Fiduciary relationships in corporate groups – Full Federal Court extends equity’s reach

The Full Federal Court held that an employee owed fiduciary obligations not only to his employer (an established category of fiduciary relationship), but also to a subsidiary of his employer. The Court considered when fiduciary obligations will be found outside the established categories.

Oliver Hume South East Queensland Pty Ltd v Investa Residential Group Pty Ltd [2017] FCAFC 141 


This case involved claims and cross-claims emanating from land transactions where a series of illicit activities resulted in two parcels of land owned by Investa Residential (Subsidiary) being sold to interests associated with the individuals charged with carrying out the sales (and allegedly at significant under-value).

The facts are complex but the central facts were these:

  • Investa Properties (Holding Co) is a property development company that wholly-owned Subsidiary. Subsidiary had no employees and made no decisions of its own; it acted via and at the direction of Holding Co.
  • Subsidiary owned two parcels of land near Ipswich in Queensland. In 2008 the Investa companies approached Oliver Hume (a real estate agency) to sell the first parcel of land. The key player for Holding Co was one of its senior employees, Mr Nankervis. The key player for Oliver Hume was one of its directors and employees, Mr Barclay. In June 2009 the first parcel of land was sold to a company with which Mr Nankervis and Mr Barclay were later found to have had undisclosed interests (and for a price alleged to have been millions of dollars under value).
  • In July 2009 Subsidiary formally appointed Oliver Hume as its estate agent to sell the second parcel of land. In February 2010 Subsidiary terminated Oliver Hume’s appointment. In June 2010 the second parcel of land was sold to a company later found to have been owned by Mr Barclay’s daughter (and for a price said to have been under value having regard to ‘secret’ steps taken by Mr Nankervis and Mr Barclay since October 2009 to subdivide the parcel and thereby increase its value).

Holding Co discovered the dealings and, together with Subsidiary, sued Mr Nankervis (by now a former employee), Oliver Hume and Mr Barclay for breach of fiduciary duties, for which they sought equitable compensation (a claim for account of profits was abandoned). The respondents filed various cross-claims.

At first instance, the trial judge relevantly held that Mr Nankervis owed and breached fiduciary obligations to his employer (Holding Co), but did not owe fiduciary obligations to Subsidiary, and that neither Oliver Hume nor Mr Barclay owed fiduciary obligations to Subsidiary in respect of the first parcel of land (because, in contrast to the second parcel of land, Subsidiary had not formally appointed Oliver Hume as its estate agent in accordance with relevant Queensland legislation).

The Investa companies appealed. Mr Nankervis did not appeal and appeared in person at the appeal.

The issues

The main issues were whether the trial judge erred in holding, first, that Mr Nankervis did not owe fiduciary obligations to Subsidiary and secondly, that Oliver Hume and Mr Barclay did not owe fiduciary obligations to Subsidiary in respect of the first parcel of land.

The judgment

In relation to the first main issue, the Court, by a 2-1 majority, allowed the appeal and held that Mr Nankervis did owe fiduciary obligations to Subsidiary.

Justice Dowsett, in dissent, reviewed relevant decisions and academic writings on the issue of when fiduciary obligations will be found in circumstances falling outside established categories: [33] – [55]. His Honour emphasised the necessity for the person who is alleged to be a fiduciary to have undertaken, expressly or impliedly, to act on behalf of the beneficiary. This emphasis was reflected in his Honour’s reasoning for finding that Mr Nankervis did not owe fiduciary obligations to Subsidiary: [61] – [63] and [81] – [84], especially the following central passage at [82] (emphasis added):

The trial Judge observed that a person who owes fiduciary duties to a parent company need not necessarily owe such duties to a subsidiary. I consider that observation to be of considerable importance. In my view, the appellants’ case is really that because of the corporate association, Mr Nankervis was necessarily in a fiduciary relationship with [Subsidiary]. Within such a group, it may not be unusual for employees of one company to perform functions which concern the affairs of another company. The question is whether Mr Nankervis undertook to act in the interests of [Subsidiary], and perhaps, to it alone. If a fiduciary obligation is incurred by an express or implied undertaking, there must be a point at which such undertaking is given. The earliest point at which Mr Nankervis could have incurred fiduciary obligations to either [Holding Co] or [Subsidiary] must have been the date of his employment by the former. There is no evidence that he was, at that time, even aware of the existence of [Subsidiary]. His contract of employment identified no company, other than [Holding Co] as his employer, or as a party to which he owed obligations. Hence one must ask whether he undertook such duties at a later stage and, if so, when…

Justice Greenwood also provided an extensive survey of decisions and academic writings: [209] and [235] – [279]. His Honour acknowledged the importance of a fiduciary having undertaken, expressly or impliedly, to act on behalf of the beneficiary. His Honour also emphasised, however, a broader strand running through the cases and writings, namely the importance of looking at the actual role carried out by the person, to see whether the person could be said to have “found themselves in a fiduciary relationship” having regard to the relevant “calculus of factual considerations”: see his Honour’s reliance on 1989 writings of Dr Finn (later Finn J): [261] – [269]. This broader focus was reflected in his Honour’s reasoning for finding that Mr Nankervis did owe fiduciary obligations to Subsidiary (with which White J agreed: [413]): [203] – [205], [247], [253] – [257], [349] – [350] and [365], especially the following illuminating passages at [257] and [350] (emphasis in original):

If the proper construction of the contract of employment is that Mr Nankervis, expressly or impliedly, is taken to have agreed or undertaken (to [Holding Co]) to act (in addition to the duties owed to [Holding Co]), for or on behalf of or in the interests of [Subsidiary] at the same time, when exercising the power of either recommending or approving sales prices, the express or implied undertaking coupled with the “critical” features apparent in his role falling within the features described by Mason J[[1]], placed Mr Nankervis, for the purposes of the conflict of duty and interest rule and the conflict of interest and interest rule, in a “limited fiduciary relationship” with [Subsidiary] apart from, and in addition to, the fiduciary relationship he had with [Holding Co].

… [T]he circumstances going to the functions actually performed by [Mr Nankervis]; the level of responsibility conceded to him; the capacity to shape and influence decision-making concerning Lot 170; the vulnerability of [Subsidiary] to action taken by him and the awareness he must reasonably be taken to have had that the function he was performing was in fact for the benefit of [Subsidiary], as well, resulted in Mr Nankervis “coming under a duty” not to put himself in a position of conflict without informed consent; a duty not to make a profit from his position without informed consent; and a duty to act in the best interests of [Subsidiary], as well as, [Holding Co], unless instructed to act otherwise by [Holding Co].

In relation to the second main issue, all three judges held that Oliver Hume and Mr Barclay owed fiduciary obligations to Subsidiary in respect of the first parcel, rejecting the trial judge’s conclusion that fiduciary obligations could not arise where there had been a failure to comply with the relevant Queensland legislation: see Dowsett J at [151] and [156] – [157] and Greenwood J at [373] – [376] (with whom White J agreed: [412]).


This decision does not establish a new matter of principle; the Court did not, for example, hold that there is now a new established category of fiduciary relationship, namely “employee and subsidiary of employer”. But the majority distilled and applied existing principles to a new situation when it found, having regard to all the facts and circumstances of the case, that Mr Nankervis owed fiduciary obligations to Subsidiary. Even Dowsett J in dissent accepted that there may be other cases where an employee will owe fiduciary obligations to a subsidiary (but in his Honour’s view the facts and circumstances of this case did not warrant such a conclusion: [86]).


The decision demonstrates that in cases falling outside the established categories of fiduciary relationship, it will remain difficult to predict with certainty when courts will find that a fiduciary relationship nevertheless existed. Minds may well differ as to the conclusion to be drawn from the relevant “calculus of factual considerations”; here, four judges considered the same factual considerations with two holding that Mr Nankervis did not owe fiduciary obligations to Subsidiary (the trial judge and Dowsett J in dissent), and two coming to the opposite conclusion (the majority on appeal).


[1] In Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41.

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