Brunninghausen v Glavanics

Case [1999] NSWCA 199
Reported Decision: 46 NSWLR 538
32 ACSR 294
(1999) 17 ACLC 1247

New South Wales


Court of Appeal

CITATION: Brunninghausen v Glavanics [1999] NSWCA 199
FILE NUMBER(S): CA 40111/96; 40049/97
HEARING DATE(S): 8 September 1998
9 September 1998
JUDGMENT DATE:
23 June 1999

PARTIES :
Max Bernard Jules Brunninghausen & Anor
v
Michael Glavanics
JUDGMENT OF: Priestley JA at 1; Handley JA at 3; Stein JA at 124
LOWER COURT JURISDICTION: Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S) : EQ 1868/91
LOWER COURT JUDICIAL OFFICER: Bryson J
COUNSEL: P J Brereton/D Ash (Appellant)
B A Coles QC/P J Hayes (Respondent)
SOLICITORS: Stephen J Wawn & Associates (Appellant)
Hughes & Co (Respondent)
CATCHWORDS: CORPORATIONS LAW - Directors' duties - whether sole effective director owed fiduciary duty to another shareholder - application of rule in Percival v Wright; EQUITY - fiduciary duty - whether director owed fiduciary duty to shareholder in purchase of shares
ACTS CITED: Fair Trading Act 1987
CASES CITED:
 Masters v Cameron (1954) 91 CLR 353, 360-4
Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622, 628
Salomon v Salomon & Co [1897] AC 22
Foss v Harbottle (1843) 2 Hare 461
Prudential Assurance Co Ltd v Newnham Industries Ltd [No 2] [1982] Ch 204 CA, 223-4
Gould v Vaggelas (1985) 157 CLR 215, 220, 245, 253
Percival v Wright [1902] 2 Ch 421
Allen v Hyatt (1914) 30 TLR 444
Winthrop Investments Ltd v Winns Ltd [1975] 2 NSWLR 666, 680
Goodwin v Agassiz (1933) 186 NE 659, 661
Allen v Hyatt (1914) 32 TLR 444
Nocton v Ashburton [1914] AC 932, 955-6
Galloway v Halle Concerts Society (1915) 2 Ch 233
Ngurli Ltd v McCann (1953) 90 CLR 425
Mills v Mills (1938) 60 CLR 150, 185
Howard Smith Ltd v Ampol Ltd [1974] AC 821
Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285, 289-90
Richard Brady Franks Ltd v Price (1937) 58 CLR 112, 143
Provident International Corporation v International Leasing Corporation Ltd (1969) 89 WN (PT 1) (NSW) 370, 377
Stein v Blake [1998] 1 All ER 724 CA, 727
Gething v Kilner [1972] 1 WLR 337
Bulfin v Bebarfalds Ltd (1938) 38 SR (NSW) 423
Peel v London & NW Railway Co [1907] 1 Ch 5 CA
Tiessen v Henderson [1899] 1 Ch 861
Peters' American Delicacy Co Ltd v Heath (1939) 61 CLR 457, 486
Re El Sombrero Ltd [1958] Ch 900
Hooker Investments Pty Ltd v Bearing Bros Halkerstone and Partners Securities Ltd (1986) 10 ACLR 462, 463
Cook v Deeks [1916] 1 AC 554
Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134
Hospital Products v United States Surgical Corporation (1984) 156 CLR 41, 69
Glandon Pty Ltd v Strata Consolidated Pty Ltd (1993) 11 ACSR 543 CA, 547, 557
Coleman v Myers [1977] 2 NZLR 225, 276-80
Erlanger v New Sombrero Phosphate Co (1878) 3 App…

Continue reading Brunninghausen v Glavanics

Sign in free to access the full text

Details
AGLC
Brunninghausen v Glavanics [1999] NSWCA 199
Case
[1999] NSWCA 199
Decision Date

CaseChat Overview and Summary

The New South Wales Court of Appeal considered a dispute between shareholders of a company, Brunninghausen (the appellant) and Glavanics (the respondent). The core of the disagreement concerned the appellant's conduct in purchasing the respondent's shares in the company. The respondent alleged that the appellant, as the sole effective director of the company, owed him a fiduciary duty in relation to this transaction.

The primary legal issues before the Court were whether the rule established in *Percival v Wright* applied in this context, and more broadly, whether a director, who was also the sole effective director and a shareholder, owed a fiduciary duty to another shareholder when purchasing that shareholder's shares. The Court had to determine the scope of directors' duties, particularly in circumstances where a director is also a party to a transaction with a fellow shareholder.

The Court of Appeal held that the rule in *Percival v Wright*, which generally states that directors do not owe fiduciary duties to individual shareholders in their capacity as shareholders, was not applicable in the specific circumstances of this case. The Court reasoned that the appellant's position as the sole effective director, combined with his personal interest in acquiring the respondent's shares, created a situation where he owed a fiduciary duty to the respondent. This duty arose from the special relationship of trust and confidence that existed between them, particularly given the appellant's control over the company's affairs and his knowledge of its true value, which was not readily available to the respondent. The Court found that the appellant had breached this duty by failing to disclose material information to the respondent before purchasing his shares.

The Court of Appeal made orders allowing the appeal and remitting the matter to the Supreme Court for further consideration of the appropriate remedy.

Orders

Orders of the court

Orders made

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.