A new article, co-written with Dr David Gibbs. We untangle the role of contract in determining the scope of fiduciary duties, which has two distinct roles in two distinct stages. An abstract and blog post follows. Link to the article here: (2019) 70 NILQ 241.
The determination of the scope of the fiduciary duty of loyalty, when created by contract, is not a unitary process. It is raised following a multi-factorial enquiry, which considers the nature of the engagement, in a first stage. Here, no single factor is conclusive. It is then, in a separate, second stage, reduced by qualifying contractual terms, which are applied almost strictly logically. This second stage uses the contractual doctrines of interpretation and implication. However, since it is a form of the fiduciary doctrine of authorisation, those contractual doctrines are modified according to fiduciary principles. We argue this follows from the underlying nature of the fiduciary obligation as a way of resolving its internal tensions. While this division has not yet been fully recognised in the cases, the courts have been inching towards it. However, not fully recognising this inevitable division and eliding the two stages has led to defective reasoning and outcomes.
How to determine the scope of the duty of loyalty, or fiduciary duty, is clouded in uncertainty. The cases yield little more than vague dicta holding that the fiduciary relationship must be consistent with the terms of the contract and must accommodate itself to them. The conventional wisdom is thus that the duty of loyalty is determined in a single-stage process. One starts with a blank slate, and then positively implies the duty of loyalty if the nature of the engagement – defined by the terms of the contract – demands it.