Case: Breen v Williams [1995] HCA 63 ; (1996) 186 CLR 71
Outcome: followed
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. 277 The observations of Gummow J in Breen v Williams at 132-133 are to the same effect. But his Honour also pointed out that a contractual term may be so precise in its regulation of what a party may do that there is no scope for the creation of a fiduciary duty. 278 It follows from these statements of principle that it is open to the parties to a contract to exclude or modify the operation of fiduciary duties. This was the view of the Law Commission Consultation Paper which was reached after a careful examination of the authorities: see at [3.3.12]. 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. 290 In Australia, the duty of loyalty is proscriptive rather than prescriptive in nature: see Breen v Williams at 113 per Gaudron and McHugh JJ, 137-138 per Gummow J; Pilmer v Duke Group Limited (In Liq) [2001] HCA 31 ; (2001) 207 CLR 165 at [74] per McHugh, Gummow, Hayne and Callinan JJ. 311 Indeed, this is a distinction which is recognised in s 912A(1)(aa) of the Corporations Act . It imposes a duty upon a financial services licensee to have in place adequate arrangements for "the management of conflicts of interest". The statutory requirement is to be contrasted with the duty in equity of a fiduciary to eliminate or avoid conflicts: see Breen v Williams at 108 per Gaudron and McHugh JJ. Of course, one way of managing conflicts would be to eliminate them but s 912A(1)(aa) does not require a licensee to take that step: see the discussion by Mr Tuch, 29 MULR at 514-515. 312 Support for the proposition that Chinese walls do not eliminate conflicts may be found in the Law Commission Consultation Paper . At [4.5.1], the UK Law Commission referred to a paper by Professor Finn, "Fiduciary Law and the Modern Commercial World", Norton Rose Oxford Law Colloquium (1991) at p 13. Professor Finn pointed out that the vice is not the possibility of misuse of confidential information but, rather the "compromising of a fiduciary's duty of loyalty." 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.