed, the court may even find that Farah Constructions is required to disgorge all of 13
and 15 Deane Street: see Murad v Al-Saraj [2005] EWCA Civ 959. For a discussion of the
issues, see V Vann, ‘Causation and Breach of Fiduciary Duty’ [2006] Singapore Jnl of Legal
Studies 86.
53 In this respect, Farah II is different from Murad v Al-Saraj.
54 l’Anson Banks, above n 23, paras 16-11–16-36; Partnership Act 1892 (NSW) s 29.
12 (2007) 2 Journal of Equity
material information to their principal is incorrectly characterised as a breach
of fiduciary obligation. It is clear, then, that in a case like Farah II, nothing
could be more important than getting correct the conceptual distinctions
between a (fictitious) fiduciary obligation of disclosure, the
immunity-conferring role of disclosure, and a non-fiduciary obligation of
disclosure. It may be true, as Finkelstein J put it in Fitzwood Pty Ltd v Unique
Goal Pty Ltd (in liq), that the law is ‘not seriously injured’ when a court speaks
of a prescriptive fiduciary obligation of disclosure even though it means a
failure, through lack of disclosure, to displace a proscriptive fiduciary
obligation not to be a position of conflict of interest and duty.55 However, the
law is seriously injured if, in a case like Farah II, a court speaks of a
prescriptive fiduciary obligation of disclosure, leading to the award of a
disgorgement remedy, even though there is no relevant breach of proscriptive
fiduciary obligation that could support the imposition of such a remedy. Such
an outcome is the logical consequence of the fallacy that should have been,
but was not, rejected clearly by the appeal courts in Farah.
II Second fallacy: There is a fiduciary obligation to
give a profit-making opportunity to the principal
A The law
If a fiduciary learns of a profit-making opportunity, under what circumstances
must they give it to their principal? By ‘give an opportunity to their principal’,
I mean take actions that will enable or assist the principal to take up the
opportunity either for their own benefit or together with the fiduciary. Such
actions might include offering to share the opportunity with the principal or
offering to deflect the opportunity to the principal outright. More specifically,
they might include introducing the principal to a person connected with the
opportunity, assisting the principal to obtain finance for the purpose of taking
up the opportunity, or making available to the principal the fiduciary’s time,
effort and skills in connection with the exploitation of the opportunity. In
many leading cases where fiduciaries have learned of profit-making
opportunities, this particular question has not arisen for consideration, either
because the principal was unable or did not wish to take up the opportunity in
question, or because the opportunity, owing to its nature, could only ever have
been an opportunity for the fiduciary.56 Nonetheless, the question requires an
answer because, as Farah makes clear, even though the question arises only
rarely there may be cases in which the outcome depends on it.
From the moment when a fiduciary learns of a profit-making opportunity,
they are, qua fiduciary, exposed to risk on two fronts. First, if they wish to take
up the opportunity, there is a risk that their interest in doing so may conflict
55 (2001) 188 ALR 566; [2001] FCA 1628; BC200107154 at [33].
56 See, eg, Keech v Sandford (1726) Sel Cas Ch 61 (the opportunity would never have been
offered to the principal); Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134; [1942] 1 All ER
378 (the principal could not afford to take up the opportunity); Boardman v Phipps [1967]
2 AC 46; [1966] 3 All ER 721 (the principal had no desire to take up the opportunity and
would have required the permission of the court to do so); Attorney-General for Hong Kong
v Reid [1994] 1 AC 324; [1994] 1 All ER 1 (the opportunity was not one that could be given
to the principal, being an opportunity to accept an illegal bribe).
Two fiduciary fallacies 13
with a duty that they owe to their principal. Secondly, even if their interest in
taking up the opportunity may not conflict with any duty that they owe to their
principal, if they learned of the opportunity qua fiduciary and profit from
taking it up, they may be required to account for that profit. In other words,
from the moment when the fiduciary learns of the profit-making opportunity,
they are at risk of breaching what are usually referred to in shorthand as the
‘no conflict’ and the ‘no profit’ rules. Of course, as I discussed above, if the
fiduciary discloses material information about the opportunity to their
principal and gains the principal’s informed consent to taking up that
opportunity, the fiduciary will be able to take up the opportunity immune from
liability for any breach of fiduciary obligation that would otherwise have
arisen. Disclosure is therefore one option available to a fiduciary who learns
of a profit-making opportunity and wishes to take it up; when disclosure leads
to informed consent, the risks associated with the opportunity are defused and
the opportunity may be taken up confidently.57
However, there are at least two reasons why a fiduciary may be less than
enthusiastic about disclosure. First, disclosure might not lead to informed
consent. Rather than consenting to the fiduciary taking up a profit-making
opportunity, the principal to whom disclosure has been made may choose to
refuse consent and may even choose, having refused consent, to pursue the
opportunity in question themselves.58 Or the principal may choose to give
consent but only if the fiduciary involves the principal in some way in the
exploitation of the opportunity.59 Or the fiduciary may believe that informed
consent has been given, but it may turn out not to have been.60 These are risks
associated with disclosure, particularly when the relationship between the
fiduciary and the principal is such that the principal does not owe reciprocal
fiduciary obligations to the fiduciary and is free to pursue their own interests
in priority to those of the fiduciary.61
Secondly, a fiduciary may not wish to make disclosure and seek informed
consent because they may believe that it is possible to take up the
profit-making opportunity without breaching the ‘no conflict’ rule, the ‘no
profit’ rule, or any non-fiduciary obligation that they owe to their principal.
Where that belief reflects the facts of the situation, the fiduciary is entitled to
take up the opportunity without having made disclosure and sought informed
consent. It is sometimes said that a fiduciary must be selfless in such
circumstances.62 This is not true. As I discussed above, a fiduciary is entitled
to be as selfish as they like, in a situation where they have just learned of a
profit-making opportunity or in any other situation for that matter, so long as
57 See, eg, Queensland Mines Ltd v Hudson (1978) 18 ALR 1.
58 The High Court in Farah alluded to this possibility: above n 1, at [108].
59 This risk would have arisen (and almost certainly would have been realised) had Dr Chan
sought the consent of Dr Zacharia in Chan v Zacharia (1984) 154 CLR 178; 53 ALR 417.
60 See, eg, Guinness plc v Saunders [1990] 2 AC 663; [1990] 1 All ER 652; possibly also
Boardman v Phipps [1967] 2 AC 46; [1966] 3 All ER 721.
61 Of course, these will only be regarded as risks by the fiduciary who wishes to take up the
profit-making opportunity. If the fiduciary has no desire to take up the profit-making
opportunity, the fiduciary will presumably view these not with concern as risks, but with
equanimity as possibilities.
62 The ne plus ultra is the well-known judgment of Cardozo J in Meinhard v Salmon 164 NE
545 (NY, 1928).
14 (2007) 2 Journal of Equity
they are not in a position of conflict of interest and duty, do not make
unauthorised profit qua fiduciary, and do not breach any non-fiduciary
obligations that they owe to their principal.63 Beyond those — admittedly
significant — constraints, a fiduciary’s actions, just like the actions of a
non-fiduciary, are unfettered, at least in jurisdictions like Australia where
fiduciaries qua fiduciaries owe only proscriptive obligations. Apart from
avoiding conflicts and refraining from making unauthorised profit, there is no
fiduciary obligation to do anything, including to take any of the actions that I
set out above and described loosely as being actions that ‘give’ the opportunity
to the principal in some sense.
When it comes to taking up profit-making opportunities, there appears to be
a strong argument for confining fiduciary obligations in this way. In a market
economy, all else being equal, the exploitation of profit-making opportunities
by the application of effort and skill over time is considered to be desirable.64
Such profit-making opportunities, if they are to be realised, usually if not
always entail exposure to a degree of risk. Given that generating wealth is
regarded as desirable and given the risk entailed in exploiting profit-making
opportunities, it is thought that fiduciaries ought to be encouraged to pursue
such opportunities to the fullest extent consistent with their fiduciary roles. If
fiduciaries are not encouraged to the fullest extent, they might choose not to
pursue profit-making opportunities, given the risk entailed, in situations where
it is desirable that they choose to pursue those opportunities. The argument is
that this encouragement would not be provided as fully as it might be if
fiduciaries were required to involve their principals in their exploitation of
profit-making opportunities, let alone if fiduciaries were required to deflect
those opportunities to their principals. Of course, where fiduciaries owe
non-fiduciary obligations to involve their principals in exploiting
profit-making opportunities or to deflect those opportunities to their
principals, limits exist within which those opportunities may be exploited.65
But in the absence of such limits, there is a strong argument to be made that
fiduciaries ought to be allowed to exploit profit-making opportunities
unfettered, and this is reflected in the orthodox principles relating to fiduciary
obligations that were set out by the High Court of Australia in Breen v
Williams.66
We are now in a position to sketch out an answer, based on principle, to the
question posed at the beginning of this section: if a fiduciary learns of a
profit-making opportunity, under what circumstances must they give it to their
principal? Three points must be reiterated. First, and obviously, if a fiduciary
owes a non-fiduciary — say, a contractual — obligation to give their principal
63 Breen v Williams (1996) 186 CLR 71 at 113 per Gaudron and McHugh JJ, 137–8 per
Gummow J; 138 ALR 259.
64 The ceteris paribus clause here is designed to draw attention to the fact that the exploitation
of profit-making opportunities is only considered to be desirable within certain limits that
are set with reference to values and principles external to the market economy. For example,
no reasonable person would argue that working hard to develop a thriving and profitable
business in the slave trade is desirable.
65 Whether or not, and the extent to which, such limits are justified is a large question, the
answer to which will vary depending on the sources of the non-fiduciary obligations in view.
66 (1996) 186 CLR 71; 138 ALR 259.
Two fiduciary fallacies 15
such an opportunity, then they must do so. Secondly, if a fiduciary wishes to
defuse the risk associated with learning of a profit-making opportunity — the
risk of being in breach of either the ‘no conflict’ rule or the ‘no profit’ rule or
both — then the fiduciary should disclose material information about the
opportunity to the principal and seek informed consent to taking up the
opportunity. As I discussed above, a fiduciary owes no fiduciary obligation to
disclose and seek informed consent in this way, although they may owe a
non-fiduciary obligation of disclosure. Nonetheless, for the fiduciary who
wishes to take up a profit-making opportunity, disclosing material information
and seeking informed consent is a prudent course of action. It is a prudent
course of action because it defuses the risks associated with learning of the
profit-making opportunity, but in choosing it the fiduciary runs further risks,
including the risk that the principal will refuse consent and seek to take up the
opportunity for themselves. If this happens, in a sense the fiduciary will have
given the opportunity to their principal. But they will not have done so
because they were obligated to, rather, they will have done so because they
sought to avoid acting in breach of obligation. Thirdly, and importantly, a
fiduciary never owes a fiduciary obligation to do anything that might amount
to giving a profit-making opportunity to their principal.
At this point, two further questions emerge. First, how likely is it that a case
will arise in which a fiduciary takes up a profit-making opportunity without
thereby breaching a non-fiduciary obligation that they owe to their principal,
the content of which is to give the opportunity to the principal? If the answer
to this first question is ‘very unlikely’, then it might be argued that it is a
matter of little practical significance that there is no fiduciary obligation to
give an opportunity to the principal. And secondly, is it ever the case that a
fiduciary who takes up a profit-making opportunity without the informed
consent of their principal is not thereby in breach of either the ‘no conflict’
rule or the ‘no profit’ rule? If the answer to this second question is ‘no’, then
the practical significance of the insight that there is no fiduciary obligation to
give a profit-making opportunity to the principal will vanish entirely, because
in every case where such an obligation might have been owed and breached,
the fiduciary will be a breach of a separate, proscriptive, fiduciary obligation
anyway. However, as we shall see, the answer to the first question is ‘not
unlikely’, and the answer to the second question is ‘yes’.
In answering the first question, let us begin by setting aside cases in which
a fiduciary takes up a profit-making opportunity in circumstances where there
is no possibility that they are in breach of any obligation — fiduciary or
non-fiduciary — that they owe to their principal. An example is where a
trustee profits by selling shares that they own in their personal capacity
because they have learned some publicly available information about the
company in which the shares are held. Such cases are not of present interest
because, in them, the fiduciary does not learn of the profit-making opportunity
in question qua fiduciary.67 Furthermore, for a similar reason let us set aside
cases in which a person breaches a non-fiduciary obligation by taking up a
profit-making opportunity, but the person who has breached that non-fiduciary
67 Aas v Benham [1891] 2 Ch 244 appears to have been treated by the English Court of Appeal
as such a case.
16 (2007) 2 Journal of Equity
obligation is not a fiduciary. Such cases demand to be analysed in terms that
do not implicate fiduciary principles, for instance as cases of breach of
contract or breach of confidence.68
That leaves cases in which a fiduciary does learn of a profit-making
opportunity qua fiduciary. How likely is it in this type of case that a fiduciary
will take up the opportunity without thereby breaching a non-fiduciary
obligation that they owe to their principal, the content of which is to give that
opportunity to the principal? In certain cases where fiduciaries are in breach
of the ‘no conflict’ rule, it appears distinctly unlikely. That is because in some
cases, breaches of the ‘no conflict’ rule entail a self-interested breach of a
non-fiduciary obligation that requires a profit-making opportunity to be given
to the principal. A good example is found in Consul Developments Pty Ltd v
DPC Estates Pty Ltd.69 There, the fiduciary, who was an employee of the
principal, diverted profit-making opportunities away from the principal and
towards a company controlled by his friend with whom he had a profit-sharing
arrangement. This constituted a flagrant breach of the fiduciary’s employment
contract; the fiduciary had been employed to find and present just such
opportunities to his principal. Moreover, the fiduciary’s actions constituted a
breach of the ‘no conflict’ rule because, by breaching his non-fiduciary
contractual obligation, the fiduciary brought that obligation into direct conflict
with his interest in profiting once the company controlled by his friend
realised the opportunities in question. Consul Developments Pty Ltd v DPC
Estates Pty Ltd illustrates well that in cases where a fiduciary has breached the
‘no conflict’ rule, the breach may take the form of diverting a profit-making
opportunity away from the principal and towards the fiduciary in breach of a
non-fiduciary obligation.70
However, even if it is correct to say that a breach of the ‘no conflict’ rule
often entails a breach of a non-fiduciary obligation, it is incorrect to say that
this is always the case. The rule proscribes not only actual conflicts of interest
and duty, but also possible conflicts of interest and duty. A possible conflict of
interest and duty may arise where a fiduciary has an interest in taking up a
profit-making opportunity and there is a possibility that the interest will, at
some moment in the future, come into conflict with a non-fiduciary obligation
that the fiduciary does not presently but may at the future moment owe to the
principal. Because the fiduciary does not yet owe the non-fiduciary obligation
in question, even though there is a possibility that the fiduciary’s interest may
conflict with the obligation once it comes to be owed, it may not be said that
the breach of the ‘no conflict’ rule that arises in such a case entails the breach
68 See, eg, Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; 55
ALR 417 (breach of contract); Lac Minerals Ltd v International Corona Resources Ltd
(1989) DLR (4th) 129 (breach of confidence).
69 (1975) 132 CLR 373; 5 ALR 231.
70 Industrial Development Consultants Ltd v Cooley [1972] 2 All ER 162; [1972] 1 WLR 443
(breach of an obligation in a contract of employment); Canadian Aero Service Ltd v
O’Malley (1973) 40 DLR (3d) 371 (breaches of obligations, arising out of contracts of
employment, which survived the resignation of the employees); Chan v Zacharia (1984) 154
CLR 178; 53 ALR 417 (breach of an obligation under a partnership deed and the general law
relating to partners).
Law School
Legal Studies Research Paper
No. 367
Two Fiduciary Fallacies
Matthew Harding
This paper can be downloaded without charge from the
Social Science Research Network Electronic Library
at: ssrn.com
Articles
Two fiduciary fallacies
Matthew Harding*
In this article, I argue that two fallacies may have characterised the way the
courts handled the fiduciary dimensions of the recent case that ultimately
reached the High Court of Australia as Farah Constructions Pty Ltd v
Say-Dee Pty Ltd. The first fallacy is in the proposition that there is a distinct
and freestanding fiduciary obligation of disclosure. The second fallacy is in
the proposition that there is a fiduciary obligation to give a profit-making
opportunity to the principal. These two fallacies persist despite clear
statements of authority pointing them out and warning against them. If
fiduciary law is to achieve rationality, and if parties are to know what may and
may not be pleaded when bringing fiduciary claims, it is important that courts
expose these fallacies whenever they are relied on in argument, and not
endorse them or pass over them in silence, as appears to have happened in
Farah.
The saga that led ultimately to the High Court of Australia’s decision in Farah
Constructions Pty Ltd v Say-Dee Pty Ltd is by now well known to those
interested in private law.1 A dispute between parties who embarked on a
property development joint venture that failed led to litigation in the NSW
Supreme Court, the NSW Court of Appeal and, finally, the High Court itself.2
Much judicial attention in the appellate courts was directed at questions
relating to the grounds of liability under Barnes v Addy3 as well as the proper
relationship between so-called ‘in personam’ claims and the indefeasibility of
Torrens title. And much judicial and academic attention has been and will
continue to be directed at those questions in light of what the High Court said
in Farah.4 But the ratio decidendi of Farah had nothing to do with Barnes v
Addy liability or Torrens title. Instead, the case turned on the question whether
there had been a breach of fiduciary obligation.
* Lecturer, Law School, University of Melbourne. As always I am grateful to Michael Bryan
for sharing his knowledge with me, and I also thank Katy Barnett, Belinda Fehlberg and Lisa
Sarmas for stimulating discussions about the subject of this article.
1 (2007) 236 ALR 209; [2007] HCA 22; BC200703851 per Gleeson CJ, Gummow, Callinan,
Heydon and Crennan JJ (Farah).
2 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2004] NSWSC 800; BC200405608 per
Palmer J (Farah trial judgment); Say-Dee Pty Ltd v Farah Constructions Pty Ltd [2005]
NSWCA 309; BC200507416 per Mason P, Tobias and Giles JJA (Say-Dee); Farah, above
n 1. In Say-Dee, Tobias JA delivered a judgment with which Mason P and Giles JA agreed.
In what follows, when I refer to the ‘judgment’ of the Court of Appeal, I mean the judgment
of Tobias JA.
3 (1874) LR 9 Ch App 244 per Lord Selborne LC.
4 See, eg, Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557; [2007] NSWCA
191; BC200706350; M Bryan, ‘Recipient Liability under the Torrens System: Some
Category Errors’ (2007) 26 Uni of Queensland L Jnl 83; J Dietrich and P Ridge, ‘“The
Receipt of What?”: Questions Concerning Third Party Recipient Liability in Equity and
Unjust Enrichment’ (2007) 31 MULR 47; M Harding, ‘Barnes v Addy Claims and the
Indefeasibility of Torrens Title’ (2007) 31 MULR 343; as well as the papers presented at the
1
2 (2007) 2 Journal of Equity
The relevant facts were these.5 Farah Constructions and Say-Dee acquired
land situated at 11 Deane Street in the Sydney suburb of Burwood. The land
was transferred to the parties as tenants in common in equal shares. Under a
joint venture agreement, Say-Dee undertook to help finance the development
of the land, and Farah Constructions undertook to manage the development
project. That undertaking extended to preparing and lodging with the
Burwood Council applications for necessary planning permits. Farah
Constructions lodged such an application on behalf of the joint venture but it
was rejected for the reason that the proposed development was too large for
the site. In a report, sent to Farah Constructions, setting out the reasons for the
rejection, the council expressed its view that ‘[t]he site needs to be
amalgamated with adjacent sites to maximise its development potential’. At
trial, the parties disputed what happened next. According to Say-Dee, Farah
Constructions did not disclose to it the council’s view about amalgamation but
instead secretly procured the acquisition of 13 and 15 Deane Street with a
view to developing for its own benefit a larger site made up of all three
adjoining blocks of land. According to Farah Constructions, it disclosed to
Say-Dee the council’s view and invited Say-Dee to join with it in acquiring 13
and 15 Deane Street, but Say-Dee declined the invitation and consented to the
acquisition of those properties for the benefit of Farah Constructions alone.
At trial, Palmer J upheld Farah Constructions’ claim for the appointment of
a trustee for sale of 11 Deane Street, and dismissed a cross-claim by Say-Dee
seeking a declaration that 13 and 15 Deane Street were held on constructive
trust for the benefit of the parties to the joint venture.6 In doing so, Palmer J
made findings of fact and a ruling on the question whether there had been a
breach of fiduciary obligation by Farah Constructions. First, his Honour found
that, on the facts, there had been no breach of fiduciary obligation.7 Secondly,
Palmer J ruled that Farah Constructions owed no fiduciary obligation to
Say-Dee that could have been breached on the facts.8 Both the findings of fact
and the ruling were reversed by the Court of Appeal.9 In the High Court,
Palmer J’s findings of fact were restored,10 but his ruling was not.11
Consequently, a different view of the fiduciary dimensions of the case was
taken at each stage of the litigation.
In this article, I argue that two fallacies may have characterised the way the
courts handled the fiduciary dimensions of the Farah case. Both fallacies were
manifest in the way that the issues for determination were formulated at trial.
One of them appeared to be present in the judgments of the Court of Appeal
and the High Court, and the judgment of the Court of Appeal appeared to
Restitution in Commercial Law Conference, University of New South Wales, 3–5 August
2007, which will be published as S Degeling and J Edelman (Eds), Unjust Enrichment in
Commercial Law, Thomson, Sydney, 2008.
5 What follows is a simplified account of the facts as stated in the judgment of Palmer J:
Farah trial judgment, above n 2, at [6]–[53].
6 Farah trial judgment, above n 2, at [78]–[79].
7 Ibid, at [55]–[62].
8 Ibid, at [72]–[75].
9 Say-Dee, above n 2, at [65]–[131] and [178]–[179].
10 Farah, above n 1, at [90]–[99]. The High Court also added a finding of fact of its own that
assisted the defendant’s case: see below n 29.
11 Farah, above n 1, at [103]–[105].
Two fiduciary fallacies 3
leave a door open to the other one. The two fiduciary fallacies that arose in the
Farah case did so despite clear statements of authority pointing them out and
warning against them. If fiduciary law is to achieve the rationality that has
always eluded it, and if parties are to have the certainty of knowing what may
and may not be properly pleaded when bringing fiduciary claims, courts must
seek to expose these fallacies whenever they are relied upon in argument, and
not endorse them or even pass over them in silence.
I First fallacy: There is a fiduciary obligation
of disclosure
A The law
In Australian law, there is no distinct and freestanding fiduciary obligation
requiring a fiduciary to disclose information to their principal. As the High
Court made clear in Breen v Williams, fiduciaries, qua fiduciaries, owe only
two obligations: the obligation not to be in a position where there is a
substantial possibility of conflict between self-interest and duty; and the
obligation not to derive unauthorised profits from the fiduciary position.12
These obligations are proscriptive in that they describe what a fiduciary is not
permitted to do. Prescriptive obligations — those that describe what a
fiduciary is required to do — are unknown to the law regulating fiduciaries in
Australia.13 An obligation to disclose information, being an obligation the
discharge of which requires action on the part of its holder, is a prescriptive
obligation. In light of Breen v Williams, it follows that an obligation to
disclose information can never be fiduciary in character. Despite occasional
suggestions to the contrary,14 this has been recognised in the case law since
Breen v Williams was handed down,15 and in the academic literature on
fiduciaries.16 It must now be regarded as settled law in Australia.
Despite the fact that fiduciaries, qua fiduciaries, owe no obligation of
12 (1996) 186 CLR 71 at 113 per Gaudron and McHugh JJ, 137–8 per Gummow J; 138 ALR
259. See also Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165; 180 ALR 249 at [74]
per McHugh, Gummow, Hayne and Callinan JJ. But see now Trevorrow v South Australia
(2007) 98 SASR 136; [2007] SASC 285; BC200706102 per Gray J.
13 Such obligations are, however, known in Canada. See, eg, McInerney v McDonald (1992) 93
DLR (4th) 415 at 423 per La Forest J.
14 See, eg, A Duggan, M Bryan and F Hanks, Contractual Non-Disclosure: An Applied Study
in Modern Contract Theory, Longman Professional, Melbourne, 1994, pp 51–71; G M D
Bean, Fiduciary Obligations and Joint Ventures, Clarendon Press, Oxford, 1995, Ch 11; and
Biala Holdings Pty Ltd v Mallina Holdings Ltd (1993) 13 WAR 11; 11 ACSR 785 at 831–2
per Ipp J (Biala Holdings). Note, however, that these two books and Ipp J’s judgment
pre-date Breen v Williams. Note also that all of the authorities to which Ipp J refers in his
judgment to support the proposition that there is a freestanding fiduciary obligation of
disclosure locate the source of an obligation of disclosure, at least in partnerships and
analogous joint venture relationships, in a non-fiduciary duty of good faith.
15 See, eg, National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd
[1998] FCA 564; BC9802104 per Lindgren J; Aequitas v AEFC (2001) 19 ACLC 1006;
[2001] NSWSC 14; BC200101950 per Austin J.
16 See, eg, P Finn, ‘The Fiduciary Principle’ in T G Youdan (Ed), Equity, Fiduciaries and
Trusts, The Carswell Co, Toronto, 1989, pp 1, 29–30; R Nolan, ‘A Fiduciary Duty to
Disclose’ (1997) 113 LQR 220 at 224; R Flannigan, ‘Fiduciary Duties of Shareholders and
Directors’ [2004] Jnl of Business Law 277 at 300.
4 (2007) 2 Journal of Equity
disclosure, questions of disclosure are often central in cases entailing fiduciary
relationships. In Farah itself, the critical question was one of disclosure: had
Farah Constructions disclosed to Say-Dee the council’s view as well as the
existence of the opportunity to purchase 13 and 15 Deane Street? Given the
significance of questions of disclosure in fiduciary cases, it is important to be
clear about the role that disclosure plays in fiduciary law. The editors of
Meagher, Gummow and Lehane’s Equity Doctrines and Remedies describe
that role in the following terms:
If a person occupying a fiduciary position wishes to enter into a transaction which
would otherwise amount to a breach of duty, he must, if he is to avoid liability, make
full disclosure to the person to whom the duty is owed of all relevant facts known
to the fiduciary, and that person must consent to the fiduciary’s proposal.17
In other words, a breach of fiduciary obligation — either the obligation not
to be in a position of conflict of interest and duty or the obligation not to make
unauthorised profits — may be averted or cured by the consent of the principal
to whom the obligation is owed, and the principal’s consent will be effective
only if the fiduciary has first disclosed to the principal any relevant material
information.18 Rather than constituting the discharge of a fiduciary obligation,
disclosure which leads to informed consent confers on a fiduciary immunity
from liability for the consequences of actions that would ordinarily amount to
breaches of fiduciary obligation.19 And the immunity-conferring function of
disclosure and informed consent provides a complete explanation of the role
of disclosure in fiduciary law.
To say that disclosure and informed consent have an immunity-conferring
function in fiduciary law is not to say that a person who is performing a
fiduciary role never owes an obligation to disclose material information to
their principal. In fact, an obligation of disclosure is owed by some fiduciaries.
But they do not owe that obligation because they are fiduciaries. To put it
another way, the explanation and justification of an obligation of disclosure
never depends on the fact that its holder performs a fiduciary role, even if its
holder happens to perform such a role. The source of the obligation is always
elsewhere. It follows that the breach of an obligation of disclosure may not be
described as a breach of fiduciary obligation, even where the person who has
breached the obligation is a fiduciary. In this regard, it is worth recalling
Millett LJ’s timely reminder in Bristol and West Building Society v Mothew:
‘it is obvious that not every breach of duty by a fiduciary is a breach of
fiduciary duty.’20
The non-fiduciary sources of an obligation of disclosure are various and
differ depending on the nature of the relationship between the holder of the
17 R P Meagher, J D Heydon and M J Leeming (Eds), Meagher, Gummow and Lehane’s Equity
Doctrines and Remedies, 4th ed, Butterworths, Sydney, 2002, para 5-115.
18 New Zealand Netherlands Society ‘Oranje’ Incorporated v Kuys [1973] 1 WLR 1126
at 1131–2 per Lord Wilberforce; [1973] 2 All ER 1222; Breen v Williams (1996) 186 CLR
71 at 125–6 per Gummow J; 138 ALR 259; Maguire v Makaronis (1997) 188 CLR 449
at 466–7 per Brennan CJ, Gaudron, McHugh and Gummow JJ; 144 ALR 729.
19 In Paul Finn’s words, the effect of informed consent is to ‘displace the fiduciary’s duty’:
Fiduciary Obligations, The Law Book Company, Sydney, 1977, p 242.
20 [1998] Ch 1 at 16; [1996] 4 All ER 698. See also Hilton v Parker Booth and Eastwood
(a firm) [2005] 1 All ER 651 at 660 per Lord Walker of Gestingthorpe.
Two fiduciary fallacies 5
obligation and the person for whose benefit the obligation is held.21 Given that
the relationship between Farah Constructions and Say-Dee was one of joint
venture, I will concentrate on whether a non-fiduciary obligation of disclosure
may be owed in such a relationship and the source of any such obligation. To
the extent that an analogy may be drawn between a joint venture relationship
and a partnership, one would expect to find sources of a joint venturer’s
obligation of disclosure in partnership law.22 And indeed this is the case.
Partners owe to each other a general law obligation to display ‘complete’23 or
‘utmost’24 good faith in all partnership dealings and transactions. Entailed in
the obligation of good faith is a more specific obligation, to disclose to one’s
partners all material information affecting the partnership. This obligation of
disclosure, which flows from the obligation of good faith, is reinforced
explicitly in the partnership legislation.25 Joint venturers, whether their
relationship satisfies the definition of partnership or is analogous to
partnership, owe to each other this obligation of good faith and the associated
obligation of disclosure.26 In addition, it is arguable that joint venturers, even
those whose relationship is not analogous to partnership, may owe an
obligation of disclosure the source of which is an implied contractual
obligation of good faith.27 However, for present purposes it is unnecessary to
pursue that thought further, given that joint venturers whose relationship either
is a partnership or is analogous to partnership clearly owe to each other a
non-fiduciary obligation of disclosure whose source is to be found in
partnership law, and given that in Farah it was not disputed that the
relationship between Farah Constructions and Say-Dee was, at the least,
analogous to a partnership.28
To recap, then: there are three points to keep in view when considering
questions of disclosure in cases entailing fiduciary relationships. First, there is
no distinct and freestanding fiduciary obligation of disclosure in Australian
law. Secondly, the role of disclosure and informed consent in fiduciary law is
explained by their immunity-conferring function in situations where liability
for breach of fiduciary obligation would otherwise arise. And thirdly, a person
who is a fiduciary may owe a non-fiduciary obligation of disclosure. Where a
21 P Finn, ‘Good Faith and Disclosure’ in P Finn (Ed), Essays on Torts, Law Book Company
Ltd, Sydney, 1989, p 150 discusses a number of such sources.
22 Some argue that, in certain cases, the joint venture relationship simply is a form of
partnership; others argue that, although the joint venture relationship is by definition never
a form of partnership, where a given joint venture is sufficiently analogous to a partnership
it ought to be governed by similar principles of law. For a discussion of the issues, see B H
McPherson, ‘Joint Ventures’ in P Finn (Ed), Equity and Commercial Relationships, Law
Book Company Ltd, Sydney, 1987, p 19.
23 R C l’Anson Banks, Lindley and Banks on Partnership, 18th ed, Sweet and Maxwell,
London, 2002, para 16-01.
24 United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 6 per Gibbs CJ; 60
ALR 741.
25 See, eg, Partnership Act 1892 (NSW) s 28: ‘Partners . . . are bound to render true accounts
and full information of all things affecting the partnership to any partner or the partner’s
legal representatives.’
26 N Thompson, ‘The Nature of the Joint Venture’ in W D Duncan (Ed), Joint Ventures Law in
Australia, 2nd ed, Federation Press, Sydney, 2005, p 1, para 1.11.4.
27 Ibid, para 1.11.5.
28 Say-Dee, above n 2, at [36].
6 (2007) 2 Journal of Equity
fiduciary is a joint venturer, the source of such an obligation may be
partnership law.
B The judgments in Farah
1 Palmer J
To what extent did the courts in Farah keep these three points in view? At
trial, Palmer J found that Farah Constructions had disclosed to Say-Dee
information about the opportunity to acquire 13 and 15 Deane Street.29 That
finding resolved one of the issues that Say-Dee had presented to his Honour
for determination: whether Farah Constructions had failed to disclose the
information in question ‘in breach of its fiduciary duty’.30 Having made the
finding, Palmer J continued:
The consequence of this finding is that, even if Farah [Constructions] had a fiduciary
duty to Say-Dee to offer it the possibility of participation in the development of Nos
13 and 15, Farah [Constructions] discharged that duty.31
His Honour was correct to refrain from stating in this passage that Farah
Constructions had a fiduciary obligation to disclose information to Say-Dee.
Moreover, as his Honour went on to point out, Farah Constructions did not
owe a fiduciary obligation to offer any possibilities to Say-Dee.32 This was
also correct. The proposition that there can be a fiduciary obligation requiring
a fiduciary to give a profit-making opportunity to their principal is a fallacy.
I consider it in detail below.33 Thus, in so far as it referred to disclosure,
Palmer J’s judgment was consistent with an understanding of disclosure in
fiduciary cases that attributes to it, when it leads to informed consent, an
immunity-conferring function. It is true that Palmer J made no reference to the
possibility that Farah Constructions owed Say-Dee a non-fiduciary obligation
of disclosure. However, that is to be expected given that his Honour thought
that relevant material information — at least that relating to the opportunity to
acquire 13 and 15 Deane Street — was, in fact, disclosed.34 In short,
Palmer J’s judgment kept in view the three points about disclosure that
I discussed above.
29 Farah trial judgment, above n 2, at [55]. Justice Palmer stated that he was ‘prepared to find’
that information about the council’s view was not disclosed ‘in terms’ to Say-Dee: at [66].
However, his Honour thought that nothing turned on that lack of disclosure: at [67]–[76].
The Court of Appeal made much of this finding in reaching its view that Farah Constructions
had acted in breach of fiduciary obligation: Say-Dee, above n 2, at [41]–[64]. However, the
High Court found that, even if information about the council’s view was not disclosed ‘in
terms’, it was nonetheless disclosed ‘in effect and substance’: Farah, above n 1,
at [39]–[42].
30 Farah trial judgment, above n 2, at [5].
31 Ibid, at [62].
32 Ibid, at [75]–[77].
33 See Part II below.
34 It is arguable that Palmer J should have explicitly recognised a breach of a non-fiduciary
obligation of disclosure given his finding that information about the council’s view was not
disclosed ‘in terms’ to Say-Dee. However, his Honour stopped short of making any firm
finding on the question of disclosure of the council’s view. It appears that he did not have
to because the question of a breach of a non-fiduciary obligation of disclosure with respect
to the council’s view was not raised in argument, despite the fact that one of the issues put
Two fiduciary fallacies 7
2 The NSW Court of Appeal
In the Court of Appeal, Palmer J’s findings of fact on the question of
disclosure were reversed.35 Moreover, the court stated that Farah
Constructions had a ‘duty’ to disclose to Say-Dee the information about the
council’s view and the opportunity to acquire 13 and 15 Deane Street.36 The
court was not referring to a non-fiduciary obligation of disclosure arising from
partnership law. So much is clear from the court’s description of Farah
Constructions’ duty as ‘the fiduciary’s duty of disclosure so as to avoid acting
to the detriment of the interests of the party to whom the duty is owed’.37
Arguably, the court was employing the word ‘duty’ in a loose sense to
convey the idea that disclosure and informed consent confer immunity on a
person from liability for breach of fiduciary obligation. Such an imprecise use
of the language of duty when it comes to questions of disclosure by fiduciaries
is far from unknown in the case law and, indeed, has been defended
judicially.38 To the extent that the Court of Appeal was simply employing the
word ‘duty’ loosely to describe the immunity-conferring function of
disclosure and informed consent, its judgment must be regarded as entirely in
accordance with orthodox principles of fiduciary law. And, indeed, reasons for
favouring this interpretation may be found in the judgment itself. For instance,
the references to a ‘duty’ of disclosure followed an extended passage of the
judgment in which the court applied orthodox principles governing
proscriptive fiduciary obligations in Australian law to the facts of the case
before it.39 And the reference to the function of disclosure being ‘to avoid
acting to the detriment’ of the principal carried with it the clear inference that
disclosure is not an end in itself but rather is to be understood with reference
to some consequence that it brings about. This was consistent with
understanding disclosure as immunity-conferring.
However, reasons for regarding the references to a ‘duty’ of disclosure in
the Court of Appeal’s judgment as a departure from orthodox principles of
fiduciary law may also be drawn out of that judgment. First, the language
employed by the Court of Appeal — ‘Farah [Construction]’s duty was to
disclose fully and accurately to Say-Dee’ — most easily bears a meaning
consistent with the proposition that a fiduciary is obligated to disclose material
information.40 Secondly, although the court’s reference to the function of
disclosure being ‘to avoid acting to the detriment’ of the principal rightly
inferred that disclosure is to be understood with reference to its consequences,
it seemed to misunderstand the consequences of disclosure. Far from ensuring
that a fiduciary avoids acting to the detriment of the principal’s interests,
disclosure and informed consent, because of their immunity-conferring
function, ensure that a fiduciary may so act without attracting liability for
before him for determination was whether there was information ‘which it was the duty of
Farah [Constructions] to disclose to Say-Dee’: Farah trial judgment, above n 2, at [5].
35 Say-Dee, above n 2, at [37]–[131].
36 Ibid, at [132], [133], [177].
37 Ibid, at [177].
38 Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566; [2001] FCA 1628;
BC200107154 at [32]–[33] per Finkelstein J.
39 Say-Dee, above n 2, at [169]–[176].
40 Ibid, at [177].
8 (2007) 2 Journal of Equity
breach of fiduciary obligation. Thirdly, earlier in its judgment, the court had
referred with approval to the judgment of Ipp J of the Supreme Court of
Western Australia in Biala Holdings,41 and the court cited that judgment again
when making its findings on the question of breach of fiduciary obligation.42
In Biala Holdings, Ipp J had stated that there was a distinct and freestanding
fiduciary obligation of disclosure.43
To the extent that the judgment of the NSW Court of Appeal may be
interpreted in more than one way on the question of the role of disclosure in
fiduciary law, that judgment was ambiguous. Because of this ambiguity, the
possibility cannot be ruled out that the reasoning of the Court of Appeal
depended on a fallacy, the fallacy being in the proposition that there exists a
distinct and freestanding fiduciary obligation of disclosure. As I discussed
above, the High Court exposed and criticised the basis of this fallacy in Breen
v Williams.44 However, in Farah, not only did the High Court appear to ignore
the possibility that the judgment of the NSW Court of Appeal had rested on
the fallacy; the judgment of the High Court appeared to rest on the fallacy as
well.
3 The High Court
The High Court restored the findings of fact of Palmer J on the question of
disclosure.45 However, like the Court of Appeal, the High Court referred in its
judgment to the ‘duty to disclose’, and elsewhere to the ‘obligation to
disclose’, that Farah Constructions owed to Say-Dee.46 Their Honours did not
explicitly describe the duty to disclose as a fiduciary one, but their judgment
contained the following passage:
The information about the council’s attitude came to Farah [Constructions] in its
fiduciary capacity; and while the other items of information [about 13 and 15 Deane
Street] did not, they represented opportunities which it was not open to Farah
[Constructions] to exploit, consistently with its fiduciary duty, unless Say-Dee gave
its informed consent to a contrary course. That is because to exploit those
opportunities without informed consent would be to place Farah [Constructions] in
a position of conflict between its self-interest and its duty to Say-Dee in relation to
No 11 [Deane Street].47
To a degree, this passage reflected orthodox principles. However, in one
respect, it incorporated the fallacy that may also have been present in the
judgment of the Court of Appeal.
The passage reflected orthodox principles to the extent that their Honours
recognised the immunity-conferring function of disclosure. Their Honours
recognised that Farah Constructions would have been in breach of the
obligation not to be in a position of conflict of interest and duty if it had
attempted to acquire 13 and 15 Deane Street without disclosing the existence
of the opportunity to do so to Say-Dee and seeking Say-Dee’s consent to that
41 (1993) 13 WAR 11; 11 ACSR 785.
42 Say-Dee, above n 2, at [74] and [181].
43 (1993) 13 WAR 11; 11 ACSR 785 at 832.
44 (1996) 186 CLR 71; 138 ALR 259.
45 Farah, above n 1, at [43]–[99].
46 Ibid, at [103] and [105].
47 Ibid, at [103].
Two fiduciary fallacies 9
acquisition. Moreover, their Honours recognised that informed consent would
have displaced Farah Constructions’ obligation not to be in a position of
conflict of interest and duty, enabling Farah Constructions to acquire 13 and
15 Deane Street even though a conflict of interest and duty would thereby
arise. In other words, their Honours recognised that informed consent would
have conferred on Farah Constructions an immunity from liability for breach
of fiduciary obligation when it came to the acquisition of 13 and 15 Deane
Street. To that extent, their references to a ‘duty’ or ‘obligation’ of disclosure
ought not to be read literally.
However, there is a troubling phrase in this passage of the High Court’s
judgment that is not easily reconciled with orthodox principles. Having
referred to Farah Constructions’ obligation to disclose information about the
council’s view to Say-Dee, their Honours said this: ‘[t]he information about
the council’s attitude came to Farah [Constructions] in its fiduciary
capacity’.48 How is this statement, read in context, to be understood? It
appears that the statement was intended to reveal the reason why Farah
Constructions had to disclose the information in question. If this is what the
statement was intended to do, then the statement was a departure from
orthodoxy. It is never true to say that the reason why a fiduciary must disclose
material information to their principal is because that information has become
known to the fiduciary qua fiduciary. To say that is to assert that there is a
distinct and freestanding fiduciary obligation of disclosure which, as I have
discussed above, is a fallacy. There are only two reasons why a fiduciary has
to disclose material information to their principal: first, if they wish to gain
immunity from liability for breach of fiduciary obligation; and/or secondly,
depending on the case, because they owe their principal a non-fiduciary
obligation so to disclose.
To the extent that this passage of the judgment of the High Court referred
to a fiduciary obligation of disclosure, the judgment not only left undisturbed
a fallacy that may have characterised the judgment of the Court of Appeal, it
also incorporated that fallacy. Their Honours should have avoided the fallacy
by pointing out: first, that there is no fiduciary obligation to disclose material
information that a fiduciary has come to know qua fiduciary; secondly, that
nonetheless in some cases there may be a non-fiduciary obligation to disclose
material information that a fiduciary has come to know, for instance, qua joint
venturer, partner or agent;49 and thirdly, that in all cases disclosure and
informed consent have an immunity-conferring function in fiduciary law.
C The hypothetical case of Farah II
It might be objected that this analysis of the judgments of the Court of Appeal
and the High Court in the Farah case makes too much of what were, in
48 Ibid, at [103].
49 Indeed, there is no reason why a fiduciary may not have a non-fiduciary contractual
obligation to disclose material information that the fiduciary has come to know qua
fiduciary. In such an unlikely situation, the circumstances in which disclosure is required
will be identical to those in which it would be required were there a fiduciary obligation of
disclosure. However, that does not make the former type of obligation a fiduciary obligation.
Its character depends on what explains and justifies it, and it is fully explained and justified
by the existence of a contract.
10 (2007) 2 Journal of Equity
essence, unimportant distinctions. To the extent that the language of ‘duty’ and
‘obligation’ was employed loosely in those judgments to convey the idea that
disclosure has an immunity-conferring function in fiduciary law — and that
appears to have been the case, in part, in both judgments — this objection has
force. But, as I hope to have shown above, the passages in the judgments of
the Court of Appeal and the High Court dealing with the question of disclosure
may not be explained away entirely by pointing to the imprecise use of
language. And the conceptual distinctions between a fiduciary obligation of
disclosure, the immunity-conferring role of disclosure, and a non-fiduciary
obligation of disclosure are far from unimportant.
To illustrate the point, imagine a hypothetical case, Farah II, whose facts
are identical to the facts of Farah, except as follows. In Farah II, Farah
Constructions receives the report expressing the council’s view about
amalgamation but, because it considers the acquisition of adjoining blocks of
land to be manifestly beyond the means of the joint venture, does not disclose
the council’s view to Say-Dee. In light of the rejection of the planning
application, and not knowing the council’s view, Say-Dee loses interest in the
joint venture and sells its interest in 11 Deane Street to Farah Constructions.
At the time of sale, Farah Constructions has no intention to pursue a larger
development with adjoining blocks of land. Rather, it intends to lodge a
further planning application proposing a smaller development at 11 Deane
Street. Farah Constructions lodges its further planning application and this too
is rejected. Only now, having reviewed its position in light of the council’s
latest rejection and having gained access to a new source of finance, does
Farah Constructions approach the owners of 13 and 15 Deane Street with a
view to acquiring those properties. The properties are acquired by Farah
Constructions. Say-Dee discovers that the council’s view was never disclosed
to it. Say-Dee sues Farah Constructions, seeking a declaration that Farah
Constructions holds a proportion of 13 and 15 Deane Street on constructive
trust for Say-Dee. Say-Dee argues that had disclosure been made, it (Say-Dee)
would have sought to purchase 13 and 15 Deane Street, either by itself or
together with Farah Constructions.
In Farah II, if Say-Dee demonstrates that Farah Constructions has acquired
13 and 15 Deane Street as a consequence of a breach of fiduciary obligation,
Say-Dee might obtain its declaration of constructive trust.50 Here is where the
conceptual distinctions between a fiduciary obligation of disclosure, the
immunity-conferring role of disclosure, and a non-fiduciary obligation of
disclosure become important. Imagine that, in Farah II, the court accepts the
proposition that Farah Constructions’ failure to disclose the council’s view is
a breach of a distinct and freestanding fiduciary obligation of disclosure. In
consequence, the court is also likely to find that Farah Constructions’
acquisition of 13 and 15 Deane Street is, to an extent, a direct consequence —
in a ‘but for’ sense — of its breach of fiduciary obligation.51 More precisely,
50 As happened in Boardman v Phipps [1967] 2 AC 46; [1966] 3 All ER 721 and was
contemplated by Mason J in Hospital Products Ltd v United States Surgical Corporation
(1984) 156 CLR 41; 55 ALR 417.
51 Indeed, Say-Dee will not even have to prove this causal link: Say-Dee, above n 2, at
[186]–[193]. See generally Brickenden v London Loan and Savings Co [1934] 3 DLR 465.
Two fiduciary fallacies 11
the court is likely to find that, but for its breach of fiduciary obligation, Farah
Constructions would only have acquired a proportion – say, half — of 13 and
15 Deane Street, because Say-Dee would have insisted on acquiring at least a
half share in those properties. Accordingly, the court may find that, because
Farah Constructions has acquired a proportion of 13 and 15 Deane Street that
it would not have acquired but for its breach of obligation, it is required to
disgorge that proportion to Say-Dee by way of a constructive trust.52
Therefore, in Farah II the availability of a disgorgement remedy like the
constructive trust may turn on whether or not the court recognises a fiduciary
obligation of disclosure. This conclusion is strengthened once it is observed
that Farah II is not a case entailing a breach of the fiduciary obligation not to
be in a position of conflict of interest and duty or the fiduciary obligation not
to make unauthorised profits.53 In Farah II, Farah Constructions’ interest in
developing a larger site made up of 11, 13 and 15 Deane Street does not arise
until after its fiduciary relationship with Say-Dee has ended. As a result, that
interest cannot conflict with any duty that Farah Constructions owes to
Say-Dee because Farah Constructions owes no duty to Say-Dee at the relevant
time. For a similar reason, Farah Constructions cannot be in breach of the ‘no
profit’ rule. It does not learn of the opportunity to acquire 13 and 15 Deane
Street until after its fiduciary relationship with Say-Dee has ended, and
therefore any profit that it makes from taking up that opportunity is beyond the
reach of the rule.
Moreover, even though, in Farah II it is likely that Farah Constructions
owes Say-Dee an obligation of disclosure whose source is partnership law,
and even though Farah Constructions appears to have breached that obligation
by not disclosing the council’s view to Say-Dee, it is not open to the court to
declare a constructive trust over 13 and 15 Deane Street in response to liability
for this breach of non-fiduciary obligation. Partners, and arguably also
non-partner joint venturers whose relationship is analogous to that of partners,
owe an obligation to disgorge profit derived from transactions concerning the
partnership or by use of the property, name, or a business connection, of the
partnership.54 Failing, in good faith, to disclose a fact in light of which a
profit-making opportunity might be attractive to a partner, and then, again in
good faith, taking up that opportunity for oneself and profiting after the
partnership has ended cannot be characterised as a derivation of profit from a
partnership transaction nor does it entail the use of the property, name or a
business connection of the partnership. Consequently, there is no basis for
disgorgement of that profit according to partnership law.
In a case like the hypothetical Farah II, the remedies available to a plaintiff
depend, in part, on how a fiduciary’s actions are characterised. If, in such a
case, a fiduciary’s actions are characterised incorrectly as a breach of fiduciary
obligation, a plaintiff may be awarded a remedy to which they are not entitled.
And this is precisely what may happen if a fiduciary’s failure to disclose
52 Indeed, the court may even find that Farah Constructions is required to disgorge all of 13
and 15 Deane Street: see Murad v Al-Saraj [2005] EWCA Civ 959. For a discussion of the
issues, see V Vann, ‘Causation and Breach of Fiduciary Duty’ [2006] Singapore Jnl of Legal
Studies 86.
53 In this respect, Farah II is different from Murad v Al-Saraj.
54 l’Anson Banks, above n 23, paras 16-11–16-36; Partnership Act 1892 (NSW) s 29.
12 (2007) 2 Journal of Equity
material information to their principal is incorrectly characterised as a breach
of fiduciary obligation. It is clear, then, that in a case like Farah II, nothing
could be more important than getting correct the conceptual distinctions
between a (fictitious) fiduciary obligation of disclosure, the
immunity-conferring role of disclosure, and a non-fiduciary obligation of
disclosure. It may be true, as Finkelstein J put it in Fitzwood Pty Ltd v Unique
Goal Pty Ltd (in liq), that the law is ‘not seriously injured’ when a court speaks
of a prescriptive fiduciary obligation of disclosure even though it means a
failure, through lack of disclosure, to displace a proscriptive fiduciary
obligation not to be a position of conflict of interest and duty.55 However, the
law is seriously injured if, in a case like Farah II, a court speaks of a
prescriptive fiduciary obligation of disclosure, leading to the award of a
disgorgement remedy, even though there is no relevant breach of proscriptive
fiduciary obligation that could support the imposition of such a remedy. Such
an outcome is the logical consequence of the fallacy that should have been,
but was not, rejected clearly by the appeal courts in Farah.
II Second fallacy: There is a fiduciary obligation to
give a profit-making opportunity to the principal
A The law
If a fiduciary learns of a profit-making opportunity, under what circumstances
must they give it to their principal? By ‘give an opportunity to their principal’,
I mean take actions that will enable or assist the principal to take up the
opportunity either for their own benefit or together with the fiduciary. Such
actions might include offering to share the opportunity with the principal or
offering to deflect the opportunity to the principal outright. More specifically,
they might include introducing the principal to a person connected with the
opportunity, assisting the principal to obtain finance for the purpose of taking
up the opportunity, or making available to the principal the fiduciary’s time,
effort and skills in connection with the exploitation of the opportunity. In
many leading cases where fiduciaries have learned of profit-making
opportunities, this particular question has not arisen for consideration, either
because the principal was unable or did not wish to take up the opportunity in
question, or because the opportunity, owing to its nature, could only ever have
been an opportunity for the fiduciary.56 Nonetheless, the question requires an
answer because, as Farah makes clear, even though the question arises only
rarely there may be cases in which the outcome depends on it.
From the moment when a fiduciary learns of a profit-making opportunity,
they are, qua fiduciary, exposed to risk on two fronts. First, if they wish to take
up the opportunity, there is a risk that their interest in doing so may conflict
55 (2001) 188 ALR 566; [2001] FCA 1628; BC200107154 at [33].
56 See, eg, Keech v Sandford (1726) Sel Cas Ch 61 (the opportunity would never have been
offered to the principal); Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134; [1942] 1 All ER
378 (the principal could not afford to take up the opportunity); Boardman v Phipps [1967]
2 AC 46; [1966] 3 All ER 721 (the principal had no desire to take up the opportunity and
would have required the permission of the court to do so); Attorney-General for Hong Kong
v Reid [1994] 1 AC 324; [1994] 1 All ER 1 (the opportunity was not one that could be given
to the principal, being an opportunity to accept an illegal bribe).
Two fiduciary fallacies 13
with a duty that they owe to their principal. Secondly, even if their interest in
taking up the opportunity may not conflict with any duty that they owe to their
principal, if they learned of the opportunity qua fiduciary and profit from
taking it up, they may be required to account for that profit. In other words,
from the moment when the fiduciary learns of the profit-making opportunity,
they are at risk of breaching what are usually referred to in shorthand as the
‘no conflict’ and the ‘no profit’ rules. Of course, as I discussed above, if the
fiduciary discloses material information about the opportunity to their
principal and gains the principal’s informed consent to taking up that
opportunity, the fiduciary will be able to take up the opportunity immune from
liability for any breach of fiduciary obligation that would otherwise have
arisen. Disclosure is therefore one option available to a fiduciary who learns
of a profit-making opportunity and wishes to take it up; when disclosure leads
to informed consent, the risks associated with the opportunity are defused and
the opportunity may be taken up confidently.57
However, there are at least two reasons why a fiduciary may be less than
enthusiastic about disclosure. First, disclosure might not lead to informed
consent. Rather than consenting to the fiduciary taking up a profit-making
opportunity, the principal to whom disclosure has been made may choose to
refuse consent and may even choose, having refused consent, to pursue the
opportunity in question themselves.58 Or the principal may choose to give
consent but only if the fiduciary involves the principal in some way in the
exploitation of the opportunity.59 Or the fiduciary may believe that informed
consent has been given, but it may turn out not to have been.60 These are risks
associated with disclosure, particularly when the relationship between the
fiduciary and the principal is such that the principal does not owe reciprocal
fiduciary obligations to the fiduciary and is free to pursue their own interests
in priority to those of the fiduciary.61
Secondly, a fiduciary may not wish to make disclosure and seek informed
consent because they may believe that it is possible to take up the
profit-making opportunity without breaching the ‘no conflict’ rule, the ‘no
profit’ rule, or any non-fiduciary obligation that they owe to their principal.
Where that belief reflects the facts of the situation, the fiduciary is entitled to
take up the opportunity without having made disclosure and sought informed
consent. It is sometimes said that a fiduciary must be selfless in such
circumstances.62 This is not true. As I discussed above, a fiduciary is entitled
to be as selfish as they like, in a situation where they have just learned of a
profit-making opportunity or in any other situation for that matter, so long as
57 See, eg, Queensland Mines Ltd v Hudson (1978) 18 ALR 1.
58 The High Court in Farah alluded to this possibility: above n 1, at [108].
59 This risk would have arisen (and almost certainly would have been realised) had Dr Chan
sought the consent of Dr Zacharia in Chan v Zacharia (1984) 154 CLR 178; 53 ALR 417.
60 See, eg, Guinness plc v Saunders [1990] 2 AC 663; [1990] 1 All ER 652; possibly also
Boardman v Phipps [1967] 2 AC 46; [1966] 3 All ER 721.
61 Of course, these will only be regarded as risks by the fiduciary who wishes to take up the
profit-making opportunity. If the fiduciary has no desire to take up the profit-making
opportunity, the fiduciary will presumably view these not with concern as risks, but with
equanimity as possibilities.
62 The ne plus ultra is the well-known judgment of Cardozo J in Meinhard v Salmon 164 NE
545 (NY, 1928).
14 (2007) 2 Journal of Equity
they are not in a position of conflict of interest and duty, do not make
unauthorised profit qua fiduciary, and do not breach any non-fiduciary
obligations that they owe to their principal.63 Beyond those — admittedly
significant — constraints, a fiduciary’s actions, just like the actions of a
non-fiduciary, are unfettered, at least in jurisdictions like Australia where
fiduciaries qua fiduciaries owe only proscriptive obligations. Apart from
avoiding conflicts and refraining from making unauthorised profit, there is no
fiduciary obligation to do anything, including to take any of the actions that I
set out above and described loosely as being actions that ‘give’ the opportunity
to the principal in some sense.
When it comes to taking up profit-making opportunities, there appears to be
a strong argument for confining fiduciary obligations in this way. In a market
economy, all else being equal, the exploitation of profit-making opportunities
by the application of effort and skill over time is considered to be desirable.64
Such profit-making opportunities, if they are to be realised, usually if not
always entail exposure to a degree of risk. Given that generating wealth is
regarded as desirable and given the risk entailed in exploiting profit-making
opportunities, it is thought that fiduciaries ought to be encouraged to pursue
such opportunities to the fullest extent consistent with their fiduciary roles. If
fiduciaries are not encouraged to the fullest extent, they might choose not to
pursue profit-making opportunities, given the risk entailed, in situations where
it is desirable that they choose to pursue those opportunities. The argument is
that this encouragement would not be provided as fully as it might be if
fiduciaries were required to involve their principals in their exploitation of
profit-making opportunities, let alone if fiduciaries were required to deflect
those opportunities to their principals. Of course, where fiduciaries owe
non-fiduciary obligations to involve their principals in exploiting
profit-making opportunities or to deflect those opportunities to their
principals, limits exist within which those opportunities may be exploited.65
But in the absence of such limits, there is a strong argument to be made that
fiduciaries ought to be allowed to exploit profit-making opportunities
unfettered, and this is reflected in the orthodox principles relating to fiduciary
obligations that were set out by the High Court of Australia in Breen v
Williams.66
We are now in a position to sketch out an answer, based on principle, to the
question posed at the beginning of this section: if a fiduciary learns of a
profit-making opportunity, under what circumstances must they give it to their
principal? Three points must be reiterated. First, and obviously, if a fiduciary
owes a non-fiduciary — say, a contractual — obligation to give their principal
63 Breen v Williams (1996) 186 CLR 71 at 113 per Gaudron and McHugh JJ, 137–8 per
Gummow J; 138 ALR 259.
64 The ceteris paribus clause here is designed to draw attention to the fact that the exploitation
of profit-making opportunities is only considered to be desirable within certain limits that
are set with reference to values and principles external to the market economy. For example,
no reasonable person would argue that working hard to develop a thriving and profitable
business in the slave trade is desirable.
65 Whether or not, and the extent to which, such limits are justified is a large question, the
answer to which will vary depending on the sources of the non-fiduciary obligations in view.
66 (1996) 186 CLR 71; 138 ALR 259.
Two fiduciary fallacies 15
such an opportunity, then they must do so. Secondly, if a fiduciary wishes to
defuse the risk associated with learning of a profit-making opportunity — the
risk of being in breach of either the ‘no conflict’ rule or the ‘no profit’ rule or
both — then the fiduciary should disclose material information about the
opportunity to the principal and seek informed consent to taking up the
opportunity. As I discussed above, a fiduciary owes no fiduciary obligation to
disclose and seek informed consent in this way, although they may owe a
non-fiduciary obligation of disclosure. Nonetheless, for the fiduciary who
wishes to take up a profit-making opportunity, disclosing material information
and seeking informed consent is a prudent course of action. It is a prudent
course of action because it defuses the risks associated with learning of the
profit-making opportunity, but in choosing it the fiduciary runs further risks,
including the risk that the principal will refuse consent and seek to take up the
opportunity for themselves. If this happens, in a sense the fiduciary will have
given the opportunity to their principal. But they will not have done so
because they were obligated to, rather, they will have done so because they
sought to avoid acting in breach of obligation. Thirdly, and importantly, a
fiduciary never owes a fiduciary obligation to do anything that might amount
to giving a profit-making opportunity to their principal.
At this point, two further questions emerge. First, how likely is it that a case
will arise in which a fiduciary takes up a profit-making opportunity without
thereby breaching a non-fiduciary obligation that they owe to their principal,
the content of which is to give the opportunity to the principal? If the answer
to this first question is ‘very unlikely’, then it might be argued that it is a
matter of little practical significance that there is no fiduciary obligation to
give an opportunity to the principal. And secondly, is it ever the case that a
fiduciary who takes up a profit-making opportunity without the informed
consent of their principal is not thereby in breach of either the ‘no conflict’
rule or the ‘no profit’ rule? If the answer to this second question is ‘no’, then
the practical significance of the insight that there is no fiduciary obligation to
give a profit-making opportunity to the principal will vanish entirely, because
in every case where such an obligation might have been owed and breached,
the fiduciary will be a breach of a separate, proscriptive, fiduciary obligation
anyway. However, as we shall see, the answer to the first question is ‘not
unlikely’, and the answer to the second question is ‘yes’.
In answering the first question, let us begin by setting aside cases in which
a fiduciary takes up a profit-making opportunity in circumstances where there
is no possibility that they are in breach of any obligation — fiduciary or
non-fiduciary — that they owe to their principal. An example is where a
trustee profits by selling shares that they own in their personal capacity
because they have learned some publicly available information about the
company in which the shares are held. Such cases are not of present interest
because, in them, the fiduciary does not learn of the profit-making opportunity
in question qua fiduciary.67 Furthermore, for a similar reason let us set aside
cases in which a person breaches a non-fiduciary obligation by taking up a
profit-making opportunity, but the person who has breached that non-fiduciary
67 Aas v Benham [1891] 2 Ch 244 appears to have been treated by the English Court of Appeal
as such a case.
16 (2007) 2 Journal of Equity
obligation is not a fiduciary. Such cases demand to be analysed in terms that
do not implicate fiduciary principles, for instance as cases of breach of
contract or breach of confidence.68
That leaves cases in which a fiduciary does learn of a profit-making
opportunity qua fiduciary. How likely is it in this type of case that a fiduciary
will take up the opportunity without thereby breaching a non-fiduciary
obligation that they owe to their principal, the content of which is to give that
opportunity to the principal? In certain cases where fiduciaries are in breach
of the ‘no conflict’ rule, it appears distinctly unlikely. That is because in some
cases, breaches of the ‘no conflict’ rule entail a self-interested breach of a
non-fiduciary obligation that requires a profit-making opportunity to be given
to the principal. A good example is found in Consul Developments Pty Ltd v
DPC Estates Pty Ltd.69 There, the fiduciary, who was an employee of the
principal, diverted profit-making opportunities away from the principal and
towards a company controlled by his friend with whom he had a profit-sharing
arrangement. This constituted a flagrant breach of the fiduciary’s employment
contract; the fiduciary had been employed to find and present just such
opportunities to his principal. Moreover, the fiduciary’s actions constituted a
breach of the ‘no conflict’ rule because, by breaching his non-fiduciary
contractual obligation, the fiduciary brought that obligation into direct conflict
with his interest in profiting once the company controlled by his friend
realised the opportunities in question. Consul Developments Pty Ltd v DPC
Estates Pty Ltd illustrates well that in cases where a fiduciary has breached the
‘no conflict’ rule, the breach may take the form of diverting a profit-making
opportunity away from the principal and towards the fiduciary in breach of a
non-fiduciary obligation.70
However, even if it is correct to say that a breach of the ‘no conflict’ rule
often entails a breach of a non-fiduciary obligation, it is incorrect to say that
this is always the case. The rule proscribes not only actual conflicts of interest
and duty, but also possible conflicts of interest and duty. A possible conflict of
interest and duty may arise where a fiduciary has an interest in taking up a
profit-making opportunity and there is a possibility that the interest will, at
some moment in the future, come into conflict with a non-fiduciary obligation
that the fiduciary does not presently but may at the future moment owe to the
principal. Because the fiduciary does not yet owe the non-fiduciary obligation
in question, even though there is a possibility that the fiduciary’s interest may
conflict with the obligation once it comes to be owed, it may not be said that
the breach of the ‘no conflict’ rule that arises in such a case entails the breach
68 See, eg, Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; 55
ALR 417 (breach of contract); Lac Minerals Ltd v International Corona Resources Ltd
(1989) DLR (4th) 129 (breach of confidence).
69 (1975) 132 CLR 373; 5 ALR 231.
70 Industrial Development Consultants Ltd v Cooley [1972] 2 All ER 162; [1972] 1 WLR 443
(breach of an obligation in a contract of employment); Canadian Aero Service Ltd v
O’Malley (1973) 40 DLR (3d) 371 (breaches of obligations, arising out of contracts of
employment, which survived the resignation of the employees); Chan v Zacharia (1984) 154
CLR 178; 53 ALR 417 (breach of an obligation under a partnership deed and the general law
relating to partners).