Background
The Plaintiff (Spring Hill Views Pty Ltd) was a special purpose vehicle established for the development of land. The Defendants (2 Fella Pty Ltd and its director, Pedro Pikos) were involved in the transaction/ development structure.
The Plaintiff (broadly) alleged that the Defendants:
- owed fiduciary duties to it; and
- breached those duties by:
- arranging for land to be sold to the Defendant’s then wife at an undervalue; and
- overcharging or duplicating fees/work under the development arrangements.
Decision
The Court held that no fiduciary relationship arose between the parties and the proceeding was dismissed in full.
The reasoning
Primary finding - no fiduciary duties
- This was not within any established category where fiduciary duties arise.
- The parties were sophisticated commercial actors dealing at arm’s length.
- Their rights and obligations were regulated by contract and nothing in the contractual arrangements suggested the Defendants had undertaken to act for or in the interests of the Plaintiff.
- There was no vulnerability, special reliance, trust or inequality of bargaining power.
- The contractual framework was otherwise inconsistent with fiduciary obligations being superimposed.
- The Court reaffirmed the decision in Hospital Products Pty Ltd v United States Surgical Corporation (1984) 156 CLR 41, where Mason J said at [68] that:
“… The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person…”.
Alternatively, and in any event, the Court found that even if fiduciary duties had existed:
- the alleged sale at undervalue was fully disclosed and undertaken with the Plaintiff’s informed consent; and
- none of the challenged fees or charges would have amounted to a breach, even on a fiduciary footing.
Accordingly, no breach would have been established.
Takeaways
The onus is on a claimant to establish that fiduciary duties exist.
There are accepted categories where a fiduciary relationship arises. However, the Court in its equitable jurisdiction may impose fiduciary duties outside those recognised categories.
It is rare that a fiduciary duty will exist in a commercial transaction or relationship. The starting point is therefore no fiduciary duty, unless something more is shown. In undertaking its enquiry, the Court will have regard to any contractual arrangements between the parties, the parties’ respective bargaining power and the overall nature of the relationship.
