Prescription and Proscription in Fiduciary Obligations

TLDR: In this article, the authors argue that the purely proscriptive understanding of fiduciary obligations represents a better understanding of English and Australian law and that the remedial rationale in breach-of-fiduciary duty cases is rescission (or elimination of the effect of the transaction) as between principal and fiduciaries rather than deterrence of the individual.

Abstract: Recent case law and scholarship has reignited the debate about whether fiduciary obligations are purely proscriptive in character. In particular, Rebecca Lee has suggested that fiduciary obligations have a prescriptive and 'directional' dimension. This article argues that the purely proscriptive understanding of fiduciary obligations represents the better understanding of English and Australian law. The argument rests upon three pillars. First, the proscriptive paradigm confines fiduciary obligations to their proper place within the broader complex of legal duties owed by those who undertake to act in the interests of other. Secondly, while it is often stated that fiduciaries have obligations to make full disclosure of relevant facts to their principals, an examination of the structure of fiduciary liability reveals that the disclosure rule functions as a subsidiary rule which removes the relevant activities from the scope of the proscription. Finally, the proscriptive character of fiduciary obligations is reflected in the remedies which are awarded for breach of fiduciary duty. Contrary to the position taken by some advocates of the proscription thesis (such as Matthew Conaglen), the author argues that the remedial rationale in breach of fiduciary duty cases is rescission (or elimination of the effect of the transaction) as between principal and fiduciary rather than deterrence of the fiduciary.