Rama v Millar [PC]
| Jurisdiction | UK Non-devolved |
| Judge | Lord Keith of Kinkel,Lord Griffiths,Lord Nolan,Lord Nicholls of Birkenhead,Lord Steyn |
| Judgment Date | 30 November 1995 |
| Court | Privy Council |
| Date | 30 November 1995 |
Privy Council
Lord Keith of Kinkel, Lord Griffiths, Lord Nolan, Lord Nicholls of Birkenhead and Lord Steyn
Stephen Bryers and Jonathan Williams (of the New Zealand Bar) (instructed by Clifford Chance) for the plaintiff.
Colin Corruthers QC (of the New Zealand Bar) and John Melinder (instructed by Cruickshanks) for the defendant.
The following cases were referred to in the judgment:
General Communications Ltd v Development Finance Corp of New Zealand Ltd[1990] 3 NZLR 406.
Wallersteiner v Moir (No. 2)ELR[1975] QB 373.
Fiduciary Duty breach Of Duty damages partnership duty Of Partners To Each Other profit-making Scheme To Borrow And Lend Dollars defendant Supplied Capital venture Foundered defendant Liable For Accruing Interest Defendant Entered into agreement with Bank without plaintiffs knowledge in breach of Fiduciary Duty whether Partner Could Act Unilaterally whether Personal Factors Influenced Defendant's Decision.
This was an appeal from the Court of Appeal of New Zealand which had held that the defendant, a partner, could not make a settlement agreement with a bank without the agreement of the other partner.
In May 1987 the plaintiff devised a scheme to take advantage of different rates of interest payable for loans of New Zealand dollars in different parts of the world, on the basis that it was cheaper to borrow New Zealand dollars overseas. He approached the defendant who agreed to provide the necessary capital and they proceeded with the scheme as partners owing each other corresponding fiduciary duties. They made three deals. Each was made by buying a transferable certificate of deposit (TCD) issued by a New Zealand bank (BNZ) and then borrowing money from a Luxembourg-based finance house (IHD) with the bank's certificate as a guarantee.
However a problem arose with the fourth TCD which had been purchased because IHD would not lend a sufficient sum of money to cover the cost of the TCD. In September the defendant entered into a deed of settlement with the BNZ in which he gave up all claim or title to the third and fourth TCDs for the payment of $1.5m. This meant that overall the transactions had been unprofitable for the partners. The defendant entered into the settlement without the plaintiffs approval and against his known wishes and took steps to conceal what he had done.
The plaintiff claimed for breach of fiduciary duty and damages calculated on the basis of the completion of the first four transactions in the amounts originally agreed. The trial judge held there had been a breach of fiduciary duty but that the partners had agreed to accept sums less than originally planned on the first three TCDs and therefore were likely to have done so on the fourth. Accordingly damages were awarded on that basis. Both parties appealed. The Court of Appeal dismissed the defendant's cross-appeal on liability but allowed the plaintiffs appeal on quantum on the grounds that there was insufficient evidence to support the judge's finding that there had been an agreed variation of the amounts originally agreed. The plaintiff appealed.
Held, allowing the appeal:
1 The Court of Appeal had misdirected itself by holding that the defendant was not free to settle with the BNZ without the agreement of the plaintiff. The partners had had to act honestly and fairly towards each other, but this did not mean that one partner could have required the other to undertake a financial risk to which he had not agreed. The defendant had been entitled to act unilaterally and to have given weight to his reluctance to expose himself to further financial risks in a venture which had foundered.
2 The Court of Appeal had failed to consider the question of fact of whether the defendant in settling on the terms had preferred his personal wish, to maintain his standing as a good customer of the bank, over the interests of the partnership. Accordingly the trial judge's award, as amended by agreement, was set aside.
(Delivered by Lord Nicholls of Birkenhead)
This appeal concerns a claim by one partner against another for compensation for breach of fiduciary duty. The major issue is the amount of the compensation.
The events took place in the New Zealand winter of 1987. The plaintiff, Mr Christopher Millar, and Mr Michael Hounsell had a banking background. The judge described Mr Millar as an alert, inventive financier. In May 1987 Mr Millar and Mr Hounsell negotiated...
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