Solving the Fiduciary Puzzle: The Bona Fide and Proper Purposes Duties of Company Directors

Abstract

The recent finding by three judges of the Western Australian Supreme Court of Appeal in Westpac Banking Corporation v. The Bell Group Ltd. (in liq)(No3) (2012) 89 ASCR 1 (‘Bell Appeal’) that the duties of directors to act bona fide in the interests of the company and for proper purposes are fiduciary duties is significant. There has been substantial doubt as to whether these duties can continue to be classified as fiduciary, despite a long history of being so characterised. Indeed Bell Appeal exemplifies a distinct clash between prevalent equity theory and corporate law jurisprudence as concerns fiduciary duties. Bell Appeal is not the final word on the characterisation of these duties given that an appeal will be heard by the High Court. Moreover, aspects of the judgment run counter to statements of the High Court in the seminal case of Breen v. Williams (1996) 186 CLR 71. A reconciliation of the fiduciary nature of these duties with the High Court’s statements is therefore necessary. This article undertakes such reconciliation. It demonstrates the appropriateness of classifying these duties as fiduciary and shows that there is in fact no great clash.