The given case tackles the issue of fiduciary duties. The paper aims to examine the main aspects of fiduciary duties laws applicable in the given case. To help Roberto build his position against Gina, four cases taken before the High and Federal Court of Australia were examined to uncover legal arguments that may be instrumental in presenting Roberto’s arguments in the given case.
The case tackles the issue of fiduciary duties owned by the directors of Kia Ora’s company to the appellants and shareholders. The company was sued for the breach of fiduciary duties towards its stockholders when it decided to acquire Western United company without due consultation. In the litigation, it has been found out that the third and the fourth directors of Kia Ora’s company were also directors and shareholders of Western United company and thus had direct benefits from the acquisition. The judges found the company guilty of a breach of fiduciary duties since there was a conflict of interests between the interests of directors and shareholders of Kia Ora’s company at the moment of acquisition. Thus, the case established that fiduciary duties owned by the directors of the company towards its shareholders or companions should override any personal interests and possible gains the directors may have if they act in their interests.
This source is relevant for Roberto’s case as it clearly shows the prevalence of fiduciary duties should have over personal gain considerations. In the Kia Ora company case, the judges stated:
The fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is a conflict or a real or substantial possibility of a conflict between the personal interests of the fiduciary and those to whom the duty is owed (Pilmer v Duke Group Ltd (in liq), 2001).
Roberto’s case clearly shows a conflict between the interests of their company Calabrian Culture Pty Ltd, and the interests of his sister’s company Ciao Bella Pty Ltd. Since Gina is the director of both companies, the case may be treated as a case where personal gain consideration overrode the fiduciary duty she has towards Roberto. The only shortcoming of the Pilmer v Duke Group case is that it treats relations between a company and its shareholders. Since Roberto and Gina are co-owners of the company, their case does not mirror Pilmer v Duke Group’s case exactly. However, the ruling of the court on the Pilmer v Duke Group case can be instrumental in strengthening Roberto’s position on fiduciary duty.
The case highlights the dealings of Digital Cinema Network Pty Ltd (DCN), which acted as a ‘digital integrator’ between American cinema studios and Australian cinema owners. Mr. Smith, the director of the Digital Cinema Network Pty Ltd, was one of the owners. He acted as an integrator between Hollywood studios and the Independent Cinemas Association of Australia (ICAA). One day, ICAA made it clear to him that it wanted to see another company – Omnilab Media Pty Limited, as an integrator between the cinema association and American studios. Mr. Smith willingly provided a considerable amount of information and support to Omnilab Media Pty when it entered the market. Thus, he acted in the infringement of interests of the company he worked for – namely, Digital Cinema Network Pty Ltd. The judge who heard the case stated that “Omnilab Media […] knowingly assisted Mr. Smith in breaching his fiduciary duties to DCN following the second limb of Barnes v Addy (1874) LR 9 Ch App 244 at 251–252” (Omnilab Media Pty Limited v Digital Cinema Network, 2011). Thus, Mr. Smith was found guilty of not fulfilling his fiduciary duties toward DCN.
The case can help strengthen Roberto’s position as it refers to benefiting another company to the exclusion of the one a person works for to fraudulent practices. The case states that acting in the interests of another company leads to a breach of fiduciary duties. In Roberto’s case, Gina acquired a lease on land in the name of her company Ciao Bella Pty Ltd, without asking for Roberto’s consent. The practice led to the fact that Gina’s company made a profit where Roberto’s and Gina’s joint company could have made it. Thus, it led to the infringement of Roberto’s interests, a fact that can be instrumental in Roberto’s consolidating his position on fiduciary duty. The drawback of the case lies in the fact that Mr. Smith provided a rival company with valuable information, which Gina did not do. However, parallels may be found between informational and material support in the form of a lease that Gina provided for her company.
The case was initiated by former officers of Tasmania Pty Ltd (LGT) company against its director, Mr. Sattler, and his company, RG Sattler Nominees Pty Ltd. LGT intended to establish some golf courses on the lands adjoining its existing links. However, “in breach of his duties, Mr. Sattler misappropriated an opportunity to establish a new golf course on land adjoining LGT’s existing course by procuring his company to take up the opportunity” (Federal Court of Australia. Links Golf Tasmania Pty Ltd v Sattler, 2012). Mr. Sattler was found guilty of breach of fiduciary duties since, being in service of the LGT, he put his interests above those of a company. The case may be helpful to defend Roberto’s position since it has many parallels with his situation. His sister, being the co-owner of Calabrian Culture Pty Ltd, chose to pursue her interests disregarding those of her brother, when she obtained a lease of the land that could be profitable for Calabrian Culture. The drawback of the case lies in the fact that Mr. Settler acquired the land Tasmania Pty Ltd may have used for his own company, while Gina leased the land, which makes her case slightly different. However, strong parallels can be drawn between the two cases.
White City Tennis Club granted John Alexander’s Clubs an option to acquire a piece of land on which White City Tennis Club was operating. However, John Alexander’s Clubs did not exercise the option itself but named Poplar Holdings Pty Ltd its nominee. Poplar Holdings Pty Ltd exercised the option, an action that City Tennis Club viewed as a breach of fiduciary duty on the part of John Alexander’s Clubs. The judge ruled that a breach of fiduciary duty took place and, therefore, City Tennis Club had a right to buy the land from Poplar Holdings Pty Ltd at a price paid for the deal (John Alexander’s Clubs v White City Tennis Club, 2010). The case may be helpful to defend Roberto’s position since it clearly illustrates that even a change of the party of a prearranged deal may be viewed as a breach of fiduciary duty. Roberto’s situation, where Gina neither informed him of the company that was going to lease the land nor of the fact of the lease itself, has even better chances to be considered favorably by the court. The drawback of the case is that the situation it deals with is rather different from that of Roberto and Gina. However, since the case seems to describe a less pronounced breach of fiduciary duty than that of Gina’s doings, it can strengthen Roberto’s position on the issue.
References
Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165
Omnilab Media Pty Limited v Digital Cinema Network Pty Ltd [2011] FCAFC 166.
Links Golf Tasmania Pty Ltd v Sattler (2012) 292 ALR 382; [2012] FCA 634 at [481]
High Court of Australia. John Alexander’s Clubs v White City Tennis Club (2010) 241 CLR 1 at 36.