J T Kelly & Anor. v B E Baker & Anor.

A fiduciary relationship outside established categories requires an objectively assessed relationship in which the alleged principal is entitled to expect loyalty and action in their interests. Subjective trust, confidence, influence, family connection or superior knowledge is insufficient without circumstances showing that the fiduciary undertook, or was entrusted, to act for the claimant in a particular matter. Close personal or family relationships may be relevant, but are not themselves the hallmark.

The claim also fails where the evidence shows that the alleged fiduciaries disclosed their participation in a management-led acquisition, acted on a price set by the owners, and did not undertake to obtain the best market price.

The claimants alleged that the defendants breached fiduciary duties in connection with the sale of businesses owned by the Kelly family. The defendants had worked for or with the businesses and became participants in a management buy-out supported by external finance.

The claimants alleged that the defendants concealed their buy-side involvement, failed to obtain the best price, failed to disclose an alleged undervalue, and benefited from completion payments. The principal issues were whether fiduciary duties were owed to the first claimant or his company, whether any duty arose specifically in relation to the transaction, and whether the alleged breaches were established.

1. Claim dismissed; counterclaim succeeded. The court found that no fiduciary relationship existed between the claimants and either defendant.
2. Outside established fiduciary categories, the relevant hallmark is an objectively assessed legitimate expectation that one party will act in the interests of the other, or in their joint interests, to the exclusion of their own separate interests. The inquiry concerns the nature of the relationship, not merely the claimant’s subjective trust or confidence.
3. Family connection, informality, personal confidence, superior knowledge, influence, or the fact that directors possess information unavailable to shareholders do not, without more, establish a fiduciary relationship. The alleged fiduciary must have undertaken, or been entrusted, to manage the claimant’s property or affairs or to act for the claimant in a particular transaction.
4. The defendants were outside the family’s real circle of power and trust. Their operational roles and the family’s reliance on them for particular work did not establish the required relationship. Nor did events during the transaction create a legitimate expectation of fiduciary behaviour.
5. In any event, the defendants had disclosed that they would participate on the buying side of a management-led acquisition. The family set the target price, approximately £140 million, and the defendants did not promise to obtain the best available market price. The allegations concerning non-disclosure of a conflict, failure to seek the best price, the JLL valuation and the completion loans therefore failed on the facts and, in some respects, independently failed for want of a relevant duty.
6. The alternative valuation issue was considered for completeness. The court preferred the defendants’ expert evidence and concluded that the transaction was not at an undervalue. The indemnity given by the claimants covered the defendants’ losses, including irrecoverable legal costs, where no duty had been breached.

not stated in the judgment.