Date: Wed, 6 Sep 2006 11:13:18 -0500

From: Geoff Mclay

Subject: Chirnside v Fay - decided by NZ Supreme Court

Colleagues

Last night the NZ Supreme Court released its judgment in Chirnside.

You may recall that the case achieved some notoriety when the Court of Appeal decided to award damages instead of an account for the taking of a business opportunity belonging to a "joint venture". The Court of Appeal applied a loss of a chance analysis, since it was not clear that the actual deal would have been completed sharing the fruits of the joint venture. This was odd as it calculated the chance at 25%.

The Supreme Court decision unanimously takes the more orthodox approach – there should have been an account and in the account the loss of the chance was simply irrelevant as the disappointed joint venturer had lost an interest in the joint venture that was on foot. There ought to be an allowance based on the other joint venturer’s contribution which was over and above that of the disappointed one (there is some dispute between the Chief Justice and the other judges on how this ought to be calculated and over the appropriateness of allowances in general.

It is a little harsh on my colleague Andrew Butler who argued for the English Guinness v Saunders no allowance unless exceptional circumstances , arguing for greater flexibility (para 138-139).

Perhaps the most interesting part of the judgment is that one that all the NZ judges involved appeared to take for granted , that there was a joint venture that was a fiduciary relationship. Both the CJ and the joint judgment of Blanchard and Tipping saw an analogy to partnership. There are also some rather open ended observations about the nature of the fiduciary relationship. I personally would have liked a little more on the relationship of this case to Arklow, and especially the nature of the disappointed joint venturers’ contribution to the venture.

The judgment is rich and fully reasoned. What future cases will make of the broad use of fiduciary here is anyone's guess. I suspect that plaintiffs may take the view that it is "game on" once again.

Geoff

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