Nocton v Ashburton and its Consequences
Nocton was an unremarkable example of a solicitor's breach of fiduciary duty when advising a client in a matter in which he had not fully disclosed his own personal interest. Though the Court of Appeal's finding of deceit and its awarding damages against the solicitor were reversed, Viscount Haldane commented that in a case such as that was, the measure of damages in deceit as opposed to that granted in equity, raised ‘a question of form only'[721] and Lord Dunedin considered the equitable remedy would ‘practically come to the same thing'.[722]
As is now well recognised, Viscount Haldane rescued cases within the excluÂsive jurisdiction of Chancery from the depredations of Derry v Peek.
Moreover, it is clear he wrote with the future development of the common law in mind. He returned to the compass of Derry v Peek in Robinson v National Bank of Scotland:[An] exaggerated view was taken by a good many people of the scope of the decision in Derry v Peek. The whole of the doctrine as to fiduciary relationships, as to the duty of care arising from implied as well as express contracts, as to the duty of care arising from other special relationships which the courts may find to exist in particular cases, still remains.[723]
Fifty years on the challenge was taken up in Hedley Byrne.[724]
The concern in this chapter, though, is not with Nocton s significance for tort law. That now is a well-known story. What is not, is its contribution to a renaisÂsance in the remedy of equitable compensation—a renaissance that began about a decade after Hedley Byrne. That it took so long is itself remarkable for a variety of reasons. Nocton itself shared much of the fate in England that befell equity jurisprudence more generally. It passed into obscurity.[725] To the extent that comÂpensatory awards were made for breaches of trust, for example, they were simply absorbed into and concealed by the long-established procedure of an equitable account for administration for wilful default or for replenishing a fund.[726] And while Viscount Haldane emphasised the ‘exclusive jurisdiction' concerning fiduciÂaries, the reported instances of compensation for loss against fiduciaries were few and far between in courts of the British Commonwealth.[727] Even this is unsurprisÂing.
The equitable remedies that, historically, have been most sought against a wrongdoing fiduciary were the rescission of a dealing (often on terms), or a claim to property derived or profits made (the remedy being the constructive trust or account of profits) by reason of wrongdoing.When I wrote Fiduciary Obligations in the early 1970s, Nocton v Ashburton notwithstanding, I unearthed few examples indeed outside of Canada[728] which considered, or awarded, compensation (or damages) for breach of fiduciary duty. Of the relatively small number of Australian fiduciary cases[729]—and the reasoning of some of these, such as P & O Steam Navigation Co v Johnson,[730] was distorted by misconceived decisions of the Privy Council[731]—the leading, but long overÂlooked decision supporting the compensatory jurisdiction was that of Dixon AJ in McKenzie v McDonald.[732] The case was one in which an estate agent, without full disclosure, bought his client's property at an undervalue. The compensatory claim made and awarded—the property had been resold—was founded on Nocton v Ashburton and a breach of fiduciary duty.
Before turning directly to the modern compensatory jurisdiction, two backÂground observations should be made about equitable remedies and their award. The first is that remedy is discretionary;[733] it must be fashioned to fit the nature of the case and the particular facts;[734] and it must be appropriate in the circumstances.[735] Secondly, in many instances and for many types of equitable wrong, the remedy that is most appropriate will self-select absent unusual circumÂstances. This is not to support some hardening of the discretionary arteries. It is simply an acknowledgement that a ‘mixture of learning, intuition and experience' and also the purpose of the particular doctrine in issue can bring a level of predictÂability to the award of remedy in routine cases.
Nonetheless, one cannot speak of a ‘right' to a particular remedy.[736]The stimuli for developing the compensatory jurisdiction and on a broad front began to emerge in the 1970s. The most obvious causes of these were, first, the proliferation of commercial activities and arrangements which the courts, in turn, were prepared to recognise as being fiduciary in character (heterodox though this might have been in many instances); secondly, the ballooning in those forms of economic and technological activity and research that led to the need to provide more considered protection for confidential information; thirdly, the recogniÂtion that many relationships in society—commercial, professional, private and governmental—had the potential to be ones in which one party routinely, or adventitiously, had the other in a position of significant dependence or vulnerÂability; and fourthly, as a driver of the legal response to these in Canada, Australia and New Zealand, the development, or exaggerated exploitation, of equitable remedies—and particularly the constructive trust—t o provide disincentives to exploitation of the trust, confidence, dependence or vulnerability that modern social and commercial ordering imposed on the community in their relationÂships and dealings with others. If the nineteenth century was the formative period for fiduciary law, the latter decades of the twentieth century were the period of unprecedented exploitation not only of fiduciary law—and its now merely satelÂlite doctrines of breach of confidence and relational undue influence[737]—but of equitable doctrine more generally. The latter process began in Australia in 1983 in a series of landmark cases in the High Court.[738]
As the pressure on the compensation grew, two issues emerged. The first, which seems to have been resolved relatively uncontroversially, was what forms of equiÂtable wrongdoing could attract this form of relief.
While Viscount Haldane denied Derry v Peek any deleterious effect in equity's ‘exclusive jurisdiction', he spoke priÂmarily of the compensatory jurisdiction only in relation to breach of fiduciary (or ‘confidential') duty.[739] But were there any limitations nonetheless on the equitable wrongs that could attract a compensatory remedy? The second issue was—and remains—controversial: what principles should inform the award, the assessÂment of, and the ‘defences' to a compensatory claim? While a quickly burgeoning jurisprudence was created, this was done without the benefit of an ordered and slow-grown evolution.As to the first of these issues, it could be said by 2009 of Australian law, correctly in my view:
Equitable compensation is frequently available as a remedy for breach of trust, breach of fiduciary duty, and liability under the two limbs of Barnes v Addy. It is not, however, limited to breaches of trust or fiduciary duty, but may be awarded, when appropriate, for any breach of an obligation within equity's exclusive jurisdiction. Therefore, it is availÂable as a remedy for breach of confidence, unconscionable conduct, undue influence and other kinds of equitable fraud.[740]
The forces leading to such a conclusion were experienced, albeit with not altogether uniform responses,[741] in other common law jurisdictions and particuÂlarly in Canada and New Zealand. So Sir Robin Cooke's unequivocal response in New Zealand in 1990: ‘Monetary compensation (which can be labelled damages) may be awarded for a breach of confidence or other duty deriving historically from equity’.[742]
Similarly in Canada, compensation for loss began to be awarded in cases where rescission of a contract for some equitable wrong (eg unconscionable dealing[743] or undue influence)[744] was not an available remedy. Such an approach was endorsed unequivocally by the Supreme Court in Rick v Brandsema,[745] where Abella J (for the Court) endorsed Professor Waddam’s view that ‘A rational legal system should surely permit the party complaining to receive a financial adjustment [ie compenÂsation for loss] in lieu of rescission’.
A remedy, it was said, should be moulded to secure ‘practical justice’. Like developments have occurred in Australia in relation to similar equitable doctrines.[746]Perhaps the two most significant doctrines compelling this development beyond the fiduciary principle were equitable estoppel[747] and breach of confidence. ComÂpensation was always a possible remedy for proprietary estoppel.[748] Equitable estoppel as a cause of action in Australia, unlike in England, is now no longer limited to representations, etc, relating to property rights and interests. It can extend, for example, to a ‘non-contractual promise [to] confer a non-proprietary legal right’,[749] such as a voluntary promise to enter into a contract.[750] Australia and New Zealand[751] have in consequence brought their respective law closer to that embodied in §90 of the Restatement of Contracts, Second in the United States. Estoppels’ domain so enlarged has all the potential to develop that character that Grant Gilmore in The Death of Contract[752] described as a ‘contort’.
The modern evolution of equitable estoppel has a complexity that defeats brief exposition. For that reason it will not be elaborated upon here.[753] Rather, the action for breach of confidence will be used to illustrate the transfiguration of what Nocton v Ashburton rescued.
VI.