In the recent case of Ross River Limited & others v Waveley Commercial Limited & others, the High Court confirmed that parties to a joint venture can owe fiduciary obligations to each other.
Furthermore, the court confirmed that in certain circumstances these obligations may extend to a director of a corporate joint venture party.
As a result, joint venture parties and their directors will need to be mindful of fiduciary obligations in their operation of the joint venture.
Ross River and Waveley had entered into a joint venture agreement (JVA) concerning a development completed around 2007.
Under the JVA, Ross River was entitled to receive certain profits, but became concerned about issues regarding how sales of the development were progressing, and a lack of information from Waveley's directors.
Ross River brought proceedings against Waveley and its directors.
All parties acknowledged that money was owed to Ross River. The court was asked to determine many disputes, including true level of profits under the JVA, and whether certain terms should be implied into the JVA.
In addition, and of particular interest to many joint venture parties, the court was asked to decide whether Ross River was owed any fiduciary duties under the JVA.
In this instance, the court held there was no need to imply terms into the JVA, but Waveley did owe fiduciary obligations to Ross River.
Specifically, the court held that Waveley had an implied obligation to act in good faith in its conduct of the joint venture, and in relation to its accounting to Ross River in respect of the share of the profits.
Furthermore, Waveley was found to owe a duty not to do anything in relation to the joint venture revenues that disadvantaged Ross River, but advantaged itself.
However, the court held that Waveley did not owe fiduciary obligations not to allow a conflict to arise between its own interests and those of Ross River, nor did it have a duty not to profit from its fiduciary position.
The court then went on to hold that a director of Waveley, who had been joined as a party to the JVA, and who had acquired and had formed another company to acquire certain interests in the site from Waveley, owed similar fiduciary obigations to Ross River.
The court noted that normally it would not be right to hold that a director of a company dealing with a third party owes personal fiduciary obligations to that third party.
However, because the director had a long term involvement in the development and was receiving a personal management fee, the court found the circumstances were such to conclude that he had taken on those fiduciary obligations.