"Skima Imports Australia Pty Ltd had 6000 shares. 5000 shares were held by Mr Max Brunninghausen and 1000 by Mr Michael Glavanics. Brunninghausen was the sole effective director and majority shareholder in the company. Glavanics was the other director and shareholder. After an initial period of cooperation, relations between the two men, who were brothers-in-law, soured and there was no longer any trust between them. Glavanics commenced a business which competed with Skima. Glavanics' retention of his directorship of Skima was a formality which brought him no information or insight into the company's affairs.
As a result of family pressure, the two men began negotiations in late 1987 to resolve their differences. At one meeting, Brunninghausen referred to a need to resolve matters so that the problems would not be left to their young sons to sort out in years to come. Glavanics indicated he was willing to sell his shares and resign as a director provided he received a fair price.
While these negotiations were proceeding, Brunninghausen received an unexpected offer from a third party to buy the assets of the company. Brunninghausen had extensive negotiations to this end without informing Glavanics.
Glavanics agreed to sell his shares to Brunninghausen for a price well below the equivalent price paid by the third party for the assets.
The trial judge held that a fiduciary duty was owed by Brunninghausen as a director to Glavanics as a shareholder, and that Brunninghausen's failure to disclose the existence of the other negotiations was a breach of that duty. The trial judge ordered an enquiry to be conducted before himself to determine the amount of compensation to be paid and, in a second judgment, preemptorily awarded $300,000 compensation to Glavanics."