Case: Aequitas v Sparad No 100 Limited (formerly Australian European Finance Corporation Limited) (2001) 19 ACLC 1006
Outcome: cited
A fiduciary relationship arises between a financial adviser and its client where the adviser holds itself out as an expert on financial matters and undertakes to perform a financial advisory role for the client: see Daly v The Sydney Stock Exchange Limited [1986] HCA 25 ; (1986) 160 CLR 371 at 377 per Gibbs CJ, 385 per Brennan J; Aequitas v Sparad No 100 Limited (formerly Australian European Finance Corporation Limited) (2001) 19 ACLC 1006 at [307] per Austin J. 284 The same principle will usually apply to financial advisers and corporate advisers. Each will owe fiduciary obligations to the client because each undertakes to act in the client's interests and not solely in its own interests: see Aequitas at [310] per Austin J. This is consistent with the principle stated by Mason J in Hospital Products at 96-97. 286 Vulnerability of the client is one of the indicia of the fiduciary relationship. But this would appear to flow from the special opportunity of the adviser to abuse the expectation of loyalty: see Breen v Williams at 134 per Gummow J; Aequitas at [313] per Austin J; cf News Limited at 541 per Lockhart, von Doussa and Sackville JJ; Hospital Products at 97 per Mason J. 325 It is true, as is shown by Daly, Hadid and Aequitas , that an adviser may have fiduciary obligations to the client. But for the express terms of the mandate letter, the pre-contract dealings between Citigroup and Toll would have pointed strongly toward the existence of a fiduciary relationship in Citigroup's role as an adviser. 326 I have set out the pre-contract dealings in some detail because they were referred to by Mr Walker and they contain all of the indicia of a fiduciary relationship of adviser and client. 327 In summary, Citigroup gave Toll advice as to the wisdom and merits of making a bid for Patrick. Citigroup gave strategic advice which involved the use of its financial acumen, judgment and expertise to further Toll's interests. Citigroup worked closely with Toll as is evidenced by the presentations made before the execution of the mandate, as well as the large number of communications between them, both oral and by email. 330 There were substantial negotiations as to the fees payable to Citigroup, and Citigroup ultimately secured success fees in the range of AUD$10 million to AUD$18 million. Fees of that order are testimony in themselves to a finding that Citigroup held itself out as an expert adviser on mergers and acquisitions, which points to the existence of a fiduciary relationship: see Daly at 377 per Gibbs CJ, 385 per Brennan J; Aequitas at [307], [310] per Austin J. 375 There is force in Citigroup's submission that Australian law does not recognise a fiduciary duty to make full disclosure. The strong weight of judicial authority is that fiduciary duties are proscriptive rather than prescriptive; accordingly, a fiduciary does not have a positive duty to disclose information: see Breen v Williams at 113 per Gaudron and McHugh JJ, 137-138 per Gummow J; Pilmer at [74] per McHugh, Gummow, Hayne and Callinan JJ; Aequitas at [283] [287] per Austin J; Dresna Pty Limited v Linknarf Management Services Pty Limited (In Liq) [2006] FCAFC 193 at [132] per Gyles J; P &amp; V Industries Pty Limited v Porto (No 2) [2007] VSC 64 at [29] per Hollingworth J. 376 It may follow that Brennan J's observations in Daly are to be confined in the manner discussed by Austin J in Aequitas at [287]. ASIC asserted that Daly was referred to by the High Court in Pilmer without disapproval at [70]; but I do not consider that their Honours' remarks amounted to a clear acceptance of the reasoning of Brennan J. However I do not need to consider this question because in my view the claim fails at a factual level.