MLL221 Study Guide - Final Guide: Fiduciary, Best Interests, Regal (Hastings) Ltd V Gulliver
24 May 2018
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Corporate Law Topic Seven
• Know the sections in Corporations Act on duties of loyalty & good faith and these duties in common law.
• Understand fiduciary obligations
ESTABLISHED CATEGORIES OF FIDUCIARY RELATIONSHIPS:
• Trustee/beneficiary
• Director/company
• Agent/principal
• Solicitor/client
• Partner/partner
• Employee/employer
• Other situations
FIDUCIARY OBLIGATIONS:
• Best interests principle:
➢ Fiduciary must act in the best interests of the beneficiary (not a legally enforceable duty)
• Conflict rule:
➢ Avoid conflicts between duty and personal interest
➢ Avoid conflicts between interests of two beneficiaries
• Profit rule:
➢ Duty not to profit from position
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• Explain the duty to act in good faith in the best interests of the company
SECTION 181(1)(a)
A director or other officer of a corporation must exercise their powers and discharge their duties:
(a) in good faith in the best interests of the corporation; and
(b) for a proper purpose.
WHO OWES THE DUTY:
Directors & Officers
WHAT IS MEANT BY GOOD FAITH?
The dut to at i good faith eas that the dieto ust at hoestl ad have a genuine belief that they
are acting in best interests of company.
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WHAT A‘E THE COMPANYS INTE‘ESTS?
Members:
Generally, the interests of the company are the interests of the shareholders as a whole
Does this mean the majority?
• No, directors must act in the best interests of the shareholders as a whole
➢ Greenhalgh v Arderne Cinemas Ltd [1951]
• Must balance interests of majority and minority
➢ In most circumstances, interests of company will be those of the majority
Individual shareholders:
Directors do not owe fiduciary duty to individual shareholder
• Percival v Wright (1902)
But, in some special circumstances a director may owe fiduciary duty to an individual shareholder
• Personal contact giving rise to obligations
• Coleman v Myers
• Brunninghausen v Glavanics
COLEMAN V MYERS (1977)
FACTS
• MD of family co has co taken over at under-value by new co
controlled by him
• Failed to disclose value of co and his personal benefit to minority
shareholders.
ISSUE
• Indicators of existence of duty
• Reliance on information and advice
• Relationship of confidence
• Significance of transaction for parties
• Any positive action taken by director to promote transaction
HELD
• Breached his duty to minority shareholders
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Document Summary
Know the sections in corporations act on duties of loyalty & good faith and these duties in common law: understand fiduciary obligations. Fiduciary must act in the best interests of the beneficiary (not a legally enforceable duty) Avoid conflicts between duty and personal interest. Avoid conflicts between interests of two beneficiaries. Explain the duty to act in good faith in the best interests of the company. The dut(cid:455) to a(cid:272)t i(cid:374) (cid:858)good faith(cid:859) (cid:373)ea(cid:374)s that the di(cid:396)e(cid:272)to(cid:396) (cid:373)ust a(cid:272)t ho(cid:374)estl(cid:455) a(cid:374)d have a genuine belief that they are acting in best interests of company. Generally, the interests of the company are the interests of the shareholders as a whole. Does this mean the majority: no, directors must act in the best interests of the shareholders as a whole. Greenhalgh v arderne cinemas ltd [1951: must balance interests of majority and minority. In most circumstances, interests of company will be those of the majority.
