Queensland Mines Ltd v Hudson

Australian Equity & Trusts

Queensland Mines Ltd v Hudson
‘Three Miners’ by Josef Herman

While the strictness of fiduciary duties within a corporate entity are prime examples of greed overshadowing obligation, this particular case demonstrates the need for contextual adjudication when examining the seemingly selfish actions of those shouldering such burdens.

Having been appointed managing director of a company designed to pursue mining opportunities within the Australasian continents in 1958, the respondent was later sued for breach of duty when obtaining coal and iron ore mining licences from the Tasmanian government by way of his position.

In the first instance, the Equity Division of the Supreme Court of New South Wales found in favour of the appellants, although legal recourse was unavailable due to its commencement beyond the statute of limitations, and so upon appeal to the Privy Council, the council was compelled to review the findings of the supreme court, while dissecting the sizeable case material used.

Here the council found that although the respondent had been serving as a director at the time negotiations had begun, it was also evident that a severe loss of capital over the preceding years had resulted in the respondent placing the company in ‘stasis’ whilst seeking alternative funding to carry out the work should they eventually receive the licences.

In addition to this, it had been made expressly clear by the board of shareholders following the receipt of the licences in 1961, that they no longer had any financial interest in the company, and that the appellant was free to pursue the benefits arising from the mining of the land available. 

However in March 1962, the appellants had also sold their existing interest in the company to a third party for the sum of £2500, and so despite any claim of breach, they had by all accounts financially, contractually and orally divorced themselves from the company and those still remaining, and so when establishing the fiduciary parameters required for such a case, the council turned to Boardman v Phipps, in which Cohen LJ had held that:

“[I]t does not necessarily follow that because an agent acquired information and opportunity while acting in a fiduciary capacity he is accountable to his principals for any profit that comes his way as the result of the use he makes of that information and opportunity.”

And so basing their judgment on the strength of Boardman the council noted that not only had the respondent been transparent in his dealings with the Tasmanian government and the appellants, but that the appellants themselves had unequivocally shown their disinterest both in the value of the company and the actions of the respondent prior to their departure; and so with little hesitation the council dismissed the appeal while holding that:

“[A] limit has to be set to the liability to account of one who is in a special relationship with another whose interests he is bound to protect.”

Author: Neil Egan-Ronayne

Legal Consultant, Author and Foodie...

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