Equity-case-notes - Case summary of all relevant cases PDF

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Table of Contents FIDUCIARY DUTIES............................................................................................................................................2 CHAN V ZACHARIA (1984) 154 CLR 178 – when does fiduciary duty cease to exist......................................2 ASC V AS NOMINEES (1995) 62 FCR 504 {SECTION OF FIDUCIARY}................................................................3 BREEN V WILLIAMS (1996) 186 CLR 71 {P 107 ONLY}......................................................................................3 BOARDMAN V PHIPPS [1967] 2 AC 46 {H EADNOTE}..........................................................................................3 ENGLISH V DEDHAM VALE PROPERTIES LTD [1978] 1 ALL ER 382...................................................................4 UNITED DOMINIONS CORPORATION V BRIAN PTY LTD (1985) 59 ALJR 676.....................................................4 HOSPITAL PRODUCTS LTD V UNITED STATES SURGICAL CORPORATION............................................................6 PARAMASIVAM V FLYYN......................................................................................................................................8 MAGUIRE V MAKARONIS (1997) 144 ALR 729...................................................................................................9 FARAH CONSTRUCTIONS PTY LTD V SAY-DEE PTY LTD (2007) 236 ALR 209............................................11 CONSUL DEVELOPMENT PTY LTD V DPC ESTATES PTY LTD (1975) 5 ALR 231.............................................13 WARMAN V DWYER (1995) 128 ALR 201.........................................................................................................15 AG FOR HONG KONG V REID.............................................................................................................................16 PILMER V DUKE GROUP.....................................................................................................................................17 CHIRNSIDE V FAY...............................................................................................................................................18 UNDUE INFLUENCE & UNCONSCIONABLE CONDUCT.........................................................................23 JOHNSON V BUTTRESS........................................................................................................................................23 COMMERCIAL BANK OF AUSTRALIA LTD V AMADIO........................................................................................24 BLOMLEY V RYAN..............................................................................................................................................26 CONSTRUCTIVE TRUSTS................................................................................................................................27 MUSCHINSKI V DODDS {DEANE J}....................................................................................................................27 BAUMGARTNER V BAUMGARTNER.....................................................................................................................28 INJUNCTIONS.....................................................................................................................................................28 Australian Conservation Foundation v The Commonwealth.............................................................................28

Fiduciary Duties Chan v Zacharia (1984) 154 CLR 178 – When does fiduciary duty cease to exist Facts: A medical practitioner had a lease prior to entering into a partnership agreement. Before the partnership dissolved 2 years latter, the other practitioner arranged for a new lease to be granted to him. Law: per Gibbs CJ Where a partner, before the partnership has been dissolved, renews a lease on the premises of the business, they hold it on constructive trust for the partnership. Where a partnership has not been completely wound up, the partners continue to have the same obligations with regards to a lease-hold as they did prior to being wound up Dr Chan (the ‘other’ prectitioner) refused to jointly exercise the option to renew; and did therefore not rebut the presumption tat hew was incapable of taking a new lease soley for his own benefit Dismissed appeal Deane J (Bennan & Dawson JJ Agreeing) The legal representative of a deceased partner aquires that partner’s share in all assets of the partnership When considering whether a constructive trust has been formed by the existence of a fiduciary relationship, with regards to specific property, it is neccisary to determine what fiduciary relationship exists and what duties flow from that relationship. A partnership can either be in relation to a specific thing or a continuing course of action Generally, the relationship between partners is a fiduciary one – this is based on the notion that the partners are acting for a common purpose and that they are acting as agents for one another There were no contractual term preventing a fiduciary relationship – quite the opposite While winding up, the partners still had a fiduciary duty to each other The notion of liability to account for profits is intended to discourage the fiduciary from breaching obligations A fiduciary has a liability to account to the beneficiary where any benefit or gain has been realised which has been received in circumstances where a conflict or significant chance of conflict exists or where it is obtained through the fiduciary relationship or any knowledge acquired from it. Any such benefit is to be held by the fiduciary as constructive trustee Although generally there will be a constructive trust, this will not always be the case Dr Chan breached his fiduciary duties and hence was ordered to hold the lease under constructive trust Appeal Dismissed

ASC v AS Nominees (1995) 62 FCR 504 (Establishing fiduciary duty) Facts: It was alleged, inter alia, that Windsor, the director of a number of unit and superannuation trust breached fiduciary duties Law: Per Finn J: That indirect fiduciary duties arise between the beneficiaries of trust A and the trustee of Trust B where Trust A and B have common directors Considerations when determining whether a fiduciary duty exists are: o Functions performed o Undertakings o Vulnerability of the beneficiary o Was the action for the benefit of the beneficiaries Identified the established criteria: o An undertaking o Vulnerability to another’s power or vulnerability necessitating reliance o Reasonable expectations

Restrictions placed on a fiduciary company, may and often do apply to officers, agents and employees of the beneficiary In the absence of an effective exclusion clause, the fiduciary must at least show informed consent to escape liability

Breen v Williams (1996) 186 CLR 71 {p 107 only} Facts: The plaintiff sought to receive their medical records in relation to her breast enhancement, which she was taking an action against the manufacturer. The doctor would only release the records if the woman released him from any liability he had towards her. Law: Per Gaudren and McHugh JJ: At law, the doctor-patient relationship is not established as is trustee to beneficiary, solicitor to client, etc. – there may, in some cases, be a fiduciary relationship with respect to some things Indicia of Fiduciary duty o The existence of relation of confidence o Inequality of bargaining power o Undertaking to complete task or fulfil duty for the benefit of another o Ability for one party to exercise unilateral decisions, effecting the other party’s rights or interests o Dependency and vulnerability experienced by one party, causing them to rely on the other

Boardman v Phipps [1967] 2 AC 46 (Lawyer and client) Facts: The agents of a trust that held 8000 shares in a company, went to the AGM of the company with proxy forms signed by the trustees. The agents used the position as agents and their knowledge gained from this position to negotiate to acquire more than 21,00 shares in the company. The agent disclosed that they had purchased the shares but it was not full disclosure. The transaction was profitable to both the agent and the trust. The trust sought an account of profits. Law: The agents placed themselves in a special position – in that they were acting as an agent for the trust for negotiations with the directors of the company - which attracted fiduciary duties In the course of their conduct, they found that their was profits to be made and obtained an opportunity to make a profit. They made a profit and they were accountable for that profit The fact that the agents did disclose their activities and it was beneficial for the trust entitled them to remuneration of their work and skill

English v Dedham Vale Properties Ltd [1978] 1 All ER 382 Facts: A development company misrepresented to the plaintiff that their property could not be developed, but offered to purchase it off them. Which the lawyers were exchanging contracts, the defendants applied for development approval for part of the property, purporting to be acting as an agent for the plaintiffs. Law: Fiduciary relationships are not refined to certain relationships – they can develop by analogy If a purchaser, while in negotiations for sale, purportedly act in the name of the vendor without consent in relation to the property, a fiduciary relationship arises, and disclosure is required. Self appointed agents attract fiduciary duties Per Slade J: No consent was given to the use of the plaintiffs’ names The action for fraudulent misrepresentation failed – the pl was not mislead, and the servant of the defendant did not deliberately, if at all, misrepresent the factual position The judge differentiated between a person putting in an application in the other party’s name after the contract had been formed (thus an equitable interst) and where the parties were merely negotiating and no interest existed.

“The liability to account would, in my judgment, arise if, and only if, the relationship was in the eyes of equity a fiduciary one on the sense that it imposed relevant fiduciary duties on the defendants towards the plaintiffs.” The categories of fiduciary relationships are not closed A person who acts as the agent for another without their consent, a self-appointed agent, will be under the same duties as if the authority had actually be vested in them.

United Dominions Corporation v Brian Pty Ltd (1985) 59 ALJR 676 Facts: UDC, Brian and others (with SPL as a participant and acting as manager and promoter) were in a joint venture. Each company contributed equity in proportion of their share of the profits. UDC gave a mortgage and charge of one of the properties under the joint venture to SPL for transactions totally unrelated to the joint venture. Law: Per Gibbs CJ: The usage of the word joint venture is not decisive of the actual nature of the agreement or relationship A person who is negotiating on behalf of the intended future partnership is acting for the partnership and may be required to account for profits. Both a partner and intending partner require upmost good faith – ie fiduciary The relationship (s) were not arms-length, they were between partners or intended partners “…there was, in the circumstances of the present case, a relationship between UDC and Brian based on the same mutual trust and confidence, and requiring the same good faith and fairness, as if a formal partnership deed had been executed.” “Once it is held that UDC was in a fiduciary relationship to Brian, there can be no doubt that UDC was in breach of its fiduciary obligations. It obtained for itself an advantage at the expense of (and without the knowledge or consent of) Brian, and is therefore bound to account to Brian for the improper advantage which it obtained.” Per Mason, Brennan and Deane JJ: “The term "joint venture" is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots' law, "adventure") will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership. The borderline between what can properly be described as a "joint venture" and what should more properly be seen as no more than a simple contractual relationship may, on occasion, be blurred. Thus, where one party contributes only money or other property, it may sometimes be difficult to determine whether a relationship is a joint venture in which both parties are entitled to a share of profits or a simple contract of loan or a lease under which the interest or rent payable to the party providing the money or property is determined by reference to the profits made by the other. One would need a more confined and precise notion of what constitutes a "joint venture" than that which the term bears as a matter of ordinary language before it could be said by way of general proposition that the relationship between joint ventures is necessarily a fiduciary one (but cf per Cardozo CJ, Meinhard v Salmon (1928) 164 NE 545 at 546). The most that can be said is that whether or not the relationship between joint ventures is fiduciary will depend upon the form which the particular joint venture takes and upon the content or the obligations which the parties to it have undertaken. If the joint venture takes the form of a partnership, the fact that it is confined to one joint undertaking as distinct from being a continuing relationship will not prevent the relationship between the joint ventures from being a fiduciary one. In such a case, the joint venturers will be under fiduciary duties to one another, including fiduciary duties in relation to property the subject of the joint venture, which are the ordinary incidents of the partnership relationship, though those fiduciary duties will be moulded to the character of the particular relationship”

On the facts here, their was a fiduciary relationship as the joint venture was a commercial enterprise with a view to profit where the profits were share (although not equally) The relationship was clearly a partnership A fiduciary relationship can arise prior to the formal execution of the joint venture agreement “the relationship between prospective partners or participants in a proposed partnership to carry out a single joint undertaking or endeavour will ordinarily be fiduciary if the prospective partners have reached an informal arrangement to assume such a relationship and have proceeded to take steps involved in its establishment or implementation.” Agreements had already been made at the time of the breach, although not formal “To transpose the words of Dixon J in Birtchnell (42 CLR at pp 407-8), the participants in each of the then proposed joint ventures were "associated for ... a common end" and the relationship between them was "based ... upon a mutual confidence" that they would "engage in [the] particular ... activity or transaction for the joint advantage only". It matters not, for present purposes, whether that relationship is seen as that which may exist between prospective partners or joint venturers before the terms of any partnership or joint venture agreement have been settled or whether it is seen as a limited preliminary partnership or joint venture to investigate and explore the possibilities of an ultimate joint venture or ventures. On either approach, it was a fiduciary one.” Where determining the extent of the fiduciary duties, the nature of the joint venture and the undertaking must be examined Per Dawson J: Agreed with Mason, Brennan & Deane JJ “Whilst the concept of a joint venture is said to be the creation of American courts (see 46 AM Jur 2d, Joint Ventures, s 2), it is a term which is widely used and it is well know in Scottish law where it is regarded as a variety of association, partnership or not, in which no firm name is used and the association is confined to a particular adventure, speculation, course of trade or voyage” A partnership may be for a single adventure, depending whether it is a carrying on of business “Perhaps, in this country, the important distinction between a partnership and a joint venture is, for practical purposes, the distinction between an association of persons who engage in a common undertaking for profit and an association of those who do so in order to generate a product to be shared among the participants. Enterprises of the latter kind are common enough in the exploration for and exploitation of mineral resources and the feature which is most likely to distinguish them from partnerships is the sharing of product rather than profit.” Fiduciary duties are presumed in partnership, but not in joint ventures

Hospital Products Ltd v United States Surgical Corporation Facts: USSC, a medical staples manufacturer, appointed Blackman as their Australian distributor. The exclusive distribution then was shifted to Hospital Products International Ltd. HPI reverse engineered and produced the products of USSC. They then terminated the distribution agreement and sold their reverse engineered products to its customers. Law: Per Gibbs CJ HPI would not have been able to develop its market if it were not for its position as exclusive distributor “A person who occupies a fiduciary position may not use that position to gain a profit or advantage for himself, nor may he obtain a benefit by entering into a transaction in conflict with his fiduciary duty, without the informed consent of the person to whom he owes the duty.” The categories of fiduciary relationships are not closed A relation of confidence is not neccisary or conclusive of a fiduciary relationship Inequality of bargaining power has thought to be an indicator of a fiduciary relationship, but it does not create such a relationship

“On the other hand, the fact that the arrangement between the parties was of a purely commercial kind and that they had dealt at arm's length and on an equal footing has consistently been regarded by this court as important, if not decisive, in indicating that no fiduciary duty arose” held that their was no duty beyond the obligations imposed by contract there was no undertaking and the agreement could be terminated at any time there was no agreement for HPI to act solely for the interests of USSC Although USSC delied on HPI, the transaction was a commercial, arms-length and on equal footing, and that the goal of HPI was to make a profit The fiduciary duties may be limited to certain parts of the business, but here there was no part which could be subject to fiduciary duties Per Mason J “The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense.” A subcontractor is not a fiduciary as they do not exercise a power or discretion, which makes the contractor vulnerable A fiduciary relationship and the duties arising thereto, must conform to the terms of any contract which regulates the relationship “My conclusion that HPI was at liberty to make some business decisions by reference to its own interests, subject to the obligations arising under the best efforts promise and the other terms of the contract express and implied, presents an overwhelming obstacle to the existence of the comprehensive fiduciary relationship found by the Court of Appeal. This is because HPI's capacity to make decisions and take action in some matters by reference to its own interests is inconsistent with the existence of a general fiduciary relationship. However, it does not exclude the existence of a more limited fiduciary relationship for it is well settled that a person may be a fiduciary in some activities but not in others” “But entitlement to act in one's own interests is not an a...