This essay examines the modern development of fiduciary law in

Australia. Perhaps the most radical attempted application of fiduciary law is its use in arguments for Native Title, and it is of great interest to see how such arguments are likely to fare in the future. In the following pages the modern development of fiduciary law in Australia will be sketched, and by the end of that sketch it should be clear why fiduciary arguments are unlikely to be helpful for Native Title claims in the forseeable future.

In spite of this, it will be suggested, the attempt to apply fiduciary arguments to Native Title claims is far from insignificant in its implications for the future of the law.

The classic Australian statement of fiduciary relations is found in Hospital

Products v United States Surgical Corporation (1984) 156 CLR 41 at 96-97 per

Mason J. His Honour lists some of the traditional fiduciary

relationships: trustee and beneficiary, agent and principal, solicitor and

client, employee and employer, director and company, and partners. These are

"relations of trust and confidence". The fiduciary "agrees to act for or on

behalf 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".

The fiduciary is thus "vulnerable to abuse" by the other party. Of course,

these relationships are diverse in their nature, and in the power relations

involved. (The suggestion that employers are in a general way "vulnerable to

abuse" by their employees may strike some as bizarre; and as a warning bell

even at this stage of the discussion). The diverse nature of the list is

important as the categories of the fiduciary relationship are not closed; as

Mason J also remarks (at 96) so new fiduciary relationships may be

discovered by the law. Other judges expressed themselves less clearly and more cautiously, and Mason J was in dissent on the fiduciary aspect of Hospital Products. Notably, Gibbs CJ was sceptical of the search for necessary and sufficient conditions for a fiduciary relationship; and inclined to stress the factor of agency rather than vulnerability.

The reason why this is a matter of interest is that the fiduciary

relationship imposes a very heavy burden of responsibility. The fiduciary

is, within the context of the relationship, expected to put the

beneficiary's interests ahead of his or her own, and avoid any semblance of

conflict of interest. Sometimes this principle is taken to a degree which

may appear extreme. In Regal Hastings Ltd v Gulliver [1967] 2 AC 134, for example, it was found that company directors who made a private profit from their directorship had to surrender that profit. This was despite the fact that their conduct had caused no loss to the shareholders and despite the fact that there was no suggestion of subjective bad faith on their part. Finn (1989 3), in a much cited essay, describes the fiduciary relationship as the top of a three part tier; at the bottom is ordinary commercial self-interest, above that is "good faith" and at the top is the fiduciary relationship. Finn suggests that particularly in North American jurisdictions relationships requiring no more than "good faith" are being described as fiduciary relations; and that a useful distinction is being blurred. The fiduciary relationship is a doctrine of equity, and equitable remedies apply; including for example the comparatively lenient equitable attititude to limitation periods.(See Evans 1996 390f 402 for an overview) It may, then, be a matter of considerable importance to the parties in litigation if a relationship between them is to be characterized as fiduciary. Australian courts, like British courts, have tended to take a conservative attitude to finding the fiduciary relationship, see Finn (1989) generally.

The symbolic affirmation of this conservatism was the decision in Breen v Williams (1996) 138 ALR 259; here the High Court rejected an argument that the physician-patient relationship was in general of fiduciary character, in the context of a patient’s attempt to get access to her medical records. This decision may seem strange, on the grounds that one needs to have "trust and confidence" in one’s physician, to whom one may be vulnerable in even more intimate ways than one would normally be vulnerable to one’s solicitor. This point is the key to the meaning of Breen v Williams and to the direction in which the law of fiduciary relations has developed in Australia. Breen v Williams stands in one respect for the victory of the "agency" as distinct from the "vulnerability" concept of fiduciary relationships.

This result is implicit in all the judgements , but perhaps most clearly expressed in that of Gaudron and McHugh JJ. As their Honours saw it (at 285):

Physicians, they conceded, "may" have fiduciary duties to their clients in some aspects of their relationships, but not overall. Gummow J was prepared to find more positively that there were fiduciary aspects to the relationship, but he finds this by from what is fundamentally an agency rather than a vulnerability argument (at 306):

However, according to Gummow J the fiduciary duty (which is to be distinguished from the physician’s duty of "skill and care") only suffices to forbid the physician from profitting from a benefit derived from a fiduicary within the field of that duty; eaxamples Gummow J gave the examples of a physician sending a patient to a hospital in which the physician had an undisclosed private interest, or the situation in Moore v Resht of the University of California (1990) 793 P2d 479 where a patient’s bodily products were used for profit.

The decision in Breen v Williams contrasts directly with Canadian law. The Canadian decision McInerney v MacDonald had held on fiduciary grounds that a patient is entitled to access medical records. Gummow J made a rather half-hearted attempt to distinguish McInerney (at 302) but Gaudron and McHugh JJ drew a clear distinction between Australian and Canadian law in this area; and criticised Canadian law for its conceptual sloppiness (at 289). This will be seen to be especially relevant to discussion of the fiduciary aspects of Native Title. It would seem however, that the difference between Australian and Canadian interpretations of the fiduciary title is not so much one of sloppiness as against precision; (perhaps not even of a "progressive" as against a "conservative" attitude) but of different methods of analysis.

Canadian cases show a greater tendency to search for a conceptual heart of the fiduciary relationship, an analytical essence from which one may predict what type of relationships might be described as fiduciary and which not. Thus we have the test in Frame v Smith (1987) 42 DLR (4^th) 81:

Some recent commentators, such as Lokan (1999) 23 MULR 65 at 117 believe that this to still be the Australian position. However the decision in Breen v Williams is just one piece of evidence showing this to not be the case. Rather, Australian law by contrast is tending to resist any clear definition of the relationship. Ten years after his remarks in Hospital Products, Mason (1994) 110 LQR 239 at 246 claimed the lack of clarity surrounding Australian fiduciary law as a virtue; it enabled certain relations to be assessed as fiduciary as a matter of public policy rather than because of some additional underlying unity. By this view a fiduciary relationship is one to which it is thought advisable to attach fiduciary remedies and responsibilities.

This view seem rather circular and unprincipled. Whether so or not, this tendency is strongly by recent developments in Australian tort law. It is worth pausing briefly to examine this parallel, especially as it has not to my knowledge been previously remarked upon.

Before turning to do this, however, it should be made clear that the dissonance between Australian and Canadian law is not necessarily absolute or permanent. Since Breen v Williams was decided by the High Court Kirby J has ascended to it; and he is on record as approving the Canadian approach when the dispute in Breen v Williams was before him. (Breen v Williams (1994) 35 NSWLR 502 at 549).

It may be thought that the Canadian approach is more productive from the viewpoint of those trying to use the law to empower people thought to be disempowered. For example fiduciary law has been held in Canada to support litigation against parents for incestuous sexual assault; both the "trespassing" father and the "negligent" mother. In the event negligence was found against the mother; but if that plea had failed fiduciary arguments, imposing a higher standard of responsibility, would have been available. Howe (1997) discusses this case and disputes the finding against the mother as indicative of shortcomings in the judicial world view. Of course, judicial creativity and judicial discretion increase litigant’s vulnerability to the shortcomings of the judicial worldview. But arguably, at least, Canadian judicial creativity based on notions of power imbalance and vulnerability is no more dangerous than Australian judicial creativity (or the lack of it) based on an ill-defined concept of "public policy".

The concept of "proximity" in the law of negligence, used to establish categories of relationship’s attracting a "duty of care" has been the subject of strikingly similar discussion. As Toohey J in Hill v Van Erp 188 CLR 159 at 189-190 described the process:

As Toohey J explained it, "proximity" is a word used to summarize this process, rather than a free-standing consideration of its own. This incremental approach to proximity is a considerable retreat even from 1994, when five judges of the High Court insisted on the underlying unity of the conception of proximity:

Mason J’s (1994) comments on fiduciary law in effect amount to a recommendation that the finding of a fiduciary relationship be based on similar considerations to those used by Toohey J in Hill v Van Erp. As regards fiduciary law at least, Canadian courts have preferred an approach analogous to that used by the majority (including Mason CJ as he then was) in Bernie. Considered as a method of judicial reasoning, the incremental approach described by Toohey J is not necessarily more or less "progressive" than than the unitary approach favoured in Bernie. Partly this will depend on which "policy considerations" are applied. This also could be said about the eqivalent difference of approach in fiduciary law.

It should be noted, however, that Toohey and Dawson JJ in Breen v Williams did not reject the project of formulating "a precise or comprehensive definition of the circumstances in which a person in his or her relations with another" incurs fiduciary obligations. They merely noted that this had not so far been achieved. They did however isolate the characteristic (at 223) that "a fiduciary acts in a representative character in the exercise of his responsibilities"

So the picture emerging from Breen v Williams regarding fiduciary obligations is that there are a number of relationships where people represent or act on behalf of others; and on some of these relationships the courts have, on public policy grounds, imposed the special "fiduciary" level of responsibility. "Vulnerability" may be one consideration the court can take into account in deciding whether public policy warrants imposing this responsibility on a given relationship.

Perhaps the most ambitious attempt to use fiduciary law to achieve social justice aims has been the attempt to base aboriginal land rights on fiduciary concepts. This project, also, is based on Canadian precedents. The high point of the use of the fiduciary law as a legal tool in the service of Native Title was some brief comments made by Toohey J in Mabo v Queensland No. 2 (1992) 175 CLR 1 at 199, as part of the majority Mabo is of course. Mabo is of course the foundational case of modern Australian Native Title, and the question at issue was whether the Merriam people continued to hold a legally recognized title to their traditional lands after the land had been claimed for the Crown. The fiduciary aspect of the case was marginal to the decision of the court, only Toohey J making a finding with regard to it. In reaching his findings Toohey J was heavily influenced by the comments of Mason J in Hospital Products and upon the Canadian Native Title case Guerin (1984 13 DLR 4^th at 334). The Crown, according to Toohey J has fiduciary obligations to Native Title holders, (in particular the Merriam people under review) for at least two separate reasons. Firstly, it was an extreme case of the "vulnerability argument". Native Title holders certainly proved vulnerable with respect to the Crown. Secondly, the legislature had shown an intention of "protection" of the Merriam people (the quotation marks are Toohey J’s !) (at 201-203) The Crown, according to Toohey, has a fiduciary relationship similar to a constructive trustee with respect to traditional landowners.

Toohey J relied in part upon the Canadian case Guerin, as remarked. But Toohey J’s remarks are far more radical in their implications than anything that can be found in Guerin. The Guerin judgement referred to a situation where an "Indian Band" had a recognized title to land within an existing statutory framework. As part of the terms of that framework land could be alienated only to the Crown; and in brief the Band made a deal with the government by which they surrendered land in return for financial profit which was not forthcoming to the extent agreed upon. It was found that they Crown had fiduciary obligations in this case to protect the financial interests of the Indian Band. In part these obligations stemmed from the limits on the Band’s right to alienate their land. Overall, the situation in Guerin was comparable to the standard commercial applications of the fiduciary principle; it was essentially an agency-like relationship which had special characteristics which were held to justify applying a fiduciary standard of care or loyalty (as with a commercial trust) upon the Crown.

Toohey J, at 205, went much further than anything in Guerin to make the remarkable and resonant suggestion that legislation adverse to the interests of Native Title holders would be a breach of the fiduciary obligation. He also stated that fiduciary obligations could not limit legislative power; so presumably damages could be recovered, or other remedies imposed. In Coe v Smith,(1993) 68 ALJR 110 Mason CJ declined to draw consequences from Toohey J’s remarks, and they continue to mark an outer limit in this area.

Later Canadian cases, notably R v Sparrow [1990] 1 SCR at 1108 have gone further than this and found a general fiduciary obligation by the Crown to the aboriginal peoples. R v Sparrow was considered in Thorpe v The Cwth 71 ALJR 767 at 775 by Kirby J; but not followed, apparently on the grounds that it rested on Canada’s particular statutory and constitutional provisions. Kirby J also remarked on the divergence between Australian and Canadian fiduciary concepts. His Honour was careful to state (at 776) that:

Answering that question in the affirmative, however, would require the High Court to rethink the attitude it took in Breen v Williams.

In fact, the application of fiduciary arguments to Native Title is a classic example of a "political trust". Re Wadi Wadi People’s Application 129 ALR 167 per French at 178 has a useful discussion of the authorities in this area. The tendency in common law courts has been to regard fiduciary breaches by public officials in the discharge of their duties as essentially non-justiciable, as breaches of trust "in a higher sense" not remediable by the courts. The leading case in this area is Tito v Waddell (No 2) [1977] Ch 106. Finn (1995) mounts a vigorous criticism of this position; the notion of popular sovereignty is historically associated with the belief that "the most fundamental of fiduciary relationships is that which exists between the community (the people) and the State and its agencies" (Finn 1995 31) This proposition might be defended on Canadian "vulnerability" arguments or on Australian "public policy" arguments. In either case it raises the uncomfortable question of what happens when a legislature breaks faith with those it governs.

The running of fiduciary arguments in native Title cases is one early sign of attempts to deal with that question. Toohey J’s remarks in Mabo should be seen as one of several signs that senior judges, also, are attempting to grapple with that question. The shape of the eventual solution is not yet clear, but arguments based on fiduciary law are contributing to the process.