Supreme Court of WA|2005-07-08|Before: Mr J, Miere J

Price v Powers & Ors [2005] WASC 154 (8 July 2005)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : PRICE -v- POWERS & ORS [2005] WASC 154

Fiduciary duties - Breach - The fiduciary principle - Establishing the existence of a fiduciary relationship - Not enough to establish that a particular relationship can be described as fiduciary - Ordinarily fiduciary obligation confined to defined area of conduct - Incorrect to impose upon parties fiduciary obligations wider than those imposed on themselves - Alleged breach of fiduciary duty is conduct outside the defined area of conduct - Breach of fiduciary duty not established

Remedies - Rectification of register - Power to rectify register - Court has jurisdiction to rectify register of unit holders in a trust whenever the plaintiff has an equity to support the remedy

British Sugar Refining Co and Joint Stock Companies Act 1856, In re [1857] EngR 280; (1857) 3 K & J 408; (1857) 69 ER 1168

Burns v Siemens Brothers Dynamo Works Ltd (1919) 1 Ch 225

Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41

Kathleen Investments (Australia) Ltd v Australian Atomic Energy Commission [1977] HCA 55; (1977) 139 CLR 117

Kelly v C A & L Bell Commodities Corp Pty Ltd (1989) 18 NSWLR 248

Lintrose Nominees Pty Ltd v King [1995] VicRp 35; [1995] 1 VR 574

New Zealand Netherlands Society "Oranje" Inc v Kuys [1973] 1 WLR 1126

Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1

Peninsula Gold Pty Ltd v Sunbeam Victa Holdings Ltd (1996) 20 ACSR 553

Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285

Whitehouse v Carlton Hotel Pty Ltd [1983] 1 Qd R 336

Amon v Raphael Tuck & Sons Ltd [1956] 1 QB 357

Baden Delvaux & Lecuit v Societe Generale pour Favoriser le Development du Commerce [1993] 1 WLR 509

Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604

Bell Group Ltd (in liq) v Westpac Banking Corp [2001] WASC 315

Boardman v Phipps [1966] UKHL 2; [1967] 2 AC 46

Breen v Williams (Medical Records Access Case) (1996) 186 CLR 71

C (a minor) v Hackney London Borough Council [1996] 1 WLR 789

Commissioner of Taxation (Cth) v Patcorp Investments Ltd [1976] HCA 67; (1976) 140 CLR 247

Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373

Foodco Group Pty Ltd v Northgan Pty Ltd (1998) 83 FCR 356

Grant v John Grant & Sons Pty Ltd [1950] HCA 54; (1950) 82 CLR 1

Hancock Family Memorial Foundation Ltd v Porteous (1999) 151 FLR 191; [1999] WASC 55

Harris v 718932 Pty Ltd [2000] NSWSC 784

Hope v RCA Photophone of Australia Pty Ltd [1937] HCA 90; (1937) 59 CLR 348

Khoury v Government Insurance Office (NSW) [1984] HCA 55; (1984) 165 CLR 622

London Hamburg & Continental Exchange Bank, In re (Ward & Henry's Case) (1867) LR 2 Ch App 431

Polly Peck International Plc v Nadir (No 2) [1992] EWCA Civ 3; [1992] 4 All ER 769

Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589

Rankine v Rankine [1998] QSC 48

Reardon Smith Line v Hansen-Tangen [1976] 1 WLR 989

Royal Brunei Airlines Sdn Bhd v Tan Kok Ming [1995] UKPC 4; [1995] 2 AC 378

The Grand Hotel (SA) Pty Ltd v Development Assessment Commission [2000] SASC 272

Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd [1966] HCA 46; (1966) 115 CLR 353

1 LE MIERE J: The plaintiff's claim is against the first and second defendants for breach of fiduciary duty and against the third defendant for aiding and abetting the first and second defendants' breaches of fiduciary duty.

2 Colin Robert Hayes and the plaintiff, who I will sometimes refer to as Mr Price, were involved in conducting motivational and personal growth seminars. In the course of those activities they met the first and second defendants, who I will sometimes refer to as Mr and Mrs Powers.

3 A unit trust, known as the Denmark Unit Trust, was established by a Trust Deed dated 2 September 1988 between Imagination Enterprises Pty Ltd and Mr Hayes. I will refer to the Denmark Unit Trust as "the Trust", and Imagination Enterprises Pty Ltd as "the Company". The Company was and has remained the trustee of the Trust. The beneficial interest in the Trust assets was divided into equal units. The first holder of units in the Trust was Mr Hayes who initially held 10 units. Subsequently, 10 units were issued to the plaintiff. At the time the Trust was created Mr Hayes and the plaintiff each held two of the four shares issued by the Company and each was a director of the Company.

4 In 1988 Mr Hayes and the plaintiff caused the Company, as trustee of the Trust, to purchase unimproved land at Denmark which became known as "the Forest block".

5 In 1990 a piece of land known as "the Scotsdale Road land", which adjoined the Forest block, was put up for sale. The Scotsdale Road land had on it a homestead and a cottage and was suitable for the purposes of a commune proposed to be established by Mr Hayes and the plaintiff. Mr Hayes approached Mr and Mrs Powers to sell their house in Kelmscott and apply the proceeds to the purchase of the Scotsdale Road land. Mr and Mrs Powers, in turn, approached Peter Ryan to join in the purchase of the land. Mr Ryan was a Geraldton businessman and cray fisherman. Mr and Mrs Powers sold their house in Kelmscott and put the proceeds of $70,000 towards the purchase of the Scotsdale Road land. The remaining $270,000 of the purchase price was provided by Mr Ryan. At a meeting in May 1990 Mr Hayes, the plaintiff, Mr and Mrs Powers and Mr Ryan agreed that in consideration of the funds Mr and Mrs Powers and Mr Ryan had contributed to enable the Trust to purchase the Scotsdale Road land the Company would issue 10 ordinary units in the Trust to each of Mr and Mrs Powers (jointly) and to Mr Ryan. It was further agreed that Mr Hayes and the plaintiff would each transfer one of their shares in the Company to Mr and Mrs Powers (jointly) and to Mr Ryan, and Mr Ryan and Mr Powers would be appointed directors of the Company. I will refer to this agreement as the May 1990 agreement.

6 On 31 May 1990, pursuant to the agreement, Mr Ryan and Mr Powers were appointed directors of the Company and the Company issued 10 units in the Trust to Mr and Mrs Powers (jointly) and 10 units to Mr Ryan.

Agreement to convert plaintiff's units to special units

7 The plaintiff had invested in the Perth property market. In 1990 the plaintiff could see that there was a possibility that he would not be able to pay his creditors and that he might be declared bankrupt at some time in the not too distant future. In August 1990 the plaintiff's position had deteriorated. In meetings with Mr Hayes, Mr and Mrs Powers and Mr Ryan he told them of his financial position and that he might go bankrupt.

8 In his evidence Mr Price said that at meetings in August 1990 attended by Mr Hayes, Mr and Mrs Powers, Mr Ryan and himself he detailed his financial position. Mr Hayes was fearful of Mr Price's possible bankruptcy affecting the Denmark commune and asked him to find a solution. Mr Price took advice and again met with Mr Hayes, Mr and Mrs Powers and Mr Ryan in December 1990. He told them that it looked like he could go bankrupt and that he had taken advice from Mr Dunne and Mr Dunne had recommended a solution which was that the Trust would repurchase Mr Price's ordinary units and issue him with 13,125 special one dollar units. The one dollar units were to be limited as to future return of capital. It was proposed by Mr Hayes that if Mr Price surrendered his ordinary units in the Trust that would mean there would not be interference by any trustee in the running of the Trust and the commune and Mr Price's creditors could still have access to units nominally valued at $13,125. The directors and unit holders agreed that in due course, once Mr Price's financial troubles were over, he would be reinstated to his previous position as a director and a holder of 10 ordinary units in the Trust. Mr and Mrs Powers, Mr Ryan and Mr Price agreed with Mr Hayes' proposal. Following the meeting at which that agreement was made, documents were drawn up to give effect to it. These documents were signed in or about March or April 1991. The documents were dated August 1990 because the discussions regarding the ordinary units being converted to special units first began in August 1990.

9 In their defence the defendants admit that the plaintiff, Mr and Mrs Powers, Mr Hayes and Mr Ryan agreed that the plaintiff's 10 ordinary units in the Trust be converted to 13,125 non-voting special units and that the plaintiff might be reinstated as an ordinary unit holder of the Trust if and when he was cleared of his bankruptcy and it was legal to do so. The defendants plead that the agreement was made in August 1991, not August 1990.

10 I accept the evidence of Mr Price. I find that the agreement was made in December 1990, or at the latest in March or April of 1991 when the documents were executed.

12 The third defendant, who I will also refer to as Mr Bazeley, had experience in running a farm. He met Mr Hayes, Mr Price and Mr and Mrs Powers when he attended an Inward Adventure Seminar conducted by Mr Hayes in 1989. In March 1992, he took up residence at the Denmark property. The farm was then in poor condition. Mr Bazeley worked to put the farm in order. He has continued to live and work on the farm since 1992.

13 At the time Mr Bazeley took up residence at the Denmark property Mr Powers was living on the property. There were some other people living on the property but they subsequently ceased to do so and it is not necessary to refer to them further. Mrs Powers subsequently took up residence and has continued to live on the property, with Mr Powers since then. At the time Mr Bazeley took up residence on the property Mr Price was not then living there but visited it occasionally.

14 On 25 April 1992 Mr Ryan died. By his Will he gave his units in the Trust and his entitlement to a share in the Company to the Company in its capacity as trustee of the Trust. He also gave to the Trust valuable properties in Cottesloe.

15 On 23 July 1994 the plaintiff was discharged from bankruptcy.

16 In 1995 Mr and Mrs Powers commenced Supreme Court action CIV 2114 of 1995 ("the 1995 action") against Mr Hayes, the plaintiff and the Company. Mr and Mrs Powers sought orders to the effect that Mr Hayes and the plaintiff each perform the May 1990 agreement by each transferring one share in the Company to Mr and Mrs Powers and to the executor of Mr Ryan's estate.

17 On 16 April 1996 Mr and Mrs Powers and the plaintiff executed a Deed of Declaration of Trust ("the April 1996 deed"). The deed was executed by each of Mr and Mrs Powers and the plaintiff. Recital G to the deed states that on or about 9 August 1990 the plaintiff exchanged his 10 ordinary units in the Trust for 13,125 special par units in the Trust in consideration of a promise by the Company, Mr and Mrs Powers, Mr Hayes and Mr Ryan that the special par units would be converted back to 10 ordinary units if he should personally request them to do so and in consideration of a declaration by Mr and Mrs Powers, Mr Hayes and Mr Ryan that they each hold the ordinary units in the Trust issued to them for one another and for the plaintiff as tenants in common in equal shares. The Deed contained the following operative clauses:

"1. Price hereby declares that he holds one share in the Company in trust for [Mr and Mrs] Powers and that he will transfer that share to them as soon as the Company will permit him to do so and hereby undertakes not to deal with the shares or exercise the powers attached to them without the knowledge and consent of [Mr and Mrs] Powers.

2. [Mr and Mrs] Powers hereby acknowledge and confirm the promise referred to in recital G above and declare that they hold the 10 ordinary units in the Trust issued to them in trust for themselves and for Price and that they will take all steps and do all things necessary to convert the special par units issued to Price to 10 ordinary units in the Trust and appoint Price a director of the Company as soon as they are able to do so and hereby undertakes [sic] not to deal with the units or exercise the powers attached to them without the knowledge and consent of Price."

18 Mr Bazeley witnessed the April 1996 deed. In par 19 of his defence he admitted that he was aware of the terms of the deed from 16 April 1996, that is the date on which he witnessed the deed. In his evidence-in-chief he said that the first and second defendants told him about the terms of the deed. In cross-examination Mr Bazeley at first displayed a reasonable understanding of the terms of the deed, but he subsequently retreated from that position and at one time retreated from the admission in his defence. I find that Mr Bazeley knew that the terms of the deed included a term to the effect that each of the unit holders, including Mr and Mrs Powers, would each hold any units they held in the Trust for each other but I am not satisfied that Mr Bazeley understood the rights and duties of the plaintiff and the first and second defendants respectively that arose from that term of the agreement. I find that Mr Bazeley knew that by the agreement the first and second defendants had agreed that the plaintiff's special units in the Trust would be converted back to ordinary units if the plaintiff requested the other unit holders to do so. I also find that Mr Bazeley knew that the first and second defendants had agreed not to deal with their units in the Trust without the knowledge and consent of the plaintiff.

19 On 13 May 1998 Templeman J delivered his reasons for judgment in the 1995 action. Templeman J made the following declarations and orders:

"1. [Mr Hayes] holds one share in [the Company] in trust for [the executor of the estate of Mr Ryan].

2. [The plaintiff] holds one share in the Company in trust for [Mr and Mrs Powers] jointly.

3. Within 7 days of the date of this order [Mr Hayes] shall execute an instrument in writing in common form transferring one ordinary share in the Company to [the executor of the estate of Mr Ryan] ...

4. Within 7 days of the date of this order [the plaintiff] shall execute an instrument in writing in common form transferring one ordinary share in the Company to [Mr and Mrs Powers] jointly ... "

20 In June 1998 a dispute between the plaintiff and Mr and Mrs Powers arose or came to a head. There was a meeting in Denmark, a meeting at the office of Mr Caine on 19 June and a meeting at Kings Park on the following day. There is a conflict of evidence as to precisely what occurred. I find that the essence of what occurred is as follows. Mrs Powers requested that the plaintiff agree that Mr Bazeley become a unit holder in the Trust and a director of the Company. The plaintiff did not agree. Mr and Mrs Powers refused or failed to take the steps necessary to convert the plaintiff's special units in the trust into ordinary units. The meeting at Mr Caine's office was acrimonious, a ruckus as Mr Powers described it.

21 On 16 August 1998 the plaintiff wrote to Mr and Mrs Powers demanding that they do all things necessary to convert the plaintiff's 13,125 special par units in the Trust to 10 ordinary units in the Trust and to appoint him a director of the Company.

22 On 21 August 1998 the plaintiff sent to Mr and Mrs Powers a form of transfer of one share in the Company from him to Mr and Mrs Powers.

23 Mr and Mrs Powers refused to comply with the plaintiff's demands contained in his letter of 16 August 1998. I find that they did so because the plaintiff would not agree to 10 ordinary units in the Trust being issued to Mr Bazeley.

24 On 9 November 1998 Mr and Mrs Powers commenced Supreme Court action CIV 2251 of 1998 against Mr Hayes, the plaintiff and the Company ("the 1998 action"). Mr and Mrs Powers sought declarations and orders to remove Mr Hayes as a director of the fourth defendant.

25 In the 1998 action the plaintiff filed a cross-claim against Mr and Mrs Powers and the Company in which he sought orders to the effect that the Company re-purchase his 13,125 special par units in the Trust and issue him with 10 ordinary units in the Trust and that he be appointed a director of the Company.

26 Some time before 21 October 1998, Mr and Mrs Powers commenced negotiations with Mr Hayes with a view to acquiring his interests in the Trust and the Company. The negotiations culminated in an agreement made on 14 July 1999, to which I will refer shortly. At the time of the negotiations the plaintiff and the first and second defendants were no longer on good terms. As I have said, on 16 August 1998 the plaintiff had demanded that the first and second defendants do all things necessary to convert the plaintiff's special par units in the Trust to 10 ordinary units in the Trust and to appoint him a director of the Company. The first and second defendants had not taken steps to do so. As I have said, I find that the first and second defendants failed to take any steps to do so because the plaintiff would not agree to 10 ordinary units in the Trust being issued to Mr Bazeley.

27 On 14 July 1999 Mr and Mrs Powers made an agreement with Mr Hayes whereby they agreed to pay Mr Hayes out of the Trust an amount equal to one half of the increase in the value of the Cottesloe properties, the property of the Trust, which had occurred and would occur between the date of Mr Ryan's death and the date of eventual sale of the Cottesloe properties by the Company and to pay Mr Hayes from the sale of the Cottesloe properties a further amount of $100,000. Mr Hayes agreed to transfer his 10 ordinary units in the Trust and his share in the Company to the nominee of Mr and Mrs Powers.

28 I find that Mr Bazeley was aware that the first and second defendants were negotiating with Mr Hayes to buy out Mr Hayes' interest in the Trust. The agreement made between Mr Hayes and the first and second defendants on 14 July 1999 was made in the course of a mediation conference held at Francis Burt chambers. Mr Bazeley was present at Francis Burt chambers but waited in a waiting room whilst the conference proceeded. Mr and Mrs Powers left the conference room and informed Mr Bazeley that they had come to an arrangement and Mr Hayes had agreed to transfer his share and units to Mr Bazeley. Mr Bazeley was then invited into the conference room. Mr Bazeley asked the mediator and the other two lawyers present: "Is all this legal? What about David Price?" Mr Bazeley was informed by the lawyers that the agreement was "all perfectly legal". I find that at the time of the mediation conference and immediately before the agreement between the first and second defendants and Mr Hayes was made Mr Bazeley was aware of the terms of the April 1996 deed and was concerned that the agreement between the first and second defendants and Mr Hayes to transfer Mr Hayes' ordinary units in the Trust to Mr Bazeley was a breach of the obligations of the first and second defendants and Mr Hayes created by or arising from the April 1996 deed. That is why Mr Bazeley asked the lawyers present: "Is all this legal? What about David Price?" As I have said, Mr Bazeley was assured by the lawyers present that the agreement reached between Mr Hayes and Mr and Mrs Powers was all perfectly legal.

29 The agreement made by the first and second defendants with Mr Hayes on 14 July 1999 was put into effect on 9 June 2000. On 9 June 2000 Mr Hayes and Mr Powers, as directors of the Company, made the following resolutions:

"1. The following share transfers are approved and registered:

(a) 1 ordinary share from [Mr Hayes] to [the executor of the estate of Mr Ryan];

(b) 1 ordinary share from [the executor of the estate of Mr Ryan] to the Company in trust for the Trust;

(c) 1 ordinary share from [the plaintiff] to [Mr and Mrs Powers] jointly;

(d) 1 ordinary share from [Mr Hayes] to [Mr Bazeley].

2. That [Mrs Powers] and [Mr Bazeley] are appointed additional directors.

3. That the secretary is authorised and directed to cancel and issue share certificates to give effect to resolution 1.

4. That the retirement of [Mr Hayes] as a director of the Company be accepted."

30 Unsigned "rotary resolutions of directors" of the Company as trustee of the Trust dated June 2000 record the following resolutions, amongst others:

"1. That in order to give effect to the Will of [Mr Ryan] ... the certificate in respect of the 10 ordinary units standing in his name is cancelled so that the remaining 20 ordinary units in the Trust are divided between [Mr Hayes], [Mr and Mrs Powers], as to 10 ordinary units for the said [Mr Hayes] and 10 ordinary units for the said [Mr and Mrs Powers] jointly.

2. That the transfer of 10 ordinary units in the Trust from [Mr Hayes] to [Mr Bazeley] in consideration of the sum of $10 be approved and registered and that the appropriate certificate be issued to the said [Mr Bazeley]."

31 The 1998 action was heard in August 2001 and White AUJ delivered judgment on 10 October 2001. White AUJ declared that the April 1996 deed was binding upon Mr and Mrs Powers and should be performed by them. His Honour granted leave to the plaintiff to apply for consequential or facilitative orders to give effect to that declaration. On 24 October 2001 White AUJ made the following order:

"Mr and Mrs Powers do, within 28 days, take all steps and do all things necessary to convert the special par units issued to the plaintiff to 10 ordinary units in the Trust and to appoint the plaintiff a director of the Company."

32 A meeting of the ordinary unit holders in the Trust was held on 16 November 2001. The terms of the Trust Deed required that the motions be passed by a special majority, that is a three quarter majority. Mr Bazeley voted against motions that the Company re-purchase the plaintiff's 13,125 special par units in the Trust and issue the plaintiff with 10 ordinary units in the Trust. As a result, those motions were lost. The minutes of the meeting indicate that Mr Bazeley requested a note be included in the minutes to explain his reasons for voting against those resolutions. The note is as follows:

"Robert Bazeley said that his solicitor, John Hayward of Freehills, had advised him that clause 6(4) of the Deed of Trust provides that no additional units of a class shall be issued without a special resolution of all unit holders, but a special resolution means a resolution passed by at least three quarters of all unit holders of that class entitled to attend and vote at the meeting and that he could see nothing that would restrain Robert Bazeley from exercising his vote as he saw fit.

Robert Bazeley said that he was voting against the resolutions because David Price had declared his intention to use his status as an ordinary unit holder to wind up the Trust in the same manner that Colin Hayes had attempted to do so.

Robert Bazeley said that he had applied himself to the maintenance and development of the Trust's assets at Denmark since 1992 without remuneration in the expectation that the Trust would continue until the vesting date and that he opposed David Price's intention to wind up the Trust before that date."

33 On 5 August 2003 EM Heenan J made orders amending the orders made by White AUJ on 24 October 2001. Heenan J ordered that the following orders be substituted for those made by White AUJ:

"1. It is declared that [Mr and Mrs Powers] and [the plaintiff] are each bound by the terms of the Deed of Declaration of Trust dated 16 April 1996.

2. [Mr and Mrs Powers] do within 28 days of 24 October 2001 take all steps and do all things necessary to convert the special par units issued to [the plaintiff] to 10 ordinary units in the Trust and to appoint [the plaintiff] as a director of [the Company]."

34 The plaintiff pleads that Mr and Mrs Powers breached the agreement, one term of which was that the 13,125 special units issued to the plaintiff would be converted back to ordinary units if the plaintiff so requested, and the terms of the April 1996 deed. However, at the conclusion of the trial counsel for the plaintiff abandoned the plaintiff's pleaded cause of action for breach of contract.

35 By par 25 of his statement of claim the plaintiff pleads that by reason of the terms of the April 1996 deed Mr and Mrs Powers owed the plaintiff a fiduciary duty not to act or do anything in their respective capacities as unit holders in the Trust, shareholders in the Company and, in the case of Mr Powers, in his capacity as a director of the Company, which would or might prevent them from ensuring, or which would or might affect their ability to ensure that the Company as trustee of the Trust issued the plaintiff with 10 ordinary units in the Trust.

36 By par 25A of his statement of claim the plaintiff pleads that by reason of the declarations acknowledged in the April 1996 deed Mr and Mrs Powers owed fiduciary duties to the plaintiff as follows:

"(a) not to deal with any interest in the units owned by themselves, [Mr] Ryan or [Mr] Hayes in any way that would defeat the plaintiff's beneficial interest in all of those units;

(b) to act as trustees for the plaintiff in respect of a 50 per cent interest in the units owned by [Mr] Hayes when they became the owners of those units or became able to exercise in effect power over those units; and

(c) not to deal with the units owned by [Mr] Hayes in a manner inconsistent with the plaintiff's 50 per cent beneficial interest therein."

37 Counsel for the plaintiff at one time submitted that the plaintiff did not assert that, as a matter of fact and law, the plaintiff had a 50 per cent beneficial interest in the units previously owned by Mr Hayes ("the Hayes units"), but asserted that Mr and Mrs Powers had acknowledged such a beneficial interest. Subsequently, counsel submitted that the plaintiff does assert that at the material time the plaintiff had a 50 per cent beneficial interest in the Hayes units.

38 By par 25B of his statement of claim the plaintiff pleads that Mr and Mrs Powers had breached the fiduciary duties they owed to the plaintiff. Paragraph 25B goes on to set out the specific breaches alleged. These may be paraphrased as follows:

(a) In breach of the fiduciary duty they owed to the plaintiff not to act or do anything in their respective capacities as unit holders in the Trust, shareholders in the Company and a director of the Company, which would or might prevent them from ensuring that the Company issued the plaintiff with 10 ordinary units in the Trust, they procured Mr Hayes to transfer his 10 ordinary units in the Trust to Mr Bazeley.

(b) In breach of the fiduciary duties they owed to the plaintiff not to deal with any interest in the units owned by themselves, Mr Ryan or Mr Hayes in any way that would defeat the plaintiff's beneficial interest in all those units and the fiduciary duty to act as trustees for the plaintiff in respect of a 50 per cent interest in the units owned by Mr Hayes when they became the owners over those units or became able to exercise in effect power over those units, they agreed to and authorised the assets of the Trust to be used to pay Mr Hayes for his units and then authorised and allowed the units owned by Mr Hayes to be transferred to Mr Bazeley.

(c) In breach of the fiduciary duty they owed to the plaintiff not to deal with the units owned by Mr Hayes in a manner inconsistent with the plaintiff's 50 per cent beneficial interest therein, they dealt with the units owned by Mr Hayes in a manner inconsistent with the plaintiff's beneficial interest therein and so as to defeat that interest.

39 The plaintiff pleads that Mr Bazeley was at all times after 16 April 1996, that is after he witnessed the April 1996 deed, aware of the terms of the April 1996 deed. That is admitted by Mr Bazeley. The plaintiff pleads that by reason of that fact, Mr Bazeley was at all times aware of the facts giving rise to the pleaded fiduciary duties I have referred to. The plaintiff then pleads that, in taking a transfer of Mr Hayes' share in the Company and the Hayes units, Mr Bazeley aided and abetted Mr and Mrs Powers' breaches of the fiduciary duties referred to.

40 The relief claimed by the plaintiff is as follows:

"1. The entry in the register of unit holders of the Trust of 13,125 special par units being held by the plaintiff be cancelled from 16 August 1998 and the plaintiff be shown as the registered holder of 10 ordinary $1 units with effect from 16 August 1998.

2. Cancellation of the 10 ordinary units in the Trust owned by [Mr Bazeley].

3. An order that the defendants do account for the income and assets of the Trust since 1 July 1998.

4. A pro rata proportion of profits distributed to ordinary unit holders since 1 July 1998 be made to the plaintiff in respect of his holding of 10 ordinary $1 units in the Trust.

5. Cancellation of the share in the [Company] owned by [Mr Bazeley]."

41 The plaintiff initially sought relief in the form of damages and equitable compensation. However, in the course of the trial the plaintiff abandoned his claim for that relief.

42 By their defence, the first, second and third defendants deny that Mr and Mrs Powers owed to the plaintiff the fiduciary duties pleaded by the plaintiff. They deny that Mr and Mrs Powers breached those fiduciary duties and deny that Mr Bazeley aided and abetted Mr and Mrs Powers in the breach of those duties.

43 The first, second and third defendants plead that it was an express or, in the alternative, an implied term of the agreement, one term of which was that the plaintiff's ordinary units in the Trust would be converted into special units, that "if and when the plaintiff's special units in the Trust were converted to ordinary units he would use them or the powers attached to them without the knowledge and consent of the first, second and third defendants to preserve and expand the commune and that he would use them to prevent [Mr] Hayes from winding up the Trust" [sic]. That pleading forms the basis of the defendants' counterclaim in which they seek an order that, if and when the plaintiff is issued with ordinary units in the Trust, he be restrained from using them for the purpose of winding up the Trust or for having any property comprised in the Trust fund transferred to him.

44 In the first, second and third defendants' outline of submissions filed immediately before the commencement of the trial, the first and second defendants stated that they do not oppose any order which was properly consequential or facilitative in order to give effect to the declaration made by White AUJ. They stated that they do not oppose an order that the entry in the register of unit holders of the Trust of 13,125 special par units being held by the plaintiff be cancelled and the plaintiff be registered as holding 10 ordinary one dollar units, with such entries to be dated the date of the Court's orders. They submitted that such an order achieves the result which White AUJ ordered to be achieved but which could not be achieved due to the fact that the third defendant, who was not a party to the proceedings before White AUJ, did not wish to vote as a unit holder in favour of the cancellation of the special units and the issue of ordinary units, given the plaintiff's stated intention to do what he can to terminate the Trust. Further, the written outline of those defendants stated that whilst there is no legal obligation upon the third defendant to do so, the third defendant will not oppose the making of such an order. The written outline went on to say that the first, second and third defendants oppose any order for rectification of the unit register other than by way of a consequential or facilitative order. In particular, they oppose the retrospective orders sought by the plaintiff. That position was maintained by the first, second and third defendants during the trial.

45 The plaintiff submits that the first question to be determined is whether Mr and Mrs Powers were in a fiduciary relationship with the plaintiff.

46 There is no single comprehensive and accepted statement of the indicia of a relationship which attracts fiduciary duties. In Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 Mason J said at 96 - 97:

"The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations ... The critical feature of [accepted fiduciary 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 or 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 who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions 'for', 'on behalf of', and 'in the interests of' signify that the fiduciary acts in a 'representative' character in the exercise of his responsibility ... "

47 In Lintrose Nominees Pty Ltd v King [1995] VicRp 35; [1995] 1 VR 574 at 580 Ormiston J said that the general fiduciary principle may perhaps be best expressed in a passage from a paper entitled "The Fiduciary Principle" by Professor Finn published in Equity Fiduciaries and Trusts, ed Youdan, at pages 46 - 47:

"What must be shown, in the writer's view, is that the actual circumstances of a relationship are such that one party is entitled to expect that the other will act in his interests in and for the purposes of the relationship. Ascendency, influence, vulnerability, trust, confidence or dependence doubtless will be of importance in making this out. But they will be important only to the extent that they evidence a relationship suggesting that entitlement. The critical matter in the end is the role that the alleged fiduciary has, or should be taken to have, in the relationship. It must so implicate that party in the other's affairs or so align him with the protection or advancement of that other's interest that foundation exists for the 'fiduciary expectation' ... A person will be a fiduciary in his 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 interests to the exclusion of his own several interests."

48 It is not enough to establish merely that a particular relationship can be described as fiduciary. It is necessary to go beyond that to establish the precise scope of the fiduciary obligation within that relationship. One person may be in a fiduciary position with respect to a part of his activities and not with respect to other parts, (New Zealand Netherlands Society "Oranje" Inc v Kuys [1973] 1 WLR 1126 per Lord Wilberforce) and one relationship may involve both fiduciary and non-fiduciary obligations (Kelly v C A & L Bell Commodities Corp Pty Ltd (1989) 18 NSWLR 248 per Mahoney JA at 256).

Relationship between the plaintiff and the Powers

49 The relationship between the plaintiff and the first and second defendants does not fit within one of the established categories of fiduciary relationship. Any fiduciary relationship between the plaintiff and the first and second defendants must arise out of the particular circumstances of this case

50 The relationship between the plaintiff and the first and second defendants arose from the May 1990 agreement between the plaintiff, the first and second defendants, Mr Hayes and Mr Ryan. That agreement provided, in effect, that the plaintiff, the first and second defendants jointly, Mr Hayes and Mr Ryan would each hold 10 units in the Trust, the plaintiff, the first and second defendants jointly, Mr Hayes and Mr Ryan would each hold one ordinary share in the Company and the plaintiff, Mr Powers, Mr Hayes and Mr Ryan would be the directors of the Company. The Company, as trustee of the Trust, would own the land on which a commune would be established. The commune was to be a home for the unit holders.

51 Some time in 1990 or 1991 the plaintiff, the first and second defendants, Mr Hayes and Mr Ryan made an oral agreement in response to the possibility of the plaintiff being declared bankrupt.

52 As I have said, I find that the agreement was made before a sequestration order was made in respect of the plaintiff under the Bankruptcy Act on 2 July 1991. I accept the evidence of the plaintiff that the oral agreement was made in or about December 1990 and the documents to give effect to it were executed in March or April 1991.

53 I further find that the agreement was intended by the parties to have legal effect and that its terms were in effect that the first and second defendants, Mr Hayes and Mr Ryan would cause the plaintiff's 10 ordinary units in the Trust to be converted to 13,125 special units in the Trust, and would cause the special units to be converted back to 10 ordinary units if and when the plaintiff so requested and further, that if the plaintiff resigned as a director of the company the first and second defendants, Mr Hayes and Mr Ryan would cause the plaintiff to be reappointed as a director on request. I will refer to this agreement as the December 1990 agreement. Subsequent to that agreement, and before the plaintiff became bankrupt, the plaintiff's 10 ordinary units in the Trust were converted into special units in the Trust.

54 On 3 September 1993 the plaintiff purchased from his trustee in bankruptcy the special units in the Trust and the two shares in the Company previously held by him. On 2 July 1994 the plaintiff was discharged from bankruptcy.

55 In 1995 the first and second defendants and the executor of Mr Ryan's estate commenced the 1995 action against Mr Hayes and the plaintiff. As I have said, in that action Mr and Mrs Powers sought orders to the effect that Mr Hayes and the plaintiff perform the May 1990 agreement by transferring one share in the company to Mr and Mrs Powers and one share to the executor of Mr Ryan's estate.

56 In par 25A of his statement of claim, the plaintiff pleads that the first and second defendants owed fiduciary duties to the plaintiff by reason of the declarations acknowledged in the deed as pleaded in par 10.5(b) of the statement of claim, that is that the first and second defendants, Mr Hayes and Mr Ryan declared that they each held the ordinary units in the Trust issued to them for one another and for the plaintiff in effect as trustees as tenants in common in equal shares.

57 In his closing submissions counsel for the plaintiff submitted that the fiduciary relationship in this case arises from the April 1996 deed.

58 In par 25B of his statement of claim the plaintiff pleads that the first and second defendants breached the fiduciary duties they owed to him in three ways. First, the plaintiff says that the first and second defendants procured Mr Hayes to transfer his 10 ordinary units in the Trust to the third defendant. Secondly, the plaintiff says that the first and second defendants authorised the assets of the Trust to be used to pay Mr Hayes for his units and then authorised and allowed Mr Hayes' units to be transferred to the third defendant. Thirdly, the plaintiff says that the first and second defendants dealt with the Hayes units in a manner inconsistent with the plaintiff's beneficial interest in the units and so as to defeat that interest.

59 Those pleadings were elaborated upon by counsel for the plaintiff in his closing submissions. Counsel submitted that by procuring Mr Hayes to transfer his units to the third defendant, the first and second defendants did something which might prevent them from ensuring that 10 ordinary units were issued to the plaintiff. That is said to be a breach of the fiduciary duty owed by the first and second defendants to the plaintiff not to act or do anything which would or might prevent them from ensuring, or which would or might affect their ability to ensure that the Company issued the plaintiff with 10 ordinary units in the Trust.

60 Secondly, counsel submitted that when the first and second defendants made the agreement with Mr Hayes on 14 July 1999, it was still open to them to deal with the Hayes units in a way that would not defeat the plaintiff's beneficial interest in those units. They could have had them transferred to the plaintiff or to themselves and the plaintiff jointly. However, by passing the resolution of 9 June 2000 the first defendant and the second defendant, who procured Mr Hayes to pass the resolution, defeated the plaintiff's beneficial interest in the units. That is said to be a breach of the fiduciary duty owed by the first and second defendants to the plaintiff not to deal with any interest in the units owned by themselves, Mr Ryan or Mr Hayes in any way that would defeat the plaintiff's beneficial interest in all of those units.

61 Thirdly, counsel submitted that the first and second defendants became able to exercise power over the Hayes units from 14 July 1999. At that point, they were under a duty to act as trustees of the plaintiff's 50 per cent beneficial interest in the units.

62 By procuring Mr Hayes to transfer the units to the third defendant on 9 June 2000, they breached the fiduciary duties owed to the plaintiff to act as trustees for the plaintiff in respect of his 50 per cent beneficial interest in the Hayes units. By procuring Mr Hayes to transfer the units to the third defendant on 9 June 2000, they breached the fiduciary duties owed to the plaintiff not to deal with the Hayes units in a manner inconsistent with the plaintiff's 50 per cent beneficial interest in them. Counsel submits that the fiduciary duties owed by the first and second defendants to the plaintiff arose when they became the owners of the Hayes units, or when they became able to exercise in effect power over those units.

63 After I had reserved judgment in this matter the plaintiff delivered supplementary written submissions. In those submissions the plaintiff submitted that the breach of fiduciary duty by the first and second defendants consisted of taking steps to have the Hayes units transferred to the third defendant, without reference to or acknowledgement of the plaintiff's beneficial interest in the Hayes units.

64 The plaintiff's case of breach of fiduciary duty is pleaded in pars 25A and 25B of the statement of claim. Those paragraphs were first introduced on the second day of the trial. The plaintiff further shaped his case in the course of his counsel's closing written and oral submissions. The plaintiff delivered further written supplementary submissions after I had reserved judgment. The plaintiff has had a thorough opportunity to consider how his case should be put. I will consider the plaintiff's case as it was finally formulated by counsel for the plaintiff in his closing oral and written submissions and subsequent supplementary written submissions.

65 As I have said, the plaintiff pleads that the first and second defendants owed him fiduciary duties as pleaded in par 25A of the statement of claim and pleads the breaches of those duties in par 25B of the statement of claim.

66 In the plaintiff's supplementary submissions it is submitted that although par 25A of the statement of claim is divided into three subparagraphs, it pleads in essence that, by reason of the declarations acknowledged in the April 1996 deed, as pleaded in par 10.5(b) of the statement of claim, the first and second defendants owed the plaintiff fiduciary duties not to take any steps or do anything which was inconsistent with the plaintiff's beneficial interest in the Hayes units and not to take any steps or do anything which would or might defeat the plaintiff's beneficial interest in the Hayes units.

67 The plaintiff submits that the declaration by Mr Hayes in August 1990 created the plaintiff's beneficial interest in the Hayes units. It also created equal beneficial interests for Mr and Mrs Powers and Mr Ryan in the Hayes units. The plaintiff then submits that the first and second defendants acknowledged in the April 1996 deed that the plaintiff's beneficial interest in the Hayes units was thereby created and/or that such interest existed at the time the April 1996 deed was executed. It is submitted that that acknowledgement gave rise to the fiduciary duties not to take any steps or do anything inconsistent with or which would or might defeat the plaintiff's beneficial interest in the Hayes units.

68 The statement of claim does not plead that in or about August 1990 the first and second defendants, Mr Hayes and Mr Ryan declared that they each held the ordinary units in the trust issued to them for one another and for the plaintiff as trustees as tenants in common in equal shares or otherwise. Paragraph 10.5 of the statement of claim pleads that the deed of 16 April 1996 contained a recital to that effect. However, that is not a plea that in or about August 1990 the first and second defendants, and Mr Hayes and Mr Ryan declared that they each held the ordinary units in the Trust issued to them for one another and for the plaintiff in effect as trustees as tenants in common in equal shares.

69 The recital in the April 1996 deed that Mr and Mrs Powers, Mr Hayes and Mr Ryan declared that they each held the ordinary units in the Trust issued to them for one another and for the plaintiff as tenants in common in equal shares is not of itself evidence that Mr and Mrs Powers, Mr Hayes and Mr Ryan held the ordinary units in the Trust issued to them for one another and for the plaintiff as tenants in common in equal shares.

70 The plaintiff did not give evidence that the first and second defendants, Mr Hayes and Mr Ryan made such a declaration in August 1990. Recital G of the April 1996 deed recites that, in effect, Mr and Mrs Powers, Mr Hayes and Mr Ryan declared that they each held the ordinary units in the Trust issued to them for one another and for the plaintiff as tenants in common in equal shares. The plaintiff did not give evidence to verify the truth of the recital. The outcome is that there is no evidence that in or about August 1990 the first and second defendants, Mr Hayes and Mr Ryan made a declaration as recited in recital G to the April 1996 deed. It follows that there is no evidence there was any declaration by Mr Hayes made in or about August 1990 that created in the plaintiff any beneficial interest in the Hayes units.

71 A recital in a deed executed by Mr and Mrs Powers that Mr and Mrs Powers, Mr Hayes and Mr Ryan had declared that they each held the ordinary units in the Trust issued to them for one another and for the plaintiff as tenants in common in equal shares does not of itself create any beneficial interest of the plaintiff in the units held by Mr Hayes.

72 The April 1996 deed is not capable of creating in the plaintiff a beneficial interest in the Hayes units. Mr Hayes was not a party to the deed. It is not part of the plaintiff's case that the defendants are or were estopped from denying that the plaintiff had a beneficial interest in the Hayes units and so it is not necessary to consider whether such an estoppel is made out.

73 The plaintiff submits that the acknowledgement by the first and second defendants in the April 1996 deed that the plaintiff's beneficial interest in the Hayes units existed at the time the deed was executed gave rise to the fiduciary duties not to take any steps or do anything inconsistent with or which would or might defeat the plaintiff's interests in the Hayes units. I do not accept that submission. An acknowledgement that the plaintiff had a beneficial interest in the Hayes units is not sufficient to create such a beneficial interest. It is not established that the plaintiff had any beneficial interest in the Hayes units. It follows that the first and second defendants did not have any fiduciary duty not to take any steps or do anything inconsistent with or which might defeat the plaintiff's beneficial interest in the Hayes units.

74 If, contrary to my conclusions thus far, the plaintiff did hold a beneficial interest in the Hayes units, the April 1996 deed does not create the fiduciary duty or duties asserted by the plaintiff. Recital G recites that Mr and Mrs Powers, Mr Hayes and Mr Ryan each held the ordinary units in the Trust issued to them for one another and for the plaintiff as tenants in common in equal shares. That is, Mr Hayes held the ordinary units in the Trust issued to him for Mr and Mrs Powers, Mr Ryan and the plaintiff as tenants in common in equal shares and Mr and Mrs Powers held the units issued to them for themselves, Mr Hayes, Mr Ryan and the plaintiff as tenants in common in equal shares. The first and second defendants were not trustee of the Hayes units. They had no legal interest in the Hayes units. In its terms the April 1996 deed gave rise to fiduciary duties owed by the first and second defendants to the plaintiff in relation to their own units, not the Hayes units.

75 Fiduciary duties may exist in circumstances where the parties have not expressly created such a duty. The mere fact that the parties are each unit holders in the Trust does not of itself give rise to fiduciary duties owed by the unit holders to each other. Nevertheless, the relationship between the plaintiff and, amongst others, the first and second defendants has some fiduciary aspects to it. For example, the April 1996 deed gives rise to a fiduciary duty owed by the first and second defendants to the plaintiff in the exercise of the rights and powers attaching to the units legally owned by the first and second defendants. However, the fact that there are fiduciary aspects to the relationship between the parties does not determine the scope of any fiduciary duties owing by one party to another.

76 Fiduciary duties may co-exist with contractual duties. Indeed, the existence of a contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, those terms. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction: Hospital Products Ltd v United States Surgical Corporation (supra) at 97 per Mason J. In this case, the terms of the April 1996 deed will determine, or at least be the prime source for determining, the scope of any fiduciary obligations of the parties.

77 It is ordinarily to be expected that a person under a fiduciary obligation to another should be under that obligation in relation to a defined area of conduct, and exempt from the obligation in all other respects. Except in the defined area, a person under a fiduciary duty retains his own economic liberty: Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 per Bryson J at 15.

78 The contention of the plaintiff appears to be that in addition to fiduciary obligations created by cl 2 of the April 1996 deed, fiduciary obligations exist in consequence of the relations created by the terms of the April 1996 deed as a whole, including in particular recital G. Some obligations of a fiduciary nature do arise from the April 1996 deed. However, it would not be right to impose on the parties fiduciary obligations wider or different from those which in careful terms they imposed upon themselves in cl 1 and cl 2 of the deed: see Noranda Australia Ltd v Lochlan Resources NL (supra) at 17 per Bryson J.

79 The plaintiff submits that by procuring Mr Hayes to transfer his units to the third defendant, the first and second defendants did something which might prevent them from ensuring that 10 ordinary units were issued to the plaintiff. That is said to be a breach of the fiduciary duty owed by the first and second defendants to the plaintiff not to act or do anything which would or might prevent them from ensuring, or which would or might affect their ability to ensure, that the Company issued the plaintiff with 10 ordinary units in the Trust.

80 The first and second defendants had a contractual duty to cause the plaintiff's special units in the Trust to be converted to 10 ordinary units upon the plaintiff so requesting. That contractual obligation arises from the December 1990 agreement. However, not all contractual obligations give rise to a fiduciary obligation.

81 A critical feature of fiduciary relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interest of another person in the exercise of a power or discretion which will affect the interest 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 who is accordingly vulnerable to abuse by the fiduciary of his position. It is partly because the fiduciary's exercise of the power or discretion can adversely affect the interests of the person to whom the duty is owed, and because the latter is at the mercy of the former, that the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed: Hospital Products Ltd v United States Surgical Corporation (supra) per Mason J at 97.

82 The trust deed provides that the trustee may issue units in the Trust. However, no additional units may be issued without the approval, by special resolution, of the unit holders. A special resolution means a resolution passed by a three quarters majority. After the plaintiff's ordinary units in the Trust had been converted into special units, the first and second defendants, Mr Hayes and Mr Ryan had the power to reconvert the plaintiff's special units in the Trust to ordinary units. To that extent the plaintiff was vulnerable to abuse by those parties of their position. The power of the other parties to affect the plaintiff's position arose from their position as unit holders in the Trust, shareholders and directors of the Company and the rights and powers attaching to those positions or entitlements. The relevant power of the first and second defendants is the power or discretion to exercise the rights attaching to their units in the Trust and their shareholding or directorship of the Company. Any fiduciary duty owed by them to the plaintiff should be confined to that area of conduct, that is the exercise of their powers and discretions as unit holders, shareholders and directors.

83 The alleged breach of fiduciary duty is conduct outside that defined area of conduct. The conduct of the first and second defendants which is alleged to be a breach of fiduciary duty is that they procured Mr Hayes to transfer his units to the third defendant. That alleged breach of fiduciary duty is not conduct by the first and second defendants in the exercise of the rights and powers arising from their unit holding in the Trust or their shareholding or directorship in the Company.

84 The second breach of fiduciary duty alleged by the plaintiff is that by passing the resolution of 9 June 2000 the first and second defendants, who procured Mr Hayes to pass the resolution, defeated the plaintiff's beneficial interest in the Hayes units. That is said to be a breach of the fiduciary duty owed by the first and second defendants to the plaintiff not to deal with any interest in the units owned by themselves, Mr Ryan or Mr Hayes in any way that would defeat the plaintiff's beneficial interest in all of those units.

85 That claim fails for two reasons. First, I have found that the plaintiff has not established that he had any beneficial interest in the Hayes units. Secondly, the alleged fiduciary duty arises from cl 2 of the April 1996 deed. By reason of that clause the first and second defendants owed to the plaintiff obligations in relation to the exercise of their powers as unit holders, shareholders and directors. Clause 2 did not create any obligation on the part of the first and second defendants in relation to the Hayes units. The first and second defendants were under no fiduciary obligation to the plaintiff in relation to the Hayes units.

86 Thirdly, the plaintiff submits that the first and second defendants were under a duty to act as trustees of the plaintiff's 50 per cent beneficial interest in the Hayes units. By procuring Mr Hayes to transfer the units to the third defendant on 9 June 2000, they breached the fiduciary duties owed to the plaintiff to act as trustees for the plaintiff in respect of his 50 per cent beneficial interest in the Hayes units. By procuring Mr Hayes to transfer the units to the third defendant on 9 June 2000, they breached the fiduciary duties owed to the plaintiff not to deal with the Hayes units in a manner inconsistent with the plaintiff's 50 per cent beneficial interest in them. Counsel submits that the fiduciary duties owed by the first and second defendants to the plaintiff arose when they became the owners of the Hayes units, or when they became able to exercise in effect power over those units.

87 I have found that the plaintiff has not established that he had any beneficial interest in the Hayes units. The plaintiff has not established that the first and second defendant were under any duty to act as trustees of the plaintiff's beneficial interest in the Hayes units, if he had such an interest.

88 The plaintiff has not established that the first and second defendants breached the fiduciary duties owed to him.

89 It is not necessary to consider the submission of the first and second defendants that if the plaintiff had any beneficial interest in the Hayes units or any cause of action arising out of such an interest, then any such interest vested in the trustee in bankruptcy and was not assigned to the plaintiff.

Participation by third defendant in breach of fiduciary duty by first and second defendants

90 I have found that the plaintiff has not established that the first and second defendants breached fiduciary duties owed to the plaintiff. It follows that the plaintiff has not established that the third defendant aided or abetted any breaches of fiduciary duty by the plaintiff.

91 I will consider each of the claims for relief by the plaintiff in his statement of claim in turn.

92 In par 28.1 of the statement of claim the plaintiff seeks an order that the register of unit holders in the Trust be rectified with effect from 16 August 1998 by cancelling the special par units held by the plaintiff and showing the plaintiff as the registered holder of 10 ordinary one dollar units. The defendants do not oppose the rectification but oppose it being made retrospectively.

93 The plaintiff submits that this Court, as a Court of Equity, has jurisdiction as part of its general powers to rectify a share or unit register. In addition, the plaintiff submits that a rectification decree of a Court of Equity can establish a position as of a past date according to which the rights of persons affected must be governed.

94 Section 175(1) of the Corporations Act provides that a company or a person aggrieved may apply to a court to have a share register kept by the company corrected. What is now s 175 replaced the former s 212 of the old Corporations Law. Unlike its predecessors, s 175 of the Corporations Act does not expressly confer jurisdiction on the courts to correct the company's register; it merely assumes that the courts have the power to do so: see Peninsula Gold Pty Ltd v Sunbeam Victa Holdings Ltd (1996) 20 ACSR 553 per Bryson J.

95 In Burns v Siemens Brothers Dynamo Works Ltd (1919) 1 Ch 225, B and H were the trustees of a trust and were the registered joint holders of all but seven of the company's shares. Under the articles, B alone was entitled to vote so that if B was ill or absent the voting power was lost. Astbury J held that in order to enable B and H effectually to exercise their voting power in all circumstances they were entitled to have their holdings split into two joint holdings with their names in different orders and that the register must be altered accordingly. Astbury J held that the register must be altered as the trustees desire, not because it is wrong and liable to rectification under s 32 of the Companies Act, but because the trustees are entitled reasonably and at all times to exercise their joint rights as members. His Honour held that s 32 of the Companies Act is not exhaustive or conclusive of the issue. It provides for a rectification of the wrong register, but it does not prevent the joint owners of shares protecting, as distinct from increasing, their voting rights, and it does not negative all cases of alteration of the register other than those expressly referred to. In that case, by virtue of their property in the shares, the joint owners were entitled to have the shares so entered upon the register as to enable them to exercise their voting power in the event of one of them being unable to be present in person at the company's meetings.

96 In Kathleen Investments (Australia) Ltd v Australian Atomic Energy Commission [1977] HCA 55; (1977) 139 CLR 117 Stephen J held that the jurisdiction to rectify the register is not confined to the statutory power and cited Burns v Siemens Brothers Dynamo Works Ltd in support of that point. Stephen J held that the plaintiff would be entitled to have the register of members of the company rectified if a person registered as a member ought not to appear upon the register as a member of the company.

97 In Whitehouse v Carlton Hotel Pty Ltd [1983] 1 Qd R 336, (affirmed on other grounds in Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285) Thomas J considered the nature of the statutory and equitable remedies to rectify a share register. His Honour referred to British Sugar Refining Co and Joint Stock Companies Act 1856, In re [1857] EngR 280; (1857) 3 K & J 408; (1857) 69 ER 1168, a case decided when the Joint Stock Companies Act was one year old. In that case the Vice Chancellor, Sir W Page Wood referred to the equitable jurisdiction to rectify the register which existed before the Act. In Whitehouse v Carlton Hotel, Thomas J said that the right to the equitable remedy must be found in the assertion of facts which can show an equity which the court will protect. For example, if the plaintiff is a shareholder then at first sight he shows such an equity if he establishes that a name is wrongly included or omitted from the register of his company. One way for a plaintiff to establish the equity is to prove an agreement to become a member. That is sufficient for a plaintiff to claim rectification of the register.

98 A review of the authorities discloses that the court has jurisdiction to rectify a register of shareholders in a company whenever the plaintiff has an equity to support the remedy. In this case the plaintiff seeks that the Trust register of unit holders be rectified. The Court has jurisdiction to rectify the register. However, the power to do so must only be exercised to give effect to some legal or equitable right on the part of the plaintiff.

99 The first, second and third defendants agree that the fourth defendant should issue 10 ordinary units in the Trust to the plaintiff and alter the register to reflect the issue of those units but they oppose any order that the register be rectified retrospectively. It is necessary to consider the rights of the plaintiff in light of the history of this matter.

100 On 24 October 2001 White AUJ ordered the first and second defendants to, within 28 days, take all steps and do all things necessary to convert the special units held by the plaintiff in the Trust into 10 ordinary units in the trust. As I have said, that order was amended by Heenan J by an order made on 5 August 2003.

101 The plaintiff was not entitled to be registered as a holder of 10 ordinary units in the Trust until those units were issued to him by the third defendant.

102 White AUJ did not order that the company issue 10 ordinary shares to the plaintiff or that the register of unit holders be corrected to record the plaintiff as the holder of 10 ordinary units. The plaintiff has not established that he has any legal right to be registered as the holder of ordinary units at any time up to and including the time when orders were made by White AUJ and Heenan J on 24 October 2001 and 5 August 2003 respectively. The plaintiff has not made out his case that the first and second defendants breached fiduciary duties owed to him. The plaintiff has not established that he had any right or equity that supports the register being retrospectively rectified.

103 The defendants agree that orders should be made that the fourth defendant cancel the plaintiff's special units, issue to the plaintiff 10 ordinary units in the Trust and amend the register to reflect the cancellation of the special units and the issue to the plaintiff of the ordinary units.

Cancellation of units owned by third defendant

104 The plaintiff has not established any breach of fiduciary duty by the first and second defendants to the plaintiff and hence that the third defendant aided and abetted the first and second defendant's breaches of fiduciary duty. The plaintiff has not established any right or equity that gives rise to an order for the cancellation of the 10 ordinary units in the Trust owned by the third defendant.

105 In his statement of claim the plaintiff seeks an order that the defendants do account for the income and assets of the Trust since 1 July 1998. In his closing submissions counsel for the plaintiff submitted that if the breach of fiduciary duty occurred in about June 2000 then the appropriate order would be that the defendants account for the income and assets of the Trust from 1 July 2000.

106 The plaintiff's entitlement to an account arises from being an ordinary unit holder. The plaintiff's claim for an account from 1 July 1998, or alternatively 1 July 2000, is based upon the register of unit holders being rectified to record the plaintiff as a unit holder from those dates. I have found that the plaintiff has not made out his case that the first and second defendants breached fiduciary duties owed to the plaintiff, or that the third defendant aided and abetted those breaches of duty. I have found that the plaintiff is not entitled to have units issued to him retrospectively or for the register of unit holders to be amended retrospectively. It follows that the plaintiff is not entitled to the account which he seeks in his statement of claim, or an account from 1 July 2000.

107 In his statement of claim the plaintiff claims a pro rata proportion of profits distributed to ordinary unit holders since 1 July 1998 be made to the plaintiff in respect of his holding of 10 ordinary one dollar units in the Trust. That claim is based upon the plaintiff becoming an ordinary unit holder from 1 July 1998, or some alternative date. I have found that the plaintiff is not entitled to have units issued to him retrospectively or for the register of unit holders to be amended retrospectively. It follows that the plaintiff is not entitled to the pro rata proportion of profits to be distributed as claimed.

108 In his statement of claim the plaintiff seeks an order for the cancellation of the share in the company owned by the third defendant, Mr Bazeley. Counsel for the plaintiff submitted that the power to cancel the share arises from the third defendant having aided and abetted the first and second defendant's breach of fiduciary duties owed to the plaintiff. The plaintiff has not made out his case that the first and second defendants breached any fiduciary duties or that the third defendant aided and abetted such a breach of duties. It follows that the plaintiff is not entitled to an order for the cancellation of the share in the company owned by the third defendant.

109 The plaintiff initially claimed equitable compensation and damages. However, at trial the plaintiff abandoned his claim for that relief.

110 The first, second and third defendants pleaded a counterclaim in these terms:

"These defendants repeat the defence, and in particular paragraph 14, and seek an order that if and when the plaintiff is issued with ordinary units in the trust he be restrained from using them for the purpose of winding up the trust, or for having any property comprised in the trust fund transferred to him."

111 Paragraph 14 of the defence pleads that it was an express, or in the alternative an implied term, of the oral agreement made between the plaintiff and the first and second defendants that if and when the plaintiffs special units in the trust were converted to ordinary units he would use them or the powers attached to them without the knowledge and consent of the first, second and third defendants to preserve and expand the commune and that he would use them to prevent Hayes from winding up the trust.

112 I assume that the pleading contains a typographical error and the defendants intend to plead that the term of the agreement was that when the plaintiff's special units in the trust were converted to ordinary units he would not use them or the powers attached to them without the knowledge and consent of the first, second and third defendants and he would use them to preserve and expand the commune and that he would use them to prevent Hayes from winding up the trust.

113 The counterclaim was not pressed at trial. Indeed, I do not recall the counterclaim being referred to by counsel for the defendants at trial. In any event, I do not find that the counterclaim has been made out.

114 For the reasons stated, I will make orders to the following effect:

1. The fourth defendant cancel the 13,125 special par units held by the plaintiff in the trust.

2. The fourth defendant issue to the plaintiff 10 ordinary one dollar units in the trust.

3. The fourth defendant correct the Trust register of unit holders to reflect the cancellation of the 13,125 special par units held by the plaintiff and the issue to the plaintiff of 10 ordinary one dollar units.

4. The plaintiff's claim and the counterclaim shall otherwise be dismissed.

British Sugar Refining Co and Joint Stock Companies Act 1856

Sugar Refining Co and Joint Stock Companies Act 1856

Price v Powers & Ors [2005] WASC 154

At a glance

Court

Decision date

Before

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Judgment (178 paragraphs)

Price v Powers & Ors [2005] WASC 154 (8 July 2005)

Parties

Legislation Cited (2)

Cases Cited (17)