Russell v Cartwright & Ors

Commercial co-venturers do not become fiduciaries merely because their relationship involves trust, confidence and co-operation. Fiduciary duties require an undertaking to exercise authority or discretion for another’s benefit, assessed objectively.

Contractual good-faith or disclosure obligations must be derived from the express agreement and the conventional tests for implication. Limited express obligations do not justify implying a wider duty where that would be neither obvious nor necessary for business efficacy. A party is not generally obliged to volunteer information about speculative opportunities where the contractual context, parties’ conduct and communications show that the recipient did not seek such information.

Dishonesty requires assessment of the defendant’s actual knowledge or belief followed by an objective assessment of conduct. A claim fails where the defendants were unaware of any duty to disclose and acted honestly.

The claimant had been one of four principals in a property development business operated through Hub Residential Ltd. His departure was documented by a Settlement Deed under which he sold his shares and released claims, subject to fraud or dishonesty-based claims.

He alleged that the remaining principals dishonestly withheld information about a Wembley development opportunity, breached express or implied contractual and fiduciary duties, made fraudulent non-disclosures or misrepresentations, and conspired by unlawful means. The defendants relied on the parties’ arrangements during the departure negotiations, including an agreement that the claimant would receive information about the existing Rockbridge projects but not other business.

The court determined liability in the first stage of a split trial, including whether the claimant had established fraud, dishonesty, breach of duty or conspiracy and whether the defendants’ counterclaim for costs succeeded.

1. Fiduciary duties. The relationship between the principals was not fiduciary. The parties were shareholders rather than partners, and the FJVA expressly excluded partnership. Trust and confidence in a commercial venture were insufficient. The relevant question was objective: whether the relationship placed one party under an obligation to exercise judgment or discretionary powers for another’s benefit and to put that party’s interests first.

2. Express and implied contractual duties. The express good-faith obligations in clauses 3.3 and 14.3 were limited and were not breached by the Wembley project, which was pursued for the Hub joint venture rather than diverted from it. Clause 16.1 did not prohibit the use of confidential information for Hub purposes. Applying the conventional implication tests, no wider obligation of good faith or disclosure was obvious or necessary for business efficacy. The detailed agreement, limited express obligations and informal working arrangements pointed against implication.

3. Disclosure and the Hub 2 agreement. The court found that the claimant agreed to receive information about the Rockbridge projects and not other Hub business. He made no request for information about Wembley or other opportunities, and staff had not been instructed to withhold information. In those circumstances the defendants were not obliged to volunteer information about Wembley, either before or after the agreement. The claimant had also indicated that he would not participate in Hayes.

4. Fraud and dishonesty. The defendants acted honestly. Applying the two-stage approach in Ivey v Genting Casinos (UK) Ltd, the claim failed because the defendants did not believe that they were subject to a duty to disclose. It also failed on the objective standard of ordinary decent people. There was no fraudulent non-disclosure, failure to correct a misunderstanding or unlawful means conspiracy.

5. Disposition. The claimant’s claim was dismissed. The Settlement Deed contained a comprehensive release, subject to the defendants’ concession that dishonesty-based claims were not released. The counterclaim succeeded because commencement and continuation of the proceedings breached the agreement not to sue. The defendants were entitled to damages and costs on the indemnity basis, subject to detailed assessment or agreement.