In Australia, a fiduciary relationship is a legal obligation between two parties. One party (the fiduciary) is responsible for acting in the other party’s best interests (the beneficiary). This relationship is based on trust, confidence, and loyalty, where the fiduciary must act honestly, fairly, and with utmost good faith.
When you hire a lawyer, a fiduciary relationship exists. This means that your lawyer has the legal responsibility to act in your best interests at all times rather than their own personal gain or personal interest. The lawyer must keep your secrets, avoid conflicts of interest, and provide competent legal advice.
Who Is a Fiduciary?
A fiduciary can be an individual or a legal entity. For instance, a company that has a special relationship with another person or entity. Examples of fiduciaries include:
- Lawyers
- Financial advisors
- Executors of a Will
- Directors of a company
- Trustees of a trust
Duties of a Fiduciary
As discussed, a fiduciary must act in the best interests of their beneficiary. They must put their beneficiary’s interests above their own and avoid conflicts. Some of the critical duties of a fiduciary include:
- Duty of loyalty: Fiduciaries must act solely in the best interests of their beneficiary, even if it means putting their interests aside.
- Duty of care: Fiduciaries must exercise reasonable care, skill, and diligence in carrying out their fiduciary obligations.
- Duty of confidentiality. Fiduciaries must keep their beneficiary’s information confidential.
- Duty to avoid conflicts of interest. Fiduciaries must avoid situations where their interests conflict with their commitment to their beneficiaries.
Legal Implications of Fiduciary Relationships
The legal implications of fiduciary relationships can be significant. If a fiduciary breaches their duty to the beneficiary, they may be held liable for any losses the beneficiary suffers. The beneficiary may also be able to recover damages for fiduciary duty breach, which can be substantial.
How Does Fiduciary Relationship Occur?
The fiduciary relationship is created when a lawyer agrees to represent a client. This agreement establishes a relationship of trust and confidence between the lawyer and client, where the lawyer is obligated to act in the client’s best interest. This means the lawyer must put their client’s interests above their own and avoid conflicts.
The fiduciary duty requires the lawyer to exercise the highest degree of loyalty, honesty, and good faith in their dealings with their client. They must keep the client informed about the progress of their case and provide them with all relevant information. The lawyer must also maintain the confidentiality of the client’s information and not disclose it to anyone without the client’s consent.
If the lawyer breaches their fiduciary duty, the client can take legal action against them. The client can sue the lawyer for malpractice or breach of fiduciary duty, and the lawyer may be liable for damages.
The fiduciary relationship between a lawyer and a client is crucial to the legal profession. It ensures that clients receive the best possible representation from their lawyers and that lawyers act ethically and professionally in their dealings with their clients. As a client, it is essential to choose a trustworthy lawyer who you can rely on to act in your best interest.
Case Law on Breaches of Fiduciary Duty of Solicitors
Marshall v Prescott (No 3) [2013] NSWSC 1949
In the case of Marshall v Prescott (No 3) [2013] NSWSC 1949, The court was urged to evaluate a solicitor’s fiduciary duty to a former client. The case also called into question whether a solicitor’s fiduciary duty survives the termination of their retainer.
The court examined the extent of a fiduciary obligation in an unusual relationship between a lawyer and a client. It also confirmed the well-known rule that the fiduciary relationship between a lawyer and a client ends when the retainer is over.
Beach Petroleum NL v Abbott Tout Russell Kennedy & Ors [1999] NSWCA 408 (5 November 1999)
The Marshall v. Prescott judgement is best appreciated in light of the guidelines outlined in Beach Petroleum NL v. Abbott Tout Russell Kennedy [1999] NSWCA 408.
The High Court ruled that the fiduciary duty, in this case, does not simply result from the status of the relationship as the starting point (Beach Petroleum at [188]). Due to the aspects of trust and power that are part of the solicitor-client relationship, the relationship has a fiduciary nature (Beach Petroleum at [189]).
The relevance of this case is that a component of the solicitor-client relationship that may be viewed as fiduciary in one circumstance may not be in another.
Remedies for Breach of Fiduciary Relationship by a Lawyer
The remedies available for breach of fiduciary duty by a solicitor in Australia are:
- Rescission. This equitable remedy allows the court to set aside a transaction that has been entered into in breach of fiduciary duty.
- Account of profits. This equitable remedy requires the person who has breached their fiduciary duty to account for any profits they have made as a result of the breach.
- Damages. This common law remedy aims to compensate the person who has suffered a loss due to the breach of fiduciary duty.
- Injunction. This equitable remedy prevents the person who has breached their fiduciary duty from continuing to act in a way that breaches their duty.
The court will consider several factors when deciding which remedy to award, including the nature of the breach, the extent of the loss suffered, and the public interest.
In addition to these remedies, the NSW Legal Services Commissioner can investigate and take disciplinary action against solicitors who have breached their fiduciary duties. This may include suspending or revoking the solicitor’s practicing certificate.
How Can We Help If Your Solicitor Has Breached Their Fiduciary Duty to You?
If you believe your solicitor has breached or owe fiduciary duties to you, seeking legal advice from a lawyer is essential. We can help you understand your rights and options for recourse.
- Firstly, we can review your case and determine if there is evidence of the breach of fiduciary duty. This may involve examining your solicitor’s actions, communications with you, and any relevant documents or agreements.
- Secondly, if there is evidence that a fiduciary failed to work in your best interests, we can advise you on the potential legal consequences for your solicitor and the options available. This may include filing a complaint with the solicitor’s regulatory body, pursuing legal action for damages, or seeking a settlement.
JB Solicitors can help you navigate the legal process and represent your interests in negotiations or court proceedings. We can also guide you on how to protect your rights and minimise the breach’s impact on your legal matter.
Schedule a consultation today if you need more information about the fiduciary rule.
