United Dominions Corporation Ltd v Brian Pty Ltd

(1985) 157 CLR 1
60 ALR 741

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(Decision by: Dawson J)

Between: United Dominions Corporation Ltd
And: Brian Pty Ltd

Court:

Judges: Gibbs CJ
Mason J
Brennan J
Deane J

Dawson J

Hearing date: 13 November 1984
Judgment date: 1 August 1985

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Decision by:
Dawson J

I have had the advantage of reading the reasons for judgment of Mason, Brennan and Deane JJ. and agree with those reasons and with their conclusion that at the time each of the mortgages was given, United Dominions Corporation Limited ("UDC") was in the position of a fiduciary as regards Brian Pty. Limited ("Brian") and that, as a consequence, the mortgages were and are unenforceable by UDC against Brian.

2. The agreement which was eventually concluded between UDC, Brian and the other participants in the development project was described as a joint venture. I agree that, despite this description, it, and the other joint venture initially proposed, nevertheless answered the description of a partnership.

3. Whilst the concept of a joint venture is said to be the creation of American courts (see 46 Am. Jur. 2d., Joint Ventures, s.2), it is a term which is widely used and it is well known in Scottish law where it is regarded as a variety of association, partnership or not, in which no firm name is used and the association is confined to a particular adventure, speculation, course of trade or voyage: Encyclopaedia of the Laws of Scotland (1931), vol.XI, par.67, at p.32. It is true, however, that the joint venture is a form of association which has been put to considerable use in the United States, largely because in that country a corporation may not, generally speaking, join a partnership. The view is taken there that the officers and directors of a corporation in partnership may not be able to carry out their responsibilities and that the corporate assets may be jeopardized in an ultra vires manner: Williston on Contracts, 3rd ed. (1959), vol.2, s.318B, at p.598 et seq.

4. That view has never been taken here, but it explains why in the United States a clear differentiation is made between a joint venture, which involves a single business transaction, and a partnership, which involves general and continuing business of a particular kind. Notwithstanding the difference, even in the United States a joint venture may comprehend a business to be continued over a considerable period of time and the distinction between a partnership and a joint venture is not always easy to discern: 46 Am. Jur. 2d., Joint Ventures, s.4. This is of no present significance, because in the United States participants in joint ventures are nevertheless subjected to fiduciary duties akin to those of partners: Meinhard v. Salmon (1928) 249 N.Y. 458 (164 NE 545).

5. Although in this country a partnership is defined in the Partnership Acts as the relation which subsists or exists between persons carrying on a business in common with a view of profit, the requirement that a business should be carried on provides no clear means of distinguishing a joint venture from a partnership. There may be a partnership for a single adventure or undertaking, for the Acts provide that, subject to any agreement between the partners, a partnership, if entered into for a single adventure or undertaking, is dissolved by the termination of that adventure or undertaking. See, e.g., Partnership Act 1892 (N.S.W.), s.32(b).

6. A single adventure under our law may or may not, depending upon its scope, amount to the carrying on of a business: Smith v. Anderson (1880) 15 ChD 247, at pp 277-278; In re Griffin; Ex parte Board of Trade (1890) 60 L.J. QB 235, at p 237; Ballantyne v. Raphael (1889) 15 VLR 538. Whilst the phrase "carrying on a business" contains an element of continuity or repetition in contrast with an isolated transaction which is not to be repeated, the decision of this Court in Canny Gabriel Castle Jackson Advertising Pty. Ltd. v. Volume Sales (Finance) Pty. Ltd. (1974) 131 CLR 321 suggests that the emphasis which will be placed upon continuity may not be heavy. Certainly each of the enterprises which were to be undertaken and the enterprise which was finally undertaken in this case, was to have an operation which was sufficiently extended to amount to the carrying on of a business and, since the association was with a view to profit, the conclusion is warranted that the parties were either in partnership or were negotiating partnership at the relevant time.

7. Perhaps in this country, the important distinction between a partnership and a joint venture is, for practical purposes, the distinction between an association of persons who engage in a common undertaking for profit and an association of those who do so in order to generate a product to be shared among the participants. Enterprises of the latter kind are common enough in the exploration for and exploitation of mineral resources and the feature which is most likely to distinguish them from partnerships is the sharing of product rather than profit. It is, however, unnecessary to pursue that matter here.

8. Although the relationship between participants in a joint venture which is not a partnership will be governed by the particular contract rather than extrinsic principles of law, the relationship may nevertheless be a fiduciary one if the necessary confidence is reposed by the participants in one another. Of course, in a partnership the parties are agents for each other and this may constitute a separate reason for the fiduciary character of a partnership. There may be no such agency between participants in a joint venture but, as Dixon J. pointed out in Birtchnell v. Equity Trustees, Executors and Agency Co. Ltd. (1929) 42 CLR 384 , at pp 407-408, even in a partnership it is really the mutual confidence between partners which imposes fiduciary duties upon them and the same confidence may, in appropriate circumstances, be found to exist between participants in a joint venture.

9. The only other thing which I wish to add is that in my view it is quite clear that a fiduciary relationship may arise during negotiations for a partnership or, for that matter, a joint venture, before any partnership or joint venture agreement has been finally concluded if the parties have acted upon the proposed agreement as they had in this case. Whilst a concluded agreement may establish a relationship of confidence, it is nevertheless the relationship itself which gives rise to fiduciary obligations. That relationship may arise from the circumstances leading to the final agreement as much as from the fact of final agreement itself. This is the view expressed in Lindley on Partnership, 15th ed. (1984), at p.480, and it seems to me that as a matter of principle it must be correct.

ORDER

Appeal dismissed with costs.