Employees as fiduciaries

Michael Wilson and Partners Limited v Robert Colin Nicholls & Ors [2009] NSWSC 1033

The protagonists in this case are the well known law firm and 3 of their former professional members. To reach the analysis of employee fiduciary obligations the decision traverses forum and conflict of law issues. Justice Einstein provides an excellent analysis of the principles and law in respect of fiduciary obligations of employees.

The discussion picks up at paragraph 33 of the judgment where the history of the duty and its content is tracked. By way of example, reference is made to Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 at 206, where Lord Browne-Wilkinson observed:

“. . . the phrase “fiduciary duties” is a dangerous one, giving rise to a mistaken assumption that all fiduciaries owe the same duties in all circumstances. This is not the case.”

The seminal decision of the High Court of Australia in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, and Mason J’s succinct expression, understandably takes up centre stage:

“’That contractual and fiduciary relationships may coexist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all-important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.”

Justice Einstein follows its application locally and further considers at some length the Supreme Court of Canada in Canadian Aero Service Ltd v O’Malley [1974] SCR 592, 40 DLR (3d) 371, as offering an outstanding analysis of the principles and duties.

To round the judgment off (at paragraphs):

• 374 – monetary compensation;

• 377 – causation; and

• 378 – election of remedies.

Brisbane Barrister – David Cormack

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