Battye v Shammall

Case [2005] SASC 138

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court: Civil)

BATTYE & ANOR v SHAMMALL

Judgment of The Full Court

(The Honourable Chief Justice Doyle, The Honourable Justice Duggan and The Honourable Justice Gray)

14 April 2005

PARTNERSHIP - RIGHTS AND DUTIES OF PARTNERS INTER SE - FIDUCIARY RELATIONSHIP

EQUITY - GENERAL PRINCIPLES - FRAUDULENT AND INNOCENT MISREPRESENTATION - THE REPRESENTATION - NON-DISCLOSURE AND CONCEALMENT

Appeal against order of judge dismissing an appeal by unsuccessful plaintiffs against decision of magistrate.

Plaintiffs and defendant entered into an agreement to purchase racehorses - plaintiffs agreed to pay defendant $A25,000 for a half interest in the racehorses - defendant failed to disclose that he had paid $A30,000 for the racehorses - magistrate rejected plaintiffs' allegation of positive misrepresentation and found that defendant owed no duty to make disclosure - plaintiffs' claim failed - on appeal judge found that defendant was under duty of disclosure arising from fiduciary relationship between parties, but as this claim had not been advanced before the magistrate the claim could not be raised on appeal.

Whether claim for breach of fiduciary duty was raised at trial - whether any prejudice arising from failure to raise fiduciary argument at trial - consideration of nature of fiduciary relationship between parties.

Held - fiduciary relationship existed between parties and gave rise to a fiduciary duty on the part of the defendant not to use fiduciary position to his personal advantage - duty to disclose - no prejudice to defendant established - appeal allowed - order of magistrate dismissing claim set aside - judgment entered for plaintiffs for $A10,000.

S P Hywood Pty Ltd v Standard Chartered Bank Ltd (Perry J, 22 December 1992, unreported); Bell v Lever Brothers Limited [1932] AC 161; Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384; United Dominions Corporation Ltd v Brian Pty Ltd (1985) 158 CLR 1; Chan v Zacharia (1983) 154 CLR 178; Tracy v Mandalay Pty Ltd (1953) 88 CLR 215; Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd R 1; Coulton v Holcombe (1986) 162 CLR 1; Sutton v Gundowda Pty Ltd (1950) 81 CLR 418; Water Board v Moustakas 1988) 62 ALJR 209; Banque Commerciale SA v Akhil Holdings Ltd (1990) 169 CLR 279, considered.

BATTYE & ANOR v SHAMMALL
[2005] SASC 138

Full Court:  Doyle CJ, Duggan and Gray JJ

  1. DOYLE CJ:          I have had the advantage of considering the reasons of Gray J.  There is no need for me to repeat the facts.

  2. I do not agree that a claim was made at trial in the Magistrates Court for breach of a fiduciary duty, the breach being the profit made by the defendant as a result of the plaintiffs paying the defendant $25,000 for a half interest in the horses in question.

  3. In the circumstances, and in particular because of the proposal that the plaintiffs and the defendant enter into a partnership, there was a…

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AGLC
Battye v Shammall [2005] SASC 138
Case
[2005] SASC 138
Decision Date

CaseChat Overview and Summary

The appeal in Battye v Shammall concerned a dispute between the plaintiffs, David John Battye and Glenda Joy Battye, and the defendant, David Maxwell Shammall, regarding the establishment and dissolution of a partnership in relation to the ownership and racing of horses. The dispute arose out of the plaintiffs' claim that the defendant had misrepresented the purchase price of three horses, which they believed led to an unfair distribution of profits. The matter was initially heard in the Magistrates Court of Victoria and was subsequently appealed to the Supreme Court of Victoria.

The primary legal issue the court had to address was whether the defendant had breached his fiduciary duty to the plaintiffs by not disclosing the actual purchase price of the horses, which resulted in a profit for the defendant. The court also needed to determine whether the plaintiffs' claim could be pursued in the current proceedings or if it should be addressed in partnership dissolution proceedings. Furthermore, the court examined whether the plaintiffs' failure to disclose the misrepresentation constituted a waiver of their rights.

The court found that the defendant had indeed breached his fiduciary duty by not disclosing the purchase price of the horses, which led to an unjust enrichment of the defendant. The court held that the plaintiffs had not waived their rights to seek redress for the misrepresentation and that their claim could be pursued in the current proceedings. The court rejected the defendant's argument that the plaintiffs should have been aware of the purchase price due to their business experience and the nature of their relationship. The appeal was allowed, and the court ordered that the magistrate's dismissal of the claim be set aside. Judgment was entered in favour of the plaintiffs for $A10,000, with the parties to be heard on the issue of interest and costs.

Orders

Orders of the court

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Background

Background to the litigation

This is an appeal from an order of a Judge of this Court dismissing an appeal by unsuccessful plaintiffs against the decision of a magistrate rejecting their claim.The Factual Background The plaintiffs and appellants David John Battye and Glenda Joy Battye were interested in horses. The defendant and respondent David Maxwell Shammall shared a similar interest. The Battyes and Mr Shammall had known each other for many years. They shared an interest in trotting and met from time to time at a suburban trotting track. They were on good terms and trusted each other. They had a past history of jointly owning and racing horses. All were experienced in business. In the early months of 1998 Mr Shammall approached Mr Battye at the trotting track. He told Mr Battye of a filly called Scherger Down. A discussion ensued about the Battyes and Mr Shammall jointly owning and racing the filly. At a later point of time whilst discussing Scherger Down, Mr Shammall also suggested that the Battyes join with him in owning and racing two Falcon Seelster colts. Mr Shammall informed Mr Battye that all the horses at the time were in New Zealand. He said that he had purchased Scherger Down and had an option to purchase the Falcon Seelster colts. Mr Shammall discussed the issue of consideration and agreement was reached at or about the same time. The Battyes agreed to pay $A25,000 for a half interest in the three horses. It was common ground at trial and on appeal that the preliminary discussions were with a view to the Battyes and Mr Shammall as partners owning training, racing and possibly breeding from the horses. On the payment of the $A25,000 the partnership came into effect. Mr Shammall did not disclose to the Battyes that he had purchased Scherger Down for $NZ20,000 and the two Falcon Seelster colts for $NZ15,000. In total Mr Shammall had paid $NZ35,000 for the three horses and the Australian dollar equivalent of that amount was $30,000. Accordingly, it can be seen that in accepting $A25,000 for a half interest in three horses, Mr Shammall had made a profit of $A10,000. No disclosure was made to the Battyes of this profit taken by Mr Shammall.The Earlier Proceedings The Battyes’ case at trial was that Mr Shammall had made positive misstatements about the payment he had made for the horses. Alternatively it was said that Mr Shammall failed to make relevant disclosures and had engaged in misrepresentation by silence. Before trial interlocutory applications were heard concerning the adequacy of the pleadings. Initially the Battyes had pursued a claim in contract in addition to the other claims advanced. A counter-claim was lodged by Mr Shammall seeking payment of a share of the expenses incurred in the maintaining and training of the horses. The parties acknowledged that a contract had been reached and that a partnership had been entered into. Debate ensued as to whether the relief being sought in the action should be pursued in partnership dissolution proceedings in the Supreme Court. The magistrate ruled that the claim in contract could not be pursued in the present proceedings. He ordered that the hearing of the counter-claim be adjourned as it appeared to be a dispute arising from the partnership agreement. The magistrate foreshadowed that the issues being raised by the counter-claim may have to be dealt with in dissolution of partnership proceedings. It was suggested that the Magistrates Court did not have jurisdiction to deal with that issue.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

DUGGAN J
The difficulty confronting this submission is that at the time of the suggested election by the Battyes to continue with the arrangement they were unaware of the circumstances surrounding the purchase of the horses and in particular the consideration paid by Mr Shammall. In these circumstances there had not been full disclosure. The Battyes were proceeding without knowledge of the relevant facts. Mr Shammall’s submission should be rejected.Conclusion This appeal should be allowed. The order of the magistrate dismissing the claim should be set aside. Judgment should be entered for the Battyes for $A10,000. The parties should be heard with respect to interest and costs.

Ratio Decidendi

Legal Principle Established

Established by: DUGGAN J

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