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Date: Wed, 21 Jun 2006 11:40:09 From: Jason Neyers Subject: Fiduciary Duty
I post on behalf of Joshua Getzler:
May I add some detail on the conflict of duty and duty that arose in the House of Lords case of Hilton v Barker Booth & Eastwood [2005] UKHL 8; [2005] 1 W.L.R. 567. I noted this case in (2006) 122 L.Q.R. 1 and won't repeat the entire analysis here. In Hilton a firm of solicitors acted for both sides of a land sale and did not disclose to the seller, Mr Hilton, who was a longtime client, that the buyer had criminal fraud convictions and was not to be trusted; those very solicitors knew the whole story having represented the buyer in the earlier fraud trial. When the buyer defaulted on the sale this caused the seller's various development projects to collapse, eventually wiping out the seller's small building business. The seller sued the solicitors for failing to keep their fiduciary duty to protect him; they riposted that it would be a breach of duty to their other client to reveal bad things about him. The court held, in the special contractual-fiduciary arena of solicitors' duties to clients, that it is an automatic breach of duty to put oneself into a situation of conflict of duty and duty, and if one chooses to cause harm through breaching duty to one client and keeping faith with another, one pays out in full to the betrayed client. Implied consent or implicit waiver was a major line of defence but was rejected by the Lords on basis of there being no possibility here of informed consent to non-disclosure of fraud. I agree with Lionel's comment on Kelly v Cooper that some saw the decision as being too quick to conflict of duty and duty through implicit waiver; I'm certainly in that camp. Kelly v Cooper was not mentioned in Hilton, but I see the later Lords' decision as clipping the wings of the earlier somewhat adventurist case from the Privy Council. Certainly Lord Browne-Wilkinson in Kelly may have mistranscribed Mason CJ's theory in Hospital Products that contractual contexts can mould fiduciary duties and reduce the intensity and scope of duties; I read Mason CJ as wanting fiduciary duties to push up contractual standards, not the other way around with contract eviscerating the effect of fiduciary duty. The court in Hilton may have been tougher in applying fiduciary duties than in Kelly because the solicitors advising Mr Hilton had, in addition to assuming conflicting duties, also concealed a degree of self-dealing and had clearly favoured the buyer in the negotiations and taken an active role in preferring one client over another. Lord Walker, whose speech was backed by the other Law Lords in Hilton, went closely into the nature of a solicitor's fiduciary disclosure duties in the common case of acting simultaneously for mortgage lender and buyer. Lord Walker also - strictly obiter - approved the obiter comments of Millett LJ on fiduciary duties in Bristol and West BS v Mothew [1998] Ch. 1. The Hon. Justice Dyson Heydon noted the pyramid of obiter statements piled up before and around Mothew's case in his essay 'Are the Duties of Company Directors to Exercise Care and Skill Fiduciary?' in Simone Degeling and James Edelman, editors, Equity and Commercial Law (Thomson 2005), just reviewed by Charles Mitchell in the LQR for July 2006. With Hilton the pyramid of obiters got bigger. Joshua
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