Say-Dee Pty Ltd v Farah Constructions Pty Ltd

Say-Dee Pty Ltd (Say-Dee) appealed to the New South Wales Court of Appeal against orders made by Palmer J in the Supreme Court of New South Wales. The dispute concerned a joint venture between Say-Dee and Farah Constructions Pty Ltd (Farah) for the redevelopment of a property. The core of the disagreement lay in Farah's subsequent acquisition of adjoining properties, which Say-Dee alleged constituted a breach of fiduciary duties owed to it within the joint venture.

The Court of Appeal was required to determine whether Farah, as a fiduciary to Say-Dee, had breached its fiduciary obligations. Specifically, the court had to consider the scope of those duties, including obligations of disclosure, the no-conflict rule, and the no-profit rule. A key issue was whether there was a sufficient causal link between the fiduciary relationship and Farah's profit from acquiring the adjoining properties. The court also had to consider whether the adjoining properties were held on constructive trust for Say-Dee, examining principles of recipient liability under the first limb of *Barnes v Addy*, including the requisite level of knowledge on the part of the recipient, and whether a restitutionary approach based on unjust enrichment was applicable. The impact of Farah acquiring an indefeasible title to the adjoining properties on Say-Dee's claim for relief, and whether Farah was entitled to an allowance for its entrepreneurial skills, were also central to the determination.

The Court of Appeal found that Farah had breached its fiduciary duties to Say-Dee. The court reasoned that the joint venture agreement created a fiduciary relationship, and Farah's acquisition of the adjoining properties, which were essential for the optimal development of the joint venture property, was undertaken in circumstances that amounted to a breach of its duty of loyalty and good faith. The court applied established principles of fiduciary law, including the no-conflict and no-profit rules, finding that Farah had placed itself in a position of conflict and had profited from its position without full disclosure and consent from Say-Dee. The court also determined that the adjoining properties were held on constructive trust for Say-Dee, applying principles of recipient liability and unjust enrichment, and that the acquisition of indefeasible title did not preclude this equitable relief.

The appeal was allowed, and the orders made by Palmer J were set aside. The parties were directed to bring in draft Short Minutes of Order within 14 days to reflect the relief granted, with costs to follow the event. Liberty was granted to the parties to apply for further directions if they could not agree on the form of the Short Minutes.