Queensland Mines Ltd v Hudson (1978)

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.”

Attorney-General for Hong Kong v Reid (1993)

English Equity & Trusts

Attorney-General for Hong Kong v Reid
‘Hong Kong Skyline’ by Bri Buckley

The phrase ‘two wrongs do not make a right’ is virtuous to the truth that misdeeds can never amount to anything more than loss, yet when adopted for equitable purposes, the exact opposite can be found.

After rising through the ranks of Hong Kong administration, a solicitor turned Director of Public Prosecutions positioned himself whereby he was able to accept sporadic bribes in exchange for his obstruction of justice through the failed convictions of known criminals. Having taken over HK $12m in payments, the respondent in this matter invested the funds into three properties, two of which were in title to himself and his wife and the third to his solicitor.

The discovery of his fraudulent behaviour and subsequent criminal prosecution, raised the question of whether by his breach of fiduciary duty as a servant of the Crown, the sums paid were now held upon constructive trust for his former employers, and that any monetary gain following the purchase of the homes was composite to that trust.

Common law principles surrounding fiduciary breach and profit from such breaches have been long held to apply in favour of the trust beneficiary, despite the illegality on the part of the fiduciary when in receipt of bribes from third parties. This is because when acting beyond the remit of the trustee, and in a manner that is dishonest, the action itself becomes legitimate, if only for the benefit of those the fiduciary/trustee was appointed to serve.

This translates that although the respondent allowed himself to selfishly receive bribes in exchange for personal profit, equity would ascribe that his deceit was immediately converted into a positive gesture conferring direct gain to his employers, as no fiduciary can be seen to profit from his breach as previously mentioned. This, by virtue of the fact of those principles, altered the manner in which the respondent not only executed his plans, but provided the Crown with privilege to acquire beneficial interest in the properties purchased, along with any increase their value since initial conveyance.

When considered by the Privy Council, it was quickly agreed that any conditions imputed by the respondents upon the entitlement of his employers to seek recovery of the debts through the homes, failed to override the fundamental obligations owed to him while serving and acting under fiduciary capacity, despite any notion of separateness or mixed investment on his part.