Arklow Investments Ltd and Another v I.D. MacLean

JurisdictionUK Non-devolved
CourtPrivy Council
JudgeMr. Justice Henry
Judgment Date01 Dec 1999
Judgment citation (vLex)[1999] UKPC J1014-1
Docket NumberAppeal No. 17 of 1999

[1999] UKPC J1014-1

Privy Council

Present at the hearing:-

Lord Steyn

Lord Lloyd of Berwick

Lord Hobhouse of Woodborough

Sir Andrew Leggatt

Mr. Justice Henry

Appeal No. 17 of 1999
(1) Arklow Investments Ltd.
and
(2) Christopher Mark Wingate
Appellants
and
I.D. Maclean

and Others

Respondents
1

[Delivered by Mr. Justice Henry]

2

On 14th October 1999 at the conclusion of the hearing their Lordships agreed humbly to advise Her Majesty that the appeal should be dismissed and that they would give their reasons later. This they now do.

3

The appeal is from a judgment of the Court of Appeal of New Zealand delivered on 16th July 1998 ( Maclean v. Arklow Investments Ltd. [1998] 3 N.Z.L.R. 680). It raises issues relating to the concept of fiduciary duty, and results from the sale of Matakana Island, which lies across the entrance to Tauranga Harbour on the eastern coast of the North Island of New Zealand. A forest, consisting mainly of radiata pine, extends over much of the area of the island, which approximates 4,300 hectares. The vendor of the sale in question was Matakana Forest Ltd., which had been placed in receivership in October 1990. The receivers put the island up for sale in February 1991, and it remained on the market until the sale was negotiated in late 1992. During that year milling of the mature trees was in operation.

4

The relevant facts are fully set out in the majority judgment of Richardson P., Gault and Keith JJ. delivered by Gault J., and need not be repeated in detail. They are also reviewed comprehensively by Thomas J. in his dissenting judgment. The background to the proceedings can be stated quite briefly. The appellant Mr. Wingate had become interested in the purchase of Matakana Island in July 1991, his intention being to develop the land for residential, recreational and resort uses. Arklow Investments Limited was to be the vehicle for this venture. On 15th June 1992, the FAR group of companies, which operated a merchant banking business, were approached on behalf of Mr. Wingate with a view to obtaining the group's assistance in raising finance to enable the proposal to proceed. Mr. Wingate had previously employed another merchant banker, Fay Richwhite & Co. Ltd., for that purpose but their relationship had been terminated. On 16th June 1992, in response to that approach FAR made a written proposal setting out the terms on which it would accept appointment. Those terms were not acceptable to Mr. Wingate, and on 15th July 1992 FAR gave written notice of withdrawal of its mandate offer. FAR proceeded to broker arrangements with other parties for the purchase of the island, which ultimately led to the February 1993 sale now in question. The transaction initially comprised a composite arrangement, under which ITT Rayonier Ltd. had acquired the forestry right to the mature standing timber, Ernslaw One Ltd. acquired the land, the remaining timber and some associated assets, and a FAR group member company acquired the balance of the assets, particularly the mill and the mill land. The total purchase price was $20.7 million, of which $50,000 was paid by the FAR interests. This transaction, originally negotiated in November 1992, was restructured to overcome statutory requirements governing acquisition by overseas interests. There has also been a subsequent re-arrangement of interests which are not relevant to matters now in issue. In broad terms the appellants, for convenience referred to as Arklow, contend that in taking the actions it did leading to the November 1992 transaction, FAR breached its fiduciary duties to Arklow. Two separate causes of action were pleaded in that respect.

5

In an interim judgment delivered in the High Court on 5th May 1997, Temm J. answered a series of specific questions governing the issue of liability. They were framed as follows:-

"1. In relation to the cause of action of breach of fiduciary duty owed by FAR to Arklow/Wingate:

  • (a)whether the FAR interests owed a fiduciary duty to the plaintiffs and

  • (b)if there was a fiduciary duty, did FAR breach any fiduciary duties.

2. In relation to the cause of action of misuse of confidential information:

  • (a)as to whether FAR Financial and/or other of the FAR interests received confidential information:

    • (i)whether those defendants received the information which the plaintiffs claim to have conveyed;

    • (ii)whether such information as they did receive was confidential;

  • (b)whether the FAR interests were under an obligation not to use the information received by them other than for the purposes for which it was conveyed;

  • (c)if the FAR interests received confidential information, and were under an obligation not to use it other than for the purposes for which it was conveyed, whether they did use it other than for the purposes for which it was conveyed;

  • (d)if detriment to the plaintiff is a relevant ingredient of a cause of action founded in breach of confidence – whether or not Arklow/Wingate suffered any loss or damage, and hence any detriment, as a result of the FAR actions."

6

Temm J. answered all questions in the affirmative. In the Court of Appeal, the majority judgment delivered by Gault J. considered the separate issues of breach of fiduciary duty not to promote or become involved in a competitive acquisition of Matakana Island, and of breach of the duty not to misuse confidential information. They held that the evidence did not establish that there was an actionable breach of either duty. Blanchard J. held that there were breaches of those or similar duties, but that they were relatively minor and not causative of any loss to Arklow. In his dissenting judgment, Thomas J. took the view that FAR owed Arklow a duty not to act contrary to Arklow's interests, that it had done so in breach of that duty, and further that FAR had misused information which was confidential to Arklow.

7

Although their Lordships heard extensive argument on both the nature and extent of fiduciary duties and the facts of the case, they have reached the conclusion that the real issues on appeal fall within a rather narrow compass which can be resolved without the need for either a comprehensive or detailed consideration of the law or a close review of the evidence. In the course of his argument, Mr. Underhill Q.C. for Arklow stressed that in this case there was a considerable overlap between the duty "not to be disloyal" and the duty to respect confidence. It was clear however, that as in the Court of Appeal and in the High Court, a major plank in Arklow's case was that FAR did have a fiduciary duty which was wider than the duty not to misuse confidential information, and extended in the circumstances to that described by Gault J. as one not to promote or become involved in a competitive acquisition of Matakana Island whether or not confidential information had been used. It is immediately apparent that protection of confidential information may be involved in or form an integral part of such a duty, and misuse may be evidence of a breach of that duty. But as the case was pleaded and argued on the basis that there was a duty which was actionable for breach in the absence of any misuse of confidential information, it is necessary to consider that contention. The first issue therefore is whether FAR owed a fiduciary duty of that nature to Arklow.

8

Duty of loyalty

9

The description of the duty under consideration as being one of loyalty was not seen by Mr. Underhill as being the most appropriate one, but for present purposes it is convenient to label it in that way. In the present context, the concept encaptures a situation where one person is in a relationship with another which gives rise to a legitimate expectation, which equity will recognise, that the fiduciary will not utilise his or her position in such a way which is adverse to the interests of the principal. An example of the obligation relevant to the present case is not to exploit or take advantage of the position of fiduciary at the expense of the principal. The existence and the extent of...

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