FAY V CHIRNSIDE: “A REMEDY IN SEARCH OF PRINCIPLES, OR HAS THE SUPREME COURT OPENED PANDORA’S BOX?

OCTOBER 2006

An opinion paper by Berry Zondag

TABLE OF CONTENTS
I II III INTRODUCTION ...................................................................................................................... 1 THE FACT SITUATION ............................................................................................................. 3 THE JUDGMENTS .................................................................................................................... 5
A. The High Court ............................................................................................................................ 5 1 Liability ................................................................................................................................. 5 2 Remedy ................................................................................................................................. 6 B. The Court of Appeal .................................................................................................................... 7 1 Liability ................................................................................................................................. 8 2 Remedy ................................................................................................................................. 9 C. The Supreme Court ................................................................................................................... 10 1 Liability ............................................................................................................................... 10 2 Remedy ............................................................................................................................... 12

IV

THE FIDUCIARY PRINCIPLE .................................................................................................. 14
A. B. C. Equitable standards.................................................................................................................... 14 Fiduciary relationships .............................................................................................................. 16 Remedies for breach of fiduciary duties .................................................................................... 20 1 Equitable damages or compensation ................................................................................... 21 2 Accounting for profits ......................................................................................................... 23 3 Other aspects of equitable remedies .................................................................................... 23 D. Fiduciary obligations of joint venturers..................................................................................... 27 1 Pre contractual fiduciary obligations ................................................................................... 28 2 Post contractual fiduciary obligations ................................................................................. 29 3 Conclusions on the scope of fiduciary duties of joint venturers .......................................... 31

V

CRITICAL ANALYSIS OF THE JUDGMENTS IN CHIRNSIDE V FAY ............................................ 36
A. B. C. The conceptual structure of joint ventures................................................................................. 36 The use of equitable standards .................................................................................................. 40 The remedial approaches ........................................................................................................... 45

VI VII

CONCLUSIONS ...................................................................................................................... 48 CASE LAW AND BIBLIOGRAPHY ........................................................................................... 50

I

INTRODUCTION

Professor Finn contends that ‘fiduciary’ has become the “peripatetic adjective”. Once encountered only in familiar environments such as trusts, partnerships, agencies and the like, it now has been coupled to the mortgagee’s power of sale in New Hampshire; in Ontario to a bank providing an opinion about a corporate take-over; in England to gifts to political parties; in Utah to a surgeon’s disclosure; and in Queensland and Ontario to unsuccessful negotiations for a joint venture or partnership.1 To Professor Finn’s examples may now be added the New Zealand Supreme Court decision in Chirnside v Fay,2 which left a retired real estate agent turned property developer with an award of almost one million dollars, apparently for participating in a number of meetings, preparing a spreadsheet, and making four telephone calls. This prize, however, was bitterly fought. Four substantive judgments and a host of interlocutory and leave application were required before the matter reached New Zealand’s ultimate judicial body. These “travaux preparatoires” provide an expose of the issues Professor Finn alludes to in his essay. They demonstrate that the concepts of fiduciary obligations and the associated remedies involve an area of law were few concrete guidelines are available. They also show that the remedy driven approach to fiduciary law has severely muddied the waters of principled obligations. Nevertheless, the Supreme Court decision emphasises that in New Zealand, as in Canada, Australia and England, designating someone a “fiduciary” exposes that person to the full rigour of equity, in both method and remedy. The decisions in Chirnside v Fay show that in our legal construction system of statute and common law, equity plays the role of the “caulking gun”; not only in providing standards that regulate behaviour that would slip between the cracks left by tort and contract, but also in the way remedies are constructed and calculated. The question arises whether the Supreme Court judgment elucidates the

1

Paraphrasing Professor Finn’s introductory remarks in Paul D Finn "The Fiduciary Principle" in Youdan (ed.), Equity, Fiduciaries and Trusts. (Carswell, Toronto, 1989). 2 Chirnside v Fay [2006] NZSC 68; [6 September 2006] Supreme Court, Elias CJ, Gault, Keith, Blanchard and Tipping JJ.

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underlying principles, or has opened a “Pandora’s box” of judicial discretion that will result in remedy driven inroads into well settled areas of contract and tort law.

This essay is written for the LLM course “LAWCOMM742 Remedies”. It therefore uses a remedial perspective in its analysis of the various court decisions in this extensive litigation. Although the different courts were reasonably in agreement as to the basis for Chirnside’s obligations to Fay, the approaches to the remedial consequences were quite different. This essay attempts to find and evaluate the principles that may be derived from the ultimate decision by using the structures proposed in Finn’s essay. It concludes that (as Finn suggests) the term “fiduciary” can be abused to bring a case into a field of unrestricted remedial consequences, barely supported by structured principles. The few general principles that apply in that environment seem rather broad, and lead to remedies that seem disproportionate to the factual circumstances. Chirnside v Fay is a case where this is demonstrated and even emphasised by the different remedies that the courts would have considered appropriate. These differences extended to the Supreme Court, where the members had differing opinions on the remedial consequences of a fiduciary breach. This essay starts with a description of the fact situation, followed by the decisions in the different courts. It then describes the concept of fiduciary obligations in general, and more specifically in the context of joint ventures. The finding that the parties were indeed joint venturers is analysed and considered on its merits. Next, the remedial consequences of a breach of fiduciary obligations that were relevant in this case are described, and the judgments are analysed against the theoretical background that is developed. In the final conclusion the author suggests that the Supreme Court has set a precedent that may well attract opportunistic litigants, who will seek to bring their failed competitive efforts under the heading of a “joint venture”, once they know that their former “business partner” has made a profit out of the transaction they sought to be concluded in.

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II

THE FACT SITUATION

The plaintiff Richard Fay (in his late sixties), was a real estate agent and property developer. He had experience in real estate in Dunedin, but had retired to Christchurch in 1999. He is described as “not being a detail-man”, and prone to exaggeration, with an inflated belief of self-importance. The first defendant, Wynston Chirnside, used to be a manufacturer of caravans, but had become a property developer in Dunedin since the mid 1970’s. He is described as a meticulous manager with an eye for detail. Justice William Young (the first instance judge) remarked that if he would have been in property development, he would have been happy to leave details to Chirnside, while he would keep these matters to himself if he would have been dealing with Fay. The second defendant Rattray Properties Limited (“Rattray”) is a company in which Chirnside is a shareholder, together with financiers introduced by his law firm. Rattray is the current holding vehicle for the property project at issue in the litigation, known as the “Harvey Norman project”. Fay and Chirnside had known each other since the early 1980’s, and had had some business dealings in that time. In 1996 they had discussed to work together as property developers “when the opportunity arose”, but there were no formal arrangements between them. They completed one project together, the “CRT project” which was organised by way of an incorporated three party joint venture company. In 1997 Fay and Chirnside independently approached Lion Nathan breweries in respect of an old building in Dunedin (the “Speights site”), in which they both saw development potential. Chirnside was part owner of an adjoining building, the “Taunton Mews”. In its acquisition, Fay had actually been involved as estate agent for the vendor. These initial independent activities had no result, and another developer obtained an option on the Speights site. In 1998 Fay and Chirnside first discussed operating together and also discussed using the Taunton Mews property in combination with the Speights site to realise the full development potential of that combination. In early 1999 contacts between the men intensified and they prepared some calculations for the financial parameters of a possible

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development. They had Harvey Norman in mind as the potential “anchor tenant”. This is an Australian retailer of furniture which was at the time expanding in New Zealand through large retail outlets in all major cities. Fay made initial contact with Harvey Norman, but eventually a deal was finalised by Chirnside. Chirnside also negotiated and eventually contracted with Lion Nathan. While Chirnside was busy concluding these arrangements Fay moved to Christchurch, but remained indirectly involved in the project (the extent of which being a factual matter which was heavily contested). The project came together with the final commitment from Harvey Norman on 7 July 2000. By that time Chirnside had “gone cold” on Fay because of problems in the CRT project, the very limited involvement of Fay as compared to the efforts expanded by Chirnside, and the fact that Fay’s real estate skills were no longer required with the anchor tenant secured. In addition, Fay was in Christchurch, while the project was in Dunedin. Originally it was intended that Fay was to play the major role in organising the finance for the project, but when Chirnside had completed the primary commercial objectives (securing the purchase of the property and the anchor tenant) he was faced with an opportunity to finance the project through investors associated with his law firm. Chirnside then wanted to exclude Fay from the project, but instead of telling him so, he intended to complete all transactions through Rattray Ltd, while trying to convince Fay that he himself was no longer involved. From that point Fay argued that there had been a partnership and that he was entitled to proceeds, which was denied by Chirnside. The project was completed by Chirnside (through Rattray). Fay sued.

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III THE JUDGMENTS
A. The High Court 1 Liability
Fay brought four causes of action: • • • • Breach of a fiduciary duty arising under a joint venture. That there had been a partnership, and that relief was available to him under ss32 and 42 of the Partnership Act 1908. That it had been represented to him that he would be a major partner to the project, which was deceptive and hence amenable to relief under s9 of the Fair Trading Act. That Rattray was in knowing receipt of property, and that it therefore held the property in constructive trust for Fay.

In its first substantive judgment,3 the High Court (William Young J) was asked to address liability only, and to consider a claim for exemplary damages. His Honour considered that the core issue in the case was the determination of the nature of the relationship between the parties,4 which had to be assessed on the externalities. His Honour approached this from the question whether there was a joint venture.5 He found there was a joint project, and that the parties had expressed to third parties that they were both involved in that project. Although the Court accepted that Chirnside had played a far greater role and accepted real liability, something which Fay had not done, the Court found that Fay had played a role, and would have possibly played a greater role, if given the opportunity. It appears that the critical assessment in the judgment is:6 If the position between Mr Fay and Mr Chirnside involved a joint venture with fiduciary obligations each way, I think that it would not be open to Mr Chirnside to simply abandon Mr Fay and to complete the development himself. This because it would not have been open to Mr Chirnside, on this
3 4

Fay v Chirnside (not reported) [20 December 2002] High Court Dunedin, William Young J, CP36/01. In para 27 His Honour states: “The fundamental issue in the case relates to the nature of the relationship between Messrs Fay and Chirnside between early 1999 and 1 September 2000. Once this issue has been addressed, the other issues associated with the case largely answer themselves.” 5 Paras 28 and 29. 6 Para 43, point 5.

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hypothesis, to take for himself a profit, to the exclusion of Mr Fay, without the latter’s consent. On that analysis, the fundamental question became whether Chirnside had made it clear to Fay that Fay’s participation was at Chirnside’s discretion. This was treated as a question of credibility,7 which His Honour decided in favour of Fay, despite some reservations about the credibility and conduct of Fay as a witness.8 Having found that the relationship was a joint venture, the next issue to be addressed was at which point such a relationship comes into existence, which was answered by reference to the House of Lords decision in Khan v Miah.9 This was thought to have parallels with the fact situation, where Fay and Chirnside had not completed the final structure of their venture, but had sufficiently progressed to imply that there was a joint venture, although it did not amount to a partnership. His Honour considered that it had sufficient characteristics of a joint venture (without specifying what those might be), with the resulting fiduciary obligations as in Marr v Arabco Traders.10 As a result, the Court found an entitlement for Fay to either damages or account of profits, with a compensation for the disproportionate efforts of Chirnside. The Court did not consider exemplary damages.

2 Remedy
The second judgment11 proceeded on the finding of fiduciary obligations. Both parties contended that an orthodox account of profits was not appropriate, given the fact that no actual profits had yet been made. Such profits would only arise when the development would be sold, and the best price would not be achieved by a court initiated sale. As a result, a true disgorging of profits approach had practical problems. Fay also contended that Chirnside and/or Rattray held the project on a constructive trust, but the Court thought that such an approach would result in practical problems with the bank that had a security over the project. Additionally, a constructive trust would in time involve Fay in the day-to-day management of the project. Given the animosity between the parties, the
7 8

Para 44, and see his Honour’s remarks about Fay’s “offer” at paras 81-85. Para 45. 9 Khan v Miah [2000] 1 WLR 2123; [2001] 1 All ER 20. 10 Marr v Arabco Traders Ltd [22 May 1987] HC Auckland, Tompkins J,A1195/77; partially reported in (1987) 1 NZBLC 102,732. 11 Fay v Chirnside (not reported) [20 December 2002] High Court Dunedin, William Young J, CP36/01

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Court saw practical problems in such an approach.12 That animosity and the interests of the third party investors in Rattray, were also amongst the reasons advanced by the Court to dismiss Chirnside’s suggestion to award Fay a shareholding in Rattray.13 Consequently, the Court sought recourse to what it described as the third traditional option for equitable relief, equitable damages. The Court held that such relief could be given in lieu of account of profits.14 The starting point for the assessment of equitable damages in this situation was held to be what Fay had lost as a result of being excluded from the joint venture.15 The equitable damage assessment was to be a “fair and appropriate surrogate for an account of profits”.16 In determining the extent of that loss in monetary terms, William Yong J determined the value of the project, based on a capitalisation of the rental stream. From this he

subtracted the costs of putting it together to find a net value of the potential profits of $1,290,000. His Honour applied an allowance for Chirnside’s efforts ($300,000) and assessed the overall assessment of Fay’s entitlements at 50% of the venture, resulting in a remedy of $495,000. The exercise was undertaken as at 1 April 2003, because accounts for Rattray were available as at 31 March 2003.

B. The Court of Appeal
Chirnside appealed against the finding of a joint venture with fiduciary obligations, while Fay appealed against the findings on quantum. The Court dealt with the liability and remedy issues in two separate judgments. The reason for this approach was that the Court considered that the approach to remedy advanced and argued by the parties and used by the High Court was incorrect, and that an approach on the basis of loss of chance was appropriate.

12 13

Para 14. Para 16-18. 14 Para 15, by reference to Aquaculture Corporation v New Zealand Green Mussel Co Ltd [1990] 3 NZLR 299 for the availability of equitable compensation and Fraser Edmiston Pty Ltd v AGT (Q) Pty Ltd [1988] 2 Qd R 1 for the authority to assess damages in lieu of account of profits. 15 Para 20. 16 Para 78.

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1 Liability
Liability issues were restricted to the question whether fiduciary obligations had correctly been found by the High Court.17 The other claims, under partnership and the Fair Trading Act were no longer pursued at this level. It must also be noted that Chirnside had initially also appealed the High Court finding that the suggested remedy based on giving Fay a shareholding in Rattray was inappropriate or impractical. This appeal was (perhaps unfortunately) not pursued in the Court of Appeal. Although the Court accepted that there was no legal concept of “joint venture” it held that it was open to the High Court to find that a relationship existed that gave rise to fiduciary obligations. The Court (quite traditionally) held that such obligations can arise in various circumstances that go beyond the “recognised categories”. The basis was the existence of a relationship of mutual trust and confidence, giving rise to an obligation of loyalty.18 Although the Court conceded that the High Court judgment was somewhat “thin” on discussing the principles involved, it concluded that the High Court judge had sufficiently put his mind to the question to answer it conclusively. Given that such a relationship had existed, and that each party had contributed to the joint venture, neither party could “hijack” the incipient transaction without good faith efforts to come to reasonable terms. Fay had therefore lost an opportunity to come to satisfactory terms. Equitable

compensation was considered to be different from common law damage assessment in that is discretionary in nature, albeit that it remains truly compensatory. The task of the Court was to compensate for real loss or detriment, in this case the value of the loss to participate on satisfactory terms. The Court of Appeal considered that the argument in the High Court had strayed from that path and come too close to an overall contractual expectancy assessment for the completed project. The Court therefore deferred a

decision on quantum to give the parties the opportunity to come to a settlement or revise their argument. In order to aid that exercise the Court provided some “observations” as to the principles that would guide its ultimate determination:19

17

Chirnside v Fay [2006] NZSC 68; [6 September 2006] Supreme Court, Elias CJ, Gault, Keith, Blanchard and Tipping JJ. 18 Paras 50, 52, 58. The Court applied Arklow Investments Ltd v McLean [2002] 2 NZLR 1 (PC) and Bristol and West Building Society v Mothew [1998] Ch 1; [1996] 4 All ER 698. 19 Para 76.

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• • • •

Would the parties have come to terms, Would Fay have achieved a 50% interest, Was it legitimate to make an allowance for additional work by Chirnside, and if so, what would be an appropriate amount? Should Fay have interest, on what basis, and from what date?

2 Remedy
As the parties had not been able to reach a settlement, submissions on quantum had been made. In its separate judgment the Court addressed the remedy issue.20 For Fay it had been argued that an account of profit would be the appropriate remedy, not the loss of chance approach as suggested by the Court. The Court deferred to revisit this argument,21 and continued on the path it had set out in its liability judgment. The Court considered that, given the “basket of remedies”, available in New Zealand following Aquaculture Corporation v New Zealand Green Mussel Co Ltd , there was no reason why such an approach would not apply where the underlying liability was based in equity, rather than common law.22 In that context, this approach should also be available for a fiduciary claim, especially where the particular opportunity had not yet ripened into an articulated agreement.23 The Court considered the problems that arise in loss of chance assessment, especially the conceptual problem of an “all or nothing” approach when coupled with the civil standard of proof, as opposed to an appropriation of chance starting from the prospect of a favourable outcome. Benton v Miller and Poulgrain
24

was used as authority for the

Court’s preference for the latter approach, a view that was strengthened by the fact that equitable, and therefore discretionary, compensation was at issue. On the evidence, the Court considered that it was very likely that the parties would have come to some agreement. The Court found however, that the “allowance” for Chirnside ($300,000) as applied by the High Court was “overly generous” and adjusted this to $100,000, without providing much background for that finding. The argument raised by Fay about the vacant space issue (which was not allowed for by the High Court) was not considered
20

Chirnside v Fay (No2) [2005] 3 NZLR 689; [2006] PNLR 7; [29 June 2005] Court of Appeal, Anderson P McGrath and Hammond JJ, CA34/03. 21 Para 13. 22 Para 16. 23 Para 17. 24 Benton v Miller and Poulgrain [2005] 1 NZLR 66.

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given the “overall approach” to the assessment, and the profit determination of the High Court was adopted. The Court considered the question whether Fay would have been a 50% partner, and thought that unlikely given the substantially different input from the parties. Taking a broad approach, and not wishing to be “parsimonious”, the Court considered a 25% profit share for Fay reasonable, which accounted to $287,500. Interest would be allowed, and the date used by the High Court was adopted.

C. The Supreme Court
Parties appealed and cross appealed. Additionally (and perhaps surprisingly), the Supreme Court allowed argument on the “vacant space” issue and was prepared to determine that matter, rather than returning it to the High Court. The central judgment is that of Blanchard and Tipping JJ, while Elias CJ provided a separate judgment reaching different conclusions as to remedy, and finding liability via a more direct route than Blanchard and Tipping JJ. Keith J concurred with Blanchard and Tipping JJ, but

favoured the liability approach by Elias CJ. Gault J concurred with Blanchard and Tipping JJ, but preferred a more direct route to quantify the remedy. The various approaches can be set out as follows:

1 Liability
(a) Elias CJ (Keith J concurring) Her Honour held that the liability issue was to be determined by considering whether parties to a joint venture owe each other fiduciary duties, and what remedy would be appropriate for a breach. She starts her judgment by concluding that the courts below concurred on the finding that there was a joint venture, and that that joint venture was not simply in prospect, but that a joint venture was actually in existence. She considered that such a finding was “unassailable”.25 As a result, the parties’ relationship was “inherently fiduciary within the scope of the venture”.26 Once arrived at that point, her Honour considered the obligation of loyalty, and expressed that neither party was permitted to place itself in a position of conflict with
25 26

Paras 6 and 8. Para 13.

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the venture. She then states that appropriation of the venture by one party is “as fundamental a breach of the fiduciary duty as can be imagined”.27 (b) Blanchard and Tipping JJ (Gault J concurring, judgment by Tipping J) On the nature of the relationship, Tipping J referred to what he termed an inconsistency in the Court of Appeal judgment (which found that there was no joint venture agreement entered into) but that this not prevented the existence of fiduciary elements. Tipping J considered that the Court of Appeal may have meant written agreement, and stated that the absence of a written agreement does not preclude the existence of a joint venture.28 When considering the fiduciary character of the parties’ relationship, Tipping J states:29 There is a strong case for saying that most joint venture relationships can properly be regarded as being inherently fiduciary because of the analogy with partnership. The relationship between partners is one which has traditionally been regarded as a classic example of a fiduciary relationship in that the parties owe to each other duties of loyalty and good faith; and they must, in all matters relevant to the activities of the partnership, put the interests of the partnership ahead of their own personal interests. The second situation in which a relationship will be classed as fiduciary depends not on the inherent nature of the relationship but upon an examination of whether its particular aspects justify it being so classified. No single formula or test has received universal acceptance in deciding whether a relationship outside the recognised categories is such that the parties owe each other obligations of a fiduciary kind. After considering a number of cases,30 Tipping J concluded that fiduciary relationships, whether inherent or particular are marked by the entitlement (rendered in Arklow Investments Ltd v McLean as a legitimate expectation) of one party to place trust and confidence in the other. His honour expressly dismissed Chirnside’s argument that such entitlement must be accepted (i.e. is of a contractual nature) and emphasised that a fiduciary duty is imposed as a result of the relationship, inherent or particular. In this case the courts below had been undoubtedly right in finding that fiduciary duties were
27 28

Para 15 and 16. Para 70. 29 Para 74 and 75. 30 Day v Mead [1987] 2 NZLR 443 (CA); New Zealand Netherland Society: "Oranje" Inc v Kuys [1973] 2 NZLR 163; Estate Realties Ltd v Wignall [1992] 2 NZLR 615; Arklow Investments Ltd v McLean [1998] 3 NZLR 680 (CA); Bristol and West Building Society v Mothew [1998] Ch 1; [1996] 4 All ER 698.

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owed between the parties, which was supported by the analogy to partnership.31 His Honour makes further observations in relation to joint ventures generally, stating that: 32 A joint venture comes into existence “once the parties have proceeded to the point where, pursuant to their arrangement or understanding, they are depending on each other to make progress towards the common objective. Each party is then proceeding on the basis that he or she is acting in the interests of all or both parties involved in the arrangement or understanding. A relationship of trust and confidence thereby arises; each party is entitled to expect from the others loyalty to the joint cause, loose as the formalities of the joint venture may still be. The resulting fiduciary relationship is not one from which a party is unable to withdraw, albeit withdrawal will usually require appropriate arrangements to be made in consideration of the severance of the joint interests and the release of the parties from their duties of loyalty to each other. Because there is, as yet, no contract between the joint venture parties, each will ordinarily be free to withdraw, on giving the other notice to that effect. On the giving of that notice duties of loyalty for the future will come to an end but confidentiality obligations may remain; and any assets, tangible or intangible, held on behalf of the joint venture will still usually be held on trust for both the erstwhile joint venturers. Appropriate steps will be necessary to agree, or obtain some external resolution as to how those assets are to be dealt with. There is, in a general sense, some analogy with the steps necessary when a formal partnership is dissolved.

2 Remedy
(a) Elias CJ Her Honour’s main point in relation to remedy was whether Chirnside should be allowed a compensation for his additional efforts. She concurred with the actual quantum

assessment of Blanchard and Tipping JJ. Her dissent with the other members of the Court involved her holding that, as a principle, there should not be an allowance for Chirnside. She expressed the view that both the High Court and the Court of Appeal were wrong to approach remedy from a compensation perspective, and held that an account of profit was the only appropriate remedy. Her Honour traversed the case law on breach of fiduciary duties, focussing on the issue of allowances awarded to trustees. She was of the opinion that the allowances arrived in the courts below were not substantiated and incorrect in principle. She considered that Chirnside’s work was contemplated to be
31 32

Paras 88-90. Para 91 and 92.

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his consideration to participate in the joint venture, and that it would therefore be inequitable to award compensation for it.33 She does however find that Chirnside was entitled to 50% of the profits by antecedent agreement, but not to any recompense for additional effort which he might have obtained by agreement if he would have been wholly loyal.34 (b) Blanchard and Tipping JJ (Keith J concurring, judgment by Tipping J) Tipping J concluded that the Court of Appeal had erred in its “loss of chance” approach, because Fay had not lost the opportunity to be involved in the joint venture, he was already part of it. His Honour revisited the allowance issue, and found that the Court of Appeal’s adjustment had been poorly substantiated. After re-considering some of the facts, the submissions made, and relevant case law, he fixed the allowance at $200,000, which was held to in fact amount to $100,000, given Chirnsides entitlement to a halfshare of the profits. On the vacant space issue, Tipping J found that an adjustment of the profit assessment was warranted and proceeded to calculate this adjustment, eventually finding a potential profit in the project of $1,900,000 (some $600,000 higher than the High Court findings). After subtracting the adjusted allowance, Fay’s share was

calculated, and awarded at $850,000, plus interest from the date assessed by the High Court. (c) Gault J Gault J concurred with the remedy findings of Blanchard and Tipping JJ, but would have upheld the allowance as found by the High Court (i.e. $300,000). This was based on the parties “antecedent profit sharing arrangements”. His Honour noted that Fay had

accepted that there would not necessarily have been an equal participation, and that Chirnside would have the benefit of an adjustment for his greater efforts, a substantial allowance was appropriate, which was not a matter of discretion, but a quantification on the basis of evidence.35

33 34

Para 46. Para 48. 35 Para 54.

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IV THE FIDUCIARY PRINCIPLE
Before commenting on the Chirnside v Fay judgments it is helpful to set out the principles that apply as they may be found in prior case law and academic writing. The structure of what follows about the fiduciary principle is based on Professor Finn’s essay36 (which was not referred to in any of the judgments).

A. Equitable standards
Fiduciary law is concerned with imposing standards of acceptable conduct on one party to a relationship for the benefit of the other where the one has a responsibility for the preservation of the other’s interests. It does this by proscribing what the party under the obligation can do with the possibilities its position provides. The standards that are thus set will vary between different relationships, and will reflect how a given society wishes to regulate the conduct of persons in their voluntary and consensual relationships with others. Finn proposes that in the entire spectrum of possible standards, a hierarchy of three dominant shades can be discerned,” the unconsionability standard”, “the good faith standard” and the “fiduciary standard”. These standards proceed from different premises. The unconsionability standard prevents excessive self interest and exploitation, often in situations where one party is in a dominant position in the relationship. The good faith standard requires positive recognition of the other party’s legitimate interests. Its domain is contract law37 and dealings between more or less equal parties, but where one is in a (temporary) position of having better information or an opportunity to unfairly prejudice the other’s interests. The fiduciary standard enjoins one party to act in the interest of the other “to act selflessly and with undivided loyalty”. The purpose of these standards is to answer two questions:38
36

37

38

Paul D Finn "The Fiduciary Principle" in Youdan (ed.), Equity, Fiduciaries and Trusts. (Carswell, Toronto, 1989). Butler seems to agree with that approach, see Andrew S Butler Equity and Trusts in New Zealand (Thomson Brookers, Wellington, 2003) at 36.4.1. Paul D Finn "The Fiduciary Principle" in Youdan (ed.), Equity, Fiduciaries and Trusts. (Carswell, Toronto, 1989), at 27, and Gerard M D Bean Fiduciary Obligations and Joint Ventures (Clarendon Press, Oxford, 1995) chapter 6.

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• •

To what extent should one party’s ability to pursue his own ends be circumscribed because of the circumstances of the relationship with the other? To what extent should that other’s interests be protected because of that relationship?

In the case of the unconsionability and the good faith standard, these questions revolve around mediation between the interests of the parties. However, where a fiduciary standard is required the emphasis shifts dramatically; its purpose is to secure the paramountcy of one side’s interests over those of the other or (as in partnership or joint venture situations) the paramountcy of joint interests over the several interests of the participants. The fiduciary is not allowed to use its position other than to serve the interests of its beneficiary, unless authorised by prior consent. The breach of these standards gives rise to different remedies. There used to be a sharp distinction between the remedies available for breach. Unconsionable conduct and

failure to act in good faith attracted the strict regimes of contractual or tortious remedies, now to some extent modified by equitable principles.39 Breach of a fiduciary obligation, however, exposed the wrongdoer to the full force of discretionary equitable remedies by default. It promised the disgruntled beneficiary the prospect of a flexible and often bountiful remedy system. Why would a plaintiff bother to prove negligence and damages or establish a contract and his reasonable expectations and argue that an approach to equity is appropriate, if direct recourse may be had to a fiduciary system that is without strict guidelines in method and where it is questionable if issues of causation, foreseeability, remoteness, mitigation, and contributory responsibility have any relevance? The popularity of bringing fiduciary claims is easily explained by this

remedial advantage. As a result, the use of the fiduciary principle by the courts has the potential to provide substantial inroads into the well established principles of contractual and tortious obligations and the methods by which these are established. It is important therefore that clear principles guide the determination of the applicable standard of conduct. A possible test may be expressed in three questions:40 • What are the nature, purpose and progress of the actual relationship between the parties particularly as manifest in their dealings inter se?

39 40

See below, under remedies. Paul D Finn "The Fiduciary Principle" in Youdan (ed.), Equity, Fiduciaries and Trusts. (Carswell, Toronto, 1989) at 5.

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What, given the circumstances of the relationship, is the one party entitled to reasonably expect (generally or in the specific circumstances) of the other in or in virtue of the relationship: that he will act in his own interests; that he will have regards to the former’s interests; or that he will act in the former’s interests? Are there any independent reasons in public policy which, of themselves, call for the regulation of the conduct of the one party, or which would justify according a significant primacy to the expectation of the other?

A later chapter will evaluate to what extent the courts in Chirnside v Fay have used these type of criteria to appraise the fact situation. An additional question seems relevant also, which involves the determination which party (or collaborative interest) in a fact scenario ought to assume or be placed in the roles of fiduciary and beneficiary. This additional question is particularly apt where the fiduciary duty arises in situations where there are more than two parties, or where a joint interest is deserving of protection.

B. Fiduciary relationships
Having thus established a system of standards of conduct between parties, it must be seen how these can be applied to the actors in actual relationships. As an example: a

contractual relationship by its nature requires parties to act to advance specified interests of the other, but this is governed by the contractual concept of consideration. Similarly, tort law imposes obligations to avoid impeding on others’ interests, and can occasionally lead to positive obligations to act in another’s interest. To say however that these are fiduciary obligations would be taking the matter too far. Unconsionability and good faith are the highest standards of conduct that can have a place here, although fiduciary obligations can arise in these circumstances, just as contractual or tortious obligations can arise in fiduciary relationships. The question remains in what circumstances a

relationship goes beyond what may be required by tort or contract, and enters the fiduciary realm, where one party must act in the other’s or their joint interests, to the exclusion (or even the detriment) of his own several interests. Important in that

assessment is whether the position and responsibilities of a fiduciary arise because they have been explicitly accepted, or whether they arise out of the factual circumstances (i.e. are imposed).

16

The archetype fiduciary relationship is the trustee-beneficiary construct, to which over time a number of well-defined relationships have been added, although the courts never fail to point out that these categories are not closed.41 Trust and confidence are said to be the constituting elements of these relationships. From a legal perspective, the ‘trust archetype’ is characterised by the existence of property held by the trustee for the beneficiary, coupled with an obligation to promote the interests of the beneficiary in dealing with that property. Although this concept may be easy to comprehend in the archetypal circumstances of the 19th century orphan and its benefactor, it is more difficult to grasp its application to the dealings between two independently wealthy and sophisticated businessmen, as in Chirnside v Fay. This problem deepens when the traditional concept of “property” is replaced by its less tangible manifestations such as “product goodwill”, “market position“, “confidential information” or indeed a “business opportunity” or “commercial plan”. Another problem arises where the relationship itself does not disclose an obvious purpose of furthering one’s interest over the other’s. Trusts, directorships and agencies are examples of relationships with a purpose that falls within the obviously fiduciary category with one parties’ interests prevailing over the other’s, while partnerships are a clear example of relationships with the purpose of joint interests superseding the several interests of the partners. In the “hard basket” one finds

collaborative enterprises, such as unincorporated and non-partnership joint ventures, distributorships, franchises etc, where the scope of the obligations between consensual contracting parties inter se are less clearly proscribed. This relationship-purpose

approach is further complicated when the legal characterisation of a relationship differs from the explicit terms used by the participants to describe it. What is called a joint venture may in legal fact be a partnership, what is termed a franchise could well be an occurrence of agency. The issue is further complicated in situations where the parties themselves have failed to properly arrange or even describe their intended relationship. This brings in focus the issue of the de-facto fiduciary relationship, i.e. the situation where parties are found on the facts to have fiduciary obligations by reason of the characteristics of their relationship, or by their conduct in relation to it. The courts’ preparedness to find “abuses of confidence” or “breaches of loyalty” in these situations
41

See for example Cooke J in Coleman v Myers [1977] 2 NZLR 225 at 332.

17

demarcates the outer limits of fiduciary law in a given jurisdiction.

The question

becomes one of public policy. It requires an elaboration on the factual circumstances in a relationship that were found to warrant one party’s entitlement to have its interests furthered not only to the exclusion of the other’s interests, but also by the other. Finn describes a sliding scale of circumstances that could provide guidance for finding the point where “ordinary” (i.e. common law) duties transcend into this strict fiduciary environment.42 It is not enough that one party is in a position of ascendancy. This is the prerequisite of the unconsionability standard. It is also not enough that one party has the capacity to influence the other; that is the normal environment of contractual dealings, where representations are made and information is supplied. It is not enough that one party is vulnerable, or that a degree of trust and confidence is present, as this is also common in contractual situations, where one party relies on the skill, integrity and fairness of the other. It is not enough that there is reliance or dependency; such is the domain of contractual remedies and standards of good faith. All of the above may be present without there being any fiduciary aspects to the relationship.43 Consumer protection provides an example of ways to ascertain proper conduct in these circumstances. What must be shown in order to traverse into fiducial territory is that one party was entitled to expect that the other will act in his interests, in and for the purpose of the relationship. Ascendancy, influence, vulnerability, trust, confidence or dependence

doubtless will be of importance of making this out, but they will be important only to the extent that they evidence a relationship suggesting that entitlement. In the New Zealand context, the situations in Coleman v Myers exemplify the difference. The first case imposed fiduciary obligations on directors of a family company buying out shareholders while making various representations to induce their counterparts to these
42

44

and Arklow Investments Ltd v McLean

45

Paul D Finn "The Fiduciary Principle" in Youdan (ed.), Equity, Fiduciaries and Trusts. (Carswell, Toronto, 1989), at 46. 43 Compare this with the ‘indicia of fiduciary relationships as formulated by Wilson J in Frame v. Smith [1987] 2 S.C.R. 99, and later adopted in LAC Minerals Ltd v International Corona resources Ltd (1989) 61 DLR (4th) 14 (SCC) and M v M 96 DLR (4th) 289; [1992] 3 SCR 6. 44 Coleman v Myers [1977] 2 NZLR 225. 45 Arklow Investments Ltd v McLean [2002] 2 NZLR 1 (PC).

18

transactions. The fiduciary obligation arose out of the relative position of the parties, the directors’ detailed inside knowledge, family aspects of the relationships, and the way the process was conducted. The second case involved a relationship between a prospective investor and a financial intermediary that was alleged to have eventually used the information supplied to it by the plaintiff to come to an arrangement with another party. The Privy Council, in dismissing the appeal from the Court of Appeal decision that no fiduciary obligations had arisen, adopted the view from Millet LJ in Bristol and West Building Society v Mothew 46 that: A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation is one of loyalty. (Author’s emphasis) In that context, Millet LJ referred to Professor Finn’s earlier work on fiduciary obligations.47 It must be noted that Finn himself no longer supports this definition as being of general application,48 but states that the fiduciary duty is closer to tort than to contract; it is concerned with an imposed,49 and not with an accepted obligation: “A person will be in a fiduciary relationship with another when and insofar as that other is entitled to expect that he will act in that other’s or in their joint interest to the exclusion of his own several interest.” This definition encloses the fiduciary relationships that have a clear aspect of acceptance, such as commercial arrangements that involve a fiduciary component, but also provides for situations where the fiduciary obligation arises in fact. Finn accepts that his definition is as broad as that of the tort of negligence, and concludes that the fiduciary principle may well be part of a family of doctrines, founded on a common principle and making available a range of behavioural standards of varying intensity.

46

Bristol and West Building Society v Mothew [1998] Ch 1; [1996] 4 All ER 698. This case also feautures with some prominence in the Supreme Court decision under review. 47 Paul D Finn Fiduciary Obligations (Law Book Co., Sydney, 1977) at 2. 48 That was developed by Professor Austin Scott, see Paul D Finn "The Fiduciary Principle" in Youdan (ed.), Equity, Fiduciaries and Trusts. (Carswell, Toronto, 1989), at 54, and see Gerard M D Bean Fiduciary Obligations and Joint Ventures (Clarendon Press, Oxford, 1995) at 120. 49 See in that respect also M v M 96 DLR (4th) 289; [1992] 3 SCR 6 at para 73.

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C. Remedies for breach of fiduciary duties
Although there may be a family of doctrines and a sliding scale of standards of behaviour, the structure of the system skews when the remedial consequences are taken into account. Findings of breach of unconsionability or good faith standards are mostly constrained within the traditional ambit of contract and tort law, both in method and remedy. The straying fiduciary, however, finds an altogether mightier adversary on its path. The fiduciary is confronted with the absolute discretion of the court and is hindered in its defence by the absence of comprehensive and structured case law, the absence of principles that guide quantification of remedy, and the absence of ample affirmative defence armoury. Additionally, because of the property character of some equitable remedies, there may well be severe consequences for third parties, such as lenders, who are not involved in any breach of duties. Too broad an application of fiduciary principles into commercial dealings can create much uncertainty, or as Lord Browne Wilkinson put it:50 The zeal of the Court in seeking to do justice between the parties in a particular case before them must not blind it to the fact that the decision in the case will be a binding authority applying to other cases. The Court will be establishing the principles applicable in other fact situations. If the law is established in a way which can give rise to commercial uncertainty and the possibility of injustice to third parties, great care should be taken before recognising such a new principle. It is for this reason that I view with concern the “reach me down a fiduciary” syndrome and approach with cautio[n] attempts to spell a trust out of informal dealings. In effect, contemporary fiduciary law may well be driven substantially by remedial opportunism, which would explain the somewhat confused state of affairs that besets it. Finn suggested that this could in fact be remedied by making some of the equitable remedies available for breaches of the “lower standards”, such as a damages claim for unconsionability, or a constructive trust to sanction commercial misconduct in good faith situations.51 A movement in this direction is underway, although it is not

uncontroversial.
50

Extra judicially, in a 1996 law conference address, as quoted in Andrew S Butler Equity and Trusts in New Zealand (Thomson Brookers, Wellington, 2003) at 36.3.4. 51 Finn refers to developments in British Columbia and the suggestions of Deane J in the Hospital Products case. See Paul D Finn "The Fiduciary Principle" in Youdan (ed.), Equity, Fiduciaries and Trusts. (Carswell, Toronto, 1989), at 56.

20

In Canson Enterprises Ltd v Boughton & Co La Forest J suggested:52 The truth is that barring different policy considerations underlying one action or the other, I see no reason why the same basic claim, whether framed in terms of a common law action or an equitable remedy, should give rise to different levels of redress. Only when there are different policy objectives should equity engage in its well-known flexibility to achieve a different and fairer result. The foundation of the obligation sought to be enforced, Somers J. notes, is "the trust or confidence reposed by one and accepted by the other or the assumption to act for the one by that other." That being so, it would be odd if a different result followed depending solely on the manner in which one framed an identical claim. What is required is a measure of rationalization. In New Zealand, Aquaculture Corporation v New Zealand Green Mussel Co Ltd 53 is the seminal case in this respect. It is necessary to describe briefly the equitable remedies that were at issue in Chirnside v Fay, and discuss this “merger of equitable and common law remedies” in that context.

1 Equitable damages or compensation
Although damages used to be the exclusive province of the common law, the Judicature Acts removed that distinction,54 but equitable damages and compensation only recently developed as a form of equitable relief, in addition to its traditional remedies that had more of a restitutionary character:55 The Court of Chancery never entertained a suit for damages occasioned by fraudulent conduct or for breach of trust. The suit was always for an equitable debt or liability in the nature of debt. It was a suit for the restitution of the actual money or thing, or value of the thing, of which the cheated party had been cheated.

52

Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534; 85 DLR (4th) 129 at para 47 and 53, and further quoting Somers J in Day v Mead [1987] 2 NZLR 443 (CA). 53 Aquaculture Corporation v New Zealand Green Mussel Co Ltd [1990] 3 NZLR 299. 54 Although it is a source of heated debate whether the merger of jurisdictions necessarily involves a merger of remedies and judicial method. 55 James and Baggalay LJJ in Ex parte Adamson (1878), 8 Ch. D. 807 at 819 (C.A.), as quoted in Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534; 85 DLR (4th) 129, at para 40.

21

It has been said that in New Zealand’s law of civil obligations, there is underway a movement to greater remedial flexibility.56 That conclusion focuses on the place of equitable damages in cases where other equitable remedies are less appropriate due to the particular fact situation.57 The fundamental difference between equitable

damages/compensation and other equitable remedies such as an account of profit, is the remedial approach. Damages and compensation focus on the plaintiff’s loss, while account is aimed at stripping the defendant from the gains obtained by its breach.58 This explains that a plaintiff will normally need to make an election, and cannot pursue both remedies. A helpful description was provided by McLaughlin J:59 In summary, compensation is an equitable monetary remedy which is available when the equitable remedies of restitution and account are not appropriate. By analogy with restitution, it attempts to restore to the plaintiff what has been lost as a result of the breach, i.e., the plaintiff's lost opportunity. The plaintiff's actual loss as a consequence of the breach is to be assessed with the full benefit of hindsight. Foreseeability is not a concern in assessing compensation, but it is essential that the losses made good are only those which, on a common sense view of causation, were caused by the breach. The plaintiff will not be required to mitigate, as the term is used in law, but losses resulting from clearly unreasonable behaviour on the part of the plaintiff will be adjudged to flow from that behaviour, and not from the breach. Where the trustee's breach permits the wrongful or negligent acts of third parties, thus establishing a direct link between the breach and the loss, the resulting loss will be recoverable. Where there is no such link, the loss must be recovered from the third parties. Although arising from breach of fiduciary duties, equitable damages/compensation therefore take on much of the common law characteristics and additional issues, such as causation and foreseeability arise. These will be discussed below.

56

Charles Rickett and Tim Gardner "Compensating for Loss in Equity; the Evolution of a Remedy" (1994) 24 VUWLR 19 . 57 Such as Coleman v Myers [1977] 2 NZLR 225, Day v Mead [1987] 2 NZLR 443 (CA) and Mout v Clark Boyce [1992] 2 NZLR 559 in the case of fiduciary breaches, and Aquaculture Corporation v New Zealand Green Mussel Co Ltd [1990] 3 NZLR 299 in the case of breach of confidence. 58 The assumption in civil litigation is of course that any such gains to be stripped of the defendant will then revert to the plaintiff, but it must be noted that there really is no principled basis to do so. If a public policy argument is used to support the availability of such a remedy, it could be argued that the proceeds of the action should also become available to the public. This argument is outside the scope of this paper and will not be pursued. 59 Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534; 85 DLR (4th) 129, at para 84.

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2 Accounting for profits
The principle underlying this remedy is that the defendant wrongdoer is not entitled to retain the ill-gotten gains.60 This is based on the concept that a fiduciary is not allowed to make a profit out of its trust, which in turn results from the requirement that a trustee should not come into a position where its interests conflict with those of the beneficiary. That background explains why informed, prior consent can absolve the trustee, and that acquiescence or laches can be used as a defence. Equity is strict in applying these principles, to the extent that it is immaterial whether the beneficiary has actually sustained a loss, may have even obtained a profit as well, or would not have been able to make the profit independently. Neither is it relevant if the trustee acted bona fides. An account for profits normally requires three steps: the determination of the actual profit, an apportionment to arrive at the profits attributable to the wrongful conduct, and allowances for the defendant’s time, trouble and expertise. The courts have, however, demonstrated considerable flexibility in making this determination, and have calculated what can only be termed a measure of damages for the plaintiff’s expected profits rather than actual profits made by the defendant, where the fiduciary breach had prevented the plaintiff from making its profits.61 It is suggested that such an approach comes very close to, or is in fact, an assessment of a loss of chance, regardless of it being formulated differently.

3 Other aspects of equitable remedies
It must be noted that as a result of their different heritage, equitable and common law remedies have different characteristics. The underlying principles are different in the sense that common law actions are bound by much stricter rules and guidelines, while equitable principles are framed in broad maxims, such as “he who seeks equity must do equity” and “one must come to equity with clean hands”. Despite the Judicature Acts and numerous judicial observations that the “two streams running in the same channel are now truly mingled”,62 it is obvious that differences remain and that litigants are actively
60 61

Andrew S Butler Equity and Trusts in New Zealand (Thomson Brookers, Wellington, 2003) at 28.1.1. For example Aquaculture Corporation v New Zealand Green Mussel Co Ltd [1990] 3 NZLR 299. 62 To paraphrase the “fluvial metaphor” used by Lord Diplock in United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 104 (HL) at 924-25.

23

seeking to exploit those in their favour. This is not restricted to the remedies only, but also to the remedial method. It is therefore relevant to briefly consider some additional aspects, to the extent that they have played a role in the Chirnside v Fay litigation.63 (a) Remoteness, causation, foreseeability and intervening causes In common law assessment these principles act to restrict the scope and extent of the remedy. Their influence in equity is less certain, and it is commonly held that they play a limited role, always subject to the court’s discretion.64 Canadian case law suggests that in that jurisdiction remoteness and causation might apply to equitable claims as well.65 In the Canson case this was brought to the foreground by the fact that the breach of the fiduciary duty and the eventual loss were in no way related. The equitable claim was expressly brought on the basis that it would defeat the common law restrictions imposed by causation and remoteness. The Canadian Supreme Court rejected that attempt, and did so by reference to New Zealand case law that had brought equitable and common law remedies closer together.66 In BNZ v NZ Guardian Trust Co Ltd Tipping J attempted to categorise cases that required varying approaches to the relevance of causation and remoteness.67 • • • In the traditional trust and property based cases there is no relevance; In cases of breach of fiduciary duties policy considerations should dictate the scope of the ‘escape route from liability’; In cases where the fiduciary claims are incidental to breaches of common law duties, the common law principles ought to apply.

In that same case, Gault J sought to link the scope of the fiduciary duty with that at common law, through a remedial connection, by stating that: The issue then is whether the breach of duty by Guardian to act with reasonable diligence is to attract liability on a restitutionary basis by analogy with breaches of trust causing loss to the trust estate or breaches of fiduciary
63

At this point the comment can be made that all legal principles develop from the search for remedy and arrive in the common law domain once principles have been established in the equitable jurisdiction. 64 Andrew S Butler Equity and Trusts in New Zealand (Thomson Brookers, Wellington, 2003) at 29.5.1 cites In re Dawson; United Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd (1966) 84 WN (Pt1) (NSW) 399 for authority on that proposition. 65 Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534; 85 DLR (4th) 129, where a breach of a fiduciary duty by solicitors did not give rise to a remedy that involved damages sustained as a result of subsequent work by a third party. 66 See para’s 40 and 41, referring to Day v Mead [1987] 2 NZLR 443 (CA). 67 BNZ v NZ Guardian Trust Co Ltd [1999] 1 NZLR 664 (CA) at 687-688.

24

duties of loyalty and fidelity. The rationale for a restitutionary approach in those situations is the need to deter breaches of trust and confidence by those in a position to take advantage of the vulnerable by using powers to be exercised solely for their benefit. Where that is not present as where a person, though under some fiduciary obligations, merely fails to exercise reasonable skill and care, there is no reason in principle for the law to treat that person any differently than those who breach duties of care imposed by contract or tort. That the liability arises in equity is no sufficient reason. Surely the stage has been reached in the development of the law where something more substantial than historical origin is needed to justify disparate treatment in the law of those in breach of the obligation to exercise reasonable care. The proper focus ought to be on the scope of the duty in the circumstances, with a consistent approach to compensating for breach. Only where good reasons exist is differentiation warranted. They do exist where breaches of trust dissipate trust property, where there is abuse of fiduciary duties of fidelity and loyalty or where there is dishonesty in the commission of certain intentional torts such as fraudulent misrepresentation. In that context his Honour also referred to Canson Enterprises Ltd v Boughton & Co and Bristol and West Building Society v Mothew .68 It appears that the English, Canadian and New Zealand authorities are of the same view about the necessity of similarities of the breach-remedy connection in common law and equitable situations, especially in the case of “modern equity”.69 (b) Mitigation and the effect of the plaintiff’s actions To an extent, the plaintiff’s actions (or inactions in the case of mitigation), are a special case of remoteness and causation. To be considered is the effect of the plaintiff’s actions on the occurrence and/or quantity of the damages that are sustained. Although typically considered only in common law actions, analogies can be readily drawn to actions framed in equity. That is particularly relevant where the distinction between common law and equitable remedies blurs. Equitable concepts of acquiescence and laches would merge with mitigation and contributory negligence.70 In the Canson case the Canadian Supreme Court held that damages that resulted from the plaintiff’s own choice of contractors could not be recovered from the solicitors that had acted in breach of fiduciary duty in the
68

Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534; 85 DLR (4th) 129, Bristol and West Building Society v Mothew [1998] Ch 1; [1996] 4 All ER 698, at 711. 69 Whether this is consistently applied is of course a different matter, on which the Chirnside v Fay litigation shines some light in the New Zealand context. 70 The New Zealand Court of Appeal decision in Day v Mead [1987] 2 NZLR 443 (CA) is cited in Canson for that proposition.

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course of purchasing the property on which the faulty constructions were erected, even when it was common ground that the plaintiffs would not have purchased that property but for the solicitors’ breach. Four members of the court reached this conclusion by way of a tort analogy, while three found an equitable route by considering “the need for a link between equitable breach and the loss for which compensation is awarded”71. The equitable breach in that context was the “breach of the relevant equitable duty”. This seems to require a breach-liability connection which would allow for the equitable standard distinction as proposed by Finn, although the court did not consider the matter to that level of detail. Apparent is something of a struggle to adopt the traditional fiduciary duties of the property holding trustee to cases of “modern equity”, where the subject of the trust and the relationship between the parties are vastly different from those encountered in the traditional trust relationships. Although it is conceptually more difficult to apply notions of remoteness and causation to an account for profit remedy, it is not impossible. As an example: the plaintiff’s inability to pursue the opportunity that resulted in the profit could be considered under this heading, which would have led to a rather different approach in seminal cases such as Boardman v Phipps .72 Such an approach could potentially avoid the issue of allowances for the efforts of the fiduciary, which always causes problems for the courts. (c) Date of damage assessment Damage assessment for common law breaches are assessed at the time of the breach. Assessment of equitable damages is normally at the time of trial, with the benefit of full hindsight.73 The courts have demonstrated some flexibility in this respect, where the justice of the case so required.74

71

See para 77 of the Canson judgment, per McLachlin J, a view that was later accepted by the House of Lords in Target Holdings Ltd v Redferns (1996) AC 421; [1995] 3 All ER 785 (HL) at 798, and see discussion in Andrew S Butler Equity and Trusts in New Zealand (Thomson Brookers, Wellington, 2003) at 29.6.4. 72 Boardman v Phipps [1967] 2 AC 46; [1966] 3 All ER 721 (HL). 73 Authority for this proposition is based on Canadian law, R v Guerin 2 SCR 335. 74 See New Zealand Land Development v Porter [1992] 2 NZLR 462, which was in essence a breach of contract case, but with an equitable aspect, in that the damages claim was made in lieu of impossible specific performance.

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D. Fiduciary obligations of joint venturers
As Butler
75

points out, joint ventures are one of the most difficult areas in which to

determine the existence of fiduciary obligations. ‘Joint venture’ is a loose term used to describe an unincorporated business association between two or more parties. McGechan J approached the joint venture as being something between a partnership and a mere contractual arrangement:76 I suspect in many cases the pivotal motive has been to endeavour to avoid the creation of a partnership with its possibilities of joint and several unlimited liability. Obviously, to raise a joint venture something more is needed than mere co-ownership or contractual relationship. Butler also highlights the importance of the joint venture agreement, and its effect in regulating what duties, including fiduciary duties, may come into existence. These

contractual duties may be added to by fiduciary principles, but that is not invariably the case, and contractual terms can well reduce the impact of such de-facto fiduciary findings. Bean77 takes a similar approach, but his work focuses on a specific type of joint venture, the joint operating agreement, mostly found in exploration ventures. These are characterised by sophisticated contractual arrangements that seek to precisely regulate the obligations and responsibilities of the co-venturers, especially those of the ‘managing’ or ‘operating’ parties. Characteristically, case law relating to such ventures revolves around interpretation of contractual terms, and fiduciary duties are considered in the light of the bounds such terms set to the scope and extent of the joint venture. Butler suggests that “the New Zealand and Australian courts have preferred to leave the regulation of joint ventures that fall short of partnerships to contract law, as opposed to equity, often under the banner of “leaving parties to set their own terms.”78 Additionally, in considering fiduciary obligations of joint venturers, there is clear difference in approach between precontractual and post contractual fact situations.

75

Andrew S Butler Equity and Trusts in New Zealand (Thomson Brookers, Wellington, 2003) at 14.3.12, and 36.4.1. 76 Commerce Commission v Fletcher Challenge Ltd [1989] 2 NZLR 554, at 615, see further notes in Andrew S Butler Equity and Trusts in New Zealand (Thomson Brookers, Wellington, 2003) at 36.4.1. 77 Gerard M D Bean Fiduciary Obligations and Joint Ventures (Clarendon Press, Oxford, 1995) . 78 Andrew S Butler Equity and Trusts in New Zealand (Thomson Brookers, Wellington, 2003) at 36.4.1. Mike Ross, in Susan Watson, et al. The law of business organisations (Palatine Press, Auckland, 2003) takes a similar approach (chapter 26).

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1 Pre contractual fiduciary obligations
Despite the lack of clear undertakings that regulate the relationship, courts have been prepared to find equitable obligations between parties negotiating towards a joint venture. In Union Dominion Corp Ltd v Brian Pty Ltd
79

the Australian High Court held that

fiduciary duties existed before the actual joint venture agreement was executed. The test was whether parties had agreed to, accepted, or assumed obligations of trust and confidence. The prospective situation in that case was found to be that of a partnership, as the proposed agreement that had been agreed on, contained all the indicia of that legal construct. The fact that the agreement had not been formalised, but that concrete steps had been taken in pursuance of it, made equitable obligations actually more relevant, and in some ways overrode what was agreed to. In LAC Minerals Ltd v International Corona resources Ltd
80

, the Canadian Supreme

Court refused to find fiduciary obligations between prospective joint venturers, but was prepared to award a constructive trust as a remedy, rather than damages, on the basis of well established industry practice in the gold exploration industry. It distinguished Union Dominion Corp Ltd v Brian Pty Ltd on the basis that in that case the parties had reached agreement on all contractual details, while LAC and Corona were still very much in a negotiation stage when one of the parties abused the confidential information it had obtained. In New Zealand the duties of joint venturers have been considered in Marr v Arabco Traders Ltd 81. In that case signed proposals were circulated between the prospective coventurers, a joint venture vehicle in the form of a company was created, and payments were made for share capital. This first joint enterprise was not in dispute, but it was alleged by the plaintiffs that it was later agreed that another company was to be formed, in similar vein. This eventually took place, but to the exclusion of the plaintiffs, although specific arrangements had been made, and confirmed and later affirmed by those involved. This second company, Arabco, succeeded to negotiate profitable export

contracts, based on confidential information obtained from the plaintiffs. Its shares were
79 80

Union Dominion Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1; 60 ALR 741 (HCA). LAC Minerals Ltd v International Corona resources Ltd (1989) 61 DLR (4th) 14 (SCC). 81 Marr v Arabco Traders Ltd [22 May 1987] HC Auckland, Tompkins J,A1195/77; partially reported in (1987) 1 NZBLC 102,732.

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later sold for substantial profit. The fact situation as alleged by the plaintiffs in this case has some similarities with the Chirnside v Fay saga, albeit that in the Marr v Arabco dealings there was much more evidence of clear contractual intentions and agreement between the main parties. The plaintiffs alleged fiduciary obligations, and were awarded a remedy on the basis of their prospective interest in Arabco. Tompkins J relied on Union Dominion Corp Ltd v Brian Pty Ltd in finding fiduciary duties for the main defendant (a Mr Bromily) and in applying a constructive trust based remedy. As a proprietary remedy could not practically be affected, the value of the shares in question was determined based on the price received for them by the main defendant, from the company purchasing them (in knowing receipt). I.e. the valuation was taken at the time of the breach and no accounting for later increases in value of the joint undertaking was applied. The fiduciary duties were based on the concept of acceptance of such duties by Mr Bromily, which was evidenced in the exchange between him and the plaintiffs. This is a crucial distinction with the situation in Chirnside v Fay where this acceptance concept was cause of much argument. Arklow Investments Ltd v McLean is not a joint venture case, although Butler analyses it under that heading.82 The Court of Appeal judgment83 is the most illustrative of the decisions, and was upheld in the Privy Council. Against a dissent by Thomas J, it found that no fiduciary duties arose out of the use of “confidential information” provided by the plaintiff to the defendant investment advisers, who used that information to involve themselves in precisely the transaction that was contemplated by the plaintiff investor.

2 Post contractual fiduciary obligations
Hospital Products Ltd v US Surgical Corp 84is a much cited case for the proposition that courts are generally reluctant to impose fiduciary obligations on parties that have negotiated arms-length commercial agreements. This, and other, cases demonstrate that the concept of equitable obligations lacks clear distinctions between duties arising on the basis of good faith, ‘confidence and reliance’, and confidentiality on the one hand, and fiduciary obligations on the other. The demarcations between contractual good faith
82 83

Andrew S Butler Equity and Trusts in New Zealand (Thomson Brookers, Wellington, 2003) , at 36.4.1. Arklow Investments Ltd v McLean [2002] 2 NZLR 1 (PC). 84 Hospital Products Ltd v US Surgical Corp (1984) 156 CLR 41 (HCA).

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obligations, quasi-tortious breach of confidence, and equitable obligations of a more stringent nature are often blurred. It is generally recognised that the commercial contracts under consideration do not always “tell the whole story”,85 and it is emphasised that the existence of a joint venture construct does not automatically turn contractual duties in fiduciary ones. Nevertheless, contractual terms may be amended by fiduciary obligations.86 In the Hung v Yu87 cases a property development project was at stake, where the plaintiffs had arranged the operational matters, and the defendant was to provide finance. The High Court found a joint venture, although the (detailed and executed) agreements were made up in terms of a partnership. The court referred to Union Dominion Corp Ltd v Brian Pty Ltd in support of the distinction between a joint venture and a partnership.88 Despite this difference it was used to exemplify fiduciary duties arising out of ‘mutual confidence’. Further references were made to Marr v Arabco Traders Ltd , to support the finding of fiduciary duties, but he judgment makes clear that these duties would apply only to whomever would have the management of the joint venture.89 The fiduciary duties were not found to extend to the expectations of the plaintiffs to be involved in that managerial position. In other words, the fiduciary duties in that respect were restricted to the relationship between the individual parties and the joint venture, and not to the parties inter se. Confusingly, later in the judgment, the contractual obligations of the defendant financier are enhanced by the finding of a fiduciary duty owed to the plaintiffs. As far as remedy was concerned, the court found it impossible to order specific performance because of the practical problems in overseeing compliance. The first judgment dealt mainly with liability, and hinted at an account for profit as a remedy. The second judgment provides in its introduction that fiduciary duties to act with “fairness, honesty and good faith” were found, but this finding was defeated by the submissions in the second hearing, which reverted to contractual obligations only. Using Union Dominion Corp Ltd v Brian Pty Ltd and Hospital Products Ltd v US
85

Gemini Personell Ltd v Morgan & Banks Ltd (not reported) [18 December 1998, Laurenson J, HC Auckland, CP113/98. 86 Hung v Yu (No1) (not reported) [9 February 2000] Rodney Hansen J, HC Auckland, CP13/99 and Hung v Yu (No2) (not reported) [12 December 2000] Rodney Hansen J, HC Auckland, CP145/00 and, in the sports arena, News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193 (FCA). 87 See previous footnote. 88 Although in that case the partnership analogy was eventually determinative, while the agreements were in terms of a joint venture. 89 See para 61 of the judgment.

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Surgical Corp as authority, the court stated that fiduciary duties “will be moulded to the character of the relationship”. Rodney Hansen J used the decisions in New Zealand Netherland Society: "Oranje" Inc v Kuys 90 and Waihi Mines Ltd v AUAG Resources Ltd
91

to support the proposition that fiduciary duties may apply to some of the activities of

the relationship, but not to others. He based the test for the existence of fiduciary duties on the principles in Hospital Products (i.e. “acceptance by the fiduciary” and/or “vulnerability of the beneficiary”). Although fiduciary duties were held to be in

existence, in the end no breach of those fiduciary duties was found. Although the defendant could have maximised the returns from the venture, his failure to do so was not considered actionable, and as there was therefore no profit, an account was not required. The plaintiffs were entitled to recoup their investment in money only, as the terms of the contract did not provide for any further expectation losses. The court did not engage in a loss of opportunity analysis, which on the facts might have been arguable.

3 Conclusions on the scope of fiduciary duties of joint venturers
Although some judicial statements and academic texts maintain that fiduciary duties in the joint venture situation apply between the individual parties and the venture, and not between the parties inter se, this principle is not made clear in the case law, and is certainly not consistently applied. This problem is perhaps caused by the fact that a joint venture is not necessarily a separate legal entity and it misses therefore the conceptually clearer situation of the duties between a director and a company. A detailed joint venture agreement assists in demarcating responsibilities and resolves much of that problem. Where this agreement is lacking, or the parties are still negotiating towards it, there is a clear conceptual problem in determining to whom fiduciary duties are owed. The author suggests that the partnership analogy provides little help, because that relationship is aimed at creating fiduciary duties not only between the parties and the “partnership”, but also between the parties inter se. The whole partnership concept is based on that

proposition and in fact purposefully serves to remove the concept of a partnership as a

90 91

New Zealand Netherland Society: "Oranje" Inc v Kuys [1973] 2 NZLR 163. Ibid , Waihi Mines Ltd v AUAG Resources Ltd [1994] 3 NZLR 571 (HC), Waihi Mines Ltd v AUAG Resources Ltd [1994] 3 NZLR 571 (CA).

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separate legal entity. The fiduciary duties arise to balance the (unrestricted) liabilities that the parties accept in respect of each other, within the scope of the partnership. Joint ventures, however, are arrangements that expressly seek to avoid the partnership structure and seek to maintain arms length relationships between the parties, although they intend to have a collaborative enterprise. It is argued that fiduciary duties that arise in a completed joint venture should be considered more in analogy with those of company directors than with those of partnerships. In that context parties would have duties to the joint venture, but not inter se, in analogy with the non existent duties between shareholders in a company. In that argument, fiduciary duties between joint venturers should be restricted to those provided for in the joint venture contract. Any finding of additional fiduciary duties, would point to a relationship that is more akin to a partnership than a joint venture, as was the case in Union Dominion Corp Ltd v Brian Pty Ltd . The pre-contractual joint venture situation should in this argument be considered from the perspective of contractual good faith, or perhaps tortious obligations where professional advisers and/or confidential information are involved, save for situations with clear industry standards, such as LAC Minerals Ltd v International Corona resources Ltd . The different scenarios can perhaps be best illustrated by way of schematic diagrams.

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(a) The company and the incorporated joint venture

DIRECTOR

COMPANY

SHAREHOLDER

SHAREHOLDER

This situation is least problematic. The obligations between the parties involved are regulated through the corporate structure, with statutory provisions for the various obligations that arise, which can be added to or amended by way of contract or company constitution. Implied fiduciary duties only arise between the director and the company and fall within a well defined category. Additional fiduciary duties can only arise by way of contract or when expressly accepted or assumed.92 (b) The partnership

PARTNERSHIP

PARTNER A

PARTNER B

92

With situations such as in Coleman v Myers [1977] 2 NZLR 225 being the exception.

33

In a partnership the parties assume obligations to the partnership and to one another. These obligations are contractual, statutory and fiduciary. The partnership is not a separate legal entity, but consists of the joint undertaking between the parties supported by unrestricted joint and several liabilities, hence the importance of fiduciary obligations in it. The parties do not operate at arm’s length, but may make contractual arrangements to organise matters between them. The partnership is, in effect, the embodiment of their joint personae, for the purpose of their collaborative enterprise. (c) The post contractual joint venture

PARTY A

JOINT VENTURE CONTRACT

PARTY B

In this situation all the obligations between the parties are captured in the joint venture contract. Fiduciary duties may arise, but conceptually these are always between a party and the joint venture, and must be assessed against the background of the joint venture contract, which regulates the scope and extent of the joint venture. In other words, a fiduciary obligation (i.e. to place the other’s interests above one’s own) exists only in relation to the collaborative enterprise. (d) The pre-contractual Joint Venture

PARTY A

INTENDED JOINT VENTURE CONTRACT

PARTY B

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It can readily be seen that this situation is most problematic. As there is no joint venture agreement it is uncertain what the intended scope and extent of the collaborative enterprise is, and it cannot be assessed what the precise interests of that prospective enterprise may be. Determining whether a party has placed itself in a position of conflict with the interests of the joint enterprise is a hypothetical (and conceptually impossible) exercise as that interest cannot be ascertained with precision. As a consequence, an obligation arises to the other party, but it is arguable if that obligation has a fiduciary character. It must depend on the fact situation whether a fiduciary obligation can be found or whether there is a mere duty of good faith to negotiate the terms of the intended joint venture, whether only common law obligations arise (e.g. a breach of confidence) or whether there is no obligation at all. Any such finding must be policy based, i.e. to what extent does a society wish to protect the expectations of parties negotiating towards collaborative enterprises? This then brings us to an analysis of Chirnside v Fay.

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V

CRITICAL ANALYSIS OF THE JUDGMENTS IN CHIRNSIDE V FAY
A. The conceptual structure of joint ventures

The author argues that the courts in this case have failed to recognise -or at least have provided little insight in their reasoning in relation to- the structural differences between partnerships and post- and pre-contractual joint ventures.

The High Court used an analogy with Khan v Miah to find that the parties had proceeded sufficiently to conclude that a joint venture had come into existence and proceeded on that basis. The conceptual difficulty with that approach is that Khan v Miah was a partnership case,93 and focussed on the question whether a partnership comes in existence with the actual start of trading or with the start of the preparations necessary to start trading. There was an agreement between the parties that their venture would be carried out by way of a partnership, and they had in fact agreed on their respective shares in it. Khan v Miah is therefore a difficult authority to use to define the characteristics of a joint venture, because the House does not address that issue at all. Although the House does use the terminology of joint venture and partnership and assesses that the distinction is not relevant, that must certainly be restricted to the particular fact situation that was under consideration, which was expressed and constructed as a partnership. As argued above, a partnership differs from a joint venture in that general fiduciary obligations arise between the parties inter se, while it is argued that this is not the case in a joint venture, where these are restricted by the joint venture agreement. A finding that a joint venture has come into existence would therefore also require further investigation what the terms of that joint venture were. This is very different in a partnership, where those terms arise in law and statutorily unless -and insofar that is allowed- they are varied by agreement. The author argues that the High Court therefore shifted too quickly from the process of finding a joint venture to fiduciary remedies, without considering what the parties may have intended. The author also suggests that finding a joint venture requires a contractual
93

It involved a number of individuals that were engaged in starting a restaurant business.

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analysis, rather than the partnership-in-development analysis that was used in Khan v Miah . This suggestion is supported by the concept that a joint venture is a creature of contract. Even though that contract may be unwritten, it must be found and its terms determined before liability and remedies can be discussed. The High Court failed to do so an seemed to assume that a finding that there was a common enterprise which was sufficiently developed can be translated directly into a joint venture, to which immediately fiduciary duties between the parties attach, which then warrant intervention of the most stringent remedies available in equity.

The author suggests that the Court of Appeal was more accurate in this respect, although it unfortunately did not provide detailed analysis of the principles involved. The Court concluded (in the author’s opinion correctly) that the case involved an evolving joint venture, in which the parties had not yet reached formal agreement. Nevertheless, the Court of Appeal did not interfere with the High Court’s finding that a joint venture was in existence, and supported that by stating that in common law there is no separate legal concept of a “joint venture”, that joint venturers may arrange their collaboration by contract, or that there may be no formal legal relationship at all.94 The Court did not attempt to specify the prerequisites of such a finding, other than a somewhat vague reference to “commercial association”.95 The Court then held that fiduciary obligations may arise for parties negotiating towards a joint venture, and proceeds on that basis. Consequently, the Court arrived at its suggestion to the parties that what was lost was in fact the chance to come to terms on a joint venture agreement. It is suggested that the Court was entirely correct in that conclusion, albeit that it failed to clearly set out the conceptual basis for it, which was unfortunate as it allowed the Supreme Court to dismiss this approach without providing details why the analysis was considered incorrect.

In the Supreme Court, Elias CJ termed the relationship “indistinguishable from a single transaction partnership”. She referred to Union Dominion Corp Ltd v Brian Pty Ltd which also uses the partnership analogy and proceeded on that basis and as a result, she

94 95

Para 42,43. Para 45.

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came to the immediate conclusion that fiduciary obligations arose between the parties inter se, although she referred to the conflict of interest being one between a party and the venture.96 Her Honour did not provide reasons for the assessment that such a partnership would have been on a 50/50 basis, although the evidence suggested that this would have been quite unlikely. The problem with Her Honour’s judgment is that it overlooks the provisos that were made in both the High Court and Court of appeal judgments as to the terms of the joint venture. Although both lower Courts found that a joint venture was in existence, they clearly left room for argument what the terms on which the parties would proceed would have been.97 Gault J drew attention to the difference between obligations to the venture as opposed to those between the parties, i.e. he recognised that obligations between the parties arise through the venture, and would be subject to the terms of a formal contract.98 The transcript of the hearing demonstrates that his Honour was quite clear on that distinction,99 but he unfortunately did not elaborate on it in his judgment and advanced to issues of remedy before developing the point. Tipping J (also writing for Blanchard J) pointed to the Court of Appeal judgment and considered that to be “a little inconsistent” in that it held that there was a joint enterprise, but no joint venture agreement yet entered into. He assumed that the Court of Appeal had meant a written agreement, but stated that that would not preclude there being a joint venture. The author of this essay suggests that the next logical step would have been to elaborate on that issue, and to use a contractual analysis in order to establish whether there was an agreement, despite the lack of writing, and what its terms were. His Honour did not choose that approach, but preferred a partnership analogy, to go to the question whether fiduciary duties had arisen. His Honour described the joint venture as “The parties were working together towards a common goal which they expected would be for their mutual benefit.” The next point is logically whether they had sufficiently moved

96 97

Para 15. Which was the Court of Appeal’s main point, and it was alluded to in para 77 of the High Court’s remedy judgment. 98 Para 52. 99 See page 6 of the transcript where Gault J remarks to Chirnside’s counsel: “Well that’s you keep saying acting in the interest of the beneficiary or the other person. In these horizontal relationships it must be acting the best interest of the joint venture mustn’t it.”

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along a path of implementation to actually find such an enterprise. 100 This resulted in a determination analogous to that in Khan v Miah instead of a contractual analysis. Tipping J touched upon a distinction between duties owed to the partnership and duties between the parties, and appeared to conclude these are the same,101 i.e. a duty owed to the partnership is in the nature of a duty to the partner. By considering that most joint venture relationships can properly be regarded as “inherently fiduciary because of the analogy with partnerships”, the conceptual difference between the two is thereby conflated through the assumed fiduciary character of the relationship. His Honour referred to academic writing in Butler to support that contention,102 but it must be noted that the paragraph quoted discusses fiduciary relationships in partnerships only. In other words, it appears that the argument starts with the finding of fiduciary duties in analogy with a partnership, and then moves to the character of the relationship. With respect, that appears to reverse the appropriate order of the analysis. Tipping J also provided some “general observations” on joint ventures.103 He stated that the essence of a joint venture which is not yet contractual is that it is an arrangement or understanding between parties that they will work together towards achieving a common objective, and that it is fallacious to think there can be no joint venture until all the necessary details have been contractually agreed. His Honour observes: A joint venture will come into being once the parties have proceeded to the point where, pursuant to their arrangement or understanding, they are depending on each other to make progress towards the common objective. Each party is then proceeding on the basis that he or she is acting in the interests of all or both parties involved in the arrangement or understanding. A relationship of trust and confidence thereby arises; each party is entitled to expect from the others loyalty to the joint cause, loose as the formalities of the joint venture may still be. And: The resulting fiduciary relationship is not one from which a party is unable to withdraw, albeit withdrawal will usually require appropriate arrangements to be made in consideration of the severance of the joint interests and the release of the parties from their duties of loyalty to each other. Because there
100 101

Para 70, 71. Para 74. 102 Andrew S Butler Equity and Trusts in New Zealand (Thomson Brookers, Wellington, 2003) at 14.3.6. 103 Para 91-93.

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is, as yet, no contract between the joint venture parties, each will ordinarily be free to withdraw, on giving the other notice to that effect. On the giving of that notice duties of loyalty for the future will come to an end but confidentiality obligations may remain; and any assets, tangible or intangible, held on behalf of the joint venture will still usually be held on trust for both the erstwhile joint venturers. Appropriate steps will be necessary to agree, or obtain some external resolution as to how those assets are to be dealt with. There is, in a general sense, some analogy with the steps necessary when a formal partnership is dissolved. The point, in short, is that joint ventures, like partnerships, can generally be brought to an end by appropriate notice. The previous joint venturers must, however, still act equitably towards each other in the steps necessary to bring the affairs of the joint venture to a conclusion which is fair to all concerned. The further the joint venture has progressed the more complex those obligations may be. Once the venture becomes contractual the contract will normally govern what is to happen on the termination of the venture or the withdrawal of a party from it. In the absence of contractual regulation, equitable principles will supply the solution. Although these remarks are obiter, they may be the basis for a flurry of litigation with plaintiffs claiming to have been working towards common objectives with defendants being accused of breaching resulting fiduciary duties. Distributorships, franchises, multi party tender situations are but some examples that may be brought under this construct. Parties that have missed out in situations of competition can now approach the courts to determine whether there was in fact a common objective and whether they had traversed far enough in its pursuit to be awarded a share of the profits of the other party.

It is the author’s opinion that the courts in Chirnside v Fay have failed to give sufficient consideration what the nature of a joint venture is, and have failed to set some clear restrictions, instead of providing this open ended approach.

B. The use of equitable standards
William Young J referred to Marr v Arabco Traders Ltd for his finding of fiduciary obligations. It has similarities with the Chirnside v Fay fact situation, but the parties in that case had advanced much further in their negotiations, and had agreed on division of shares and on the structure of the company to be set up. The principal defendant (Bromily) had confirmed and affirmed the entitlements of the plaintiffs (i.e. he had

40

acknowledged and accepted a fiduciary position on the evidence).

His Honour’s

statement “each of the parties owing the usual fiduciary obligations to each other” in reliance on Marr v Arabco Traders Ltd appears to take the analogy with that case somewhat out of proportion. That is all the more so, as in that case the fourth defendant (Hazard) was certainly party to the joint venture, but was held not to have accepted fiduciary duties, and none were imposed. In the end, The High Court simply concluded that the (intended) relationship was short of a partnership but was in fact a joint venture (without defining that term) and concluded directly from that proposition that fiduciary duties between the parties had arisen. The Court gave no consideration to a possible differentiation in equitable standards, and directly assumed that the most stringent were applicable.

The Court of Appeal made reference to the confidentiality of the initial calculation exercises that the parties undertook, and concluded that an action for breach of confidence would have been possible if either of the parties had disclosed the financial workings they had prepared together to a third party. That conclusion has aspects of Arklow Investments Ltd v McLean confidence.105 The Court’s crucial point is that although there may not be a joint venture agreement entered into, there may nevertheless have arisen fiduciary obligations.106 The Court thus seemed to accept that a joint venture is a creature of contract, but failed to draw a sharp distinction between the character of the obligations of parties negotiating towards such a contract and the obligations that may arise under it, or inconsequence of it. The Court exemplifies its approach with reference to LAC Minerals Ltd v International Corona resources Ltd and Union Dominion Corp Ltd v Brian Pty Ltd . The problem with that comparison is that the first case concerned parties that were negotiating towards a joint
104

but the court did not elaborate on it. Nor did it

point to different equitable standards that might apply in the case of breach of

104 105

Arklow Investments Ltd v McLean [2002] 2 NZLR 1 (PC). Para 15 of the liability decision Chirnside v Fay [2004] 3 NZLR 637; [29 June 2004] Court of Appeal, Anderson P, McGrath, Hammond JJ, CA34/03. 106 Para 47.

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venture in an industry where that is a well settled construct107 and the decision in that respect was based on custom in that industry. The second case involved parties

negotiating towards what they called a joint venture, while the Court held that it was in fact a partnership, and ruled on that basis, i.e. in line with Khan v Miah . In the end the Court of Appeal held that there can be fiduciary relationships between parties negotiating towards a joint venture, and used Marr v Arabco Traders Ltd as an example. The problems with that reference have been set out above, in that case

fiduciary duties had been accepted, while in this case they are imposed. In order to reach its conclusion, the court referred to the purpose which fiduciary law serves, and thereby links the question to a policy objective.108 After stating that fiduciary law is not concerned with private ordering and mediation between interests of parties, and that that is for contract law, the court quotes Hodgkinson v Simms 109 for the proposition: . . . the question to ask is whether, given all the surrounding circumstances, one party could reasonably have expected that the other party would act in the former’s best interests with respect to the subject matter at issue. Discretion, influence, vulnerability and trust were mentioned as nonexhaustive examples of evidential factors to be considered in making this determination . . . It will be noticed that this question comes very close to the approach as suggested by Professor Finn, as discussed above. The Court considered that “in doctrinal terms, the starting point must always be whether there was a relationship of mutual trust and confidence giving rise to an obligation of loyalty.” The Court then refers to Arklow Investments Ltd v McLean in which Lord Millet’s dictum in Bristol and West Building Society v Mothew is noted with approval. It has been discussed above (in chapter IV) how that standard differs from Professor Finn’s approach. As a result, the Court of Appeal did not expressly appreciate the difference between imposed and accepted fiduciary duties, and equated duties of loyalty with the reasonable entitlement to expect that the fiduciary would place the beneficiary interests above its own. However, when the Court introduced its “loss of chance approach” it considered that what Fay had lost
107

The JOA that is the topic of Bean’s book; Gerard M D Bean Fiduciary Obligations and Joint Ventures (Clarendon Press, Oxford, 1995) . 108 Para 50. 109 Hodgkinson v Simms 919940 117 DLR (4th) 161.

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was not a share of the profit in the venture, but the chance to participate in it. The Court thereby impliedly recognised the distinction between duties to the venture and duties between the parties. The court determined that the chief incidence of the duty of loyalty between the two men (probably as opposed to the duty towards the joint venture), was one of good faith. It is argued that that is another equitable standard. A good faith standard is one that is consistent with a contractual analysis, which is further supported by the Court’s holding that “there would be no presumptive hijacking of the incipient transaction by either man” and “no destruction of their relationship without good faith efforts to come to terms”.110 It is suggested that the Court of appeal clearly recognised the different equitable standards that apply, and appeared to have based these on the distinction between the duties of the parties to the venture and the duties of the parties inter se.

In the Supreme Court, Elias CJ did not discuss the distinction in equitable standards at all, as she proceeded from a partnership analogy, and found that the joint venture was already underway. Gault J proceeded from an obligation of loyalty arising out of the mutual commitments and the resulting duty between the parties not to act against their joint interest in the project. Tipping J traversed case law on the subject, and concluded with Arklow Investments Ltd v McLean and its reference to Lord Millet as also considered in the Court of Appeal. He also referred to Henry J’s statement in Arklow that the concept of a duty of loyalty:111 ….encapsulates a situation where one person is in a relationship with another which gives rise to a legitimate expectation, which equity will recognise, that the fiduciary will not utilise his or her position in such a way which is averse to the interest of the principal. This seems to be of a lower standard (i.e. the mediation of interests standard) than the expectation in Hodgkinson v Simms where the expectation is that the beneficiary will advance the beneficiary’s interests over his own interests. The difference is compounded by ambiguity about the issue to whom these duties are owed. I.e. Chirnside may have had the higher standard of duty to the joint venture, but that does not mean that the same
110 111

Para 58,59. Para 78.

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standard would automatically apply to his duties to Fay. Tipping J rejected Chirnside’s submissions that such stringent duties to Fay ought to have been accepted, i.e. that they should be of a contractual nature, and arrives at the “true principle”112 that “the circumstances must be such that one party is entitled to repose and does repose trust and confidence in the other”, and that “the existence of an agreement or undertaking is but a manifestation of that circumstance.” Tipping J finally supported his conclusions with the partnership case Union Dominion Corp Ltd v Brian Pty Ltd , and referred to M v M 113 for the proposition that fiduciary duties can be imposed, rather than contractually accepted. That latter case concerned a daughter suing her father for breach of fiduciary duties which consisted of a long period of sexual abuse when she was a child. The analogy seems somewhat oblique. Tipping J concluded his discussion on the character of the duties owed by stating that partnership analogy allowed that Fay turned to equity now the parties had not contractually arranged their relationship, and that Chirnside had acted against good conscience. The last remark seems to point to the equitable standard of unconsionability that, it is suggested, is also quite different from the much more onerous fiduciary standard.

In conclusion, the courts in Chirnside v Fay have certainly not created much clarity on the concept of equitable standards. Loyalty, trust and confidence, good faith and even unconsionability are all mixed together and to some extent used interchangeably under the banner of fiduciary obligations. Tests, such as proposed by Finn, and which could lead to a principled approach have obviously not been applied expressly, although the Court of Appeal came quite close, albeit rather impliedly. The author argues that the Court of Appeal judgment is to be preferred when considering the academic and conceptual approach that was set out in chapter IV.

112 113

Para 85. M v M 96 DLR (4th) 289; [1992] 3 SCR 6.

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C. The remedial approaches
In the High Court, once the concept “fiduciary” had entered into the equation the remedial approach started from the most stringent equitable principles to remedy. It seems that His Honour considered that a broad discretionary approach was appropriate, and he continued in that vein, both in assessing the potential value of the project, the allowance for Chirnside, and the 50/50 division which appears to have originated from the Court, rather than from the parties. The choice of his wording and the reference to equitable damages as reflecting the loss associated with the gains made by the defendants was somewhat unfortunate, as the remedy clearly progressed on the basis of accounting for profit, including the “hindsight approach” associated with it. His Honour also

(somewhat confusingly) remarked that “relevant to the current exercise is an assessment of me of the likely terms upon which Messrs Fay and Chirnside would have proceeded with the Harvey Norman project if Mr Chirnside had not excluded Mr Fay from the joint venture.”114 That remark seems to point to a remedy on the basis of loss of chance, connected with liability on the basis of breach of good faith or unconsoniability standards, rather than fiduciary standards. The High Court decision exemplifies the problem of equitable remedies that are not principally based on clear and more or less precise liability findings or a structured remedial approach. It appears that the Court perceived a strong connection between the liability finding, the standard that had been breached and the approach to remedy, in order to do overall justice.

The Court of appeal accepted the liability finding and the apparently compensatory approach to damages, but proceeded on a radically different course, following its analysis of the obligations of the parties and (impliedly) the applicable equitable standards. The approach to the calculation of remedy was of course quite discretionary, but that is inherent to this area of law. The remedy judgment must be seen in the context of the entire case and in that of overall justice between the parties. Although the vacant space issue was again introduced by the plaintiff, the Court deferred to revisit it, again in the light of the overall character of its determination. The adjustment for Chirnside’s efforts
114

Para 77.

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must also be seen in that light. The Court expanded on “loss of chance” principles, after considering that Aquaculture Corporation v New Zealand Green Mussel Co Ltd provided authority for a “basket of remedies” approach, and holding that loss of chance damages would be available in fiduciary claims. In that respect the Court pointed to the conceptual differences between duties towards the venture and duties inter se.115 The Court considered that an “apportionment approach” was appropriate116 and that relevant equitable considerations, such as compensation for Chirnside’s efforts, should come into play. The Court then considered the factual circumstances, and made its discretionary determinations accordingly.

The author concurs with the remedial approach in the Court of Appeal; it is based on a principled finding of liability and progresses from the appropriate starting position. Although some comment could be made on the limited reasoning for adjusting Chirnside’s compensation, this must be seen in the light of the overall remedy; too much attempt at precision is illusory.

The Supreme Court approached remedy entirely from an account of profit perspective, which is not surprising given its strong finding of fiduciary duties and the absence of attention to different equitable standards. It is suggested that the Court fell in the trap of taking a quasi principled approach to remedy, i.e. once it accepted the fiduciary breach there was no limit to the remedy. This was aggravated by the Court’s preparedness to revisit the vacant space issue, which the courts below had refused to consider in detail, given the overall discretion to do justice in the case. Once the Court had taken the principled route, it could not avoid applying that to the vacant space issue as well, ending up with an award that (in the opinion of the author) was clearly out of context with the fact situation. This is all the more so as the remedy was based on the assumption of a 50/50 partnership. Tipping J considered that distribution briefly, but held that the onus was on the defendants to show that anything else was considered between the parties.117
115

Para 17 of the remedy judgment Chirnside v Fay (No2) [2005] 3 NZLR 689; [2006] PNLR 7; [29 June 2005] Court of Appeal, Anderson P McGrath and Hammond JJ, CA34/03. 116 Referring to Benton v Miller Poulgrain [2005] 1 NZLR 66. 117 Para 86.

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This seems somewhat surprising, as the judgment was on appeal from the Court of Appeal where precisely that issue was considered in detail. It is unclear how exactly Chirnside would have been expected to satisfy that onus in the Supreme Court.

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VI CONCLUSIONS
As can be seen in the cases preceding Chirnside v Fay, the courts have real difficulties to make the type of principled distinctions that are advocated by Finn. Confidence, mutual trust, good faith, honesty and fairness are conflated or distinguished without any principled basis. The Supreme Court had the opportunity to set some clear guidelines for the New Zealand jurisdiction. The author suggests that it has failed to do so, and contends that the Court of Appeal judgment is to be preferred in all aspects, although it also could have been much clearer.

In the author’s view a clear distinction ought to have been made between Chirnside’s obligations to the venture and those to Fay. The obligations to the venture are analogous with a director’s duties to the company. There was no evidence that Chirnside had failed to properly dispose of those obligations. The standard of the obligations to Fay could have been no more onerous than an unconsionability or a good faith standard. Those standards had been clearly breached, but they do not warrant remedies based on the fiduciary standard. The breach was related to Fay’s possible participation in the joint venture, and the appropriate remedy was therefore an equitable compensation based on a loss of chance. It is suggested that a really equitable remedy would have been based on a participation of Fay in the corporate vehicle that was eventually used (Rattray). Even if that was practically impossible, the remedy could have proceeded from a valuation of Chirnside’s potential share in that company, or even based on awarding such shares, which could have been sold to the other shareholders or on the open market. The fact that the parties had an acrimonious relationship is not enough to prevent such a remedy, as there are statutory provisions that protect minority shareholders, and there is welldeveloped authority on how to resolve such issues.

The author suggests that the Supreme Court has set a dangerous precedent for remedial opportunism, and the case demonstrates that a formalistic and quasi-principled separation

48

of liability and remedy assessment should not have a place in the equitable jurisdiction. It allows for the use of clever tactics which seemed to have detracted the Supreme Court from comprehensively clarifying an area of law that is increasingly important with the growing popularity of new ways to do business.

The author suggests that the Supreme Court has indeed opened a “Pandora’s box” that may well lead to opportunistic litigation in which plaintiffs will seek to bring their failed competitive efforts under the heading of a joint venture.

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VII CASE LAW AND BIBLIOGRAPHY
Case law Aquaculture Corporation v New Zealand Green Mussel Co Ltd [1990] 3 NZLR 299 Arklow Investments Ltd v McLean [2002] 2 NZLR 1 (PC) BNZ v NZ Guardian Trust Co Ltd [1999] 1 NZLR 664 (CA) Boardman v Phipps [1967] 2 AC 46; [1966] 3 All ER 721 (HL) Bristol and West Building Society v Mothew [1998] Ch 1; [1996] 4 All ER 698 Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534; 85 DLR (4th) 129 Chirnside v Fay [2006] NZSC 68; [6 September 2006] Supreme Court, Elias CJ, Gault, Keith, Blanchard and Tipping JJ Chirnside v Fay (No2) [2005] 3 NZLR 689; [2006] PNLR 7; [29 June 2005] Court of Appeal, Anderson P McGrath and Hammond JJ, CA34/03 Coleman v Myers [1977] 2 NZLR 225 Commerce Commission v Fletcher Challenge Ltd [1989] 2 NZLR 554 Day v Mead [1987] 2 NZLR 443 (CA) Fay v Chirnside (not reported) [20 December 2002] High Court Dunedin, William Young J, CP36/01 Frame v. Smith [1987] 2 S.C.R. 99 Gemini Personell Ltd v Morgan & Banks Ltd (not reported) [18 December 1998, Laurenson J, HC Auckland, CP113/98 Hospital Products Ltd v US Surgical Corp (1984) 156 CLR 41 (HCA) Hung v Yu (No1) (not reported) [9 February 2000] Rodney Hansen J, HC Auckland, CP13/99 Hung v Yu (No2) (not reported) [12 December 2000] Rodney Hansen J, HC Auckland, CP145/00 In re Dawson; United Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd (1966) 84 WN (Pt1) (NSW) 399 Khan v Miah [2000] 1 WLR 2123; [2001] 1 All ER 20 LAC Minerals Ltd v International Corona resources Ltd (1989) 61 DLR (4th) 14 (SCC) M v M 96 DLR (4th) 289; [1992] 3 SCR 6 Marr v Arabco Traders Ltd [22 May 1987] HC Auckland, Tompkins J,A1195/77; partially reported in (1987) 1 NZBLC 102,732 Mout v Clark Boyce [1992] 2 NZLR 559 New Zealand Land Development v Porter [1992] 2 NZLR 462 New Zealand Netherland Society: "Oranje" Inc v Kuys [1973] 2 NZLR 163 News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193 (FCA) R v Guerin 2 SCR 335 Target Holdings Ltd v Redferns (1996) AC 421; [1995] 3 All ER 785 (HL) Union Dominion Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1; 60 ALR 741 (HCA) United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 104 (HL) Waihi Mines Ltd v AUAG Resources Ltd [1994] 3 NZLR 571 Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602; [1995] All ER 907

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Aquaculture Corporation v New Zealand Green Mussel Co Ltd [1990] 3 NZLR 299 Arklow Investments Ltd v McLean [2002] 2 NZLR 1 (PC) Arklow Investments Ltd v McLean [1998] 3 NZLR 680 (CA) Bartlett v Barclay's Bank trust Co Ltd (No2] [1980] Ch. 515; [1908] 2 All ER 92 Benton v Miller and Poulgrain [2005] 1 NZLR 66 BNZ v NZ Guardian Trust Co Ltd [1999] 1 NZLR 664 (CA) Boardman v Phipps [1967] 2 AC 46; [1966] 3 All ER 721 (HL) Bristol and West Building Society v Mothew [1998] Ch 1; [1996] 4 All ER 698 Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534; 85 DLR (4th) 129 Chirnside v Fay [2006] NZSC 68; [6 September 2006] Supreme Court, Elias CJ, Gault, Keith, Blanchard and Tipping JJ Chirnside v Fay (minute of the court, not reported) [26 August 2004] Supreme Court, Blanchard and Tipping JJ, SC CIV 7/2004 Chirnside v Fay [2004] 3 NZLR 637; [29 June 2004] Court of Appeal, Anderson P, McGrath, Hammond JJ, CA34/03 Chirnside v Fay [2005] NZSC 67; [22 September 2005] Supreme Court, Keith and Tipping JJ, SCCIV7/04 Chirnside v Fay (No2) [2005] 3 NZLR 689; [2006] PNLR 7; [29 June 2005] Court of Appeal, Anderson P McGrath and Hammond JJ, CA34/03 Coleman v Myers [1977] 2 NZLR 225 Commerce Commission v Fletcher Challenge Ltd [1989] 2 NZLR 554 Day v Mead [1987] 2 NZLR 443 Day v Mead [1987] 2 NZLR 443 (CA) Donselaar v Donselaar [1982] 1 NZLR 97 Estate Realties Ltd v Wignall [1992] 2 NZLR 615 Fay v Chirnside (2004) 17 PRNZ 382; [2 December 2004] Supreme Court, Elias CJ, Gault J, SC CIV 7/2004 Fay v Chirnside (2002) 16 PRNZ 87; [28 March 2002] High Court Dunedin, Master Venning, CP36/01 Fay v Chirnside (not reported) [20 December 2002] HC Dunedin, William Young J, CP36/01 Fay v Chirnside (Not reported) [15 August 2003], High Court Dunedin, William Young J, CIV-2001-412-13 Frame v. Smith [1987] 2 S.C.R. 99 Fraser Edmiston Pty Ltd v AGT (Q) Pty Ltd [1988] 2 Qd R 1 Gemini Personell Ltd v Morgan & Banks Ltd (not reported) [18 December 1998, HC Auckland, Laurenson J, CP113/98 Hodgkinson v Simms 919940 117 DLR (4th) 161 Hospital Products Ltd v US Surgical Corp (1984) 156 CLR 41 (HCA) Hung v Yu (No1) (not reported) [9 February 2000] HC Auckland, Rodney Hansen J, CP13/99 Hung v Yu (No2) (not reported) [12 December 2000] HC Auckland, Rodney Hansen J, CP145/00 In re Dawson; United Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd (1966) 84 WN (Pt1) (NSW) 399 Khan v Miah [2000] 1 WLR 2123; [2001] 1 All ER 20

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LAC Minerals Ltd v International Corona resources Ltd (1989) 61 DLR (4th) 14 (SCC) M v M 96 DLR (4th) 289; [1992] 3 SCR 6 Malec v Hutton 169 CLR 638; 64 ALJR 316 Marr v Arabco Traders Ltd [22 May 1987] HC Auckland, Tompkins J, A1195/77; partially reported in (1987) 1 NZBLC 102,732 Mouat v Clark Boyce [1992] 2 NZLR 559 Muschinski v Dodds 160 CLR 583; 60 ALJR 52; 62 ALR 429; 11 Fam LR 930 New Zealand Land Development v Porter [1992] 2 NZLR 462 New Zealand Netherland Society: "Oranje" Inc v Kuys [1973] 2 NZLR 163 News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193 (FCA) R v Guerin 2 SCR 335 Sellars v Adelaide Petroleum NL 179 CLR 332; 120 ALR 16 Target Holdings Ltd v Redferns (1996) AC 421; [1995] 3 All ER 785 (HL) Union Dominion Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1; 60 ALR 741 (HCA) United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 104 (HL) Waihi Mines Ltd v AUAG Resources Ltd [1994] 3 NZLR 571 Waihi Mines Ltd v AUAG Resources Ltd (1995) 5 NZBLC 103,601 Warman International Ltd v Dwyer (1995) 182 CLR 544

Learned texts, journal articles and court transcripts Birchall John "Duties of Good Faith in Commercial Joint Ventures? Contractual Duties, Fiduciary Duties, and Shareholder Remedies." JBL (2005) May 269 Coote Brian "Recovery for Loss of a Chance: Could it be for all or nothing at all?" (2006) 12 NZBLQ 127 Rickett Charles, & Gardner Tim "Compensating for Loss in Equity; the Evolution of a Remedy" (1994) 24 VUWLR 19 Watt Gary "Laches and the Risk of Joint Venture" CONVPL 2005, MAR/APR, 174-180 Bean Gerard M D Fiduciary Obligations and Joint Ventures (Clarendon Press, Oxford, 1995) Birks Peter The Classification of Obligations (Clarendon Press, Oxford, 1997) Butler Andrew S Equity and Trusts in New Zealand (Thomson Brookers, Wellington, 2003) Dal Pont G E, & Chalmers Donald R C Equity and Trusts in Australia and New Zealand (2nd ed, LBC Information Services, North Ryde, N.S.W., 2000) Ellis Mark V Corporate and Commercial Fiduciary Duties (Carswell, Scarborough, Ont., 1995) Finn Paul D Fiduciary Obligations (Law Book Co., Sydney, 1977) Finn Paul D "The Fiduciary Principle" In: Youdan (ed.), Equity, Fiduciaries and Trusts. (Carswell, Toronto,1989) Glover John Commercial Equity (Butterworths, Sydney, 1995) Grantham Ross, & Rickett Charles Restitution Commentary and Materials (Brookers, Wellington, 2001) Hewitt Ian Joint Ventures (3rd ed, Sweet & Maxwell, London, 2005) McDermott Peter M Equitable Damages (Butterworths, Sydney, 1994)

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Porat Ariel, & Stein Alex Tort Liability under Uncertainty (Oxford University Press, Oxford, 2001) Spry I. C. F. The principles of equitable remedies : specific performance, injunctions, rectification and equitable damages (4th ed, Law Book Co., Sydney, 1990) Watson Susan, Gunasekara Gehan, & Gedye Mike The law of business organisations (Palatine Press, Auckland, 2003) Youdan T. G. Equity, fiduciaries, and trusts (Carswell, Toronto, 1989) Chirnside v Fay [2006] NZSC 68 Transcript of civil appeal hearing before the Supreme Court, 14 and 15 November 2005.

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Chirnside v Fay;Allied Maples Group Ltd v Simmons & Simmons;Aquaculture Corporation v New Zealand Green Mussel Co Ltd;Arklow Investments Ltd v McLean;Arklow Investments Ltd v McLean;Bartlett v Barclay's Bank trust Co Ltd (No2];Benton v Miller and Poulgrain;BNZ v NZ Guardian Trust Co Ltd;Boardman v Phipps;Bristol and West Building Society v Mothew;Canson Enterprises Ltd v Boughton & Co;Coleman v Myers;Commerce Commission v Fletcher Challenge Ltd;Chirnside v Fay;Chirnside v Fay (No2);Fay v Chirnside;Fay v Chirnside;Fay v Chirnside;Fay v Chirnside;Chirnside v Fay;Chirnside v Fay;Chirnside v Fay;In re Dawson; United Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd;Day v Mead;Day v Mead;Donselaar v Donselaar;Estate Realties Ltd v Wignall;Frame v. Smith;Fraser Edmiston Pty Ltd v AGT (Q) Pty Ltd;Gemini Personell Ltd v Morgan & Banks Ltd;R v Guerin;Hodgkinson v Simms;Hospital Products Ltd v US Surgical Corp;Hung v Yu (No1);Hung v Yu (No2);Khan v Miah;LAC Minerals Ltd v International Corona resources Ltd;Malec v Hutton;Marr v Arabco Traders Ltd;Mouat v Clark Boyce;Muschinski v Dodds;M v M;New Zealand Land Development v Porter;News Ltd v Australian Rugby Football League Ltd;New Zealand Netherland Society: "Oranje" Inc v Kuys;Sellars v Adelaide Petroleum NL;Target Holdings Ltd v Redferns;United Scientific Holdings Ltd v Burnley Borough Council;Union Dominion Corp Ltd v Brian Pty Ltd;Waihi Mines Ltd v AUAG Resources Ltd Waihi Mines Ltd v AUAG Resources Ltd;Warman International Ltd v Dwyer;G. M. D. Bean Clarendon Press;J. Birchall;P. Birks Clarendon Press;A. S. Butler Thomson Brookers;B. Coote;G. E. Dal Pont and D. R. C. Chalmers LBC Information Services;M. V. Ellis Carswell;P. D. Finn Law Book Co.;P. D. Finn Carswell;J. Glover Butterworths;R. Grantham and C. Rickett Brookers;I. Hewitt Sweet & Maxwell;P. M. McDermott Butterworths;A. Porat and A. Stein Oxford University Press;C. Rickett and T. Gardner;I. C. F. Spry Law Book Co.;S. Watson et al. Palatine Press;G. Watt;T. G. Youdan Carswell

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