Administrator's duty of inquiry
143As to the first step of the appellants' submission, the nature, scope and content of the administrator's duty of inquiry has been variously expressed in the authorities. The earliest case appears to be Deputy Commissioner of Taxation v Portinex Pty Ltd (No 2) at 423-424. In Portinex at [3], Austin J referred to the duty of care of a voluntary administrator which had been recognised in the cases. These authorities expressed the view that the discharge of that duty of care requires the voluntary administrator to satisfy himself or herself, immediately after appointment, that the resolution of directors under s 436A authorising the appointment appears on the face of the minute which records it to be a valid resolution, and that the instrument of appointment, extended pursuant to the resolution of the board, also appears on its face to be valid.
144The nature of the "duty of care" to which Austin J had regard to in Portinex was not in any sense a fiduciary duty. Rather, his Honour's express reference to "the duty of care ... recognised in the authorities", may be taken to be a reference to the duty at law in the tort of negligence, or under statute, being the duty of care and diligence under s 180 of the Corporations Act, which applies to an administrator as an officer of the corporation.
145The definition of the term "officer" in s 9 of the Corporations Act includes a purported administrator or deed administrator acting in that capacity, because the definition includes a person who makes or participates in making a decision that affect the whole, or a substantial part. of the business of the corporation. This language is wide enough to encompass an invalidly appointed administrator or deed administrator.
146In Wilson v Manna Hill Mining Co Pty Ltd [2004] FCA 1663; (2004) 51 ACSR 404 at 412, Lander J agreed with the view of Austin J in Portinex, that an administrator should satisfy himself or herself that he or she has been regularly appointed. However, his Honour emphasised that this did not mean that an administrator must undertake a comprehensive analysis of the historical records of a company. His Honour described the scope and content of the administrator's "duty to inquire" in the following terms at [63]:
"However, where the minute containing the appointing resolution, the appointing resolution or the circumstances surrounding the passing of the resolution or any other circumstances particular to the company involved contain some feature which ought to put an administrator on notice, the duty to inquire will oblige the administrator to carry out whatever reasonable enquiries are necessary to satisfy the administrator that the appointment has been validly and regularly made. What is reasonable will depend upon the facts and circumstances of each individual case."
147The description of the administrator's duty in terms of a "duty of care" (Portinex at 423 [3]), and a duty to carry out "whatever reasonable inquiries are necessary" (Wilson at 412), is not consonant with the third step in the appellants' submission, namely, that a failure by an administrator to satisfy himself that he has been properly appointed is a breach of fiduciary duty.
148It may be readily accepted that as the company's agent, the administrator owed fiduciary duties to the company (see s 437B Corporations Act). However, the obligations which equity imposes on a fiduciary are generally considered to be proscriptive rather than prescriptive in nature: first, a duty not to obtain any unauthorised benefit from the relationship; and secondly, a duty not to be in a position of conflict: see Breen v Williams (1996) 186 CLR 71 at 135; Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 at 198. As observed by P D Finn, "The Fiduciary Principle" in T G Youdan (ed), Equity, Fiduciaries and Trust (1989), Casswell at 27, two themes are embodied in these overlapping proscriptions: one concerns itself with misuse of fiduciary position and the other with conflicts of duty and interest or conflicts of duty and duty arising in or in virtue of that position, citing Deane J in Chan v Zacharia (1984) 154 CLR 178 at 198. These themes reflect the fiduciary principle which insists on loyalty of the fiduciary in the service of the principal.
149Further, a relationship may be fiduciary as to some, but not all, of its aspects: see Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 at 15 per Bryson J; Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41 at 73 and 102. This is particularly so where there the relationship is based in contract, or includes a duty of care at law or under statute.
150The appellants submitted at the trial that the administrator had a duty to remove uncertainty. This was obviously not a fiduciary duty. The appellants reformulated this submission on appeal, by casting the administrator's fiduciary duties as including a duty to "be careful". This was said to be analogous to a trustee's duty of care in the administration of trust property. There are two answers to the appellants' contention.
151First, there is no proper analogy between the nature, scope and content of the duty of administrators to satisfy themselves that they have been properly appointed, including to make reasonable inquiries if put on notice of possible invalidity, and a trustee's duty to exercise care when making investments with trust property. As to the latter duty see: Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449 at 473; Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 at 500 [38].
152Secondly, the appellants' contention conflates the circumstances giving rise to a duty of inquiry by an administrator, with the very different circumstances involving the manner of exercise of fiduciary powers being an area in which "the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed": Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 97; John Alexander's Clubs Pty Ltd v White City Tennis Club Limited [2010] HCA 19; (2010) 241 CLR 1 at 34 [87]. Acting in the interests of the principal means not acting in a way that prefers the fiduciary's own interest or duty to a third person. The former concerns a duty relating to the creation of the agency; the latter concerns a duty arising in the carrying out or performance of the agency. The appellants' contention, if accepted, would have the consequence of characterising what is, at most, negligent conduct, as a breach of fiduciary duty. This proposition is to be rejected. As observed by Finn in "The Fiduciary Principle" at page 28:
"Loyalty is thus exacted, often in a draconian way. But save in one very distinctive class of case involving "fiduciary powers," no more than loyalty is exacted. This warrants emphasis. It is not the case that the pure negligence of a lawyer, an agent's excess of authority, a partner's breach of the partnership contract or a trustee's improvident investment is, as such, a breach of fiduciary duty, no matter how harmful to the interests of the client, the principal, etc. If no issue of disloyalty is involved, such matters will be actionable through those primary bodies of law which constitute or govern the ordinary incidents of the relationship in question - negligence, breach of contract or breach of trust. What is being rejected here is the proposition that the fiduciary principle is a prescriptive one in what it exacts." [citations omitted].
153The appellants were not able to identify any authority supporting their submission. They referred to an extrajudicial article written by Mr R P Austin (when a judge of the Supreme Court), who expressed the view that an administrator owes a fiduciary duty to the company represented (where it is insolvent) by the creditors as a whole, and accordingly must be independent and impartial ( see "The Legal Standard of Loyalty and Professional Guidelines", a paper by Justice R P Austin, Supreme Court of New South Wales, IPAA National Conference 12-13 October 2006). So much may be readily accepted. However, broad statements to the effect that an administrator must be independent and impartial reflect no more than that within the scope of the fiduciary relationship, the fiduciary must give their undivided loyalty to the person to whom the obligation is owed.
154As noted above, it is the requirement of loyalty which underpins the "no profit rule" and the "no conflict rule" attaching to fiduciaries. It does not, however, justify the leap which the appellants ask the Court to make in the present case. The appellants' submission should be rejected. It is unsupported by authority, and is not justified by any legitimate process of reasoning.
155In view of the above conclusion, it is unnecessary to consider the debate in the authorities and by learned authors, as to whether it is inappropriate to apply the expression "fiduciary" to the obligation of a trustee or other fiduciary to use proper care and skill in the discharge of his or her duties: see Bristol & West Building Society v Mothew [1998] Ch 1 at 16; Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187 at 237; (1994) ACSR 109 at 158; compare Meagher, Gummow and Lehane's Equity Doctrines and Remedies 4th ed, (2002) Lexis Nexis at [5-295]-[5-330]; Young, Croft, Smith, On Equity (2009) Thomson Reuters at [7.460]-[7.490].
156It is also unnecessary to consider in this context, the second step of the appellants' submission. This issue is considered below in the context of the appellants' reliance on s 128(4).
157In my view, Ground 1B of the amended notice of appeal is not made out.