EQUITABLE OBLIGATIONS 
AND THE POINT AT WHICH THEY BECOME FIDUCIARY

The Hon Justice Nicholas Owens, Federal Court of Australia

Paper delivered at the 12th Appellate Judges’ Conference
Perth, 27 March 2026

In my preparation for this session, my mind has on more than one occasion wandered to Odysseus’ account of Tantalus in Hades:
“Yes, and I saw Tantalus in bitter torment, standing in a pool, and the water came close to his chin. He was wild with thirst, but had no way to drink; for as often as the old man stooped down, eager to drink, so often would the water be swallowed up and vanish away, and at his feet the black earth would appear, for some god would dry it all up. And trees, high and leafy, let hang their fruits from their tops, pears and pomegranates, and apple trees with their bright fruit, and sweet figs, and luxuriant olives. But as often as the old man would reach out toward these, to clutch them with his hands, the wind would toss them to the shadowy clouds.”
Trying to achieve a firm grasp on any principle other than bromides in relation to the law of fiduciaries, to me in any event, can feel a little bit like that. What from a distance appears solid, has a tendency to dissipate as you approach. Even as I searched for some basic proposition that might prove to be both uncontroversial and useful as a starting point for analysis I was inevitably disappointed; each candidate, on closer examination, would be revealed to lack at least one of those qualities.
The fact that there is a lively debate even about so basic a proposition as whether someone is subject to fiduciary obligations because they are a fiduciary, or whether they are a fiduciary because they are subject to fiduciary obligations, tells us that the whole topic is one in which subtle distinctions may have the potential to produce real differences in both analysis and outcome.
And it is not as if, even if the fundamental framework of analysis is clarified, that the answers to all other questions would fall out neatly and easily. The recent decision of Naaman v Jaken Properties Australia Pty Ltd, although decided by the narrowest majority, does not seem to me to have revealed any deep division in relation to basic issues of principle or approach. Perhaps it is for that very reason that, as a result, it does not shed very much light on the question upon which this session has been convened. The prospect of any firm, sure, and practical answer to the question, at what point does an equitable obligation become fiduciary?, remains tantalizing.
Naaman v Jaken Properties Australia Pty Ltd
The issue in the case can be stated shortly: a judgment creditor of a former trustee was subrogated to the former trustee’s entitlement to indemnification out of the assets of the trust. The successor trustee fraudulently transferred the trust’s assets to third parties in order to defeat the claim of the former trustee. The former trustee’s right to obtain equitable compensation from the third parties under the first limb of Barnes v Addy was thought to depend on demonstrating that the transfer occurred in breach of a fiduciary obligation owed by the successor trustee to the former trustee.
Both the majority and minority judgments in Naaman proceed from the premise that the logical first step in the analysis is to determine whether or not a fiduciary relationship exists. And both judgments identified the fundamental characteristic of such a relationship in essentially similar terms.
The majority (Gageler CJ, Gleeson, Jagot, and Beech-Jones JJ) said that:
“It is enough to acknowledge that a fiduciary obligation cannot exist other than as an incident of a fiduciary relationship and that a fiduciary relationship is a relationship of ‘absolute and disinterested loyalty’ within the scope of which one party, the fiduciary, is recognised in equity as having a responsibility to act in the interests of the other party (or in their shared interests) to the exclusion of the fiduciary’s own interests.”
The minority (Gordon, Edelman and Steward JJ) also emphasised, at least for most cases, the dependence of fiduciary obligations on the prior existence of a fiduciary relationship. They said that “[f]iduciary duties most commonly arise as an incident of a fiduciary relationship”, and that:
“In this appeal, it is sufficient to say that a person will be in a fiduciary relationship with another when and insofar as that person has undertaken loyalty in the sense of an undertaking to perform such a function for, or has assumed such a responsibility to, another as would thereby reasonably entitle that other to expect that they will act in that other’s interest to the exclusion of their own or a third party’s interest.” 
Both judgments may also be seen to acknowledge the necessity, if a novel category of fiduciary relationship is to be recognised, of considering the appropriateness of imposing the particular postulated fiduciary obligation in question in the relevant circumstances. In other words, there is no point in asking the question who is a fiduciary divorced from a consideration of the consequence of so finding. 
On the majority’s reasoning, however, the fiduciary relationship for which the appellant contended could be rejected without needing to identify and analyse with precision the relevant obligation that would be imposed if the relationship did exist. In particular, their Honours said that they found it “unnecessary to examine the usefulness of attaching the label of ‘fiduciary obligation’ to obligations other than ‘proscriptive obligations’ concerning conflicts and unauthorised profits”. (I will return to the possibilities thus left open in due course.) For the majority, the answer to the case was found in a more basic caution:
“Having regard to the onerousness of the responsibility that a fiduciary responsibility entails, a fiduciary relationship should not lightly be imposed upon commercial parties who stand at arm’s length in respect of interests that are protected by other institutions of the common law or of equity. In particular, a fiduciary relationship should not be superimposed on another legal or equitable relationship merely to overcome perceived shortcomings in the nature or extent of the remedies available to enforce or protect other applicable institutions of the common law or of equity.”
On the majority’s analysis of the nature and incidents of a former trustee’s entitlement to indemnification, the simple fact was that:
“… [t]he successor trustee, being required to deal with the trust assets in the performance of the trust, and so in the interests of the cestuis que trust, does not act in the interests of the former trustee.” 
On that analysis, a successor trustee was in no different a position vis-à-vis a former trustee than many other relationships in which one person holds property in which the other has an equitable proprietary interest, and where it could not be doubted that no fiduciary relationship existed. As Leeming JA put it in his judgment in the Court of Appeal, the rights that the former trustee had in relation to the trust property did not “entail a personal relationship of trust and confidence”. The asserted vulnerability of the former trustee to the successor trustee did not change the outcome:
“… vulnerability is not the touchstone of a fiduciary relationship. Vulnerability is relevant to the existence of a fiduciary relationship only to the extent that the vulnerability in question is suggestive of a responsibility on the part of the putative fiduciary to act in the interests of the vulnerable party to the exclusion of the interests of the putative fiduciary.”
The minority, on the other hand, understood the beneficial interest of the former trustee, coupled with the obligations of the successor trustee, and the relationship between the two parties, in a different way. On their analysis, the critical circumstances were:
“… first, that the former trustee in this case had an existing equitable right of exoneration out of the trust property (not merely a contingent right) which gave rise to equitable proprietary rights in relation to the trust estate and, second, that the successor trustee was bound to prioritise that right over the claims of the beneficiaries of the trust.”
Their Honours went on to say:
The successor trustee is also in a fiduciary relationship with a former trustee where the circumstances make apparent that the former trustee has a right of exoneration from the trust assets. It would be peculiar indeed if the critical feature of a fiduciary relationship – an undertaking to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense – supported only a fiduciary relationship with the beneficiaries of the trust and not with the former trustee whose equitable proprietary interest in relation to the trust assets, objectively apparent to the successor trustee, is given legal priority over that of the beneficiaries.
Critically, that was because:
“In the circumstances of this appeal, the successor trustee assumed a responsibility to the former trustee by accepting appointment to replace the former trustee as trustee of the trust and receiving trust property, in circumstances in which it was objectively apparent that the former trustee had a right of exoneration out of trust assets for expenses and liabilities properly incurred by it as trustee of the trust, and not merely a contingent right. In those circumstances, the former trustee was entitled to expect that the successor trustee would act in its interests as well as those of the beneficiaries of the trust, to the exclusion of the interests of its own as the successor trustee or a third party’s interest.”
The minority judgment did note that “the former trustee relevantly stands in the same position of vulnerability as the beneficiaries of the trust”, but I would not read that as suggesting some greater relevance to the concept of vulnerability than was stated in the majority judgment.
In terms of the precise obligation that was owed, their Honours recognised that there “is no positive fiduciary obligation to act loyally or in the best interest of another person”, but rather “fiduciary obligations (that is, obligations peculiar to fiduciaries) arise because a person has undertaken to act in another’s interests”. And, in particular, “the nature of the fiduciary obligation must be one that justifies the interference [by a court] as an aspect of the fiduciary’s undertaking of loyalty”.
The minority identified the relevant fiduciary obligation as one “not to deal with the trust estate so as intentionally to destroy, diminish or jeopardise the former trustee’s entitlement to be indemnified from that trust estate”. It was, they said, an obligation that was “proscriptive and limited”:
“… [I]t is a duty to act in relation to the trust assets, in a disinterested manner, consistently with the right of the former trustee to be exonerated out of the trust estate. The subject matter of the duty is limited: not intentionally to defeat the continued holding and realisation of the former trustee’s interest in the trust estate.
That proscriptive duty is no different in nature from other proscriptive duties of a trustee. Indeed, although it was not argued in this way before this Court, the proscriptive duty might be seen merely as a particular expression of a fiduciary’s general duty not to put themself in a position of actual or potential conflict between their own interests and their undertaken duty to the former trustee, where their personal interest arises from whatever might motivate intentionally defeating the interest of the former trustee in the trust property.”
They immediately went on to say, however:
“[I]n Breen, Gaudron and McHugh JJ emphasised that fiduciary obligations arise because a person has come under an obligation to act in another’s interests and it is as a result of that obligation that equity imposes proscriptive obligations. Their Honours, together with Dawson and Toohey JJ, did not suggest, and should not be taken as suggesting, that the proscriptive fiduciary obligations of a fiduciary were limited to the proscriptive duties not to obtain any unauthorised benefit from the relationship and not to put themself in a position of actual or potential conflict.”
Ultimately, therefore, it may be seen that the differing outcomes under the majority and minority approaches are explicable by reference to the different answers given to the fundamental question whether the successor trustee had an obligation to act in the interests of the former trustee to the exclusion of its own interests. There was, in other words, no real disagreement concerning the fundamental character of a fiduciary relationship, or the nature of the obligation pursuant to which one will be recognised.
As the case showed, there will be disagreements in particular cases about whether the key element of personal loyalty is present, but there are no signs of the fundamental concept being radically expanded. However interesting the controversy about the nature of the rights of a former trustee in relation to trust property, and the relationship between a former and successor trustee, that question can now be regarded as settled, and with, I suspect, limited direct significance for the resolution of other controversies about whether particular equitable interests give rise to an obligation of loyalty sufficient to recognise a relationship as fiduciary. It is no part of my purpose today to examine the competing analyses of the majority and minority in that respect.
In a sense, the real issue in Australia is what flows from recognition of a relationship as fiduciary. In terms of the subject matter of this session, because the majority denied the presence of a fiduciary relationship at all, Naaman necessarily provides minimal guidance in relation to the question whether particular equitable obligations are themselves fiduciary obligations.
The minority was, of course, at pains to emphasise that the particular obligation that they found to be owed was one of the entirely orthodox proscriptive duties (and, at the very least, that they were not straying beyond proscriptive duties generally). Whether the duty was in fact entirely orthodox is a proposition that could no doubt be debated. Their Honours said this:
“It might be doubted whether a successor trustee who acts with care owes any duty to a former trustee to prevent accidental prejudice to the former trustee’s right of indemnity. And any liability of a successor trustee to a former trustee for acts that honestly but carelessly prejudice the former trustee’s right of indemnity might be seen as a separate obligation which is a manifestation of a duty to exercise care. The relevant obligation is, instead, best described as an obligation owed by the successor trustee to the former trustee not to deal with the trust estate so as intentionally to destroy, diminish or jeopardise the former trustee’s entitlement to be indemnified from that trust estate.”
Ordinarily, of course, the “no conflict” obligation applies indifferently to innocent and intentional conduct, so the postulated duty appears unconventional in at least that respect. On one view, to the extent that the full rigour of the core proscriptive duty was regarded as inappropriate in the context of the relationship, it might be thought to implicitly acknowledge a qualification to the extent to which the relationship was in fact one of absolute and disinterested loyalty to begin with. 
In any event, returning to focus on the defining characteristics of those obligations that may appropriately be recognised as “fiduciary”, the passage from which I have just quoted does implicitly address one issue of ongoing debate: whether a duty to exercise care might be regarded as fiduciary. The minority appears to have regarded it as clear that such a duty is not fiduciary. That is consistent with their Honours’ evident care to emphasise one defining limitation of fiduciary duties as proscriptive only. That, perhaps, serves as a useful entry point to the more general topic.
Coming at the Problem from the Opposite Direction
On the whole, resolution of the issue in Naaman proceeded from an analysis of whether the relationship between the former and successor trustees involved the requisite element of loyalty; in other words, whether there was a fiduciary relationship. But recognition that a particular relationship is fiduciary does not necessarily make it any easier to identify the obligations that exist, or to divide those that do into fiduciary, as opposed to simple equitable, categories. 
For one thing, as Gummow J observed in Breen v Williams:
“… it is necessary to consider not only whether the relationship between the parties is such as to give rise to fiduciary obligations but also the extent of those obligations in the particular case, ‘the subject matter over which the fiduciary obligations extend’, so that there may be identified the breach or apprehended breach for which the plaintiff seeks relief from a court of equity.”
But more than that, the boundary between those duties owed by a fiduciary that are fiduciary, and those that are not, can be controversial.
That there is such a boundary (that is, that “not every breach of duty by a fiduciary is a breach of fiduciary duty”) is “universally accepted”. Where it lies, is not.
I have already mentioned that, in Naaman, the basis upon which the majority denied the existence of a fiduciary relationship meant that they did not need to consider any issues concerning the precise nature of the fiduciary obligation that might have been found to be owed by a successor trustee.
In both minority and majority judgments, however, one can see a recognition of the magnitude of the step that would be involved in identifying obligations other than the core, proscriptive, obligations of “no conflict” and “no profit” as fiduciary obligations.
When the majority said that it was not necessary for them to consider “the usefulness” of attaching the label “fiduciary” to other obligations, they cited a passage in Friend v Brooker where it was said:
“McColl JA held that Mr Brooker and Mr Friend were subject to a fiduciary obligation ‘to be equally and personally liable to each other for losses flowing from personal borrowings’. In this Court, the appellant correctly emphasises that such a formulation of fiduciary duty went beyond the imposition of proscriptive obligations, a limitation emphasised in decisions of this Court.”
The minority too, in passages to which I have already referred, went out of their way to emphasise that the duty they found to exist was proscriptive, and could be understood as an aspect of the “no conflict” rule. The minority did, of course, go on to say that existing authority should not be understood to limit the proscriptive fiduciary obligations to the two, traditional, core obligations. But in doing so, they might be taken to have emphasised, by implication, that fiduciary obligations are not prescriptive.
Certainly, I do not think that the minority’s statement that there “is no positive fiduciary obligation to act loyally or in the best interest of another person” is at all controversial in Australia. As Gummow J said in Breen v Williams:
“Equitable remedies are available where the fiduciary places interest in conflict with duty or derives an unauthorised profit from abuse of duty. It would be to stand established principle on its head to reason that because equity considers the defendant to be a fiduciary, therefore the defendant has a legal obligation to act in the interests of the plaintiff so that failure to fulfil that positive obligation represents a breach of fiduciary duty.”
But the possibility that fiduciary obligations might extend beyond the two central proscriptive obligations of “no conflict” and “no profit”, and indeed extend to prescriptive duties, has long been asserted. Indeed, the question was once tantalizingly close to being answered by the High Court, in a case that was fought over a very great number of years in the Courts of this State.
Westpac Banking Corporation v Bell Group Ltd
In early August 2013 I was looking forward to a four-day appeal raising exactly that issue that had been listed to commence on 10 September. All of the written submissions had been prepared and filed, and we were finessing our approach to oral argument. By the end of August, however, our clients had made good on their threat to settle the matter, and the hearing was vacated. 
The matter, of course, was Westpac Banking Corporation v Bell Group Ltd (In Liq). The written submissions, to the extent anyone is interested in the arguments that were going to be put to the High Court, can still be found on the High Court website under the, in this respect at least, misleadingly named “Decided Cases” tab.
The issues in the case were many, but for present purposes hopefully the following, very incomplete, summary will suffice. The appellants were banks who were originally unsecured creditors of various companies in the Bell Group. About 14 months before the Bell companies entered provisional liquidation, the banks entered into various agreements with them, one consequence of which was that the banks obtained security for their loans. In proceedings brought by the liquidators of the Bell Group companies, it was alleged (and found) that, in causing the companies to enter into those agreements, the directors of the Bell Group companies breached their duties to act bona fide in the best interests of each relevant company (which at the relevant time were said to include the interests of all creditors), and to exercise their powers for proper purposes. The liquidators contended (successfully) that the duties that were breached were fiduciary duties, with the consequence that the banks were liable under both limbs of Barnes v Addy.
The majority in the Court of Appeal considered statements contained in Breen v Williams to the effect that fiduciary obligations were proscriptive only as limited to the particular factual scenario of doctor and patient. Drummond AJA ultimately concluded (with Lee AJA holding to broadly similar effect):
“… until the High Court declares the law to be otherwise, long established authority requires the duties of company directors to act bona fide in the interests of the company and to exercise their powers for proper purposes to be accepted as fiduciary ones even though they may require the directors to take positive action.”
It is not my purpose here to engage in a detailed description, let alone assessment, of the reasoning of the trial and intermediate appellate Courts in relation to that issue. It is enough to observe that the case demonstrates in a particularly vivid way the kind of issues that may arise from time to time in the context of a debate about whether a particular breach of duty by a fiduciary is a breach of a fiduciary duty.
There is no doubt at all that a director stands in a fiduciary relationship to his or her company. Nor is there any doubt that a director owes a duty to act bona fide in the best interests of that company, and to exercise his or her powers for a proper purpose. Indeed, directors uncontroversially owe other duties too, including the duty to exercise reasonable care and skill in performing their role.
Whether or not those duties are fiduciary duties, though, is (at least in some cases) likely to lead to a materially different approach to questions of remedy. It may thus be observed that answering the question, “is there a fiduciary relationship?”, will often be only the beginning of the analysis.
The distinction between the fiduciary and non-fiduciary duties owed by a fiduciary was explained succinctly by Gummow J, in the context of the archetypal fiduciary relationship (trustee under an express trust and beneficiary) as follows:
“Where an express trust has been effectively constituted and under its terms the trustee is obliged to manage a trust business, the trustee is required both to observe the terms of the trust and, in doing so, to exercise the same care as an ordinary, prudent person of business would exercise in the conduct of that business were it his or her own. There is a well-accepted gloss on, or adjunct to, these requirements in relation to the exercise of powers of investment of a trust fund, pending distribution to those who are or have become absolutely entitled. The trustee is, of course, a fiduciary. But the above obligations arise from a particular characteristic, not of fiduciary obligations, but of the trust.”
The proposition that a director’s duty to exercise due care and skill is a fiduciary duty is famously denied by, at least, Permanent Building Society (in liq) v Wheeler and Bristol and West Building Society v Mothew. But there exists a respectable body of opinion to the contrary. 
In any event, the Bell Group companies were at pains to emphasise in their submissions to the High Court that the duties found to have been breached in that litigation were of a “different character” to the duty to exercise reasonable care and skill:
“That is because it is not concerned with any position of disadvantage or vulnerability and a breach of the duty does not, of itself, indicate any disloyalty to, or abuse of, the relationship of trust and confidence that is the hallmark of fiduciary obligations. A lack of care is different in character from an abuse of power or a failure to perform at all the obligation to act in the interests of the party who is the beneficiary of a commitment to exercise a power or discretion in his interests alone. The first is defective performance, the second is no performance at all; it is an abdication of the fiduciary obligation.”
A failure to act bona fide in the interests of the company, or to act for improper purposes, was, in other words, said to be so fundamentally inconsistent with the basis upon which the fiduciary relationship had been recognised in the first place, that they should be regarded as breaches of fiduciary obligations. The Bell Group companies submitted that:
“The recognition of the proscriptive fiduciary duties is protective of the more fundamental affirmative fiduciary obligation. It would be very odd if the consequences of breach of the protective rules were greater than the consequences for a breach of the fundamental fiduciary obligation.”
That submission finds an echo in the current edition of Meagher, Gummow and Lehane:
“Conaglen sees the two key proscriptive duties as methods of ensuring effective performance of the prescriptive duties of fiduciaries. If the ancillary or subsidiary or concurrent or backup proscriptive obligations are fiduciary, why not the primary obligations which they secure the performance of?”
The Banks’ answer to that submission was, at its core, that the “fundamental fiduciary obligation” upon which it was based was nothing more than the foundational circumstance that constitutes a person as a fiduciary in the first place. The obligation of loyalty “finds its complete expression in the ‘two overlapping proscriptive ‘themes’ which govern the fiduciary’s liability to account to his or her beneficiary’”.
Resolution of the conflicting positions is, to state the obvious, far from straightforward. It can certainly be said that the cornerstone of the Banks’ argument, that the current state of High Court authority was that fiduciary obligations were proscriptive only, reflects the general approach of Australian courts even today. But nuances lurk close to the surface. To take, as one example, the same case I just cited as recognising the general state of High Court authority, the NSW Court of Appeal went on immediately afterwards to say this:
“No occasion arises to consider the implications of these High Court cases for earlier authorities which accepted that fiduciaries have some positive obligations in particular contexts. Two types of cases, among others, should be mentioned.
First, it has long been accepted that those who issue a prospectus or information proposal to potential investors have an obligation of ‘utmost candour and honesty’: Directors, etc of Central Railway Co of Venezuela v Kisch (1867) LR 2 HL 99 at 113 (Lord Chelmsford LC). The High Court applied Kisch in United Dominions Corporation v Brian Pty ltd (1985) 157 CLR 1 at 12 (Mason, Brennan and Deane JJ), 5-6 (Gibbs CJ); [1985] HCA 49 in the context of the fiduciary duties owed by a person who was negotiating a joint venture.
Second, earlier authorities of the High Court stated that company directors owe a fiduciary duty to exercise their powers bona fide in the interests of the company as a whole: see, for example, Harlowe’s Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Company NL (1968) 121 CLR 483 at 490, 492-494 (Barwick CJ, McTiernan and Kitto JJ); [1968] HCA 37. In BCI Finances Pty Ltd (in liq) v Binetter (2018) 362 ALR 597; [2018] FCAFC 189 at [598], the Full Court of the Federal Court (Allsop CJ, Moshinsky and Colvin JJ) expressed the view that the more recent High Court cases referred to at [111] above did not suggest that the earlier authorities of the High Court, such as Harlowe’s Nominees, were incorrect.”
As always, care is required in understanding precisely what is being said. For example, it might be observed that the decision in Harlowe’s Nominees could be argued not to stand for quite the proposition for which it was there (and in BCI Finances) cited; or, at the very least, as is so often the case in this area, care needs to be taken with respect to the precise meaning of terms capable of being used in different ways. Rather than holding that directors “owe a fiduciary duty to exercise their powers bona fide in the interests of the company as a whole”, the “undoubted general proposition” to which Barwick CJ, McTiernan, and Kitto JJ referred was that:
“… a power vested in directors to issue new shares is a fiduciary power which the directors are not entitled to exercise otherwise than bona fide for the benefit of the company as a whole.”
In that regard, the description of the second “discrete part” of fiduciary law described in Grimaldi v Chameleon Mining NL (No 2) is worth keeping in mind:
“There are two discrete parts to modern Australian fiduciary law. The better known and understood part is concerned with the setting of standards of conduct for persons in fiduciary positions. Its burden, put shortly, is with exacting disinterested and undivided loyalty from a fiduciary – hence, for example, its focus on conflicts between duty and undisclosed personal interest, conflicts between duty and duty and misuse of a fiduciary position for personal gain or benefit. The other part serves a different function and is often overlooked in discussion of fiduciary law. Its essential concern is with judicial review of the exercise of powers, duties and discretions given to a fiduciary to be exercised in the interests of another (the ‘beneficiary’) where the beneficiary does not have the right to dictate or veto how the power, discretion, etc is exercised by the fiduciary. Here the law channels and directs how ‘fiduciary discretions’ are exercised. Unsurprisingly, there is quite some similarity between the grounds of judicial review of the decisions and actions of fiduciaries entrusted with such powers etc – for example, trustees, company directors and executors – and the grounds of judicial review of administrative action.”
To say that a fiduciary’s exercise of a power vested in them is reviewable on grounds including, for example, that it was not exercise bona fide in the interests of the beneficiary, is not to say that there is a correlative fiduciary duty. The exercise of a power for a foreign purpose will not inevitably amount to a breach of fiduciary duty. As Finn has said:
“[T]here are two levels of bases of judicial review. First, has he as donee  committed a “fraud on his power”? Secondly (alternatively or in addition), has he failed to act in his beneficiaries’ interests, has he breached his fiduciary duty? Though logically distinct these two bases for review are not often separated in the cases. Nonetheless the distinction can be important for a fiduciary’s decision will be reviewed if he has failed to exercise his power properly even though he has not at the same time committed a breach of fiduciary duty – it is not every excess or abuse of power that constitutes such a breach.
In other words, if a power is exercised by a director so as to obtain a profit at the expense of the company, or in pursuing an interest which conflicts with the director’s duties to the company, then there will be a breach of a fiduciary duty; but not otherwise.
To return to the general point, however, in relation to the cornerstone of the view that fiduciary duties are limited to proscriptive duties, Breen v Williams, the latest edition of Meagher, Gummow and Lehane has this to say:
“There is no reason to doubt the correctness of the actual decision in Breen v Williams. But it would have sufficed to have held that the doctor in that case was not subject to the positive duty recognised in Canada, a duty to act with ‘utmost good faith and loyalty’. There is no doubt that fiduciary duties in many of their standard operations are negative and proscriptive in character. The question is whether they can in some instances, perhaps quite infrequently, also have a prescriptive character. Arguably, the distinction between prescriptive and proscriptive duties was drawn too sharply in Breen v Williams.
The answer will, presumably, ultimately be found in a consideration of the fundamental nature of the fiduciary paradigm that the majority in Naaman found it unnecessary to consider.
In that regard, it is worth recalling the fundamental basis upon which the majority decided Naaman: that the personal relationship between the former and successor trustees was not underpinned by the fundamental obligation of loyalty necessary to characterise the relationship as fiduciary. The foundational importance of that element highlights perhaps the critical difference between the law relating to fiduciaries and perhaps almost every other branch of the law. Most other areas of the law, including those defined by statute, tend to focus not on a relationship in its own right, and the protection of its core values, but more generally on conduct which falls short of a particular standard. Ultimately, the recognition of particular obligations as fiduciary obligations is best understood prophylactic; that is, they protect the core and defining quality of that special relationship. It is that narrow focus which defines, and limits, the concept of fiduciary obligations.
Conclusion
Overall, it may be seen that, in answering the question in what circumstances fiduciary obligations may be found, identification of the occasions on which fiduciary relationships will be recognised is only part of the answer. For as long as the focus remains on the core proscriptive obligations of “no profit” and “no conflict”, no great challenges are perhaps likely to arise. But as litigants become more adventurous in pushing the boundaries of the concept of fiduciary obligations, issues that have received relatively less attention to date will begin to demand close scrutiny.