Detection Services Ltd v Pickering

JurisdictionNew Zealand
JudgeWoolford J
Judgment Date14 December 2018
Neutral Citation[2018] NZHC 3310
Docket NumberCIV-2015-404-003135
CourtHigh Court
Date14 December 2018
Between
Detection Services Limited
First Plaintiff
Detection Solutions Limited
Second Plaintiff
Detection Services Pty Limited
Third Plaintiff
Detection Solutions Pty Limited
Fourth Plaintiff
Stephen Carl John Simmons
Fifth Plaintiff
and
Christopher Lorraine Pickering
First Defendant
Aqatar Limited
Second Defendant
Jake Van Der Peyl
Third Defendant

[2018] NZHC 3310

CIV-2015-404-003135

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TAMAKI MAKAURAU ROHE

Commercial, Equity — claims for breach of fiduciary duty and estoppel — joint venture — test for fiduciary relationship

Appearances:

M Corlett QC and R Butler for the Plaintiffs

A Barker QC and J Grimmer for the Defendants

JUDGMENT OF Woolford J

This judgment was delivered by me on Friday, 14 December 2018 at 1.00 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Table of Contents

Background

[1]

Parties

[5]

Causes of action

[8]

Employment proceedings

[10]

The law - fiduciary obligations

[12]

Fiduciary obligations

[12]

Duty of loyalty

[18]

Duty of good faith

[19]

Did fiduciary obligations arise in the present case?

[25]

The relationship between the parties

[25]

Did the parties' relationship give rise to fiduciary obligations?

[39]

Relational contract

[47]

Breach

[48]

Estoppel by representation

[70]

Counterclaim

[76]

Loss

[86]

Result

[92]

Background
1

The fifth plaintiff, Stephen Carl John Simmons, and the first defendant, Christopher Lorraine Pickering, were once good friends. They worked together from around 2007 to develop a leak detection system for use in high pressure water mains. The association between the parties got even closer when Mr Simmons employed Mr Pickering as General Manager of his companies (Detection Services group) in January 2010.

2

Unfortunately, they had a falling out in 2011 and Mr Simmons fired Mr Pickering. The dispute between them revolved around ownership of the leak detection system. They were unable to agree who was to have the system and it was placed in storage. It remains there today.

3

Mr Simmons proceeded to build a new leak detection system. He and his companies now sue Mr Pickering and his company for the cost of building the new system, including componentry and staff costs, as well as for loss of profits. In total, $3,165,850 is claimed. Mr Pickering counterclaims for $257,170, which he says is the sum Mr Simmons agreed but refused to pay for the original leak detection system.

4

I expand on the facts and make findings where appropriate in my reasons below.

Parties
5

The statement of claim names five plaintiffs. At the outset of the hearing, counsel acknowledged only two suffered loss and are the proper plaintiffs for the purpose of the proceedings:

  • (a) The third plaintiff, Detection Services Pty Ltd, is the company which incurred staff time on the rebuild and is alleged to have suffered the loss of profits that are claimed.

  • (b) The fourth plaintiff, Detection Solutions Pty Ltd, is the company which incurred most of the costs to build the new leak detection system.

6

Likewise, counsel advised the Court the plaintiff no longer sought judgment or relief against the third defendant, Jake Van Der Peyl, who has played no part in the proceedings.

7

There will accordingly be an order striking out the first, second and fifth plaintiffs and the third defendant under r 4.56(1)(a) of the High Court Rules.

Causes of action
8

The statement of claim originally contained causes of action for breach of contract and misuse of confidential information. These are no longer pursued. The only remaining relevant causes of action are the claims for breach of fiduciary duty and estoppel brought by the third and fourth plaintiffs, Detection Services Pty Ltd and Detection Solutions Pty Ltd, against the first and second defendants, Mr Pickering and his company, Aqatar Ltd.

9

The causes of action pleaded in the counterclaim are breach of contract and estoppel.

Employment proceedings
10

Mr Pickering filed a claim for unjustified dismissal and payment of a bonus in the Employment Relations Authority. The claim was heard over nine days in 2012. In a decision dated 31 July 2012, the Authority found Mr Pickering had been unjustifiably dismissed because Mr Simmons could not dismiss Mr Pickering for refusing to hand over the leak detection system as the system had been jointly developed. Furthermore, the development of the leak detection system was not part of Mr Pickering's employment contract. Any work undertaken on the system by Mr Pickering was, therefore, not as an employee.

11

The Authority also concluded Mr Pickering had contributed to his dismissal because he had incorporated his own company, Aqatar Ltd, without advising Mr Simmons, failed to send invoices to Mr Simmons, and asserted he or Aqatar alone owned all the rights in the system. The award for unjustified dismissal was therefore reduced by 50 per cent.

The law - fiduciary obligations
Fiduciary obligations
12

There are two broad types of circumstances in which the issue of the existence of fiduciary obligations will arise. In the first, the relationship is of a kind which, by its nature, is recognised as inherently fiduciary. 1 These inherently fiduciary relationships include that of solicitor and client, trustee and beneficiary, principal and agent, and doctor and patient. 2 However, an inherently fiduciary relationship may nevertheless involve duties which have no fiduciary element. 3

13

Aside from the established categories, any relationship, whether contractual or otherwise, may potentially give rise to fiduciary obligations. Whether it did so will depend on the particular aspects of the relationship. The “true principle” is for there to be fiduciary obligations, the “circumstances must be such that one party is entitled to repose and does repose trust and confidence in the other”. 4 That is the test.

14

In the present case, Mr Simmons says there was a joint venture relationship. In Chirnside v Fay, Blanchard and Tipping JJ said: 5

The essence of a joint venture which is not yet contractual is that it is an arrangement or understanding between two or more parties that they will work together towards achieving a common objective. It is fallacious to think that there can be no joint venture unless and until all the necessary details have been contractually agreed. A joint venture will come into being once the parties have proceeded to the point where, pursuant to their arrangement or understanding, they are depending on each other to make progress towards the common objective. Each party is then proceeding on the basis that he or she is acting in the interests of all or both parties involved in the arrangement or understanding. A relationship of trust and confidence thereby arises; each party is entitled to expect from the others loyalty to the joint cause, loose as the formalities of the joint venture may still be. This in essence is the position

which was reached between Messrs Chirnside and Fay. Neither of them was thereafter entitled to act solely in his own interests.

15

A joint venture relationship is, however, not inherently fiduciary. As the Supreme Court said in Paper Reclaim Ltd v Aotearoa International Ltd, the term “joint venture” is to be applied with caution. 6 It is a wide term that can apply to a range of circumstances. This is evident in the following statement from the High Court of Australia: 7

The term “joint venture” is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots’ law, “adventure”) will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership.

16

Then, in Amaltal Corp Ltd v Maruha Corp, the Supreme Court said the characterisation of a commercial arrangement as a joint venture can be unhelpful as a guide to whether the parties owed each other fiduciary obligations. 8 The determination as to whether the parties owed fiduciary obligations remains heavily fact dependent. 9 As the English Court of Appeal said in Ross River Ltd v Waveley Commercial Ltd: 10

From these it is clear that, although the analogy with a partnership may suggest that fiduciary duties are owed in the context of a joint venture, the phrase “joint venture” is not a term of art either in a business or in a legal context, and each relationship which is described as a joint venture has to be examined on its own facts and terms to see whether it does carry any obligations of a fiduciary nature.

17

The central question remains whether the circumstances were such that one party was entitled to, and did, repose trust and confidence in the other. In Curtis v Gibston, the Court of Appeal set out factors relevant to that determination: 11

Relevant factors will include the degree of common purpose established between the parties, the stage in the venture that has been reached and the extent to which the parties have reposed trust and confidence in each other. In

general, some positive steps towards the implementation of a joint plan will be required before the Court will be willing to find that fiduciary obligations have arisen. And, as Finn J observed in Gibson Motorsport Merchandise Pty Ltd v Forbes it must be shown that the circumstances are such as to require the parties to subordinate their self interest to joint interest.
...

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3 cases
  • Detection Services Pty Ltd v Pickering
    • New Zealand
    • Court of Appeal
    • 21 d4 Novembro d4 2019
    ...for a standard appeal on a band A basis and usual disbursements. We certify for second counsel. 1 Detection Services Ltd v Pickering [2018] NZHC 3310, [2019] NZAR 515 [High Court 2 At [37]. 3 At [26]. 4 At [36]. 5 At [28]. 6 At [28]. 7 At [28]. 8 At [28]. 9 At [38]. 10 At [40]. 11 At [53].......
  • Detection Services Ltd v Pickering
    • New Zealand
    • High Court
    • 15 d4 Outubro d4 2020
    ...Mr Simmons now estimates that Mr Hoppe spent a total of 390 hours over a two year period. 10 Detection Services Ltd v Pickering [2018] NZHC 3310, [2019] NZAR ...
  • Detection Services Limited v Pickering
    • New Zealand
    • High Court
    • 13 d1 Dezembro d1 2021
    ...v Detection Services Pty Ltd [2020] NZSC 35. Detection Services Pty Ltd v Pickering [2019] NZCA 575. Detection Services Ltd v Pickering [2018] NZHC 3310. Pickering v Detection Services Pty Ltd [2021] NZCA Detection Services Ltd v Pickering [2020] NZHC 2705. Detection Services Ltd v Pickerin......

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