Chan v Zacharia

Australian Equity & Trusts

Chan v Zacharia
Image: ‘Doctor’s Office’ by Norman Rockwell

Matters of contract and the fiduciary elements of a working partnership, become at odds in a case involving opportunism with little regard to the details of the agreement signed when two former business partners acrimoniously part ways.

In 1979, two doctors agreed to set up a joint practice in an enviable part of Adelaide, and upon doing so, drafted a partnership agreement that established express terms around honourable working practices, and an ethical approach to the future of the enterprise. Sadly, as often happens in commercial relationships, the two men found working together intolerable, and so agreed to dissolve the practice.

One of the attractive features of the property was that of its location and the option to renew the lease for another two years, on the proviso that both partners were complicit in its execution. However, at the point of litigation, the appellant had shown clear reluctance to renew the lease, thus leaving the respondent no choice but to circumnavigate the matter as best as possible.

While the two parties had terminated the business, there was still a portion of the existing lease remaining, of which an equal share was held by both men, and yet in a strange turn of events, the landlord agreed to extend the lease to the appellant, and accordingly wrote to confirm this to the respondent. This prompted action by the respondent on grounds that the appellant had breached his fiduciary duty in accepting the new lease while inheriting the value of the interest of the existing lease, and that by doing so, he held the new lease as a constructive trustee on the equitable principle that the lease was an asset of the former partnership and therefore under a right of claim.

This contention was duly supported by the Supreme Court, at which point the appellant sought the wisdom of the High Court. Here, s.38 of the Partnership Act 1891 (SA) noted that:

“After the dissolution of a partnership the authority of each partner to bind the firm, and the other rights and obligations of the partners, continue, notwithstanding the dissolution, so far as may be necessary to wind up the affairs of the partnership, and to complete transactions begun but unfinished at the time of the dissolution, but not otherwise.”

While s.39 also stated how:

“On the dissolution of a partnership every partner is entitled, as against the other partners in the firm, and all persons claiming through them in respect of their interests as partners, to have the property of the partnership applied in payment of the debts and liabilities of the firm, and to have the surplus assets after such payment applied in payment of what may be due to the partners respectively after deducting what may be due from them as partners to the firm; and for that purpose any partner or his or her representatives may on the termination of the partnership apply to the Court to wind up the business and affairs of the firm.”

However, clause 26 of the partnership agreement clearly expressed that any surplus assets remaining after payment of debts, liabilities, expenses and amounts due to the partners, was to be divided equally through the execution of observation of all legal instruments and Acts, and the provisions contained therein.

This was the position adopted in Hugh Stevenson & Sons Ltd v Aktiengesellschaft Fur Cartonnagen-Industrie, where Romer LJ remarked:

“[W]herever the legal estate may be, whether it is in the partners jointly or in one partner or in a stranger it does not matter, the beneficial interest…belongs to the partnership, with an implied trust for sale for the purpose of realising the assets and for the purpose of giving to the two partners their interests when the partnership is wound up and an account taken…”

A fact that was equally present in clause 19 of the partnership agreement, which required each partner to:

“[D]evote his whole time (subject to annual leave) to the medical practice, to act in all things according to the highest standards of professional conduct and be just and faithful to the other partner in all transactions relating to the partnership…”

And so it was for these undeniable reasons, that the Court held (by majority) that when agreeing to and pursuing the opportunity to secure an extension of the lease after refusing to cooperate with his former partner, the appellant did, by virtue of his selfishness, breach what remained of his fiduciary capacity, and in doing so, became a constructive trustee for the value of the lease, and thus owed account to the respondent in kind.

R v Stone; R v Dobinson

English Criminal Law

R v Stone (John Edward)
‘The Earth (Zemliia)’ by Bohdan Pevny

In this landmark criminal law case, the distinction between indifference to, and perception of risk, are carefully weighed, in order to appreciate that when compared for their relevance to recklessness, the outcome remains the same, despite differing routes to dire consequences.

In 1972, an eccentric sibling moved into the home of her older disabled brother after a falling out with her sister. The terms of the living arrangement was that of a landlord and tenant, in so much that rent was paid and each were free to live their lives independently of one another. While the brother lived with his mistress and housekeeper along with his mentally challenged son, the sister occupied the front room of the home and maintained a high degree of privacy, despite openly suffering from anorexia nervosa (although undiagnosed at the time); a condition that precluded regular meals in favour of a low bodyweight, that in many instances was known to result in premature death, or at best, extreme immobility.

After a period of almost nearly three years, the sister’s health deteriorated to a point that she became permanently bedridden and unable to clean or feed herself. Despite repeated express concerns from the mistress to the brother regards his sister’s condition, there were no attempts made by the either party to extend their efforts in seeking medical help beyond that of unsuccessfully trying to locate her doctor. When matters continued with no real intervention, the now seriously ill woman was eventually found dead in her bed, amidst evidence that no care had been taken to tend to her toiletry needs or physical health requirements, prior to her death.

When reported to the police, the two defendants were summoned and convicted of manslaughter upon grounds of a breach of duty of care through recklessness, whereupon the two parties appealed under the presumption of diminished responsibility. When considered under appeal, the judges found that irrespective of whether the couple claimed to have taken limited steps to get the deceased help, there was insufficient evidence to avoid the conviction of recklessness, as (i) there was adequate foresight of the risk posed to the dying woman while under the assumed care of her brother and mistress, and (ii) that the conduct taken to redress such a risk, was made with little regard to the seriousness of her condition.

Ultimately, and when taken in context, the court felt that it mattered not which route had been taken, only that the destination resulted in her death; and that both parties had been made aware of possible options, yet continued to ignore the duty bestowed upon those assigned the care of a vulnerable person, in particular a close relative with a history of self-neglect and malnutrition.

R (Rogers) v Swindon NHS Primary Care Trust

English Medical Law

 

R (Rogers) v Swindon NHS Primary Care Trust
‘In the Pink!’ by Shelley Ashkowski

Irrationality and subsequent weakness of policy become the key ingredients of this appeal case between an individual and local NHS trust when a breast cancer patient is diagnosed with a particular form of metastasis and the consultant responsible for their treatment prescribes a medicine that while proven to significantly prevent the progression of this specific virus, is a brand still yet to undergo full inclusion within the regulatory core of acceptable National Health Service medicines.

After the patient volunteered to self-fund her course of treatment, the spiralling costs quickly proved overwhelming, at which point she applied to her regional Primary Care Trust to request funding (an action not frowned upon in certain circumstances).

When the trust refused to provide any financial assistance on grounds that the drug used was not officially recognised and therefore subject to certain qualifying criteria, the appellant sought to challenge the refusal through judicial review, citing an inherent failure to properly establish sound reasons for non-funding, despite statistical supportive evidence, first-hand testimony and a general position of endorsement by the Secretary of State for Health.

When examined in the Court of Appeal, the emerging facts showed a lack of collective agreement as to exactly why funding for this specific treatment would be prohibited, along with an erring of caution to offer those funds. However this proved a baseless hesitation when held against the ‘ethical over monetary’ line taken by the Health Secretary (and regulatory bodies) and their drive for swift inclusion of this new weapon in the fight against breast cancer.

Upon ruling in favour of the patient, it was advised by the Court that far from being in any position to ‘rubber stamp’ the uninterrupted sponsoring of the appellant’s course of treatment, it was left to the Primary Care Trust and ruling bodies to further refine their criteria for approved patient administration in order that future prescriptions would avoid undue objections during the uptake of other medicines, while holding that:

“People have equal rights of access to health care, but there may be times when some categories of care are given priority in order to address health inequalities in the community.”