This was an appeal of a decision that the Appellants had breached the fiduciary duties they owed to the Respondent by taking advantage of, or using knowledge obtained from their position as directors, to divert an opportunity away from the Respondent. In the Supreme Court, it was held that a constructive trust existed over the shares in favour of the Respondent due to the breach.
The Respondent’s only asset was a 70% interest in the Cue gold mining tenement. Streeter or his companies had a substantial interest in the Respondent.
Brailey caused ANPC to make proposal to Streeter. Streeter and Cooper put an ‘offer’ to ANPC using the Respondent as the corporate vehicle for the project. It was rejected. ANPC wanted a fresh corporate vehicle.
The structure of new company Western Areas NL (“WANL”) was agreed with ANPC in December 1999. Cooper and Streeter were directors of this new company.
At the Respondent’s board meeting in January 2000, Brailey agreed for the Respondent to receive shares in WANL for its Cue tenement with some shares to go to a Streeter company to satisfy debts.
The trial judge found the Appellants had failed to disclose to Brailey the name of the entity buying the Cue tenements, that they were directors, that a Streeter company had acquired the remaining 30% interest in the Cue tenement which would be vended to the WANL or that the 30% interest in Cue tenement was up for sale prior to buying it. Brailey resigned in March 2000.
The prospectus for WANL was issued in May 2000 to all the Respondent’s shareholders and capital raising was completed in July. Streeter obtained discounted shares plus options. Cooper received options. Streeter company received 150,000 shares for its 30% interest in Cue tenement. Streeter company took 350,000 shares as trustee for Respondent’s 70% interest in Cue tenement.
The options were exercised. WANL’s share price rose significantly. Streeter made substantial capital injections.
In June 2006 the Appellants were removed from the Respondent’s board and proceedings commenced shortly after.
McLure P and Buss JA held there was only one breach of fiduciary duties by Appellants which they agreed with Murphy JA.
The ANPC proposal was not an opportunity for the Respondent (), Streeter did not require the Respondent’s assets for the ANPC proposal as without them he would have a 20% interest and control of WANL (), Streeter was approached by ANPC as a potential capital provider, not as Respondent’s director ().
Two themes were discussed with relation to fiduciary duties: the conflict rule and the profit rule: .
- The conflict rule was not strictly applied to company directors: .
- The content of fiduciary duties are moulded to the particular relationship and the circumstances of the appointment or course of dealings determine the scope of the duty: .
Cooper and Streeter were not prohibited from investing or directorship of other mining companies: .
Where the relief sought is an account of profits there must a causal connection between profit and use of fiduciary position: . There was no positive duty to acquire a benefit in this case. If there is benefit acquired, it is irrelevant that the person to whom fiduciary duty owed was unwilling, unlikely or unable to make the profits or that fiduciary acted honestly or reasonably: . It is relevant to whether the person had a conflicting interest with the fiduciary if they had no positive duty to acquire the benefit: .
The Respondent had no opportunity to be the corporate vehicle therefore there was no conflict between the Respondent and Streeter: . The only conflict was after WANL incorporated transferring the 70% tenement, however, the profit on the initial shares received was not relevantly connected to the Cue tenement: .
It was held unanimously that Streeter had breached their fiduciary duty by obtaining 30% interest in Cue tenement but only relevant to the profit on the 150,000 vendor shares received for the interest:  and . The defence of laches was successful. Other relevant factors included:
- Mines, due to their fluctuating natures and claims for constructive trusts, traditionally require special promptness: .
- The Respondent’s shareholders were aware of material facts in May 2000. Two had received legal advice. They thus had freedom to act.
- Circumstances had significantly changed. It was inferred that the Respondent’s shareholders lacked the appetite for risking their own capital and the proper inference was failure to act was acquiescence: .
- Granting trust would cause great injustice: .
Relevant paragraphs of Ford
[8.010], [9.010], [9.057], [9.220], [9.280], [9.350]