Fiduciary duties

Fiduciary duties are the duties owed by a fiduciary to their client, reflecting the highest standard of care. A fiduciary relationship exists where one person (the fiduciary) undertakes to act for another (the principal) and in doing so, must place the interests of the principal above their own.

There are three fiduciary duties in Australian law. These duties are negative/proscriptive (i.e. a duty to refrain from doing something). They are derived from the case of Breen v Williams and are as follows:

  1. Do not place oneself in a position of conflict between self-interest and client interests;

    (A breach occurs where “a reasonable man looking at the relevant facts…would think that there was a real sensible possibility of conflict”)

  2. Do not make a profit from the principal’s trust; and

    (Making any sort of gain is prohibited, regardless of whether it harmed the principal, whether it was even available to the principal or, whether it actually benefited the principal as well)

  3. Do not act for your own benefit or for the benefit of a third party without the consent of the principal.

Informed consent from the principal acts as a defence to a breach of either of the above two duties.

These duties are limited by scope – the fiduciary only owes these duties as they relate to their role as a fiduciary (e.g. a solicitor’s fiduciary duties only extend to their actions in their capacity as their client’s solicitor).

The test for the presence of a fiduciary relationship simple: the principal can expect the fiduciary to act in their best interests, based on relevant considerations such as influence, trust, and vulnerability.

Recognised fiduciary obligations include solicitor and client, trustee and beneficiary, and guardian and ward. Relationships such as those between agent and client and employer and employee usually give rise to a fiduciary obligation, but not always – the court will examine the relationship on the facts.