Case: Hospital Products Limited v United States Surgical Corporation [1984] HCA 64 ; (1984) 156 CLR 41
Outcome: followed
In Hospital Products Limited v United States Surgical Corporation [1984] HCA 64 ; (1984) 156 CLR 41 at 97, Mason J said that where a contractual relationship provides the foundation for the erection of a fiduciary relationship, the contract regulates the rights and liabilities of the parties. His Honour went on to say that the fiduciary relationship, "if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to", the contractual terms. 18 How then, to use the language of Mason J in Hospital Products , can a fiduciary relationship be superimposed upon the mandate letter in the face of clear language which excludes it? 21 Citigroup disputes the applicability of ten of the eleven propositions propounded by ASIC. It submits that because the mandate letter provides so precisely that no fiduciary relationship exists between Citigroup and Toll, there is simply no scope for the mandate to accommodate a fiduciary relationship. It submits that the propositions put forward by ASIC to overcome this difficulty have no application particularly when the fiduciary relationship is not one of the 'per se' relationships referred to in the authorities: see for example Hospital Products at 96 per Mason J. 22 The substance of Citigroup's answer to the claim is that the duty of a fiduciary to obtain the informed consent of a client has no application here because it presupposes the existence of an antecedent fiduciary relationship. No such pre-existing relation is claimed to have been created. 23 Citigroup also relies, to the extent necessary, upon events preceding (and post-dating) the execution of the mandate letter, as demonstrating Toll's knowledge of, and informed consent to, Citigroup's proprietary trading in Patrick shares. These events include the submission by Citigroup to one of the Toll companies, Toll Transport Pty Limited ('Toll Transport'), and subsequent execution, of a Custodian &amp; Nominee Appointment Agreement dated 23 June 2005. That contract deals with the acquisition by Citigroup of a discreet pre-bid stake in Patrick for and on behalf of Toll. This contract contained express disclosure of Citigroup's right to trade as principal in Patrick shares. 270 As Gaudron and McHugh JJ observed in Breen v Williams [1995] HCA 63 ; (1996) 186 CLR 71 at 106, "Australian courts have consciously refrained from attempting to provide a general test for determining when persons [...] stand in a fiduciary relationship". It may be, as their Honours said, that the term "fiduciary relationship" defies definition. This is because of the difficulty of stating a comprehensive principle suitable for application to different types of relationships that carry different obligations: see Hospital Products at 69 per Gibbs CJ; News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410 at 538 per Lockhart, von Doussa and Sackville JJ. 271 The courts have recognised certain classes of persons as falling within established categories of fiduciary relationships. Examples of these include trustee and beneficiary, agent and principal, solicitor and client, director and company, employee and employer, and partners: see Hospital Products at 68 per Gibbs CJ, at 96 per Mason J. 272 Apart from the established categories, perhaps the most than can be said is that a fiduciary relationship exists where a person has undertaken to act in the interests of another and not in his or her own interests but all of the facts and circumstances must be carefully examined to see whether the relationship is, in substance, fiduciary: see Hospital Products at 71-72 per Gibbs CJ; News Limited at 541 per Lockhart, von Doussa and Sackville JJ. 276 In Hospital Products, Mason J observed at 97 that "contractual and fiduciary relationships may co-exist". His Honour said that if a fiduciary relationship is to exist between parties to a contract, the fiduciary relationship must conform to the terms of the contract. He went on to say that: "The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction." 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. 288 The scope of the fiduciary duties will vary and is to be determined according to the nature of the relationship and the facts of the case: see Hospital Products at 69 per Gibbs CJ, 102 per Mason J. 390 Moreover, there is force in Citigroup's submission that the alleged conflict of interest is too remote. There must be "a conflict or a real or substantial possibility of a conflict": see Hospital Products at 103 per Mason J. In fact , Mason J went even further at 104, quoting the statement of Judge Learned Hand in Phelan v Middle States Oil Corporation (1955) 220 F (2d) 593 at 602-603 that the conflict rule does not apply: "... not only when the putative interest, though in itself strong enough to be an inducement, was too remote, but also when, though not too remote, it was too feeble an inducement to be a determining motive".