Phosphate Resources Ltd v Western Stevedores Pty Ltd
[2003] WASC 84
PHOSPHATE RESOURCES LTD -v- WESTERN STEVEDORES PTY LTD [2003] WASC 84
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2003] WASC 84 | |
| Case No: | CIV:2730/2002 | 15 APRIL 2003 | |
| Coram: | MASTER NEWNES | 6/05/03 | |
| 23 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | PHOSPHATE RESOURCES LTD WESTERN STEVEDORES PTY LTD |
Catchwords: | Practice and procedure Order 16 Defendant's application for summary judgment Whether contract for joint venture Whether fiduciary duties owed by prospect joint venturer Turns on own facts |
Legislation: | Rules of the Supreme Court, O 16 |
Case References: | Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384 Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 Furs Ltd v Tomkies (1936) 54 CLR 583 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486 Terrex Resources NL v Magna Petroleum Pty Ltd [1988] 1 WAR 144 United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 Warman International Ltd v Dwyer (1994) 182 CLR 544 Alcoa of Australia Ltd v SEC (WA) (1995) 17 WAR 112 Anderson v Effexseven & Anor (1999) 10 ANZ Ins Cas 61-424 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 Evans v Bartlam [1937] 2 All ER 646 Forsayth NL v Northern Gold NL, unreported; SCt of WA; Library Number 940012; 20 January 1994 Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd R 1 Industrial Development Consultants Ltd v Cooley [1972] 2 All ER 162 Interhotel Australia Pty Ltd v Austotel Pty Ltd (1987), unreported; SCt of WA; Library No 6787; 15 July 1987 May & Butcher Ltd v R [1934] 2 KB 17 Paul Dainty Corporation Pty Ltd & Anor v National Tennis Centre Trust & Ors (1990) 94 ALR 225 Regal (Hastings) Ltd v Gulliver & Ors [1967] 2 AC 134 Schipp v Cameron, Harrison & Ors [1998] NSWSC 997 Secured Income Real Estate (Australia) Ltd v St Martin's Investments Pty Ltd (1979) 144 CLR 596 Woodside Offshore Petroleum Pty Ltd v Atwood Oceanics Inc & Anor [1986] WAR 253 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
WESTERN STEVEDORES PTY LTD
Defendant
Catchwords:
Practice and procedure - Order 16 - Defendant's application for summary judgment - Whether contract for joint venture - Whether fiduciary duties owed by prospect joint venturer - Turns on own facts
Legislation:
Rules of the Supreme Court, O 16
Result:
Application dismissed
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr M H Zilko SC
Defendant : Mr M C Hotchkin
Solicitors:
Plaintiff : Troika Legal
Defendant : Hotchkin Hanly
Case(s) referred to in judgment(s):
Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101
Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Furs Ltd v Tomkies (1936) 54 CLR 583
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486
Terrex Resources NL v Magna Petroleum Pty Ltd [1988] 1 WAR 144
United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1
Warman International Ltd v Dwyer (1994) 182 CLR 544
Case(s) also cited:
Alcoa of Australia Ltd v SEC (WA) (1995) 17 WAR 112
Anderson v Effexseven & Anor (1999) 10 ANZ Ins Cas 61-424
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
Evans v Bartlam [1937] 2 All ER 646
Forsayth NL v Northern Gold NL, unreported; SCt of WA; Library Number 940012; 20 January 1994
Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd R 1
Industrial Development Consultants Ltd v Cooley [1972] 2 All ER 162
(Page 3)
Interhotel Australia Pty Ltd v Austotel Pty Ltd (1987), unreported; SCt of WA; Library No 6787; 15 July 1987
May & Butcher Ltd v R [1934] 2 KB 17
Paul Dainty Corporation Pty Ltd & Anor v National Tennis Centre Trust & Ors (1990) 94 ALR 225
Regal (Hastings) Ltd v Gulliver & Ors [1967] 2 AC 134
Schipp v Cameron, Harrison & Ors [1998] NSWSC 997
Secured Income Real Estate (Australia) Ltd v St Martin's Investments Pty Ltd (1979) 144 CLR 596
Woodside Offshore Petroleum Pty Ltd v Atwood Oceanics Inc & Anor [1986] WAR 253
(Page 4)
1 MASTER NEWNES: This is an application by the defendant under O 16 for summary judgment. The defendant contends that there is no serious issue to be tried in the action.
2 The plaintiff's claim relates to a proposed joint venture between the plaintiff and the defendant in connection with the provision of facilities management services to the Christmas Island port.
3 The plaintiff pleads that, on or about 28 July 2001, the Commonwealth Department of Transport and Regional Services ("Department of Transport") called for proposals to provide facilities management services to the port for a two-year period, with an option for two extensions of 12 months each. Proposals were to be submitted to the Western Australian Department of Industry and Technology ("Department of Industry") by 17 August 2001.
4 The plaintiff pleads that, on or about 10 August 2001, the plaintiff and the defendant orally agreed to enter into a joint venture for the purpose of submitting a proposal. The agreement is said to have been made in a telephone conversation between David Lee, on behalf of the plaintiff, and John Peraldini, on behalf of the defendant.
5 In its statement of claim, the plaintiff alleges that the terms of the agreement were (i) the plaintiff and the defendant would incorporate a company to manage the project; (ii) the proposed company would enter into the requisite contractual arrangements with the Department of Transport; (iii) the shareholders in the proposed company would be the plaintiff as to 50 per cent and the defendant as to 50 per cent; (iv) the plaintiff and the defendant would provide such financial support to the proposed company as was necessary to ensure the successful execution of its obligations under the contract with the Department of Transport; (v) the plaintiff and the defendant would provide their expertise and experience to the joint venture to ensure its success; (vi) the defendant would advise the Department of Industry of the proposed joint venture and generally act on behalf of both the plaintiff and the defendant in any dealings with the Department of Industry.
6 It pleads that, on 17 August 2001, the defendant wrote to the Department of Industry advising it of the proposed joint venture and submitting a summary of the joint venturers' intention in relation to the provision of facilities management services to the port.
7 On 24 September 2001, the defendant wrote again to the department providing additional information regarding the joint venture, the proposed
(Page 5)
- joint venture company and a draft of the parties' intended business plan if the joint venturer's tender was successful. The defendant provided further information regarding the proposal to the department on 19 October 2001.
8 The plaintiff says that, at some time prior to 8 April 2002, the defendant, in its own right only, entered into a contract with the Department of Transport for the provision of facilities management services at the port. It says the defendant took no steps to incorporate the joint venture company, or to do the other things necessary for the company to enter into a contract for the provision of facilities management services at the port ("Christmas Island Contract") on behalf of the parties, nor did it advise the plaintiff of its intention to enter into that contract or invite the plaintiff to participate in it.
9 Two claims are made by the plaintiff. First, it says that the defendant is in breach of the agreement to enter into a joint venture for the purposes of submitting a joint proposal. The plaintiff seeks damages for breach of contract. Secondly, it says that the defendant owed to the plaintiff fiduciary duties which the defendant breached by entering into the Christmas Island Contract in its own right alone.
10 The plaintiff says that the specific fiduciary duties owed to it by the defendant were (i) not to act so as to gain an advantage for itself to the prejudice of the interests of the plaintiff; (ii) to act in good faith at all times in relation to the affairs of the proposed joint venture; (iii) to act bona fide and for the benefit of both the plaintiff and the defendant in the defendant's dealings with the Department of Transport and the Department of Industry; (iv) not to subordinate the interests of the plaintiff to those of the defendant; and (v) not to obtain or receive any benefit or gain by reason of the defendant's dealings with the Department of Industry or Department of Transport to the exclusion of the plaintiff. The plaintiff seeks equitable compensation or an account of profits.
11 In support of the defendant's application for summary judgment an affidavit was sworn by John Martin Peraldini on 25 February 2003. Mr Peraldini is a director of the defendant. In his affidavit, Mr Peraldini says that he knew Mr David Lee of the plaintiff because they had previously worked together. Mr Peraldini says that they had kept in touch over the phone and socially. In or about early July 2001, he says, he discussed with Mr Lee the pending tender process by the Commonwealth Government for the management of the Christmas Island port. Mr Peraldini says they agreed to look at making a joint proposal for the management services, but little discussion took place at that stage.
(Page 6)
12 After the Department of Industry had issued a request for proposals for facilities management services for the port in July 2001, Mr Peraldini says he had two or three brief several telephone discussions with Mr Lee in which they discussed the basis upon which a joint bid would be made. Mr Peraldini says that both of them had a copy of the request for proposals and the contents of it were discussed. He says that he volunteered to make the bid. It was agreed between them that if the bid were successful a company would be incorporated to be the vehicle for provision of the facilities management services. Mr Peraldini says he told Mr Lee that the defendant would need to manage the contract for the provision of the facilities management services if the bid were successful. He says Mr Lee agreed the defendant would undertake that principal operating role.
13 Mr Peraldini says that nothing more than that was discussed and there was no discussion as to how the arrangements between the plaintiff and the defendant would be advanced. He says there was not enough time for there to be any detailed analysis of the proposal between them, so it was left to him to decide how best to frame the bid. Mr Peraldini says that he did not offer to undertake, Mr Lee did not insist upon, further consultation before the bid was made.
14 According to Mr Peraldini, over the course of the next few days he drafted a bid and asked Mr Lee to confirm in writing that the plaintiff would be involved in the bid. He says the bid was lodged on 17 August 2001 and a copy of it was provided to the plaintiff around that date. The covering letter, after introducing the parties, went on as follows:
"Western Stevedores (1997) Pty Ltd and Phosphate Resources Ltd propose to enter into a 50/50 joint venture agreement for the specific purpose of responding to the Request of Proposals for Facilities Management Services for Christmas Island Port. The Joint Venture Agreement intends that a company (50% owned by each of the parties) will be established to manage the Facilities and Services for Christmas Island Port.
Western Stevedores (1997) Pty Ltd and Phosphate Resources Ltd have not been able to formalise the Joint Venture Agreement, or establish the proposed management company prior to the closing time set for the close of proposals, nor have they been able to finalise the detail of the proposal to be submitted.
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- Therefore Western Stevedores Pty Ltd submits the following proposal on behalf of the above two parties, with the intention of demonstrating the ability to meet the compliance and qualitative criteria.
If the Summary Proposal is accepted for the purpose of evaluation, Western Stevedores Pty Ltd undertakes on behalf of the parties to submit by Friday, 31st August 2001 full details of:
- the JV Agreement
- arrangements for the proposed management company
- specific proposals for the Management of Facilities and Service Delivery for Christmas Island Port."
16 The letter of 24 September attached, among other things, details of the proposed joint venture arrangement. As these were canvassed in argument, it is necessary to set them out. They are as follows:
"(1) Joint Venture Arrangements
(a)Parties
Western Stevedores Pty Ltd
Phosphate Resources Ltd
(b)Agreement
The parties agree to establish a Pty Ltd company for the purpose of providing facilities management services for Christmas Island Port.
(Page 8)
- Western Stevedores will be the majority shareholder (nominally 51 per cent).
Western Stevedores Pty Ltd and Phosphate Resources Ltd will each be entitled to nominate two directors to the Board of the Management Company. The General Manager of the Management Company will be the fifth director of a five person Board. The Board will elect the chairperson of the company.
The parties will provide initial funding by way of capital injection in proportion to shareholding as necessary to cover start-up costs and working capital (including security deposit). Western Stevedores will provide to the Management Company full professional, technical and operational support necessary to ensure the competent and efficient management of Facilities for Christmas Island Port.
Phosphate Resources Ltd will provide the Management Company with on-island support in relation to administration and personnel backup.
No charges for services will be levied by the shareholding companies, or agreed by the Management Company unless the services and charges proposed are documented and accepted in writing by the Management Company prior to provision of the service.
The final shareholding in the Management Company is subject to the agreement of the Christmas Island Administration and no changes to shareholding to incur [sic] without the agreement of the Christmas Island Administration.
In the event of the occurrence of any dispute between shareholders that has the potential to impact on the performance of the Management Company, the following steps will occur:
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- - the Christmas Island Administration will be informed of the dispute and its potential impacts, and
- if the dispute cannot be resolved between the parties within a reasonable period the matter will first be referred for formal mediation/arbitration and failing that, for legal resolution.
- (2) Proposed Management Company
(a)Shareholding
Western Stevedores Pty Ltd 51% (nominal)
Phosphate Resources Ltd 49%
(b)Board and Directors
The Board will comprise five directors;
- two nominated by Western Stevedores Pty Ltd
- two nominated by Phosphate Resources Ltd
- one being the general manage of the Management Company
The directors will elect the chairperson who will be appointed for one year.
All positions (excluding the general manager) will be renominated each year.
Western Stevedores, Phosphate Resources and the general manager will each nominate one proxy to cover the unavailability of a director for Board meetings.
Board meetings will initially be held monthly until such time as the Management Company is
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- operating effectively, and then no less frequently than every two months.
- (c) Purpose
The primary purpose of the Management Company is to provide facilities management services for Christmas Island Port in accordance with conditions and requirements of contract entered into with the Christmas Island Administration.
The Management Company may expand its scope of operations to include provision of services but only subject to ensuring that its prime purpose is not compromised.
(d) Board Decisions
Wherever possible the Board will endeavour to reach consensus decisions.
Decisions impacting on the corporate structure of the Management Company will require at least four votes in favour. Decisions impacting on the management and operating arrangements of the Management Company will require at least three votes in favour.
(e) Funding
The shareholders will contribute start-up and working capital and will guarantee the performance of the contract, in proportion to shareholding."
17 On 12 October 2001 the Department of Industry wrote to the defendant requesting clarification of certain matters in connection with the bid. One of the matters on which clarification was sought was as follows:
"How would you handle the potential conflict of interest between PRL [that is, the plaintiff], as the major user of the port, and other port users?"
(Page 11)
18 The defendant replied, by its general manager, Mr Bryan Martin. In relation to that question, he said:
"The development and documentation of an objective tariff structure and criteria for access to berths and services will be the major strategy for handling conflict issues.
A consultative mechanism will be utilised to minimise the conflict/disagreement that may arise through the process."
19 Mr Peraldini says that the content of the response was not discussed with the plaintiff and, as they had had no contact with the plaintiff, he assumed the plaintiff was content to allow the defendant to complete the bid process, on the assumption that, if the defendant was successful, the parties would then negotiate in good faith the terms of a joint venture agreement and a management contract.
20 On 22 October 2001, a meeting took place between the defendant and representatives of the Commonwealth government in connection with the tender. Mr Martin and Mr Peraldini from the defendant attended the meeting. A number of representatives of the Commonwealth attended.
21 Mr Martin has sworn an affidavit of 24 February 2003 in which he says that at the meeting the Commonwealth representatives raised concerns about the conflict of interest arising out of the plaintiff's involvement in the management contract, as the plaintiff was the major customer of the port. Mr Martin said that he and Mr Peraldini told the Commonwealth officers that the plaintiff had not had any input into the bid or into the information subsequently provided. He goes on in his affidavit:
"We also advised the Commonwealth that Western Stevedores Pty Ltd was prepared to enter into the management contract on its own. The Commonwealth representatives responded by saying that they would prefer it if Western Stevedores Pty Ltd entered into the management contract in its own right due to the potential conflict of interest created by PRL's involvement.
After that meeting all communications and negotiations between Western Stevedores Pty Ltd and the Commonwealth were done only on behalf of Western Stevedores Pty Ltd and not on behalf of PRL or any proposed joint venture."
(Page 12)
22 Mr Peraldini says that his recollection of the meeting generally accords with what is set out in Mr Martin's affidavit.
23 Mr Peraldini says he believed at that stage the Commonwealth did not have a clear understanding of what was required for the management of the port facilities and that its lack of understanding could cause problems for any successful bidder. The defendant, therefore, proposed that it prepare a business plan for the port.
24 Mr Martin says that, during October and November 2001, he had various discussions with officers of the Commonwealth on the terms and conditions of the management contract and also in relation to the preparation of a business plan and a three-month consultancy which the defendant would provide before the management contract was entered into. Mr Martin says that he and Mr Peraldini considered that, through the consultancy service and the business plan, they could provide clear guidance to the Commonwealth about what the Commonwealth required for the proper management of the port facilities.
25 Mr Martin says that he prepared an offer to the Commonwealth for the preparation of the business plan and the provision of consultancy services by the defendant. He wrote to the Commonwealth some time in November 2001 in that regard. The letter itself is undated.
26 Following further negotiations, the defendant entered into the consultancy agreement with the Commonwealth on 29 November 2001 and commenced preparation of the business plan. Mr Martin says that he assisted Mr Peraldini with the preparation of the business plan, which was completed on about 21 February 2002.
27 Mr Martin also says that, after October 2001, he had conversations with several representatives of the Commonwealth who told him that the Commonwealth did not want the plaintiff to be part of the management contract and that the Commonwealth wanted the defendant to manage the facility in its own right.
28 In his affidavit, however, Mr Peraldini says that during the period up to 21 February 2002, although there was no correspondence between the plaintiff and the defendant, he kept Messrs Lee and Lai of the plaintiff "informed on a casual basis when we played golf from time to time as to how things were going. I told them that the proposal was on hold whilst Western Stevedores was preparing a business plan for the Commonwealth to consider. They did not ask me to prepare a draft Joint Venture Agreement or a Management Contract, nor did they suggest that they
(Page 13)
- should do one themselves for me to consider. Neither of them made any particular comment regarding what they hoped would be the outcome as far as PRL was concerned. There was simply no mention at all about the proposed joint venture".
29 Mr Peraldini says that the business plan was accepted by the Commonwealth, which then requested that the defendant assist in the preparation of the proposed management contract.
30 He then says that Mr Martin told him that he had been informed by Commonwealth representatives that the Commonwealth did not want the plaintiff involved in the management contract. As a result, Mr Peraldini says he informed Mr Lai of the plaintiff of that and told him that the Commonwealth regarded the defendant as having a substantial conflict of interest. According to Mr Peraldini, as a result of that advice to Mr Lai, a meeting between representatives of the plaintiff and the defendant was arranged.
31 Mr Peraldini says the meeting took place at the Burswood Hotel in March 2002. It was attended by Mr Argyle, Mr Teo and Mr Lai on behalf of the plaintiff, and Mr Martin and himself on behalf of the defendant. Mr Peraldini says that at the meeting Mr Argyle insisted that the plaintiff be permitted to take a 50 per cent interest in the Christmas Island Contract. Mr Peraldini says he told him the Commonwealth did not want the plaintiff involved because of its conflict of interest. He said he told Mr Argyle that if the Commonwealth did agree to their involvement he would be prepared to negotiate terms for their 50 per cent interest. Mr Martin's account of the meeting in his affidavit is to the same effect.
32 The plaintiff has filed affidavits of Mr Argyle and Mr Teo dealing with the events of February and March 2002. No affidavits have been filed dealing with the earlier period.
33 In Mr Argyle's affidavit, he says that he and Mr Teo had a meeting with Mr Peraldini on 28 February 2002 at the Burswood Hotel. He does not say why the meeting was convened. He says, however, that, because Mr Peraldini was running late for it, he telephoned him and stressed that it was very important the defendant receive an update on the progress of the bid. Mr Argyle says he explained that he would be travelling to Canberra in March to meet with senior officials of the Department of Transport to discuss a range of issues relating to the plaintiff. When Mr Peraldini arrived for the meeting, he told Mr Teo and Mr Argyle that "everything was on track for the 50/50 joint venture to win the Contract". Mr Argyle
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- said that, because of that, he did not subsequently raise the matter when he met with officials of the Department in March 2002. Mr Argyle says that he did not have any meeting with representatives of the defendant in March 2002, as claimed by Mr Peraldini, as he (Mr Argyle) left Perth on 1 March and did not return until 7 April 2002.
34 Mr Teo has filed an affidavit in which he simply says that he did not have any meeting with Mr Peraldini or Mr Martin during March 2002 and he has never had a meeting with Mr Martin.
35 Mr Peraldini says that the defendant entered into the Christmas Island Contract with the Commonwealth on or about 28 March 2002. It appears that the terms of the contract were negotiated over some period prior to that. The copy of the contract annexed to Mr Peraldini's affidavit is marked "Draft 14 March 2002".
36 It appears from documents annexed to Mr Peraldini's affidavit that in the meantime, on 23 March 2002, the plaintiff, by Mr Teo, wrote to the Department of Transport, noting that the defendant had informed Mr Argyle that the plaintiff could not be part of the Christmas Island Contract because the Department believed there was a conflict of interest. In the letter, Mr Teo noted that the contract was about to be let and asked for an opportunity to respond to the Department's concerns.
37 The department responded by a letter of 8 April 2002 from its Assistant Secretary, Mr Wilson, who, among other things, said the Commonwealth had now entered into the contract with the defendant. On the question of the conflict of interest he said:
"Any changes to the corporate structure that Western Stevedores employs for dealing with the provision of services is essentially one for Western Stevedores to address and bring forward for our consideration. However, as I pointed out to David Argyle, our primary concerns would relate to conflict of interest, or perceptions of conflict of interest, as this major overhaul of port facilities is completed. We would not see it as appropriate that a major user of the port be in a position, through the contract for the overhaul, to influence, or be perceived as influencing, the outcome. In the same vein, we have made it plain to Western Stevedores that it should not pursue a commercial interest in the Island's stevedoring operations during the course of the current contract. The contract contains quite onerous provisions relating to conflict of
(Page 15)
- interest and I have attached the relevant extract for your information."
38 The defendant contends on this application that the plaintiff has no arguable cause of action against it for breach of contract or breach of fiduciary duty.
39 I will deal first with the plaintiff's claim for breach of fiduciary duty.
40 It was the plaintiff's contention that the fiduciary duties pleaded arose because it had devolved upon the defendant the responsibility for negotiating the bid on behalf of the plaintiff as well as on its own behalf. It said it was not to the point (if it were found to be the case) that, at the time of the alleged breach, the joint venture had not been consummated.
41 The defendant, on the other hand, says that the existence of the alleged fiduciary duties is dependant upon the plaintiff establishing a binding contract in relation to the joint venture; there were no other circumstances in this case which could give rise to such duties on the part of the defendant. No such contract was ever concluded and therefore no such duties ever arose. It says, further, that, even if fiduciary duties were owed, they were not breached by the defendant because there was never any opportunity available to the plaintiff to participate in the contract with the Commonwealth because of the plaintiff’s conflict of interest.
42 I do not accept the defendant's proposition that the existence of the fiduciary duties alleged is dependant upon a finding that a contract existed between the parties in relation to the joint venture.
43 In Hospital Products Ltd v United States Surgical Corporation (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 relationships … viz trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these 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 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 was
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- 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, to adopt an expression used by the Court of Appeal.
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 … "
44 In United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 12 - 13 Mason, Brennan and Deane JJ said:
"A fiduciary relationship can arise and fiduciary duties can exist between parties who have not reached, and who may never reach, agreement upon the consensual terms which are to govern the arrangement between them. In particular, a fiduciary relationship with attendant fiduciary obligations may, and ordinarily will, exist between prospective partners who have embarked upon the conduct of the partnership business or venture before the precise terms of any partnership agreement have been settled. Indeed, in such circumstances, the mutual confidence and trust which underlie most consensual fiduciary relationships are likely to be more readily apparent than in the case where mutual rights and obligations have been expressly defined in some formal agreement. Likewise, the relationship between prospective partners or participants in a proposed partnership to carry out a single joint undertaking or endeavour will ordinarily be fiduciary if the prospective partners have reached an informal arrangement to assume such relationship and have proceeded to take steps involved in its establishment or implementation.
… To transpose the words of Dixon J in Birtchnell (1929) 42 CLR at pages 407 - 408 the participants in each of the then proposed joint ventures were 'associated for … a common end' and the relationship between them was 'based … upon a mutual confidence that they would 'engage in [the] particular … activity or transaction for the joint advantage only'. It matters not, for present purposes, whether that relationship is seen as
(Page 17)
- one which may exist between prospective partners or joint venturers before the terms of any partnership or joint venture agreement have been settled or whether it is seen as a limited preliminary partnership or joint venture to investigate and explore the possibilities of an ultimate joint venture or ventures. On either approach it was a fiduciary one. That being so, the proposed participants in each joint venture were under fiduciary obligations to one another in relation to the proposed project at the time when the first of the mortgages was given and accepted. In particular each participant was under a fiduciary duty to refrain from pursuing, obtaining or retaining for itself or himself any collateral advantage in relation to the proposed project without the knowledge and informed assent of the other participants. The subject matter over which the fiduciary obligations extended must 'be determined by the character of the venture or undertaking for which' the relationship between the prospective joint venturers existed; per Dixon J, Birtchnell at 408 in a partnership context but otherwise applicable here."
45 In the same case, at page 405, Gibbs CJ said:
"The decision of Lord Lyndhurst LC in Fawcett v Whitehouse is clear authority for the proposition that a person who is negotiating for himself and his future partners as an agent for the intended partnership, and who clandestinely receives an advantage for himself, must account for the advantages to the partnership when it is formed … Other authorities, cited by Lindley, concerned promoters of companies, but there is an analogy between the position of company promoters and that of persons who invite others to join in a partnership. The principle was stated generally in Directors, etc. of Central Railway Co. of Venezuela v Kisch:
'It cannot be too frequently or too strongly impressed upon those who, having projected any undertaking, are desirous of obtaining the co-operation of persons who have no other information on the subject other than that which they choose to convey, that the utmost candour and honesty ought to characterize their published statements'."
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- arguably one that assumed a fiduciary character once the defendant took it upon itself to negotiate the bid on behalf of the proposed joint venture. It is common ground that at that stage the parties had agreed to make a joint tender, to enter into a joint venture as equal participants if the tender was successful, to form a company as the vehicle to provide the services to the port and to devolve the management of the provision of the services to the defendant. It is also common ground that the defendant was to prepare the tender and to conduct the negotiations with the Commonwealth on behalf of both the plaintiff and the defendant. On the defendant's own evidence it is therefore arguable that the defendant undertook to act in their joint interests in the tender process and that the plaintiff placed trust in it to do so and was vulnerable to any abuse of that trust.
47 It follows, in my view, that on the material before me it is arguable that the defendant was under a fiduciary duty to act in good faith in pursuing the tender for the benefit of the parties jointly and to refrain from pursuing, obtaining or retaining for itself any advantage in relation to the subject matter of the proposed joint venture without the knowledge and informed consent of the plaintiff: Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384 per Dixon J at 409; United Dominions Corporation Ltd v Brian Pty Ltd (supra) per Mason, Brennan and Deane JJ at 13.
48 The defendant further contended that, even if fiduciary duties were owed, they were not breached by the defendant because there was never any opportunity available to the plaintiff to participate in the contract with the Commonwealth because of the plaintiff's conflict of interest. I accept the plaintiff's submission that the defendant's contention does not reflect the general rule. It is ordinarily immaterial to the fiduciary's liability that the person to whom the fiduciary obligation is owed could not have earned the profit or gain: Birtchnell v Equity Trustees, Executors and Agency Co Ltdop cit at 408-9; Furs Ltd v Tomkies (1936) 54 CLR 583 at 592; Warman International Ltd v Dwyer (1994) 182 CLR 544 at 562 - 3. Whether or not that rule is applicable in this case is plainly a matter for trial.
49 Moreover, it is not clear on the evidence that a joint venture involving the plaintiff never had any prospect of success. Whether or not the Commonwealth's concerns could have been overcome does not appear, on the evidence before me, to have been seriously explored.
50 It is notable from the defendant's affidavit evidence that Mr Martin and Mr Peraldini were alerted to the Commonwealth's concerns about the
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- plaintiff's conflict of interest as early as October 2001. On the evidence, it seems no real steps were taken by the defendant to assuage or overcome those concerns or to alert the plaintiff to them. Rather, Mr Martin and Mr Peraldini simply advised the Commonwealth that the defendant was willing to enter into the contract on its own behalf alone and the Commonwealth representatives said that they would prefer that.
51 Mr Martin says that, at all times after that, communications between the defendant and the Commonwealth were on the defendant's behalf only and not on behalf of the plaintiff or the joint venture.
52 Mr Martin also says that from October 2001 onwards he had a number of conversations with officers of the Commonwealth in which it was apparently reiterated that the Commonwealth did not want the plaintiff to be part of the management contract. Mr Martin does not suggest he sought to persuade those officers otherwise nor does he suggest that he informed the plaintiff of what had been said to him.
53 In fact, Mr Peraldini says that, up to 21 February 2002, he told the plaintiff's representatives that the proposal was on hold while the defendant prepared a business plan for the Commonwealth to consider. He does not suggest the plaintiff had been informed either of the Commonwealth's concerns about the conflict of interest or that the defendant had told the Commonwealth in October 2001 that the defendant would be prepared to enter into the contract on its own behalf and that it had thereafter negotiated with the Commonwealth on that basis.
54 It appears from Mr Peraldini’s affidavit that the defendant first communicated the Commonwealth's concerns to the plaintiff only some time shortly prior to the meeting at the Burswood Hotel in March 2002.
55 Moreover, in relation to that meeting there is a conflict of evidence. Mr Argyle denies he attended any meeting in March as claimed by Mr Peraldini.
56 Mr Argyle says that a meeting took place on 28 February 2002 at the Hotel. He says that at that meeting Mr Peraldini told him everything was on track for the 50/50 joint venture to win the contract.
57 In support of the defendant's contention that the Commonwealth would never have entered into a joint venture arrangement involving the plaintiff, counsel for the defendant relied particularly on the letter from the Department of Transport to the plaintiff of 8 April 2002.
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58 But it is not clear that that is what the letter was intended to mean. Although it certainly evinced the department's concern about the question of conflict of interest, it noted that any change to the corporate structure was one for the defendant to address and to bring forward for the Department's consideration. That is arguably consistent with the position reflected in the Department's letter of 12 October 2001 about the conflict of interest and how it was to be dealt with. I do not consider that it can be concluded on the basis of the letter of 8 April 2002 that there never any prospect at all that the Department's concern could have been overcome.
59 Accordingly, in my view, whether or not the defendant owed the alleged fiduciary duties to the plaintiff and, if so, whether or not the defendant was in breach of any fiduciary duties that may be found to exist, are issues that can only properly be determined at trial. The application for summary judgment in respect of the claim for breach of fiduciary duty must therefore fail.
60 As I have said, the defendant also seeks summary judgment on the plaintiff's claim for breach of contract.
61 In that regard, the defendant submitted that, on the uncontradicted evidence of Mr Peraldini, it was clear that no binding agreement had been concluded in relation to the joint venture. It contended that essential commercial elements of such a contract remained unresolved. In particular, there was no agreement as to the level and nature of capital contributions, who was to be responsible for providing services to the Commonwealth, who would administer the provision of such services, what was the value to be attributed to services to be provided by either of the participants and who was to provide the facilities required to provide the services. Put at its highest, the parties had done no more than express an intention to enter into a joint venture, the essential terms of which were left to be negotiated if the bid was successful.
62 The defendant also says that it was a condition precedent to the joint venture that the Christmas Island Contract be awarded to the proposed joint venture. But, as it turned out, the Commonwealth would never have entered into a facilities management contract involving the plaintiff because, as the major user of the port, the plaintiff had an obvious conflict of interest. The condition precedent, therefore, could never have been satisfied.
63 No affidavits were filed by the plaintiff dealing with the discussions between the parties in which it says the agreement was made. In
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- particular there was no affidavit from Mr Lee setting out his account of the discussions he had with Mr Peraldini. No explanation was offered for that.
64 It was submitted by counsel for the plaintiff that, in relation to the contract, there were essentially two questions. The first was whether the parties intended to enter into a contract binding at law. The second was whether, having regard to what was agreed, and what still needed to be agreed, the contract was incomplete or uncertain in a legal sense: Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101. In relation to the former, it was said that that involved an assessment of all the relevant circumstances and that was not something that could, or should, be embarked upon on an application of this sort. Equally, it was contended, the question of whether the contract was incomplete or uncertain involved issues that could not properly be determined on affidavit evidence.
65 Counsel for the plaintiff argued that the defendant's contention, that because a number of significant issues had been left unresolved there was no binding agreement, ignored the fact that that a party may enter into a valid contract containing a limited number of terms, being those terms essential to the bargain, in the expectation that at a later date a further contract will be arrived at containing additional terms that will facilitate and clarify the initial contract; that is, a binding contract may be arrived at although it leaves unresolved many matters which may arise in the future. He referred to Terrex Resources NL v Magna Petroleum Pty Ltd [1988] 1 WAR 144 at 159; Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486 at 494-495 and Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (supra) at 24 and 25.
66 Counsel submitted that sufficient evidence to support the plaintiff's claim was contained in the affidavits filed on behalf of the defendant. Counsel suggested Mr Peraldini's affidavit was coy in describing specifically what had, in fact, been agreed in the discussions he had had with Mr Lee. However, on Mr Peraldini's own evidence it had been agreed, at least, to make a joint tender, to enter into a joint venture as equal participants if the tender was successful, to form a company as the vehicle to provide the services to the port and to devolve the management of the provision of the services to the defendant.
67 In addition, counsel pointed, in particular, to Mr Peraldini's letters to the Department of Industry of 17 August 2001 and 24 September 2001 in relation to the terms of the proposed joint venture. He said that the
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- comments by Mr Peraldini about the nature and brevity of the discussions with Mr Lee were inconsistent with the statements that Mr Peraldini had made to the Department in those letters, particularly in the letter of 24 September 2001, in which, counsel argued, Mr Peraldini had indicated that much more had been agreed in respect of the proposed joint venture. Counsel argued that those contemporaneous documents were consistent with the tenor of the agreement pleaded by the plaintiff as having been made between Mr Lee and Mr Peraldini and, implicitly, that the claim in Mr Peraldini's affidavit that he had simply inserted the terms of the proposed joint venture on his own initiative without reference to the plaintiff was not credible.
68 The plaintiff's counsel submitted that, in the end, whether or not a binding contract had been made between the parties depended upon a number of findings that could not be made on affidavit evidence on an application of this sort. They included precisely what had been agreed between the parties, and the factual matrix in which that agreement had been reached, and whether what had been agreed was incomplete or uncertain in a legal sense.
69 I do not consider that the plaintiff's position has been assisted by the absence of any affidavit evidence of Mr Lee as to the terms of the discussions he had with Mr Peraldini. As I have said, no explanation has been offered for the absence of such evidence.
70 I am mindful, however, of the heavy onus the defendant bears on this application. The power to order summary judgment must be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: Fancourt v Mercantile CreditsLtd (1983) 154 CLR 87 at 99. In the end, I do not think the position can be said to be that clear in respect of the contract claim. For instance, despite the absence of any evidence from Mr Lee, there is, I think, an important issue of fact as to precisely what was agreed between Mr Lee and Mr Peraldini, particularly given what Mr Peraldini has said in his affidavit was agreed and what he seems to have indicated in his correspondence to the Department was the position.
71 Moreover, the content and circumstances of the conversations between Mr Lee and Mr Peraldini in relation to the proposed joint venture, which are primary issues in relation to the contract claim, are likely also to be relevant to the claim for breach of fiduciary duty and it is likely that at least a good deal of that evidence will have to be canvassed in any event.
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72 In those circumstances, in my view, the application for summary judgment should be dismissed in its entirety.
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