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Published online by Cambridge University Press: 01 January 2025
Consumers use financial intermediaries such as brokers and other credit advisers to navigate complex financial markets and to provide guidance on credit products. In 2017 ASIC reported that ‘[b]rokers … are responsible for arranging … half of all home loans in Australia’ (Australian Securities & Investments Commission, Report 516: Review of Mortgage Broker Remuneration (2017) 8 [18]). The National Consumer Credit Protection Act 2009 (Cth) (‘Credit Regime’) regulates the conduct of such advisers including requiring disclosure of fees and some commissions. The Credit Regime also permits conflicts between the interest of the adviser and the client, provided that the adviser has in place ‘adequate arrangements to ensure … [that the client is] … not disadvantaged by any conflict of interest’ and that the conflict does not breach the adviser’s obligation to act ‘efficiently, honestly and fairly’. This article demonstrates that equitable fiduciary obligations also operate to regulate the conduct of the adviser in his or her dealings with the client. Such conflict and other conduct may breach any equitable fiduciary obligation thus exposing the adviser to equitable remedies. Equitable fiduciary obligations may thus be an as yet under-exploited avenue of protection for consumers and a concomitant zone of compliance risk for those subject to the Credit Regime.
We are grateful for the comments of participants at the Statutory Interpretation In Private Law Symposium and the Inaugural Fiduciary Law Workshop both held at UNSW Law in 2017 and the comments of the anonymous reviewers. We are indebted to Whittens and McKeough for their support of private law research at UNSW Law and the excellent research assistance given by Maximus Jones. We are responsible for any remaining errors.
1. Explanatory Memorandum, National Consumer Credit Protection Bill 2009 (Cth) 375 [10.52].
2. Ibid 29 [2.14].
3. Ibid 28 [2.6], 81 [3.14].
4. Ibid 29 [2.14], 80 [3.11].
5. National Consumer Credit Protection Act 2009 (Cth) s 47(1)(b) (‘Credit Regime’).
6. Ibid s 47(1)(a).
7. Grimaldi v Chameleon Mining NL [No 2] (2012) 200 FCR 296, 345 [178] (Finn, Stone and Perram JJ).
8. Ibid.
9. See Simone Degeling and Jessica Hudson, ‘On Being Fiduciary Focused: Statutory and Equitable Conceptions of Advice’ (Paper delivered to UNSW Law Statutory Interpretation In Private Law Symposium, 27–28 October 2017).
10. Credit Regime s 47(1)(b).
11. Ibid s 47(1)(a).
12. Commonwealth Bank of Australia v Smith (1991) 42 FCR 390, 392 (Davies, Sheppard and Gummow JJ); Breen v Williams (1996) 186 CLR 71, 135 (Gummow J): ‘[t]he fiduciary is obliged not to enter upon conflicting obligations to several parties’; Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165, 199 [78] (McHugh, Gummow, Hayne and Callinan JJ). See also Maguire v Makaronis (1997) 188 CLR 449, 461 (Brennan CJ, Gaudron, McHugh and Gummow JJ); Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 48 NSWLR 1, 47 (Spigelman CJ, Sheller JA, Stein JA); Howard v Commissioner of Taxation (2014) 253 CLR 83, 107 [59] (Hayne and Crennan JJ).
13. Commonwealth Bank of Australia v Smith (1991) 42 FCR 390, 392 (Davies, Sheppard and Gummow JJ); Breen v Williams (1996) 186 CLR 71, 135 (Gummow J); Birtchnell v Equity Trustees and Agency Co Ltd (1929) 42 CLR 384, 408 (Dixon J); Boardman v Phipps [1967] 2 AC 46, 124 (Lord Upjohn); Hospital Products Ltd v United States Surgical Co (1984) 156 CLR 41, 103 (Mason J); Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165, 199 [79] (McHugh, Gummow, Hayne and Callinan JJ); Australian Careers Institute Pty Ltd v Australian Institute of Fitness Pty Ltd (2016) 340 ALR 580, 581–2 [3]–[5] (Bathurst CJ), 605 [132] (Sackville AJA, with whom Meagher JA agreed).
14. Subject to the requirements to disclose in the credit guide, s 113, and the credit proposal disclosure document, s 121.
15. Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134, 143 (Lord Russell of Killowen); Howard v Commissioner of Taxation (2014) 253 CLR 83, 107–8 [62]–[64] (Hayne and Crennan JJ).
16. Australian Securities & Investments Commission, Regulatory Guide 203: Do I need a credit licence? (2017) [203.66] (‘ASIC RG 203’).
17. Credit Regime ss 5–9. The Credit Regime only applies to a credit service when provided to a client who is a natural person or strata corporation and credit is for personal, domestic or household purposes, or in relation to a purchase, renovation or improvement of residential property as defined by s 5 of the Credit Regime which imports the meaning given by s 5 of Sch 1 of the Credit Regime.
18. Credit Regime s 113(1).
19. Ibid s 113(2)(e).
20. Ibid s 113(2)(g). Note that this requires information about commissions likely to be received, directly or indirectly, from credit providers in relation to credit contracts for which the licensee has provided credit assistance any commissions that might be received.
21. Ibid s 113(2)(f).
22. Ibid s 6.
23. Ibid s 29.
24. Ibid s 47(1)(a).
25. Ibid s 47(1)(b). Conflict of interest is not defined in the Credit Regime. However, regulatory guidance and explanatory material indicates that a conflict of interest may arise where an interest of the licensee conflicts with any legal obligation or duty owed to their client, including one that arises under statute, at common law, or under contractual arrangements between the licensee and the client. See National Consumer Credit Protection Bill 2009 52 [2.117]; Australian Securities & Investments Commission, Regulatory Guide 205: Credit licensing: General conduct obligations (2010) [205.81] (‘ASIC RG 205’).
26. ASIC RG 205 [205.59]–[205.63] refers to compliance with ‘other laws’. However, this does not specifically contemplate fiduciary obligations as informing the general requirement of an Australian Credit Licence (ACL) holder to act ‘efficiency, honestly and fairly’. National Consumer Credit Protection Bill 2009 46 [2.82] specifically contemplates, in relation to the requirement that an ACL holder be a ‘fit and proper person’ that ‘breach…[of their] fiduciary obligations…demonstrates that [the credit adviser is]…not a fit and proper person’: Credit Regime ss 37(1)(c), 55(1); Australian Securities & Investments Commission, Regulatory Guide 204: Applying for and varying a credit licence (2013). A similar requirement binding Australian Financial Service Licence (‘AFSL’) Holders under Corporations Act 2001 (Cth) s 912A(1)(a) is interpreted via Australian Securities & Investments Commission, Regulatory Guide 174: Financial product advisers — Conduct and disclosure (2017) to include compliance with common law obligations [175.73], including fiduciary obligations [175.73] and [175.74]. Further, as highlighted by Foster J in Australian Securities and Investments Commission v Camelot Derivatives Pty Limited (in liq) [2012] FCA 414 [69] AFSL requirements may impose an obligation to act in a manner which is ‘ethically sound’, which we argue may include compliance with equitable fiduciary obligations.
27. Further areas of inquiry include the Australian Securities and Investments Commission Act 2001 (Cth) (s 12CA unconscionable within the meaning of the unwritten law; s 12CB unconscionable conduct in connection with financial services; s 12DA, misleading and deceptive conduct; s 12DB and s 12DC, false or misleading representations in relation to financial products that involve interests in land). Note that the Australian Securities and Investments Commission Act 2001 (Cth) does not define ‘intermediary’. However, in Nguyen and Australian Securities and Investments Commission [2017] AATA 920, [96] (Stevenson J), the broker’s ‘actions clearly were directed at the procuring of loans from [the credit provider] for the [client].…it is immaterial that [the clients] may have requested this assistance from [the broker]’. The broker’s role varied in each instance but included providing advice as necessary regarding loan requirements, completing or assisting with the completion of documentation and necessary Vietnamese language translation services. See also Competition and Consumer Act 2010 (Cth) sch 2, which imports various prohibitions including those against unconscionable conduct, misleading or deceptive conduct, and false or misleading representations.
28. Credit Regime s 47(1)(b).
29. Ibid s 47(1)(a).
30. See, eg, the examples provided in National Consumer Credit Protection Bill 2009 52 [2.118].
31. Subject to the requirements to disclose in the credit guide, s 113, and the credit proposal disclosure document, s 121.
32. Credit Regime s 9 (definition of intermediary); ASIC RG 203 [203.76], notes that a finance broker ‘is also likely to be providing credit assistance’. ASIC RG 203 [203.75].
33. S 6(1): ‘A person engages in a credit activity if…the person provides a credit service’; s 7(a): ‘A person provides a credit service if [they]…provide…credit assistance to a consumer’ or s 7(b): ‘acts as an intermediary’; s 8(a): ‘A person provides credit assistance…if…[they] suggest…that the consumer apply for a particular credit contract with a particular credit provider’. All references are to the Credit Regime.
34. Credit Regime s 47(b).
35. Ibid s 47(1)(a).
36. This section applies the framework identified and developed by the present authors: Simone Degeling and Jessica Hudson, ‘Equitable Money Remedies against Financial Advisers Who Give “Advice about Advice”’ (2015) 33 Company and Securities Law Journal 166; Simone Degeling and Jessica Hudson, ‘Fiduciary Obligations, Financial Advisers and FOFA’ (2014) 32 Company and Securities Law Journal 527.
37. Credit Regime s 8(a): ‘A person provides credit assistance…if…[they] suggest…that the consumer apply for a particular credit contract with a particular credit provider’.
38. Credit Regime s 8(a).
39. See below text to footnotes 42–43.
40. This example alters and extrapolates from example 5, in ASIC RG 203 [203.66].
41. In Australian Securities & Investments Commission, Report 156: Review of Mortgage Broker Remuneration (2017) 9 [26], one the key findings from ASIC’s review of the mortgage broking market is that ‘Brokers almost universally receive commissions paid by the “supply side” of the market…rather than by the consumer’. Relatedly, 57 [273], ‘Broker business generate their revenue in two ways: (a) a commission for providing the service and arranging the home loan that is paid by the lender whose loan they sell…or (b) a fee for service charged to the consumer (this remuneration model is rare in Australia; if a fee is charged, the business may rebate any commission earned through the loan to the consumer)’.
42. Credit Regime s 113(1) (emphasis added).
43. The credit guide should as a matter of chronology already have been provided to the client since the obligation arises ‘as soon as practicable after it becomes apparent…’. In short-listing and selecting Provider D we argue that the credit adviser has ‘provided credit assistance’. Similarly, in applying for a credit card and negotiating with D, we argue that the credit adviser has ‘acted[ed] as an intermediary’. The application may also be ‘credit assistance’. ‘A person engages in a credit activity if…the person provides a credit service’ [s 6(1)]. ‘A person provides a credit service if [they]…provide…credit assistance to a consumer’ [s 7(a)] or ‘acts as an intermediary’ [s 7(b)]. ‘A person provides credit assistance…if…[they] suggest…that the consumer apply for a particular credit contract with a particular credit provider’. [s 8(a)]. All references are to National Consumer Credit Protection Act 2009 (Cth).
44. Credit Regime s 8. See also example 5 in ASIC RG 203 [203.64].
45. Ibid.
46. Credit Regime ss 113(2)(f), 113(2)(g). Where there are six or fewer, all credit institutions must be listed. However, where the credit adviser conducts business with more than six, the adviser needs only to identify the six credit institutions with whom it reasonably believes it conducts the most business: Credit Regime s 113(2)(f).
47. Ibid s 117(1). For example, the credit adviser might request recent pay slips, bank statements and rent receipts: Australian Securities & Investments Commission, Regulatory Guide 209: Credit licensing: Responsible lending conduct (2014) [209.50].
48. Credit Regime s 115.
49. Ibid s 121(1)(a) since the credit adviser is providing credit assistance.
50. Note that on exceptional facts, the obligation to provide a credit proposal disclosure document may also arise in relation to advice about advice. This is shown in the extreme hypothetical case where a credit adviser only provides advice on a single topic area of advice: ‘suitability of client to take out credit card with XYZ institution’ and we assume that XYZ institution offered a single credit card product. In this example, guidance about whether or not to receive substantive advice on the topic may overlap with substantive advice on the topic.
51. Credit Regime s 121(2)(b).
52. Ibid s 47(1)(a).
53. Ibid s 47(1)(b).
54. Cf Corporations Act 2001 (Cth) pt 7.7A, which prohibits conflicted remuneration by financial advisers in relation to financial product advice.
55. Credit Regime ss 113, 121.
56. See ASIC RG 205 [205.79].
57. Credit Regime s 47(1)(b).
58. Ibid s 8(a) (emphasis added). See also example 5, ASIC RG 203, 19 [203.64].
59. This is despite the commission paid by the top six (including provider D) being higher than that paid by other competitors in the market.
60. Cf Corporations Act 2001 (Cth) s 960B, which states: ‘The obligations imposed on a person under this Part are in addition to any other obligations to which the person is subject under this Act or any other law’.
61. Credit Regime ss 23(1), 23(3).
62. Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 151–2 [135] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).
63. The conclusion that equitable fiduciary principle is capable of application aligns with the National Consumer Credit Protection Bill 2009 46 [2.82], which specifically contemplates, in relation to the requirement that a licence holder be a ‘fit and proper person’, that breaching ‘fiduciary obligations…demonstrates that [the adviser is]…not a fit and proper person’.
64. Howard v Commissioner of Taxation (2014) 253 CLR 83, 107 [62] (Hayne and Crennan JJ); Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134, 143 (Lord Russell).
65. Commonwealth Bank of Australia v Smith (1991) 42 FCR 390, 392 (Davies, Sheppard and Gummow JJ); Breen v Williams (1996) 186 CLR 71, 135 (Gummow J); Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165, 199 [78] (McHugh, Gummow, Hayne and Callinan JJ); Howard v Commissioner of Taxation (2014) 253 CLR 83, 107 [59] (Hayne and Crennan JJ).
66. Boardman v Phipps [1967] 2 AC 46, 124 (Lord Upjohn); Breen v Williams (1996) 186 CLR 71, 135 (Gummow J); Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165, 199 [79] (McHugh, Gummow, Hayne and Callinan JJ); Howard v Commissioner of Taxation (2014) 253 CLR 83, 107 [59] (Hayne and Crennan JJ); Australian Careers Institute Pty Ltd v Australian Institute of Fitness Pty Ltd [2016] NSWCA 347, [3]–[5] (Bathurst CJ), [132] (Sackville AJA, with whom Meagher JA agreed).
67. See, eg, Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371, 377 (Gibbs CJ), 385 (Brennan J) (‘Daly’). See also Aequitas Ltd v AEFC Pty Ltd [2001] NSWSC 14, [307] (Austin J); Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd [No 4] (2007) 160 FCR 35, 77–8 [282]–[286] (Jacobson J); Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028, [733] (Rares J); ABN AMRO Bank NV v Bathurst City Council (2014) 224 FCR 1, 210 [1066] (Jacobson, Gilmour and Gordon JJ).
68. Lionel Smith, Parenthood Is a Fiduciary Relationship (24 July 2017) SSRN, 13 <https://ssrn.com/abstract=3007812> (emphasis in original).
69. In the sense that a financial adviser–advisee relationship falling strictly within the criteria identified will be fiduciary. Refer Daly (1986) 160 CLR 371, 377 (Gibbs CJ), 385 (Brennan J). Daly was approved in Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165, 198 [74] (McHugh, Gummow, Hayne and Callinan JJ). See also Aequitas v AEFC [2001] NSWSC 14, [307] (Austin J) and Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35, 77–8 [283]–[284] (Jacobson J) which hold fast to criteria identified in Daly — viz the need to identify an undertaking to act in the client’s interests in a particular financial advisory role and a holding out by the putative adviser of some expertise in financial matters. To the extent that the facts systematically disclose these elements in financial adviser relationships, Daly applies, unless displaced — as for example in Pilmer, where the necessary element of ‘advising’ was not present. Rather, the report of the auditor was a statement of opinion provided to satisfy the ASX listing rules.
70. (1986) 160 CLR 371.
71. Ibid 377 (Gibbs CJ).
72. Ibid 385 (Brennan J).
73. Daly v Sydney Stock Exchange Ltd [1981] 2 NSWLR 179, 183 (Powell J).
74. Ibid 183.
75. Ibid 183.
76. Perhaps also suggesting no prior relationship between the parties. We are grateful to Professor Joe Campbell for pointing out this aspect of the case. See Joe Campbell, ‘Fiduciary Relationships in a Commercial Context’ (Sydney Law School Research Paper No 14/26, The University of Sydney, 3 March 2014) <https://ssrn.com/abstract=2404202>.
77. Daly v Sydney Stock Exchange Ltd [1981] 2 NSWLR 179, 183 (Powell J).
78. Ibid.
79. Daly (1986) 160 CLR 371, 375 (Gibbs CJ).
80. Other interpretations of this case emphasise potential agency aspects. See, eg, Robert Baxt, Ashley Black and Pamela F Hanrahan, Securities and Financial Services Law (Lexis Nexis, 9th ed, 2017) 581–2.
81. The Explanatory Memorandum to the National Consumer Credit Protection Bill 2008–09 (Cth) observes that ‘[a]t the same time the development of a greater and more complex range of credit products in the market has made it much less straightforward for consumers to determine whether a product is suitable for their needs and increased their dependence on intermediaries. As a result there are considerable information asymmetries that justify regulatory intervention’.…(28 [2.6])…‘Moreover, purchasing decisions will often involve complex product comparisons, with consumers frequently relying on intermediaries to make these comparisons on their behalf’ (81 [3.14]).
82. Daly (1986) 160 CLR 371, 377 (Gibbs CJ), 384–5 (Brennan J).
83. Grimaldi v Chameleon Mining NL [No 2] (2012) 200 FCR 296, 345 [177] (Finn, Stone and Perram JJ), citing Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 96–7 (Mason J) (‘Hospital Products’); News Limited v Australian Rugby Football League Ltd (1996) 64 FCR 410, 538–41 (Lockhart, von Doussa and Sackville JJ); Matthew Conaglen, Fiduciary Loyalty (Hart Publishing, 2010) ch 9. The Court expressed this definition to be sufficient ‘for present purposes’.
84. In the specific context of financial advice, there is authority recognising the existence of fiduciary relationships ad hoc: Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028 [743] (Rares J). See also ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1, 210 [1066] (Jacobson, Gilmour and Gordon JJ); Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35, 77–8 [282]–[286] (Jacobson J), although on the particular facts the court found that a fiduciary duty had by contract been validly excluded.
85. Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 96–7 (Mason J).
86. Grimaldi v Chameleon Mining NL [No 2] (2012) 200 FCR 296, 345 [177] (Finn, Stone and Perram JJ). See also Bristol & West Building Society v Mothew [1998] Ch 1, 18 (Millett LJ) (also emphasising that a fiduciary who is someone who has undertaken to act for and on behalf of another). The Federal Court’s decision in Grimaldi has resonance with Finn’s non-judicial writing, which is that a fiduciary relationship exists when there is a legitimate expectation in the client that the adviser will act in the client’s interests. See Paul Finn, ‘Fiduciary Reflections’ (2014) 88 Australian Law Journal 127; P Finn, ‘The Fiduciary Principle’ in Fiduciary Obligations: 40th Anniversary Republication with Additional Essays (Federation Press, 2016) 308, 354. There are other judicial accounts of circumstances that point towards the existence of a fiduciary relationship, including the ‘multi-factorial’ account given in Breen v Williams (1996) 186 CLR 71, 107 (Gaudron and McHugh JJ), according to which the presence of a fiduciary relationship may be indicated by ‘the existence of a relation of confidence; inequality of bargaining power; an undertaking by one party to perform a task or fulfil a duty in the interests of another party; the scope for one party to unilaterally exercise a discretion or power which affect the rights or interests of another; and a dependency or vulnerability on the part of one party that causes that party to rely on another’ (citations omitted). Some of these elements are present in the Grimaldi account and the ‘essence’ account discussed below.
87. Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 96 (Mason J).
88. Ibid 96–7.
89. Grimaldi v Chameleon Mining NL [No 2] (2012) 200 FCR 296, 345 (Finn, Stone and Perram JJ).
90. This is often assumed to be the nature of the fiduciary relationship in Daly. For the reasons we have already elaborated, we do not consider this interpretation of Daly to be supported on its facts as no securities were bought or sold on behalf of Dr Daly. However, it remains the case that other stockbrokers are agents for their principal for precisely this reason.
91. This speculation is supported by Australian Securities and Investments Commission, Report 516: Review of Mortgage Broker Remuneration (2017), 8 [18]: ‘Brokers play a very important role in the home loan market. They are responsible for arranging around half of all home loans in Australia.…Consumers are increasingly turning to brokers to get help in obtaining a home loan’; 8 [21]: ‘brokers can help…match the needs of the consumer with the right home loan product…navigate the home loan application process’.
92. See, eg, Medsted Associates Ltd v Canaccord Genuity Wealth (International) Ltd [2017] EWHC 1815 [89]–[90] (Teare J) in which a broker constituted themselves an agent by undertaking to deal with and introduce their client to ‘a first tier provider of [contracts for difference]’ with whom the client could not deal with personally, despite not having the authority to bind their client to any agreement with the provider, referring to Peter Watts and F M B Reynolds (eds), Bowstead & Reynolds on Agency (Sweet & Maxwell, 21st ed, 2018) [1–020]; Hurstanger Ltd v Wilson [2007] 1 WLR 2351, 2361–5 [33]–[44] (Tuckey LJ); McWilliam v Norton Finance (UK) Ltd [2015] EWCA Civ 186, [32]–[56] (Tomlinson J). A parallel example is the authority of an estate agent who has authority to introduce or find a purchaser for property which the vendor desires to sell. The real estate agent has no authority to enter into the contract on behalf of the principal. See Turnbull v Wightman (1945) 45 SR (NSW) 369, 372 (Jordan CJ, Halse Rogers J, Nicholas CJ in Eq); Davies v Sweet [1962] 1 All ER 92, 94 (Danckwerts LJ, with whom Lord Evershed MR and Donovan LJ agreed).
93. Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 67–8 (Gibbs CJ), 96–7 (Mason J); Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342, 350 (Dixon CJ, McTiernan and Fullager JJ). See also Scott v Davis (2000) 204 CLR 333, 409 [229] (Gummow J). Note however that there is English authority suggesting that an ‘incomplete agency’ where the agent does not have authority to bind is not a status based fiduciary relationship but nonetheless can give rise to a fiduciary relationship on the facts when ‘trust and confidence’ are present: see, eg, McWilliam v Norton Finance (UK) Ltd [2015] EWCA Civ 186, [40]–[41] (Tomlinson LJ, with whom Mitting and Jacob JJ agreed); Medsted Associates Ltd v Canaccord Genuity Wealth (International) Ltd [2017] EWHC 1815, [89] (Teare J); Peter Watts and F M B Reynolds (eds), Bowstead & Reynolds on Agency (Sweet & Maxwell, 21st ed, 2018) [1–020].
94. Not all aspects of the relationship between adviser and client will be fiduciary. See, eg, Howard v Federal Commissioner of Taxation (2014) 253 CLR 83, 100 [34] (French CJ and Keane J).
95. See ‘Credit Adviser as Agent for Client’ section above.
96. Commonwealth Bank of Australia v Smith (1991) 42 FCR 390, 392 (Davies, Sheppard and Gummow JJ); Breen v Williams (1996) 186 CLR 71, 135 (Gummow J); Birtchnell v Equity Trustees, Executors & Agency Co Ltd (1929) 42 CLR 384, 408 (Dixon J); Boardman v Phipps [1967] 2 AC 46, 124 (Lord Upjohn); Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 103 (Mason J); Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165, 199 [79] (McHugh, Gummow, Hayne and Callinan JJ); Australian Careers Institute Pty Ltd v Australian Institute of Fitness Pty Ltd [2016] NSWCA 347, [3]–[5] (Bathurst CJ), [132] (Sackville AJA with whom Meagher JA agreed).
97. (2014) 253 CLR 83, 107 [62] (Hayne and Crennan JJ).
98. Ibid 107–8 [62]–[64] (Hayne and Crennan JJ). See also Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134, 143 (Lord Russell).
99. Australian Securities and Investments Commission, Report 516: Review of Mortgage Broker Remuneration (2017) 57 [273] indicates that mortgage broker businesses generate their revenue in part by a fee for service charged to the consumer, albeit that this remuneration model is ‘rare in Australia’. However, this is an empirical statement and the conceptual point remains.
100. Proof of the absence of the elements of informed consent are not positive components of the equitable claim against the fiduciary. Moreover, the presence of informed consent is a conclusion of law. As stated by Leeming JA in Hasler v Singtel Optus Pty Ltd, ‘[f]ully informed consent is a defence.…It is for the fiduciary to make it out. It may not be determined until the end of the trial, and may depend upon a complex assessment of the facts’: see Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609, 638 [135] (Leeming JA, with whom Barrett JA agreed at 612 [3] and Gleeson JA at 613 [6]) (emphasis in original) (footnotes omitted).
101. (1997) 188 CLR 449, 466 (Brennan CJ, Gaudron, McHugh and Gummow JJ).
102. Gwembe Valley Development Co Ltd v Koshy [2003] EWCA Civ 1048, [65] (Mummery LJ).
103. ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1, 212 [1072] (Jacobson, Gilmour and Gordon JJ).
104. (2011) 191 FCR 1, 23 [110] (Besanko J).
105. Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 139 [107] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).
106. Credit Regime s 121(1)(a), since the credit adviser is providing credit assistance.
107. Ibid s 121(2)(b).
108. Ibid ss 113(2)(f)–(g). Where there are six or fewer, all credit institutions must be listed. However, where the credit adviser conducts business with more than six, the credit adviser needs only to identify the six credit institutions with whom it reasonably believes it conducts the most business: s 113(2)(f).
109. Ibid s 113(2)(e). Fees are also disclosed in the ‘Quote for providing credit assistance’ in accordance with s 114.
110. Ibid s 121(2)(b) requires disclosure of ‘a reasonable estimate of the total amount of any commissions that the licensee…is likely to receive in relation to the credit contract and the method used for working out that amount…’.
111. Ibid s 6(1): ‘A person engages in a credit activity if…the person provides a credit service’; s 7(a): ‘A person provides a credit service if [they]…provide…credit assistance to a consumer’; s 8(a): ‘A person provides credit assistance…if…[they] suggest…that the consumer apply for a particular credit contract with a particular credit provider’. Since advice about advice is conceptually preliminary guidance, not capable of implementation by the consumer or client, it is not a credit activity.
112. See the ‘Obligation to Provide a Credit Guide to the Client’ section.
113. Ibid s 6 (definition of credit activity); s 47(1)(a).
114. Ibid s 6(1): ‘A person engages in a credit activity if…the person provides a credit service’; s 7(a): ‘A person provides a credit service if [they]…provide…credit assistance to a consumer’; s 8(a): ‘A person provides credit assistance…if…[they] suggest…that the consumer apply for a particular credit contract with a particular credit provider’. Since advice about advice is conceptually preliminary guidance, not capable of implementation by the consumer or client, it is not a credit activity.
115. (1997) 188 CLR 449, 466 (Brennan CJ, Gaudron, McHugh and Gummow JJ).
116. Albeit that these commissions may be pegged or similar to the six market participants with whom Provider D customarily does business.
117. Credit Regime s 113(g) (emphasis added); s 5 defines ‘commission’ to include ‘any financial or other benefit in the nature of a commission’.
118. Ibid s 113(2)(f).
119. Kelly v Cooper [1993] AC 205, 215 (the Board).
120. There may be any number of conflicted reasons why the agent may select Provider D. For example, the agent may desire to maintain the volume of sales to Provider D such that their profile as one of the top six credit providers doing business with the agent is maintained.
121. Credit Regime s 113(2)(e). Fees are also disclosed in the ‘Quote for providing credit assistance’ in accordance with s 114.
122. Ibid s 114(1)(e).
123. Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd [No 4] (2007) 160 FCR 35, 79–80 [293]–[307], 82 [322] (Jacobson J).
124. Ibid 80 [306].
125. See United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1.
126. The pursuit of these remedies is subject to the doctrine of election, such that where a principal has available alternative and inconsistent remedies, she must elect between them. Election is not required when remedies are cumulative rather than alternative. See generally Tang Man Sit v Capacious Investments Ltd [1996] AC 514, 520–1 (the Board).
127. Maguire v Makaronis (1997) 188 CLR 449, 467, 475 (Brennan CJ, Gaudron, McHugh, and Gummow JJ).
128. Warman International Ltd v Dwyer (1995) 182 CLR 544, 560 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).
129. Grimaldi v Chameleon Mining NL [No 2] (2012) 200 FCR 296, 346–7 [183]–[185] (Finn, Stone and Perram JJ); FHR European Ventures LLP v Cedar Capital Partners LLC [2015] AC 250, 262 [7], 275 [50] (the Court). It should also be acknowledged that there is a debate as to the true nature of this equitable liability, and whether in substance all breaches of fiduciary duties amount to ‘wrongdoing’ such that the response is truly remedial. See, eg, Lionel Smith, ‘Fiduciary relationships: ensuring the loyal exercise of judgment on behalf of another’ (2014) 130 Law Quarterly Review 608. Professor Lionel Smith argues that the no conflict rules ‘tell a fiduciary when judgment cannot be safely exercised in relation to a fiduciary power’. Breach of the no conflict rules render a transaction voidable at the election of the principal. Smith argues that the no-profit rule is a ‘rule of primary attribution’ such that when the fiduciary acquires profit in the relevant circumstances ‘the fiduciary immediately comes under a primary duty render the profit to the beneficiary’. The no-conflict rule is thus about the vitiation of the principal’s consent and the no-profit rule about the carrying out or enforcement of the principal’s primary right to the profit. On Smith’s view, therefore, the no-profit rule does not attract the label ‘wrongdoing’ and is not in this sense remedial.
130. Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484.
131. See discussion above in Pt I.B–C, the ‘Types of Credit Advice’ and ‘Hypothetical Course of Dealing, the Application of the Credit Regime and Conflicted Advice’ sections.
132. See discussion above in Pt I.C; Credit Regime pt 4–2, the ‘Hypothetical Course of Dealing, the Application of the Credit Regime and Conflicted Advice’ section.
133. Equitable remedies are awarded within equity’s discretion. Factors such as laches, acquiescence and unclean hands may be relevant to the nature and extent of any remedy awarded.
134. Credit Regime s 121(2)(b).
135. Ibid ss 113(2)(f)–(g). Where there are six or fewer, all credit institutions must be listed. However, where the credit adviser conducts business with more than six, the credit adviser need only identify the six credit institutions with whom it reasonably believes it conducts the most business, s 113(2)(f).
136. Warman International Ltd v Dwyer (1995) 182 CLR 544, 560 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).
137. Hart Security Australia Pty Ltd v Boucousis [2016] NSWCA 307, [165]–[167] (Meagher JA, with whom Bathurst CJ and Beazley P agreed); Ramsay v BigTinCan Pty Ltd [2014] NSWCA 324, [72] (Macfarlan JA).
138. Hart Security Australia Pty Ltd v Boucousis [2016] NSWCA 307, [167] (Meagher JA, with whom Bathurst CJ and Beazley P agreed).
139. This will of course depend on the facts. On the postulated course of dealing in which the client receives advice on refinancing with a new credit card, she may also successfully invest her redundancy payout in which case the client may have suffered no loss.
140. O’Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262, 275 (Spigelman CJ).
141. Agricultural Land Management v Jackson [No 2] (2014) 48 WAR 1, 75 [395] (Edelman J). Specifically, there is no suggestion on the hypothetical course of dealing that reconstitution of a fund is required such that substitutive equitable compensation would be sought. Similarly, the facts do not engage the contentious approach to causation associated with Brickenden v London Loan & Savings Co [1934] 3 DLR 465, 469 (the Board). See generally Matthew Conaglen, ‘Brickenden’ in Simone Degeling and Jason N E Varuhas (eds), Equitable Compensation and Disgorgement of Profit (Hart Publishing, 2017) 111; J D Heydon, ‘Causal relationships between a fiduciary’s default and the principal’s loss’ (1994) 110 Law Quarterly Review 328, 331–2.
142. Agricultural Land Management v Jackson [No 2] (2014) 48 WAR 1, 74–5 [392]–[396] (Edelman J).
143. Maguire v Makaronis (1997) 188 CLR 449, 470 (Brennan CJ, Gaudron, McHugh and Gummow JJ).
144. Ibid 467, 472 (Brennan CJ, Gaudron, McHugh and Gummow JJ); Mayfair Trading Co Pty Ltd v Dreyer (1958) 101 CLR 428, 452 (Dixon CJ).
145. John McGhee (ed), Snell’s Equity (Sweet & Maxwell, 33rd ed, 2015) 403.
146. Maguire v Makaronis (1997) 188 CLR 449, 467 (Brennan CJ, Gaudron, McHugh and Gummow JJ).
147. Ibid 475 (Brennan CJ, Gaudron, McHugh and Gummow JJ), citing Mayfair Trading Co Pty Ltd v Dreyer (1958) 101 CLR 428, 452 (Dixon CJ). See, eg, Bathurst Regional Council v Local Government Financial Services Pty Ltd [No 5] [2012] FCA 1200, [3322] (Jagot J), where the principal’s claim for rescission of contract for sale of investment notes with the financial adviser was dismissed because the parties could not be put in at least substantially the same position prior to entry into the contract. Jagot J’s findings in relation to rescission in equity were not appealed in ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1.
148. Arguably this aligns with a quantum meruit measure for value of services rendered. See, eg, Guinness Plc v Saunders [1992] 2 AC 663, 701 (Lord Goff); O’Sullivan v Management Agency & Music Ltd [1985] 1 QB 428, 458–9 (Dunn LJ).
149. This analysis depends on the conscience of the third party. Where a principal enters into a contract with a third party, and that contract is mediated by the credit adviser (fiduciary), the contract with the third party might also be voidable if the third party is sufficiently implicated in the fiduciary breach such that the third party has sufficient knowledge or notice of the breach of duty. Thus, in relation to the client’s entry into the credit contract with Provider D, assuming that the credit adviser is also acting as agent for Provider D, then according to conventional agency principles, Provider D may be affixed with the knowledge of the credit adviser and thus implicated in any breach of fiduciary duty. See generally Dominic O’Sullivan, Steven Elliott and Rafal Zakrzewski, The Law of Rescission (Oxford University Press, 2nd ed, 2014) 228–9 [8.48]–[8.50].
150. Credit Regime s 47(1)(b).
151. Ibid s 47(1)(a).
152. Subject to the requirements to disclose in the credit guide, Credit Regime s 113, and the credit proposal disclosure document, s 121.