Thornley v Tilley

The High Court of Australia heard an appeal from the Supreme Court of New South Wales concerning a dispute between John Brooks Thornley (the appellant) and William Tilley & Co. (the respondents), who were stock and sharebrokers. Thornley alleged that the brokers had purchased shares on his behalf and subsequently dealt with these shares without his knowledge or authority, thereby making secret profits. Thornley sought an account of moneys due and an inquiry into and repayment of any secret profits made by the brokers.

The central legal issue before the High Court was the interpretation of the instruction given by Thornley to the brokers to "carry at 8 per cent" shares purchased on his behalf. Specifically, the court had to determine whether this instruction entitled the brokers to deal with the purchased shares for their own benefit, retaining any profits made from such dealings, or whether they were bound to hold the shares for Thornley and account for any profits derived from them.

The High Court, in allowing the appeal, reasoned that the instruction to "carry at 8 per cent" meant that the brokers were to purchase shares on behalf of Thornley, pay for them, and hold them for him, charging interest at 8 per cent per annum on the money advanced until repayment. The court found that the brokers were not entitled to deal with the scrip for their own benefit. While the brokers' defence initially relied on a custom of the Sydney Stock Exchange, this was abandoned in favour of an argument based on the "natural meaning" of the instruction. The court held that even if evidence of custom were admissible, it was insufficient to establish a usage that would bind the court, and furthermore, such a custom would be unreasonable. The court concluded that the brokers' dealings with the shares constituted a breach of their fiduciary duty to Thornley, and they were liable to account for the profits made.

The High Court ordered that the appeal be allowed, the decision of the Supreme Court be discharged, and a decree be made in favour of Thornley for an account and an inquiry into secret profits. The respondents were ordered to pay the costs in both the Supreme Court and the appeal.