Case: Daly v The Sydney Stock Exchange Limited [1986] HCA 25 ; (1986) 160 CLR 371
Outcome: considered
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. 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. 371 The first conflict is said to have arisen once Citigroup acquired its own interest in Patrick shares on 19 August 2005. Citigroup is then said to have had a fiduciary duty to disclose to Toll, as its adviser, all relevant knowledge in relation to decisions to be made by Toll about the bid. The duty is said to be based on the decision of the High Court in Daly , in particular the reasons of Brennan J at 385. 372 The duty of disclosure pleaded in the first conflict is said to be a duty to furnish Toll with all relevant knowledge possessed by Mr Bartels which may reasonably be regarded as relevant to the making of Toll's decision as to whether the premium for the bid should be marketed by reference to the closing price of Patrick shares on Friday, 19 August 2005 or the closing price on Thursday, 18 August 2005: see Further Amended Statement of Claim [59]. 373 It is then said that it was relevant for Toll, when making a decision as to how to market the bid, to know that the market activity in Patrick shares on 19 August 2005 "had been materially contributed to by Citigroup's own actions" in acquiring its stake in Patrick for the purpose of making profits for itself: see Further Amended Statement of Claim [60]. 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. 379 The second conflict, as with the first, also raises the question of whether Australian law recognises the positive duty to furnish information consistently with that stated in Daly . 380 The second conflict is said to arise from the following knowledge, as at about 7pm on 19 August 2005, on the part of Messrs Roberts, Sinclair, Monaci and Scott: &#8722; that Mr Dempsey and the private side employees of Citigroup in the IBD who were assisting him, were advising Toll on the bid; &#8722; that Citigroup had acquired a substantial shareholding in Patrick on its own account on 19 August 2005; &#8722; that they were concerned about how the acquisition of Citigroup's stake would be perceived by Toll and by the market; &#8722; that there was a perception that Toll and the market might infer that Citigroup's Chinese walls had failed. 381 Citigroup is then said to have had a duty (through Messrs Roberts, Sinclair, Monaci and Scott) to inform Toll that it had engaged in substantial trading in Patrick shares on 19 August 2005. Thus Citigroup is said to have had a conflict of interest and duty: see Further Amended Statement of Claim [66], [70]. 461 Both counts of misleading or deceptive conduct are founded upon a fiduciary duty to disclose in accordance with Daly. The claims fail in the absence of any finding of fiduciary relationship between Citigroup and Toll and particularly my rejection of any Daly duty in the circumstances of the present case. 462 Section 12CA(1) of the ASIC Act prohibits conduct in relation to financial services if the conduct is unconscionable within the meaning of the unwritten law. 463 ASIC contends that by being in the five alleged positions of conflict, Citigroup breached its fiduciary duty to Toll and that each breach of fiduciary duty was unconscionable conduct within the meaning of the unwritten law of a State or Territory.