Case: Law Society of New South Wales v Foreman (1994) 34 NSWLR 408
Outcome: considered
ASIC's answer to this conundrum is to be found in eleven propositions to which I will refer later. At the heart of them is the proposition that where the inclusion of a particular term in a contract between a fiduciary and client would create an actual or potential conflict of interest between the fiduciary and the client, the fiduciary must obtain the client's informed consent to the inclusion of that provision. This approach to the question builds, in large measure, analogically upon principles applicable to solicitors: see in particular the observations of Mahoney JA in Law Society of New South Wales v Foreman (1994) 34 NSWLR 408 at 435-436. 20 The gravamen of ASIC's case is that for the exclusion of the fiduciary relationship in the mandate letter to be effective, it was incumbent upon Citigroup to draw Toll's attention expressly to the effect of the exclusion, that is, that it permitted Citigroup to trade in Patrick shares on its own account, in potential conflict with the interests of Toll. 298 A solicitor who wishes to enter into a time charging costs agreement with the client must make full disclosure to the client of all the implications of such an agreement: see Foreman at 435-437 per Mahoney JA; Re Morris Fletcher v Cross' Bill of Costs [1997] 2 Qd R 228 at 243 per Fryberg J; McNamara Business &amp; Property Law v Kasmeridis [2007] SASC 90 at [28] [31] per Doyle CJ. 300 In Foreman , Mahoney JA said at 435 that fiduciary obligations, including full disclosure, exist not only in the carrying out of an agreement already made between a solicitor and client "but also in respect of the making of it." 301 Mr Walker submitted that this observation by Mahoney JA indicates that the disclosure obligation applies to the making of a contract where a person who would otherwise be in a fiduciary relationship seeks to exclude fiduciary obligations in the terms of the contract. 302 However, I do not consider that this submission provides an answer to the conundrum presented by the apparent exclusion of the fiduciary relationship in the present case. There are two reasons for this. 304 Indeed, in Foreman at 435, Mahoney JA specifically pointed out that a solicitor is in a fiduciary position vis-&agrave;-vis the client and/or in a position of influence. Hence the need for the solicitor to give the client advice that would enable a proper understanding of the operation and effect of a time based costs agreement: see McNamara at [28] per Doyle CJ. 344 This submission is said to be based upon the principles stated in the authorities dealing with time charging by solicitors: see Foreman and the other authorities referred to at [298] [300] above. ASIC submitted that the principle is not limited to solicitors and applies generally to all fiduciaries. 345 However, for reasons given above at [303] [306], I do not consider that this principle applies in the present case. In particular, even if the principle stated by Mahoney JA in Foreman is of general application to fiduciaries, it cannot apply unless the fiduciary is within an established category or is subject to fiduciary obligations before entering into the contract. 346 To hold otherwise would be to say that a person who is not a fiduciary may nevertheless owe an obligation which flows from a fiduciary relationship. That could hardly be correct.