Breach of Fiduciary Duty – the Good, the Bad and the Ugly
The Honourable Justice Patrick O’Sullivan – Federal Court of Australia
I acknowledge with gratitude the assistance of my Associate, Ailish Glennon-Dey, in preparing this paper.

One might be forgiven in taking the view that to address this topic in 45 minutes is a Herculean task. Well, it is so the topic will be necessarily addressed at a fairly high level.
The topic of fiduciary duties, including breach, has attracted extensive attention both at an academic and at a judicial level.
The logical first step is to consider the circumstances in which fiduciary duties might arise. That is followed by a consideration of scope and content and then breach, in particular the no conflict rule and the no profit rule.
The circumstances in which fiduciary duties arise
Fiduciary duties arise in two broad categories of circumstance: first, within well-established relationships long recognised as fiduciary in nature, and second, in more nuanced, fact-specific settings where the circumstances justify the imposition of such duties on an ad hoc basis.
Whether a relationship is such that ad hoc fiduciary duties arise, draws on principles which led to the identification of established fiduciary relationships. Those principles inform the circumstances in which such a relationship might arise as well as scope and content of fiduciary duties. 
The framework around fiduciary duties was summarised by Black J of the New South Wales Supreme Court, speaking extra-judicially on the topic of fiduciary relationships in commercial contexts and the complex interaction between equity and contract. 
His Honour referred to how jurists have grappled with identifying when fiduciary duties arise. 
As an example, the late Justice Paul Finn argued both extrajudicially and judicially that fiduciary duties reflect a duty of loyalty, grounded in “higher community standards or values”. According to this view, fiduciary duties exist where one party is entitled to expect that the other will act in their interests – or the joint interests of both parties – rather than solely in pursuit of self-interest. Relevant considerations include the vulnerability of the beneficiary or the person to whom fiduciary duties are owed, the societal role and responsibilities of the fiduciary, and whether the relationship involves promoting a separate personal interest.
Finn J emphasised that ultimately what matters is the role that the alleged fiduciary plays in the relationship. It must involve an alignment with, or entanglement in, the other party’s interests such that a fiduciary obligation is established. His Honour clarified that a fiduciary relationship arises where one party is entitled reasonably to expect that the other will act in their interest – or joint interest – to the exclusion of their own separate interest, and in furtherance of the purpose of the relationship.
Writing extra-judicially, Edelman J considered a contractual basis for fiduciary obligations. According to this perspective, fiduciary duties are not imposed by law based on status or relationship alone but arise from a voluntary undertaking – an expression of intent, usually through contract. In his Honour’s view, this explains why fiduciary duties can be shaped or limited by contractual terms, why they cannot override those terms, and why such obligations may not survive the termination of the contract in which they were assumed.
Ultimately, however case law provides courts and practitioners with analytical tools for identifying when a fiduciary duty may arise – especially in ad hoc contexts. But even within that framework, outcomes remain highly sensitive to context.
In Streeter v Western Areas Exploration Pty Ltd (No 2) (2011) 278 ALR 29 at [76] President McLure of the Western Australian Court of Appeal observed:
“Indeed, where a complex course of dealing is in issue, as in this case, minds reasonably may differ as to the outcome of the application of the principles: Maguire v Makaronis (468). The principles in this area of the law are easier to state than to apply.” 
That complexity is often seen in differing first-instance and appellate decisions on whether ad hoc fiduciary duties exist, particularly within the context of commercial relationships and if so, the scope and content of those duties. Of course, that complexity can also arise in the established categories.
Identification of a fiduciary relationship
The idea that a fiduciary relationship is context-dependent has been consistently reinforced in legal scholarship and case law. 
In his well-known text, Fiduciary Obligations, Finn J observed that a person “is not subject to fiduciary obligations because he is a fiduciary; it is because he is subject to them that he is a fiduciary”. In other words, being a fiduciary is the consequence, not the source, of such obligations.
Consistent with that theme, in his essay, The Role of Status in the Law of Obligations,  Edelman J explains that although status – such as being a lawyer, trustee, or partner – does not create fiduciary duties, often it helps define the context in which those duties arise. Status shapes the reasonable expectations between parties, but the actual undertakings – explicit or implicit – form the true foundation of fiduciary obligations.
Whether someone is a solicitor, trustee, or director, the critical question is not what their title is, but what responsibility they have assumed, hence Finn J’s observations to which I have just referred. The duties must be tied to an undertaking to act in another’s interest – an undertaking that is objectively manifested by conduct, not subjectively intended.
This has significant implications. First, it imposes a discipline on courts: they must avoid superimposing fiduciary duties on top of contracts unless the fiduciary nature of the obligation is grounded in an identifiable undertaking. As Edelman J puts it, fiduciary duties – like implied contractual terms – are constructed, not imposed.
Second, it calls for nuance. A trustee may not owe fiduciary duties in all aspects of their role. A financial adviser may be a “salesman” in one context and a fiduciary in another.
There is no single universal definition of who is a fiduciary. In Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296, the Full Court (Finn, Stone and Perram JJ) offered a compelling and practical formulation:
“… a person will be in a fiduciary relationship with another when and insofar as that person has undertaken to perform such a function for, or has assumed such a responsibility to, another as would thereby reasonably entitle that other to expect that he or she will act in that other's interest to the exclusion of his or her own or a third party's interest …” 
In Breen v Williams (1996) 186 CLR 71, Gaudron and McHugh JJ articulated five key factors that may indicate the existence of a fiduciary relationship. These factors, drawn from both Australian and Canadian jurisprudence, are not conclusive on their own but are important factors when taken together. 
Those five factors are:
1.	The existence of a relationship of confidence: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 69 (Gibbs CJ);
2.	Inequality of bargaining power: Hospital Products at 69-70 (Gibbs CJ);
3.	An undertaking by one person to perform a task or fulfil a duty in the interests of another: Hospital Products at 96-7 (Mason J);
4.	The scope for one party to exercise a discretion or power unilaterally which may affect the rights or interests of another: Frame v Smith [1987] 42 DLR (4th) 81;
5.	A dependency or vulnerability on the part of the relying party which causes them to rely on the claimed fiduciary: Johnson v Buttress (1936) 56 CLR 113 (Dixon J);
Trust and confidence
In Hospital Products, Gibbs CJ observed that a relationship of confidence often underlies fiduciary duties. But a relationship of confidence alone is not enough. 
His Honour pointed out that “an actual relation of confidence – the fact that one person subsequently trusted another – is neither necessary nor conclusive of the existence of a fiduciary relationship”. A beneficiary may never have met the trustee. A vendor who defrauds a purchaser does not become a fiduciary by the mere fact that the latter trusted the former. 
Finn J explained in Gibson Motorsport Merchandise Pty Ltd v Forbes (2006) 149 FCR 569; [2006] FCAFC 44, that what matters is the direction of that trust – whether it is anchored in the subordination of self-interest to the interest of another or to joint interests. The fiduciary is not merely trusted – they are trusted in a way that gives rise to an expectation of loyalty, which is the “distinguishing obligation” of the fiduciary: see also Bristol and West Building Society v Mothew [1998] Ch 1.
Equity does not inquire whether a party felt trusted. Rather, it asks whether – objectively – the nature of the relationship gives rise to fiduciary expectations: see ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1. 
Inequality of bargaining power
Power imbalances often signal fiduciary dynamics, but it is not the sole indicator. In Hospital Products at 69–70, Gibbs CJ acknowledged that an inequality of bargaining power, particularly where one party wields significant influence over the interests of another, is a relevant consideration.
But again, the principle is nuanced. Not all unequal relationships attract fiduciary obligations. The law is careful not to blur the boundaries between fiduciary duties and doctrines such as unconscionable conduct, estoppel, or tort. As Lehane J warned in C-Shirt Pty Ltd v Barnett Marketing and Management Pty Ltd (1996) 37 IPR 315, 336, vulnerability (which can be a consequence of inequality of bargaining power) is significant – but it is not determinative. The real question is: for what purpose, and for the promotion of whose interests, are powers held?
Undertaking to act on behalf of another
This factor lies at the very heart of the law of fiduciary relationships. 
A fiduciary duty arises where a person has undertaken to act, or is reasonably understood to have undertaken to act, in the interests of another party. The inquiry is objective and grounded in how the alleged fiduciary's conduct would be interpreted by a reasonable person.
In Hospital Products at 96–97, Mason J observed that the critical feature of a fiduciary relationship is the assumption of responsibility – an undertaking to act in the interests of another person.  Where such an undertaking exists, and where its execution may materially affect another’s rights or interests, the person assuming the duty bears a legal burden. Why? - because the fiduciary is in a unique position where they are able to harm – and thus must be restrained by Equity.
This is a central feature of the law of fiduciary relationships, i.e. the nature of the obligation assumed by the fiduciary. These expressions, however must be interpreted with care. If understood too broadly, the risk is that fiduciary relationships might collapse into any form of assistance or co-operation. 
In Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1 at [67]–[69], Gageler J explained that, within the scope of a fiduciary relationship – whether between employee and employer or any fiduciary and principal – the fiduciary undertakes to act exclusively in the interests of the person to whom the duty is owed. 
The fiduciary’s commitment must be construed in a reasonably strict sense – requiring more than mere benefit or alignment of interests. It must reflect a deliberate or inherent undertaking to act for another within a relationship of trust and confidence. 
In John Alexander’s Clubs Pty Ltd v White City Tennis Club (2010) 241 CLR 1, the High Court observed fiduciary duties can emerge where, absent certain facts, no such duty would arise.  However, in these so-called “fact-based” fiduciary cases, the threshold remains high. Courts typically require a clear undertaking – express or implied – that the alleged fiduciary will act solely in the interests of the other party. Mere influence, reliance, or trust is insufficient; the relationship must be defined by a commitment to act with exclusive loyalty. 
This approach finds support in decisions such as Galambos v Perez [2009] 3 SCR 247 and Streetscape Projects (Australia) Pty Ltd v City of Sydney (2013) ALR 760, where the courts emphasised that fiduciary duties cannot be implied from the mere existence of good faith dealings or co-operative conduct. Instead, they must be grounded in a commitment to act in a manner that forecloses the pursuit of self-interest. Take care with that concept because, of course, it is subject to scope and content. 
The difficulty, however lies in identifying when such an undertaking has occurred. 
Lehane J, writing extra-judicially, posed the critical question: when does a contractual provision, offered for the benefit of one party, amount to a fiduciary undertaking by the other? Similarly, when does a proposal for a mutually beneficial arrangement become a legally enforceable commitment to act solely in the other’s interests? These questions highlight the fine line between contract and fiduciary duty, and the potential for confusion.
Ultimately, the defining characteristic of a fiduciary relationship is its essential purpose: to serve the interests of another party to the exclusion of self-interest. This is not a relationship in which the parties pursue parallel goals or overlapping benefits, but one in which the fiduciary is not permitted to pursue their own interests in relation to the matters entrusted to them to the exclusion of the party to whom the fiduciary obligation is owed. In this way, Equity imposes a distinct demand, i.e. exclusive loyalty. It is that exclusive loyalty which differentiates it from other private law obligations, even when they arise within similar factual or relational contexts.
Equity enforces the obligation of loyalty through the two “proscriptive obligations” to which I will refer later, each identifying circumstances in which conduct is regarded as unconscionable and therefore attracts equitable remedies.
This is evident in well-established fiduciary roles: the trustee administering a trust, the director managing a company, the partner conducting the affairs of a partnership, and the employee acting within the business of the employer. In such cases, the fiduciary position is a result of the undertaking. 
Unilateral power to make decisions
The unilateral power to make decisions that impact another’s rights or property is fertile ground for fiduciary responsibility. Where one party holds the reins of discretion – and the other stands exposed to the consequences – Equity intervenes to ensure that the exercise of the discretion is not abused. The discretion must be exercised not for the fiduciary’s own gain, but in the interests of the party to whom the fiduciary obligation is owed.
Dependency or vulnerability
Vulnerability invokes Equity’s core rationale. In Johnson v Buttress, Dixon J recognised that where one party places trust in another due to their own weakness or reliance, and that trust is knowingly accepted, fiduciary obligations may arise. 
But, and this is crucial, vulnerability alone does not suffice. Lehane J observed in C-Shirt that the law does not impose fiduciary duties merely because one party is weaker. Instead, Equity asks whether this vulnerability makes the party dependent on the other’s discretion – and whether that discretion is exercised for another’s benefit, not one’s own.
Summary
Whilst recognising that the question of whether a fiduciary relationship arises is necessarily context driven, nonetheless it may be observed that:
(i)	a fiduciary is one who undertakes to act for, or on behalf of, or in the interests of another person in the exercise of a power or discretion that will affect that other person’s interests in a legal or practical sense: Hospital Products at 96 (Mason J);
(ii)	the existence and scope of fiduciary duties are inherently dependent upon the facts of the particular case: Hospital Products at 102 (Mason J);
(iii)	not only must the scope of a fiduciary duty be determined by reference to the facts, but it must also be shaped according to the nature of the relationship in question: Hospital Products at 102 (Mason J).See also Howard v Commissioner of Taxation (2014) 253 CLR 83 at [34] (French CJ and Keane J); Links Golf Tasmania Pty Ltd v Sattler (2012) 213 FCR 1 at [481] (Jessup J);
(iv)	fiduciary duties imposed by equity are proscriptive rather than prescriptive: Breen v Williams at 113 (Gaudron and McHugh JJ); and
(v)	as a general proposition, fiduciary obligations come to an end with the termination of the fiduciary relationship, although there are recognised exceptions. In particular, obligations of confidentiality that arise from a fiduciary relationship survive its conclusion: Blythe v Northwood (2005) 63 NSWLR 531 at [195] (Mason P).
See also LK Law Pty Ltd v Karas (No 4) [2025] FCA 1461 at [1264].
It may be seen then that fiduciary duties may arise where one party undertakes to act in another’s interests, has discretionary power, and the other is vulnerable or dependent on that discretion. While trust and confidence, power imbalances, and vulnerability are important indicators, fiduciary obligations only arise where the relationship as a whole attracts an obligation of loyalty and the subordination of self-interest to another’s interests.
Scope and content of a fiduciary duty
“But to say a man is a fiduciary only begins analysis; it gives direction to further inquiry. To whom is he a fiduciary? What obligations does he owe as a fiduciary? In what respect has he failed to discharge these obligations? And what are the consequences of his deviation from duty?”
These words, from Frankfurter J of the Supreme Court of the United States in Securities and Exchange Commission v Chenery Corporation 318 US 80 (1943), have been cited with approval by the High Court in Pilmer v The Duke Group (in liq) (2001) 207 CLR 165 at [77] and again in Murdoch v Mudgee Dolomite & Lime Pty Ltd (In Liq) (2022) 398 ALR 658 at [76]. They serve as an essential starting point in understanding the law relating to fiduciary obligations: recognising someone as a fiduciary does not complete the analysis – it initiates it. 
Apart from the challenge in determining if a fiduciary relationship exists, yet further challenges await in determining the scope and content of the fiduciary duty owed.
Determining scope and content requires careful examination of both the terms of any agreement, or the relationship if there is no agreement, and of course the parties’ conduct.
Scope
Even in relationships traditionally seen as fiduciary – such as between solicitor and client, or business partners – not every action or decision falls within the scope of the fiduciary duty. Courts have emphasised that even in these well-known cases, aspects of conduct may fall outside the fiduciary obligations, particularly when the terms of a trust deed or partnership agreement dictate how the relationship ends or is otherwise structured: see for example Anderson v Canaccord Genuity Financial Ltd (2023) 113 NSWLR 151. 
In Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 Bryson J observed:
“It is in no way difficult but is ordinarily to be expected that a person under a fiduciary obligation to another should be under that obligation in relation to a defined area of conduct, and exempt from the obligation in all other respects. Except in the defined area, a person under a fiduciary duty retains his own economic liberty.” 
In joint ventures, for example, the form of the venture and the specific obligations undertaken by each party define the fiduciary obligations. These duties may be limited in duration or scope, confined to a single transaction or extending over time.
In Hospital Products, Mason J made it clear (at 102), that the scope of the fiduciary duty must be moulded according to the nature of the relationship and the facts of the case.  That is, fiduciary duties are not generic – they are tailored.
In Breen v Williams, Brennan CJ said (at 82):
“It is erroneous to regard the duty owed by a fiduciary to his beneficiary as attaching to every aspect of the fiduciary’s conduct, however irrelevant that conduct may be to the agency or relationship that is the source of fiduciary duty.” 
His Honour continued by reiterating the need to identify the subject matter over which fiduciary duties extend. Simply identifying a fiduciary relationship is not enough. 
The consequence is that a person is not a fiduciary in everything they do. The duty only attaches to parts of the relationship where one party has undertaken to act in another’s interests. 
In short, the nature and circumstances of the relationship is the critical consideration, rather than status labels such as “partner” or “agent”. Whereas it is always important, that exercise is of particular importance when considering ad hoc fiduciary relationships.
The question posed when considering scope is: in relation to what activities, decisions or aspects of the relationship does the fiduciary duty apply? 
The scope of the fiduciary duty involves a factual consideration of the activities or actions or areas over which the fiduciary duties operate, i.e. the subject matter over which the fiduciary duties apply.
It is for those reasons that it is well-settled that a contract may modify or exclude fiduciary duties, provided that the intention is sufficiently clear. In Chan v Zacharia (1984) 154 CLR 178, Deane J observed that it is possible for a partnership agreement to exclude fiduciary obligations altogether.  Yet, the courts will always ask whether in law a fiduciary relationship has truly arisen. A declaration in a contract that “no fiduciary obligation exists” will not necessarily make it so.
A good example of scope being limited by the relationship is in Links Golf, where Jessup J held that the scope of fiduciary duties is influenced by the relationship itself, including any understandings or practices that exist between the parties.
In Links Golf, the first defendant Mr Sattler, was the owner of land leased by the plaintiff, Links Golf Tasmania Pty Ltd, for four successive 10-year leases commencing on 1 January 2003 and upon which Links Golf operated a golf course. 
Mr Sattler was a director of Links Golf between 25 November 2002 and 16 July 2009, and the Chief Executive Officer between 10 May 2003 and 13 January 2010. He developed a second golf course on adjacent land he owned. The second golf course, developed and operated by Mr Sattler, was known as “Lost Farm”. 
Links Golf alleged that the opportunity to build and operate Lost Farm belonged to it in Equity and that by benefiting from the opportunity to develop and operate Lost Farm, whilst at the time a director and CEO of Links Golf and/or by operating a business in competition with Links Golf, amongst other things, Mr Sattler breached his fiduciary duties to Links Golf. 
After referring to a number of authorities, Jessup J identified three questions that needed to be addressed as a starting point (at [481]): (1) is the relationship a fiduciary one; (2) if so, what is its scope; and (3) what is its content? 
On the question of scope, his Honour observed that, “a person may be in a fiduciary position [with respect to] only part of his or her activities”, citing New Zealand Netherlands Society ‘Oranje’ Inc v Kuys [1973] 1 WLR 1126 at 1130. Jessup J continued that the circumstances may not be conclusive as to the scope of any fiduciary duty and there may be cases where the beneficiary has permitted the fiduciary to conduct his or her own business (at [482]). Those observations are, of course, entirely consistent with Mason J’s observations in Hospital Products. 
So it is, that a partner will not be liable to others for profits earned in a venture that falls outside the scope of the partnership business: see Birtchnell v Equity Trustees Executors and Agencies Co Ltd (1929) 42 CLR 384.
Typically, although not exclusively, fiduciary obligations do not survive the end of the relationship. However, resignation or termination does not allow a fiduciary to escape liability for breaches already committed. Partnerships are a good example. In some cases, a new fiduciary relationship may arise after the original one ends. Further, obligations of confidentiality arising out of fiduciary relationships survive the end of fiduciary relationships. 
Even where parties attempt to exclude fiduciary duties, there are limits. A fiduciary cannot exclude liability for fraud or intentional dereliction of duty, and may also be prevented from relying on an exemption or release clauses where doing so would be unconscionable or where the conduct attracts the operation of statute such as the Australian Consumer Law.
Content
The difference between scope and content is an important distinction but one which can be difficult to keep in mind. The content is what comprises the duty that exists within the scope of that duty.
The question posed when considering content is: what obligation does the duty impose once it applies? Content describes the substance of the obligations.
An example of what might constitute content is in ss 180, 181 and 182 of the Corporations Act 2001 (Cth). Section 180 requires directors to exercise care and diligence in performing their entrusted functions. Section 181 reflects the core fiduciary obligations of loyalty, requiring directors to act in good faith in the company’s best interest and for proper purposes. Section 182 embodies the traditional fiduciary prohibitions against conflicts and unauthorised profit by preventing directors from exploiting their position for personal advantage or to the company’s detriment. 
In this way, these provisions are not creating new duties, but express in statutory form, the content of the fiduciary obligations directors already owe in Equity.
Does the conduct about which complaint is made comprise a breach?
Fiduciary duties, under Australian law, are proscriptive in nature. That is, they restrain rather than compel. In Breen v Williams, Gaudron and McHugh JJ observed that:
“… equity imposes on the fiduciary proscriptive obligations – not to obtain any unauthorized benefit from the relationship and not to be in a position of conflict. … But the law of this country does not otherwise impose positive legal duties on the fiduciary to act in the interests of the person to whom the duty is owed.”
The No Conflict and No Profit Rules 
Two core themes run through the issue of breach:
1.	the first is that the principal is entitled to any benefit gained by the fiduciary where there is a conflict, or a real possibility of conflict, between personal interest and duty; and
2.	the second is that the fiduciary must account for any benefit acquired by reason of their position, or through knowledge or opportunity arising from it. 
These two rules serve to guard against situations where fiduciaries are tempted to put their own interests ahead of those they serve, or where they might exploit the fiduciary position for personal gain.
Stated comprehensively, the equitable principle is that a fiduciary must account for any benefit obtained either where a conflict, or significant possibility of conflict, exists between duty and personal interest, or where the benefit is obtained by reason of the fiduciary position or opportunities or knowledge arising from it. In short, Equity insists that a fiduciary cannot profit where loyalty may be compromised, nor appropriate for personal gain opportunities which their fiduciary role has placed in their hands.
The two core “themes” were formulated by Deane J in Chan v Zacharia at 198–199, commonly described as the “no conflict” rule and the “no profit” rule:
The variations between more precise formulations of the principle governing the liability to account are largely the result of the fact that what is conveniently regarded as the one “fundamental rule” embodies two themes. The first is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest. The second is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing his position for his personal advantage. Notwithstanding authoritative statements to the effect that the “use of fiduciary position” doctrine is but an illustration or part of a wider “conflict of interest and duty” doctrine (see, e.g., Phipps v Boardman; N.Z. Netherlands Society “Oranje” Inc v Kuys), the two themes, while overlapping, are distinct. Neither theme fully comprehends the other and a formulation of the principle by reference to one only of them will be incomplete. Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between[their] fiduciary duty and [their] personal interest in the pursuit or possible receipt of such a benefit or gain or (ii) which was obtained or received by use or by reason of [their] fiduciary position or of opportunity or knowledge resulting from it.
(citations omitted, square brackets provided)
Deane J’s explanation that what is often treated as a single fundamental rule of fiduciary accountability in fact embodies two distinct, though overlapping, principles is of fundamental importance. His Honour observed that differences in judicial formulation often arise because one or the other theme is emphasised. 
His Honour stressed the two principles are not identical. Misuse of position cannot simply be treated as an example of conflict of interest, because each principle captures situations the other may not. A formulation of fiduciary liability based only on conflict, or only on misuse of position, would therefore be incomplete.
In Foresters at [67]–[69], Gageler J (as his Honour then was) reaffirmed and refined this approach, explaining that fiduciary liability is ultimately grounded in a duty of absolute and disinterested loyalty, enforced through the same two overlapping themes identified by Deane J in Chan v Zacharia:
The fiduciary duty that an employee has to an employer within the scope of the relationship of employment, no less than the fiduciary duty that any other person in a fiduciary position has to any other person to whom the fiduciary duty is owed within the scope of the venture or undertaking in respect of which the person in the fiduciary position has undertaken or assumed a responsibility to act in the exclusive interests of that other person, is a duty of “absolute and disinterested loyalty”. That duty of loyalty is imposed in equity by means of two overlapping “proscriptive obligations”. Each proscriptive obligation, or “theme”, is “descriptive of circumstances in which equity will regard conduct of a particular kind as unconscionable and consequently attracting equitable remedies”.
“The first”, often referred to as the “conflict rule”, “is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest.” The unconscionability which attracts equitable remedies in circumstances where the conflict rule alone is invoked lies not so much in receipt by the fiduciary of the benefit or gain (over which the fiduciary need not have control) as in retention by the fiduciary of the benefit or gain which in conscience ought to be disgorged to the principal.
 “The second”, often referred to as the “profit rule”, “is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of [the] fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing [the fiduciary’s] position for [the fiduciary’s] personal advantage.” The unconscionability which attracts equitable remedies in such circumstances lies in pursuit by the fiduciary of self–interest, or, more precisely, in pursuit of an interest other than the exclusive interest of the principal.
(citations omitted)
See also Breen v Williams at 93–94 (Dawson and Toohey JJ); Coope v LCM Litigation Fund Pty Ltd [2016] NSWCA 37; (2016) 333 ALR 524 at [105] Payne JA, with whom Gleeson and Leeming JJA agreed; Warman International Ltd v Dwyer (1995) 182 CLR 544 at 209. 
Gageler J’s formulation thus reinforces that fiduciary doctrine is not concerned merely with preventing dishonesty or loss, but with enforcing strict loyalty. Equity intervenes where a fiduciary either places themselves in a position of conflicting interests or appropriates opportunities arising from the fiduciary role. In each case, the remedy flows from the same basic concern: that a fiduciary must not prefer personal advantage over the interests they have undertaken to serve exclusively.
Yet, while the two rules or themes themselves are settled, their application is deeply contextual. Breach is not determined in the abstract. Courts examine the substance of the relationship, the function the fiduciary undertook, the reasonable expectations between the parties and the scope and content of any fiduciary duties. A situation that constitutes a breach in one context may not in another – particularly where duties have been modified or narrowed by informed consent.
As with most things, there are limits. A fiduciary is not required to account for profits that are genuinely obtained outside the scope of the fiduciary relationship. For example, a partner will not be obliged to account to the other members of the partnership for profits derived from some business which falls outside the scope of the partnership business.
Nonetheless, these are not rigid, mechanical rules. They are part of the living doctrines of Equity, applied flexibly to real facts, real lives, and evolving relationships.
However, where fiduciary obligations do arise, they are applied with uncompromising strictness. Equity does not weigh the fairness or consequence of the breach – it asks simply whether the rule has been broken. And if it has, it considers the relief that follows.
No Conflict Rule 
In Foresters, Gageler J described the no conflict rule, under which any benefit obtained where personal interest conflicts, or may conflict, with fiduciary duty must be treated as belonging in conscience to the principal. The focus is not merely on the receipt of the benefit – since that may occur without wrongdoing – but on the fiduciary’s retention of a gain that, consistently with loyalty, ought to be surrendered. The unconscionability lies in keeping a benefit obtained in circumstances where loyalty was compromised or exposed to compromise.
In Equity, the no-conflict rule is a core principle of fiduciary duties. To appreciate the scope of the no conflict rule, it is necessary to distinguish between three types of conflicts:
1.	Conflict of interest and interest: a conflict between the personal interest of the fiduciary and the personal interest of the person to whom fiduciary duties are owed; 
2.	Conflict of interest and duty: a conflict between the personal interest of the fiduciary and the fiduciary’s duty to the person to whom fiduciary duties are owed; and
3.	Conflict of duty and duty: a conflict between the fiduciary’s duty to one person to whom fiduciary duties are owed, and another.
The no conflict rule focuses on the second and third types of conflict. Both types address conduct under which a fiduciary may breach their fiduciary duty to a principal. In contrast, although the first type may involve a breach of duty, it is not necessarily the case and it will depend on scope and content. In Break Fast Investments v Rigby Cooke [2021] VSC 398, Macaulay J explained (at [107]):
“[T]he interest of the principal is not a proxy for the duty of the fiduciary. In other words, the interest of the principal does not of itself identify or define the scope of a duty owed by the fiduciary to the principal, nor do the conflicting interests of those principals necessarily identify or define the scope of any conflict between the duties owed to them by the fiduciary.”
(emphasis in original)
Under the no conflict rule, a fiduciary is precluded strictly from acting in circumstances where there is a conflict between personal interest and fiduciary duty, or even where there is a significant possibility that such a conflict may arise.
There are competing doctrinal explanations for the no conflict rule. On one view, it is “founded upon the highest and truest principles of morality”. On another, it is based not on morality but “the fallibility of human nature”. The latter rationale – preventing a fiduciary being swayed by personal interest – is the prevailing one in Australia.
This is a strict obligation: it is not necessary to prove that the fiduciary actually preferred their own interests over their duty. The breach occurs when the fiduciary places themselves in a position in which there is the sufficient possibility of a conflict between the two: Chan v Zacharia at 198–199 (Deane J); Breen v Williams at 93 (Dawson and Toohey JJ); Foresters at [68]–[69] (Gageler J); Grimaldi at [178]–[179] (Finn, Stone and Perram JJ).
Courts have adopted various formulations of what constitutes a sufficient possibility of conflict: (1) a ‘real sensible possibility of conflict’; (2) a ‘real or substantial possibility of conflict’; (3) ‘a sensible, real or substantial possibility’; or (4) ‘a significant possibility’. Under these various formulations, a conflict arises if there is a real and sensible possibility that the personal interests of the fiduciary divide the loyalty of the fiduciary, with the result that he or she could not properly discharge his or her duties to the beneficiary. In Boardman v Phipps [1967] 2 AC 46, Lord Upjohn explained that the phrase ‘possibly may conflict’:
“… means that the reasonable man looking at the relevant facts and circumstances of the particular case would think that there was a real sensible possibility of conflict; not that you could imagine some situation arising which might, in some conceivable possibility in events not contemplated as real sensible possibilities by any reasonable person, result in a conflict.”
Although in dissent in Boardman v Phipps, his Lordship’s formulation is often cited and has been regularly endorsed and applied by Australian courts. 
So it is that possibility of conflict must be real and prospective, not merely speculative or theoretical. Equity intervenes when there is a genuine prospect of conflict between duty and interest.
The conflict rule means that a fiduciary who acts without informed consent is under an obligation not to advance their personal interests by making or pursuing a gain in circumstances where there is a conflict, or a real or substantial possibility of conflict, between their personal interest and the interests of those to whom the duty is owed: Pilmer v Duke at [78] (McHugh, Gummow, Hayne and Callinan JJ).
No Profit Rule
The no profit rule requires a fiduciary to account for any gain obtained by reason of, or through use of, the fiduciary position itself, including opportunities or knowledge acquired through that position. The focus here is on preventing the fiduciary from actually exploiting their office or access for personal benefit, even where a direct conflict of duty and interest cannot be demonstrated. That is one of the reasons why both scope and content are critical considerations.
The object of the no profit rule is to prevent the fiduciary from misusing their position for personal advantage: Chan v Zacharia at 198–199 (Deane J); Breen v Williams at 93 (Dawson and Toohey JJ); Foresters at [68]–[69] (Gageler J); Grimaldi at [178]–[179] (Finn, Stone and Perram JJ).
In Foresters, Gageler J described the no profit rule as requiring a fiduciary to account for gains obtained by use of the fiduciary position or opportunities or knowledge flowing from it. Here, the unconscionability arises from the fiduciary pursuing self-interest, or an interest other than the exclusive interests of the principal, by exploiting the position entrusted to them. In such circumstances, Equity requires the fiduciary to account for any benefit obtained or received as a result of that position.
A fiduciary is not permitted to profit from their position unless they have obtained informed consent from their principal. This extends to what is known as the self-dealing rule, which prohibits fiduciaries from appropriating trust property for themselves unless there is full, prior consent of those to whom fiduciary duties are owed.
The self-dealing rule is distinct from the fair-dealing rule. Under self-dealing, the breach is automatic, and even ratification by the beneficiaries, or transfer to a bona fide purchaser for value, does not cure the breach – the property remains subject to a constructive trust.
In contrast, under the fair-dealing rule, if a fiduciary makes full disclosure and obtains informed consent, they may obtain clear title and ownership to the property.
In limited circumstances, where significant profits have been made through the fiduciary’s own skill, property, resources, or risk, courts may consider whether the fiduciary is entitled to retain a proportion of those profits. That is because Equity is astute to ensure that a plaintiff is not unjustly enriched.
The no profit rule has been described as one of the most vital safeguards in the law of fiduciary obligation. Its purpose is clear and unyielding: it requires a fiduciary to account for any benefit or gain that has been obtained or received by reason of their fiduciary position – or through opportunity or knowledge that came from it.
The consequences of breach
So, what happens when a fiduciary gains a benefit? The law is clear: a fiduciary must account for any gain.
The principle that a fiduciary is liable to account for a profit or benefit obtained in breach of his or her duty as a fiduciary, is integral to the formulation of the fiduciary principle itself. “Profit” is not understood in strict accounting terms.
In such cases, the benefit may be treated as if the fiduciary holds it on trust – a constructive trust – for the person to whom the obligation is owed. It is immaterial that there was no absence of good faith or damage to the person to whom the fiduciary obligation was owed.
In some situations, the constructive trust is imposed immediately – simply because there was a conflict between duty and interest. In other situations, the breach might not occur until the fiduciary fails to account for the benefit they have received – such as when a payment is made by a third party, even as a reward for faithful service.
The rule goes further. A stranger to the breach of fiduciary duty may still be treated as a constructive trustee if their knowledge of the situation is such that it would be unconscionable for them to retain the benefit.
Of course, not every lapse amounts to a breach of fiduciary duty. There is a recognised difficulty in distinguishing between a mere failure of skill or care, and a true breach of loyalty or trust.
It is in that context that it is important to keep in mind that in the case of knowing assistance, the requirement of a dishonest and fraudulent design is to set the impugned conduct apart from innocent or trivial breaches of fiduciary duty arising out of well-meaning fiduciaries: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [170], [184] referring to Maguire v Makaronis (1997) 188 CLR 449 at 473–474. 
Conclusion 
Having considered the nature, scope and content of fiduciary obligations, and the strictness with which Equity enforces them, it is possible to return to the theme announced in the title of this address –“Breach of Fiduciary Duty – the Good, the Bad and the Ugly” – and to do so with clearer focus.

There is, in truth, no such thing as a “good” breach of fiduciary duty. The language of Equity does not recognise degrees of moral comfort once loyalty has been compromised. What may sometimes be described as “good” is no more than an innocent, technical or well-meaning departure from strict obligation – a breach arising not from disloyalty, but from inadvertence or misapprehension. Even then, the rule is engaged. Equity’s concern is not punishment, but the preservation of undivided loyalty. If the obligation has been transgressed, the consequences follow, however blameless the motive.

The “bad” breach is more familiar territory: the fiduciary who knowingly places personal interest in competition with duty; who fails to obtain informed consent; who retains a benefit that conscience requires to be disgorged. Here, the prophylactic purpose of the conflict and profit rules is vindicated. Equity intervenes not only because loss is proven, nor simply because dishonesty is established, but because loyalty has been exposed to compromise.

And then there is the “ugly”. That is the realm of fraud, calculated exploitation, contumelious disregard of entrusted responsibility, and deliberate appropriation of opportunity. It includes not only the fiduciary who consciously subordinates the principal’s interests to personal gain, but also the third party who knowingly assists, procures or participates in a dishonest and fraudulent design. In that territory, the language of conscience speaks most forcefully, and the remedies of Equity respond with corresponding severity.

That said, it is all a question of degree and I do not suggest there are these distinct categories of breach that require a choice. Rather, I am emphasising that what comprises a breach of fiduciary duty can cover a wide spectrum of acts and/or omissions.

What unites all three is the central and uncompromising demand of fiduciary law: absolute and disinterested loyalty within the scope of the undertaking assumed. The rules are strict because human nature is fallible. They are proscriptive because temptation is real. They endure because the integrity of relationships of trust depends upon them.

So, while breaches may differ in moral colour, the principle does not. Equity insists that those who undertake to act exclusively in another’s interests must do so, or account. That, ultimately, is both the discipline and the enduring strength of the fiduciary doctrine.

21 February 2026