Global Energy Horizons Corp v Gray

A fiduciary relationship may arise in a commercial setting where a person undertakes to act for another and the circumstances objectively create a legitimate expectation of loyalty. The duty may concern only a particular venture or activity. A fiduciary who acts for competing principals must serve each faithfully and must not permit personal interests or another principal’s interests to influence performance of the duty. Fully informed consent requires full and frank disclosure of the nature of the fiduciary’s interest. A fiduciary cannot avoid liability by purporting to resign in order to appropriate a maturing business opportunity belonging to the principal. Liability under the no-profit rule does not depend on proof of loss.

Global Energy Horizons Corp claimed that Robert Gresham Gray owed it fiduciary duties in relation to the commercialisation of acoustic well stimulation technology and breached those duties by acting for Pieter Heerema and by obtaining an indirect personal interest in RegEnersys, the vehicle which acquired interests in the technology.

Mr Gray denied owing fiduciary duties and relied on GEHC’s alleged consent or acquiescence. The trial concerned liability, including whether GEHC had a business opportunity, whether Mr Gray had acted in conflict with GEHC, whether consent was informed, and whether proof of quantifiable loss or profit was required before an account and inquiries could be ordered.

1. Fiduciary status. Mr Gray became a member of GEHC’s Acquisition Strategy deal team and agreed to share its potential revenues. Between December 2004 and December 2005 he owed GEHC fiduciary duties concerning the Acquisition Strategy and AWS technology. The existence of those duties depended on the capacity in which he acted and the particular activity concerned, not merely on formal office or contract.
2. GEHC was objectively entitled to expect Mr Gray’s loyalty. His duties included the duty of good faith, the no-inhibition principle and the actual-conflict rule. He could act for more than one principal only if he served each faithfully and did not allow one relationship to affect his service to another.
3. When Mr Gray agreed to manage Mr Heerema’s fund, he came into actual conflict with GEHC. He could not continue negotiating for both GEHC and Mr Heerema while seeking to maximise their respective interests. He should have declined one role or limited the other. His conduct from January 2006 breached the duty of good faith, the no-inhibition principle and the actual-conflict rule.
4. From 17 March 2006, Mr Gray’s agreed personal interest in the fund’s profits placed him in conflict with GEHC and involved exploitation of GEHC’s business opportunity. His later attempt to act solely for himself and Mr Heerema did not validly terminate his duties, because it was connected with appropriating the maturing opportunity which had come to him through GEHC.
5. The opportunity to obtain a licence for the AWS technology and participate in the Acquisition Strategy was a business opportunity actively pursued by GEHC. Mr Gray’s indirect interest in RegEnersys therefore engaged the no-profit rule. GEHC did not need to prove loss before obtaining an account or inquiries.
6. GEHC consented only to Mr Gray acting for Mr Heerema in negotiating the purchase of Mr Zolezzi’s shares and to his personal interest in that share purchase. It did not give fully informed consent to his conflicting role or personal interest in the Acquisition Strategy and AWS technology. Declarations, an account and inquiries were ordered, with questions of relief and costs left for further determination.

First-instance judgment. The judgment does not state any prior appellate decision.