The fiduciary concept is a "concept in search of a principle." Despite numerous attempts by commentators and the judiciary to define the basis for the imposition of all fiduciary obligations, it is often said that no universally accepted basis has been developed.
In the quest for a universal basis, it appears that six different theories have emerged. The `undertaking' theory, the `property' theory, the `reliance' theory, the `power' theory, the `vulnerability' theory, and finally the `loyalty' theory.
This essay will consider the proposition as suggested by Dawson J in Hospital Products Ltd v United States Surgical Corporation (Hospital Products) that `The notion underlying all the cases of fiduciary obligation that [is] inherent in the nature of the relationship itself is a position of disadvantage or vulnerability on the part of one of the parties...' In other words, this essay seeks to ascertain whether or not vulnerability is the basis for the imposition of all fiduciary obligations.
The view taken in this essay is that `loyalty' not `vulnerability' is the basis for the imposition of all fiduciary obligations. After a general introduction into the fiduciary notion, part two of this essay will provide a look into the failed theories emerged from the quest for a fiduciary principle. Part three will offer a close examination into the vulnerability proposition and part four will further the view taken by this paper through an examination of the loyalty proposition.
I. THE FIDUCIARY NOTION AS IT STANDS TODAY
It is clear that the result of the imposition of fiduciary obligations is the mandatory adherence by a fiduciary to the two proscriptive fiduciary duties: "(1) that no person in a fiduciary position may use the position to obtain a private advantage and (2) that no person in a fiduciary position may enter into any engagement in which his personal interest conflicts, or may possibly conflict, with his duty" .
It is the question of when such fiduciary obligations should be imposed that has so far eluded precise definition, the position best summarised by Chief Justice Gibbs in Hospital Products:
"I doubt if it is fruitful to attempt to make a general statement of the circumstances in which a fiduciary relationship will be found to exist. Fiduciary relations are of different types, carrying different obligations...and a test which might seem appropriate to determine whether a fiduciary relationship existed for one purpose might be quite inappropriate for another purpose. ...In the decided cases, various circumstances have been relied on as indicating the presence of a fiduciary relationship" (Per Gibbs CJ at 432-33)
The courts have however recognised certain relationships that have long been regarded as possessing fiduciary characteristics such as solicitor/client, trustee/beneficiary, director/company, employer/employee, and principle/agent. These relationships are presumed to give rise to the...