HIGH COURT OF AUSTRALIA

Pilmer and Ors v The Duke Group Limited (In Liquidation) and Ors

[2001] HCA 31

McHugh, Gummow, Kirby, Hayne and Callinan JJ

31 May 2001 - Canberra

Kirby J. 93 This appeal, ^[1] in my opinion, is mainly concerned with fiduciary obligations. It involves the ambit of a propounded fiduciary duty, the remedies available where such a duty is found to have been breached, and, specifically, whether such remedies may be modified by a conclusion that there has been "contributory fault" on the part of a beneficiary. Only if these issues are answered unfavourably to the claimant beneficiary do questions necessarily arise as to the scope of that party ' s recovery at common law. ^[2]

The unusual course of the proceedings

94 The primary judge in the Supreme Court of South Australia (Mullighan J) acknowledged that, by the end of the trial, the plaintiff (to whom I shall refer as Kia Ora) had principally put its case on the basis of fiduciary duties. ^[3] However, he concluded that Kia Ora had not established that there was a fiduciary relationship with the appellants, who were their Perth accountants. ^[4] He therefore dismissed Kia Ora ' s claim against the appellants, as so propounded. He did so by the application of what he took to be the requirements of this court ' s decision in Breen v Williams. ^[5] At the time that was the most recent statement by this court about the nature of fiduciary duties and the consequences of their breach. ^[6]

95 In the full court, the primary judge ' s holding in respect of fiduciary obligations was reversed. The full court held that, by providing their report to Kia Ora, to be placed before its shareholders in compliance with listing rule 3J(3) of the Australian Stock Exchange Ltd (ASX) rules, ^[7] the appellants were in breach of a fiduciary duty which they owed to Kia Ora. ^[8] They were therefore liable to account to Kia Ora in respect of the loss which Kia Ora had suffered as a consequence of their report. ^[9]

96 Whilst holding that the appellants were liable, under this head, to pay Kia Ora equitable compensation (including a component for interest) ^[10] the full court went on to determine that the equitable compensation should be reduced. It did this primarily by reference to what it said was "an allowance for unreasonable action on the part of [Kia Ora] which might be described as contributing fault but having the same effect as contributory negligence under apportionment legislation" . ^[11] The full court assessed the extent of the reduction for such "contributing fault" to be the same percentage as it would have allowed for contributory negligence if that were available under this head of claim, namely 35 % . ^[12]

97 Because the claim by Kia Ora, framed in common law negligence, was subject to reduction for contributory negligence but the claim in contract was not, Kia Ora, unsurprisingly, elected before the full court to take its judgment in contract. However, that election was obviously made on the footing of the then determination of Kia Ora ' s legal and equitable entitlements. Naturally enough, it was made with the view to maximising Kia Ora ' s recovery. But in this court, events took an unusual turn.

98 Initially, the only ground upon which special leave was granted to the appellants to appeal to this court concerned their assertion that Kia Ora had suffered no loss by the issue and allotment of its own shares to the shareholders of Western United Limited (Western United) as part of the consideration for a takeover of Western United. That ground addressed technical arguments, responsive to Kia Ora ' s claim in contract, in respect of which judgment had been entered against the appellants by the full court. Argument was heard on that limited question. That question is now the subject of the joint reasons.

99 After the judgment of this court was reserved, the court, by order, enlarged the issues for consideration. ^[13] It directed the parties to provide further submissions on 3 questions concerning the full court ' s finding that the appellants had breached a fiduciary duty which they owed to Kia Ora. ^[14] Inherent in that direction, in the application and counter - application which the appellants and Kia Ora respectively then made (and in the oral argument which was reopened as a result), is the consequence that, if this court were to reach conclusions on the subject of fiduciary duty different from those of the full court, it would give effect to them. Any other course would be impermissible and unjust. It would be impermissible for the issue of fiduciary obligations to be considered as a purely hypothetical exercise. ^[15] It would be unjust if the only possible outcome of the added issue were one favourable to one side, in this case the appellants. Once the issues of the contested fiduciary duty and its consequences were revived it necessarily followed that this court was empowered (and, given certain decisions, obliged) to give effect to any conclusions it reached about those issues.

100 In my view, the special leave previously granted by this court should be expanded. The appellants should be permitted to appeal on added question (a), namely whether the full court erred in finding that the appellant breached a fiduciary duty owed to Kia Ora. ^[16] In respect of this enlargement of the appeal, I therefore agree with the other members of this court. However, unlike my colleagues, I do not believe that this decision, and its outcome, render it unnecessary to determine the consequential questions upon which Kia Ora urged that special leave should then be granted.

101 The consequential questions concern whether the full court erred in assessing the amount of equitable compensation to be awarded to Kia Ora (added question (b)) and whether it erred in holding that such equitable compensation was liable to be reduced on account of Kia Ora ' s "contributing fault" (added question (c)). ^[17] Once special leave is granted to the appellants on added question (a), this court should, in my view, grant special leave to the respondents on added questions (b) and (c). At least, it should do so if the answer to added question (a) is favourable to Kia Ora, if a strongly arguable case appears that the full court has erred on the matters raised by the other added questions, if resolution of these issues will return the matter to the way in which Kia Ora primarily presented its case at trial, and if the remedies then available to Kia Ora are as large as, or larger than, any remedies available at common law, whether in contract or negligence.

102 Given the unusual way in which this appeal unfolded, I will start at the end opposite to that taken in the joint reasons. I will address myself to the 3 questions posed by the court when it became plain that it was necessary, one way or the other, to consider and decide Kia Ora ' s primary case, namely its claim that the appellants were in breach of a fiduciary duty to it.

The background and additional facts

103 The complexity of the facts is reflected by the length of the reasons both of the primary judge ^[18] and of the full court. ^[19] The background facts are described in the joint reasons. ^[20] However, in order to deal with the enlarged question of fiduciary obligations, it is necessary out of fairness to the conclusion of the full court on these issues, to add further reference to the evidence. This will help to explain the conclusion which the full court reached.

104 It was the directors of Kia Ora who proposed that that company should make a takeover bid for Western United. Apart from Messrs Quilty and Singleton, those directors were also shareholders in Western United. Hence, they had a personal interest in the outcome of the proposed takeover. ^[21] The identified directors and their associates were actually substantial shareholders in Western United. The primary judge found that they may well have received 85 % of the takeover proceeds. ^[22]

105 It was in such circumstances that ASX listing rule 3J(3) applied to the proposal. It required that the takeover be approved at a meeting of Kia Ora ' s shareholders convened for the purpose of approving the takeover. Shareholders associated with Western United were disqualified from voting on the proposal. The ASX rule also required that notice of the meeting be accompanied by a report (with valuations or other material) from "independent qualified persons sufficient to establish that the purchase or sale price of such assets is a fair price" . ^[23] It was this report which the appellants purported to provide.

106 The ASX rule obliged the appellants to report not only about their opinion on the value of Western United but also whether the price proposed was fair. Necessarily, this had to be looked at from Kia Ora ' s point of view. ^[24] Thus the appellants were not called upon merely to provide factual information of an objective kind. They were retained to provide what was, in effect, professional advice and a recommendation, prerequisite to the takeover proceeding.

107 A precondition for the provision of the report, obvious from the circumstances but also expressly stated, was the complete independence of the appellants from those proposing the takeover. On the face of things, as chartered accountants, the appellants would have appeared to uncommitted shareholders of Kia Ora as "independent" and "qualified" . In terms of commercial reality, such shareholders were not, for the most part, in a position themselves to make an informed assessment of the takeover proposal or of the fairness of the share price.

108 All of the foregoing would have been plain to the directors who retained the appellants for this purpose. It would also have been obvious to the appellants. If they had stopped to consider it, they would have realised that the uncommitted shareholders were highly dependent upon them. The ASX was also dependent on their report. So, indeed, was the general public investing in shares for whom ASX rule 3J(3) affords both a standard, and an assurance, of integrity and propriety in takeover proposals in which directors of an acquiring company are personally interested. Unless that rule is carried out in accordance with its letter, and intent, the danger of self - interested actions on the part of directors is manifest.

109 As found by the full court, the appellants were not "independent" as required. Instead, there had been extensive, lengthy and close business and personal associations over a number of years between various members of the appellants ' firm and Kia Ora, Western United and Mr Harold Abbott (the third respondent) in particular. ^[25] The detail of these associations is complex and is described by the courts below. It specially involved one of the members of the appellants, Mr Geoffrey Stokes (since deceased), ^[26] Mr Munachen, ^[27] Mr Pilmer ^[28] and, to a lesser extent, Mr Martino. ^[29]

110 The primary judge found that such associations gave rise to a breach of the contractual requirement of independence. He concluded that, effectively, the appellants allowed Mr Pilmer to do as he was told, rather than to exercise a truly independent professional judgment. ^[30] The primary judge also found that "in the context of commercial affairs which were mutually advantageous to all of them" , ^[31] the appellants were so involved with the committed directors of Kia Ora and Western United as to make it inappropriate for the appellants, by reason of their association alone, to undertake the preparation of the report required by ASX rule 3J(3). Although this conclusion was stated in the context of the primary judge ' s consideration of the implied contractual obligations owed by the appellants to Kia Ora, the same considerations are clearly relevant to an evaluation of whether a fiduciary duty was enlivened by the relationship and/or the circumstances and, if such a duty existed, whether it was breached.

111 The reason that the primary judge withheld relief under the claim for breach of fiduciary duty was his understanding of the law established by this court for the ascertainment of fiduciary obligations, most notably in Breen. ^[32] He did not dismiss the claim on the basis of a different assessment of the facts. He had expressed his conclusions about the facts in strong terms. Those conclusions depended upon his assessment of the credibility of key witnesses, concessions made for the appellants during the trial and the common relevance of the facts found for the 3 ways in which Kia Ora propounded its claim. In such circumstances, there can be no real doubt that, had the judge considered that it was open to him in law to find that a fiduciary duty was owed by the appellants to Kia Ora, he would have concluded that such duty had been proved.

112 In an appeal by way of rehearing it was therefore open to the full court (reaching a different conclusion on the applicable law) to give effect to its contrary classification of the facts and to uphold Kia Ora ' s alternative claim. This the full court did. ^[33] It reached the conclusion that the circumstances found imposed a fiduciary duty on the appellants in respect of the provision of their report to Kia Ora under the ASX rule. That conclusion necessitated the consideration by the full court of the nature of the fiduciary duty in question and of its breach, ^[34] the relief that should be given to Kia Ora by way of equitable remedy ^[35] and whether such relief could, or should, be reduced by a conclusion that there was "contributing fault" on the part of Kia Ora. ^[36]

113 In my respectful view, the primary judge erred in rejecting Kia Ora ' s claim that the appellants owed Kia Ora a fiduciary duty which they had breached. The full court was right to correct that error. Whilst granting special leave to reagitate the point, because of its importance generally and for the present parties, this court, in disposing of this appeal, should affirm the full court ' s decision in that regard.

114 This conclusion necessarily lifts into this court the consequential questions regarding the relief to be afforded. As soon as this court ' s appellate consideration of those questions is engaged, it is necessary for the consequences to be analysed and given effect. The appellants, having advanced their arguments about fiduciary duty and in my opinion having lost, the respondents should be permitted the special leave that they seek to reagitate the remedial consequences that follow. In particular, they should be permitted to dispute the deduction for "contributing fault" which the full court upheld. I would allow Kia Ora to do this on the basis that the course of the proceedings, the supervening order of this court and Kia Ora ' s written submissions and argument on these points amount, in substance, to propounding a notice of contention (by which Kia Ora seeks to uphold the outcome in the full court on a basis different from that which the full court decided) or a cross - appeal to allow consequential correction of the judgment. No contrary submission was advanced for the appellants when the three added questions were fully debated, as they were.

115 To explain how I come to my conclusions, it is necessary first to analyse the ratio decidendi of this court in Breen; to distinguish that decision from the issues presented by the relationship of the present parties and the circumstances of their transactions; and then to suggest the features of that relationship, and of those transactions, that make it clear that a fiduciary duty attached to the appellants with large consequences for the remedies available to Kia Ora.

The decision in Breen

116 In Breen, this court upheld a judgment of a majority in the New South Wales Court of Appeal. ^[37] In that court I dissented on a point that is here relevant. It was whether a fiduciary duty existed in law in the relationship between the parties or by reason of the other circumstances of that case; ^[38] whether it had been breached; ^[39] and, if it had, what equitable relief should be granted. ^[40]

117 Whilst I respectfully adhere to the opinions which I expressed in Breen v Williams, I must be careful, in applying the law to the present appeal, to conform to the ratio of Breen in this court, including as it appears in any reasoning which, by inference, is incompatible with what I said in the Court of Appeal. In that case, I followed the decision of the Supreme Court of Canada in McInerney v MacDonald. ^[41] That decision was to the effect that a medical practitioner and a patient are involved in a fiduciary relationship for the purpose of the law of fiduciary obligations. ^[42] On that basis, with certain limitations, a patient was entitled to oblige a medical practitioner to accede to a request to allow access to medical records held by the practitioner in respect of the patient. This court unanimously disagreed.

118 In ascertaining the ratio of Breen, it is primarily necessary to examine the differing ways in which members of this court explained their respective conclusions, for within this court there were differences of opinion. One can perform this task, conscious of the wealth of commentary which the decision has evoked. The comments have ranged from the condemnatory, ^[43] through the disappointed, ^[44] to the resigned and accepting, ^[45] rising to praise ^[46] and ending just short of unalloyed pleasure. ^[47] Where a judicial decision produces such a wide range of responses, for the most part from knowledgeable writers, it is fair to assume that the law does not speak with total clarity or that its content is uncontested.

119 When one examines what Breen actually stands for, as a matter of legal authority, it clearly negates any entitlement by patients, under the common law, to inspect their medical records, save with the agreement of the medical practitioner concerned or where legislation so provides. In this respect, this court confirmed the unanimous opinion of the Court of Appeal. ^[48] But the point upon which a difference of opinion had emerged in the Court of Appeal related to the alternative claim which the patient advanced, based on the suggested equitable category of fiduciary duty. This court held, affirming the majority in the Court of Appeal (Mahoney JA and Meagher JA), that no such fiduciary duty existed in the circumstances.

120 There were differences of reasoning in this court ' s decision in Breen. A majority were clearly of the opinion that the relationship of medical practitioner and patient did not, without more, create fiduciary obligations. Thus, that relationship bore no sufficient analogy to that between a solicitor and client, or trustee and cestui que trust, that traditionally gives rise, without more, to fiduciary obligations. ^[49] On the other hand, Gummow J ^[50] concluded that the relationship between a medical practitioner and a patient who seeks skilled and confidential advice and treatment was indeed a fiduciary one. ^[51] In his Honour ' s opinion, this conclusion followed, by analogy, from the earlier decision of this court in Daly. ^[52] It also followed from an analysis of the formulations of the mainspring of fiduciary duty found in other decisions of this court, ^[53] other Australian authority ^[54] and authority of the Supreme Court of Canada apart from McInerney. ^[55] The point of Gummow J ' s analysis was that the answer to the claim advanced by Ms Breen was not to be found, alone, in a classification of her relationship with Dr Williams. The "nature of the relationship" ^[56] was only one aspect of the two - fold test to be applied for ascertaining the existence and scope of a fiduciary duty. The other aspect considers "the facts of the case" . ^[57]

121 In some established relationships, ^[58] the relationship itself will be enough to make it clear that a fiduciary obligation is owed by one party to the other in respect of related transactions between them during the relationship. Relationships giving rise to such obligations differ between jurisdictions. In Australia, Gaudron and McHugh JJ in Breen ^[59] mentioned "trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company and partners" . However, in other countries, perhaps reflecting different social circumstances, courts have been willing to add new and different categories. Thus in Canada, the Supreme Court has added (but this court has not) the category of medical practitioner and patient. ^[60] That court has also added the relationships of parent and child ^[61] and the Crown and indigenous peoples. ^[62] In the United States of America still further relationships have been added. These include majority and minority shareholders, ^[63] patients and physicians, ^[64] or psychiatrists ^[65] and others. ^[66]

122 The primary point for which Breen stands in relation to fiduciary duties is that, in Australia, attempts to elevate a relationship between medical practitioner and patient effectively to a special one which, without more, will import fiduciary obligations has, for the moment, failed. Proving that the relationship involves an imbalance of power, and even vulnerability on the part of the patient, was not sufficient.

123 Like that between doctors and their patients, the relationship of chartered accountant and client has not yet been classified as one of the categories which, without more, gives rise to fiduciary obligations. Because such obligations are more onerous (and the legal consequences more drastic) than those arising from common law duties of care or from contractual relationships, it is understandable that the per se categories of fiduciary relationship have been limited in the past and will not be extended except by clear analogy with those presently accepted. ^[67] I must comply with this approach.

124 A further point established by Breen is not unconnected. This is that a degree of caution must be observed in relying upon Canadian and United States authorities concerning the expansion of per se fiduciary relationships or factual circumstances in other relationships that are said to combine to impose fiduciary obligations. This difference between the approach of North American courts and those of other common law jurisdictions, particularly the United Kingdom, was also observed by Chief Justice Mason. ^[68] At least so far as the relationship of medical practitioner and patient was concerned, I suggested in the Court of Appeal that professional paternalism, evident in the decisions on the issue in the United Kingdom, was less in harmony with the social circumstances and law ^[69] of Australia than was the position prevailing in North America. ^[70] Similar considerations might inform the approach of Australian law to the obligations of chartered accountants to their clients. Although my approach in this regard in Breen v Williams has been taken to task, ^[71] I remain of the opinion there stated. But it matters not in this appeal.

125 I do not read Breen as obliging Australian courts to ignore all Canadian and United States authority on fiduciary obligations. ^[72] There remains much in the law of those jurisdictions which is common to Australian law so far as equitable doctrine and remedies are concerned. The basis for fiduciary duties in all jurisdictions is explained in common terms by reference to obligations of loyalty to a person dependent on another who, to the knowledge of that other, is specially vulnerable. ^[73] Nevertheless, in matters of detail, following Breen, it must be accepted that a view has been taken that North American courts have, to some extent, become engaged in "reshaping the law of obligations in a way which blurs significant distinctions" ^[74] that are still maintained by the courts of the United Kingdom ^[75] and Australia. To the extent that there are differences, Australian courts should therefore adhere to "accepted doctrine" . They will not uncritically follow judicial authority from North America.

126 Third, Breen illustrates a general disinclination of Australian law to expand fiduciary obligations beyond what might be called proprietary interests into the more nebulous field of personal rights, such as those agitated in Breen itself. ^[76] There the patient had no proprietary rights of any kind in the notes of the medical practitioner. ^[77] The kinds of disputes concerning alleged fiduciary obligations that typically find their way to the courts usually involve financial relationships. Fiduciary obligations were never limited to disputes about property interests. ^[78] Nevertheless, Breen stands as a warning that the imposition of fiduciary obligations "gives rise to proprietary remedies that affect the distribution of assets in bankruptcies and insolvencies" . ^[79] This represents a further reason for exercising restraint in expanding the categories of per se relationships or treating new fact situations as attracting fiduciary obligations beyond those accepted in the past.

127 Fourth, and most importantly, Breen upholds the principle stated in the aphorism that fiduciary obligations are "proscriptive" and not "prescriptive" . ^[80] This, in my view, is the fundamental reason why all members of this court in Breen rejected Ms Breen ' s claim of a fiduciary obligation. Whatever the differing views which the justices held concerning the character of the relationship in question there and whether it was, or was not, a fiduciary one for some or all purposes, there was agreement that Ms Breen ' s claim failed because it would have involved imposing on the suggested fiduciary positive obligations to act. ^[81] It would have burdened him with an affirmative obligation to grant access to his notes to a patient (prescriptive duties). It would thus have gone further than the conventional (proscriptive) duties of loyalty, of avoiding conflicts of interest or of misusing one ' s power, such as fiduciary duties have traditionally upheld. ^[82]

128 Whilst, for my own part, I question the viability of this supposed dichotomy (because omissions quite frequently shade into commissions) I must accept that Breen embraces the distinction. Moreover, it is one that has been approved in commentaries. ^[83] Until further elucidated by this court, it should therefore be followed by Australian courts and by me.

Breen does not exclude a fiduciary obligation

129 When the foregoing considerations are extracted from Breen, as the binding rule established by that decision, it will be seen immediately that none of them decides the present case. Kia Ora did not allege that the relationship of chartered accountant to client was per se of the variety that attracted fiduciary obligations. It did not set out to draw an analogy between that relationship and the closest analogy of a fiduciary kind, namely legal practitioner and client. While there are obvious overlaps between the professions of chartered accountant and legal practitioner, the history of each has been different and their respective functions are distinct. This is not, therefore, a case (nor was it ever suggested to be) where an established relationship, as such, gave rise to the imposition of fiduciary duties to Kia Ora on the part of the appellants. At all times, Kia Ora addressed itself to the peculiarities of the facts of its relationship with the appellants. This was also how the full court dealt with the claim.

130 Nor did Kia Ora advance its entitlements by reference to North American authority. I will likewise refrain from referring to otherwise pertinent developments in that part of the world. Instead, Kia Ora relied, and the full court decided the case, upon orthodox principles of the Anglo/Australian law of fiduciary obligations.

131 So far as the conventional attention which this branch of the law has given to proprietary rights, nothing in Breen speaks against the recognition of fiduciary obligations in the kind of relationship and activities proved by the evidence in this case. Indeed, this was a classic case in which the proprietary interests of Kia Ora and the shareholders, independent of the directors, were at stake. Although Breen was an invitation to enter new territory, this case is not. It is placed squarely in the middle of the kind of circumstance in which fiduciary obligations have been upheld on countless occasions: where the obligation of loyalty to the financial interests of identifiable persons who were specially vulnerable is abused by other persons entrusted with duties permitting them to make judgments, in effect, for others which called for the selfless pursuit of the interests of others, the independent performance of their duties and (if that be not possible) a refusal to be involved. As Professor Finn put it: ^[84]

The lawyer and the stockbroker illustrate the functionary regarded as clearly fiduciary at least when acting in an advisory, and not merely in a ministerial, capacity. Predictably it is these the courts have in mind when they describe the adviser as a fiduciary. And what these suggest is that fiduciary responsibilities will be exacted where the function the adviser represents himself as performing, and for which he is consulted, is that of counselling an advised party as to how his interests will or might best be served in a matter considered to be of importance to his personal or financial well - being, and in which the adviser would be expected both to be disinterested, save for his remuneration, and to be free of adverse responsibilities unless the contrary is disclosed at the outset.

132 This was not, ultimately, a case where "prescriptive" duties were imposed. As the full court found ^[85] in the circumstances of self - interest, conflict of interest and lack of independence in which they found themselves, the duty of the appellants was clear. It did not involve assuming affirmative initiatives. It simply involved compliance with the loyalty ordinarily required of fiduciaries, namely the scrupulous avoidance of any possibility of misuse of power. The appellants should have declined to provide the report under ASX rule 3J(3). The duty falling upon them was therefore proscriptive. Within this rubric, no prescription of affirmative conduct was imposed.

133 It follows that, so far as the ratio of Breen in this court is concerned, it provided no impediment to a finding that the appellants owed Kia Ora fiduciary obligations. But is there any other reason why this court should hold that such obligations were inapplicable to the circumstances of the case?

The principles governing fiduciary obligations

134 The full court explained its conclusion, favourable to Kia Ora ' s argument in respect of fiduciary obligations, in a passage which is, in my opinion, correct: ^[86]

[N]ot only did [the appellants], in the circumstances, lack independence, but they were in a position where their obligation to act solely in the interests of Kia Ora was compromised by and in substantial conflict with their personal and commercial loyalty to certain of the directors of Kia Ora. The fact that they apparently did prefer, whether consciously or sub - consciously, the interests of the directors to those of Kia Ora is borne out by their failure to mention in their report such fundamental matters of which they were or ought to have been aware and which, if disclosed, could only have had a substantial effect on the opinion they expressed. Amongst those matters were the knowledge of the Parry transaction some few weeks before at a substantially lower price per share than they were considering to be fair to Kia Ora, the identity of the major depositors with Western United and the back - to - back loan transactions being undertaken through Western United, failure to disclose all of which gave a misleading impression of the asset position and business activity of Western United.

135 The reasons of the full court go on to describe several other instances where the appellants showed preference for, and loyalty to, the directors with whom they were associated rather than to Kia Ora, the company which had retained them and whose uncommitted shareholders were reliant on their report and dependent on their independent judgment about the fairness of the price of the share offer. In the circumstances, Kia Ora and such shareholders were clearly vulnerable to the consequences of incomplete information and a biased opinion given by the appellants. Time and space restrain me from mentioning all of the considerations. They are referred to in the reasons of the full court. ^[87] They repay careful reading. The conduct portrayed is the very opposite of that which proper professional standards and compliance with ASX rule 3J(3) envisaged. Because that conduct was obligatory for the protection of a corporation and its shareholders reliant on the appellants (and of the larger community of potential shareholders in the investing public reliant on the arrangements put in place by the ASX rule) an apparent case of fiduciary duty is established in conformity with authority.

136 A number of propositions concerning the existence, or otherwise, of fiduciary obligations may be stated. They include the following:

(1) Fiduciary obligations are not confined to established relationships or to exactly identical facts as those that have given rise to them in the past. Even those jurists most resistant to analogical extensions in this field accept that the list of persons owing fiduciary duties is not closed. ^[88] It could scarcely be so, given that equity is itself the embodiment of judicial invention. ^[89] Unless legislation requires a different approach, ^[90] equity and equitable remedies respond to changing times, different social and economic relationships ^[91] and altered community expectations. However, where a suggestion is made that fiduciary obligations arise in a new relationship, or out of particular facts, it is essential that judges perform their functions by analogy from settled principles. ^[92] They are not entitled to distort those principles. Nor may they superimpose an equitable classification on facts, simply because to do so would afford better or larger remedies to a plaintiff who appears to have suffered some wrong. ^[93]

(2) Specifically, it is not sufficient, to impose fiduciary obligations on an alleged wrong - doer, simply to point to the vulnerability of the person claiming to have been wronged. Many people who are in an arm ' s length relationship with each other (if they have any real relationship at all) experience a serious disproportion of power in their dealings. To turn every such case into one giving rise to fiduciary obligations would be to distort basic doctrine. Where the voice of equity is silent, the party harmed will have to rely upon entitlements, if any, that it enjoys under the common law, specifically on the basis of contract or tort. Several recent expositions of negligence law make reference to vulnerability as a consideration relevant to the imposition of legal duties of care. ^[94] For fiduciary obligations, vulnerability to wrong - doing will certainly be a relevant consideration. However, it is not sufficient. Vulnerability can call forth remedies in a case of some proved wrong - doing. But to call forth fiduciary obligations, more than vulnerability is required. ^[95]

(3) The mere fact that a party may have remedies at law, whether in contract or tort, does not exclude the possibility that fiduciary obligations may also be imposed. There is no antipathy between such concurrent obligations. ^[96] Because equitable remedies will commonly be more significant and protective, it will often be the case that a party, with an arguable case that fiduciary obligations arise from the facts, will give primacy to that aspect of its case. This is what Kia Ora did in the present proceedings. If equitable relief were available, many of the technicalities of the common law remedies would fall away. Normally, the party establishing such an entitlement will be in at least as good a position, and often much better, than it would be if confined to remedies at common law. It is entitled to advance its case as it chooses. It is not necessary for it first to exhaust any remedies it may have at common law. ^[97]

(4) The greatest difficulty facing those who assert the existence of fiduciary obligations, outside the classic per se relationships, arises from the fact that the law has not formulated any precise or comprehensive definition of the criteria adopted for imposing such obligations. ^[98] The inadequacies and incompleteness of past attempts do not, however, relieve a judge, faced with such a claim, of the necessity to have a notion of what is involved. Without this, there would be no proper, orderly development of fiduciary responsibilities or predictability and clarity in the law. Nor would a foundation be provided upon which those affected might reasonably organise their affairs. ^[99]

(5) Various theories have been propounded in an attempt to capture the essence of the "fiduciary principle" . They include the opinion that it arises where a trust is created in relation to specific property or where a person is in a position that involves "confidence so as to impress him with a fiduciary character" . ^[100] This exposition is inadequate as it is no defence for a fiduciary to prove that the beneficiary did not really have confidence in it. Trust itself is not the essential attribute of fiduciary liability, although it will often exist in fact. Something additional is required. ^[101] Attempts to suggest that this additional element is the presence of a peculiar vulnerability to the fiduciary holding a discretion or power ^[102] must be rejected as being too broad, for the reasons already stated. ^[103] A third suggestion would have it that a fiduciary obligation arises where one person accepts a transfer of powers from another with a requirement that the deployment of such power be restricted to uses for the benefit of the beneficiary only. ^[104] However, obviously, this is more a statement of the problem than the provision of a useful criterion. It is in these circumstances that a fourth theory was advanced by Professor Finn. ^[105] He suggested that the unifying principle of fiduciary obligations arises from the existence of a duty of loyalty that, reflecting "higher community standards or values" , ^[106] gives rise to a "legitimate expectation that the other party will act in the interests of the first party or at least in the joint interests of the parties and not solely self - interestedly" . ^[107] Essentially, this was the criterion that I favoured in Breen v Williams. ^[108] Whilst it can be criticised as tautologous and subjective, I still consider that it represents the best attempt to express what is involved. ^[109] Read with the qualifications accepted by this court in Breen, ^[110] it does offer a useful "description" ^[111] to assist in the practical application of basic doctrine to varying relationships and facts.

(6) As a matter of practicality, to reduce the uncertainties that arise from the elusive "essence" of the "fiduciary principle" , it is reasonable for courts to have regard to features commonly found in cases where fiduciary obligations have been upheld. Necessarily, such features are not exhaustive. They may overlap. As Gaudron and McHugh JJ pointed out in Breen, ^[112] they have included in the past: "the existence of a relation of confidence; ^[113] inequality of bargaining power; ^[114] an undertaking by one party to perform a task or fulfil a duty in the interests of another party; ^[115] the scope for one party to unilaterally exercise a discretion or power which may affect the rights or interests of another; ^[116] and a dependency or vulnerability on the part of one party that causes that party to rely on another" . ^[117] Superimposed on all of these instances is the common requirement of "loyalty" . ^[118] Whilst that word itself is also somewhat tautologous, it signals, in the context, the central idea involved. In some relationships, or factual circumstances, an element of selflessness is implicit. It is not enough that the party charged with default may have conformed to contractual duties or even to the standards of a tortious duty of care. Whether it has or not, equity will require that party not to profit in any way from the relationship nor advance any interests other than those of the beneficiary, except with the beneficiary ' s informed consent. Equity will oblige the fiduciary not to have any interest unknown to the beneficiary that could conflict with the foregoing duties. ^[119]

The appellants owed a fiduciary duty

137 When the foregoing principles are applied to the facts as found in the present case, it is my opinion that the full court was correct to hold that the appellants owed a fiduciary duty to Kia Ora. The company relied on the appellants for an independent, impartial and competent report which the appellants were incapable of providing, and did not provide.

138 First, there is no error in the analysis by the full court or the criteria which it applied. Correctly, the full court recognised, in contradistinction to the primary judge, ^[120] that nothing in the ratio of this court ' s decision in Breen obliged the opposite conclusion. Second, the full court prudently reminded itself of the need for care against unnecessarily importing equitable principles (and fiduciary obligations) into commercial relationships. ^[121] This is a view that I have myself expressed. ^[122] It has a long judicial lineage. ^[123] Third, the full court examined the rules of professional ethics applicable in 1987 to chartered accountants in Australia, such as the appellants. It did so, acknowledging that such rules were not binding on the court but viewing them as "a reliable and important indicator of … accepted opinion" . ^[124] Such rules would obviously be pertinent to the consideration representing the "essence" of the fiduciary principle described by Professor Finn. ^[125] A similar use of professional rules in the context of fiduciary obligations has been adopted in Canada ^[126] and New Zealand ^[127] in judicial opinions that have otherwise been cited in this court with apparent approval. ^[128]

139 According to "ethical guidelines" of the Institute of Chartered Accountants in Australia issued at the applicable time, the principles binding on persons such as the appellants included those of "integrity, objectivity, independence, confidentiality and professional competence" . ^[129] The adoption of those rules reflected the fact that, in certain circumstances at least, clients and persons dependent upon clients of chartered accountants will be extremely vulnerable to the discharge of their duties.

140 The adoption of ASX rule 3J(3) is, in turn, a further indication that in respect of identified functions having implications for clients, their shareholders and the investing public, chartered accountants who undertake such duties are not simply business people performing contracted services for profit. Whatever might be the case in respect of other activities that they undertake, the very nature of the reporting function envisaged by ASX rule 3J(3) imposes on chartered accountants, who accept that duty, fiduciary obligations owed to those who reasonably expect that the function will be carried out with selfless loyalty to the client which commissions the report. In the present case, this meant loyalty and integrity with respect to Kia Ora, the company, as distinct from its committed directors who were able to send a lot of business, as they had in the past, in the direction of the appellants ' firm.

141 This is the way the full court reasoned. By avoiding the pitfalls that this court had identified in Breen and upholding a duty of loyalty and integrity which was imposed on the appellants by the very nature of the task entrusted to them, the full court came to the correct conclusion on this issue. The appellants owed Kia Ora fiduciary duties in performing the reporting function under ASX rule 3J(3). ^[130]

142 Having found the existence of the duty, it was unsurprising that, consonant with the factual findings of the primary judge, the full court should also find that it had been breached. The duty of "undivided loyalty to the persons whom they serve" ^[131] had been flagrantly negated. ^[132] In circumstances where, in effect, undivided loyalty to Kia Ora and its unsuspecting shareholders was impossible, had not been, and probably could not have been, repaired by disclosure, the only way in which the appellants could have discharged their fiduciary obligation was by declining to act. ^[133] Fiduciaries do this regularly. I am confident that chartered accountants throughout Australia do it all the time.

143 Why must persons in the position of the appellants act in the way suggested? It cannot only be because the rules of their professional body oblige it or the provisions of the ASX imply it. In my opinion, it is, ultimately, because the law imposes such duties by virtue of the loyalty that the law extracts from specified circumstances, of which this is one. The law that imposes such a duty is not confined to the contract between the chartered accountant and the client. Nor is it limited to the duty of care imposed by the law of negligence. Such duties can easily be modified or bargained away. The law that imposes such a duty is one resting on the observance of conscientious conduct by persons, such as the appellants, towards clients, such as Kia Ora and through them to the unsuspecting shareholders and potential shareholders who depend on such loyalty and adherence to selfless conduct, at least in matters of this kind.

144 With all respect to those of a different view, this court should not, by its decision in this case, send a signal that chartered accountants in the position of the appellants were merely the contracted agents of their client or simply a tortfeasor liable under the law of negligence. The duty they assumed, by providing their report under ASX rule 3J(3), was of a higher quality. It was a fiduciary duty.

145 The appellants suggested that they were relieved of any fiduciary duty because Kia Ora knew of their past associations with the company, its directors and Western United. I disagree. This was not a case of informed consent. Such consent requires full and frank disclosure to the party affected of all material facts. ^[134] It obliges the fiduciary to reveal to the beneficiary all relevant information necessary for the beneficiary to make a proper judgment as to whether to give consent to the activity that would otherwise be a breach of fiduciary obligations. No such disclosure was made here. No such consent was forthcoming, either on the part of the shareholders of Kia Ora (to whom the ASX rule 3J(3) report is ultimately addressed) or even the directors. Indeed, there was no disclosure to the shareholders at all.

146 Given the nature, duration and complexity of the relationships that disqualified the appellants from performing the rule 3J(3) reporting function, it would have been virtually impossible, as a matter of practicality, to fulfil the requirements of full disclosure. ^[135] As for the directors, the full court correctly found that disclosure to each other, of the very facts that gave rise to the circumstances that disqualified the appellants, would not have fulfilled the protective purpose for which the ASX rule was adopted. The appellants' fiduciary obligations to Kia Ora could not be cured, in effect, by the consent of the compromised directors condoning the involvement of the appellants which was the source of their disqualification. ^[136]

147 It follows that no error has been shown in the full court ' s conclusion that the circumstances were such as to impose on the appellants a fiduciary duty towards Kia Ora. Indeed, the full court ' s conclusion in that regard did not initially even attract a grant of special leave to this court. First impressions were correct. The matter having been fully argued, I would grant special leave in relation to added question (a). I would dismiss the appeal so far as it challenged the full court ' s finding that the appellants owed Kia Ora a fiduciary duty and that they were in breach of such duty by accepting the retainer, ignoring their conflict of interest and providing the report under rule 3J(3) as they did.

The quantification of equitable compensation

148 Because this is a minority opinion, I will say no more in respect of added questions (b) and (c) than is necessary to reach the orders which I favour in this appeal. The appellants urged that it was unnecessary to address those added questions at all. This is the view substantially favoured by the majority of this court. ^[137] Because I have reached a different conclusion on added question (a), it is essential, in the approach that I take, to consider the further added questions.

149 Where fiduciary obligations exist and have been breached, equitable remedies are available both to uphold the principle of undivided loyalty which equity demands of fiduciaries ^[138] and to discourage others, human nature being what it is, from falling into similar errors.

150 The fiduciary must make good any breaches arising from its default in discharging the fiduciary obligations. ^[139] It must account for any profits it has made as a consequence. The overall purpose of the law of fiduciary obligations is to restore the beneficiary to the position it would have been in if the fiduciary had complied with its duty. ^[140] To attain this end, the beneficiary is entitled to invoke a range of remedies much broader than those typically available at common law. They are also remedies devoid of many of the common law limitations and technicalities. ^[141] As well, presumptions are available that facilitate proof of a claim. Amongst the applicable remedies is the broad power to award equitable compensation. ^[142]

151 In affording remedies for a fiduciary ' s breach of its obligations, equity is seen, depending on one ' s point of view, at its "flexible pragmatic best (or worst)" . ^[143] There are, of course, limits. They are those appropriate to enforcing the obligations of conscience. In a proper case, they will require just counter - entitlements to be set off, or deducted, where this can be done with accuracy. ^[144] The purpose of equity ' s relief is not punishment but restoration. ^[145] The "cardinal principle of equity [is] that the remedy must be fashioned to fit the nature of the case and the particular facts" . ^[146]

152 The rule governing the calculation of equitable compensation is that stated by McLachlin J in Canson Enterprises Ltd v Boughton & Co: ^[147]

The basis of the fiduciary obligation and the rationale for equitable compensation are distinct from the tort of negligence and contract. In negligence and contract the parties are taken to be independent and equal actors, concerned primarily with their own self - interest. Consequently the law seeks a balance between enforcing obligations by awarding compensation and preserving optimum freedom for those involved in the relationship in question, communal or otherwise. The essence of a fiduciary relationship, by contrast, is that one party pledges itself to act in the best interest of the other. The fiduciary relationship has trust, not self - interest, at its core, and when breach occurs, the balance favours the person wronged … In short, equity is concerned, not only to compensate the plaintiff, but to enforce the trust which is at its heart.

McLachlin J ' s exposition has been cited in this court, ^[148] in the United Kingdom ^[149] and in other decisions ^[150] and texts. ^[151]

153 It is because equitable relief has large objectives that the measure of equitable compensation will often differ from the measure of common law damages. Often, it will be greater. Thus, the mere fact that no property can be restored, or other order of restitution fashioned which is apt to the circumstances, will not relieve a fiduciary, in breach of its duties, from fulfilling both the compensatory and prophylactic objectives that equity upholds. Equitable relief will self - consciously favour the beneficiary by "holding trustees to their duties and thereby protecting the interests of beneficiaries" . ^[152]

154 The foregoing rule is given effect by the differing approaches of equity and the common law to assessing the consequences of the wrong, and to whom that wrong is properly attributed. I explained some of those differences in Maguire. ^[153] I remain of the views stated.

155 In the light of these differences of approach, and of the fact that equitable remedies in a particular case fulfil "purposes other than the mere adjustment of the position as between the fiduciary and the beneficiary" , ^[154] it is my opinion that the full court erred in its assessment of the equitable compensation payable to Kia Ora. It did so, first, by restricting the award of interest to Kia Ora to a 6 - month period from 1 January 1988 to 30 June 1988. Concededly, this imposed a semi - artificial limitation. Once it reached a conclusion (contrary to the primary judge) that fiduciary obligations had been established, and that their breach had been proved, the full court should have fashioned remedies that restored Kia Ora (as best the court ' s orders could) to the position that it would have been in if the appellants had declined the retainer, as they should have done.

156 It is here that a crucial difference emerges between the question presented by the claims framed at common law (with which the joint reasons in this court deal) and the relief which equity affords. Equity will not be concerned, as such, with the common law analysis. It will ask what would have happened if the appellants, as fiduciaries, had adhered to their obligations. The answer to that question will be either that some other firm of chartered accountants would have been retained who, performing their functions independently and objectively would have been bound on the accepted evidence to report that the price of the shares proposed was not a "fair" one within ASX rule 3J(3). Or, in the exigencies, it would have been impossible for the protagonist directors to have obtained a report as required by the rule at all. In either event the requirements for shareholder approval would not have been fulfilled.

157 Against the theoretical possibility that full disclosure of the otherwise disqualifying considerations might have been made by the appellants to Kia Ora and its shareholders, it is inconceivable (had this been done) that the shareholders would have given their "informed consent" to the takeover of Western United at the share price proposed. In any of the postulated events, therefore, the takeover would not have taken place. Kia Ora would not have been burdened by the issue against its limited capital of the shares which thereupon became a debt of Kia Ora. Kia Ora would not have paid the cash and issued its shares ^[155] to the fortunate shareholders of Western United who received those benefits on terms so favourable to them and Western United but so unfavourable to Kia Ora.

158 The common law may impose artificial consequences for the valuation of the shares issued by Kia Ora as part of this transaction. The majority, in this appeal, so hold. Whilst expressing my doubts that such an apparently unjust outcome reflects the requirements of the common law, I reserve my opinion about that question. Given my view that the correct analysis of Kia Ora ' s claim against the appellants is primarily to be made in terms of the appellants ' fiduciary duties, it is unnecessary for me to express a concluded view. At least this is so provided Kia Ora ' s judgment, pursuant to the principles of equitable relief, is no less than that which Kia Ora would recover under its claim in contract (as in my opinion it is).

159 Once it is acknowledged (as I believe to be the case) that the appellants ' breach consisted of their acceptance of the retainer to provide a report under ASX rule 3J(3), it becomes plain that it was the appellants ' breach of their fiduciary duties to Kia Ora that provided the occasion, and the possibility, for the directors ' wrongdoings in pursuing the takeover to further their own private interests, as distinct from the interests of Kia Ora. But for the appellants ' breach of their fiduciary obligations, the takeover would simply not have happened. Before this court, as below, counsel for the appellants conceded that, as a practical matter, unless there had been a report and a meeting of shareholders, the takeover of Western United could not have proceeded. This was a proper concession. The calculation of equitable compensation must therefore proceed on that footing. On that basis, so far as equitable relief is concerned, a court is entitled to act on the accounting evidence that showed the true loss to Kia Ora, as being the difference between the valuable consideration given by Kia Ora ^[156] and the true value of Western United when acquired. ^[157]

160 Accepting that equitable compensation has the dual functions earlier mentioned, the full court ought to have awarded equitable compensation against the appellants in the form of compound interest from 1 January 1988 to the judgment of the primary judge on 30 January 1998. During the whole of that time, Kia Ora was kept out of reimbursement of the cash component which it had paid in the takeover. Moreover, it was obliged, in issuing shares against its accumulated capital to forgo other uses to which that available capital might have been put. This could have included the issue of a similar number of its shares for their true value or the pursuit of investments at a proper value, then or later, which would have been to the financial advantage of Kia Ora, as the most improvident transaction into which it was led by the appellants' report was not.

161 The full court ' s termination of the entitlement to interest was justified by reference to common law principles. ^[158] It concluded that, within a short time, the directors would probably have dissipated Kia Ora ' s funds in some other way. However applicable such principles might be in considering claims at common law, they were not, in my view, appropriate to the provision of equitable relief.

162 Of course, the amount of interest involved is very large. It was natural to hesitate before ordering interest for the entire duration proposed. But the award of interest is only large because the outlays into which Kia Ora was inveigled are themselves very large. No equitable justification can be suggested for termination of interest, arbitrarily, after 6 months. If the governing principle is restoration, that principle can only be achieved by the award of interest during the whole time that Kia Ora was prevented from using the money lost by the cash payment and share issue.

163 Kia Ora has therefore made good its complaint against the approach of the full court concerning the calculation of equitable compensation. To that extent, I would disturb the full court ' s decision about such compensation. Doing so does not, as the appellants contended, constitute punishment. It amounts to no more than remedying the financial consequences which they occasioned to Kia Ora by providing their flawed and incompetent report. Once they did so, everything else followed. ^[159] The appellants did not rebut the presumption that, without the takeover, Kia Ora would have used the same dissipated capital in a profitable way. The contrary proposition is pure speculation. It is unsustained by the evidence or by a proper approach to such evidence as was called.

164 With respect to other matters concerned with the calculation of Kia Ora ' s equitable compensation, I would refuse special leave to either party to agitate the several grounds which they respectively argued. I am unconvinced that any other error of calculation on the part of the full court has been demonstrated. However, my conclusion about interest as part of Kia Ora ' s equitable compensation requires recalculation of that compensation by the full court. It is preferable for such recalculation to be performed in circumstances where the parties might speak to it so that it could be judicially determined accurately for the first time. ^[160] To that extent, special leave should be granted in respect of added question (b).

"Contributing fault" and equitable compensation

165 Added question (c) asked whether the full court erred in reducing the amount of equitable compensation awarded to Kia Ora on account of what the full court described as Kia Ora ' s "contributing fault" .

166 The appellants sought to express this concept more favourably to their interests by suggesting that the deduction was "on account of [Kia Ora ' s] own conduct" . ^[161] However, the expression used by the full court cannot be wished away, or explained, by adopting different language. I was reminded by the appellants of my own opinion in Maguire as to the "elasticity of equitable remedies" and as to the capacity of a court of equity to fashion remedies "according to the exigencies of the particular case so as to do what is ' practically just ' as between the parties" . ^[162] I adhere to those opinions. I accept that equitable compensation will sometimes exceed the measure of damages that can be recovered at common law for the same wrong. ^[163] But this is not what the full court said. Nor, more importantly, is it what it did.

167 The full court confronted, quite directly, a controversy which has engaged judges and academic writers for some time, both in Australia and elsewhere. The issue was whether there can be grafted onto the principles governing equitable remedies a new equitable principle of reduction for responsibility in the case of "contributing fault" . Can such a principle be adapted, by analogy, from the advances that have occurred in respect of common law claims and statutory provisions that apply where a defendant can show contributory negligence?

168 There is no authority of this court on the point. It was mentioned in passing in Maguire. However, it was reserved because the point was not argued in that case. ^[164] It was certainly argued in the present litigation. The full court was therefore correct to express its conclusion on the point. That conclusion was that the principles of equitable relief, as they have developed in Australia, recognise a deduction for "contributing fault" . ^[165] Having so concluded, the full court went on to determine that the same failures as "render[ed] Kia Ora guilty of contributory negligence" , ^[166] in this case constituted "contributing fault for the purpose of considering any reduction in compensation otherwise payable for the breach of fiduciary duty" . ^[167]

169 In a thorough review of authority, both for and against this conclusion (and a reference to a consideration by this court of a somewhat analogous question ^[168] which seemed to tell against its ultimate result) the full court finally accepted the principle of "contributing fault" . As I read its reasons, it did not (as perhaps it might have done) subsume the considerations pertinent to such a deduction within a more general analysis of the issue of causation, or a different analysis by reference to general equitable notions of apportionment. ^[169] Instead, boldly, the full court embraced the idea of "contributing fault" . It did so knowing full well that this was a contentious conclusion.

170 I do not consider that equitable remedies (any more than those of the common law) are chained forever to the rules and approaches of the past. Nor do I find the notion of developing equitable rules (any more than those of the common law) ^[170] by reference to statutory developments as uncongenial as, on occasion, this court has done. ^[171] The idea that the common law develops in "imitation" of statutes is not a recent one. ^[172] A similar notion was sometimes reflected in equitable remedies, particularly in relation to defences based on statutes of limitations. ^[173] Furthermore, all equitable and legal principles must today operate in a universe dominated by the star of statute. It would be surprising if the gravitational pull of statute, felt everywhere else in the law, did not penetrate into the expression and re - expression of non - statutory rules. ^[174]

171 Nevertheless, there are, as the joint reasons point out, severe "conceptual difficulties" ^[175] in the path of adopting a principle derived by analogy from contributory negligence to diminish awards of equitable compensation for the breach of fiduciary obligations. The foundation of the difficulty is explained by Justice Gummow, writing extracurially, in an essay to which I referred in Maguire: ^[176]

While negligence is concerned with the taking of reasonable care, a fiduciary traditionally has more expected of him. His duty is one of undivided and unremitting loyalty. The fiduciary acts in a "representative" capacity in the exercise of his responsibility. One must fear that introduction of concepts of contributory negligence into that setting inevitably will work a subversion of fundamental principle.

172 To the same effect, Justice Handley has said: ^[177]

Equity has not hitherto considered that a beneficiary is bound to protect himself against his fiduciary. The relationship is not at arm ' s length and the beneficiary is entitled to place trust and confidence in the fiduciary. The basis for a finding of contributory negligence is therefore lacking.

173 Whatever might have been my inclination to explore the notion adopted by the full court prior to Astley v Austrust Ltd, ^[178] I regard the holding in that case as a splash of cold water, discouraging any creative instinct in this connection. There, after all, the Court was considering the development of an apportionment principle within the 4 walls of the common law and the applicable statute. A majority of the court concluded ^[179] that no such development was available. Damages for breach of contract could therefore not be reduced under apportionment legislation expressed in terms of "contributory negligence" whether or not the plaintiff had, or could also have, sued in tort. In the face of that decision and the repeated recognition by this court that, in Australia, the substantive rules of equity have retained their identity as part of a separate and coherent body of principles, ^[180] the attempt to push common law notions of contributory negligence, as now modified by statute, into equitable remedies collapses in the face of insurmountable obstacles.

174 Having come to this conclusion, the foundation for the full court ' s deduction for the "contributing fault" of Kia Ora disappears. It is not, therefore, necessary to consider the factual complaints of Kia Ora about the conduct attributed to it by the full court, on the basis of which such "contributing fault" was found to exist. Kia Ora objected that, insofar as the full court had relied on the conduct of some or all of its directors to establish "contributing fault" on its part, this was misconceived. For Kia Ora, the issue was the appellants ' separate breach of fiduciary duty. That breach could not be minimised by reason of breaches on the part of others. Such arguments simply lend force to the comments, stated above, concerning the danger of deflecting attention from the purposes of equitable relief, once breaches of fiduciary duties are found.

175 For these reasons, added question (c) should be answered in the affirmative. The special leave originally granted by the court should be enlarged to permit the disposition of the proceedings conformably with the answers to the 3 added questions.

176 Before leaving added question (c), it is appropriate for me to record that, in the Supreme Court of South Australia, proceedings were commenced by the appellants for equitable contribution to their judgment from the directors of Kia Ora. The primary judge determined the proportions that should be contributed by the various defendants to the original proceedings, including the appellants. That determination was the subject of an appeal to the full court with which this court has not been concerned. We were informed by counsel that the decision in that appeal is pending, perhaps awaiting the outcome of these proceedings. I mention this issue to illustrate the fact that, in a case of this kind, equitable remedies are not indifferent to the apportionment of responsibility between several wrongdoing fiduciaries. But that consideration is quite separate from that of "contributing fault" on the part of a beneficiary wronged by a fiduciary.

Conclusions: an entitlement to recover for fiduciary breaches

177 It follows from the enlargement of special leave, upon which this court is unanimously agreed, and from my answer in favour of Kia Ora of each of the 3 added questions, ^[181] that Kia Ora was entitled to succeed in the full court on the basis of a breach of fiduciary duty upon which, at trial, it primarily presented its case against the appellants. To that extent, in my view, the appeal to this court would properly be dismissed, for, standing alone, the full court had upheld Kia Ora ' s appeal against the approach of the primary judge in this respect.

178 However, the answer to added questions (b) and (c), and the enlargement of the appeal to permit the consequential determination of those questions, requires adjustment to the relief afforded by the full court. Such adjustment would involve the provision to Kia Ora of the interest which it claimed as part of its entitlement to equitable compensation beyond the semi - arbitrary 6 months which the full court allowed and up to the judgment at trial. It would also involve the restoration to Kia Ora of the amount incorrectly deducted from its equitable compensation on the basis of Kia Ora ' s suggested "contributing fault" .

179 When such adjustments are made, it is abundantly clear that the recovery by Kia Ora against the appellants would be greater in equity than that provided by the full court in respect of Kia Ora ' s claim against the appellants framed in contract or negligence. Kia Ora should be relieved of the election to take its judgment on the claim framed in contract. That election was based upon considerations which, in my opinion, have been overtaken by events and shown to have been legally flawed.

180 Upon these premises, it is unnecessary for me to express any conclusion about the result reached by the majority that would substantially limit Kia Ora ' s recovery from the appellants under the common law. I remind myself of Lord Esher MR ' s famous dictum that "any proposition the result of which would be to shew that the Common Law of England is wholly unreasonable and unjust, cannot be part of the Common Law of England" . ^[182] The same, I believe, is true of the common law of Australia, as now declared by this court. With all respect, I regard the result reached by the majority in this appeal as invoking this dictum. But because I do not need to reach a final view on the point, I will refrain from doing so.

Orders

181 The appeal must be allowed. However, the purpose of allowing it would not be, as the other members of the court decide, substantially to reduce the recovery of Kia Ora. Instead, it would be to permit the full court to recalculate Kia Ora ' s recovery under the principles of equitable compensation, providing fully for interest and removing the impermissible deduction made for "contributing fault" .

182 To give effect to these conclusions, the orders that I favour are:

1. Grant special leave to enlarge the previous grant so as to include each of the 3 issues raised by the questions stated in the order of the court of 8 August 2000.

2. Answer those questions:

(a) No;

(b) Yes;

3. Allow the appeal. Set aside the judgment of the full court of the Supreme Court of South Australia. Remit to that court the recalculation of the judgment in favour of the first respondent against the appellants. The appellants should pay the costs of the proceedings in this court. The costs order made by the full court in respect of the proceedings to date should not be disturbed. The costs of the proceedings remitted to the full court should be as that court provides.